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Annual Report 2021

Plain-text annual report

CSR LIMITED ANNUAL REPORT 2021 BUILDING SOLUTIONS FOR A BETTER FUTURE CSR at a glance Chair’s Message Building Products Overview – Masonry & Insulation Contents 2 4 6 Managing Director’s Review 8 8 10 – Interior Systems 12 – Construction Systems 14 Property 15 Aluminium 16 Sustainability at a glance 18 – Environment 20 – People and Safety 22 – Community CSR LIMITED ABN 90 000 001 276 24 Financial Overview 25 Operating and Financial Review 30 Corporate Governance Statement and Risk 44 Board of Directors 46 Directors Report 50 Remuneration Report 71 Financial Report 112 Directors Declaration 113 Independent Auditor’s Report 116 Shareholder Information AGM DETAILS CSR’s Annual General Meeting (AGM) will be held on 25 June 2021 at 10am (AEST). Details on arrangements for the AGM are included in the Notice of Meeting. CSR is building solutions for a better future for our customers by investing in new building systems to reduce construction time and deliver better energy efficiency, comfort and design…and for our people and the environment by creating a safe, diverse and sustainable place to work and grow. 1 CSR AT A GLANCE CSR is a leading building products company in Australia and New Zealand. Formed in 1855, CSR is one of Australia’s oldest manufacturing companies. Today it is a leading building products company in Australia and New Zealand and is the name behind some of the market’s most trusted and recognised brand names. BUSINESS SEGMENT OVERVIEW CONSTRUCTION MARKET DIVERSIFICATION 9% 21% YEM21 EBIT $238m 70% Building Products Property Aluminium 8% 8% 10% YEM21 Building Products Revenue $1.5bn 54% 20% Detached Non-residential Medium density High density Alterations and additions Strong financial position1 Operational excellence with a strong foundation 4% $2.1bn Revenue 17% $146m Statutory net profit after tax 10% $238m Earnings Before Interest and Tax (EBIT) 21% 33.1c Earnings per share 2,538 CSR employees 170+ Manufacturing and distribution sites across Australia and New Zealand 50+ Property sites owned across Australia 18,000+ Customers across Australia and New Zealand 23c Full year ordinary dividend (fully franked) 13.5c Special dividends (fully franked) 1. Before significant items, unless stated. 2 $251m Net cash $2.2bn Total assets CSR LIMITED ANNUAL REPORT 2021Building Products CSR’s leading range of building products and systems serve a broad range of construction segments backed by technical expertise across building technology, compliance, energy efficiency and architectural design. CSR continues to invest in new solutions to reduce construction time and improve the comfort and design of homes and buildings. MASONRY & INSULATION Masonry & Insulation brings together the key areas of PGH Bricks and Monier Roofing for selection of external colours and design, integrating with Bradford’s insulation and ventilation systems for improved energy efficiency and home comfort. INTERIOR SYSTEMS Interior Systems builds on Gyprock’s leading brand position in the plasterboard market with the extensive range of Martini, Himmel and Potter commercial fitout offerings. CONSTRUCTION SYSTEMS Construction Systems develops engineered walling and cladding systems across three leading brands of Hebel, AFS and Cemintel which bring speed of construction with versatile design applications. Aluminium Through its 70% shareholding in Gove Aluminium Finance Limited, CSR holds an effective 25.2% interest in the Tomago aluminium smelter in New South Wales. Property CSR generates additional earnings from its Property business which focuses on maximising financial returns from surplus former manufacturing sites and industrial land. 3 CHAIR’S MESSAGE STRONG OPERATIONAL AND FINANCIAL PERFORMANCE Significant increase in dividends reflects strong cash generation CSR’s strong operational performance and financial position has enabled the company to provide a significant lift in dividends for shareholders. Following the additional proceeds from Property this year, we have also declared a special dividend of 9.5 cents per share (fully franked). This is in addition to the final dividend we have declared of 14.5 cents per share (fully franked). This compares to the previous year when no final dividend was paid due the company’s COVID-19 cash preservation position. This will bring the full year dividend (excluding special dividends) to 23.0 cents per share (fully franked) up from 10.0 cents per share (50% franking) in the previous year. We ended the year with a strong net cash position of $251 million which is before the $116.5 million in dividends to be paid in July 2021. This provides significant opportunity to invest in the business over the coming years. Building Products positioned for growth A key milestone this year was the launch of a number of strategic initiatives for the business. CSR has a very strong position in the detached housing market, but we see opportunities to diversify into other sectors so we can drive improved performance through the housing cycle and scale for growth by leveraging capability from across the business. Julie and the team have reorganised the business this year to deliver on this strategy. This was achieved while ensuring the business stayed focused on our customers and operating in the COVID-19 environment. This was a difficult situation to manage and our result this year is a strong endorsement of the capabilities of the CSR team. JOHN GILLAM CHAIR Result reflects improved performance in Building Products and increased Property contribution I am pleased to report that we ended the year with a strong result for the business. Throughout this year, we have operated within the COVID-19 environment with the health and safety of our teams remaining our first priority. We also ensured the business had a solid liquidity position and managed our costs, so we were prepared for the year ahead with a secure financial position. With this platform, we performed very well while making a number of important strategic changes to how we organise the business and drive future growth. Group statutory net profit after tax up 17% Our statutory net profit after tax of $146.1 million was up 17% from $125.3 million in the previous year. Before significant items, net profit after tax of $160.4 million was up 19%. The lift in net profit was driven by an 8% increase in Building Products earnings to $184.3 million. Strong cost control and operational efficiency offset the impact of the slowdown in residential construction activity which declined 4% during the year. Property delivered earnings of $54.2 million compared to the previous year when no significant earnings were recorded due to the timing of transactions. This result is the second major settlement of the Horsley Park industrial development and is a great example of the significant value created from our Property projects. Earnings from our investment in Aluminium declined to $23.4 million down from $59.6 million reflecting a sharp decline in aluminium prices at the start of the financial year which was partly offset by hedging and lower input costs. 4 CSR LIMITED ANNUAL REPORT 2021“ We are increasing our position across more diverse construction segments and markets to drive improved performance through the housing cycle and scale for growth. ” Environment and climate change a key priority Climate change is a key priority area for CSR. We continue to progress our strategy to improve the sustainability of our operations. This includes ongoing review of the risks and opportunities of climate change across the business. Over the past ten years, we have covered many of the key recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) framework. This includes how we manage our internal risks to capture specific questions on climate risks on the business. Further details on our approach to sustainability over the past year are included in the 2020 CSR Sustainability Report which was published in December 2020. Property delivering strong returns Property plays a crucial role in our strategy to provide flexibility for our Building Products operations, capture the best value from our extensive land holdings and fund reinvestment in our manufacturing businesses. Work continues on the next stage of our Horsley Park development. We have also made good progress on our 200 hectare site at Badgery’s Creek which is adjacent to the new Western Sydney Airport. The industrial zoning of this site was completed in September 2020 and we are now providing water from the rehabilitation of the quarry at the site for the construction of the airport which is saving over 1 billion litres of potable water. The strong demand for industrial sites in western Sydney, combined with the delivery of contracted transactions above expectations, has significantly increased the valuation of CSR’s extensive Property portfolio. Our Property portfolio is well positioned to deliver strong returns over the next 10 years and beyond. Board changes In December 2020, we welcomed Nigel Garrard to the CSR board as a non-executive director. Nigel brings extensive operational, manufacturing and listed company experience to CSR. Nigel has already provided a valuable contribution to the board over the last few months since he joined the company. We will also be saying farewell to non- executive director Mike Ihlein later this year. As an experienced board director across a range of industries, Mike has played a crucial role on our board committees and we thank him for his contribution to CSR over the past 10 years. Thank you to the CSR team On behalf of the board, I want to commend the 2,500 CSR employees across Australia and New Zealand for their efforts this year. The team faced many challenges and delivered a strong performance. Thanks to all of our teams for supporting each other and our customers during this difficult year. Thanks as well to our shareholders for your ongoing support. JOHN GILLAM CHAIR Capital management increasing returns for shareholders CSR’s strong financial performance is backed by our operational discipline, cost control and investment in growth which has provided the opportunity for the company to deliver consistent returns to shareholders both through dividends and capital management over the past five years. CAPITAL MANAGEMENT (DIVIDENDS AND SHARE BUY BACKS) $ MILLION $135 $137 $138 $131 $177 4 1 7 131 136 131 65 112 62 20 49 $177m In total dividends to be paid for YEM21 YEM17 YEM18 YEM19 YEM20 YEM21 Dividends Special dividends Share buy backs 5 MANAGING DIRECTOR’S REVIEW BUILDING ON A STRONG FOUNDATION JULIE COATES MANAGING DIRECTOR AND CEO Maximising current market opportunity and delivering long- term growth CSR performed very well during the year reflecting the strength of our position across different segments and markets. This ensured we delivered a strong performance as market conditions were mixed, particularly at the start of the year with COVID-19. The second half of the year has seen improvement in detached housing activity and we will benefit from our strong position in this market. Our business is operating on a strong foundation with a unique opportunity to build scale and growth. To achieve this, we have completed the formation of a streamlined structure with three new business units: Masonry & Insulation, Interior Systems and Construction Systems. These businesses include our trusted brands with market leading positions and are expanding their offering across the construction market by developing more complete solutions. 6 We have also formed two new teams in Supply Chain and Customer Solutions to ensure we maximise our business units’ operational strengths while capturing the value of CSR’s considerable synergy opportunities. Building Products earnings up 8% Our Building Products business performed well as strong cost control and operational efficiency generated an 8% increase in earnings to $184.3 million. CSR’s largest business Gyprock delivered increased earnings as the business benefitted from a diversified revenue base across residential and commercial sectors. PGH Bricks’ earnings also increased following the benefit of overhead cost savings. Hebel and AFS were lower as they have a significant exposure to the high density market which continues to decline after a period of very strong demand. Our work on optimising our extensive site network continues to identify areas for re-investment, improve efficiency and ultimately release valuable surplus land for redevelopment. Sustainability – core to how we operate and grow Sustainability is a core part of our strategy both in how we operate and how we will grow. This strategy is aligned with our priority areas of environment, people, community and supply chain. In June 2020, we completed environmental targets set back in 2010 with some significant results including a 57% reduction in waste per tonne of saleable product, 32% reduction in emissions, 24% reduction in energy use and 13% reduction in water. This year we have broadened our approach to set new targets to 2030 across a range of metrics including the use of resources, renewable energy and biodiversity which are linked to five of the United Nations Sustainable Development Goals. CSR LIMITED ANNUAL REPORT 2021Building solutions for a better future A key part of developing our strategy is establishing our purpose. This captures both what we are doing across the organisation with an eye on the future with innovation and sustainability for all stakeholders. Customer Solutions: Moving from a product-focused to a solution-focused business and from a core position in detached housing to servicing a broad range of construction segments. This involves enhancing our level of technical assistance – particularly in the specification stage which includes planning for the various requirements from acoustic and fire protection to structural and engineering advice. Supply Chain: Unlocking efficiencies across our large network and developing a supply chain model that integrates the logistics activity across all of our brands to provide benefits to customers while increasing productivity across our sites and reducing our environmental impact. Each CSR business unit is now updating their roadmap to align their operations to these goals which will be reviewed regularly by senior management and the board Workplace Health, Safety and Environment Committee. In terms of safety, COVID-19 had a significant impact on how we operated the business as we shifted our safety agenda to adapt the business to new guidelines. This followed a significant investment over the past few years in our safety management systems. We are now transitioning our safety strategy to focus on two key areas. Firstly, to build on our risk management framework by focusing our operational teams and activities with high consequence risk. STRONG FOUNDATION – Trusted brands with leading market position – Serving a broad range of construction segments – 18,000+ customers across Australia & New Zealand – Multiple channels to market OPERATIONAL EXCELLENCE – 40+ Manufacturing sites – operations excellence and innovation – Significant upside from supply chain integration across CSR – Extensive network of 100+ CSR branded and distribution outlets (metro and regional reach) SUSTAINABLE PLATFORM – Strong balance sheet – Industry leading Building Products Return on Funds Employed (ROFE) with track record of financial discipline – 50+ Property sites owned across Australia with significant EBIT locked in for the next three years CUSTOMER ENGAGEMENT – Experienced team of 2,500+ – Highly credentialed team to unlock value and deliver strategy – Sales, marketing and technical expertise in building technology, compliance, energy efficiency and architectural design Secondly, we are transitioning our safety strategy to focus more on coaching and mentoring our teams to ensure we move towards demonstrating best practice safety leadership into the future. We have also launched a new program this year called Wellbeing@CSR which is providing our teams with tools needed to stay well both physically and mentally. Providing health and wellbeing support for our employees is a top priority for us. Outlook for the year ending 31 March 2022 (YEM22) Building Products – The diversity of CSR’s business provides resilience and performance will benefit from our strong position in the detached housing market. Property – The Horsley Park project is progressing well with a further $146 million in sale proceeds contracted over the next three years, including $18 million of EBIT expected to complete in YEM22. Marketing continues on the final 12 hectare tranche at Horsley Park, with work progressing on other projects. Aluminium – The forward hedge position was strengthened in the second half of YEM21 to lock-in future returns. Based on the significant hedge position, EBIT for YEM22 is expected to be in the range of $32 million to $40 million, assuming all other revenue and cost areas are unchanged. A further update on current trading for the CSR Group will be provided at the company’s AGM on 25 June 2021. Thanks to the team for their dedication and commitment to CSR In closing, I want to echo John’s comments about the dedication of the CSR team this year in what has been a very challenging environment. We now have a great opportunity to maximise the opportunities in the current market and drive the growth and development of the business for the long-term. We look forward to sharing more with you on our strategy in the year ahead. JULIE COATES MANAGING DIRECTOR AND CEO 7 BUSINESS UNIT OVERVIEW | BUILDING PRODUCTS MASONRY & INSULATION MASONRY & INSULATION BRINGS TOGETHER ESTABLISHED BRANDS WITH LEADING MARKET POSITIONS BACKED BY OUR MANUFACTURING EXPERTISE AND TECHNICAL AND ENGINEERING TEAMS. CSR provides a unique depth of product offering, ranges, colours and textures to complete the look and feel of the home. Unique depth of product range and systems Our offering includes leading solutions in exterior design, home health and comfort and energy efficiency. As part of the path to establishing net-zero in the Australian National Construction Code (NCC), we are providing improvements in energy efficiency, condensation control and internal air quality in new homes through our suite of systems across insulation, construction fabrics and ventilation. Extensive distribution and selection centres The Masonry & Insulation businesses include an extensive range of selection centres and distribution networks that supports our builder customers, approved resellers, retail hardware partners and a network of installers and tradespeople. Sustainability of operations Sustainability is core to our operations with Bradford glasswool insulation produced from up to 80% recycled glass. Monier is extending its use of waste by-product fly ash to incorporate 15-20% of its cement requirements, while PGH continues to assess biosolids as a feedstock for the kiln system to reduce gas consumption. “ Early planning for thermal and acoustic insulation for a new build or renovation will ensure the structural health and comfort of your home. ” YEM21 BUILDING PRODUCTS REVENUE LEADING BRANDS $1.5bn 43% MASONRY & INSULATION Leading supplier of materials designed to make homes and buildings energy efficient, comfortable and healthy. The leading roofing expert with over 100 years experience manufacturing quality roofing products underpinned by a commitment to innovation. Leading manufacturer and innovator of clay bricks, walling systems and façade solutions. 8 CSR LIMITED ANNUAL REPORT 2021“ Choosing sustainable home materials with the environment in mind. ” Get the look from The Block 2020 CSR HAS A LONG RELATIONSHIP WITH THE BLOCK TV SHOW WHICH HAS SHOWCASED MANY OF OUR PRODUCTS OVER THE YEARS. The 2020 season of The Block was located in the bayside suburb of Brighton in Melbourne with each team allocated a different period home to transform in keeping with its original heritage style. The Block showcased the versatility of PGH Bricks when it comes to designing for any style. Using brick allows seamless design flows between indoor and outdoor spaces, creating cohesive areas for the Australian lifestyle. Bradford was also the secret weapon in every room in The Block, as insulation solutions are the key to ensuring comfort and sustainability. The Block also highlighted the importance of designing insulation systems prior to the construction phase across internal and external walls, ceilings and roofs. bradfordinsulation.com.au | pghbricks.com.au Monier Crafted for Australia campaign Monier’s terracotta rooftiles bring a timeless beauty and rustic charm to a home. Manufactured in Australia, Monier terracotta bring natural materials, long-lasting colour, natural insulation and a 50 year guarantee. The beautiful array of colours and profiles were relaunched in 2020 as part of the Crafted for Australia campaign. Terracotta maintains a consistent temperature in the home to keep it cooler in summer and warmer in winter, lowering energy bills with its thermal properties and natural materials reducing condensation and mould. monier.com.au 9 The Three Birds Renovations team created a Hamptons haven using Monier’s Horizon tile. BUSINESS UNIT OVERVIEW | BUILDING PRODUCTS INTERIOR SYSTEMS “ The Block 2020 featured a curved wall using Gyprock Flexible and ceilings with style using Gyprock Supaceil. ” INTERIOR SYSTEMS BUILDS ON GYPROCK’S LEADING BRAND POSITION WITH THE INTERIOR SYSTEMS EXPERTISE OF MARTINI, HIMMEL AND POTTER TO PROVIDE A COMPLETE RESIDENTIAL AND COMMERCIAL OFFERING. Gyprock – Australia’s leader in plasterboard For almost 75 years, CSR has led the innovation of plasterboard in the Australian market. The business is backed by four strong, low cost manufacturing sites in Brisbane, Sydney, Melbourne and Perth. A key channel to market is the 56 Gyprock Trade Centres and 38 aligned distributors and retail partners across Australia. Our customers have a strong connection to the Gyprock brand and have referred to themselves as Gyprockers for decades. Unique offering in interior systems with deep technical expertise Gyprock’s leading position is bolstered by a stronger presence in the commercial segment to provide complete interior lining systems for our customers. Martini manufactures a range of acoustic insulation products with thermally-bonded polyester fibres made from up to 80% recycled PET packaging. Himmel in Australia and Potter in New Zealand are leading interior systems businesses supplying ceiling tiles, aluminium partitions and architectural hardware across social, infrastructure and commercial projects. All of the businesses have extensive technical expertise which we use to work with architects and specifiers to deliver solutions for the unique challenges and specifications for their projects. LEADING BRANDS YEM21 BUILDING PRODUCTS REVENUE Gyprock is Australia’s leading manufacturer of gypsum based products including plasterboard, cornice and compounds. Designs and manufactures high quality thermal and acoustic polyester fibre products. Leading brands in aesthetic and acoustic interior solutions. $1.5bn 39% INTERIOR SYSTEMS 10 CSR LIMITED ANNUAL REPORT 2021Martini brings style and acoustic performance to Google MARTINI’S DECO QUIET PANELS INCLUDED IN THE INNOVATIVE DESIGN OF GOOGLE’S SYDNEY OFFICE When designing the new office of Google, the team wanted a functional and contemporary working space that is buzzing with activity. The office was designed with a number of open planned collaborative spaces, as ideas get bounced around so does the noise. Martini dECO Quiet Panels were selected to help attenuate reverberating noise. Product performance and test data were central in the decision making process to use the Martini product. Multiple colours from the Captivate range were chosen to bring energy and brightness to the various spaces. Captivate is velcro receptive and pinnable so the panels can become working walls for brainstorming and collaboration. csrmartini.com.au Gyprock Living – Designers first choice for home interior solutions Gyprock is bringing its technical expertise for superior impact resistance, sound absorption, strength and style with the latest building trends and experts in Gyprock Living. Projects are featured from Australia’s leading designers including Greg Natale, Kate Walker and Three Birds Renovations who have used Gyprock to create beautiful spaces including curves and arches. The Gyprock Living website features the new magazine and encourages home owners to take their property from Simple to Stunning! gyprockliving.com.au “ Walls and ceilings are often the first considerations in designing a room. ” (Left) Himmel Troldtekt features in MK Lawyers office in Melbourne. (Above) Potter’s products at the offices of Minter Ellison Rudd Watts in Auckland, New Zealand. himmel.com.au potters.co.nz 11 BUSINESS UNIT OVERVIEW | BUILDING PRODUCTS CONSTRUCTION SYSTEMS CONSTRUCTION SYSTEMS IS TARGETING A NUMBER OF NEW MARKETS IN STRUCTURAL SYSTEMS AND FACADES AND CLADDING. An unparalleled suite of products to deliver beautiful buildings, ease of installation and lower cost construction. Strong and versatile, high performance systems AFS is a leader in load bearing permanent formwork walling solutions with codemarked concrete walling and permanent PVC formwork systems. For over two decades, AFS has contributed to the swift construction of apartments, offices, warehouses and more. Utilising cutting edge technologies, AFS are constantly researching new opportunities for innovation for load-bearing, hand- erected walls. Cemintel provides the Australian market with an alternative fibre cement range of traditional and prefinished fibre cement products and systems. Through research, analysis of trends and customer feedback, Cemintel has delivered innovative fibre cement products to the market for external and internal applications. Its diversified range includes products that are suitable for facades and cladding, internal linings, ceilings and soffits, and compressed flooring and decking products. Hebel is a strong, versatile, high performance building product made from Autoclaved Aerated Concrete (AAC). CSR has developed the expansion of Hebel across Australia and New Zealand over the past 25 years as an innovative product. Hebel systems are non-combustible, thermally efficient and have inherent acoustic performance properties. The systems are lightweight and easy to install. Barestone Internal Original Barestone Internal Ash Barestone Internal Graphite Barestone Internal Lunar “ Cemintel Barestone panels are manufactured in Australia. Their natural, raw appearance blends seamlessly into its environment. ” LEADING BRANDS YEM21 BUILDING PRODUCTS REVENUE A leader in load bearing permanent formwork walling solutions with concrete walling and permanent PVC formwork systems. Traditional and prefinished fibre cement solutions for facades and cladding, internal linings, ceilings and soffits, flooring and decking. Australia’s only manufacturer of Aerated Autoclaved Concrete (AAC) products commonly used in intertenancy, boundary wall and cladding solutions. 12 CONSTRUCTION SYSTEMS 18% $1.5bn CSR LIMITED ANNUAL REPORT 2021Hebel’s PowerPattern hits the mark HEBEL’S POWERPATTERN RANGE IS A COLLECTION OF DECORATIVE, PRE-ROUTED HEBEL PANELS. This range was featured in the stunning Schofield Gardens development in Sydney. The range delivered a variety of design options with the benefits of Hebel including fire-rating compliance, fast construction times and a high quality finish that is seen throughout the entire project. Each panel contains steel reinforcement for added strength and an anti-corrosion layer on the steel for maximum durability. hebel.com.au “ Tested and Trusted – All systems are backed by CSR technical expertise and rigorous compliance testing with a full suite of solutions across a range of residential, commercial, industrial and civil applications. “ AFS walling solutions are part of the new BUPA Aged Care building in St. Ives, NSW afsformwork.com.au Prefinished Cemintel Territory gaining traction The new Marion Hotel development in Adelaide completed in 2020 originally specified natural timber cladding in the soffits under the eaves. Cemintel worked with the builder, Sarah Constructions, to achieve the look of teak without the ongoing maintenance budget associated with timber. Prefinished products continue to gain traction in the market as the benefits are more widely accepted. Territory is the only fibre cement product to pass the rigorous AS 5113 test, gaining an EW classification. cemintel.com.au 13 BUSINESS UNIT OVERVIEW | PROPERTY PROPERTY PROPERTY HAS DELIVERED OVER $150 MILLION IN EARNINGS IN THE LAST FIVE YEARS BRINGING COMPLEX PROJECTS TO THE MARKET. CSR has over 50 Property sites owned across Australia which is almost 1,400 hectares of freehold land, and over 1,000 hectares of that sits in urban areas. We also manage a significant network of leased sites to support the operational businesses. The Group Property team works with the CSR business units to understand their requirements to grow and expand their operations. We have built an inhouse team to identify, plan and execute large-scale projects including: – Maximising value of operational footprint – Generating returns through various stages of the development cycle – Providing an opportunistic approach to the staged development process – Managing numerous projects through rehabilitation, zoning and planning consent 50+ property sites are owned and managed by CSR across Australia Warner Quarry, Queensland “ Property projects provide flexibility for our Building Products operations, capture the best value from each landholding, fund reinvestment and deliver realised capital growth. ” CONTINUED DEVELOPMENT OF MAJOR PROJECTS Horsley Park, NSW (Industrial) – 52ha site of a former PGH Brick factory redeveloped into an industrial park. Rehabilitation of the final stage of the project is expected to continue over the next three years – Completed and contracted proceeds of $284 million with marketing underway of the final 12ha Schofields, NSW (Residential) – 90ha site (1,525 lots) zoning under review as part of broader planning of West Schofields precinct – Stage 1 (32ha) will be developed when zoning and local town planning approvals are finalised with timing based on market conditions – Stage 2 (58ha) currently includes a PGH Brick operating plant – timing based on market conditions and operational network requirements Warner, QLD (Residential) – Residential zoning of around 450 lots under review located 20km from Brisbane Badgerys Creek, NSW (Industrial) – 200ha strategically located adjacent to Western Sydney International Airport – Zoned Enterprise (Industrial) in September 2020 – Rehabilitation underway with water from the site being transferred for construction of the Western Sydney Airport 14 CSR LIMITED ANNUAL REPORT 2021BUSINESS UNIT OVERVIEW | ALUMINIUM ALUMINIUM CSR IS A JOINT VENTURE PARTICIPANT IN THE TOMAGO ALUMINIUM SMELTER – ONE OF AUSTRALASIA’S LARGEST ALUMINIUM SMELTERS. Through its 70% shareholding in Gove Aluminium Finance Limited (GAF), CSR holds an effective 25.2% interest in the Tomago aluminium smelter, located near Newcastle, NSW. Tomago produces around 600,000 tonnes of aluminium each year. CSR was one of the founding partners in the smelter in 1983 which today employs approximately 1,000 people. Tomago is managed independently with joint venture partners Rio Tinto, GAF and Hydro Aluminium. tomago.com.au Power saving projects underway at Tomago A NUMBER OF SIGNIFICANT POWER-SAVING PROJECTS ARE UNDERWAY AT TOMAGO TO REDUCE POWER CONSUMPTION AND IMPROVE ENERGY EFFICIENCY. The largest and most significant project is the Pacific Aluminium Low Energy Pot (PALE) launched in 2015. The materials used in the construction of PALE pots enables the cell to operate using much less energy and without compromising anode cathode distance (ACD), therefore maintaining excellent metal production performance. The new design also ensures the pot can operate in a broader amperage range, with the flexibility to accommodate market conditions and business needs by running at a low ACD. An extended testing and trial phase over the past few years has ensured Tomago has delivered a smooth implementation of the PALE design across the pot network which is expected to be completed by 2024 delivering more than $30 million to Tomago in power cost savings and improved energy efficiency. 15 “ Reducing the use of electricity in the production of aluminium is a key priority at Tomago. GAF ALUMINIUM HEDGE BOOK POSITION In order to reduce volatility and lock-in profitable returns, GAF has a significant hedge book in place over the next few years. ” AS OF 30 APRIL 2021 YEM22 YEM23 YEM24 YEM25 YEM26 Average price A$ per tonne (excludes premiums) $2,800 $2,879 $2,910 $2,969 $2,991 % of net aluminium exposure hedged 95% 79% 66% 41% 2% A$ Aluminium Price ALUMINIUM PRICE A$/TONNE 3,000 2,800 2,600 2,400 2,200 2,000 9 1 n a J 9 1 b e F 9 1 r a M 9 1 r p A 9 1 y a M 9 1 n u J 9 1 l u J 9 1 g u A 9 1 p e S 9 1 t c O 9 1 v o N 9 1 c e D 0 2 n a J 0 2 b e F 0 2 r a M 0 2 r p A 0 2 y a M 0 2 n u J 0 2 l u J 0 2 g u A 0 2 p e S 0 2 t c O 0 2 v o N 0 2 c e D 1 2 n a J 1 2 b e F 1 2 r a M SUSTAINABILITY | AT A GLANCE SUSTAINABILITY AT A GLANCE Our approach to sustainability is underpinned by targets set across key areas of the environment, our people and the community We continued to improve the sustainability of our operations, whilst also helping our customers in the construction market by making substantial progress in energy efficiency, comfort and the performance of homes and buildings. Further details on CSR’s approach to sustainability over the past year are included in the 2020 CSR Sustainability Report which was published in December 2020. CSR is also in a very unique position to make a substantial reduction in emissions linked to the built environment which represents approximately 25% of Australia’s emissions. Our leading range of energy efficient solutions includes insulation, building fabrics, ventilation, solar and battery systems as well as design and technical support. CSR is also Tesla’s preferred solar battery supplier into the new home market and is working on the launch of the Tesla Solar Roof into the Australian residential market. 16 Clean Up Australia Day, North Ryde office, Sydney CSR LIMITED ANNUAL REPORT 2021Environment CSR is committed to contributing to an overall positive impact on the environment and reducing reliance on non-renewable resources. CSR seeks to reduce greenhouse gas emissions by improving energy efficiency across its network and through the roll-out of renewable energy solutions. Increasing our water recycling and reducing solid waste to landfill are also key priorities. CSR is also working with customers to minimise waste at building sites and provide services to pick-up pallets and unused building products so they can be recycled or re-used. 2020 PERFORMANCE OF KEY METRICS (ABSOLUTE BASIS)1 11% decrease in total CO2e in 2020 5% 6% 11% decrease in total potable water usage in 2020 increase in total solid waste to landfill in 20202 decrease in total energy use in 2020 1 Environment data is based on the period of 1 July 2019 to 30 June 2020 to be consistent with the National Greenhouse Reporting and Energy (NGER) scheme. 2 Increase in waste due in part to commissioning of new Hebel factory at Somersby, NSW. People CSR recognises that a sustainable workplace is one that provides a safe, rewarding and diverse environment for our employees. A key part of our strategy is to focus more on coaching and mentoring our teams to ensure we move towards demonstrating best practice safety leadership into the future. Scouts at Warner, Queensland 12.8 Safety performance declined during the year as measured by Total Recordable Injury Frequency Rate (TRIFR) from 10.2 to 12.8 as at March 2021 (per million hours worked) Community A key part of our sustainability strategy is based on proactively maintaining our social license to operate through greater interaction and positive impacts on the community. To achieve this aim, we continue to partner with a number of organisations in line with our commitment to operate in a sustainable manner and to gain the confidence of the communities in which we operate. Our community relations program covers four key areas: Site level community relations, Building Products donations for charities, Community Support Program funding donations and the Student Mentor Program. 21% Female participation in the business declined slightly in YEM21 to 21% from 22% in YEM20 8 years CSR volunteers have donated their time for Business Clean Up Day at sites across Australia for the past 8 years $73,580 donated to CSR Community Support program in YEM21 43% Female board membership and 25% of executive leadership team are women Bushfire rebuild CSR product and technical support for bushfire rebuild projects Online mentoring CSR volunteers continued to support ABCN Student Mentor Program in 2020 17 SUSTAINABILITY | ENVIRONMENT ENVIRONMENT AS PART OF MITIGATING THE IMPACTS OF CLIMATE CHANGE FROM OUR OPERATIONS, IN 2009 CSR SET FOUR INTENSITY TARGETS. These were to deliver a 20% reduction per tonne of saleable product in energy consumption, greenhouse gas emissions, solid waste to landfill and potable water usage using 2009/10 as the base year. At the time, CSR was one of the first manufacturing companies in Australia to set specific environmental targets. 2020 TARGETS COMPLETED TARGETING A 20% REDUCTION 57% decrease in solid waste to landfill (Kg/tonne of product) 24% decrease in energy use (GJ/tonne of product) Completion of 2020 environment goals sets a strong platform to 2030 sustainability targets 32% decrease in greenhouse gas emissions (Kg/tonne of product) Approach to climate risk and opportunities Identifying, managing and reporting on environmental and climate change risks has long been a key component of CSR’s risk management and governance framework. In 2018, CSR developed a staged approach to assess and disclose climate-related risks and opportunities using the global Task Force on Climate Related Financial Disclosure (TCFD) framework. This included the development of new sustainability targets to the year 2030. As part of this staged approach, over the past two years, CSR has completed detailed climate related risk analysis of its operations including scenario analysis of its Gyprock plasterboard and Bradford insulation businesses. This analysis models three climate scenarios focused on transition risk, physical risks and qualitative commentary on supply chain risk. This disclosure is in line with the TCFD framework on Strategy, Governance, Risk Management and Metrics and Targets and is included in the 2020 CSR Sustainability Report. 18 13% decrease in potable water (Ltr/tonne of product) CSR LIMITED ANNUAL REPORT 2021“ All of our businesses are now working on initial three year plans as a pathway to achieve our 2030 targets which will not only improve our sustainability platform but lead to better efficiency and business outcomes in the future. ” Sustainability targets to 2030 In mid 2020, CSR announced its new strategy to ensure the business is resilient for future market changes. Sustainability is a foundation pillar of this strategy. In line with the sustainability pillar, CSR has developed new 2030 targets covering a range of metrics. These goals are linked to five of the United Nations Sustainable Development Goals most relevant to CSR and where we can make the greatest impact. All businesses have initial three year plans to identify projects and programs to help achieve these targets. These projects are tested to ensure robustness and tracked to determine alignment with CSR’s overall emission reduction target. UNITED NATIONS SUSTAINABLE DEVELOPMENT GOAL 2030 TARGETS INITIATIVES TO HELP REACH TARGETS Affordable and Clean Energy – Establish and implement a CSR connected power network; 50% of electricity generated by renewable energy – Solar installations continue across major sites with Monier Darra, QLD and Bradford ventilation at Seven Hills, NSW both installing 99kW systems in 2020 – 20% energy reduction (GJ) per tonne of – Examples include: Replacing wastewater pumps with high saleable product Sustainable Cities and Communities – 5% of indirect spend by Procurement to be spent with social enterprises efficiency pumps at Bradford Ingleburn, NSW and installation of a more efficient boiling system at Cemintel Wetherill Park, NSW – Develop tender/contract award procedures and evaluation – Completed review of existing arrangements – Training and reporting to embed target across CSR Responsible Consumption and Production – CSR packaging to be closed loop (either 100% reusable; recyclable; compostable) – Increase data analysis across all packaging to capture key opportunities – 75% reduction in solid waste to landfill – Waste and water reduction projects under review as part – 30% reduction of potable water consumed (ltr) per tonne of saleable product of initial three year roadmap – An example is the redesign of water spray systems to reduce potable water use at Bradford ventilation at Sevens Hills, NSW Climate Action – 30% reduction of greenhouse gas emissions – Viable projects rolled into the CSR wide capital (CO2e) per tonne of saleable product allocation process – All projects are assessed against the CSR targets to understand pathway to achieving the 2030 ambition Life on Land – Enhance biodiversity outcomes on CSR sites – Baseline information under review and developments – Key biodiversity outcomes underway at Property sites including Warner, QLD and Horsley Park, NSW “ We have set sustainability targets to 2030 aligned to UN development goals most relevant to CSR and where we can make the greatest impact. ” 19 SUSTAINABILITY | PEOPLE AND SAFETY PEOPLE AND SAFETY CSR recognises that a sustainable workplace is one that provides a safe, rewarding and diverse environment for our employees RECORDABLE INJURIES AT CSR SITES 8% 15% 77% Zero Recordable injuries 1 Recordable injury at 21 sites >1 Recordable injury at 12 sites 112 sites achieved zero recordable injuries in YEM21 In the second half of YEM21, we moved to a centralised Workplace Health, Safety and Environment (WHSE) team across all of CSR and this team, in partnership with the executive leadership team and operational leaders have prepared a three year WHSE strategy to guide on a path forward this year. TOTAL RECORDABLE INJURY FREQUENCY RATE (TRIFR) PER MILLION WORK HOURS 40 35 30 25 20 15 10 5 0 36.7 27.4 25.6 13.3 13.2 13.2 10.6 10.5 10.6 10.2 10.2 12.8 20.8 YEM10 YEM11 YEM12 YEM13 YEM14 YEM15 YEM16 YEM17 YEM18 YEM19 YEM20 YEM21 Safety performance in YEM21 YEM21 was significantly impacted by COVID-19. The intended workplace health and safety programs needed to be paused to ensure that the safety agenda shifted to adapt the business to new guidelines and address the potential transmission risks to our people and customers. This created a loss of valuable face to face time within sites. The business has adapted well to utilising new technology to progress our safety agenda. However, our performance as measured by total recordable injury frequency rate (TRIFR) declined to 12.8 from 10.2 (per million work hours). We are very proud of the 112 sites who achieved zero recordable injuries in the year. 20 CSR LIMITED ANNUAL REPORT 2021THEME APPROACH YEM22 AREAS OF FOCUS Hearts and Minds Launch and communicate WHSE programs to engage our people Developing a program across CSR that talks to a consistent narrative that appeals to the hearts and minds of our people Risk Management Risk reduction in areas of high exposure Refocus on embedding Hazard Identification, Risk Assessment and Control (HIRAC) into business System Refinement Investing in current systems to improve the clarity and consistency across CSR Development and implementation of CSR wide WHSE hazard and system standards Leading safety at CSR The revised approach being rolled out across the business specifically focuses on the top risks within CSR and each part of the business is working on risk reduction plans to address those top risks. Our leaders will play a key role in ensuring our teams are supported, that we are working with one system that is clear and easy to understand and is using a risk based approach to prioritise areas that will make the biggest impact on safety. Recognising the scale and breadth of CSR’s activities in serving customers through our manufacturing, supply chain, building and construction requires that we focus on simple, clear, consistent and well managed standards. Our approach to safety is based on three key principles: Hearts and Minds, Risk Management and System Refinement. Risk reduction emphasis While TRIFR is a key metric for CSR and will remain so, we are encouraging our people to shift focus to making sure that we clearly understand the key risks in our business and most importantly we implement corrective actions to reduce the potential for harm. Our strategic plan gives our business units and sites a roadmap of the activities to undertake to achieve that outcome of reducing risk. Our audit assurance, leadership activities and incident prevention indicators have all been modified to be consistent in supporting this shift in focus and to support our operational areas to achieve this outcome. Forking Safely program improving safe behaviours Our risk management approach seeks to eliminate or reduce risks with a simple, common sense approach which can be applied across all operations. Forklift safety remains a key risk area which is responsible for many incidents at CSR. Within Interior Systems, over 600 forklift operators work across the manufacturing sites, distribution centres and Gyprock Trade Centres. During the past year, we have progressed the Forking Safely program which was launched in 2018. Many of CSR’s products include larger sizes and variable weights that require specific training. During YEM21, state based champions helped lead the program and build capability at all sites to ensure all teams take responsibility and ownership of their drivers’ coaching and training. Over the next year, sites will be identifying high interaction points and improving the segregation methods between mobile plant and pedestrians. 21 SUSTAINABILITY | COMMUNITY COMMUNITY CSR continues to work with our local communities in line with our commitment to operate in a sustainable manner WE CONTINUE TO PARTNER WITH A NUMBER OF ORGANISATIONS IN LINE WITH OUR COMMITMENT TO OPERATE IN A SUSTAINABLE MANNER AND TO GAIN THE CONFIDENCE OF THE COMMUNITIES IN WHICH WE OPERATE. Clean Up Australia Day, Bradford Ingleburn, NSW Site level community relations – working together in Warner, Queensland CSR is progressively rehabilitating the quarry in Warner, QLD which includes the planting of over 5,000 trees at the site. CSR founded the Warner Working Group in 2018 to bring the community together in a forum including representatives of koala care and rescue groups, local community members, Landcare, schools, industry and government. This group has led a number of initiatives including engaging ecologists and veterinary scientists in koala research to track the movement of the koala population and rehabilitating sick or injured koalas for release back into the area. The advocacy of the Warner Working Group was included in the Queensland Government’s South East Queensland Koala Conservation Strategy 2020-2025. Clean Up Business Day CSR participates in Clean Up Business Day as a signatory to the Australian Packaging Covenant – a sustainable packaging initiative targeting sustainable packaging, increasing recycling rates and reducing packaging litter. 8 years CSR volunteers have donated their time for Business Clean Up Day at sites across Australia for the past 8 years 22 CSR LIMITED ANNUAL REPORT 2021Bushfire rebuild support Following the devastating bushfires in Australia in the summer of 2020, CSR supported a number of initiatives to assist communities impacted by the disaster and support the rebuild process. CSR raised a total of $50,000 from employee donations and matching by CSR for the Salvation Army Bushfire Appeal. CSR has also partnered with some of its customers to provide community and non-profit organisations access to CSR products and expertise to assist in the rebuild of buildings impacted by the bushfires. “ CSR has supported the efforts of Hotondo Helping Hands to rebuild homes in the local community following the unprecedented bushfire crisis. ” Australian Business and Community Network CSR commenced working with the Australian Business and Community Network (ABCN) in 2011. It is a partnership of highly committed national business leaders and companies working on mentoring and coaching programs in schools in high need areas. Since 2011, CSR volunteers have donated over 6,000 hours to the program. In 2020, mentoring was moved on-line in response to COVID-19. CSR was part of three pilot programs to continue mentoring in a digital format which included over 60 volunteer hours by CSR volunteers working online with 38 students. Online mentoring CSR volunteers continued to support ABCN Student Mentor Program in 2020 Community Support Program Launched in 2003, CSR matches employee contributions dollar for dollar to three charitable organisations. Over $3.4 million has been donated by CSR and its employees over the last 18 years. During YEM21, $73,580 was donated by CSR and its employees to three charities, The Salvation Army, Youth Off The Streets and Assistance Dogs Australia. The Salvation Army is a national charity, offering caring support for every problem “from the cradle to the grave.” They offer services to aged care, crisis accommodation, suicide prevention, youth and families at risk, telephone counselling, to name just a few. Youth off the Streets is a youth-specific charity, assisting young people dealing with issues of substance and other abuse, alienation from family and community and homelessness. Assistance Dogs Australia trains and places unique dogs with Australians in unique situations. They currently train dogs that specialise in support for people with a physical disability, autism as well as PTSD. As well as providing a range of services to these individuals and their families. Luna from Assistance Dogs visits the team at CSR’s office in North Ryde, NSW 23 FINANCIAL OVERVIEW FINANCIAL OVERVIEW Statutory net profit after tax of $146.1 million, up 17% which reflects good operational performance and continued cost management FOUR YEAR PERFORMANCE SUMMARY 1 Year ended 31 March ($ million) unless stated Operating results Trading revenue Earnings before interest and tax (EBIT) Building Products Property Aluminium Segment total Corporate and restructuring and provisions2 CSR EBIT 2021 2020 2019 2018 2,122.4 2,212.5 2,322.8 2,237.7 184.3 54.2 23.4 261.9 (24.0) 237.9 170.5 (1.5) 59.6 228.6 (11.8) 216.8 134.8 125.3 206.5 38.8 36.6 281.9 (16.9) 265.0 181.7 78.0 214.1 47.8 79.5 341.4 (21.1) 320.3 210.6 188.8 Net profit after tax (before significant items) 160.4 Statutory net profit after tax (after discontinued operations) 146.1 Financial position Total equity Total assets Net cash / (debt) 1,152.5 2,171.5 250.8 1,125.5 2,404.5 94.8 1,231.1 1,991.1 50.0 1,274.1 2,136.0 (14.3) Key data per share Earnings before significant items (cents) Earnings after significant items and discontinued operations (cents) Dividend ordinary (cents) Dividend special (cents) 33.1 30.1 23.0 13.5 Payout ratio on ordinary dividends (%) 69.5 Key measures Profit margin (EBIT/trading revenue) (%) Return on funds employed (ROFE) (%)3 Employees (number of people employed) 11.2 21.1 2,538 27.3 25.4 10.0 4.0 36.6 9.8 17.8 2,823 36.1 15.5 26.0 – 72.0 11.4 21.8 2,960 41.9 37.5 27.0 – 64.4 14.3 27.8 2,861 1 From continuing operations for 2018 and 2019 unless stated, which excludes the Viridian Glass business which was sold on 31 January 2019. 2 Represents unallocated overhead expenditure and other revenues. 3 ROFE is calculated as EBIT before significant items for the 12 months to 31 March divided by average funds employed which excludes cash, tax balances and certain other non-trading assets and liabilities as at 31 March. 24 CSR LIMITED ANNUAL REPORT 2021 OPERATING AND FINANCIAL REVIEW OPERATING AND FINANCIAL REVIEW Group EBIT of $237.9 million, up 10% with improved earnings from Building Products and Property Trading revenue of $2.1 billion for the year ended 31 March 2021 (YEM21), down 4% on the prior year. Earnings before interest and tax (EBIT before significant items) of $237.9 million, up 10% included the following results:  Building Products - EBIT of $184.3 million, up 8%, with EBIT margin increased to 12.0% from 10.7%. Strong cost control and operational efficiency offset the slowdown in residential construction activity which declined 4% during the year  Property - EBIT of $54.2 million compared to the previous year when no significant earnings were recorded  Aluminium - EBIT of $23.4 million, down from $59.6 million, reflecting a sharp decline in aluminium prices at the start of the financial year due to COVID-19 volatility which was partly offset by hedging and lower input costs Statutory net profit after tax of $146.1 million, up 17%. Earnings per share (before significant items) of 33.1 cents, up 21%. Dividends - Final dividend of 14.5 cents per share (fully franked) declared. This compares to the previous year when no final dividend was declared due to COVID-19 cash preservation position. Full year dividend (excluding special dividends) of 23.0 cents per share (fully franked) up from 10.0 cents per share (50% franking) in the previous year. Special dividend of 9.5 cents per share (fully franked) declared following settlement of the Property sale at Horsley Park. A$m unless stated1 Trading revenue EBIT Building Products Property Aluminium Corporate (including restructure and provisions) Group EBIT Net finance costs Tax expense Non-controlling interests Net profit after tax before significant items1 Significant items after tax Statutory net profit after tax 2021 2,122.4 2020 2,212.5 184.3 54.2 23.4 (24.0) 237.9 (6.1) (65.7) (5.7) 160.4 (14.3) 146.1 170.5 (1.5) 59.6 (11.8) 216.8 (10.8) (58.0) (13.2) 134.8 (9.5) 125.3 change (4%) 8% (61%) 10% 19% 17% 1 All references are before significant items unless stated. These are non-IFRS measures and are used internally by management to assess the performance of the business and have been extracted or derived from CSR’s financial statements for the year ended 31 March 2021 (YEM21). All comparisons are to the year ended 31 March 2020 (YEM20) unless otherwise stated. Statutory net profit after tax of $146.1 million for the year ended 31 March 2021, up 17% with good operational performance in Building Products and Property offset by the expected reduction in earnings from Aluminium. This includes significant items of $14.3 million (after tax) from business restructuring, asset impairment and plant closure costs offset by a previously recorded lease adjustment. Tax expense of $65.7 million (before significant items) was up from $58.0 million due to the higher pre-tax profits. CSR’s effective tax rate for the year (before significant items) was 28% in line with the prior year. Cash flow from operating activities of $253 million was up 3% with higher operating cash flow following a strong focus on working capital. Capital expenditure (excluding Property and acquisitions) was $49.0 million during the year. Of this total, $26.1 million was for stay-in-business projects and $22.9 million was development related capital expenditure, including the purchase of the Bradford Brendale, QLD site for $16 million. Capital expenditure (excluding Property and acquisitions) was down from $100.2 million in YEM20 as some projects were delayed due to the COVID-19 environment. Property invested $29.8 million during the year as part of rehabilitation of key sites. Net cash of $250.8 million increased from the net cash position of $94.8 million as of 31 March 2020, which included settlement of two Property transactions. CSR also has additional credit standby facilities of $420 million. These facilities have fixed maturity dates as follows: $154.0 million in 2023, $191.0 million in 2024 and $75.0 million in 2025. Share buyback – In March 2019, CSR launched a $100 million on-market share buyback. $69 million in shares were purchased prior to the completion of the program in February 2021. Product liability – As at 31 March 2021, the asbestos provision fell to $231.0 million from $246.9 million as at 31 March 2020. This provision included a prudential margin of $34.9 million. CSR paid asbestos related claims of $20.6 million (including legal costs) compared to $27.8 million in the prior year. 25 OPERATING AND FINANCIAL REVIEW BUILDING PRODUCTS PERFORMANCE Construction market activity by segment Australia Residential (12 months – 000s) Detached1 Medium density1 High density1 Total Residential Commencements Non-residential (A$B)2 A&A (A$B)2 NZ consents (12 months - 000s)3 2021 2020 change 104.1 33.1 36.5 173.7 46.9 9.9 37.7 107.2 33.9 39.5 180.6 48.0 9.3 36.5 (3%) (3%) (8%) (4%) (2%) 6% 4% 1 Source ABS data – (original basis two quarter lag – i.e. 12 months to September). 2 Source ABS, BIS Oxford Economic forecast (value of work done – 12 months to March). 3 Source Statistics New Zealand – (residential consents 2 quarter lag – 12 months to September). The majority of CSR’s Building Products are utilised at the end of the construction process which results in product sales occurring on average two quarters after the start of a residential housing commencement. While this can vary between detached and multi-residential housing, CSR’s revenues for YEM21 are generally aligned to residential commencements for the 12 months to September 2020. Australian residential housing commencements on a two quarter lag basis of 173,657 were down 4% compared to the prior year. Detached housing on the east coast of Australia decreased by 3%, while Western Australia was down 5%. The medium and high density market slowed during the period, down 5%, as projects continue to slow following a period of very high activity over the last few years. The non-residential market was down 2% with growth in the social sector offset by declines in the commercial sector. The alterations and additions market has performed strongly backed by a buoyant trade retail sector which was up 22% in the 12 months to March 2021. The New Zealand market remained reasonably strong across all segments despite the impact of the COVID-19 shutdown at the start of the financial year. The Australian Government’s HomeBuilder stimulus provided significant new demand during the year with almost 100,000 applications for new homes and 22,000 substantial renovations received in the program. The extension of the HomeBuilder commencement to 18 months announced in April 2021 is expected to spread the pipeline of activity across calendar years 2021 and 2022. Strong cost control and operational efficiency lift earnings by 8% A$m unless stated1 Revenue EBITDA EBIT Funds employed2 EBIT/revenue Return on funds employed3 2021 1,534.5 265.7 184.3 844.3 12.0% 20.6% 2020 1,591.3 254.9 170.5 945.8 10.7% 18.0% change (4%) 4% 8% (11%) 1 Before significant items. 2 Excludes cash and tax balances and certain other non-trading assets and liabilities as at 31 March. A reconciliation of funds employed is included in Note 2 in the financial report. 3 Based on EBIT (before significant items) for the 12 months to 31 March divided by average funds employed. Trading revenue from Building Products was $1,534.5 million, down 4% in line with the decline in market activity. Building Products EBIT of $184.3 million was up 8% as strong cost control and operational efficiency offset the decline in volumes due to the slowdown in building activity during the period. CSR’s largest business Gyprock delivered increased earnings as the business benefitted from a diversified revenue base across residential and commercial sectors. PGH Bricks earnings also increased despite the slowdown in the detached market following the benefits of overhead cost savings. Hebel and AFS earnings were lower as they have significant exposure to the high density market which was down 8% during the period. EBIT margin of 12.0% was up from 10.7% due to cost savings across the operating network with the opportunity for price increases above inflation becoming more limited in some products and regions. No payment of Australian JobKeeper was received during the year. The return on funds employed of 20.6% increased from 18.0%. 26 CSR LIMITED ANNUAL REPORT 2021 OPERATING AND FINANCIAL REVIEW Building Products Business Performance MASONRY & INSULATION INTERIOR SYSTEMS CONSTRUCTION SYSTEMS 43% 39% 18%  YEM21 revenue $667m (4% below YEM20)  YEM21 revenue $593m (3% below YEM20)  YEM21 revenue $275m (3% below YEM20)  Volumes in line with detached activity  EBIT higher supported by overhead cost reductions  PGH and Monier EBIT higher with cost management offsetting lower volumes  Bradford EBIT down due to higher proportion of imports, product mix and freight costs partly offset with improved factory performance Building Products Outlook  Gyprock – stable volumes due to diversified market position. Pricing flat as 2020 price increase did not proceed due to COVID-19  Cemintel and Hebel continuing share growth in residential housing, especially Victoria  EBIT higher following operational  Slowdown in high density apartments improvement and cost management impacting Hebel and AFS sales  Commercial Interiors EBIT impacted by lockdowns, slowdown in commercial and reduced exports due to COVID-19  EBIT in line with previous year with cost management offsetting volume decline in high density apartment market Detached (54% of revenue) – activity will be supported by HomeBuilder commencements with the extension of the timetable likely to extend the pipeline across calendar years 2021 and 2022. Medium/High density (18% of revenue) – medium density market expected to be more resilient than the high rise market following the continued decline in high rise approvals since the previous peak in 2018. Alterations and Additions (8% of revenue) – strong trade retail performance expected to continue (up 22% in the year to March 2021), complemented by larger value HomeBuilder renovation projects. Non-residential (20% of revenue) – pipeline of approvals is down 9% (year to March 2021) following COVID-19 uncertainty over the last year. Weaker private commercial activity expected to be offset in part by continued elevated levels of social infrastructure spend. Overall, the diversity of CSR’s business provides resilience and performance will benefit from our strong position in the detached housing market. 27 OPERATING AND FINANCIAL REVIEW PROPERTY Good progress on key development projects A$m unless stated1 EBIT Funds employed2 Return on funds employed3 2021 54.2 139.5 35.3% 2020 (1.5) 167.8 (0.8%) change n/m (17%) 1 Before significant items. 2 Excludes cash and tax balances and certain other non-trading assets and liabilities as at 31 March. A reconciliation of funds employed is included in Note 2 in the financial report. 3 Based on EBIT (before significant items) for the 12 months to 31 March divided by average funds employed. CSR’s Property business continued to make good progress on key development projects. Property delivered EBIT of $54.2 million compared to a loss of $1.5 million in the previous year when no significant transactions were completed. The result includes the completion of the first tranche of Stage 2 at the industrial development at Horsley Park, NSW. This project has contracted proceeds of $146 million over the next three years with marketing underway of the final 12 hectares at the site. Horsley Park property project Size (ha) Proceeds ($m) EBIT ($m) 10.1 11.7 4 5 8.6 39.4 12.4 58 80 28 34 84 284 32 52 18 22 48 172 Completion Completed Completed YEM22 YEM23 YEM24 Marketing underway (increased from 9ha due to strong demand for site) Tranche Stage 1 Stage 2.1 Stage 2.2a Stage 2.2b Stage 3.1 Total contracted Stage 3.2 28 CSR LIMITED ANNUAL REPORT 2021 OPERATING AND FINANCIAL REVIEW ALUMINIUM EBIT down reflecting lower A$ aluminium price A$m unless stated1 Sales (tonnes) A$ realised price2 Revenue EBITDA EBIT Funds employed3 EBIT/revenue Return on funds employed4 2021 213,722 2020 209,905 2,751 587.9 35.4 23.4 136.0 4.0% 16.9% 2,960 621.2 71.5 59.6 141.0 9.6% 42.4% change 2% (7%) (5%) (50%) (61%) (4%) 1 Before significant items. 2 Realised price in A$ per tonne (including hedging and premiums). 3 Excludes cash and tax balances and certain other non-trading assets and liabilities as at 31 March. A reconciliation of funds employed is included in Note 2 in the financial report. 4 Based on EBIT (before significant items) for the 12 months to 31 March divided by average funds employed. The realised aluminium price in Australian dollars (including hedging and premiums) of A$2,751 was down 7% following the decline in the A$ aluminium price in the first half of YEM21. Gove Aluminium Finance (GAF – 70% CSR) sales volumes of 213,722 tonnes were up 2% from the prior year due to the timing of shipments. Trading revenue of $587.9 million was down 5% due to LME aluminium prices. The Australian dollar averaged 72 US cents compared to 68 US cents in the prior year, while the average MJP ingot premium for the year was US$94 per tonne, below the US$98 per tonne in the prior year (Platts Metals Week – Main Japanese Port ingot premium). EBIT of $23.4 million was down from $59.6 million due to the lower A$ aluminium price and higher alumina costs following the start of new contracts in January 2020. Other input costs including coke declined as well as the overall cost of electricity due to a lower coal cost pass through compared to the prior year. GAF has secured new contracts for alumina, all of which are effectively linked to the US$ aluminium price. These new contracts began in January 2020 which have staged end dates to 31 December 2023. For future years, the following alumina volumes have been contracted:   Calendar years 2021 and 2022: 100% of alumina volume Calendar year 2023: ~60% alumina volume. GAF Aluminium Hedge Book position - significant increase in forward hedge position Given Tomago’s high energy cost (which is not correlated to LME aluminium prices), CSR’s approach is to take advantage of profitable pricing by hedging when possible. A significant hedge book is in place through to March 2026. As of 30 April 2021 Average price A$ per tonne (excludes premiums) % of net aluminium exposure hedged YEM22 2,800 95% YEM23 2,879 79% YEM24 2,910 66% YEM25 2,969 41% YEM26 2,991 2% YEM22 EBIT scenario The table below provides a YEM22 EBIT range based on various A$ per tonne aluminium spot prices. This assumes all other revenue and cost areas are unchanged. As of 30 April 2021 YEM22 EBIT A$m Aluminium average spot price A$/t for YEM22 A$3,100 A$2,700 A$2,300 A$32m A$36m A$40m 29 CORPORATE GOVERNANCE STATEMENT AND RISK CORPORATE GOVERNANCE STATEMENT Corporate governance is the system by which CSR is directed and managed. It is the framework of rules, relationships, systems and processes that underpin the company’s values and behaviours, the way it does business and how:  the CSR board of directors is accountable to shareholders for the operations, financial performance and growth of the company; and  business risks are identified and managed. This Corporate Governance Statement is current as at 12 May 2021 and has been approved by the board. CSR actively reviews Australian and international developments in corporate governance and considers the views of shareholders, regulators and other stakeholders. The CSR board adopts those arrangements which it considers are in the best interests of CSR and its shareholders. The directors of CSR are committed to ensuring that the company maintains an effective system of corporate governance and that good corporate governance is an integral part of the culture and business practices of the CSR group. Throughout the reporting period, being the year ended 31 March 2021, CSR complied with the recommendations contained in the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations (4th edition) (ASX CGC Principles). CSR’s existing practices were largely consistent with the changes introduced in the 4th edition, with some practices updated to address the emerging issues included in the 4th edition. Charters and policies referred to in this corporate governance statement are available on CSR’s website in the ‘Investors and News’ section under Corporate Governance. The board The board strives to build sustainable value for shareholders whilst protecting the assets and reputation of the company. CSR's Constitution sets out the provisions that govern the management of the company and can only be amended by special resolution of shareholders. Under the constitution, shareholders elect directors, whose function is to represent shareholders and to act in the best interests of the company. Role of the board The board has adopted a formal board charter, available on CSR’s website on the Corporate Governance page which establishes those matters reserved for the board and authority delegated to management. The board’s functions, as summarised in the board charter, include:  approving CSR strategies, budgets, plans and policies;  assessing performance against business plans to monitor both the performance of management as well as the continuing suitability of business strategies;  reviewing operating information to understand the current status of the company;  considering management recommendations on proposed acquisitions, divestments and significant capital expenditure;  considering management recommendations on capital management, the issue or allotment of equity, borrowings and other financing proposals, guarantees of non-group liabilities, and restructures;  ensuring that the company operates an appropriate corporate governance structure and culture, in particular ensuring that CSR acts legally and responsibly on all matters and that the highest ethical standards are maintained;  approving CSR’s risk framework and appetite, as well as CSR's risk management strategy and monitoring whether the company is operating within that framework and appetite;  considering the social, ethical and environmental impact of CSR’s activities and monitoring compliance with CSR’s sustainability policies and practices;  ensuring that the company’s governance processes, in particular, the remuneration and other reward structures, align with the company’s values and risk appetite;  maintaining a constructive and ongoing relationship with the Australian Securities Exchange (ASX) and regulators, and approving policies regarding disclosure and communications with the market and shareholders; and  monitoring internal governance including delegated authorities, and monitoring resources available to senior executives. Appointment and election of directors CSR undertakes a rigorous process when selecting new directors. The company aims to have a board which, as a whole, has the range of skills, knowledge, background and experience to govern CSR, made up of individuals of high integrity, with sound commercial judgement, inquiring minds and the ability to work cohesively with other directors. When considering director candidates, CSR seeks a combination of former chief executives and individuals experienced in manufacturing, finance, the law and, ideally, the industries in which CSR participates as well as the areas in which it hopes to grow. CSR undertakes background checks on prospective candidates, covering the candidate’s character, experience, education, criminal record and bankruptcy history. External consultants are engaged, where appropriate, to advise on potential appointees. The potential appointees must have a strong reputation and high ethical standards. Prospective directors are required to confirm that they will have sufficient time to meet their obligations and that they will keep the company informed of their other commitments. Non-executive directors are subject to re-election by rotation at least every three years. Newly appointed directors must seek election at the first general meeting of shareholders following their appointment. The relevant notice of meeting contains all material information for shareholders in relation to the election or re-election of a director. 30 CSR LIMITED ANNUAL REPORT 2021 CORPORATE GOVERNANCE STATEMENT AND RISK Directors’ independence At all times throughout YEM21, the board comprised of a majority of independent directors. Each of the non-executive directors, including the chair, has been determined by the board to be independent of CSR and its management, having no business or other relationships that could compromise his or her autonomy as a director. The board’s framework for determining director independence is included in the board charter and operates in accordance with the considerations set out in the ASX CGC Principles. Any past or present relationship with the company is examined carefully to assess the likely impact on a director’s ability to be objective and exercise independent judgement. Directors are required to disclose, on an ongoing basis, circumstances that may affect their ability to exercise independent judgement enabling the board to determine independence on a regular basis. The length of tenure of each director is set out below. Table 1: Director tenure Director John Gillam (chair of the board) Julie Coates (managing director) Nigel Garrard Christine Holman Michael Ihlein Matthew Quinn Penny Winn Date appointed December 2017 September 2019 December 2020 October 2016 July 2011 August 2013 November 2015 Date last re-elected 2018 Annual Meeting 2020 Annual Meeting Not previously elected 2020 Annual Meeting 2020 Annual Meeting 2019 Annual Meeting 2018 Annual Meeting The board charter states that non-executive directors will not seek re-election after serving for ten years. Director letters of appointment Letters of appointment are prepared for non-executive directors covering duties, time commitments, induction, company policies and corporate governance. The managing director’s responsibilities and terms of employment, including termination entitlements, are set out in a formal executive service agreement. A summary of the main elements and terms of the managing director service agreement is set out in the remuneration report and is disclosed to the ASX when the managing director is appointed. Directors’ induction, education and access to information The board strives to ensure that directors and key executives have the knowledge and information needed to operate effectively. The chair briefs new directors on their roles and responsibilities. New directors receive a comprehensive information pack as part of this induction, as well as briefings from management and visits to key operating sites to assist them to rapidly understand CSR’s businesses, strategic direction and associated material risks. Time is allocated at board and committee meetings for continuing education on significant issues facing the company and changes to the regulatory environment. To help directors maintain their understanding of the businesses and to assess the people managing them, directors are briefed regularly by members of the senior management team. Directors also have access to a wide range of employees at all levels during inspections of operations and in other meetings. Directors receive a comprehensive monthly business performance report regardless of whether a board meeting is scheduled. Directors have unrestricted access to company records and information. Directors may obtain independent professional advice, at CSR’s expense, on matters arising in the course of their board and committee duties, after obtaining the chair’s approval. The board charter requires that all directors be provided with a copy of such advice and be notified if the chair’s approval is withheld. The board appoints and removes the company secretary. All directors have direct access to the company secretary who is accountable to the managing director and, through the chair, to the board, on all governance matters. The work of directors In addition to attending board and committee meetings, non-executive directors allocate time for, amongst other things, strategy and budget sessions, preparing for meetings and inspecting operations. The chair commits additional time and meets regularly with the managing director to review business and strategic issues and to agree board meeting agendas. The directors usually meet with no management present at the commencement of board meetings and on other occasions as required. Non-executive directors also meet without the managing director present where it is appropriate to do so. Except where the directors need to meet privately, the company secretary and chief financial officer attend all board meetings. Other members of management, such as business unit executive general managers, or other functional managers also attend board meetings by invitation, where appropriate. The board also invites external experts to present to it on key matters, where appropriate. The directors regularly visit the company’s operations, as COVID-19 travel restrictions allow, to better understand the issues facing each of the businesses and their people. These visits are conducted either as a full board, a board committee or with one or two directors. Every meeting of the Workplace Health, Safety & Environment Committee is held at a CSR site, either physically or virtually when restrictions have not enabled physical site visits. In addition, directors may meet customers, business partners, suppliers and other stakeholders of the company as requested by management. 31 CORPORATE GOVERNANCE STATEMENT AND RISK Size, composition and skills of the board The board comprises directors with an appropriate mix of skills, experience and personal attributes that allow the directors individually, and the board collectively, to:  discharge their responsibilities and duties under the law effectively and efficiently;  understand the suite of CSR businesses and the external environment in which CSR operates so as to be able to agree with management the objectives, goals and strategic direction to maximise shareholder value; and  assess the performance of management in meeting those objectives and goals. The board currently comprises six non-executive directors and one executive director. Information about directors, including their skills, experience, expertise and their period in office is set out on pages 44 to 45 and is available on CSR’s website on the Corporate Governance page. The chair is appointed by the board and provides leadership to ensure that a high standard of values, processes and constructive interaction is maintained by the board. The chair represents the views of the board to shareholders and canvasses the views of stakeholders, including through the annual general meeting. In YEM21, changes to the board were as follows:  Nigel Garrard joined the Board as an independent non-executive director on 1 December 2020. CSR has developed a matrix of required skills and experience of the board. This matrix is developed by taking into account CSR’s desire to ensure a diverse range of gender, background and experience is maintained on the board at all times, and also ensuring directors are appropriately qualified. The board keeps the balance of skills and experience of its members, as well as their independence, under review. The board strives to achieve diversity in its composition as evidenced by the charts below. The table on the following page sets out the skills and experience the board considers essential for effective governance, including the current representation of those skills and experience on the board. Figure 1: Board diversity TERTIARY QUALIFICATIONS INDUSTRY SECTOR EXPERIENCE 14% 14% 14% TENURE 42% Commerce/Accounting 58% 14% Mathematics/Education 14% 14% 43% 58% Engineering/Science 14% Business Administration & Management 14% 29% Manufacturing operations 43% Supply chain management 29% Property development 14% Technology & Digital 14% GENDER DIVERSITY 29% 29% 0 to 2 years 29% 2 to 5 years 29% 5 to 10 years 42% 43% 57% Men 57% Women 43% 32 CSR LIMITED ANNUAL REPORT 2021 CORPORATE GOVERNANCE STATEMENT AND RISK Size, composition and skills of the board (continued) Table 2: Summary of board skills and experience Skills Relevant experience Leadership and Governance Directors with skill/experience Executive leadership Sustainable success in business at a senior executive level and a proven track record of leadership to create long-term shareholder value. Governance and Compliance Commitment to the highest standards of governance, including experience with a major organisation that is subject to rigorous corporate governance standards, and an ability to assess the effectiveness of senior management. Finance and Risk Financial acumen Experience as a senior executive or equivalent experience in financial accounting and reporting, corporate finance and internal financial controls, including an ability to probe the adequacies of financial and risk controls. Strategy Track record of developing and implementing a successful strategy, including appropriately questioning and challenging management on the delivery of agreed strategic planning objectives. Risk management Track record in developing a business portfolio over the long-term that remains resilient to systemic risk, including an ability to identify key business risks (both financial and non-financial) and mitigation strategies, as well as monitoring the effectiveness of risk management frameworks and controls. Capital projects Experience working in an industry with projects involving large-scale capital outlays and long-term investment horizons. Operations and Technology Operations and Supply chain Experience having led or overseen the management of complex operating assets, with a focus on business operations, end to end supply chain and the oversight of key processes. Health, safety and environment Experience related to workplace health and safety, environmental and social responsibility, including implementing and monitoring systems to ensure safe working conditions. Sustainability and climate change Experience or demonstrated understanding of key environmental impacts, including climate change risks and community concerns, and the governance of these impacts. Innovation and digital platforms Proven success creating more effective processes, products and ideas, leading to new growth platforms. For example, experience using digital platforms to improve the service offering and subsequent performance and customer experience; or understanding how to align existing digital touch points to improve performance and customer interfaces. People Human Resources and Remuneration Board remuneration committee membership or management experience in relation to remuneration, including incentive programs and relevant legislation and contractual frameworks governing remuneration. Culture and People Experience and ability to develop succession plans, develop talent, oversee people management, monitor culture and improve diversity. Marketing and Customers Senior executive experience in consumer and customer marketing and customer service delivery. 33 The specific responsibilities allocated to each committee are set out below and on the following page. Risk & Audit Committee The Risk & Audit Committee is chaired by Mike Ihlein. Until 28 October 2020 the other members of the committee were Christine Holman and Matthew Quinn. From 29 October 2020 the other members of the committee were Christine Holman, Matthew Quinn and Penny Winn, and from 1 December 2020 the other members of the committee were Nigel Garrard, Christine Holman, Matthew Quinn and Penny Winn. Each of these directors is deemed to be independent and their qualifications and experience are set out on pages 44 and 45 of the annual report, available on CSR’s website on the Annual Reports page. The external audit firm partner in charge of the CSR audit attends all Risk & Audit Committee meetings by invitation, together with relevant senior managers (also by invitation). The committee advises the board on all aspects of internal and external audit, the adequacy of accounting and risk management procedures, systems, controls and financial reporting. A summary of CSR’s material environmental, social and economic sustainability risks is set out on pages 40 and 41 of this statement. The Risk & Audit Committee Charter sets out the committee’s specific responsibilities, and include:  reviewing the scope of the annual audit plans of the external auditor and internal auditor and oversight of the work performed by the auditors throughout the year;  considering and recommending to the board significant accounting policies and material estimates and judgements in financial reports;  reviewing and monitoring internal controls and risk management across the group, including the risk management framework and risk appetite statements;  reviewing and recommending to the board the adoption of the company’s full-year and half-year financial statements; and  reviewing the performance and effectiveness of the internal and external auditors. The committee is a direct link for providing the views of internal and external auditors to the board, when necessary, independently of management influence. Time is allocated for detailed questioning of the material presented and for separate sessions with each of the external auditor, internal auditor and chief financial officer. CORPORATE GOVERNANCE STATEMENT AND RISK Dealing with conflicts of interest The board has a process in place to ensure that conflicts of interest are managed appropriately. If a potential conflict of interest arises, the director concerned is excluded from all discussion and decision making on the matter. At all times, directors are required to keep the company secretary informed of all relevant interests and directors must advise the board immediately of any interests that could potentially conflict with those of CSR. Performance evaluation of the board, its committees and individual directors The performance of the board is reviewed regularly. The board undertakes a self-assessment of its collective performance and that of individual directors and its committees and seeks specific feedback from the executive management team on particular aspects of its performance. The board establishes procedures and oversees this performance assessment program. The process may be assisted by an independent third party facilitator. The results and any action plans flowing from this assessment are documented, together with specific performance goals that are agreed for the coming year. The performance of the managing director is reviewed, at least annually, through a formal performance appraisal process conducted by the non-executive directors. In YEM21, no formal board or committee reviews were undertaken however the directors and executive management continued to provide regular feedback to the chair in relation to the processes and operation of the board. A review of the board and the Remuneration & Human Resources Committee are scheduled to be undertaken in YEM22. Board Committees To increase its effectiveness, the board has three committees consisting of the Risk & Audit Committee, Workplace Health, Safety & Environment Committee and Remuneration & Human Resources Committee. It is the policy of the board that a majority of the members of each committee be independent directors, that all Risk & Audit Committee members be independent directors and that the Remuneration & Human Resources Committee and the Workplace Health, Safety & Environment Committee be chaired by an independent director. Each committee has a charter which includes a more detailed description of its duties, responsibilities and specific composition requirements. The charters are available on CSR’s website on the Corporate Governance page. The Risk & Audit Committee, the Remuneration & Human Resources Committee and the Workplace Health, Safety & Environment Committee each comprise at least three non-executive directors and are chaired by a director who is not the chair of the board. All committees meet at least four times per year. The managing director attends meetings of board committees by invitation. Other members of management also attend committee meetings by invitation. All directors are welcome to attend committee meetings even though they may not be a member. Committee papers are made available to all directors before the meetings. Minutes of committee meetings are included in the papers for the next board meeting and the chair of each committee reports to the board on matters addressed by the committee. 34 CSR LIMITED ANNUAL REPORT 2021 CORPORATE GOVERNANCE STATEMENT AND RISK Board Committees (continued) Remuneration & Human Resources Committee Nominations Committee The company’s size is not considered sufficient to warrant a separate nominations committee. The board takes on the role of the nominations committee, which includes the following functions:  determining the appropriate size and composition of the board (in accordance with the company’s constitution);  determining the appropriate criteria (necessary and desirable skills and experience) for the appointment of directors;  addressing board succession, including recommending the appointment and removal of directors;  assessing the independence of each non-executive director;  defining the terms and conditions of appointment to and retirement from the board;  overseeing induction and continuing education programs for non- executive directors; and  evaluating the board’s performance. Attendance at board and committee meetings during YEM21 Details of director attendance at board and board committee meetings held during the year are provided on page 48 of the Directors’ Report. The Remuneration & Human Resources Committee is chaired by Matthew Quinn. Until 30 November 2020 the other members of the committee were John Gillam and Penny Winn. From 1 December 2020 the other members of the committee are Nigel Garrard, John Gillam and Penny Winn. Each of these directors is considered to be independent. The committee’s specific responsibilities are set out in the Remuneration & Human Resources Committee Charter, and include:  advising the board on remuneration policies and practices;  assessment of culture within the company;  evaluating the performance of the managing director against pre- agreed goals;  making recommendations to the board on remuneration for the managing director and executive managers reporting to the managing director; and  overseeing CSR’s human resources strategy, particularly succession and development planning for executive managers. The committee considers independent advice on policies and practices to attract, motivate, reward and retain strong performers. Workplace Health, Safety and Environment (WHS&E) Committee An important part of CSR’s governance commitments includes protection of its people’s workplace health and safety, and protection of the environment. The board endorsed WHS&E Policy details the company’s and individuals’ obligations in respect of WHS&E. The board’s Workplace Health, Safety & Environment Committee oversees and reports to the board on the management of the company’s WHS&E responsibilities. The Workplace Health, Safety & Environment Committee is chaired by Christine Holman. Until 28 October 2020 the committee was chaired by Penny Winn and the other members of the committee were Christine Holman and Mike Ihlein. From 29 October 2020 the other members of the committee are John Gillam, Mike Ihlein and Penny Winn. The managing director and other members of management attend meetings of the Workplace Health, Safety & Environment Committee by invitation. The committee’s specific responsibilities are set out in the Workplace Health, Safety & Environment Committee Charter, and include:  receiving regular performance reports from management on WHS&E matters;  overseeing the risk management of WHS&E matters;  reviewing the adequacy and effectiveness of CSR’s WHS&E management systems and ensuring appropriate improvement objectives and targets are set and monitored; and  monitoring potential liabilities, changes in legislation, community expectations, research findings and technological changes. The committee conducts every meeting at a CSR site and such meetings include a presentation from local management and a site tour. During YEM21, two committee meetings were held virtually due to COVID-19 restrictions. 35 CORPORATE GOVERNANCE STATEMENT AND RISK SENIOR MANAGEMENT Delegations to management Day-to-day management of the company’s affairs and the implementation of strategy and policy initiatives are formally delegated by the board to the managing director and senior executives. The company has an executive leadership team, comprised of the managing director and direct reports. The executive team meets weekly and is responsible for:  implementing the strategic objectives as set by the board;  operating within the risk framework as approved by the board;   all other aspects of the day-to-day management of the company; instilling and reinforcing values as set by the board; and  ensuring timely and accurate reporting to the board and board committees. During YEM21, progress has been made building substantial change management and transformation capability within the management team. As part of this, three new building products business units have been created, as well as new teams in areas of customer solutions, transformation and logistics to deliver the strategy set by the board. Senior executive appointments and service agreements CSR undertakes background checks on prospective senior executives, covering the candidates’ character, experience, education, criminal record and bankruptcy history. Senior executives’ responsibilities and terms of employment, including termination entitlements, are set out in a formal executive service agreement. A summary of the main elements and terms of the managing director’s and chief financial officer’s service agreements are set out in the remuneration report. Induction of senior executives New executives undertake a structured induction program when they join the company. This includes comprehensive briefings and information on the company’s businesses, and its policies and procedures. Additionally, the program includes site visits and meetings with people in key internal and external roles in order to build the relationships necessary to meet the requirements of their roles. As discussed further below, and in the remuneration report, key performance indicators are agreed with each executive to ensure goals and performance measures are fully and accurately understood and disclosed. Performance evaluation of senior executives CSR’s performance management framework requires that a balanced scorecard of annual key performance indicators (including financial and non-financial measures) is set for each senior executive. Every half year, each senior executive discusses their performance with their manager. At the end of the year, as part of a formal review process, each senior executive’s performance is reviewed against the performance indicators. Also, each individual’s performance and behaviour are internally and externally benchmarked and assessed. CSR conducted evaluations of its senior executives in accordance with this process in October 2020, as well as in March/April 2021. During YEM21, change management, capability and reward have been key focus areas. During the year, a review of CSR’s reward strategy was undertaken considering all elements of reward across the company with particular focus on the link between performance and reward to drive a high-performance culture. Further details of the process for evaluating the performance of key management personnel and the remuneration policy for key management personnel are provided in the remuneration report. CODE OF BUSINESS CONDUCT, ETHICS AND CULTURE Code of business conduct and ethics CSR has a Code of Business Conduct and Ethics (the code) which underpins its goals and values. The code sets the standards for dealing with external stakeholders. The underlying principle of CSR’s code is that lawful, ethical and responsible behaviour is required of directors, executives and all other employees, as well as advisers, consultants and contractors. The board has endorsed the Code of Business Conduct and Ethics. The code formalises the longstanding obligation of all CSR’s employees (including directors) and contractors, to behave ethically, act within the law, avoid conflicts of interest and act honestly and responsibly in all business activities. The code articulates how employees are expected to operate in line with CSR’s fundamental values. CSR's Values are set out both in the code and separately on CSR’s website. The code incorporates CSR’s anti-bribery and corruption policy as well as all relevant whistle-blower protection laws. The code reinforces the company’s commitment to giving proper regard to the interests of people and organisations dealing with the company. Each CSR employee and contractor is required to respect and abide by the company’s obligations to employees, shareholders, customers, suppliers and the communities in which it operates. CSR employees, directors and major contractors are required to sign a certificate of compliance each year signifying that they have read and complied with the code and are not aware of any breaches of that code. Further, CSR employees are encouraged to report potential breaches in a number of ways, including via a confidential telephone service. The company's Reporting Incidents Policy provides that an employee will not be subject to retaliation by CSR for reporting in good faith a possible violation of the code of business conduct and ethics. The board is advised of all material breaches of the code and incidents reported under the policy via the Risk & Audit Committee. CSR is committed to conducting business honestly and fairly and in compliance with all laws and regulations. The company’s Supplier Code of Conduct sets out the expectations of CSR’s suppliers, and applies to all suppliers, including all organisations and sub-contractors providing goods and services to CSR, based in Australia, New Zealand and overseas. During YEM21, the company submitted a Modern Slavery Statement in accordance with the Commonwealth Modern Slavery Act 2018. The Statement addresses the company’s key modern slavery risks and how these risks have been identified and assessed, as well as information on the actions being taken to mitigate those risks and how the effectiveness of these mitigating actions is assessed. 36 CSR LIMITED ANNUAL REPORT 2021 CORPORATE GOVERNANCE STATEMENT AND RISK Culture CSR workplace profile Throughout YEM21, CSR has undertaken substantial work to better align culture and behaviours to the CSR strategy and purpose. CSR’s remuneration framework is kept under review to ensure that at all times it is attracting diverse talent and motivating the right behaviours across the company. Diversity at CSR CSR has policies and practices designed to improve diversity. The company’s Fairness, Respect & Diversity Policy is available on CSR’s website. CSR places great importance on our people and remains committed to promoting an inclusive workplace by applying policies and practices designed to improve both gender equality and diversity within our organisation. Improving diversity brings a range of benefits to our business, such as improved business decision making, new and different perspectives to foster innovation and ultimately better solutions for our customers. Year on year we review our recruitment and retention strategies and practices to further support gender diversity and equity in our workplace. We have maintained regular reporting on attraction, selection and retention of female employees by tracking metrics on:  The number of women that have joined CSR;  Women who have left CSR and the reason for leaving;  The gender participation ratio for CSR as well for each business unit; and  Gender pay equity. The diversity of CSR's employees remains fundamental to its success and CSR is committed to increasing female representation at all levels of management and across the organisation. In accordance with the requirements of the Workplace Gender Equality Act 2012 (Cth), CSR submits its Gender Equality Indicators with the Workplace Gender Equality Agency. The report can be viewed at the website of the Workplace Gender Equality Agency and also on CSR’s website. At the end of YEM21, the percentage of women in the CSR workforce was 21%. During YEM21, 21% of new hires were women. In YEM21, the proportion of CSR’s workforce currently represented by women in leadership roles is set out below: Table 3: Women in leadership Level of leadership Directors Executives Senior Management Roles Board of Directors Executive Leadership Team (CEO-1) Reporting to the Executive Leadership Team (CEO-2) YEM21 YEM20 43%1 25% 50% 18% 27% 27% 1 In December 2020, the number of Directors increased from six to seven as a temporary measure to facilitate board transition. 37 CORPORATE GOVERNANCE STATEMENT AND RISK Measurable objectives Improving diversity requires cultural change driven by the leadership and commitment of the board and senior management. CSR has structured its measurable objectives around this commitment. The achievements for YEM21 and the initiatives for YEM22, as approved by the Remuneration & Human Resources Committee, are set out below: Table 4: Diversity measurable objectives Measurable objective YEM21 achievements Overview of YEM22 initiatives Leadership and culture  Changes made to the business structure included identifying and selecting internal talent for key opportunities, resulting in 33% of all promotions during the year being women, which is higher than CSR’s workforce participation rate of women of 21% Policy & Governance  Responded proactively to current and prospective employees’ expectations on flexibility as a result of COVID-19, with improved processes to plan and manage flexibility and in particular remote working and working from home up to two days per week, complementing the Flex@CSR programs introduced in 2019  Gender pay analysis completed and corrective actions implemented  Completed a comprehensive review of the paid parental leave policy with new processes implemented to bring it more in line with market expectations  Central management of remuneration has been implemented to ensure consistency and parity throughout the company Recruitment and retention  CSR monitors female voluntary terminations and seeks to understand the reasons for these  21% of all new hires were women   Implementation of consistent behaviours, improving alignment to the newly implemented company purpose and strategy Implementation of enhanced means of measuring culture to provide more meaningful real-time insights  Promote diversity and inclusion through recognition  and celebration of global events Implementation of online learning tools for individual and team development  Continue the established bi-annual process to ensure gender pay parity including reviews by the executive team and the board Implementation of a paid domestic (violence) leave policy   Launch of a new Wellbeing provider, aimed at providing all employees with the tools needed to stay well, both physically and mentally  Continuously review company policies, procedures and ways of working to ensure that CSR’s practices align with market practice  Continue to further develop and implement a plan to improve gender participation rates for females (21% as at March 2021) to be better than the industry standard of 27.5% (ABS as at December 2020), including continuing to target recruitment of women into engineering, operations and sales roles  Continue to identify female talent to be assigned to strategic on-job development opportunities REMUNERATION CSR’s policy is to reward executives with a combination of fixed remuneration and short and long-term incentives structured to drive improvements in shareholder value. Non-executive directors receive no incentive payments and there are no retirement benefit schemes in place. Executives and directors may forgo a small part of their cash salary or, for non-executive directors, their directors’ fees, to acquire shares in CSR. Further details are included on page 66 of the Remuneration Report. Employees cannot approve their own remuneration, nor can they review that of their direct subordinates without their manager’s approval. The Remuneration Report, commencing on page 50 of the annual report, includes further details on CSR’s remuneration policy and its relationship to the company’s performance. It also includes details of the remuneration of directors and key management personnel for YEM21 and clearly distinguishes between the structure of non-executive director remuneration from that of the executive director and other key management personnel. Shareholders are invited to vote on the adoption of the remuneration report at the company’s annual general meeting. 38 CSR LIMITED ANNUAL REPORT 2021 CORPORATE GOVERNANCE STATEMENT AND RISK RISK MANAGEMENT There are many risks in the markets in which CSR operates. A range of factors, some of which are beyond CSR’s control, can influence performance across CSR’s businesses. CSR constantly and deliberately assumes certain levels of risk in a calculated and controlled manner. CSR has in place a range of policies and procedures to monitor the risk in its activities as well as defined limits of authority for all levels of management and these are periodically reviewed by the board. CSR’s Risk Management Policy sets out the framework for risk management, internal compliance and control systems. There are several layers that assist the board in ensuring the appropriate focus is placed on the risk management framework:  Risk & Audit Committee – reviews and reports to the board in relation to the company’s financial reporting, internal control structure, risk management systems including the risk framework and risk appetite statements and the internal and external audit functions;  Workplace Health, Safety & Environment Committee – reviews and reports to the board on the management of the company’s safety, health and environment liabilities and legal responsibilities as well as the company’s involvement in the communities in which it operates; and  Executive management team – manages and reports to the board on business and financial risks and overall compliance. Risk management is sponsored by the board and is a priority for senior managers, starting with the managing director. The board oversees the risk profile of CSR and ensures that business developments are consistent with the goals of CSR. The board receives monthly assurances from the management team that significant risks are being managed appropriately. A risk management framework is in place covering business risk, financial risk, financial integrity, legal compliance and sustainability risk. The risk management framework requires current and emerging risks across the businesses to be identified, evaluated, monitored and controlled. Risks are classified as either strategic/commercial, operational, financial or compliance/conduct risks. The framework also includes evaluation of mitigation strategies. CSR’s Risk Appetite Statements, approved by the board, are core to the Risk Management Policy and defines (within practical boundaries) the amount of risk the organisation is willing to accept in pursuing its strategic objectives. By expressly articulating and documenting its Risk Appetite Statements, CSR aims to ensure that:  risks can be measured, managed and monitored;  risk appetites can be consistently articulated and understood by all relevant stakeholders; and  day-to-day operations are undertaken in alignment with CSR’s tolerance for risk. The board, through the Risk & Audit Committee, receives recommendations in relation to the risk profile of CSR, breaches of the policy framework and external developments which may impact on the effectiveness of the risk management framework. It also approves significant changes to the risk management framework, risk appetite statements and related policies. The Risk & Audit Committee has responsibility for monitoring compliance with the risk management framework approved by the board for internal control and compliance matters. In this role, the Risk & Audit Committee monitors and reviews the effectiveness of the internal audit and compliance functions. CSR’s Corporate Governance and Disclosure Committee has responsibility for any governance matters. Committees exist at the executive management level to ensure the necessary elements of expertise are focused on specific risk areas. Beneath this level, other committees exist where subject matter experts focus on specific risks as appropriate. Risk management accountability As part of the process of approving the financial statements, at each reporting date, the managing director and other responsible senior executives provide statements in writing to the board on the quality and effectiveness of the company’s risk management and internal compliance and control systems. The Risk & Audit Committee reviews the risk management framework annually to confirm that the framework continues to be appropriate and effective. The most recent assessment of the risk management framework took place in October 2020. The board has also received statements from the managing director and the chief financial officer certifying that, having made all reasonable enquiries and to the best of their knowledge and belief:  the statements made in relation to the financial integrity of the CSR group financial reports are founded on a sound system of effective and efficient risk management and internal compliance and control;  the system of risk management in operation throughout YEM21 was operating effectively; and  the systems relating to financial reporting were operating effectively in all material respects. In YEM21 the board received the relevant declarations required under section 295A of the Corporations Act 2001 from the managing director and chief financial officer as well as the relevant reports and assurances that their opinions were formed on the basis of a sound system of risk management and internal controls which are operating effectively. Financial report accountability CSR’s managing director and chief financial officer, who are present for board discussion of financial matters, declare to the board, in writing, that the company’s financial statements are in accordance with relevant accounting standards, give a true and fair view in all material respects of the company’s and the group’s financial condition and operational results and comply with the Corporations Act 2001 and associated regulations. The chief financial officer oversees a robust internal process, where business unit financial managers regularly meet with representatives from the corporate finance team to discuss the financial aspects of each business. This includes a review of the business unit profit and loss statement, balance sheet and all other relevant matters. Non-financial report accountability For those periodic corporate reports that are not audited or reviewed by the external auditor, a rigorous internal review process is implemented. This process is led by the internal subject matter experts with reviews undertaken by management and key internal stakeholders. External advice is obtained as required. Non-audited periodic reports include the annual Sustainability Report, the Modern Slavery Statement and this corporate governance statement. These periodic reports are approved by the board. 39 CORPORATE GOVERNANCE STATEMENT AND RISK Environmental, social and economic sustainability risks CSR’s risk management framework is intended to provide the basis for a systematic approach to the identification and management of risks. The matters below reflect CSR’s material economic, environmental and social sustainability risks. Table 5: Material economic, environmental and social sustainability risks Key areas of materiality Risks Monitor and manage risk Aluminium, currency and debt markets Australian construction markets and competitor activity  CSR’s results are impacted by movements in the global US dollar price for aluminium and currency fluctuations.  Some risks related to the aluminium operation cannot be hedged including regional price premiums, global relativity of price of electricity and inputs such as alumina and petroleum coke as well as changes to the joint venture structure or potential operational issues at the Tomago smelter including electricity curtailments.  CSR has a policy to hedge both US dollar sales and foreign currency exposure when specific targets are met, with the primary objective of reducing short-to-medium term earnings volatility. This policy is monitored regularly by CSR’s Finance Committee which includes CSR’s managing director, chief financial officer, group treasurer and the general manager of Gove Aluminium Finance.  CSR regularly monitors cash flow and the group financial position as part of the Finance committee’s function.  CSR is actively engaged with the Tomago operating committee through its position on the Tomago Board. Tomago undertakes separate material risk analysis to identify and mitigate potential operational risks.  Approximately 70% of CSR’s total revenue is generated from products and services supplied into the construction sector of Australia and New Zealand which is impacted by several macro-economic factors.  Changes in ownership in the construction sector has resulted in larger customers representing an increasing proportion of CSR’s revenue.  Reviews of market activity are factored into CSR’s monthly reporting, quarterly forecasting and annual budget and planning cycles, which in turn drive capacity and capital planning. Furthermore, the nature of CSR’s building products is that they are typically sold late in the construction process, giving CSR some visibility of changes in market conditions before specifically impacting demand.  CSR is actively developing and acquiring new products, services and distribution networks to improve its position in the market and provide a comprehensive service offering.  As a supplier to the construction market,  The release of future land supply for residential Digital and cyber security Energy and climate change CSR is subject to a number of competitive forces including other domestic and international suppliers and new technologies which could replace existing building methods.  Digital services are increasingly used by the construction sector. CSR’s digital development program is critical to achieving growth in its key markets.  CSR network and data risks for cyber security breaches.  CSR’s manufacturing operations use significant amounts of energy including electricity and gas.  These energy costs are increasing, particularly for Tomago aluminium, which in turn impacts its cost competitiveness compared to global smelters.  The transition to a low carbon economy and mitigating the potential impacts of climate change, as well as government regulations and planning may impact the availability and nature of energy supply as well as how CSR manages our land assets and business processes. development relies on the coordination of government and regulatory bodies with builders and developers to deliver infrastructure and services for new projects. Implemented regular user security awareness training.   A cyber security improvement plan launched with accreditation in accordance with ISO27001.  Regular penetration testing and patching across systems.  For 2030, CSR has set new 10 year targets which cover key areas of energy and emissions reduction, procurement, packaging, minimising water use and waste and preserving biodiversity. Initial three year planning is underway as a pathway to achieve 2030 targets which is monitored and reviewed regularly by senior management and the board Workplace Health, Safety & Environment Committee.   Where possible, CSR enters into long-term contracts to provide greater security of energy supply for its factories.  CSR’s Energy and Carbon Management Committee oversees risks related to electricity and gas pricing and management.  Alternative energy sources including solar power systems are installed at some sites in addition to site specific energy reduction initiatives.  Transition risk assessment scenarios were completed for Gyprock plasterboard and Bradford insulation, two of CSR’s largest businesses by revenue. This analysis focused on transition (market, policy & regulatory) risks, complementing earlier work undertaken on the physical (weather) risks impacting sites and supply chain risks. 40 CSR LIMITED ANNUAL REPORT 2021 CORPORATE GOVERNANCE STATEMENT AND RISK Environmental, social and economic sustainability risks (continued) Table 5: Material economic, environmental and social sustainability risks (continued) Key areas of materiality Risks Monitor and manage risk Product liability  Previous involvement in asbestos in  CSR meets all valid claims in both Australia and the United Reputational risk associated with breach of social licence to operate Supply Chain and product compliance Australia and exporting asbestos to the United States.  CSR ceased asbestos mining in 1966 and divested remaining interests in 1977.  CSR operates a number of factories across Australia and New Zealand and employs over 2,500 employees.  CSR‘s activities can impact the community and environment in which it operates.  CSR relies on an extensive supply chain to manufacture and distribute its products and services.  This supply chain can be impacted by natural, political or technological disruptions which the company reviews to develop alternative supply options and minimise the risk of potential supply dislocation.  Changes in building codes requires ongoing assessment to ensure products are fit for purpose and compliant with all relevant codes. This includes additional risks associated with supply and install services. States on an equitable basis.  The asbestos provision is impacted by movements in claim numbers, settlement rates and values and movements in AUD/US$ exchange rate.  CSR’s code of business conduct sets out the behaviours expected of all employees, suppliers and other contractors. Compliance with the code is measured annually.  There is a dedicated, external confidential hotline available to employees and other stakeholders for reporting misconduct.  CSR has a quality management system to ensure that all products manufactured or supplied consistently meet the requirements and specifications of international and national quality standards and customer expectations.  CSR has launched a two-year work plan to develop and implement its sustainable procurement strategy. This process will also align CSR with the requirements of Australian Modern Slavery legislation.  The company’s Supplier Code of Conduct sets out the expectations of CSR’s suppliers, and applies to all suppliers, including all organisations and sub-contractors providing goods and services to CSR, based in Australia, New Zealand and overseas.  CSR has set targets out to 2030, with a view to increasing the quantity of products purchased from social enterprises. Workplace health and safety  CSR has a stated long-term objective of achieving zero harm to CSR people across all operations.  The board WHS&E Committee regularly reviews initiatives targeting improved safety performance across CSR’s businesses. Note: Material Risks are listed alphabetically. 41 CORPORATE GOVERNANCE STATEMENT AND RISK Role of the external auditor The Risk & Audit Committee seeks to ensure the independence of the external auditor. The policy on auditor independence applies to services supplied by the external auditor and their related firms to CSR. Under the policy on auditor independence:  the external auditor is not to provide non-audit services under which the auditor assumes the role of management, becomes an advocate for the group, or audits its own professional expertise;  significant permissible non-audit assignments awarded to the external auditor must be approved in advance by the committee or, between committee meetings by the chair of the committee;  the external audit engagement partner and review partner must be rotated every five years;  procedures for selection and appointment of the external auditor, and for the rotation of external audit engagement partners, are set out in the committee charter; and  the external auditor confirms its independence within the meaning of applicable legislation and professional standards at each half- year and full-year. The external auditor attends the company’s annual general meeting so shareholders are given the opportunity to ask questions relevant to:  the conduct of the audit;  the preparation and content of the auditor’s report;  the accounting policies adopted by the company in relation to the preparation of the financial statements; and  the independence of the auditor in relation to the conduct of the audit. Role of the internal auditor The Risk & Audit Committee recommends to the board the appointment or dismissal of the internal auditor, who is independent of the external auditor. The internal audit function is led by the head of legal, company secretary and risk and provides objective assurance to management and the board on the effectiveness of CSR’s internal control, risk management and governance systems and processes. The function oversees the execution of the internal audit plan, as approved by the Risk & Audit Committee. The head of legal, company secretary and risk has a reporting line to the chief financial officer as well as to the Risk & Audit Committee. The role of the internal auditor is to:  report to the board through the Risk & Audit Committee on CSR’s compliance against its governance framework and policies, including investigating, and advising on, any potential or actual breaches;  oversee the implementation of CSR’s risk framework across the organisation; and  recommend improvements to the company’s risk management framework. The function comprises a mix of qualified in-house professionals and support from relevant external expertise. The internal audit function has full access to all CSR businesses, records and personnel. Noting the reporting line and the combined role of the Head of Legal, Company Secretary and Risk, the board does not consider the internal audit function to be completely independent of management. In cases where this may impact the objectivity of the function, then external auditors/investigators are retained. The internal audit plan is formulated using a risk-based approach to align assurance with CSR’s key risks. Internal audit activity and outcomes are reported to the Risk & Audit Committee at least bi- annually. ENGAGEMENT WITH STAKEHOLDERS CSR has a number of stakeholders including shareholders, employees, customers, suppliers and local communities. The board identifies and prioritises CSR’s key stakeholders, develops a strategy for engagement with stakeholders and supports management to engage with key stakeholders to understand, consider and respond to issues. Continuous disclosure CSR believes that shareholders, regulators, ratings agencies and the investment community generally, should be informed of all major business events and risks that influence CSR, in a factual, timely and widely available manner. CSR has a long established practice of providing relevant and timely information to stakeholders, supported by its Share Market Disclosure Policy which details comprehensive procedures to ensure compliance with all legal obligations. Under this policy, any price sensitive material for public announcement, including full-year and half-year results announcements, release of financial reports, presentations to investors and analysts and other prepared investor briefings for CSR, will be:  lodged with the ASX as soon as practical and before external disclosure elsewhere; and  posted on CSR’s website. The policy limits external briefings in the periods between the end of a full-year and half-year and the release to the ASX of the relevant results. The board has responsibility for compliance with CSR’s continuous disclosure obligations to keep the market fully informed of information that may have a material effect on the price or value of CSR’s securities. Internal procedures and guidelines for continuous disclosure and communications have been developed. These procedures sit together with CSR’s Share Market Disclosure Policy to ensure the board and the Corporate Governance and Disclosure Committee is made aware of any information that should be considered for release to the market. CSR’s Corporate Governance and Disclosure Committee meets as required, and often on very short notice, to ensure compliance with disclosure requirements. Members of this committee are the managing director, chief financial officer, chair of the Risk & Audit Committee, company secretary and general manager investor relations and corporate communications. The managing director approves all disclosures before they are released. The board approves all disclosures that are significant. All announcements include a statement identifying the title of the body, or the name and title of the officer of the company, who approved the disclosure. Directors receive a copy of all ASX disclosures promptly following release. The Share Market Disclosure Policy is reviewed regularly to ensure compliance with the ASX Listing Rules and guidance on continuous disclosure. The company secretary is responsible for communications with the ASX. 42 CSR LIMITED ANNUAL REPORT 2021 CORPORATE GOVERNANCE STATEMENT AND RISK Commentary on financial results Role of the investor relations function CSR provides a review of operations and financial performance in the full-year and half-year results, which also includes the company’s financial report. Results announcements to the ASX, analyst presentations and the full text of the chair’s and managing director’s addresses at the company’s annual general meeting are made available on CSR's website. Other engagement activities CSR strives to communicate effectively with shareholders about the company’s performance, presenting the annual report and other corporate information in clear language, supported by descriptive graphics and tables. This approach is outlined in the company’s Shareholder Communication Policy. Where practicable, the company uses the latest widely available electronic technology to communicate openly and continuously with shareholders, and the share market in general. Announcements to the ASX, significant briefings, presentations, notices of meetings and speeches at annual general meetings are promptly posted on the Investors and News section of CSR’s website. Shareholders can register to receive shareholder information and can lodge proxies electronically for the annual general meeting. The annual general meeting, results announcements and other major briefings are available via a live webcast from CSR’s website, for access by all interested parties. Shareholders are encouraged to submit questions or comments ahead of, or during, the company’s annual general meeting. Members of senior management are present at the annual general meeting, along with directors, to answer questions about the company’s operations. On occasions when the annual general meeting may be held as a hybrid or virtual meeting, an opportunity for shareholders to ask questions and vote in real time will be made available. All resolutions at the annual general meeting are decided by a poll rather than on a show of hands. The company’s Sustainability Report provides information on CSR’s sustainability record across a number of priority areas including the environment, people and safety, community and supply chain. The company’s Supplier Code of Conduct sets out the expectations of CSR’s suppliers, and applies to all suppliers, including all organisations and sub-contractors providing goods and services to CSR, based in Australia, New Zealand and overseas. During YEM21, the company submitted a Modern Slavery Statement in accordance with the Commonwealth Modern Slavery Act 2018. The Statement addresses the company’s key modern slavery risks and how these risks have been identified and assessed, as well as information on the actions being taken to mitigate those risks and how the effectiveness of these mitigating actions is assessed. CSR’s investor relations function is designed to ensure that the market is kept informed of all aspects relevant to the company and also to provide an opportunity for investors and other stakeholders to express views on the company. The program includes lodgement of information on the ASX platform, managing and updating the CSR website, investor roadshows, conferences and other briefings with all materials lodged with the ASX prior to distribution. CSR utilises the following activities to promote effective communication with the market:  comprehensive and up to date company website;  investor briefings, presentations, conferences and other events;  encouraging questions via the company’s website and ahead of the AGM as outlined in the Notice of Meeting; and  webcasting important company events. SHARE TRADING POLICY Under the company’s Share Trading Policy, directors, senior managers and identified designated employees may only buy or sell CSR shares, or give instructions to the trustee of CSR’s employee share acquisition plan (ESAP), or vary their participation in the dividend reinvestment plan (DRP) during one month periods commencing 24 hours after the date of the full-year and half-year results announcements and the annual general meeting. Also, they are prohibited from dealing in any financial products relating to CSR securities or entering into hedging arrangements in respect of CSR securities they hold, or which are held on their behalf. Additional clearance requirements apply to directors of CSR Limited, the managing director, chief financial officer as well as senior executives who are eligible to participate in CSR’s long-term incentive plan. Each of these individuals must obtain clearance for any proposed dealing in CSR’s securities. Under the policy, and as required by law, all directors and employees are prohibited from buying or selling CSR shares at any time if they are aware of any market sensitive information that has not been made public. All CSR share dealings by directors are notified to the ASX within the required time. Additional trading restrictions apply to key management personnel. OTHER IMPORTANT POLICIES In addition, the board has adopted specific internal policies in key areas, including trade practices; workplace health, safety and the environment; fairness, respect and diversity in employment; capital investment; dealing with price sensitive and other confidential information; privacy; indemnification of employees; and requirements for authorising and entering into business transactions on behalf of CSR. Details of the company’s engagement with the community are available in the Sustainability Report found on CSR’s website. DISCLOSURE CSR considers that the above corporate governance practices comply with the ASX CGC Principles and Recommendations (4th edition). The company’s corporate governance framework is kept under review, with a report provided to the board by the company secretary at least annually, recommending any improvements necessary to respond to changes to the company’s business or applicable legislation and standards. 43 BOARD OF DIRECTORS BOARD OF DIRECTORS The Board of Directors are responsible for and oversee the governance, culture and management of CSR. CSR’s shareholders approve the appointment of Directors and hold them accountable for the performance of the Company. JOHN GILLAM BCom, MAICD, FAIM. Chair of the board since 1 June 2018, non-executive director since December 2017. Other CSR responsibilities: Member of the Remuneration & Human Resources Committee and Workplace Health, Safety & Environment Committee. Experience and expertise: John joined Wesfarmers Limited in 1997 and held a number of senior leadership roles in the company over 20 years, including CEO of the Bunnings Group from 2004 to 2016, Managing Director of CSBP from 2002 to 2004 and Chairman of Officeworks from 2007 to 2016. Other directorships/offices held:  Chairman of Nufarm Limited (Director since July 2020 and Chair since September 2020 to current)  Chairman of BlueFit Pty Limited (2018 to current)  Director of Trinity Grammar School, Kew (2018 to current, Chairman to July 2020)  Director of Heartwell Foundation (2009 to current)  Director of Clontarf Foundation (2017 to current) JULIE COATES BA, DipE. Appointed to the board as an executive director and managing director on 2 September 2019, having joined CSR on the same date. Other CSR responsibilities: Attends committee meetings by invitation. Experience and expertise: Julie was formerly the managing director of Goodman Fielder Australia and Goodman Fielder New Zealand. Julie has also held several senior roles at Woolworths Limited, including managing director of Big W, chief logistics officer and human resources director, working closely on business strategy and major transformational change programs, delivering strong results at both a divisional and group level. Julie has proven leadership skills, a strong understanding of manufacturing, safety and operational processes and deep experience in supply chain efficiency, optimisation and digitisation. Other directorships/offices held:  Previously a non-executive director of Coca-Cola Amatil Limited (2018 to 2019) NIGEL GARRARD BEc, CA, MAICD. Non-executive director since December 2020. Other CSR responsibilities: Member of the Risk & Audit Committee and Remuneration & Human Resources Committee. Experience and expertise: Nigel was formerly managing director and CEO of leading packaging manufacturing company Orora Limited from 2013 to 2019. Nigel has also held a number of senior positions in a range of manufacturing industries including managing director/president of Amcor Australasia & Packing Distribution, managing director Coca-Cola Amatil Food & Services Division and managing director of the then listed SPC Ardmona. Other directorships/offices held:  Non-executive director of Ansell Limited (2020 to current)  Chairman of McMahon Services Aust. Group advisory board (2019 to current)  Director of Hudson Institute Medical Research (2016 to current)  Director of Detmold Group advisory board (2020 to current)  Previously a director of Orora Limited (2013 to 2019) 44 CSR LIMITED ANNUAL REPORT 2021 BOARD OF DIRECTORS CHRISTINE HOLMAN PGDipBA, MBA, GAICD. Non-executive director since October 2016. Other CSR responsibilities: Chair of the Workplace Health, Safety & Environment Committee and member of the Risk & Audit Committee. Experience and expertise: Christine was formerly commercial director at Telstra Broadcast Services until March 2016 and chief financial officer and commercial director of Globecast Australia until June 2015. Christine also spent seven years at Capital Investment Group involved in strategy, business development and mergers and acquisitions. Christine has over 20 years’ experience across the technology, private equity and digital sectors in a variety of functions including finance, commercial, technology and marketing. Other directorships/offices held:  Non-executive director of Metcash Limited (2020 to current)  Non-executive director of Blackmores Limited (2019 to current)  Non-executive director of Collins Foods Limited (2019 to current)  Non-executive director of The Moorebank Intermodal Company, a Federal Government Business Enterprise (2018 to current)  Non-executive director of The Bradman Foundation (2016 to current)  Non-executive director of the State Library of NSW Foundation (2017 to current)  Non-executive director of the T20 World Cup 2020 Cricket Board (2018 to current)  Non-executive director of the McGrath Foundation (2020 to current)  Previously a non-executive director of HT&E Limited (2015 to 2018)  Previously a non-executive director of WiseTech Global Limited (2018 to 2019) MIKE IHLEIN BBUS (Accounting), FAICD, FCPA, FFIN, MFEI. Non-executive director since July 2011. Other CSR responsibilities: Chair of the Risk & Audit Committee and member of the Workplace Health, Safety & Environment Committee. Experience and expertise: Mike was formerly chief executive office and executive director of Brambles Limited until November 2009, prior to which he was Brambles chief financial officer for four years. Mike has also had a long career with Coca-Cola Amatil Limited including seven years as chief financial officer and executive director and a number of senior operational, finance, business development and treasury roles including managing director of Coca-Cola Amatil Poland. Other directorships/offices held:  Non-executive director of Scentre Group (2014 to current)  Non-executive director of Inghams Group Limited (2020 to current)  Non-executive director of Ampol Limited (2020 to current)  Non-executive director of Kilfinan Australia Limited (2016 to current)  Previously a non-executive director of Snowy Hydro Limited (2012 to 2019) MATTHEW QUINN BSc (HONS), ACA, ARCS. Non-executive director since August 2013. Other CSR responsibilities: Chair of the Remuneration & Human Resources Committee and member of the Risk & Audit Committee. Experience and expertise: Matthew was formerly managing director of Stockland for 12 years until January 2013. Matthew has an extensive background in commercial, retail, industrial and residential property investment, development and environmental land rehabilitation. Other directorships/offices held:  Chairman of Class Super (Director since 2015, Chair since 2017 to current)  Chairman of TSA Management Group Holdings Pty Limited (2018 to current)  Non-executive director of Regis Healthcare Limited (2018 to current)  Non-executive director of Elders Limited (2020 to current)  Member of the Australian Business and Community Network Scholarship Foundation PENNY WINN BCOM, MBA, GAICD. Non-executive director since November 2015. Other CSR responsibilities: Member of the Risk & Audit Committee, Remuneration & Human Resources Committee and the Workplace Health, Safety & Environment Committee. Experience and expertise: Penny was formerly director of Group Retail Services with Woolworths responsible for leading the Logistics and Information Technology divisions and the Customer Engagement teams, a position held until October 2015. Penny has over 30 years of experience in retail in senior management roles in Australia and overseas, including experience in workplace health & safety. Other directorships/offices held:  Non-executive director of Ampol Limited (2015 to current)  Non-executive director of Goodman Limited and Goodman Funds Management Limited (2018 to current)  Board member of the ANU Foundation (2020 to current)  Previously Chairman of Port Waratah Coal Services Limited (2015 to 2019)  Previously a non-executive director of Coca-Cola Amatil Limited (2019 to May 2021) 45 DIRECTORS REPORT DIRECTORS REPORT Events after balance sheet date Dividends On 12 May 2021 the board resolved to pay a final dividend of 14.5 cents per share and a special dividend of 9.5 cents per share. Both of these dividends will be fully franked at the 30% corporate tax rate. The final and special dividend for the financial year ended 31 March 2021 have not been recognised in this financial report. No other matters or circumstances have arisen since the end of the financial year that have significantly affected or may significantly affect the CSR group’s operations, the results of those operations or the CSR group’s state of affairs in future financial years. Dividends and distributions to shareholders Dividends through the year have been as follows:  an interim ordinary dividend of 8.5 cents per ordinary share and an interim special dividend of 4.0 cents per ordinary share (100% franked at the 30% corporate tax rate) was paid on 8 December 2020 (as set out in note 19 to the financial statements on page 92). No other distributions were paid during the year. Options over share capital Other than as disclosed in the Remuneration Report:  no CSR options were granted to executives or non-executive directors during the year;  there were no unissued shares or interests in CSR subject to options at the date of this report; and  no CSR shares or interests were issued pursuant to exercised options during or since the end of the year. The board of directors of CSR Limited (CSR) presents its report of the consolidated entity, being CSR and its controlled entities (CSR group), for the year ended 31 March 2021. The information appearing on pages 46 to 70 forms part of the directors’ report and is to be read in conjunction with the following information: Principal activities The principal activities of entities in the CSR group during the year included the manufacture and supply of building products in Australia and New Zealand. In Australia, the CSR group has an interest in the smelting of aluminium through its 70% interest in Gove Aluminium Finance Limited, which owns 36.05% of the Tomago aluminium smelter located near Newcastle, NSW. CSR also maximises returns from the sale of its surplus land by advancing sites through stages of the development process. Review of operations and financial results A review of the CSR group operations and results for the year ended 31 March 2021 is set out on the inside front cover to page 43 and pages 71 to 112 of the annual report and forms part of the directors’ report. This includes the summary of consolidated results as well as an overview of the group’s strategy, material risks and future prospects. Significant changes There have been no significant changes to the CSR group in the financial year ended 31 March 2021. Impact of COVID-19 pandemic The CSR group has managed, and continues to actively manage, the risks arising from the COVID-19 pandemic and any known impacts have been reflected in the financial statements for the year ending 31 March 2021. CSR’s response includes a financial response plan that incorporates scenario and contingency planning at various levels of construction activity. In addition to a CSR group business continuity plan (BCP), all CSR businesses have tailored BCPs, which are specific to their business and contemplate the operational responses at various levels of construction activity. As at 31 March 2021, CSR had cash of $250.8 million and $420.0 million in undrawn borrowing facilities. This provides CSR with financial flexibility to manage during an uncertain business activity environment. 46 CSR LIMITED ANNUAL REPORT 2021 DIRECTORS REPORT Indemnities and insurance Auditor independence Under rule 101 of CSR’s constitution, CSR indemnifies every person who is or has been an officer of CSR, to the extent permitted by law and subject to the restrictions in sections 199A and 199B of the Corporations Act 2001 against:  liability incurred by that person as an officer of CSR (including liabilities incurred by the officer as a director of a subsidiary of CSR where CSR requested the officer to accept appointment as director); and  reasonable legal costs incurred in defending an action for a liability or an alleged liability incurred by that person as such an officer of CSR (including such legal costs incurred by the officer as a director of a subsidiary of CSR where CSR requested the officer to accept appointment as director). For the purposes of rule 101 of CSR’s constitution, ‘officer’ means a director, secretary and executive officer of CSR (as defined in the Corporations Act 2001). CSR has entered into a deed of indemnity, insurance and access with current and former directors of CSR and its subsidiaries. Under each director’s deed, CSR indemnifies the director against all costs, losses or liabilities, including without limitation, legal costs and expenses, on a full indemnity basis, incurred by the director in their capacity as a director of CSR or, in some cases as a director of a CSR subsidiary. The deeds also provides directors certain rights of access to board papers and require CSR to maintain insurance cover for directors. No director or officer of CSR has received benefits under an indemnity from CSR during or since the end of financial year. CSR’s external auditor is not indemnified under rule 101 of CSR’s constitution or any agreement. During the year, CSR paid premiums in respect of insurance contracts for the year ended 31 March 2021 and, since the end of the year, CSR has paid, or agreed to pay, premiums in respect of such contracts for the year ended 31 March 2022. The insurance contracts insure against certain liability (subject to exclusion) incurred by persons who are or have been directors or officers of CSR and its controlled entities. In accordance with normal commercial practice, the insurance contract prohibits disclosure of the nature of the liability covered by, or the premium payable under, the contract of insurance. No claims under the indemnities have been made against CSR during or since the end of the year. Performance in relation to environmental regulation The board places a high priority on environmental issues and is satisfied that adequate systems are in place for the management of CSR’s compliance with applicable environmental regulations under the laws of the Commonwealth, States and Territories of Australia and of New Zealand. CSR is not aware of any pending prosecutions relating to environmental issues, nor is CSR aware of any environmental issues, not provided for, which would materially affect the business as a whole. Political donations CSR attended a small number of events organised by political parties such as conferences in the year ended 31 March 2021. CSR’s businesses are often involved in a degree of interaction with all levels of government. CSR assists all sides of politics in the development of policy in fields where CSR has specific expertise. No fees were paid to attend these events (2020: $nil) and as such disclosure to the Australian Electoral Commission was not required. There is no current or former partner or director of Deloitte Touche Tohmatsu, CSR’s auditor, who is, or was at any time during the year ended 31 March 2021, an officer of the CSR group. No auditor who played a significant role in the CSR group audit for the year ended 31 March 2021 has done so for a period exceeding the extended audit involvement period of five successive financial years. The auditor’s independence declaration (made under section 307C of the Corporations Act 2001) is set out on page 49. Non-audit services Details of the amounts paid or payable to the CSR group auditor, Deloitte Touche Tohmatsu, for non-audit services provided by that firm during the year are shown in note 33 to the financial statements on page 110. In accordance with written advice provided by the Risk & Audit Committee, the directors are satisfied that the provision of non- audit services during the year by Deloitte Touche Tohmatsu:  is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001; and  did not compromise the auditor independence requirements of the Corporations Act 2001 in view of the materiality of the amounts, the nature of the services and the processes established to monitor the independence of the auditors. Proceedings on behalf of CSR No proceedings have been brought, or intervened in, on behalf of CSR, nor has any application for leave been made in respect of CSR under section 237 of the Corporations Act 2001. Remuneration of directors and key management personnel (KMP) The remuneration report on pages 50 to 70 provides: a summary of the board’s remuneration policy and practices during the past year as they apply to directors and other KMP (as defined by the Accounting Standard AASB 124 Related Party Disclosures); the relationship between remuneration policy and the CSR group’s performance; and the remuneration details for each director and other KMP. Directors and company secretary On 1 December 2020 Mr Nigel Garrard was appointed as a non- executive director. The names of directors who held office at 12 May 2021, as well as details about current directors’ period of appointment, qualifications, experience, special responsibilities, current directorships and directorships for the past three years of other listed companies, are on pages 44 and 45 and forms part of the directors’ report. The qualifications and experience of the company secretary at 12 May 2021 are as follows: Debbie Schroeder BED (HONS), LLB, GAICD, AGIA. Joined CSR in 2001 and has been company secretary since 2010. In 2018, Debbie was appointed head of risk and internal audit, and in July 2020 was also appointed head of legal. Prior to joining CSR, Debbie was a lawyer at Tress Cocks & Maddox and Landers & Rogers. Debbie has extensive experience in corporations law and corporate governance, risk management and compliance, dispute resolution, employment law and insurance. Debbie holds a Graduate Diploma in Applied Corporate Governance, is an Associate of the Governance Institute of Australia and a Graduate of the Australian Institute of Company Directors (AICD). 47 DIRECTORS REPORT Directors’ meetings and directors’ shareholdings The number of meetings of the company’s board of directors and each board committee held during the year ended 31 March 2021, and the number of meetings attended by each director are detailed in Table 1 below. The directors’ relevant interests in shares in CSR or a related body corporate as at the date of this report are detailed in the remuneration report on pages 69 and 70. Other than as disclosed elsewhere in this report, no director:  has any relevant interest in debentures of, or interests in a registered scheme made available by, CSR or a related body corporate;  has any rights or options over shares in, debentures of or interests in a registered scheme made available by, CSR or a related body  corporate; or is a party to or entitled to a benefit under any contracts that confer a right to call for or deliver shares in, debentures of or interests in a registered scheme made available by, CSR or a related body corporate. Table 1: Meetings of directors Year ended 31 March 2021 CSR Board1 Risk & Audit Committee Workplace Health, Safety & Environment Committee Remuneration & Human Resources Committee Held2 Attended3 Held2 Attended3 Held2 Attended3 Held2 Attended3 John Gillam4 Nigel Garrard5, 6 Christine Holman7 Michael Ihlein7 Matthew Quinn6 Penny Winn8 Julie Coates 17 3 17 17 17 17 17 17 3 17 17 17 17 17 n/a 1 5 5 5 1 5 5 1 5 5 5 5 5 2 n/a 4 4 n/a 4 4 2 – 4 4 – 4 4 4 1 n/a n/a 4 4 4 4 1 4 3 4 4 4 Includes additional meetings held to specifically discuss COVID-19 implications. 1 2 Meetings held while a member. 3 Meetings attended. 4 A member of the Workplace Health, Safety & Environment Committee from 29 October 2020. 5 Appointed as non-executive director from 1 December 2020. 6 Director is not a member of the Workplace Health, Safety & Environment Committee. 7 Director is not a member of the Remuneration & Human Resources Committee. 8 A member of the Risk & Audit Committee from 29 October 2020. John Gillam Chair of the board 12 May 2021 Julie Coates Managing Director and CEO 12 May 2021 48 CSR LIMITED ANNUAL REPORT 2021 AUDITOR’S INDEPENDENCE DECLARATION TO THE DIRECTORS OF CSR LIMITED The Directors CSR Limited Triniti 3 39 Delhi Road North Ryde NSW 2113 12 May 2021 Dear Directors 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 CSR Limited In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence to the directors of CSR Limited. As lead audit partner for the audit of the financial statements of CSR Limited for the financial year ended 31 March 2021, I declare that to the best of my knowledge and belief, there have been no contraventions of: (i) (ii) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and any applicable code of professional conduct in relation to the audit. Yours sincerely DELOITTE TOUCHE TOHMATSU J L Gorton Partner Chartered Accountants Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Asia Pacific Limited and the Deloitte organisation. 49 REMUNERATION REPORT REMUNERATION REPORT Shareholder letter Dear Shareholder On behalf of the board, I am pleased to present CSR’s Remuneration Report for the year ended 31 March 2021 (YEM21). One of our most important roles as a board is to implement a remuneration framework for our senior executives and employees that is fair, reasonable and motivates them to deliver strong performance. The key principle of our remuneration strategy is alignment of executive and shareholder outcomes. We meet regularly with major shareholders and their advisors to discuss the framework and ensure it remains fit for purpose in a dynamic and rapidly changing business environment. YEM21 targets and performance The financial targets for YEM21 were set by the board in March 2020 prior to the commencement of the financial year, before the impact of the COVID-19 pandemic could be foreseen. The COVID-19 pandemic created uncertainty and challenges, and it was clear that the risks to the businesses operations and the financial results would need to be closely managed. At the onset of the pandemic, the leadership team acted immediately and decisively. Business continuity plans were deployed, cost disciplines and new ways of working embedded. Notwithstanding the uncertainty of the pandemic, the management team continued to implement the business strategy to streamline CSR’s operating model from five to three business units, along with a dedicated focus on logistics and customer solutions. The business is now leaner and fit for purpose, and CSR is well positioned to drive the most competitive product and service solutions for the market. The business has been well managed by the executive leadership team through a year of uncertainty and change, delivering strong financial performance and positive outcomes for shareholders. The share price hit a 10 year high in April 2021 and the YEM21 full year dividend is the highest in 12 years. Remuneration outcomes Despite the onset of COVID-19, the board and executive team agreed that the original financial targets set in March 2020 should remain unchanged for the purpose of assessing performance for STI, and we are pleased to report that CSR’s YEM21 EBIT exceeded the target. The board also determined that certain significant items should be adjusted for in determining STI, reducing EBIT for STI assessment purposes from $238 million to $230 million. Even allowing for this adjustment, the STI payout reflects stretch performance against targets set at the beginning of the year. As a result, the management team and employees have been appropriately rewarded for their efforts and results. Apart from the downward adjustment for significant items, the board has not exercised any discretion in determining the STI award for YEM21. Looking forward YEM21 was a very good year for CSR, both in terms of financial performance and setting the company up for success. The board is confident that our remuneration framework is appropriate and will motivate our executives to create value for our shareholders in the long term. Matthew Quinn Chair, Remuneration & Human Resources Committee 50 CSR LIMITED ANNUAL REPORT 2021 REMUNERATION REPORT | REMUNERATION REPORT OVERVIEW Overview 1 Basis of preparation of the Remuneration Report This Remuneration Report provides a summary of CSR’s remuneration policy and practices during the past financial year as they apply to CSR directors and executives. The Remuneration Report has been prepared in accordance with the requirements of section 300A of the Corporations Act 2001 and Corporations Regulation 2M.3.03 and has been audited by CSR’s external auditor. The report contains an overview which is intended to provide a ‘plain English’ explanation for shareholders of the key management personnel (KMP) and senior executives’ actual remuneration outcomes for the year ended 31 March 2021 (YEM21) and the remuneration framework. The report also details proposed changes for the financial year ended 31 March 2022 (YEM22). Consistent with prior years, actual remuneration of executive KMP has been included in the Remuneration Report in section 3. 2 Key management personnel (KMP) and senior executives KMP for YEM21 are detailed in the table below. KMP are as defined by the Accounting Standard AASB 124 Related Party Disclosures (AASB 124). Given the flat organisational structure of the company and following a review of senior executives against the criteria for determining executive KMP, only the Managing Director and CEO and Chief Financial Officer qualify as executive KMP, consistent with prior years. Table 1: Key management personnel Name Position Term as KMP Non-executive Directors (NEDs) John Gillam Nigel Garrard Christine Holman Michael Ihlein Matthew Quinn Penny Winn Executive KMP Julie Coates David Fallu Director and Chair of the board Director Director Director Director Director Full year From 1 December 2020 Full year Full year Full year Full year Managing Director and CEO Chief Financial Officer and Executive General Manager, Property and Aluminium Full year Full year The senior executives are detailed in the table below. Following the business reorganisation undertaken during YEM21, there have been some changes to the senior executives. These senior executives are not KMP as defined by AASB 124. In some cases, where aspects of remuneration apply to other senior roles within CSR, the term ‘executive’ is also used. Table 2: Senior executives Name Position Term as senior executive Current senior executives Amy Bentley Paul Dalton Catherine Flynn Andrew Mackenzie Gary May Andrew Rottinger Anthony Tannous Mark White Cameron Webb Former senior executives Ian Hardiman Nick Pezet Andrea Pidcock Executive General Manager, Logistics Executive General Manager, Interior Systems Executive General Manager, Human Resources General Manager, Property Executive General Manager, Customer Solutions Executive General Manager, Construction Systems Executive General Manager, Masonry & Insulation General Manager, Aluminium From 14 September 2020 From 28 September 2020 From 4 May 2020 Full year From 1 June 2020 From 17 June 2020 Full year Full year Executive General Manager, Transformation, Technology & Digital From 28 September 2020 Executive General Manager, New Business, Innovation & Technology To 5 June 2020 Executive General Manager, PGH Bricks To 3 July 2020 Executive General Manager, Interior Systems To 4 September 2020 51 REMUNERATION REPORT | REMUNERATION AND PERFORMANCE OUTCOMES Remuneration and performance outcomes 3 Actual remuneration The actual remuneration disclosure has been prepared to provide shareholders with a view of CSR’s remuneration structure and how remuneration was paid to the executive KMP for YEM21. The board believes presenting information in this way provides shareholders with increased clarity and transparency of executive KMP remuneration, clearly showing the amounts awarded for each remuneration component (fixed, short and long-term) within the financial year. This disclosure differs from the statutory remuneration disclosures contained in section 10, with a summary of the differences detailed in the table below. Table 3: Comparison of actual and statutory remuneration disclosures Fixed annual remuneration Short-term incentive (STI) Long-term incentive (LTI) Actual remuneration disclosures Cash salary, superannuation contributions and other eligible salary sacrifice benefits STI award for YEM21, inclusive of the 40% STI deferral, expressed as a cash value Value of LTIs that have vested during the year, calculated based on the number of shares valued using the five day volume weighted average price (VWAP) prior to issue of the shares. Excludes the value of unvested LTIs at 31 March 2021 Statutory remuneration disclosures As above STI award for YEM21, exclusive of STI deferral, plus amortisation of STI deferrals relating to current year and prior two years Value of LTIs recorded in accordance with accounting standards (based on fair value determined at grant date expensed over the vesting period). The amount for YEM21 relates to YEM19 to YEM21 LTI grants Leave accruals Not included Included Other benefits Includes Universal Share Ownership Plan (USOP) and other costs relating to company business or contractual obligations, where the benefit has been received As above, except where Performance Rights Plan (PRP) rights are granted as part of contractual obligations. These are expensed over the vesting period Executive KMP actual remuneration Actual remuneration received by executive KMP is set out in table 4 below and is prepared on the basis summarised in table 3. Commentary on the key components of remuneration is set out in table 5 below. Table 4: Actual remuneration received by executive KMP Year ended $ 31 March 2021 Julie Coates David Fallu Total 31 March 2020 Julie Coates David Fallu Rob Sindel1 Total Fixed remuneration Short-term incentive Long-term incentive Other benefits 1,150,000 700,000 1,850,000 670,833 631,625 678,254 1,980,712 1,104,000 700,000 1,804,000 – – 522,000 522,000 – 92,827 92,827 – – 683,048 683,048 – 999 999 – 1,563 – 1,563 Total 2,254,000 1,493,826 3,747,826 670,833 633,188 1,883,302 3,187,323 1 Actual fixed remuneration for Mr Sindel for YEM20 was up to September 2019. The short-term incentive represents a special incentive paid to Mr Sindel based on goals set by the board and determined for services up to 31 August 2019. Table 5: Commentary on actual remuneration received by executive KMP Area Explanation Total remuneration  Total actual remuneration has increased due to higher STI outcomes in YEM21, with Ms Coates and Mr Fallu forfeiting any entitlement to a STI in YEM20, in recognition of the uncertainty arising from the COVID-19 pandemic when the STI awards were determined in May 2020.  Further detail on the STI awarded is detailed below and in section 4. Fixed remuneration  Ms Coates’ fixed remuneration was not increased during the year. As Ms Coates’ commenced as Managing Director and CEO on 2 September 2019 the YEM20 total remuneration does not include a full year of fixed remuneration.  Mr Fallu’s fixed remuneration was increased from 1 April 2020 from $635,500 to $700,000 per annum, as a market adjustment to align with a relevant industry peer group. 52 CSR LIMITED ANNUAL REPORT 2021 REMUNERATION REPORT | REMUNERATION AND PERFORMANCE OUTCOMES 3 Actual remuneration (continued) Table 5: Commentary on actual remuneration received by executive KMP (continued) Area Explanation Short-term incentives  The board assessed Ms Coates’ performance against the objectives set and determined that Ms Coates would be awarded an STI between target and stretch. The STI outcome recognises Ms Coates’ leadership of the business over the last year, including the significant efforts to deliver financial results above the target while managing the business through a period of uncertainty and disruption due to the COVID-19 pandemic. In addition, significant progress has been made implementing the CSR strategy, including streamlining of the business operating model to focus on driving the most competitive product and service solutions for the market. The STI award represents 96% of Ms Coates’ maximum STI opportunity for YEM21.  The board assessed Mr Fallu’s performance against the objectives set and determined that Mr Fallu would be awarded an STI at stretch. The STI outcome recognises Mr Fallu’s management of the business during the COVID-19 pandemic and significant role in the CSR strategy implementation. Mr Fallu has played a critical role in managing the financial uncertainty faced by the business throughout the COVID-19 pandemic and has led the Property and Aluminium businesses, both of which have delivered strong financial performances in YEM21 and progressed their respective strategies. The STI award represents 100% of Mr Fallu’s maximum STI opportunity for YEM21.  Further detail on the STI outcomes is included in sections 4 and 7. Long-term incentives Other benefits  Other benefits included USOP.  Long-term incentives represent the partial vesting of the YEM18 LTI for Mr Fallu.  Further detail is included in sections 4, 8 and 12.  There were no termination benefits paid to executive KMP during the year. Senior executive actual remuneration The year-on-year change in total actual remuneration for senior executives is summarised in the table below and is prepared on the basis outlined in table 3. The analysis excludes the executive KMP. The disclosure of senior executives for YEM21 has been expanded by two existing roles and now includes all Executive General Managers reporting to the Managing Director and CEO and the General Manager of Aluminium and the General Manager of Property. Due to changes in the composition of senior executives during YEM21, the senior executive actual remuneration disclosure is not directly comparable to YEM20. The increase in total remuneration is due to higher STI outcomes in YEM21 with the senior executives forfeiting any entitlement to an STI in YEM20 in recognition of the uncertainty arising from the COVID-19 pandemic. Further explanation on STI outcomes is set out in table 7 over the page. Table 6: Senior executive remuneration Year ended 31 March $ 2021 2020 Actual fixed remuneration received1 4,094,123 3,731,054 Short-term Incentive2 2,586,859 – Long-term incentive 446,211 693,887 Other benefits3 2,996 5,876 Total 7,130,189 4,430,817 1 Actual fixed remuneration received is based on the term as a senior executive and includes the three former senior executives listed in table 2. 2 3 Other benefits include USOP. In recognition of the uncertainty arising from the COVID-19 pandemic senior executives forfeited any entitlement to an STI in YEM20. 53 REMUNERATION REPORT | REMUNERATION AND PERFORMANCE OUTCOMES 4 Performance outcomes Summary of performance outcomes for YEM21 A summary of the YEM21 short-term and long-term incentive outcomes are set out in table 7 and table 8 below, with further detail included in sections 7 and 8 respectively. Table 7: YEM21 short-term incentive outcomes Area Explanation YEM21 financial targets for STI purposes  At the start of each year, the board sets challenging financial targets taking into account the relevant factors for each business segment including forecasts for building activity, aluminium pricing and the property market, as well as considering investor requirements for a certain level of sustainable returns.  As earnings before interest and tax (EBIT) is the primary STI financial measure, the board has elected not to disclose Assessment of performance against targets the financial target due to commercial sensitivity.  The financial targets for YEM21 were set by the board in March 2020 prior to the commencement of the financial year and did not contemplate any impact arising from the COVID-19 pandemic. The executive KMP and senior executives were tasked by the board to achieve the YEM21 target earnings, irrespective of the impacts of the COVID-19 pandemic.  YEM21 CSR group EBIT exceeded the financial target set due to: ‒ Strong cost control and operational improvements, which mitigated the impact of lower Building Products revenue. Although Building Products revenue was down by 6% compared to the financial target set, strong cost disciplines led to earnings being ahead of the financial target set. Building Products EBIT margin (calculated as EBIT divided by revenue) increased to 12.0%, which is ahead of YEM20’s EBIT margin of 10.7%. ‒ The sale of Horsley Park Stage 2.1 was delivered in line with the target set and significant progress was also made on the balance of the site, with a further sale at this site announced during the year and site rehabilitation tracking ahead of schedule. ‒ The group’s Aluminium business delivered higher earnings compared to the financial target set, due to profitable hedging secured during YEM21. In addition, the longer-term hedging portfolio has increased, providing greater certainty of Aluminium earnings for the next three years. ‒ Decisive action taken to respond to the uncertainty and financial impact of disruptions arising from COVID-19, including implementing business continuity plans and embedding cost disciplines and new ways of working. ‒ Further detail on the financial performance is detailed in Table 13.  An assessment of significant items was also completed by the board resulting in a lowering of the actual EBIT result for STI purpose from $238 million to $230 million.  Details of the significant items assessment, including the adjustments made and business performance are set out in section 7. STI awarded  The STI awarded amounts to a payout ratio of 7.5% of YEM21 EBIT.  When the combined YEM21 and YEM20 STI award is considered over the two years earnings, it amounts to an average payout ratio of 5% per annum. This measure is relevant as in YEM20, in response to the uncertainty regarding the impact of the COVID-19 pandemic, the Managing Director, Chief Financial Officer and all senior executives forfeited their entitlement to a STI for YEM20. In addition, a company-wide remuneration review was not conducted for salaried employees during YEM21.  The STI awarded by the board acknowledges the significant efforts of management to produce financial results above the financial target, while managing the business through a period of uncertainty and disruption due to the COVID-19 pandemic, and continuing to progress the implementation of the new CSR strategy. Table 8: YEM21 long-term incentive outcomes LTI measure Explanation Overall  The YEM18 LTI performance hurdles were partially met resulting in 28.7% of the YEM18 PRP grant vesting in March 2020.  The value of LTI that vested in YEM21 decreased compared to YEM20 due to a lower number of rights vesting.  Further detail is contained in section 8. TSR EPS  Total shareholder return (TSR) target: 28.7% vested out of 50% potential.  Earnings per share (EPS) target: nil% vested out of 50% potential. 54 CSR LIMITED ANNUAL REPORT 2021 REMUNERATION REPORT | REMUNERATION AND PERFORMANCE OUTCOMES 4 Performance outcomes (continued) Overall financial performance and variable remuneration The following table summarises the clear link between company performance and incentives awarded to executive KMP, senior executives and other eligible employees: Table 9: Summary of financial performance and STIs and LTIs awarded Financial performance6 STI LTI EBIT ($ million)1 TSR (%)2 EPS (cents)1 ROFE (%)3 Share price ($)4 Executive KMP ($ million) Senior executives ($ million) All eligible employees STI as a % of EBIT Vested value – Executive KMP ($ million)5 Vested value – Senior executives ($ million)5 YEM21 YEM20 YEM19 YEM18 YEM17 237.9 87.3 33.1 21.1 216.8 1.5 27.3 17.8 265.0 (32.9) 36.1 21.8 320.3 25.3 41.9 27.8 298.0 45.7 36.5 21.6 5.78 3.17 3.32 5.18 4.51 1.8 0.57 1.4 1.2 0.9 2.6 –7 2.0 2.2 2.0 7.5%8 2.6% 6.3% 5.4% 5.5% 0.1 0.7 2.0 1.8 2.8 0.4 0.7 2.1 1.8 2.2 1 EBIT and EPS are calculated before significant items. For YEM18 to YEM21, EBIT and EPS are from continuing operations before significant items. 2 TSR at 31 March sourced from Bloomberg. Relative TSR performance is disclosed in Table 21 along with the LTI vesting outcomes. 3 Return on Funds Employed (ROFE) defined in note 2 to the CSR group financial statements. ROFE for YEM18 to YEM21 is from continuing operations. 4 Closing share price at 31 March. 5 Represents the value of PRPs vesting in the period, calculated based on the number of shares issued, valued using the five day VWAP prior to issue. 6 Dividends paid for the last four years are disclosed on page 24. 7 An STI was not awarded to executive KMP or senior executives for YEM20, except for the special incentive paid to Mr Sindel based on goals set by the board and determined for services up to 31 August 2019. 8 Total STI awarded for YEM21 represents 141% of the target STI opportunity. Further detail on the STI awarded is outlined in table 7. Further detail on the assessment of each of the performance measures for short and long-term incentives is set out in sections 7 and 8 respectively. 55 REMUNERATION REPORT | REMUNERATION GOVERNANCE Remuneration Governance 5 Remuneration governance CSR’s remuneration governance framework is set out below. While the board retains ultimate responsibility, CSR’s remuneration policy is implemented through the Remuneration & Human Resources Committee. The composition and functions of the Remuneration & Human Resources Committee, which oversees remuneration issues and human resources matters, are set out in the charter available from the CSR website. The charter was reviewed and updated during the year. Figure 1: CSR’s remuneration governance framework CSR Board   Overall responsibility for the remuneration strategy and outcomes for executives and non-executive directors. Reviews and, as appropriate, approves recommendations from the CSR Remuneration & Human Resources Committee. Remuneration & Human Resources Committee Management and Board remuneration policy Human Resources, Talent Management and Diversity Monitors, recommends and reports to the board on:  Alignment of remuneration incentive policies and guidelines for executive managers and senior employees with long-term growth, shareholder value and behaviours consistent with CSR’s company behaviours.  Superannuation arrangements.  Employee share plans.  Recruitment, retention and termination policies and procedures for senior management. Monitors, recommends and reports to the board on:  The adequacy of talent pools for senior management succession.  The effectiveness of CSR's diversity policies and initiatives, including an annual assessment of performance against measurable objectives and the relative proportion of women at all levels of management.  Management development frameworks and individual development progress for key talent.  Board remuneration including the terms and conditions of  Monitoring surveys conducted by the company in relation to appointment and retirement and non-executive remuneration within aggregate approved by shareholders.  The remuneration of the executive KMP and senior the culture of the organisation.  Initiatives to improve and drive a strong performance culture.  CSR's compliance with external reporting requirements. executives. Managing Director and Executive General Manager - Human Resources Provides information to the Remuneration & Human Resources Committee for the Committee to recommend on:  Incentive targets and outcomes.  Remuneration policy.  Long and short-term incentive participation.  Individual remuneration and contractual arrangements for executives. External advisors  Provide independent advice, information and recommendations relevant to remuneration decisions.  Throughout the year, the Remuneration & Human Resources Committee and management received information from external providers Ernst & Young, Korn Ferry Hay Group, Herbert Smith Freehills and Mercer Consulting (Australia) related to remuneration market data and analysis, market practice on the structure and design of incentive programs (both long term and short-term), performance testing of existing long term incentives and legislative and regulatory requirements.  There were no remuneration recommendations received from external providers during the year. 56 CSR LIMITED ANNUAL REPORT 2021 REMUNERATION REPORT | COMPONENTS OF REMUNERATION Components of remuneration 6 Summary of the fixed and ‘at risk’ components of remuneration The core elements of CSR’s remuneration strategy for the executive KMP and senior executives are outlined below. Figure 2: CSR’s remuneration strategy and structure Performance driven Alignment with shareholder interests Market competitive remuneration Total target remuneration Fixed At risk Fixed annual remuneration Short-term incentive Long-term incentive Fixed annual remuneration for KMP is targeted at the median of a custom peer group that falls within 50% to 200% of CSR’s market capitalisation, revenue and EBIT. Reference is also made to CSR’s major competitors who compete directly for the services of KMP. For senior executives the Korn Ferry Hay Group industrial and services database as well as internal relativities are considered CSR’s executives participate in an STI plan. The STI plan is weighted 60% to financial metrics and 40% to individual performance metrics Refer to section 7 for further detail LTIs are provided through the Performance Rights Plan (PRP) and are linked to:  Total shareholder return  Growth in CSR’s EPS Refer to section 8 for further detail  Base salary  Superannuation  Other eligible salary sacrifice benefits  Reviewed annually or on promotion, with no guaranteed increases included in any executives’ contracts  60% cash and 40% shares  50% shares are deferred for one year and 50% deferred for two years  Deferred equity remains at risk until vesting  Equity with performance assessed over three years  From the YEM21 LTI grant onwards, there is a restriction on trading through a 12 month holding lock for all shares awarded under the LTI The following figure illustrates the timing of how remuneration is earned, subject to performance measures being met for executive KMP and senior executives. Figure 3: YEM21 short-term and long-term incentive plans Year 1 Year 2 60% paid as cash Year 3 Year 4 1 year performance period 20% shares restricted for 1 year Vesting 20% shares restricted for 2 years Vesting 3 year performance period Holding lock Vesting Short Term Incentive Plan Long Term Incentive Plan 57 REMUNERATION REPORT | COMPONENTS OF REMUNERATION 6 Summary of the fixed and ‘at risk’ components of remuneration (continued) The key principles on which CSR’s executive remuneration policy is based are outlined below. Table 10: Key principles of CSR’s executive remuneration Objective Explanation Performance driven  Remuneration should reward executives based on individual performance and contribution aligned to business strategy and long-term shareholder returns. The variable components of remuneration (both short-term and long-term) are driven by challenging targets, focussed on both external and internal measures of financial and non-financial performance.  A significant proportion of executive remuneration is ‘at risk’. The following chart sets out the remuneration mix as fixed annual remuneration, target STI and the maximum value of the LTI granted during the year for the executive KMP. Managing Director and CEO Chief Financial Officer 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Fixed STI LTI Market competitive remuneration  Remuneration, including those elements which can be earned subject to business performance, are set at competitive levels that will attract, motivate and retain high quality executives.  Executive remuneration is reviewed annually. CSR aims to provide market competitive remuneration against jobs of comparable size and responsibility against a custom peer group of between 15 to 20 companies that falls within 50% to 200% of CSR’s market capitalisation, revenue and EBIT. This ensures that remuneration for KMP is based on roles of comparable size.  In setting executive remuneration, reference is also made to CSR’s major competitors, the Korn Ferry Hay Group industrial and services database as well as internal relativities.  At risk remuneration (through STI and LTI) provides the opportunity to earn reward that reaches the top quartile of the market for superior performance. Alignment with shareholder interests  Executive remuneration is aligned with shareholder interests through a significant emphasis on ‘at risk’ remuneration. Incentive plans and performance measures are aligned with CSR’s strategy for short and long-term success.  KMP and senior executives are required to hold, or make progress towards holding, a minimum CSR shareholding. The requirement for KMP is 100% of fixed annual remuneration, acquired over a reasonable timeframe. Further detail on this policy is set out in section 13.  Ownership of CSR shares is encouraged through the LTI plan, STI deferral plan for executive KMP and senior executives, the Universal Share Ownership Plan (USOP) and the ability to forgo part of fixed remuneration to acquire shares annually through the Employee Share Acquisition Plan (ESAP). 58 CSR LIMITED ANNUAL REPORT 2021 REMUNERATION REPORT | COMPONENTS OF REMUNERATION 7 (i) At risk remuneration – short-term incentive Table 11: Details of the short-term incentive plan Purpose Motivates and rewards people and teams to deliver the business strategy and financial performance to increase shareholder value. Frequency and timing Awards are determined on an annual basis with performance measured over the year to 31 March, with payment made in July. Performance measures The performance measures for the STI are based on a combination of financial and non-financial measures: Performance component Corporate roles Business unit roles CSR group EBIT Business unit EBIT Individual objectives Customer objectives Total 60% – 30% 10% 100% 30% 30% 30% 10% 100% Financial measures are based on the board approved EBIT budget. Given the cyclical nature of the building industry, it is not appropriate to set financial targets based on year-on-year linear growth. Instead, at the start of each year, the board sets challenging financial targets taking into account the relevant factors for each business segment including forecasts for building activity, aluminium pricing and the property market, as well as considering investor requirements for a certain level of sustainable returns. Return on Funds Employed (ROFE) is also assessed by the board to ensure the effectiveness with which capital is deployed, measured and rewarded. The maximum STI payable is 200% of a participant’s target STI opportunity (target STI opportunity varies based on seniority) except for the Managing Director and CEO who is capped at 143% of target STI opportunity, equivalent to 100% of fixed annual remuneration. Detail on the actual performance for YEM21 compared to the targets set is summarised later in this section. The board reviews items classified as significant at the end of each financial year to determine the extent, if any, by which reported EBIT should be adjusted for STI purposes depending on whether the items were influenced by or within the control of management. A minimum financial performance threshold is based on 95% of the board approved EBIT budget, below which no financial component will be paid. Target financial performance equates to the approved EBIT budget while stretch performance is 110% of the approved EBIT budget. The target and stretch budgets are set at a challenging level. The STI accrues on a straight-line basis for financial performance between threshold and target and between target and stretch. These parameters apply at both the CSR and business unit level. Performance component Threshold2 Percentage of EBIT target achieved Percentage of target STI payable1 95% 0% Target 100% 100% Stretch 110% 200% 1 Managing director and CEO’s STI is capped at 143% of target STI opportunity, equivalent to 100% of fixed annual remuneration. 2 The financial threshold target is calculated based on the financial target plus the amount of STI payable if the budget is achieved. Under the plan rules, if the financial threshold is not met the non-financial individual and customer objectives are discounted by 50%. Should both CSR and the applicable business unit not reach the financial threshold, then any payment will be at the discretion of the board. In addition, under the plan rules, the board has discretion to reduce, remove or increase any STI payable after considering overall business performance. Significant items Minimum financial performance requirements Individual objectives The non-financial objectives are set for each participant at the beginning of the financial year and are aligned to the business strategy and CSR’s desired culture and behaviours. These objectives include relevant KPI’s such as safety and sustainability, meeting customer needs, leadership and development of people, operational improvement and growth. These objectives are documented in CSR’s performance management system ACHiEVE@CSR and performance is assessed during the year, with a final assessment to coincide with year end. Customer objectives Customer objectives are set at a group level and business unit level at the start of the year. The objectives are focussed on improvements in the customer experience through specific measures for customer feedback. Assessment of performance against measures Individual performance assessments and recommendations are made by the participant’s immediate manager, based on the delivery of set objectives. All recommendations are reviewed and approved by the business unit Executive General Manager. The Remuneration & Human Resources Committee approves executive KMP and senior executive STIs as well as the overall STI pool in aggregate. 59 REMUNERATION REPORT | COMPONENTS OF REMUNERATION 7 (i) At risk remuneration – short-term incentive (continued) Table 11: Details of the short-term incentive plan (continued) Board discretion The intention is to minimise discretionary adjustments to the plan outcomes. However, the board and the Managing Director and CEO retain discretion in certain circumstances to alter payments having regard to:  CSR’s overall financial performance, including consideration of any material amounts recorded outside of EBIT (e.g. Service condition Equity deferral ‘significant items’);  any significant changes in AUD price for aluminium compared with the prices assumed in the budget;  occurrence of a fatality, regardless of fault;  maintenance and preservation of the company’s assets and reputation;  any short-term action which causes market share loss or other damage to CSR;  other special circumstances (e.g. acquisitions and divestments); and  any breach of CSR’s Business Code of Conduct and Ethics policy. New starters or people promoted into eligible roles may participate in the STI with pro rata entitlements if they have been in the role for more than three months of the relevant financial year. Employees must be actively employed at time of payment to be eligible for any reward. For participants who retire, die or are retrenched after the performance period, the Managing Director and CEO has discretion in awarding a STI. Unless the board determines otherwise, no payment will be made to participants who cease employment voluntarily, or have their employment terminated for inadequate performance or for cause. Under the STI deferral plan, 40% of any STI earned by executive KMP and senior executives is delivered in CSR shares with half released to participants at the end of year one and the balance released at the end of year two. These shares are held in trust subject to trading restrictions and are contingent on the participant remaining employed at the end of each period. During the restriction periods, the shares are subject to forfeiture if the executive resigns or is terminated for cause. No further performance conditions apply and shares fully vest to the participant at the end of the restriction period if the continued service requirement is met. As the shares are awarded in lieu of a full cash STI payment and relate to an incentive that has already been earned, during the restriction period participants are entitled to all dividend and voting entitlements applying to the shares held in trust in their name. An important feature of the STI deferral plan rules is the clawback provisions which allow the board to withhold some or all of the deferred equity whether vested or not in the event of fraudulent or dishonest acts including financial errors, misstatements or misrepresentations. (ii) Table 12: Changes from YEM22 – short-term incentive plan Objective Details of YEM22 STI Framework Link to strategy Performance measures Aligning with CSR’s new purpose and strategy, the YEM22 STI framework will reinforce team behaviour to leverage growth opportunities across CSR’s products and brands for delivery of customer solutions. Changes in relation to the STI framework are as follows;  For those individuals in a business unit role, 30% of STI will now be based on the overall business segment financial performance rather than business unit financial performance. Business segments are Building Products, Property and Aluminium. Individual non-financial reward component of 40% will be subject to performance of ACHiEVE goals, aligned with individual priorities for the year and will include a relevant customer measure and safety and sustainability measure. The revised STI framework for YEM22 is illustrated below:   Performance component Corporate roles Business unit roles CSR group EBIT Business segment EBIT Individual objectives Total 60% – 40% 100% 30% 30% 40% 100% 60 CSR LIMITED ANNUAL REPORT 2021 REMUNERATION REPORT | COMPONENTS OF REMUNERATION 7 At risk remuneration – short-term incentive (continued) (iii) Assessment of YEM21 short-term incentive performance Details on the short-term incentive target setting process and an assessment of the YEM21 performance outcomes are summarised in the table below. Table 13: YEM21 STI financial targets and assessment of performance outcomes Business Explanation of STI financial targets and assessment of performance outcomes Building Products YEM21 STI financial targets  The targets were established having regard to the forecast reduction in new housing activity, with building activity for YEM21 forecast to be down across both detached and multi-residential segments. The business was tasked to mitigate the impact of reduced market activity through growth initiatives and cost savings.  Given the expected shortfall in building activity, the YEM21 financial targets for the Building Products businesses were set below the YEM20 result. YEM21 assessment of STI performance outcomes  Building Products sales revenue for YEM21 was 6% below the target set. Businesses with concentrated levels of exposure to high-rise building activity (Construction Systems business) experienced a more pronounced impact compared to those with greater detached and renovations exposure (Masonry & Insulation and Interior Systems).  In response to lower sales and uncertainty and disruptions caused by the COVID-19 pandemic, business continuity plans and cost disciplines were immediately embedded. Significant reductions in expenditure were delivered, with selling, administration and other operating costs down 20% compared to the financial target and 15% compared to YEM20. Despite revenue falling short, total Building Products EBIT exceeded the financial target set.  The roll-out of the new CSR strategy continued, with a focus on streamlining the organisation and establishing more efficient ways of working. This has not only delivered financial results for YEM21, but also positioned the business to drive the most competitive product and service solutions for the market. Property YEM21 STI financial targets  A challenging target was set for the Property business in YEM21, including the sale of Horsley Park stage 2.1 which required completion of rehabilitation works. The delivery of this site would result in proceeds of $80 million and EBIT of $52 million in YEM21. YEM21 assessment of STI performance outcomes   The completed Horsley Park site was delivered to the purchaser in the second half of YEM21. The business also continued the development of the Property portfolio including the announced sale of 8.6 hectares of land at Horsley Park and progressed the rezoning process for the Schofields site. The Property business exceeded the financial targets set and the business unit financial STI component was awarded slightly above target. Aluminium YEM21 STI financial targets  In the context of a volatile decline in Australian dollar aluminium price during YEM20 and higher production costs, the Aluminium business was set a YEM21 financial target of lower EBIT compared to YEM20. YEM21 assessment of STI performance outcomes   During the year the Tomago smelter has performed well and with the US dollar Aluminium prices improving over the past year, CSR has taken the opportunity to secure a significant increase in the long-term hedged position to provide buffer against the elevated operating cost. These actions have resulted in a more favourable earnings performance for YEM21, with the financial target significantly exceeded, and the business unit financial STI component awarded at stretch. CSR group YEM21 assessment of STI performance outcomes  The actual EBIT result is above the financial target set for the CSR group and resulted in the CSR group financial component of STI being awarded at stretch.  An assessment of significant items was also completed by the board resulting in a lowering of the actual EBIT result for STI purpose from $238 million to $230 million. Details of this assessment, including the adjustments made are set out in table 14.  The uncertainty and disruptions arising from the COVID-19 pandemic have been managed through decisive management which saw business continuity plans deployed and measures implemented to deliver the financial results, such as cost disciplines and new ways of working.  CSR did not qualify for the Australian JobKeeper Payment scheme and the amount received from the New Zealand Wage Subsidy scheme of NZ$0.3m was fully distributed to employees who were stood down due to the lockdown.  Due to the average six-month lag between housing commencements and the use of CSR’s products in construction, the government incentives to stimulate building activity has not had a material impact on YEM21 earnings. 61 REMUNERATION REPORT | COMPONENTS OF REMUNERATION 7 At risk remuneration – short-term incentive (continued) (iii) Assessment of YEM21 short-term incentive performance (continued) Consideration of significant items recorded in YEM21 The STI financial targets are set based on EBIT before significant items. The board reviews all ‘significant items’ at the end of each performance period and considers whether it is appropriate to adjust for their impact on incentive outcomes. In forming its views, the board will have consideration as to whether the item was due to current management control or decisions. After assessing the significant items reported in YEM21, the board has determined that the earnings used in assessing the remuneration outcomes would be adjusted down from $238 million to $230 million. Detail on the assessment of each of the significant items is outlined below, including the rationale for the treatment for remuneration purposes. Further detail on significant items reported for YEM21 is contained in note 3 to the financial statements on page 80. Table 14: Assessment of significant items for remuneration purposes Amount (pre-tax) $’million Remuneration outcomes adjusted (12.7) No (8.3) Yes Item Business streamlining restructure costs Impairment of building product assets Horsley Park closure costs (5.2) No Product liability provision Previous significant items (5.6) 11.3 No No STI non-financial measures Rationale for treatment for remuneration purposes        The employee related restructure cost incurred to implement the business streamlining was not known when the financial targets were set, and the full benefit of the streamlining will not be realised until YEM22. These assets were previously impaired in YEM17 and treated as a significant item, with remuneration outcomes downgraded for the impairment charge. A consistent treatment has been applied in YEM21, with EBIT and EPS used in the assessment of STI and LTI outcomes downgraded by the current year impairment charge. A higher EPS will be used to set the LTI targets for the YEM22 PRP grant, as the EPS will not be downgraded by the impairment charge. The cost of closing the site was not contemplated when the financial targets were set, and the benefit of the sale is not anticipated until YEM24, once site rehabilitation works have been completed. The product liability expenses pre-dates current management and the board has consistently treated these amounts as significant items. These adjustments relate to previous significant items and do not relate to current year trading. The board did not exercise any discretion in determining the non-financial STI component awarded in YEM21. The CSR group and a number of businesses met their business unit financial target and as a result their non-financial STI component was awarded. For businesses that did not meet their business unit financial targets their non-financial STI pool was halved. This treatment is in accordance with the STI plan (as detailed in table 11). 62 CSR LIMITED ANNUAL REPORT 2021 REMUNERATION REPORT | COMPONENTS OF REMUNERATION 8 At risk remuneration - long-term incentive (i) Purpose of the long-term incentive (LTI) plan CSR’s long-term incentive program aims to:  drive performance and deliver strategic objectives that create long-term shareholder value;  provide executives with the opportunity to build their interests in CSR equity; and  attract, motivate and retain the necessary executive talent to deliver and sustain business performance and increase returns to shareholders. (ii) Details of the LTI plan The long-term incentive plan is delivered through the CSR Performance Rights Plan (PRP). The following plan details apply to PRP grants from YEM18 to YEM21. Table 15: Features of the long-term incentive plan Participation Managing director, senior executives and selected key roles are eligible subject to approval by the board. Grant frequency Grants are made on an annual basis. Type of award Grants of performance rights are subject to service requirements, calculated using a face value of shares and convert to shares subject to performance vesting criteria. If performance conditions are met, CSR shares will be purchased on market and transferred to participants. Refer to section 8(iii) for more detail. Vesting and performance period Treatment of capital return Awards are subject to a three year vesting period. Immediately following completion of the vesting period, the performance conditions are tested to determine whether, and to what extent, awards vest. To the extent that performance rights have not vested following the testing, they will lapse (i.e. participants forfeit their interests in the performance rights). There is no entitlement to a capital return. However, the board may make an adjustment to the number of shares underlying unvested performance rights that would be awarded to the participant if and when the performance rights vested. The number of additional shares underlying the performance rights corresponds to the cash amount per share returned to shareholders and is intended to ensure that the value of awards of PRP holders is not eroded by capital returns. Capital returns are included as part of TSR performance. At vesting For all PRP grants, rights are eligible for one CSR Limited share per one performance right on vesting. Holding lock From the YEM21 PRP grant onwards, a 12 month holding lock on shares awarded under the LTI has been introduced to aid senior executive retention and supplement CSR’s clawback provisions. During the holding lock period, provided the participant remains employed by CSR, they are entitled to receive dividends and other distributions and have full voting rights. Sales restrictions post vesting Shares transferred to participants on the vesting of performance rights are subject to the CSR Share Trading Policy. Dividends There is no entitlement to dividends on performance rights during the performance period. Treatment on cessation of employment Unvested awards: Generally, a participant who ceases to be employed prior to the performance conditions being met will forfeit their interest in the unvested shares. If the cessation of employment is the result of retirement, redundancy, total or permanent disablement, death or any other special circumstances, the treatment of the rights will be determined at the board’s discretion. Vested awards: Awards that have vested are transferred to participants at the time of vesting. Treatment on change of control Unvested awards: The board has discretion to allow awards to vest on a change of control of CSR (e.g. a takeover or merger). In exercising this discretion, the board would generally apply pro rata assessments for plans on foot. Vested awards: Awards that have vested are transferred to participants at the time of vesting. Prohibition of hedging arrangements Participants will forfeit their interests in unvested shares if they enter into any hedging transaction in relation to those shares in breach of CSR’s Share Trading Policy. At 31 March 2021, executive KMP confirmed in writing their beneficial interest in CSR shares, including confirming that they had not entered into any hedging arrangements over vested or unvested CSR shares. Board discretion The board retains discretion to reduce or lapse performance rights (or recover the net proceeds where vested shares have been sold) in several circumstances including, but not limited to, material financial misstatements, the performance and conduct of the participant, the performance of the business unit the participant is employed in, CSR group performance, fraudulent or dishonest acts, bringing CSR or any business unit into disrepute or breach of duties or obligations to CSR (including acting in breach of the terms and conditions of their employment and/or CSR’s Code of Business Conduct and Ethics). 63 REMUNERATION REPORT | COMPONENTS OF REMUNERATION 8 At risk remuneration – long-term incentive (continued) (iii) PRP performance conditions A summary of the performance hurdles for each PRP grant, along with further detail on how each hurdle is measured, is set out below. Table 16: Performance hurdles for each PRP grant Note YEM21 YEM20 YEM19 YEM18 Relative TSR (Tranche A) Absolute TSR (Tranche A) Earnings per share (Tranche B) 1 2 3 50% – 50% – 50% 50% 50% – 50% 50% – 50% 1. Relative TSR for YEM18, YEM19 and YEM21 PRPs TSR is the percentage growth in shareholder value, which measures the changes in share price, taking into account dividends and capital returns. The board believes relative TSR is an appropriate measure for the PRP as it directly aligns with shareholder interests and provides transparency and focus of eligible executives in driving both earnings and share price growth. Relative TSR for the YEM21 PRP  Relative TSR has been reintroduced as a performance measure for the YEM21 PRP grant as it is an established measure with greater alignment to market practice.  Absolute TSR will be retained but as a positive gateway to vesting to ensure that participants are only rewarded for positive shareholder returns. If absolute TSR is negative over the performance period, no rights will vest in this tranche.  The comparator peer group used to calculate relative TSR will be those companies comprising the S&P/ASX51 – ASX150 defined at the start of each performance period. This peer group is sufficiently broad to measure relativity and the market capitalisation has greater alignment to CSR than the S&P ASX200. The board may adjust the comparator group to take into account events including, but not limited to, takeovers, mergers or de-mergers that might occur during the performance period.  In measuring TSR, share prices will be calculated based on a 90-day VWAP at the start and end of the performance period (compared to the current 10 day calculation) to address share price volatility.  Assuming the absolute TSR gate is met, the proportion of the Tranche A performance rights that vest will be determined based on CSR’s relative TSR, in accordance with the vesting schedule in table 17 below. Relative TSR for the YEM18 and YEM19 PRPs  TSR performance is assessed against the constituents of the S&P/ASX 200 index (Peer Group) defined at the start of the performance period.  For the purposes of the TSR calculation, the start and end share prices will be calculated based on 10 trading days VWAP. Table 17: Vesting schedule for all Relative TSR PRP grants TSR of CSR relative to the Peer Group Proportion of Tranche A to vest Below the 50th percentile At the 50th percentile 0% 50% Between the 50th percentile and the 75th percentile Straight-line vesting between 50% and 100% 75th percentile or greater 100% 2. Absolute TSR for YEM20 PRP  For the YEM20 PRP, a review of performance hurdles was conducted incorporating potential property transactions over the ensuing three years. As a result, relative TSR was replaced with absolute TSR.  The board considered that absolute TSR was a more appropriate measure for the YEM20 PRP as it more directly aligns with shareholder interests and provides transparency and focus of executives in driving both earnings and share price growth.  The targets are set out in table 18 below. In setting these targets consideration was given to the historical TSR performance of CSR, the cost of capital and projected earnings through the performance period. Table 18: Vesting schedule for the Absolute TSR grant Cumulative Average Growth Rate (CAGR) of TSR Proportion of Tranche A to vest Below TSR of 14% TSR of 14% 0% 75% Between TSR of 14% and 18% Straight-line vesting between 75% and 100% 18% and above 100% 64 CSR LIMITED ANNUAL REPORT 2021 REMUNERATION REPORT | COMPONENTS OF REMUNERATION 8 At risk remuneration – long-term incentive (continued) (iii) PRP performance conditions (continued) 3. Earnings per share (EPS) Compound growth in EPS assesses the success of the business in generating continued growth in earnings and aligns the effort of executive KMP and senior executives with shareholder interests. The use of EPS as a long-term performance measure is also consistent with market practice. EPS is defined as net profit after tax per share before significant items. The board reviews all ‘significant items’ at the end of each performance period and considers whether it is appropriate to adjust for the impact on incentive outcomes. A consistent treatment is applied for both STI and LTI assessments, with the YEM21 outcome summarised in section 7 (iii) and table 14. In addition, the board may adjust EPS to exclude the effects of material business acquisitions or divestments and for certain one-off costs. EPS is measured on an averaged basis over the three year performance period rather than point to point to reflect the cyclical nature of the business. Target performance is calculated by taking the total EPS from the performance period using actual EPS of the base year and compounding 5% per annum for three years and dividing the result by three. Stretch performance is calculated using the same methodology, except the growth is compounded by 10% per annum. Table 19: Performance hurdles for the YEM18 to YEM21 PRP grants YEM21 YEM20 YEM19 YEM18 EPS performance hurdle Target Stretch Target Stretch Target Stretch Target Stretch Cumulative EPS required over next three years (cents per share) Average EPS required over next three years (cents per share) 85.4 93.9 119.5 131.4 140.0 154.0 120.8 132.9 28.5 31.3 39.8 43.8 46.7 51.3 40.3 44.3 The reduction in the EPS target for the YEM21 grant is due to a lower EPS in YEM20 compared to the prior three years. Table 20: EPS PRP vesting schedule CAGR of EPS Below 5% At 5% Between 5% and 10% 10% and above Proportion of Tranche B to vest 0% 50% Straight-line vesting between 50% and 100% 100% (iv) Assessment of performance impacting YEM21 remuneration LTIs have been linked to company performance as follows:  the value of performance rights (under the PRP) ultimately depends on share price performance; and  awards vest subject to EPS growth and TSR performance as measured through the movement in the share price and dividends paid. In relation to the YEM18 PRP assessment, the EPS and TSR outcomes are described over the page in table 21. 65 REMUNERATION REPORT | COMPONENTS OF REMUNERATION 8 At risk remuneration – long-term incentive (continued) (v) Details of the PRP awards outstanding Table 21: Status and key dates of PRP awards Grant date Valuation per right1 Holding period Performance testing period 25 July 2017 (YEM18) Tranche A (TSR) $1.76 Tranche B (EPS) $3.37 25 July 2017 to 31 March 2020 1 April 2017 to 31 March 2020 Expiry date (if hurdle not met) 1 April 2020 Performance status2 Tranche A (TSR): Performance condition met with 57.3% of the allocation vesting and the remaining unvested rights lapsed. Tranche B (EPS): compound growth performance condition not met and all rights lapsed. 25 July 2018 (YEM19) Tranche A (TSR) $1.36 Tranche B (EPS) $3.60 25 July 2018 to 31 March 2021 1 April 2018 to 31 March 2021 1 April 2021 Subsequent to 31 March 2021: Tranche A (TSR): Performance condition was met and 68% of allocation vested and the remaining unvested rights lapsed. Tranche B (EPS): compound growth performance condition was not met and all rights lapsed. 19 July 2019 (YEM20) Tranche A (TSR) $1.99 Tranche B (EPS) $3.72 19 July 2019 to 31 March 2022 1 April 2019 to 31 March 2022 21 July 2020 (YEM21) Tranche A (TSR) $1.06 Tranche B (EPS) $3.08 21 July 2020 to 31 March 2023 1 April 2020 to 31 March 2023 1 April 2022 Performance testing not commenced. 1 April 2023 Performance testing not commenced. 1 The value of performance rights at grant date calculated in accordance with AASB 2 Share-based Payments. Valuations are performed by a third party, Ernst & Young. 2 To ensure an independent TSR measurement, CSR engages the services of an external organisation, Mercer Consulting (Australia) Pty Ltd, to calculate CSR’s performance against the TSR hurdles. (vi) Long-term incentive framework changes No changes are proposed to the LTI framework for YEM22. (vii) Other equity incentive plans Table 22: Other equity incentive plans Purpose Participation Form and quantum of award Universal Share Ownership Plan (USOP) Employee Share Acquisition Plan (ESAP) To encourage share ownership by enabling executives and employees to benefit from favourable Australian tax treatment. All executives and employees (except directors), who have the equivalent of at least one year’s full-time service at the date the shares are allotted. All full and part time employees and directors within Australia. Each year, the board approves the purchase of shares up to a maximum value of $1,000 (being the limit of the tax exemption) for each eligible participant. The award is structured such that participants buy shares which are then matched one for one by the company at no additional cost to participants. Directors and employees can forgo up to $5,000 of their cash remuneration annually to acquire shares in the company. The shares are purchased on market by the CSR Share Plan trustee, who acts on instructions given in accordance with the plan rules and the company’s Share Trading Policy. Vesting period Shares vest immediately upon acquisition by participants. The shares can only be sold three years after the date of grant, unless the participant’s employment ceases before then. The shares are held in trust while the participant is employed by CSR, unless board approval is granted to sell or transfer shares under specific circumstances (e.g. financial hardship). Under current Australian tax law, the maximum period of income tax deferral on the shares purchased is 15 years. Absence of a performance condition The plans are designed to encourage share ownership for employees and therefore do not have any performance conditions attached. Dividends and voting rights Participants are entitled to dividends and other distributions and have full voting rights. Participants are entitled to dividends and other distributions and have full voting rights while the shares are held in trust. 66 CSR LIMITED ANNUAL REPORT 2021 REMUNERATION REPORT | REMUNERATION IN DETAIL Remuneration in detail 9 Service agreements Managing Director and CEO – Executive service agreement Julie Coates was appointed as Managing Director and CEO effective 2 September 2019. Ms Coates’ contractual remuneration package is summarised below: Table 23: Managing Director and CEO’s remuneration package Fixed annual remuneration Fixed annual remuneration of $1,150,000 inclusive of superannuation contributions. Fixed annual remuneration is reviewed annually and increases are not guaranteed. Notice period Under the Executive Service Agreement there is no fixed term and Ms Coates’ employment can be terminated by:  the company giving her 12 months’ notice of termination; or  Ms Coates giving six months’ notice of resignation. STI LTI There is no guaranteed entitlement to an STI payment and the maximum STI opportunity is 100% of fixed annual remuneration for exceptional performance. Achievement of target performance would result in 70% of the maximum STI being paid. The STI is weighted 60% to financial performance and 40% to individual performance. Under the STI deferral plan rules, 40% (YEM20: 20%) of the STI value will be deferred into CSR shares which vest over two years (50% at the end of the first year and 50% at the end of the second year). Further details on the STI deferral plan is contained in table 11. The value of any award of performance rights is currently set at a maximum of 120% of fixed annual remuneration. Grants of performance rights are subject to performance hurdles and vesting criteria set by the board (refer to section 8(iii) for details) and are subject to shareholder approval at the AGM. Following benchmarking, the board is proposing that the award of performance rights for the YEM22 LTI grant is adjusted upwards to 140% of fixed annual remuneration. Further information will be included in the CSR 2021 Notice of Meeting. Chief Financial Officer – Executive service agreement David Fallu was appointed as Chief Financial Officer effective 2 February 2017. Mr Fallu’s remuneration package is summarised below: Table 24: Chief Financial Officer’s remuneration package Fixed annual remuneration Fixed annual remuneration of $700,000 inclusive of superannuation contributions effective from 1 April 2020. This represented an increase of 10% compared to YEM20 as a market adjustment to align with a relevant industry peer group. Fixed annual remuneration is reviewed annually and increases are not guaranteed. Notice period Under the Executive Service Agreement, Mr Fallu’s employment can be terminated by:  the company giving him six months’ notice of termination; or  Mr Fallu giving six months’ notice of resignation. STI LTI There is no guaranteed entitlement to an STI payment and the maximum STI opportunity for YEM21 is 100% of fixed annual remuneration for exceptional performance. Achievement of target performance would result in 50% of the maximum STI being paid. The STI is weighted 60% on financial performance and 40% on individual performance. Under the STI deferral plan rules, 40% (YEM20: 20%) of the STI value will be deferred into CSR shares which vest over two years (50% at the end of the first year and 50% at the end of the second year). Further details on the STI deferral plan is contained in table 11. The potential value of any award of performance rights is set at a maximum of 60% of fixed annual remuneration. Grants of performance rights are subject to performance hurdles and vesting criteria set by the board (refer to section 8(iii) for details). Following benchmarking, the board has determined that the award of performance rights for the YEM22 LTI grant will be adjusted upwards to 80% of fixed annual remuneration. 67 REMUNERATION REPORT | REMUNERATION IN DETAIL 9 Service agreements (continued) Table 25: Treatment of the Managing Director’s and Chief Financial Officer’s incentives on termination Circumstance Short-term incentive1 Long-term incentive – unvested performance rights2 Immediate termination for cause No STI payable and clawback provisions may Rights are forfeited. Resignation Notice by company, retirement, redundancy, death or permanent disability apply (including deferred STI). STI is forfeited unless board determines otherwise. Board discretion to award STI on a pro rata basis (including deferred STI). Change of control STI will be paid on a pro-rata basis. Rights are forfeited unless board determines otherwise. Board discretion to allow awards to vest or remain subject to performance hurdles after termination on a pro-rata basis. The board has discretion to allow awards to vest on a change of control of CSR (e.g. a takeover or merger). In exercising this discretion, the board would generally apply pro-rata assessments for plans on foot. 1 Any STI payments will be paid according to the normal annual STI payment time frame (i.e. payment timing will not be accelerated). 2 Shares allocated in respect of vested performance rights are not subject to restrictions after vesting. 10 Statutory remuneration Managing Director’s and Chief Financial Officer’s remuneration The remuneration table below shows an increase in total remuneration expensed for accounting purposes for executive KMP in YEM21 compared with YEM20. Table 26: Executive KMP statutory remuneration $ Year ended 31 March Fixed1 Variable ‘At risk’ Cash salary Super- annuation Leave benefits Other benefits2 STI expense3 LTI expense4 Total STI5 LTI5 Managing Director and CEO – Julie Coates 1,128,479 2021 655,081 20206 21,521 15,752 20,845 31,267 – – 846,400 – 363,043 307,695 2,380,288 1,009,795 Chief Financial Officer – David Fallu 2021 2020 678,479 610,740 21,521 20,885 37,809 24,504 999 1,563 565,860 49,288 145,935 74,522 1,450,603 781,502 Former Managing Director – Rob Sindel7 – 2021 – – 2020 667,870 10,384 (8,403) – – – – – 645,311 (618,839) 696,323 36% – 39% 6% – – 15% 30% 10% 10% – – 1 Fixed annual remuneration may be allocated at the executive’s discretion to cash, superannuation (subject to legislative minimums), motor vehicles and certain other benefits. 2 Other benefits included USOP. 3 STI expense for YEM21 plus amortisation of STI deferrals relating to prior years’ grants. STI payments may be allocated at the executive’s discretion to cash or additional superannuation contributions. 4 LTI expense is as defined in the accounting standards. PRP grants are expensed over the vesting period at a valuation determined on grant date. Valuations are performed by a third party and are detailed in table 21. 5 STI and LTI as a percentage of total remuneration. 6 2020 actual fixed remuneration for the Managing Director and CEO reflects for time in role from 2 September 2019. 7 Former Managing Director Mr Sindel ceased to be a KMP on 2 September 2019 and remained employed until 13 September 2019. The STI paid to Mr Sindel includes a specific incentive based on goals set by the board and determined for services up to 31 August 2019. 11 Deferred shares Table 27: STI deferred shares for executive KMP Julie Coates David Fallu Number of STI deferred shares Balance 1 April 2020 – 26,600 Granted Vested Lapsed Balance 31 March 2021 – – – (26,600) – – – – Deferred STI in relation to the YEM21 STI award is issued subsequent to 31 March 2021 and will be disclosed in the YEM22 Remuneration Report. 68 CSR LIMITED ANNUAL REPORT 2021 REMUNERATION REPORT | REMUNERATION IN DETAIL 12 Performance rights Table 28: Executive KMP performance rights Julie Coates David Fallu Number of performance rights Balance 1 April 2020 460,986 323,589 Granted1 452,206 137,628 Vested2 Lapsed Balance 31 March 2021 – – (21,789) (54,264) 913,192 385,164 1 The accounting value of Ms Coates and Mr Fallu’s rights granted were $936,066 and $284,890 respectively. 2 The following rights vested to ordinary shares during the year ended 31 March 2021: Mr Fallu: YEM18 Tranche A rights vested of 21,789. A total of 21,789 shares were issued on 4 June 2020, and the value of each of these shares was $4.26, representing a total value to Mr Fallu of $92,827. 13 Shareholdings Minimum shareholding requirements KMP are required to accumulate over time the equivalent of 100% of fixed annual remuneration in CSR shares. The value of the shares held by the KMP is calculated as the higher of the current market price or the price the shares were acquired at. The minimum shareholding requirements are applicable to the Managing Director and CEO, Chief Financial Officer and CSR Non-executive Directors. Non-executive Directors are required to meet the minimum shareholding requirements within four years of appointment. Executive KMP will be provided a reasonable timeframe in which to accumulate the minimum shareholding having regard to the business cycle and likely variable incentive outcomes that may become available to count towards the requirements. Senior executives are required to hold 50% of fixed annual remuneration in CSR shares. Table 29: Executive KMP shareholdings Julie Coates David Fallu Balance 1 April 2020 – 64,497 Number of CSR shares1 Acquired2 1,217 23,558 Sold or transferred – – Other – – Balance 31 March 2021 1,217 88,055 1 CSR shares in which the executive KMP has a beneficial interest, including shares held by the CSR share plan trustee for vested shares from the PRP and shares held in respect of the STI deferral plan, by the ESAP trustee or via their related parties. It also includes spouse shareholdings. 2 Represents shares allocated upon vesting of rights under the PRP and shares acquired under the STI deferral plan as detailed earlier in this report. Ms Coates acquired shares include 1,196 shares acquired under ESAP and 21 shares acquired under the Dividend Reinvestment Plan. Mr Fallu’s acquired shares include 21,789 shares issued on vesting of PRPs, 1,197 shares acquired under ESAP and 572 shares acquired under USOP. 14 Other transactions with KMP The CSR group offers staff discounts on certain products which are also made available to KMP. There were no other transactions, including loans between CSR and KMP (including their related parties), during YEM20 and YEM21. 69 REMUNERATION REPORT | NON-EXECUTIVE DIRECTORS Non-executive directors 15 Arrangements Non-executive directors are paid a base fee for service to the board which includes one committee membership, with an additional fee for service to additional board committees. The fees are set with consideration to the fees paid in companies of a similar size and complexity and are inclusive of superannuation. The shareholder approved fee pool is currently $1,450,000 per annum including superannuation. Table 30: Non-executive Director (NED) arrangements Role Annual fee for YEM21 (including superannuation guarantee) Chair base fees (including all committee memberships) Other NED base fees (including one committee membership) Chair of the Risk & Audit Committee Chair of the Remuneration & Human Resources Committee Chair of the Workplace Health, Safety & Environment Committee Additional committee memberships $395,264 $158,106 $27,447 $27,447 $27,447 $11,764 per additional committee (applies to NEDs other than the chairman) Following benchmarking in YEM21 and considering that no fee increases have been made in the past two years, effective 1 April 2021 a 2.0% fee increase was applied to all NED annual fees. No retirement allowances are payable to NEDs. NEDs do not participate in the company’s STI or LTI plans or receive any variable remuneration but may forgo fees for CSR shares under the ESAP. To further align NEDs’ interests with those of shareholders, the company expects all NEDs to acquire a beneficial interest in CSR shares equivalent to 100% of their fixed annual remuneration. Further information is detailed in section 13. 16 Non-executive director fees Table 31: Non-executive directors’ fees Year ended 31 March John Gillam (chair of the board) Nigel Garrard Christine Holman Michael Ihlein Matthew Quinn Penny Winn Total non-executive directors YEM21 YEM20 YEM21 YEM20 YEM21 YEM20 YEM21 YEM20 YEM21 YEM20 YEM21 YEM20 YEM21 YEM20 17 Shareholdings Table 32: Non-executive directors’ shareholdings Directors’ fees Termination benefits Superannuation 373,743 374,379 51,710 – 161,208 155,131 181,529 169,455 169,455 169,455 167,936 169,455 1,105,581 1,037,875 – – – – – – – – – – – – – – 21,521 20,885 4,913 – 15,315 14,738 4,024 16,098 16,098 16,098 15,954 16,098 77,825 83,917 Total 395,264 395,264 56,623 – 176,523 169,869 185,553 185,553 185,553 185,553 183,890 185,553 1,183,406 1,121,792 John Gillam (chair of the board) Nigel Garrard Christine Holman Michael Ihlein Matthew Quinn Penny Winn Number of CSR shares1 Balance 1 April 2020 Included in remuneration 253,510 – 79,312 63,148 72,419 51,248 – – – – – – Acquired – 60,000 2,048 1,197 3,088 – Other Balance 31 March 2021 – – – – – – 253,510 60,000 81,360 64,345 75,507 51,248 1 CSR shares in which the director has a beneficial interest, including shares held under the ESAP trust or via related parties. 70 CSR LIMITED ANNUAL REPORT 2021 FINANCIAL REPORT FINANCIAL REPORT Consolidated financial report Statement of financial performance Statement of comprehensive income Statement of financial position Statement of changes in equity Statement of cash flows Notes to the financial report Directors declaration Independent auditor’s report Shareholder information Notes to the financial report 1 Basis of preparation Financial performance overview Segment information 2 Significant items 3 Earnings per share 4 Revenue 5 Expenses 6 Net finance costs 7 Income tax expense 8 Business combinations 9 72 73 74 75 76 77 112 113 116 Balance sheet items 10 Working capital 11 Property holdings 12 Property, plant and equipment and intangible assets 13 Net deferred income tax assets 14 15 Provisions 16 Product liability Leases Issued capital Capital structure and risk management 17 Borrowings and credit facilities 18 19 Dividends and franking credits 20 Reserves 21 Financial risk management Group structure 22 Subsidiaries 23 Deed of cross guarantee 24 Non-controlling interests 25 26 Equity accounting information 27 Parent entity disclosures Interest in joint operations Other 28 Employee benefits 29 Related party disclosures 30 Subsequent events 31 Commitments and contingencies 32 Other non-current assets 33 34 Other accounting policies Auditor’s remuneration 77 77 78 78 80 81 81 82 82 83 84 85 85 86 86 88 89 90 91 92 92 92 92 93 94 99 99 99 102 102 103 104 105 105 109 109 110 110 110 111 71 FINANCIAL REPORT Statement of financial performance $million Trading revenue – sale of goods Cost of sales Gross profit Other income Warehouse and distribution costs Selling, administration and other operating costs Share of net profit of joint venture entities Impairment expense Other expenses Profit before finance costs and income tax Interest income Finance costs Profit before income tax Income tax expense Profit after tax Profit after tax attributable to: Non-controlling interests Shareholders of CSR Limited1 Profit after tax Earnings per share attributable to shareholders of CSR Limited Basic (cents per share) Diluted (cents per share) Note 2,5 5 26 12,26 7 7 8 24 4 4 2021 2020 2,122.4 (1,516.9) 2,212.5 (1,541.5) 605.5 72.9 (191.4) (251.1) 13.5 (9.3) (17.1) 223.0 1.5 (13.2) 211.3 (59.5) 151.8 5.7 146.1 151.8 30.1 30.0 671.0 17.7 (197.0) (282.4) 13.9 (9.1) (4.7) 209.4 3.3 (20.3) 192.4 (53.9) 138.5 13.2 125.3 138.5 25.4 25.4 1 Net profit before significant items attributable to shareholders of CSR Limited is $160.4 million (2020: $134.8 million). Refer to note 3 of the financial statements. The above statement of financial performance should be read in conjunction with the accompanying notes. 72 CSR LIMITED ANNUAL REPORT 2021 FINANCIAL REPORT Statement of comprehensive income $million Profit after tax Other comprehensive income (expense), net of tax Items that may be reclassified to profit or loss Hedge (loss) profit recognised in equity Hedge profit transferred to statement of financial performance Exchange differences arising on translation of foreign operations Income tax benefit (expense) relating to these items Items that will not be reclassified to profit or loss Actuarial gain (loss) on superannuation defined benefit plans Income tax (expense) benefit relating to these items Other comprehensive expense – net of tax Total comprehensive income Total comprehensive income attributable to: Non-controlling interests Shareholders of CSR Limited Total comprehensive income Note 2021 151.8 2020 138.5 21 21 20 13 28 13 (67.0) (18.2) (3.2) 25.6 17.6 (5.3) (50.5) 101.3 (12.1) 113.4 101.3 12.9 (10.5) 1.3 (0.7) (13.9) 4.2 (6.7) 131.8 18.6 113.2 131.8 The above statement of comprehensive income should be read in conjunction with the accompanying notes. 73 FINANCIAL REPORT Statement of financial position $million Current assets Cash and cash equivalents Receivables Inventories Property holdings Other financial assets Income tax receivable Prepayments and other current assets Total current assets Non-current assets Receivables Property holdings Investments accounted for using the equity method Other financial assets Property, plant and equipment Right-of-use lease assets Goodwill Other intangible assets Deferred income tax assets Other non-current assets Total non-current assets Total assets Current liabilities Payables Lease liabilities Other financial liabilities Tax payable Provisions Total current liabilities Non-current liabilities Borrowings Lease liabilities Other financial liabilities Provisions Deferred income tax liabilities Other non-current liabilities Total non-current liabilities Total liabilities Net assets Equity Issued capital Reserves Retained profits Equity attributable to shareholders of CSR Limited Non-controlling interests Total equity The above statement of financial position should be read in conjunction with the accompanying notes. 74 CSR LIMITED ANNUAL REPORT 2021 Note 2021 2020 34 10 10 11 21 32 11 26 21 12 14 12 12 13 32 10 14 21 15 17 14 21 15 13 28 18 20 24 250.8 224.2 313.8 40.7 63.0 0.4 8.9 901.8 23.4 102.6 35.7 57.7 693.7 127.2 58.3 13.8 144.9 12.4 1,269.7 2,171.5 256.7 30.2 71.1 46.9 131.6 536.5 – 141.1 86.0 252.7 – 2.7 482.5 414.8 254.1 341.9 59.7 48.1 – 10.0 1,128.6 15.0 87.0 42.6 31.5 741.5 153.2 58.3 15.8 130.3 0.7 1,275.9 2,404.5 245.5 32.9 33.2 39.4 129.9 480.9 320.0 167.1 19.0 265.0 18.5 8.5 798.1 1,019.0 1,152.5 1,279.0 1,125.5 966.7 (89.6) 241.7 1,118.8 33.7 1,152.5 966.7 (45.7) 144.0 1,065.0 60.5 1,125.5 FINANCIAL REPORT Statement of changes in equity $million Note Balance at 1 April 2020 Profit for the year Total other comprehensive income (expense) – net of tax Dividends paid Acquisition of shares by CSR employee share trust Acquisition of non-controlling interest Share-based payments – inclusive of tax 19,24 20 9,20 20 Issued capital 966.7 – – – – – – Reserves Retained profits (45.7) – (45.0) – (1.0) (0.1) 2.2 144.0 146.1 12.3 (60.7) – – – CSR Limited interest 1,065.0 146.1 (32.7) (60.7) (1.0) (0.1) 2.2 Non- controlling interests 60.5 5.7 (17.8) (14.7) – – – Total equity 1,125.5 151.8 (50.5) (75.4) (1.0) (0.1) 2.2 Balance at 31 March 2021 966.7 (89.6) 241.7 1,118.8 33.7 1,152.5 Balance at 1 April 2019 Profit for the year Total other comprehensive income (expense) – net of tax Dividends paid On-market share buy-back Acquisition of shares by CSR employee share trust Acquisition of non-controlling interest Share-based payments – inclusive of tax 19,24 20 9,20 20 1,028.8 – – – (62.1) – – – (38.4) – (2.4) – – (0.1) (6.3) 1.5 162.1 125.3 (9.7) (133.7) – – 1,152.5 125.3 (12.1) (133.7) (62.1) (0.1) – – (6.3) 1.5 52.7 13.2 5.4 (6.8) – – (4.0) – 1,205.2 138.5 (6.7) (140.5) (62.1) (0.1) (10.3) 1.5 Balance at 31 March 2020 966.7 (45.7) 144.0 1,065.0 60.5 1,125.5 The above statement of changes in equity should be read in conjunction with the accompanying notes. 75 FINANCIAL REPORT Statement of cash flows $million Cash flows from operating activities Receipts from customers Payments to suppliers and employees Dividends and distributions received Interest received Income tax paid Net cash inflow from operating activities Cash flows from investing activities Proceeds from sale of property holdings and other assets Purchase relating to property holdings Purchase of property, plant and equipment and other assets Proceeds from sale of business Purchase of controlled entities and businesses, net of cash acquired Costs associated with disposal of businesses Payments for financial assets Loans and receivables (advanced) repaid Net cash inflow from investing activities Cash flows from financing activities On-market share buy-back Net (repayment) drawdown of borrowings Dividends paid1 Acquisition of shares by CSR employee share trust Lease payments Interest and other finance costs paid2 Net cash (outflow) inflow from financing activities Net (decrease) increase in cash held Net cash at the beginning of the financial year Effects of exchange rate changes Net cash at the end of the financial year Reconciliation of net profit attributable to shareholders of CSR Limited to net cash from operating activities Net profit attributable to shareholders of CSR Limited Net profit attributable to non-controlling interests Depreciation and amortisation Impairment of assets Share of profits of associates not received as dividends or distributions Share-based payments Finance cost net of discount unwind Net gain on disposal of property holdings Net change in current receivables Net change in current inventories Net change in current payables Net change in product liability provision Net change in other provisions Net change in current and deferred tax balances Net change in other assets and liabilities Net cash from operating activities Note 2021 2020 26 9 20 14 2 24 6 20 5 2,376.1 (2,081.6) 18.3 1.3 (61.1) 2,500.7 (2,252.1) 10.6 3.5 (16.6) 253.0 246.1 130.6 (29.8) (49.0) – (0.7) – (23.0) (0.7) 27.4 – (320.0) (75.4) (1.0) (34.0) (13.8) (444.2) (163.8) 414.8 (0.2) 250.8 146.1 5.7 96.2 9.3 4.8 1.7 13.6 (57.2) 13.6 28.1 10.9 (15.9) 6.5 (5.3) (5.1) 253.0 114.5 (42.2) (100.2) 78.5 (16.8) (0.7) – 13.6 46.7 (62.1) 320.0 (140.5) (0.1) (33.9) (11.6) 71.8 364.6 50.0 0.2 414.8 125.3 13.2 99.7 9.1 (3.3) 0.3 11.6 (3.5) 26.9 (10.6) (11.6) (21.1) (26.5) 33.4 3.2 246.1 1 During the year ended 31 March 2021, within the $75.4 million of dividends paid, dividends to CSR Limited shareholders were $60.7 million. Of the $60.7 million in dividends, $5.7 million was used to purchase CSR shares on-market to satisfy obligations under the Dividend Reinvestment Plan (DRP), and the remaining $55.0 million was paid in cash. In accordance with AASB 16 Leases, interest and other finance costs paid for the year ended 31 March 2021 includes finance costs relating to leases of $8.0 million (2020: $9.4 million). Refer to notes 7 and 14 for further details. 2 The above statement of cash flows should be read in conjunction with the accompanying notes. 76 CSR LIMITED ANNUAL REPORT 2021 NOTES TO THE FINANCIAL REPORT | BASIS OF PREPARATION Notes to the financial report 1 Basis of preparation This section sets out the basis upon which the CSR group’s financial statements are prepared as a whole. Significant and other accounting policies that summarise the measurement basis used and are relevant to an understanding of the financial statements are provided throughout the notes to the financial statements. All other accounting policies are outlined in note 34. Statement of Compliance: CSR Limited is a limited company incorporated in Australia whose shares are publicly traded on the Australian Securities Exchange. This general purpose financial report is prepared in accordance with the Corporations Act 2001 and applicable Accounting Standards and Interpretations, and complies with other requirements of the law. CSR Limited is a ‘for profit’ entity. The financial report includes the consolidated financial statements of CSR Limited and its controlled entities (CSR group). Accounting Standards include Australian Accounting Standards. Compliance with Australian Accounting Standards ensures that the financial statements and notes of the company and the CSR group comply with International Financial Reporting Standards. Basis of preparation: The financial report is based on historical cost, except for certain financial assets and liabilities which are at fair value. In preparing this financial report, the CSR group is required to make estimates and assumptions about carrying values of assets and liabilities. These estimates and assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. The accounting policies adopted are consistent with those of the previous year, unless otherwise stated. Impact of COVID-19 pandemic: The CSR group has managed, and continues to manage, the risks arising from the COVID-19 global pandemic, with any known impacts being included in the financial statements for the year ending 31 March 2021. CSR’s response includes a financial response plan that incorporates financial forecasts over the near term, which are regularly updated for any material changes in market conditions. In addition to a CSR group business continuity plan (BCP), all CSR businesses have tailored BCPs, which are specific to their business with operational responses implemented at varying levels of construction activity. To mitigate the impacts of COVID-19, governments have provided businesses with financial assistance. CSR did not qualify for the Australian JobKeeper Payment scheme. During the year ending 31 March 2021 the CSR group qualified for the New Zealand Wage Subsidy and received an amount of NZ$0.3m which was fully distributed to employees who were stood down due to the lockdown. As of 31 March 2021, the CSR group had:     net cash position of $250.8 million, calculated as cash and cash equivalents less borrowings, as disclosed in the statement of financial position. The net cash position at 31 March 2021 increased by $156.0 million compared to 31 March 2020; nil borrowings, with available undrawn borrowing facilities of $420.0 million, as disclosed in note 17; positive cash inflow from operating activities of $253.0 million, as disclosed in the statement of cash flows; and net current assets of $365.3 million, calculated as current assets of $901.8 million less current liabilities of $536.5 million, as disclosed in the statement of financial position. On the basis of reviews of the financial forecasts and consideration of the financial position summarised above, as at the date these financial statements are authorised for issue, the directors of CSR Limited consider it is appropriate for the going concern basis to be adopted in the preparation of this financial report. Basis of consolidation: The consolidated financial statements have been prepared by aggregating the financial statements of all the entities that comprise the CSR group, being CSR Limited and its controlled entities. In these consolidated financial statements:  results of each controlled entity are included from the date CSR Limited obtained control and until such time as it ceased to control an entity; and  all inter-entity balances and transactions are eliminated. Control is achieved where CSR Limited is exposed to, or has rights to, variable returns from its involvement with an entity and has the ability to affect those returns through its power to direct the activities of the entity. Entities controlled by CSR Limited are under no obligation to accept responsibility for liabilities of other common controlled entities except where such an obligation has been specifically undertaken. Rounding: Unless otherwise shown in the financial statements, amounts have been rounded to the nearest tenth of a million dollars and are shown by $million. CSR Limited is a company of the kind referred to in the Australian Securities and Investments Commission (ASIC) Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191, dated 24 March 2016. Currency: Unless otherwise shown in the financial statements, amounts are in Australian dollars, which is the CSR group’s functional currency. New or revised accounting standards: The CSR group has adopted all amendments to Australian Accounting Standards which became applicable for the CSR group from 1 April 2020. There have been no new or revised accounting standards which materially impacted the financial report. Standards not yet applicable are not expected to have a material impact on the CSR group. Critical accounting judgments and key sources of estimation uncertainty: Critical judgments and key assumptions that management has made in the process of applying the CSR group's accounting policies and that have the most significant effect on the amounts recognised in the financial statements are detailed in the notes below: Note Judgment/Estimation 12 15 15 Asset impairment Measurement of provisions for restoration and environmental rehabilitation Provision for uninsured losses and future claims 15, 16 Product liability 25 Classification of joint arrangements NOTES TO THE FINANCIAL REPORT: The notes are organised into the following sections. Financial performance overview: provides a breakdown of individual line items in the statement of financial performance, and other information that is considered most relevant to users of the annual report. Balance sheet items: provides a breakdown of individual line items in the statement of financial position that are considered most relevant to users of the annual report. Capital structure and risk management: provides information about the capital management practices of the CSR group and shareholder returns for the year. This section also discusses the CSR group’s exposure to various financial risks, explains how these affect the CSR group’s financial position and performance and what the CSR group does to manage these risks. Group structure: explains aspects of the CSR group structure and the impact of this structure on the financial position and performance of the CSR group. Other: provides information on items which require disclosure to comply with Australian Accounting Standards and other regulatory pronouncements and about items that are not recognised in the financial statements but could potentially have a significant impact on the CSR group’s financial position and performance. 77 NOTES TO THE FINANCIAL REPORT | FINANCIAL PERFORMANCE OVERVIEW Financial performance overview 2 Segment information Operating and reportable segments The CSR group has identified its operating segments based on the internal reports that are reviewed and used by the board of directors in their role as the chief operating decision makers (CODM) in assessing performance and in determining the allocation of resources. Operating segments are identified by management and the board of directors based on the nature of the products sold and production processes involved. Reportable segments are based on operating segments determined by the similarity of the products produced and sold as these are the sources of the CSR group's major risks and have the most effect on the rates of return. Each of the business units disclosed below has been determined as a reportable segment. Building Products Property The Building Products business unit comprises Interior Systems (Gyprock plasterboard, Martini, Himmel Interior Systems and Rondo rolled formed steel products joint venture), Construction Systems (Hebel autoclaved aerated concrete products, AFS walling systems and Cemintel fibre cement), and Masonry and Insulation (Bradford insulation, Bradford energy solutions, Edmonds ventilation systems, Monier roofing, PGH Bricks and Pavers and New Zealand Brick Distributors joint venture). The Property business unit generates returns typically from the sale of former operating sites. In addition, this business is currently involved in a small number of large-scale developments in New South Wales, Queensland and Victoria. These projects, in most cases, are in-fill developments (currently vacant land or discontinued operating sites within otherwise built up areas) located in metropolitan regions. Aluminium The Aluminium business unit relates to the CSR group’s 70% interest in Gove Aluminium Finance Limited, which in turn holds a 36.05% interest in the Tomago aluminium smelter (i.e. an effective interest of 25.24%). Gove Aluminium Finance Limited sources alumina, has it toll manufactured by Tomago and then sells aluminium into predominantly the Asian market. Products from the aluminium business include aluminium ingot, billet and slab. Accounting policies and inter-segment transactions The accounting policies used by the CSR group in reporting segments internally are the same as those disclosed in the significant accounting policies, with the exception that significant items (i.e. those items which by their size and nature or incidence are relevant in explaining financial performance) are excluded from trading profits. This approach is consistent with the manner in which results are reported to the CODM. Transfers of assets between segments are recognised at book value. It is the CSR group's policy that if items of revenue and expense are not allocated to operating segments, then any associated assets and liabilities are also not allocated to segments. This is to avoid asymmetrical allocations within segments which management believes would be inconsistent. Reporting provided to the board of directors in respect of earnings is primarily measured based on earnings before interest and tax (EBIT), excluding significant items, with significant items reviewed and reported separately to the CODM. The following items are not allocated to operating segments as they are not considered part of the core trading operations of any segment:  corporate overheads;  restructuring and provisions;  net finance costs; and  significant items. Geographical information The CSR group operates principally in Australia. For the year ended 31 March 2021, the CSR group's trading revenue from external customers in Australia amounted to $2,065.6 million (2020: $2,140.9 million), with $56.8 million (2020: $71.6 million) of trading revenue related to other geographical areas. The CSR group's non-current assets excluding investments accounted for using the equity method, deferred tax assets and other financial assets in Australia amounted to $1,024.1 million at 31 March 2021 (2020: $1,062.3 million), with $7.3 million (2020: $9.2 million) related to other geographical areas. 78 CSR LIMITED ANNUAL REPORT 2021 NOTES TO THE FINANCIAL REPORT | FINANCIAL PERFORMANCE OVERVIEW 2 Segment information (continued) $million Trading revenue1 EBITDA before significant items2 Depreciation and amortisation Earnings before interest, tax and significant items Business segment 2021 2020 2021 2020 2021 2020 2021 2020 Building Products Property Aluminium Corporate3 Restructuring and provisions4 1,534.5 1,591.3 – 587.9 – – – 621.2 – – 265.7 54.2 35.4 (16.6) (4.6) 254.9 (0.8) 71.5 (8.0) (1.1) Total CSR group 2,122.4 2,212.5 334.1 316.5 81.4 – 12.0 2.8 – 96.2 Reconciliation of earnings before interest, tax and significant items to profit after tax $million Earnings before interest, tax and significant items Net finance costs Income tax expense Profit after tax before significant items (before non-controlling interests) Less: non-controlling interests 84.4 0.7 11.9 2.7 – 99.7 Note 7 184.3 54.2 23.4 (19.4) (4.6) 170.5 (1.5) 59.6 (10.7) (1.1) 237.9 216.8 2021 237.9 (6.1) (65.7) 166.1 (5.7) 2020 216.8 (10.8) (58.0) 148.0 (13.2) Profit after tax before significant items attributable to shareholders of CSR Limited 160.4 134.8 Significant items after tax attributable to shareholders of CSR Limited 3 (14.3) (9.5) Profit after tax attributable to shareholders of CSR Limited 146.1 125.3 Business segment As at 31 March 2021 As at 31 March 2020 As at 31 March 2021 As at 31 March 2020 Funds employed ($million)5 Return on funds employed (%)6 Building Products Property Aluminium Corporate Total CSR group 844.3 139.5 136.0 (54.8) 945.8 167.8 141.0 (65.6) 1,065.0 1,189.0 20.6% 35.3% 16.9% – 21.1% 18.0% (0.8%) 42.4% – 17.8% 1 Trading revenue excludes net gain on disposal of assets, interest income, dividend income from other entities, share of net profit of joint venture entities and other income. Inter-segment sales are negligible. 2 EBITDA before significant items is earnings before interest, tax, depreciation, amortisation and significant items. 3 Represents unallocated overhead expenditure and other revenues. 4 Represents restructuring and provisions. Includes legal and managerial costs associated with long-term product liabilities and minor product liability claims that arise from time to time, certain defined benefit superannuation liabilities and expenses, other payables, non-operating revenue and other costs (excluding those categorised as significant items). 5 Funds employed is net assets of the CSR group less certain non-trading assets and liabilities. Funds employed at 31 March 2021 is calculated as net assets of $1,152.5 million (2020: $1,125.5 million), excluding the following assets: cash of $250.8 million (2020: $414.8 million), net tax assets of $98.4 million (2020: $72.4 million), net financial assets of $nil (2020: $24.0 million), net superannuation assets of $8.4 million (2020: $nil) and interest receivable of $0.7 million (2020: $0.7 million). In addition, the following liabilities have been excluded from funds employed: borrowings of $nil (2020: $320.0 million), asbestos product liability provision of $231.0 million (2020: $246.9 million), net financial liabilities of $39.8 million (2020: $nil) and net superannuation liabilities of $nil (2020: $8.5 million). 6 Return on funds employed (ROFE) is calculated based on EBIT before significant items for the 12 months to year end divided by average funds employed. ROFE is not a measure used for Corporate costs which are considered in the context of the CSR group result. Property ROFE varies due to timing of projects. 79 NOTES TO THE FINANCIAL REPORT | FINANCIAL PERFORMANCE OVERVIEW 3 Significant items $million Impairment of Building Products assets Business streamlining restructure costs Site closure costs Previously recorded significant items, including lease adjustments Significant items before finance costs and income tax Discount unwind and hedging relating to product liability provision Income tax benefit on significant items Significant items after tax Significant items attributable to non-controlling interests Significant items attributable to shareholders of CSR Limited Net profit attributable to shareholders of CSR Limited Significant items attributable to shareholders of CSR Limited Net profit before significant items attributable to shareholders of CSR Limited Note (i) (ii) (iii) (iv) 7 2021 (8.3) (12.7) (5.2) 11.3 (14.9) (5.6) 6.2 (14.3) – (14.3) 146.1 14.3 160.4 2020 (10.9) – – 3.5 (7.4) (6.2) 4.1 (9.5) – (9.5) 125.3 9.5 134.8 Earnings per share attributable to shareholders of CSR Limited before significant items1 Basic (cents per share) Diluted (cents per share) 33.1 32.9 27.3 27.3 1 The basis of calculation is consistent with the earnings per share disclosure in the statement of financial performance. Refer to note 4. Note Description Further explanation (i) (ii) Impairment of Building Products assets Business streamlining restructure costs (iii) Site closure costs (iv) Previously recorded significant items During the year ended 31 March 2021, the Building Products segment recorded an impairment charge of $8.3 million (2020: $10.9 million) to reduce the carrying value of assets to their recoverable amount. During the year ended 31 March 2021, the CSR group incurred employee related restructure costs of $12.7 million associated with the CSR strategy implementation. Costs incurred were associated with the re-organisation and streamlining of the operating model to drive efficiency of business performance. The sale of 8.6 hectares of the third tranche of land at Horsley Park was announced during the year, with the sale expected to be recorded in the financial year ended 31 March 2024. To prepare the site for sale, the PGH Bricks Horsley Park manufacturing site was closed and costs of $5.2 million were incurred, including redundancies and inventory relocation costs. During the year ended 31 March 2021, the CSR group:  sub-let two leased sites where the leased assets had previously been impaired through significant items. A receivable for the sub-lease income has been recorded during the period, resulting in a gain of $9.3 million; and reassessed and re-measured provisions associated with prior significant items, resulting in a gain of $2.0 million.  During the year ended 31 March 2020, the CSR group recorded income of $3.5 million following the settlement of a legal dispute. Recognition and measurement Significant items are those which by their size and nature or incidence are relevant in explaining the financial performance of the CSR group, and as such are disclosed separately. 80 CSR LIMITED ANNUAL REPORT 2021 NOTES TO THE FINANCIAL REPORT | FINANCIAL PERFORMANCE OVERVIEW 4 Earnings per share Weighted average number of ordinary shares used in the calculation of basic EPS (million)1 Weighted average number of ordinary shares used in the calculation of diluted EPS (million)2 Profit after tax attributable to shareholders of CSR Limited ($million) Basic EPS (cents per share) Diluted EPS (cents per share) 2021 485.1 487.1 146.1 30.1 30.0 2020 493.5 494.1 125.3 25.4 25.4 1 Calculated by reducing the total weighted average number of shares on issue of 485.4 million (2020: 493.9 million) by the weighted average number of shares purchased on market and held in trust to satisfy incentive plans as these plans vest of 242,666 (2020: 423,278). 2 Calculated by increasing the weighted average number of shares used in calculating basic EPS by outstanding performance rights of 1,987,861 (2020: 642,017). Performance rights granted under the LTI plan are included in the determination of diluted earnings per share to the extent to which they are dilutive. 5 Revenue $million Trading revenue Other income Net gain on disposal of property holdings Significant items Other Recognition and measurement Note 2021 2020 2 3 2,122.4 2,212.5 57.2 9.3 6.4 3.5 3.5 10.7  Sale of goods: the group sells a range of building products and aluminium. Sales are recognised when control of the products has transferred, being when the products are delivered and accepted by the customer. A receivable is recognised when the goods are delivered as this is the point in time that the consideration is unconditional because only the passage of time is required before the payment is due. The group’s obligation to repair or replace faulty products under the standard warranty terms is recognised as a provision.  Sale and installation of goods: certain CSR businesses supply and install building products. Sales are recognised over time given that there is generally no alternative use of the product (it is generally specified based on the requirements of the building) and there is an enforceable right to payment. Revenue from providing services is recognised in the accounting period in which the services are rendered. For fixed-priced contracts, revenue is recognised based on the actual service provided to the end of the reporting period as a proportion of the total services to be provided because the customer receives and uses the benefits simultaneously. For each of these contracts an appropriate driver is determined which is then used to recognise revenue as the work is completed. In the case of fixed-price contracts, the customer generally pays the fixed amount based on a payment schedule. If the services rendered by CSR exceed the payment, a contract asset is recognised. If the payments exceed the services rendered, a contract liability is recognised. Some contracts include multiple deliverables, such as the sale of product and related installation services. However, if the installation could be performed by another party it is accounted as a separate performance obligation. Where the contracts include multiple performance obligations, the transaction price will be allocated to each performance obligation based on the stand-alone selling price. Revenue in relation to the sale of the product is recognised at a point in time when the product is delivered, and legal title has passed, and the customer has accepted the goods. Estimates of revenues, cost or extent of progress toward completion are revised if circumstances change. Any resulting increases or decreases in estimated revenues or costs are reflected in profit or loss in the period in which the circumstances that give rise to the revision become known by management. Sale and installation of goods revenue is disclosed within ‘trading revenue’ above and in note 2 given it is not material for separate disclosure.  Sale of property holdings: income is recognised when control over the property has been transferred to the customer. The properties have generally no alternative use for the group due to contractual relationships. An enforceable right to payment does not arise until after the customer has taken control of the property which is the earlier of when title of the property passes or when the customer has physical possession of the property. As a result, income is recognised when control of the property passes to the customer. Income is measured as the amount receivable under the contract. It is discounted to present value if deferred payments have been agreed and the impact of discounting is material. In most cases, the consideration is due when legal title is transferred. Profit realised on the sale of property holdings are disclosed within ‘net gain on disposal of property holdings’ and classified as 'other income’ on the statement of financial performance and is recognised in the Property segment.  Disposal of assets: income is recognised when control of the asset passes to the purchaser. The revenue is measured as the amount receivable under the contract. It is discounted to present value if deferred payments have been agreed and the impact of discounting is material. 81 NOTES TO THE FINANCIAL REPORT | FINANCIAL PERFORMANCE OVERVIEW 6 Expenses $million Expenses Significant items1 Employee benefits expense Depreciation Amortisation Note 2021 2020 3 12,14 12 24.2 419.4 91.0 5.2 10.9 443.8 92.5 7.2 1 Significant items are included within impairment expense and other expenses in the statement of financial performance. Nature of expense Employee benefits expense: includes salaries and wages, share-based payments and other entitlements. 7 Net finance costs $million Interest expense and funding costs Finance cost - leases Discount unwind and hedging relating to product liability provision Discount unwind of other non-current liabilities Foreign exchange (gain) loss Finance costs Interest income Net finance costs Finance costs included in significant items Net finance costs before significant items Recognition and measurement Note 2021 2020 14 3 5.6 8.0 5.6 0.8 (6.8) 13.2 (1.5) 11.7 (5.6) 6.1 2.2 9.4 6.2 0.8 1.7 20.3 (3.3) 17.0 (6.2) 10.8 Interest income and expense are accrued on a time basis, by reference to the principal outstanding and at the applicable effective interest rates. Funding costs are capitalised and subsequently amortised over the term of the facility. Unwinding of the interest component of discounted assets and liabilities is treated as a finance cost. 82 CSR LIMITED ANNUAL REPORT 2021 NOTES TO THE FINANCIAL REPORT | FINANCIAL PERFORMANCE OVERVIEW 8 Income tax expense Reconciliation of income tax expense charged to the statement of financial performance: $million Profit before income tax Income tax expense calculated at 30% (Decrease) increase in income tax expense due to: Share of net profit of joint venture entities Taxable profit on property disposals Non-deductible impairment of goodwill and other assets Income tax under (over) provided in prior years Other items Total income tax expense Comprising of: Current tax expense Deferred tax credit relating to movements in deferred tax balances Total income tax expense Note 13 2021 211.3 63.4 (3.9) 0.1 – 0.7 (0.8) 59.5 72.3 (12.8) 59.5 2020 192.4 57.7 (4.1) 0.1 0.4 (0.2) – 53.9 59.1 (5.2) 53.9 Recognition and measurement Current and deferred tax is recognised as an expense in the statement of financial performance except when it relates to items credited or debited directly to equity, in which case the deferred tax is also recognised directly in equity, or where it arises from the initial accounting of a business acquisition, in which case it is taken into account in the determination of goodwill. Tax transparency report The CSR group has prepared a voluntary tax transparency report which is available to view online or to download from the CSR website (www.csr.com.au). The report sets out relevant tax information for CSR Limited and its controlled entities for the year ended 31 March 2021. Disclosure of company tax information Under tax legislation the Australian Taxation Office will publish in 2021 the following data for the CSR Limited tax consolidated group and Gove Aluminium Finance Limited in relation to the 2020 tax year: Entity CSR Limited (ABN: 90 000 001 276) Gove Aluminium Finance Limited (ABN: 45 001 860 073) Total revenue1 ($million) Taxable income ($million) Tax payable ($million) 1,609.9 627.3 198.2 107.3 35.4 30.4 1 For financial reporting and taxation purposes, items may have been classified between revenue and expenses differently. Therefore, total revenue may not reconcile to note 2 or note 24. Income tax is payable on taxable income (not total revenue) after allowing for expenses and specific adjustments under the tax law. For CSR Limited, tax payable for 2020 was $35.4 million because CSR was entitled to utilise franking credits on dividends received and R&D tax offsets to reduce its tax payable. The net amount of tax losses, capital losses and rebates carried forward at the end of the year is set out below: Value of tax losses, capital losses and rebates carried forward (net) CSR group 2021 ($million) 187.52 2020 ($million) 190.2 2 The gross value of unused tax losses for which no deferred tax asset has been recognised are $36.5 million (31 March 2020: $38.7 million). Unused tax losses were predominately generated by a New Zealand subsidiary that is no longer considered likely to utilise the tax losses in the foreseeable future. Unused tax losses can be carried forward indefinitely subject to meeting ownership continuity requirements. The gross value of unused capital losses for which no deferred tax asset has been recognised are $590.9 million (31 March 2020: $598.0 million). Unused capital losses were predominately generated from the sale of the Viridian Glass business and it is not considered likely that the capital losses will be utilised in the foreseeable future. Unused capital losses can be carried forward indefinitely subject to meeting ownership continuity requirements. 83 The accounting for this acquisition, the necessary tax consolidation calculations and the net impact of this transaction on equity have been finalised in the year ended 31 March 2021. Building Products segment During the year ended 31 March 2020, the Building Products segment acquired the business assets of two entities for total consideration of $3.9 million with goodwill of $1.8 million arising as a result of these acquisitions. Cash consideration of $3.2 million has been paid, with $0.7 million deferred. The Building Products segment also invested in an entity for cash consideration of $1.5 million. NOTES TO THE FINANCIAL REPORT | FINANCIAL PERFORMANCE OVERVIEW 9 Business combinations i) Current year Building Products segment During the year ended 31 March 2021, deferred consideration of $0.7 million was paid in relation to an acquisition that occurred during the year ended 31 March 2020. ii) Prior year CSR Martini Pty Limited Background On 20 December 2019, the CSR group acquired the 30% minority interest in CSR Martini Pty Limited (Martini) for cash consideration of $12.1 million. Revenue and profit contribution If the minority interest share of Martini was excluded from the CSR group results for the year ended 31 March 2020, profit after tax attributable to non-controlling interests would have been $1.1 million lower and profit after tax attributable to shareholders of CSR Limited would have been $1.1 million higher. Acquisition accounting for the transaction In accordance with AASB 10 Consolidated Financial Statements, as the CSR group has a controlling interest in Martini, the acquisition is treated as a transaction between shareholders. As a result, the difference between the consideration paid by the CSR group to purchase the minority interest in Martini and the non-controlling interest has been recorded in the non-controlling interest reserve. Fair value acquisition accounting is not required and the CSR group continues to consolidate Martini. Effective 21 December 2019, the CSR group has recognised 100% of the net profit after tax of Martini. Details of the effect of changes in the ownership interest on the equity attributable to shareholders of the CSR group is summarised as follows: Carrying amount of non-controlling interest at acquisition date Consideration paid Add: put option liability extinguished Less: deferred tax impact arising from Martini joining the CSR tax consolidation group Amount recognised in non-controlling interest reserve Note $million 4.0 (12.1) 3.3 (a) (1.6) (6.4) a) Deferred tax impact arising from Martini joining the CSR tax consolidation group Martini automatically entered the CSR tax consolidation group at acquisition date. Accordingly, the tax cost base of the net assets of Martini needed to be reset, which has resulted in an adjustment to the deferred tax balances. As the entry into the tax consolidation group was a direct consequence of CSR’s acquisition of the non- controlling interest, the impact of revising the deferred tax balances has been recorded in equity in the year ended 31 March 2020. 84 CSR LIMITED ANNUAL REPORT 2021 NOTES TO THE FINANCIAL REPORT | BALANCE SHEET ITEMS Balance sheet items 10 Working capital i) Current receivables ii) Inventories $million 2021 2020 $million 2021 2020 Trade receivables Allowance for doubtful debts Net trade receivables Property receivable Other loans and receivables Total loans and receivables 216.1 (8.2) 228.1 (8.6) 207.9 219.5 – 16.3 16.3 17.3 17.3 34.6 Current Raw materials and stores Work in progress Finished goods Total current inventories 100.5 16.8 196.5 313.8 102.7 18.0 221.2 341.9 1 Write-down of inventories recognised as an expense within cost of sales for the year ended 31 March 2021 totalled $14.4 million (2020: $13.6 million). iii) Current payables $million Trade payables Other payables Total current payables 2021 229.1 27.6 256.7 2020 217.4 28.1 245.5 Total current receivables 224.2 254.1 Ageing Past due 0-60 days – not impaired Past due >60 days – not impaired Past due 0-60 days – impaired Past due >60 days – impaired Movement in allowance for doubtful debts Opening balance Trade debts written off Trade debts disposed Trade debts provided Closing balance Recognition and measurement 2.6 – 7.1 1.1 (8.6) 2.2 – (1.8) (8.2) 7.9 – 3.7 4.9 (7.2) 1.8 – (3.2) (8.6)  Trade receivables: are recognised initially at fair value and are subsequently measured at amortised cost. The CSR group has adopted an expected credit loss (‘ECL’) model under AASB 9 Financial Instruments. The ECL model requires the CSR group to account for expected credit losses and changes in those expected credit losses at each reporting date to reflect changes in credit risk since initial recognition of the financial assets. Accordingly, the CSR group’s allowance for doubtful debts calculation applies the expected loss model and takes into consideration the likely level of bad debts (based on historical experience and forward looking information) as well as any known ‘at risk’ receivables. Bad debts are written off against the allowance account and any other change in the allowance account is recognised in the statement of financial performance. The recoverability of debtors at 31 March 2021 has been assessed to consider the impact of the COVID-19 pandemic and no material recoverability issues have been identified.  Inventories: are valued at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business less the estimated cost of completion and costs necessary to make the sale. Costs included in inventories consist of materials, labour and manufacturing overheads which are related to the purchase and production of inventories. The value of inventories is derived by the method most appropriate to each particular class of inventories. The major portion is valued on either a first-in-first-out or average cost basis.  Trade and other payables: are recognised when the CSR group becomes obliged to make future payments resulting from the purchase of goods and services. Payables are stated at their amortised cost. 85 NOTES TO THE FINANCIAL REPORT | BALANCE SHEET ITEMS 11 Property holdings $million Current Held for sale Total current property holdings Non-current Held for sale Property projects Total non-current property holdings 2021 2020 40.7 40.7 16.4 86.2 102.6 59.7 59.7 13.7 73.3 87.0 Property holdings are accounted for as Investment Properties in accordance with AASB 140 Investment Property. The carrying amount of property holdings includes the cost of acquisition and costs incurred in preparing the site for sale. Costs incurred after completion of the site are expensed as incurred. Property holdings are classified as either:   Held for sale: if the carrying amount will be recovered principally through a sale transaction and a sale is considered highly probable. The assets are measured at the lower of their carrying amount and fair value less costs to sell. Held for sale property assets that are not expected to settle within 12 months but are subject to a sales agreement are classified as non-current assets. Property projects: property holdings are the investment properties which are not yet classified as ‘held for sale’. Property holdings not expected to be fully developed within 12 months are classified as non-current assets. 12 Property, plant and equipment and intangible assets i) Property, plant and equipment $million Cost or written down value Land and buildings Plant and equipment Total Note 2021 2020 2021 2020 2021 2020 392.5 388.5 1,347.5 1,344.8 1,740.0 1,733.3 Accumulated depreciation and impairment (104.5) (96.4) (941.8) (895.4) (1,046.3) (991.8) Net carrying amount Net carrying amount at 1 April Capital expenditure Disposed Depreciation Impairments Exchange differences Acquisitions - business combinations Transferred from (to) property plant and equipment, property holdings and other assets 288.0 292.1 0.7 (0.8) (8.2) (0.4) – – 292.1 252.7 25.7 – 405.7 449.4 43.6 (0.4) (8.1) (52.7) – – – (7.5) (0.1) – 449.4 456.9 71.0 (0.4) (52.7) (3.5) – 1.5 693.7 741.5 44.3 (1.2) (60.9) (7.9) (0.1) – 4.6 21.8 (26.6) (23.4) (22.0) 741.5 709.6 96.7 (0.4) (60.8) (3.5) – 1.5 (1.6) 6 9 Balance at 31 March 288.0 292.1 405.7 449.4 693.7 741.5 ii) Goodwill and other intangible assets $million Cost Accumulated amortisation and impairment Net carrying amount Net carrying amount at 1 April Capital expenditure Disposed Amortisation Impairments Exchange differences Acquisitions - business combinations Balance at 31 March Goodwill Software Other Total other intangible assets Note 2021 2020 2021 2020 2021 2020 2021 2020 58.3 – 58.3 58.3 – – – – – – 58.3 – 58.3 57.2 – – – (0.7) – 1.8 88.8 (83.0) 87.3 (79.1) 31.2 (23.2) 30.0 120.0 117.3 (22.4) (106.2) (101.5) 5.8 8.2 3.5 – (4.4) (1.4) (0.1) – 8.2 13.6 2.6 – (5.6) (2.4) – – 8.0 7.6 1.2 – (0.8) – – – 7.6 10.1 1.0 – (1.6) (1.9) – – 13.8 15.8 4.7 – (5.2) (1.4) (0.1) – 15.8 23.7 3.6 – (7.2) (4.3) – – 58.3 58.3 5.8 8.2 8.0 7.6 13.8 15.8 6 9 86 CSR LIMITED ANNUAL REPORT 2021 NOTES TO THE FINANCIAL REPORT | BALANCE SHEET ITEMS 12 Property, plant and equipment and intangible assets (continued) Recognition and measurement  Property, plant and equipment: assets acquired are recorded at historical cost of acquisition less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of items. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred. The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.  Depreciation/amortisation: assets are depreciated or amortised at rates based upon their expected economic life using the straight-line method. Land, goodwill and trade names with indefinite lives are not depreciated or amortised. Useful lives are as follows: buildings 10 to 40 years; plant and equipment 2 to 40 years; and systems software and other intangible assets 2 to 8 years.  Software: developed internally or acquired externally, is initially measured at cost and includes development expenditure. Subsequently, these assets are carried at cost less accumulated amortisation and impairment losses.  Other intangible assets: including trade names and customer lists obtained through acquired businesses, are measured at fair value at the date of acquisition. Trade names of $1.6 million (2020: $1.6 million) that have an indefinite life are assessed for recoverability annually. Customer lists and all other trade names that have a defined useful life are amortised and subsequently carried net of accumulated amortisation. Intangible assets not obtained through acquired businesses are measured at cost. These assets are subsequently carried at cost less accumulated amortisation and impairment losses.  Goodwill: represents the excess of the cost of acquisition over the fair value of the identifiable assets and liabilities acquired. Goodwill is not amortised, but tested annually and whenever there is an indicator of impairment. Critical accounting estimate – carrying value assessment The CSR group tests property, plant and equipment and intangible assets for impairment to ensure they are not carried at above their recoverable amounts:  at least annually for goodwill and trade names with indefinite lives; and  where there is an indication that the assets may be impaired (which is assessed at least each reporting date). These tests for impairment are performed by assessing the recoverable amount of each individual asset or, if this is not possible, then the recoverable amount of the cash generating unit (CGU) to which the asset belongs. CGUs are the lowest levels at which assets are grouped and generate separately identifiable cash flows. The recoverable amount is determined each reporting period using the CGU’s fair value which is calculated using the discounted cash flows expected to arise from the asset. Management judgment is required in these valuations to forecast future cash flows and to determine a suitable discount rate in order to calculate the present value of these future cash flows. Future cash flows take into consideration forecast changes in the building cycle, aluminium prices and exchange rates where appropriate. If the recoverable amount of a cash generating unit is estimated to be less than its carrying amount, the carrying amount of the cash generating unit is reduced to its recoverable amount with any impairment recognised immediately in the statement of financial performance. The carrying amount of goodwill and trade names with indefinite lives forms part of the Building Products segment: $58.3 million and $1.6 million respectively (31 March 2020: $58.3 million and $1.6 million respectively). The recoverable amounts of the cash generating units that include goodwill are determined using discounted cash flow projections. Key assumptions used in the impairment assessments:  Cash flow forecasts: The cash flows are modelled over a five-year period with a terminal value used from year six onwards. The first five years represent financial plans forecast by management, based on the CSR group's view of the most recent outlook on building activity levels, with the terminal year representing long-term average activity levels. These estimates are informed by a review of a sample of external forecasts available as at the date of these financial statements. In addition, cash flows for the Aluminium cash generating unit reflect the most recent forecasts for key assumptions such as the US$ London Metal Exchange (LME) price and USD:AUD exchange rate.  Post-tax discount rate: The valuation is calculated using a post-tax annual discount rate of 9.0% for all segments other than Aluminium which uses 10.5% (2020: 10.0% for all segments other than Aluminium which was 11.2%).  Terminal value: The terminal value annual growth rate assumed is 2.0% (2020: 2.5%). AFS cash generating unit AFS is a business within the Building Products segment and provides permanent formwork walling solutions for the construction industry. At 31 March 2021, the carrying value of the AFS CGU was $70 million, which included goodwill and other intangible assets of $38 million. During the year ended 31 March 2021, the business experienced a shortfall in earnings when compared to internal forecasts, mainly due to reductions in market activity for the New South Wales apartment segment. As a result, an impairment assessment was performed for the AFS CGU at 31 March 2021 in accordance with AASB 136 Impairment of Assets. Key assumptions used in the impairment assessment are consistent with those outlined above. The cash flow forecast for AFS assumes a recovery in market activity consistent with external forecasts. Following the detailed impairment review of future cash flow projections, the recoverable amount of the AFS CGU is estimated to exceed the carrying amount of the CGU at 31 March 2021 by $5 million. The impact of reasonable possible changes in key assumptions has also been considered:  A 10% reduction in the volumes throughout the period modelled would result in an impairment of $24 million.  A 1% increase in the discount rate applied (from 9% to 10%) would result in an impairment of $8 million.  A 1% decrease in the terminal annual growth rate (from 2% to 1%) would result in an impairment of $5 million. No other reasonable possible changes in key assumptions have been identified. 87 NOTES TO THE FINANCIAL REPORT | BALANCE SHEET ITEMS 13 Net deferred income tax assets $million Net deferred income tax assets arising on temporary differences1 Net deferred income tax liabilities arising on temporary differences Tax losses – revenue recorded as asset1 Total net deferred income tax assets 2021 143.0 – 1.9 144.9 2020 129.4 (18.5) 0.9 111.8 1 For the year ended 31 March 2021, deferred income tax assets in the statement of financial position total $144.9 million (31 March 2020: $130.3 million). Movement in deferred income tax assets $million 2021 Property, plant and equipment Right-of-use lease assets Lease liabilities Superannuation defined benefit plans Product liability provision Employee benefits provisions Other provisions Spares and stores Fair value of hedges Other individually insignificant balances Tax losses Total net deferred income tax assets 2020 Property, plant and equipment Right-of-use lease assets Lease liabilities Superannuation defined benefit plans Product liability provision Employee benefits provisions Other provisions Spares and stores Fair value of hedges Other individually insignificant balances Tax losses Total net deferred income tax assets Recognition and measurement Opening balance Credited (charged) to profit or loss Credited (charged) to equity Other (including transfers) Closing balance (15.7) (45.9) 60.0 2.5 74.1 24.4 21.3 (11.8) (6.8) 8.8 0.9 111.8 (17.4) – – (2.6) 80.4 28.2 26.3 (11.9) (6.1) (4.8) – 92.1 1.2 9.7 (10.5) 0.3 (4.8) 2.6 0.8 11.8 – 0.7 1.0 12.8 1.5 9.7 (10.2) 0.9 (6.3) (3.8) (0.6) 0.1 – 13.0 0.9 5.2 – – – (5.3) – – – – 25.6 0.4 – 20.7 (0.6) (51.2) 66.0 4.2 – – (3.4) – (0.7) 0.3 – 14.6 (0.4) (1.9) 1.9 – – – – – – – – (14.9) (38.1) 51.4 (2.5) 69.3 27.0 22.1 – 18.8 9.9 1.9 (0.4) 144.9 0.8 (4.4) 4.2 – – – (1.0) – – 0.3 – (0.1) (15.7) (45.9) 60.0 2.5 74.1 24.4 21.3 (11.8) (6.8) 8.8 0.9 111.8 Current tax: represents the amount expected to be paid in relation to taxable income for the financial year measured using tax rates and tax laws that have been enacted or substantively enacted by the reporting date. Current tax for current and prior periods is recognised as a liability (or asset) to the extent that it is unpaid (or refundable). Deferred income tax: is provided in full, using the balance sheet liability method, on temporary differences arising between the carrying amounts of assets and liabilities for financial reporting and tax purposes. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period(s) when the asset and liability giving rise to them are realised or settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the reporting date. Deferred tax assets are recognised to the extent that it is probable that sufficient taxable amounts will be available against which deductible temporary differences or unused tax losses and tax offsets can be utilised. Deferred tax assets and liabilities are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future. A deferred tax liability is not recognised in relation to taxable temporary differences arising from goodwill. Tax assets and liabilities are offset when there is a legally enforceable right to offset tax assets and liabilities, when the tax balances relate to the same taxation authority and when the CSR group intends to settle the tax assets and liabilities on a net basis. No provision for withholding tax has been made on undistributed earnings of overseas controlled entities where there is no intention to distribute those earnings. 88 CSR LIMITED ANNUAL REPORT 2021 NOTES TO THE FINANCIAL REPORT | BALANCE SHEET ITEMS 14 Leases i) The CSR group’s leasing activities The CSR group leases various properties, equipment and vehicles. Property leases typically are for a period of 4 to 10 years and often have extension options and equipment and vehicle leases are typically for a period of 3 to 6 years. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants, but leased assets may not be used as security for borrowing purposes. Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the group. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to the statement of financial performance over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis. Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in the statement of financial performance. Short-term leases are leases with a term of 12 months or less. Low-value assets comprise IT equipment and office equipment such as photocopiers. ii) Amounts recognised in the financial statements The statement of financial position shows the following amounts relating to leases: $million Right-of-use assets Properties Equipment Vehicles Total right-of-use assets Lease liabilities Current Non-current Total lease liabilities The statement of financial performance contains the following amounts relating to leases: $million Depreciation charge for right-of-use assets Properties Equipment Vehicles Total depreciation charge for right-of-use assets Interest expense (included in finance cost) Expense relating to short-term and low-value leases The statement of cashflows contains the following amounts within ‘financing activities’ relating to leases: $million Lease payments Interest Total lease cash outflows included in ‘cash flows from financing activities’ 2021 2020 116.5 6.3 4.4 127.2 30.2 141.1 171.3 140.4 6.4 6.4 153.2 32.9 167.1 200.0 2021 2020 24.1 2.5 3.5 30.1 8.0 11.5 2021 34.0 8.0 42.0 6 7 7 25.4 2.3 4.0 31.7 9.4 12.6 2020 33.9 9.4 43.3 2020 42.1 69.6 54.4 83.2 The table below analyses the undiscounted cash flows for the CSR group’s lease liabilities, into relevant maturity groupings based on the remaining lease term at the reporting date: $million 1 year or less 1 to 3 years 3 to 5 years Over 5 years 2021 37.1 61.8 45.9 62.3 Total undiscounted cash flows 207.1 249.3 89 NOTES TO THE FINANCIAL REPORT | BALANCE SHEET ITEMS 15 Provisions $million Current Employee benefits Restructure and rationalisation Product liability Restoration and environmental rehabilitation Uninsured losses and future claims Other1 Total current provisions Non-current Employee benefits Product liability Restoration and environmental rehabilitation Make-good for property leases Uninsured losses and future claims Other1 Total non-current provisions 2020 Recognised/ remeasured Settled/ transferred Discount unwind 76.8 6.6 30.0 1.1 4.0 11.4 129.9 4.3 216.9 0.7 11.5 20.0 11.6 265.0 49.0 10.0 14.6 0.6 3.6 5.4 83.2 – (14.6) 1.2 – (3.3) – (16.7) (40.5) (12.7) (20.6) (0.2) (2.2) (5.3) (81.5) 0.3 – – (0.6) – (0.8) (1.1) – – – – – – – – 4.7 – – 0.7 0.1 5.5 2021 85.3 3.9 24.0 1.5 5.4 11.5 131.6 4.6 207.0 1.9 10.9 17.4 10.9 252.7 1 Includes provision for anticipated disposal costs of Tomago aluminium smelters spent pot lining and onerous lease liabilities. Recognition, measurement and critical accounting estimates Provisions are recognised when the CSR group has a present obligation (legal or constructive) as a result of a past event, it is probable that settlement will be required and the obligation can be reliably estimated. Provisions which are not expected to be settled within 12 months are measured at the present value of the estimated future cash outflows to be made by the CSR group. Provisions representing critical accounting estimates and key sources of estimation uncertainty  Product liability: provision is made for all known asbestos claims and reasonably foreseeable future claims has been determined using reports provided by independent experts in each of Australia and the United States, and includes an appropriate prudential margin. Refer to note 16 for further details of the key assumptions and uncertainties in estimating this liability.  Measurement of provisions for restoration and environmental rehabilitation: the liability is immediately recognised when the environmental exposure is identified and the rehabilitation costs can be reliably estimated. Judgment is required in arriving at an estimate of future costs required to extinguish these obligations. Given the nature of these issues, circumstances may change and estimates and provisions will be updated accordingly. Expert advice is relied upon (where available) and known facts at the date of this report are considered to arrive at the best estimate for future liabilities.  Provision for uninsured losses and future claims: relates to the CSR group’s self-insurance program for workers’ compensation. CSR Limited is a licensed self-insurer in New South Wales, Queensland, Victoria, Western Australia and the Australian Capital Territory for workers compensation insurance. The provision recognises the best estimate of the consideration required to settle the present obligation for anticipated compensation payments and is determined at each year end using reports provided by independent experts annually. Other provisions  Employee benefits provisions: provision is made for benefits accruing to employees in respect of wages and salaries, annual leave, long service leave and other employee obligations when it is probable that settlement will be required and they are capable of being reliably measured. Provisions made in respect of employee benefits expected to be settled within 12 months are measured at their nominal values using the remuneration rate expected to apply at the time of settlement.  Make-good for property leases: provision has been recognised for the present value of the estimated expenditure to restore leased properties to their original condition at the end of the respective lease terms. These costs have been capitalised as part of the cost of the right-of-use leased asset and are amortised over the shorter of the term of the lease and the useful life of the assets.  Restructure and rationalisation: provision is made for restructuring and rationalisation where the CSR group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. The provision is measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the end of the reporting period. 90 CSR LIMITED ANNUAL REPORT 2021 NOTES TO THE FINANCIAL REPORT | BALANCE SHEET ITEMS 16 Product liability Background CSR Limited and/or certain subsidiaries (CSR) were involved in mining asbestos and manufacturing and marketing products containing asbestos in Australia, and exporting asbestos to the United States. CSR’s involvement in asbestos mining, and the manufacture of products containing asbestos, began in the early 1940s and ceased with the disposition of the Wunderlich asbestos cement business in 1977. As a result of these activities, CSR has been named as a defendant in litigation in Australia and the United States. CSR has been settling claims since 1989. It has been, and remains, CSR’s policy to ensure that all legitimate asbestos related claims, whether in Australia or the US, are resolved on a fair and equitable basis. Where there is a demonstrated liability, CSR will seek to offer a fair settlement and, in the case of US claimants, one that is consistent with claim settlement values in Australia. Default judgements have been sought and obtained against CSR in the US, without CSR being present or represented (and for damages that are excessive and of a nature that would not be recognised in Australia). Australian law does not recognise the jurisdiction of US courts in such matters. There have not been any US judgements enforced against CSR. As at 31 March 2021, CSR had resolved approximately 5,100 claims in Australia and approximately 137,900 claims in the United States. Basis of provision CSR includes in its financial statements a product liability provision covering all known claims and reasonably foreseeable future asbestos related claims. This provision is reviewed every six months. The provision recognises the best estimate of the consideration required to settle the present obligation for anticipated compensation payments and legal costs as at the reporting date. The provision is net of anticipated workers compensation payments from available workers compensation insurers. CSR does not believe there is any other significant source of insurance available to meet its asbestos liabilities. CSR no longer has general insurance coverage in relation to its ongoing asbestos liabilities. In determining the product liability provision, CSR has obtained independent expert advice in relation to the future incidence and value of asbestos related claims in Australia and the United States. CSR has appointed Finity Consulting Pty Limited as the independent expert to estimate the Australian liabilities. CSR has appointed Nathan Associates, Inc as the independent expert to estimate the United States liabilities. The independent experts make their own determination of the methodology most appropriate for estimating CSR’s future liabilities. The assessments of those independent experts project CSR’s claims experience into the future using modelling techniques that take into account a range of possible outcomes. The present value of the liabilities is estimated by discounting the estimated cash flows using the pre-tax rate that reflects the current market assessment of the time value of money and risks specific to those liabilities. Many factors are relevant to the independent experts’ estimates of future asbestos liabilities, including:  numbers of claims received by disease and claimant type and expected future claims numbers, including expectations as to when claims experience will peak;  expected value of claims;  the presence of other defendants in litigation or claims involving CSR;  the impact of and developments in the litigation and settlement environment in each of Australia and the United States;  estimations of legal costs;  expected claims inflation (Australian liability 2.50% and US liability 2.0%); and  the discount rate applied to future payments (Australian liability 2.25% and US liability 1.70%). There are a number of assumptions and limitations that impact on the assessments made by CSR’s experts, including the following:  assumptions used in the modelling are based on the various considerations referred to above;  the future costs of asbestos related liabilities are inherently uncertain for the reasons discussed in this note;  uncertainties as to future interest rates and inflation;  the analysis is supplemented by various academic material on the epidemiology of asbestos related diseases that is considered by the experts to be authoritative;  the analysis is limited to liability in the respective jurisdictions of Australia and the United States that are the subject of the analysis of that expert and to the asbestos related diseases that are currently compensated in those jurisdictions; and  the effect of possible events that have not yet occurred which are currently impossible to quantify, such as medical and epidemiological developments in the future in treating asbestos diseases, future court and jury decisions on asbestos liabilities, and legislative changes affecting liability for asbestos diseases. The product liability provision is determined every six months by aggregating the Australian and United States estimates noted above, translating the United States base case estimate to Australian dollars using the exchange rate prevailing at the balance date and adding a prudential margin. The prudential margin is determined by the CSR directors at the balance date, having regard to the prevailing litigation environment and any material uncertainties that may affect future liabilities. As evidenced by the analysis below, the prudential margin has varied over the past five years. The directors anticipate that the prudential margin will continue to fluctuate within a range approximating 10% to 30% depending on the prevailing circumstances at each balance date. Having regard to the extremely long tailed nature of the liabilities and the long latency period of disease manifestation from exposure, the estimation of future asbestos liabilities is subject to significant complexity. As such, there can be no certainty that the product liability provision as at 31 March 2021 will definitively estimate CSR’s future asbestos liabilities. If the assumptions adopted by CSR’s experts prove to be incorrect, the current provision may be shown to materially understate or overstate CSR’s asbestos liability. However, taking into account the provision already included in CSR’s financial statements and current claims management experience, CSR is of the opinion that asbestos litigation in Australia and the United States will not have a material adverse impact on the CSR group’s financial condition. CSR’s asbestos provision is summarised in the graph and table below: Table and Graph 1: Five year history – asbestos provision 312.4 289.0 268.0 246.9 231.0 500 400 300 200 100 0 2017 2018 Base case provision A$m 2019 2020 2021 Prudential margin A$m $million Base case estimate Prudential margin Prudential margin % Total product liability provision Year ended 31 March 2021 2020 196.1 34.9 17.8% 231.0 218.9 28.0 12.8% 246.9 91 NOTES TO THE FINANCIAL REPORT | CAPITAL STRUCTURE AND RISK MANAGEMENT Capital structure and risk management 17 Borrowings and credit facilities i) Borrowings $million Non-current borrowings – unsecured Recognition and measurement 2021 – 2020 320.0 Borrowings are recorded initially at fair value, net of transaction costs. 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 profit or loss over the period of the borrowing using the effective interest rate method. ii) Credit facilities The CSR group has a total of $420.0 million (31 March 2020: $320.0 million) committed standby facilities with external financial institutions. These facilities have fixed maturity dates as follows: $154.0 million in 2023, $191.0 million in 2024 and $75.0 million in 2025. As at 31 March 2021, $420.0 million of the standby facilities were undrawn (2020: $320.0 million drawn). 18 Issued capital On issue 31 March 2020 On-market share buy-back – net of transaction costs On issue 31 March 2021 Ordinary shares fully paid1 Issued capital $million 485,382,776 – 485,382,776 966.7 – 966.7 1 Fully paid ordinary shares are listed on the Australian Securities Exchange and carry one vote per share and the right to dividends. No shares were issued during the years ended 31 March 2021 and 31 March 2020 under employee share plans as shares in respect of the plans were acquired on market. During the years ended 31 March 2021 and 31 March 2020, eligible shareholders were able to reinvest all or part of their dividends in fully paid ordinary shares. Shares were acquired on-market and did not have any impact on issued capital. Net tangible assets per ordinary share for the year ended 31 March 2021 are $2.16 (2020: $2.04). Net tangible assets per share is calculated as net assets attributable to CSR Limited shareholders of $1,118.8 million (2020: $1,065.0 million) less intangible assets of $72.1 million (2020: $74.1 million) divided by the number of issued ordinary shares of 485.4 million (2020: 485.4 million). During the year ended 31 March 2021, the company ended the on-market share buy-back program. 19 Dividends and franking credits i) Dividends Dividend type 2019 Final 2020 Interim ordinary 2020 Interim special 2020 Final 2021 Interim ordinary 2021 Interim special 2021 Final ordinary1 2021 Final special1 Cents per share Franking Total amount $million Date paid/payable Graph 1: Dividends declared relating to each financial year – cents per share 13.0 10.0 4.0 – 8.5 4.0 14.5 9.5 50% 50% 50% – 100% 100% 100% 100% 64.9 2 July 2019 49.1 10 December 2019 19.7 10 December 2019 – – 41.3 8 December 2020 19.4 8 December 2020 70.4 46.1 2 July 2021 2 July 2021 40.0 30.0 20.0 10.0 - 26.0 27.0 26.0 36.5 14.0 2017 2018 2019 2020 2021 1 The amounts disclosed as recognised in 2021 are the interim dividends in respect of the financial year ended 31 March 2021. ii) Franking credits $million Franking account balance on an accruals basis1 2021 88.4 2020 39.8 1 The above amounts are calculated from the balance of the franking account as at the end of the reporting period, adjusted for franking credits and debits that will arise from the settlement of income tax liabilities or receivables after the end of the year. 92 CSR LIMITED ANNUAL REPORT 2021 NOTES TO THE FINANCIAL REPORT | CAPITAL STRUCTURE AND RISK MANAGEMENT 20 Reserves $million Balance at 1 April 2020 Hedge loss recognised in equity Hedge profit transferred to the statement of financial performance Translation of foreign operations Income tax related to other comprehensive income Share-based payments expense Income tax related to share-based payments expense Acquisition of shares by CSR employee share trust Acquisition of non-controlling interest Balance at 31 March 2021 Balance at 1 April 2019 Hedge profit recognised in equity Hedge profit transferred to the statement of financial performance Translation of foreign operations Income tax related to other comprehensive income Share-based payments expense Income tax related to share-based payments expense Acquisition of shares by CSR employee share trust Acquisition of non-controlling interest Balance at 31 March 2020 Nature and purpose of reserves Hedge reserve 9.3 (49.2) (10.6) – 18.0 – – – – (32.5) 13.0 3.8 (9.1) – 1.6 – – – – 9.3 Foreign currency translation reserve Employee share reserve Non- controlling interests reserve Other Total Share based payment trust reserve (24.4) – – – – – – (1.0) – 40.2 – – – – 1.7 0.5 – – (68.7) – – – – – – – (0.1) 42.4 (25.4) (68.8) 38.7 – – – – 0.3 1.2 – – (24.3) – – – – – – (0.1) – (59.1) – – (3.3) – – – – – – – (9.6) – – – – – 3.3 – – – – – – – – – – (45.7) (49.2) (10.6) (3.2) 18.0 1.7 0.5 (1.0) (0.1) (89.6) (38.4) 3.8 (9.1) 1.3 1.6 0.3 1.2 (0.1) (6.3) (2.1) – – (3.2) – – – – – (5.3) (3.4) – – 1.3 – – – – – (2.1) 40.2 (24.4) (68.7) – (45.7) Hedge reserve: the hedge reserve is used to record gains or losses on a hedging instrument in a cash flow hedge that are recognised in other comprehensive income. Amounts are reclassified to profit or loss when the associated hedged transaction affects profit or loss. Foreign currency translation reserve: exchange differences arising on translation of foreign controlled entities are recognised in other comprehensive income and accumulated in a separate reserve within equity. Employee share reserve: the employee share reserve is used to recognise the share-based payments expense and associated income tax recognised through other comprehensive income. Share based payment trust reserve: treasury shares are shares in CSR Limited that are held by the CSR Limited Share Plan Trust (‘Trust’) for the purpose of issuing shares under the CSR employee share plans and the CSR executive incentive plans (see pages 63 to 66 of the remuneration report for further detail). When the Trust purchases the company’s equity instruments, the consideration paid is recorded in the share-based payments trust reserve. Number of shares Opening balance Acquisition of shares by the Trust (average price of $4.55 (2020: $3.40) per share) Issue of shares under executive incentive plans Closing balance 2021 2020 21,354 225,000 (144,173) 683,663 25,000 (687,309) 102,181 21,354 Non-controlling interests reserve: this reserve is used to record the differences which may arise as a result of transactions with non- controlling interests that do not result in a loss of control. Other reserves: other reserves were used to recognise the written put option the minority shareholders of the Martini business had to sell all of their remaining interest to the group at an agreed price (based on the financial results of the business). The written put option was extinguished as a result of the CSR group’s purchase of the remaining 30% of Martini. Refer to note 9 for further details. 93 NOTES TO THE FINANCIAL REPORT | CAPITAL STRUCTURE AND RISK MANAGEMENT 21 Financial risk management The CSR group’s activities expose it to a variety of financial risks, including credit, liquidity and market risks. This note presents information about the Risk Management Policy framework (‘framework’) and each of these risks. The framework sets out the specific principles in relation to the use of financial instruments in hedging exposures to market risk, specifically interest rate risk, foreign exchange risk and commodity risk (aluminium, alumina, oil, electricity and gas) and the investment of excess liquidity. The risk management policy has been approved by the board of directors. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the CSR group’s activities. Compliance with the framework and procedures is reviewed by the Finance Committee on a routine basis. The Finance Committee membership consists of the managing director and other relevant senior executives. The CSR group uses a variety of derivative instruments to manage market risks. There have been no changes in the type and scale of risk that the CSR group is exposed to or the risk management policies used to manage these risks during the years ended 31 March 2021 and 31 March 2020. The CSR group does not use derivative or financial instruments for speculative or trading purposes. Recognition and measurement Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value at each reporting date. The 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. i) Credit risk Nature of the risk Credit risk is the risk of financial loss to the CSR group if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the CSR group’s receivables from customers. The carrying amount of financial assets represents the maximum credit exposure. Credit risk management: receivables The CSR group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also considers the factors that may influence the credit risk of its customer base, including the default risk of the industry sector and country in which customers operate. To manage this risk, the CSR group has a policy for establishing credit approvals and limits under which each new customer is analysed individually for creditworthiness before the CSR group’s standard payment and delivery terms and conditions are offered. Credit limits are established for each customer and reviewed regularly. Any sales exceeding those limits require approval from the general manager. The CSR group continuously monitors the financial viability of its trade customers and accounts, ageing analysis and, where necessary, carries out a reassessment of credit limits provided. Concentrations of credit risk with respect to receivables are limited due to the large number of customers and markets in which the CSR group does business, as well as the dispersion across many geographic areas. The CSR group measures the loss allowance at an amount that reflects expected losses for trade and other receivables (refer to note 10). Credit risk management: derivatives The CSR group has an established counterparty credit risk policy. Derivatives may be entered into with banks that are rated at least A– from rating agency Standard & Poor’s or A3 from rating agency Moody’s, unless otherwise approved by the board. ii) Liquidity risk Nature of the risk Liquidity risk is the risk that the CSR group has insufficient funds to meet its financial obligations when they fall due. Liquidity risk management Liquidity risk management requires maintaining sufficient cash, bank facilities and reserve borrowing facilities in combination with continuously monitoring forecast and actual cash flows, to enable matching the maturity profiles of financial assets and liabilities. The CSR group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its obligations when due, without incurring unacceptable losses or risking damage to the CSR group’s reputation. Details of credit facilities and the maturity profile are given in note 17. The table below analyses the undiscounted cash flows for the CSR group’s financial liabilities and derivative financial instruments, currently in a liability position, into relevant maturity groupings based on the remaining period at the reporting date to maturity: Liquidity risk ($million) 1 year or less 1 to 3 years 3 to 5 years Total 2021 Current payables Commodity financial instruments Foreign currency financial instruments 256.7 76.6 – 110.4 – 256.7 3.3 190.3 1.1 0.9 – 2.0 Total 334.4 111.3 3.3 449.0 2020 Current payables Borrowings (including interest) Commodity financial instruments Foreign currency financial instruments 245.5 3.4 – 297.9 – 245.5 25.1 326.4 8.4 9.6 1.0 19.0 18.8 8.4 – 27.2 Total 276.1 315.9 26.1 618.1 94 CSR LIMITED ANNUAL REPORT 2021 NOTES TO THE FINANCIAL REPORT | CAPITAL STRUCTURE AND RISK MANAGEMENT 5 9 d e r e t n e , s t c a r t n o c e t a r e g n a h c x e d r a w r o f n i i s e r u s o p x e e t a r e g n a h c x e t n a c i f i n g s d n a ) s e r u s o p x e e c i r p y t i d o m m o c e g a n a m o t ( s e v i t a v i r e d y t i d o m m o c t u o b a n o i t a m r o f n i l s e d i v o r p w o e b e b a t e h T l ) d e u n i t n o c ( t n e m e g a n a m k s i r l i a c n a n F i k s i r t e k r a M 1 2 ) i i i I T N E M E G A N A M K S R D N A E R U T C U R T S L A T I P A C | I T R O P E R L A C N A N F E H T O T S E T O N I % 0 1 . 7 7 9 ) 5 3 . ( ) 2 2 . ( ) 1 0 . ( ) . 8 8 2 ( ) . 2 6 8 ( . 7 0 5 ) 0 7 . ( ) 1 4 . ( ) 3 3 . ( – ) . 0 2 7 ( % 0 1 y b ) . 7 7 9 ( . 8 8 2 5 3 . 2 2 . 1 0 . . 5 0 7 0 7 . 1 4 . 3 3 . – . 9 8 5 ) . 7 0 5 ( x a t e r o f e b y t i u q e n i e g n a h C e g n a h c x e / e c i r P y b s n e k a e w e t a r e g n a h c x e / e c i r P s n e h t g n e r t s e t a r ) . 3 9 2 1 ) . 9 2 1 ( ) 3 3 . ) 1 9 . ) 5 0 . ) 9 0 . ( ( ( ( ) 1 0 . ( ) 1 8 . ( ) . 5 9 ( ) 3 7 . ( – ) . 6 6 2 ( ( – – . 9 0 . 3 0 . 1 0 . 4 2 9 . 1 7 5 8 . 0 3 7 2 . 9 8 3 . 9 1 3 . 2 0 2 . 7 8 6 7 . 2 3 5 . 3 7 6 5 – – – 7 0 . . 6 6 1 . 4 9 8 . 0 1 5 . 6 0 4 – . 7 7 9 6 – – – 2 1 . . 0 5 4 . 0 8 0 1 . 1 3 1 – . 0 0 1 – – – . 4 6 5 4 . 1 3 0 2 – . 1 5 2 . 9 8 1 . 2 1 2 4 s s e l . 9 9 6 . 8 3 1 . 8 1 1 . 2 0 2 . 7 2 9 2 . 5 2 0 3 . 4 0 2 3 . 8 3 3 2 – – . 1 0 3 . 5 5 2 . 4 9 8 . 9 0 1 . 1 5 1 – . 6 0 5 3 . 1 7 4 3 y t i l i b a L i t e s s A l a t o T s r a e y 5 o t 3 s r a e y 3 o t 1 r o r a e y 1 5 – . 7 3 8 . 2 1 6 4 6 . 7 0 . . 6 0 4 9 1 , / e c i r p e g a r e v A , 2 1 e t a r e g n a h c x e 5 – . 4 3 8 . 0 6 6 – 6 0 . . 0 9 8 7 1 , i i l m u n m u a / a n m u a – s p a w s l i i i l m u n m u a – s p a w s n o i l l i m $ y t i d o m m o C y t i d o m m o C 1 2 0 2 y t i l c i r t c e e – s e r u t u f & s p a w s y t i d o m m o C s a g – s n o i t p o & s p a w s y t i d o m m o C l i o – s p a w s y t i d o m m o C 6 ) l l e s – r a l l o d S U ( s t c a r t n o c e t a r e g n a h c x e d r a w r o F 6 ) l l e s – r a l l o d S U ( s t c a r t n o c e t a r e g n a h c x e d r a w r o F i i l m u n m u a / a n m u a – s p a w s l i i i l m u n m u a – s p a w s y t i d o m m o C y t i d o m m o C 0 2 0 2 y t i l c i r t c e e – s e r u t u f & s p a w s y t i d o m m o C s a g – s n o i t p o & s p a w s y t i d o m m o C l i o – s p a w s y t i d o m m o C , 4 3 e u a v l r i a F e u a v l l a n o i t o N : p u o r g R S C e h t y b o t n i e h t n o d e s a b n o i t i n g o c e r f o g n m i i t d e t c e p x e e h T . s n o i t c a s n a r t i l t s a c e r o f e b a b o r p y l h g h f o s e g d e h w o l f h s a c o t e t a e r l s e s s o l e h t s a 1 2 0 2 n i d e r r e f e d e r e w ) s n a g i t e n n o i l l i . m 5 8 2 $ : 0 2 0 2 ( s e s s o l t c a r t n o c y t i d o m m o c f o t e n n o i l l i . m 5 3 5 1 $ . ) s a g ( J G / D U A d n a ) y t i l c i r t c e e ( h W M / D U A , ) l i o ( l e r r a b / D U A , ) i i m u n m u a ( e n n o t l c i r t e m / D S U n i s i e c i r p l a e d e g a r e v A . s t c a r t n o c e t a r e g n a h c x e d r a w r o f o t e b a c l i l p p a e t a r e g n a h c x E e u a v l r i a f e h T . ) s s o l n o i l l i m 7 0 $ . : 0 2 0 2 ( s s o l n o i l l i m 9 2 $ . : s r a e y e v i f o t e e r h t i ; ) n a g n o i l l i m 3 9 $ . : 0 2 0 2 ( s s o l n o i l l i . m 2 1 8 $ : s r a e y e e r h t o t e n o i ; ) n a g n o i l l i . m 9 9 1 $ : 0 2 0 2 ( s s o l n o i l l i . m 4 9 6 $ : s s e l r o r a e y e n o s i 1 2 0 2 h c r a M 1 3 t a s e u a v l r i a f . s s o l r o t i f o r p n i i d e s n g o c e r i ) s n a g f o n o i l l i m 4 0 $ . : 0 2 0 2 ( s e s s o l f o n o i l l i . m 3 0 $ s e d u c n l i ) n o i l l i . m 9 8 2 $ : 0 2 0 2 ( n o i l l i . m 8 3 5 1 $ f o e h t n o d e s a b n o i t i n g o c e r f o g n m i i t d e t c e p x e e h T . s n o i t c a s n a r t i l t s a c e r o f e b a b o r p y l h g h f o s e g d e h w o l f h s a c o t e t a e r l i s n a g e h t s a d e r r e f e d n e e b e v a h ) s e s s o l t e n n o i l l i . m 0 0 1 $ : 0 2 0 2 ( i s n a g t c a r t n o c e g n a h c x e n g e r o f i t e n f o n o i l l i . m 5 1 9 $ . ) l i n : 0 2 0 2 ( n a g n o i i l l i . m 0 1 $ s r a e y e v i f o t e e r h t d n a ) n a g n o i i l l i m 3 0 $ . : 0 2 0 2 ( n a g n o i i l l i . m 9 4 4 $ : s r a e y e e r h t o t e n o ; ) s s o l n o i l l i . m 3 0 1 $ : 0 2 0 2 ( n a g n o i i l l i . m 6 5 4 $ : s s e l r o r a e y e n o s i 1 2 0 2 h c r a M 1 3 t a s e u a v l r i a f r i a f e h T . s t u p n i g n i r u t c a f u n a m n i d e d n e p x e y c n e r r u c n g e r o f e s a h c r u p o t i s d r a w r o f X F d n a s n o i t i s o p h s a c i y c n e r r u c n g e r o f e g a n a m o t s p a w s X F s e s u p u o r g R S C e h t , n o i t i d d a n I . e g d e h e g n a h c x e n g e r o f i i t n a n m o d e h t s i r a l l o d S U f o s e a S l . i i l e c i r p m u n m u a g n i t a o l f a s y a p d n a e c i r p a n m u a g n i t a o l f a s e v i e c e r p u o r g R S C e h t l i , o t n i i d e r e t n e s p a w s m u n m u a / a n m u a e h t l l i i r e d n U . ) n o i l l i m 5 0 $ . : 0 2 0 2 ( n o i l l i . m 1 1 $ f o e u a v l y t i l i b a i l d n a ) n o i l l i m 7 5 $ . : 0 2 0 2 ( n o i l l i . m 6 0 $ f o e u a v l t e s s a n a s i 1 2 0 2 h c r a M 1 3 t a e s e h t f o e u a v l 1 2 3 4 5 6 95 NOTES TO THE FINANCIAL REPORT | CAPITAL STRUCTURE AND RISK MANAGEMENT 21 Financial risk management (continued) iii) Market risk (continued) The table below provides details on the nature, risk management and sensitivity in relation to interest rate and foreign exchange risk. Risk Nature of risk Risk management and sensitivity Interest rate Foreign exchange At the reporting date, CSR group’s interest rate exposure is limited to the net cash balance of $250.8 million (2020: net cash balance of $414.8 million). The maturity profile for the net cash balance of $250.8 million is less than 1 year. The average interest rate on debt for the year was 1.1% (2020: 1.1%) and the average interest rate on cash balances for the year was 0.39% (2020: 1.07%). The CSR group’s major foreign currency exposure relates to its US dollar aluminium sales revenue. A portion of revenue is unhedged to offset its US dollar expense requirements for raw materials and equipment. The group also has foreign currency exposure arising from payments for raw materials and capital equipment in its other businesses. This exposure is not material compared to aluminium sales revenue exposure. The CSR group has a policy of hedging interest rate risk to reduce the volatility of interest expense. At 31 March 2021 the group had no interest rate risk management measures in place because it had no significant borrowings. If interest rates had increased/decreased by one percentage point per annum from the year end rate with all other variables held constant, the post-tax profit for the year would have been $0.8 million higher/lower (2020: $0.6 million higher/lower). This is mainly due to higher/lower interest income on net cash balances. The CSR group uses a variety of foreign exchange risk management instruments, including spot, forward and swap currency contracts and currency options, to hedge foreign currency denominated receipts resulting from revenue and payments for raw materials and capital equipment denominated in foreign currencies. The CSR group’s policy is to hedge its net US dollar aluminium exposure to reduce the volatility of aluminium earnings, when acceptable Australian dollar outcomes can be achieved. Forecast US dollar receipts are based on highly probable forecast monthly sales receipts of aluminium which ensures that the underlying foreign currency exchange risk is identical to the hedged risk component (i.e. the US dollar price). Hedging is undertaken at declining levels for up to four years. Sensitivity of fair values to changes in exchange rate is disclosed in the market risk table on page 95. The table below provides details on the nature and risk management in relation to commodity price risk. Sensitivity of fair values to changes in commodity prices is disclosed in the market risk table on page 95. Commodity Nature of commodity price risk Commodity price risk management Aluminium The CSR group has exposure to aluminium commodity prices which arises from sales contracts that commit the CSR group to supply aluminium in future years. Prices for product supplied under these contracts are a function of the US dollar market price at the time of delivery. Alumina The CSR group has exposure to alumina commodity prices through the consumption of alumina at the US$ denominated market price. Oil The CSR group has exposure to oil commodity prices through oil price linked gas purchasing contracts. The A$ gas purchase price is partially a function of the prevailing US$ oil price and A$/US$ exchange rate. Electricity The CSR group purchases electricity from the National Electricity Market which gives rise in exposure to the spot electricity price. Gas The CSR group has exposure to gas hub prices through purchases of gas from the Victorian Declared Wholesale Gas Market and New South Wales, South Australia and Queensland Short-Term Trading Markets. The CSR group has a policy of hedging its aluminium sales (net of any linked exposure on inputs such as alumina), where acceptable pricing is available, to reduce the volatility of its aluminium earnings when exchanged into Australian dollars. Eligible hedging instruments used for hedging commodity price risk include commodity forward contracts and commodity options. Hedging is undertaken at declining levels for up to four years. The CSR group has a policy of hedging its alumina purchases to reduce the volatility of its aluminium manufacturing costs. Eligible hedging instruments are commodity forward contracts and commodity futures contracts. The commodity forward contracts utilised are typically of the form where the CSR group receives a floating alumina price and pays a floating aluminium price. The CSR group has a policy of hedging the oil price component of the price of gas purchased to reduce the volatility of its energy costs. Eligible hedging instruments are commodity forward contracts and commodity futures contracts. These contracts are either denominated in A$ or US$. If denominated in US$ the risk arising from movements in the A$/US$ exchange rate is managed through foreign exchange forward and option contracts. The CSR group has a policy of hedging the electricity spot price to reduce the volatility of its energy costs. Eligible hedging instruments are commodity forward contracts and options and commodity futures contracts and options. The CSR group has a policy of hedging its exposure to gas hub prices to reduce the volatility of its energy costs. Eligible hedging instruments are commodity forward contracts and options and commodity futures contracts and options. 96 CSR LIMITED ANNUAL REPORT 2021 NOTES TO THE FINANCIAL REPORT | CAPITAL STRUCTURE AND RISK MANAGEMENT 21 Financial risk management (continued) iv) Capital management The CSR group manages its capital to ensure that entities in the CSR group will be able to meet their obligations as and when due, take advantage of business opportunities as they present, and continue as a going concern while maximising the return to shareholders in the context of business and financial market conditions. The capital structure of the CSR group consists of cash and cash equivalents, issued capital and reserves disclosed in notes 18 and 20, retained profits and debt. The CSR group reviews the capital structure regularly and balances its overall capital structure through the payment of dividends, new share issues, share consolidations and share buy-backs, as well as the issue of new debt or the repayment of existing debt. v) Fair value measurement of financial instruments The table below provides an analysis of hedge accounted financial instruments that are measured subsequent to initial recognition of fair value. The CSR group only has Level 2 financial instruments in the fair value hierarchy. $million Current1 Non-current Total Current1 Non-current Total 2021 2020 Financial assets at fair value Commodity swaps – aluminium Commodity swaps – alumina/aluminium Commodity swaps – oil Commodity swaps – electricity Commodity swaps – gas Forward exchange rate contracts Collateral with financial institutions2 Other Total Financial liabilities at fair value Commodity swaps – aluminium Commodity swaps – alumina/aluminium Commodity swaps – oil Commodity swaps – electricity Commodity swaps – gas Forward exchange rate contracts Other Total 0.3 – – 0.2 0.1 46.3 16.1 – 63.0 59.6 5.8 0.6 3.5 0.5 1.1 – 71.1 0.6 – – 0.1 – 46.7 6.9 3.4 57.7 69.7 7.1 2.7 5.6 – 0.9 – 86.0 0.9 – – 0.3 0.1 93.0 23.0 3.4 120.7 129.3 12.9 3.3 9.1 0.5 2.0 – 157.1 34.2 – – 0.5 – 13.4 – – 48.1 – 8.1 3.3 2.9 – 18.8 0.1 33.2 19.0 – – 0.2 – 8.9 – 3.4 31.5 0.1 – 6.2 4.4 – 8.3 – 19.0 53.2 – – 0.7 – 22.3 – 3.4 79.6 0.1 8.1 9.5 7.3 – 27.1 0.1 52.2 1 Derivatives are presented as current assets or liabilities to the extent they are expected to be settled within 12 months after the end of the reporting period. 2 Collateral against unrealised losses on derivative instruments, under credit support and futures account agreements. Level 1: fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities. The CSR group has no Level 1 financial instruments in the fair value hierarchy. Level 2: fair value measurements are those derived from inputs other than 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 liability that are not based on observable market data (unobservable inputs). The CSR group has no Level 3 financial instruments in the fair value hierarchy. There were no transfers from Level 2 to Level 1 and Level 3 in 2021 and no transfers in either direction in 2021. The fair value amounts shown above are not necessarily indicative of the amounts that the CSR group would realise upon disposition, nor do they indicate the CSR group’s intent or ability to dispose of the financial instrument. Recognition and measurement The fair value of financial instruments, including financial assets and liabilities approximates their carrying amount. The fair values of derivative instruments are calculated using quoted market prices. Where such prices are not available, a discounted cash flow analysis is performed using the applicable yield curve for the duration of the instruments for non-optional derivatives, and option pricing models for optional derivatives. Foreign currency forward contracts are measured using quoted exchange rates and yield curves derived from quoted interest rates matching the maturities of the contract. The CSR group designates its derivatives as 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. Amounts deferred in equity are recycled in profit or loss in the year when the hedged item is recognised in profit or loss. 97 NOTES TO THE FINANCIAL REPORT | CAPITAL STRUCTURE AND RISK MANAGEMENT e m o c n i n i m e t i e n L i f o t n e m e t a t s e v i s n e h e r p m o c ) s s o l ( n a G i m o r f r e h t o d e i f i s s a c e r l e v i s n e h e r p m o c 2 x a t e r o f e b s s o l r o t i f o r p o t e m o c n i r e h t o 1 e m o c n i e v i s n e h e r p m o c n i i d e s n g o c e r i ) s s o l ( n a g e g d e H e v r e s e r – ) s e g d e h i g n u n i t n o c ( ) s s o l ( n a g i e g d e h w o l f h s a C r o f d e s u e g d e h g n i t a u c a c l l e g d e h l g n i t a u c a c l r o f ) s s o l ( n a g i ) s s o l ( n a g i – s s e n e v i t c e f f e n i – s s e n e v i t c e f f e n i l e u a v n i s e g n a h C l e u a v n i s e g n a h C m e t i d e g d e h f o d e s u t n e m u r t s n i f o y t i l i b a L i g n i y r r a c t n u o m a t e s s A g n i y r r a c t n u o m a t n u o m a l a n o i t o N 1 2 0 2 : s w o l l o f s a s i p u o r g R S C e h t f o n o i t i s o p l i a c n a n i f f o t n e m e t a t s e h t n o 1 2 0 2 h c r a M 1 3 f o s a s p h s n o i t a e r l i i g n g d e h l a i r e t a m n i i d e t a n g s e d s t n e m u r t s n i i g n g d e h f o t c a p m i e h T I T N E M E G A N A M K S R D N A E R U T C U R T S L A T I P A C | I T R O P E R L A C N A N F E H T O T S E T O N I ) d e u n i t n o c ( t n e m e g a n a m k s i r l i a c n a n F i 1 2 i g n g d e h w o l f h s a C ) i v e u n e v e r i g n d a r T . ) 0 1 1 ( l s e a s f o t s o C . 9 1 1 l s e a s f o t s o C l s e a s f o t s o C l s e a s f o t s o C . 7 2 . 1 4 . 1 0 l s e a s f o t s o C . 2 0 e u n e v e r i g n d a r T . ) 2 6 2 ( e u n e v e r i g n d a r T . ) 9 0 2 ( – l s e a s f o t s o C l s e a s f o t s o C l s e a s f o t s o C l s e a s f o t s o C e u n e v e r i g n d a r T – ) 4 2 ( . ) 1 2 ( . – . 0 6 1 ) 1 1 ( . s s o l e g d e h e h t o t s e l i c n o c e r . ) 6 0 7 1 ( . ) 6 6 1 ( . 5 3 . ) 6 5 ( ) 4 0 ( . . 8 7 2 1 . ) 1 5 ( . 4 4 4 ) 1 8 ( . . ) 0 1 1 ( . ) 1 1 1 ( – ) 8 5 ( . . 5 4 . ) 4 8 2 1 ( . ) 9 2 1 ( ) 3 3 ( . . ) 6 8 ( . ) 4 0 ( . 5 1 9 . ) 2 0 ( . 1 3 5 ) 1 8 ( . ) 5 9 ( . ) 9 6 ( . – . 5 4 . ) 1 0 1 ( ) n o i l l i m 1 9 $ . : 0 2 0 2 ( n o i l l i . m 8 7 1 $ f o s t s e r e t n . 1 2 8 1 . ) 6 1 8 1 ( . ) 3 9 2 1 ( . 9 0 s e n n o t 0 5 5 5 3 3 , s p a w s y t i d o m m o c m u n m u A l i i . 7 4 ) 2 6 ( . . 9 1 ) 2 0 ( . . 9 4 . ) 5 1 0 1 ( . ) 7 3 2 ( . 9 7 . 5 3 1 . 5 3 1 – . ) 3 0 1 ( ) 4 3 ( . ) 7 4 ( . . 2 6 ) 5 1 ( . ) 5 0 ( . . 6 1 0 1 ) 9 4 ( . . 5 3 2 ) 1 8 ( . . ) 4 3 1 ( . ) 2 3 1 ( – . 2 0 1 . 4 3 i g n i l l o r t n o c - n o n s s e l i ) n a g t e n n o i l l i . m 9 2 1 $ . ) 9 2 1 ( ) 3 3 ( . . ) 1 9 ( ) 5 0 ( . ) 9 0 ( . . ) 4 1 ( ) 1 0 ( . ) 1 8 ( . ) 5 9 ( . ) 3 7 ( . – . ) 6 6 2 ( ) 8 0 ( . : 0 2 0 2 ( n o – – . 5 0 . 1 0 . 4 2 9 . 2 1 s e n n o t 0 0 0 5 7 6 , 3 s p a w s i y t i d o m m o c m u n m u a / a n m u A l l i i l s e r r a b 0 0 0 5 6 4 , s p a w s y t i d o m m o c l i O h W M 3 5 4 1 2 5 , s p a w s y t i d o m m o c y t i c i r t c e E l . 4 8 6 7 . 2 5 1 J G 0 0 0 0 2 4 2 , , ) s e s a h c r u p ( s t c a r t n o c y c n e r r u c d r a w r o F l ) s e a s ( s t c a r t n o c y c n e r r u c d r a w r o F s p a w s y t i d o m m o c s a G 0 2 0 2 . 2 3 5 s e n n o t 5 7 6 5 9 1 , s p a w s y t i d o m m o c m u n m u A l i i – – – . 4 0 . 5 6 1 . 3 5 i l l i . m 0 7 6 $ g n s e n n o t 0 5 3 8 5 1 , 3 s p a w s i y t i d o m m o c m u n m u a / a n m u A l l i i l s e r r a b 0 0 0 2 1 6 , s p a w s y t i d o m m o c l i O h W M 3 6 1 5 1 6 , s p a w s y t i d o m m o c y t i c i r t c e E l – . 3 2 3 6 . 0 2 4 ) s e s a h c r u p ( s t c a r t n o c y c n e r r u c d r a w r o F l ) s e a s ( s t c a r t n o c y c n e r r u c d r a w r o F s p a w s y t i d o m m o c s a G i l l a t o t e m o c n i e v i s n e h e r p m o c r e h t o n i i d e s n g o c e r s s o l e g d e h t e n e h T e h t o t s e l i c n o c e r ) n o i l l i m 4 1 $ . : 0 2 0 2 ( n o i l l i . m 6 7 $ f o s t s e r e t n i g n i l l o r t n o c - n o n s s e l ) n o i l l i . m 5 0 1 $ : 0 2 0 2 ( n o i l l i . m 2 8 1 $ g n i l l a t o t x a t e r o f e b s s o l r o t i f o r p o t e m o c n i e v i s n e h e r p m o c r e h t o m o r f d e i f i s s a c e r n a g l i t e n e h T . 0 2 e t o n n i e c n a m r o f r e p l i a c n a n i f f o t n e m e t a t s e h t o t d e r r e f s n a r t n a g e g d e h i . i l a n m u a f o s e n n o t s i t n u o m a l a n o i t o N . i i l e c i r p m u n m u a g n i t a o l f a s y a p d n a e c i r p a n m u a g n i t a o l f a s e v i e c e r p u o r g R S C e h t l i , o t n i i d e r e t n e s p a w s m u n m u a / a n m u a e h t l l i i r e d n U . 0 2 e t o n n i y t i u q e o t d e r r e f s n a r t 1 2 3 98 CSR LIMITED ANNUAL REPORT 2021 1 2 0 2 T R O P E R L A U N N A D E T I M I L R S C 8 9 NOTES TO THE FINANCIAL REPORT | GROUP STRUCTURE Group structure 22 Subsidiaries Entity 2021 2020 Entity % CSR ownership Incorporated in Australia A-Jacks Hardwall Plaster Pty Ltd A-Jacks Unit Trust AFS Systems Pty Limited2 AFS Unit Trust BI (Contracting) Pty Limited Bradford Insulation Industries Pty Limited Bradford Insulation (S.A.) Pty Limited1 Bricks Australia Services Pty Limited2 Buchanan Borehole Collieries Pty Ltd CSR Building Products Limited2 CSR Developments Pty Ltd CSR Erskine Park Trust CSR Finance Limited2 CSR Industrial Property Trust CSR Industrial Property Nominees No. 1 Pty Limited CSR Industrial Property Nominees No. 2 Pty Limited CSR International Pty Ltd CSR Investments Pty Limited2 CSR Investments (Asia) Pty Limited CSR Investments (Indonesia) Pty Limited CSR Martini Pty Limited2, 3 CSR Share Plan Pty Limited CSR Structural Systems Pty Limited2 CSR Subsidiary Finance Pty Limited2 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 Incorporated in Australia (continued) 100 CSR Subsidiary Holdings Limited2 100 CSR-ER Nominees Pty Limited 100 Gove Aluminium Finance Limited 100 High Road Capital Pty Limited 100 Midalco Pty Limited 100 Monier PGH Superannuation Pty Limited 100 PASS Pty Limited 100 PGH Bricks & Pavers Pty Limited2 100 Rediwall Unit Trust 100 Rivarol Pty Limited2 100 Seltsam Pty Limited 100 Softwood Holdings Limited1 100 Softwood Plantations Pty Limited1 100 Softwoods Queensland Pty Limited1 100 Thiess Bros Pty Limited 100 Thiess Holdings Pty Limited 100 100 100 CSR Building Products (NZ) Ltd 100 100 100 CSR Guangdong Glasswool Co., Ltd (China) 100 CSR Insurance Pte Limited (Singapore) 100 PT Prima Karya Plasterboard (Indonesia) Incorporated in other countries Incorporated in New Zealand % CSR ownership 2021 2020 100 100 70 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 70 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 79 100 100 79 100 100 In members voluntary liquidation. 1 2 These subsidiaries have been granted relief from the necessity to prepare financial reports in accordance with ASIC Corporations (Wholly-owned Companies) Instrument 2016/785. 3 The CSR group held a 70% interest in CSR Martini Pty Limited until 20 December 2019 when the remaining 30% interest was acquired. Refer to note 9 for further details. 23 Deed of cross guarantee CSR Limited, AFS Systems Pty Ltd, Bricks Australia Services Pty Limited, CSR Building Products Limited, CSR Finance Ltd, CSR Investments Pty Limited, CSR Structural Systems Pty Limited, CSR Subsidiary Finance Pty Limited, CSR Subsidiary Holdings Limited, PGH Bricks & Pavers Pty Limited, Rivarol Pty Limited and CSR Martini Pty Limited (joined during the year ended 31 March 2020) are parties to a deed of cross guarantee (‘the Deed’) under which each company guarantees the debts of the others. By entering into the Deed, the wholly owned entities have been relieved from the requirement to prepare a financial report and directors’ report under ASIC Corporations (Wholly-owned Companies) Instrument 2016/785. The above companies represent a ‘closed group’ for the purposes of the Class Order, and as there are no other parties to the Deed that are controlled by CSR Limited, they also represent the ‘extended closed group’. Set out on the following page is a consolidated statement of financial performance, a consolidated statement of comprehensive income, a consolidated statement of financial position and a summary of movements in consolidated retained profits for the years ended 31 March 2021 and 31 March 2020 of the closed group. 99 NOTES TO THE FINANCIAL REPORT | GROUP STRUCTURE 23 Deed of cross guarantee (continued) i) Consolidated statement of financial performance $million Trading revenue – sale of goods Cost of sales Gross margin Other income Warehouse and distribution costs Selling, administration and other operating costs Share of net profit of joint venture entities Impairment expense Other expenses Profit before finance costs and income tax Interest income Finance costs Profit before income tax Income tax expense Profit after tax ii) Consolidated statement of comprehensive income $million Profit after tax Other comprehensive income (expense), net of tax Items that may be reclassified to profit or loss Hedge profit (loss) recognised in equity Hedge profit transferred to statement of financial performance Exchange differences arising on translation of foreign operations Income tax benefit relating to these items Items that will not be reclassified to profit or loss Actuarial gain (loss) on superannuation defined benefit plans Income tax (expense) benefit relating to these items Other comprehensive income (expense) – net of tax Total comprehensive income iii) Summary of movements in consolidated retained profits $million Opening retained profits Profit for the year Actuarial gain (loss) on superannuation defined benefit plans (net of tax) Dividends provided for or paid Closing retained profits 100 CSR LIMITED ANNUAL REPORT 2021 2021 2020 1,477.7 (935.8) 1,519.8 (952.5) 541.9 104.9 (163.9) (233.7) 12.9 (9.3) (16.5) 236.3 1.5 (18.1) 219.7 (51.9) 167.8 567.3 26.4 (170.0) (262.3) 13.7 (9.1) (4.6) 161.4 2.8 (18.8) 145.4 (36.7) 108.7 2021 167.8 2020 108.7 2.0 (2.6) (3.2) 0.2 17.6 (5.3) 8.7 176.5 2021 156.0 167.8 12.3 (60.7) 275.4 (17.3) (5.7) 1.3 6.9 (13.9) 4.2 (24.5) 84.2 2020 190.7 108.7 (9.7) (133.7) 156.0 NOTES TO THE FINANCIAL REPORT | GROUP STRUCTURE 23 Deed of cross guarantee (continued) iv) Consolidated statement of financial position $million Current assets Cash and cash equivalents Receivables Inventories Property holdings Other financial assets Income tax receivable Prepayments and other current assets Total current assets Non-current assets Receivables Property holdings Investments accounted for using the equity method Other financial assets Property, plant and equipment Right-of-use lease assets Goodwill Other intangible assets Deferred income tax assets Other non-current assets Total non-current assets Total assets Current liabilities Payables Lease liabilities Other financial liabilities Tax payable Provisions Total current liabilities Non-current liabilities Payables Lease liabilities Borrowings Other financial liabilities Provisions Other non-current liabilities Total non-current liabilities Total liabilities Net assets Equity Issued capital Reserves Retained profits Equity attributable to shareholders of the closed group 2021 2020 243.2 158.4 210.3 40.7 5.1 0.4 7.7 665.8 21.2 102.6 28.1 104.5 600.6 116.2 58.3 11.8 122.9 12.4 409.6 180.3 240.2 59.7 – – 9.3 899.1 26.1 87.0 34.4 162.0 643.2 143.0 58.3 14.5 127.2 0.7 1,178.6 1,296.4 1,844.4 2,195.5 111.4 30.2 5.7 47.3 112.4 307.0 0.1 134.4 – 8.3 242.5 2.7 388.0 188.6 32.9 0.6 31.9 110.8 364.8 4.0 159.1 320.0 10.6 254.6 8.5 756.8 695.0 1,121.6 1,149.4 1,073.9 966.7 (92.7) 275.4 966.7 (48.8) 156.0 1,149.4 1,073.9 101 NOTES TO THE FINANCIAL REPORT | GROUP STRUCTURE 24 Non-controlling interests Summarised financial information for each subsidiary that has non-controlling interests that are material to the CSR group is set out below. The amounts disclosed are before intercompany eliminations. $million Statement of financial position Current assets Non-current assets Current liabilities Non-current liabilities Statement of financial performance Revenue Profit after tax for the year Other comprehensive income for the year Total comprehensive income for the year Statement of cash flows Cash flows from operating activities Cash flows from investing activities Cash flows from financing activities Net (decrease) increase in cash held Transactions with non-controlling interests Profit allocated to non-controlling interests1 Dividends paid to non-controlling interests2 Gove Aluminium Finance Limited 2021 2020 191.5 180.5 172.1 88.7 587.9 18.9 (59.3) (40.4) 12.4 (25.4) (37.5) (50.5) 5.7 14.7 212.2 140.4 114.0 38.1 621.2 40.5 18.0 58.5 58.2 (8.4) (16.3) 33.5 12.1 4.5 1 Profit allocated to non-controlling interests for subsidiaries that are not material for disclosure was $nil for the year ended 31 March 2021 (2020: $1.1 million). 2 Dividends paid to non-controlling interests for subsidiaries that are not material for disclosure were $nil (2020: $2.3 million). Recognition and measurement Non-controlling interests in the results and equity of subsidiaries are shown separately in the statement of financial performance, statement of comprehensive income, statement of financial position and statement of changes in equity respectively. The effects of all transactions with non- controlling interests are recorded in equity if there is no change in control. Where there is a loss of control, any remaining interest in the entity is remeasured to fair value and a gain or loss is recognised in the income statement. Any losses are allocated to the non-controlling interest in subsidiaries even if the accumulated losses should exceed the non-controlling interest in the individual subsidiary’s equity. 25 Interest in joint operations The CSR group’s interest in the Tomago aluminium smelter joint operation of 36.05% (2020: 36.05%) is held through a controlled entity in which the CSR group has a 70% interest, resulting in an effective interest in the joint operation of 25.24% (2020: 25.24%). Recognition and measurement The shareholders of the joint operation are jointly and severally liable for the liabilities incurred by the operation and have rights to the assets. This entity is therefore classified as a joint operation and the group recognises its direct right to the jointly held assets, liabilities, revenues and expenses. Where the CSR group and the parties to the agreements only have rights to the net assets of each of the operations under the arrangements, these entities will be classified as joint ventures of the CSR group and accounted for using the equity method. Refer to note 26. Critical accounting estimate Investments in joint arrangements are classified as either joint operations or joint ventures. The classification depends on the contractual rights and obligations of each investor, rather than the legal structure of the joint arrangement, and therefore requires judgment in determining the classification. The CSR group has both joint operations and joint ventures. 102 CSR LIMITED ANNUAL REPORT 2021 NOTES TO THE FINANCIAL REPORT | GROUP STRUCTURE 26 Equity accounting information Carrying amount ($million) Entity1 Building products Rondo Building Services Pty Ltd2 Gypsum Resources Trust Australia2 New Zealand Brick Distributors3 Other2 Total investment 2021 Equity accounted investment Long-term loan Net investment Long-term loan 2020 Equity accounted investment Net investment – 12.0 – – 12.0 15.9 – 7.5 0.3 23.7 15.9 12.0 7.5 0.3 35.7 – 12.0 – – 12.0 21.7 – 8.1 0.8 30.6 21.7 12.0 8.1 0.8 42.6 1 The CSR group’s interest in these entities is 50% (2020: 50%). 2 Entities incorporated in Australia. 3 Entity is a limited partnership in New Zealand. Recognition and measurement Investments in joint venture and associate entities have been accounted for under the equity method in the CSR group financial statements. CSR’s share of net profit/loss of joint venture entities is recorded in the statement of financial performance. Purchases and sales of goods and services to joint venture entities are on normal terms and conditions. i) Net investment in joint ventures $million Opening net investment Share of net profit before income tax Share of income tax Dividends and distributions received Impairment of equity accounted investment Foreign currency translation and other Disposal of equity accounted investment Impact of new leases standard Closing net investment ii) Summarised financial information of joint venture entities $million Statement of financial position Current assets Non-current assets Current liabilities Non-current liabilities Statement of financial performance Revenue Share of net profit (loss) after tax Rondo Building Services Pty Ltd Other 2021 42.6 19.3 (5.8) (18.3) – (1.8) (0.3) – 35.7 2020 40.4 20.0 (6.1) (10.6) (0.6) 0.8 – (1.3) 42.6 2021 2020 100.1 66.5 67.8 50.4 98.6 77.1 53.1 56.8 259.3 293.1 12.8 0.7 13.8 0.1 iii) Balances and transactions with joint venture entities $million Note 2021 2020 Current loans payable to CSR Non-current loans payable to CSR Current payables to joint venture entities Purchases of goods and services Sales of goods and services 32 0.4 8.4 7.5 33.6 4.2 0.8 7.7 7.0 35.3 7.1 103 NOTES TO THE FINANCIAL REPORT | GROUP STRUCTURE 27 Parent entity disclosures i) Summary financial information of CSR Limited $million Statement of financial position Current assets Non-current assets Current liabilities1 Non-current liabilities1 Net assets Equity Issued capital Reserves Retained profits Total equity Statement of financial performance Profit after tax for the year Total comprehensive income 2021 2020 684.2 1,787.9 (1,013.6) (265.6) 725.1 1,779.6 (768.0) (609.8) 1,192.9 1,126.9 966.7 11.0 215.2 966.7 9.8 150.4 1,192.9 1,126.9 124.7 125.5 48.8 48.6 1 Included within current liabilities are the current portion of the product liability provision and uninsured losses and future claims provision of $24.0 million and $5.4 million respectively (2020: $30.0 million and $4.0 million respectively). Included within non-current liabilities are the non-current portion of the product liability provision and uninsured losses and future claims provision of $207.0 million and $17.4 million respectively (2020: $216.9 million and $20.0 million respectively). See notes 15 and 16 for further details. ii) CSR Limited transactions with controlled entities During the financial years ended 31 March 2021 and 2020, CSR Limited advanced and repaid loans, sold and purchased goods and services, and provided accounting and administrative assistance to its controlled entities. All loans advanced to and payable to these related parties are unsecured and subordinate to other liabilities. Loans between members of the Australian tax consolidation group are not on normal terms and conditions. iii) Contingent liabilities $million Contingent liabilities, capable of estimation, arise in respect of the following categories: Performance guarantees provided to third parties1 Bank guarantees to Harwood Superannuation Fund2 Total contingent liabilities Note 2021 2020 28 123.4 3.2 116.9 3.2 126.6 120.1 1 Financial guarantees disclosed above relate to bank guarantees provided to third parties to guarantee CSR Limited’s performance of its liabilities of $80.6 million (2020: $80.4 million) and guarantees provided to third parties outside of the CSR group of $42.8 million (2020: $36.5 million). In addition, CSR Limited has undertaken to provide financial support, as and when required, to certain wholly owned controlled entities so as to enable those entities to pay their debts as and when such debts become due and payable. 2 CSR Limited has an obligation to contribute amounts so as to ensure that the assets attributable to certain superannuation defined benefit plans are not less than 107% of the amount required to meet the actuarial liabilities. iv) Capital commitments CSR Limited has committed $nil to the acquisition of any property, plant and equipment as at 31 March 2021 (2020: $nil). 104 CSR LIMITED ANNUAL REPORT 2021 NOTES TO THE FINANCIAL REPORT | OTHER Other 28 Employee benefits i) Superannuation commitments During the year, the CSR group participated in a number of superannuation funds (funds) in Australia and New Zealand. The funds provide benefits either on a cash accumulation or defined benefit basis, for employees (and spouses) on retirement, resignation or disablement, or to their dependants on death. Employer contributions are legally enforceable, with the right to terminate, reduce or suspend those contributions upon giving written notice to the trustees. CSR Limited and its Australian controlled entities are required to provide a minimum level of superannuation support for employees under the Australian superannuation guarantee legislation. Australian superannuation funds In Australia, the CSR group participates in the Harwood Superannuation Fund and the Pilkington (Australia) Superannuation Scheme for those employees and pensioners who are currently members of these funds and any new employees who become members. Retirement funds The contributions to the funds for the year ended 31 March 2021 for the CSR group were $31.9 million (2020: $36.2 million). Accumulation funds The benefits provided by accumulation funds are based on the contributions and income thereon held by the funds on behalf of the members. Contributions are made as agreed between the member and the company, and for the financial year ended 31 March 2021 contributions totalled $28.9 million (2020: $32.3 million). These contributions are expensed in the year they are incurred. CSR group’s legal or constructive obligation is limited to these contributions. Defined benefit funds The benefits provided by defined benefit divisions of funds (DBDs) are based on length of service or membership and salary of the member at or near retirement. Member contributions, based on a percentage of salary, are specified by the rules of the fund. Employer contributions generally vary based on actuarial advice and may be reduced or cease when a fund is in actuarial surplus. DBDs are closed to new members. Changes to defined benefit obligations The Harwood Superannuation Fund Trust Deed was amended with effect from midnight on 31 December 2011 to restructure the various plans within the fund, including splitting the CSR Plan Division One (defined benefit) into three separate plans. The amendment reflected the agreement between CSR Limited and Wilmar International Limited that Sucrogen Limited would assume full responsibility to fund its obligations for defined benefit members employed by the Sucrogen business as well as its share of the funding obligation in respect of the Harwood Pensioner DBD Plan. As such, amounts recorded for the CSR group exclude funding obligations and share of assets and liabilities which have been assumed by Wilmar Sugar Australia Limited. The Pilkington (Australia) Superannuation Scheme Trust Deed was amended with effect from midnight on 31 January 2019 to restructure the plan within the fund, including splitting the Pilkington (Australia) Superannuation Scheme defined benefit plan into two separate plans. The amendment reflected the agreement between CSR Limited and Viridian Glass Limited that Viridian Glass Limited would assume full responsibility to fund its obligations for defined benefit members employed by the Viridian Glass Limited business. The CSR group will retain the funding obligations in respect of the Viridian pensioner defined benefit plan. As such, amounts recorded for the CSR group exclude funding obligations and share of assets and liabilities which have been assumed by Viridian Glass Limited. Asset backing The last actuarial assessment for the Harwood Superannuation Fund was completed as at 30 June 2020. The funding requirements were reviewed as at 30 June 2020. A combination of the attained age normal and projected unit credit funding methods were used to determine the contribution rates for the Harwood Superannuation Fund. The projected unit credit funding method was used for the Pilkington (Australia) Superannuation Scheme. The Trust Deed sets out a minimum funding level of 103% and a funding guarantee of 107% of actuarial liabilities for the DBD CSR and DBD Harwood Pensioner plans. At the time of the last actuarial review, DBD CSR had a funding position in excess of 107% and DBD Harwood Pensioner had a funding position of 103%. Therefore, as at 31 March 2021, CSR Limited was required to provide bank guarantees of $3.2 million to the trustee of the fund to satisfy the balance of its commitments (2020: $3.2 million). The bank guarantees have been disclosed in note 27. Table 1: Defined benefit plans (DBDs) sponsored by the CSR group $million CSR contributions to the funds Present value of fund assets Present value of fund liability Net defined benefit asset (liability) Contributions paid Harwood Superannuation Fund DBD CSR and DBD Harwood Pensioner1 DBD Monier PGH $nil from 1 April 2020 $nil from 1 April 2020 67.5 39.6 (60.2) (35.8) 7.3 3.8 0.2 0.2 Pilkington (Australia) Superannuation Scheme DBD2 $nil from 1 April 2020 16.4 (19.1) (2.7) – 1 Actuarial liabilities are determined to be past service liabilities based on membership accrued up to 31 March 2021. 2 Funds contributed by CSR are for accumulation members. 105 NOTES TO THE FINANCIAL REPORT | OTHER 28 Employee benefits (continued) i) Superannuation commitments (continued) Key assumptions used by actuaries Key assumptions and parameters used by the actuaries (expressed as weighted averages) are outlined below: % Discount rate (after tax) Expected salary increase Asset class allocation – Equity instruments – Debt instruments – Property – Other Impact of plans on the statement of financial performance and comprehensive income $million Amounts recognised in the statement of financial performance1 Current service cost Finance cost Interest income Total expense included in the statement of financial performance 2021 2020 2.8 2.5 28.1 47.0 2.7 22.2 2.4 2.5 26.5 45.0 3.4 25.1 2021 2020 0.9 2.9 (2.7) 1.1 1.0 4.2 (4.4) 0.8 Actuarial gain (loss) incurred during the financial year and recognised in the statement of comprehensive income 17.6 (13.9) Cumulative actuarial losses recognised in the statement of comprehensive income (50.6) (68.2) 1 Disclosed in selling, administration and other operating costs. Impact of plans on the statement of financial position $million Net asset (liability) of superannuation defined benefit plans Fair value of assets Present value of liabilities Net asset (liability) Included in the statement of financial position Other non-current assets (note 32) Other non-current liabilities Net asset (liability) Movements in the fair value of the defined benefit plan assets Assets at the beginning of the financial year Interest income Return on assets (in excess of interest income) Contributions from the employer Contributions from participants Benefits paid Assets at the end of the financial year Movements in the present value of the defined benefit plan liabilities Liabilities at the beginning of the financial year Current service cost Finance cost Contributions from participants Actuarial (gain) loss Benefits paid Liabilities at the end of the financial year 106 CSR LIMITED ANNUAL REPORT 2021 2021 2020 123.5 (115.1) 121.4 (129.9) 8.4 (8.5) 11.1 (2.7) 8.4 121.4 2.7 10.8 0.4 0.1 (11.9) – (8.5) (8.5) 134.3 4.4 (6.5) (2.0) 0.4 (9.2) 123.5 121.4 129.9 0.9 2.9 0.1 (6.8) (11.9) 126.1 1.0 4.2 0.4 7.4 (9.2) 115.1 129.9 NOTES TO THE FINANCIAL REPORT | OTHER 28 Employee benefits (continued) i) Superannuation commitments (continued) Net asset (liability) of superannuation defined benefit plans 200 180 160 140 120 100 80 60 40 20 0 172.8 158.3 169.9 158.5 134.3 126.1 129.9 121.4 123.5 115.1 14.5 11.4 8.2 (8.5) 8.4 2017 2018 2019 2020 2021 Present value of fund liabilities ($m) Fair value of fund assets ($m) Net asset (liability) ($m) Recognition and measurement For superannuation 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 in full, directly in retained profits, in the year in which they occur, and are presented in the statement of comprehensive income. Past service cost is recognised immediately to the extent that the benefits are already vested, and otherwise is amortised on a straight-line basis over the average period until the benefits become vested. The defined benefit obligation recognised in the statement of financial position represents the present value of the defined benefit obligation, adjusted for unrecognised past service cost, net of the fair value of the plan assets. Any asset resulting from this calculation is limited to past service costs, plus the present value of available refunds and reductions in future contributions to the plan. ii) Share-based payments Long-term incentive (LTI) plan – Performance rights plan (PRP) Under the LTI plan effective during the year ended 31 March 2021, eligible executives were invited to receive performance rights in the company. Shares acquired on vesting of performance rights are fully paid ordinary shares and the amount payable to acquire these shares is $nil. A summary of the performance rights granted under the plan is set out below: Number of performance rights Opening balance Granted during the year Vested during the year Lapsed during the year Closing balance 2021 3,116,307 1,372,449 (247,314) (1,098,379) 2020 3,004,974 1,609,588 (535,107) (963,148) 3,143,063 3,116,307 There were no vested and exercisable shares at 31 March 2021 (2020: nil). Performance rights outstanding at the end of the year have the following expiry dates: A summary of key valuation assumptions for rights granted in the year ended 31 March 2021 is set out below: Grant date 25 July 2017 25 July 2018 19 July 2019 21 July 2020 Total Expiry date 1 April 2020 1 April 2021 1 April 2022 1 April 2023 Performance rights 2021 – 503,592 1,267,022 1,372,449 2020 863,248 687,269 1,565,790 – 3,143,063 3,116,307 Grant date Vesting condition Valuation method Start of performance period Testing date Expected life Grant date share price Volatility Dividend yield Risk-free rate Fair value 21 July 2020 Relative TSR with a positive absolute TSR requirement 21 July 2020 EPS growth Monte Carlo simulation Binominal Tree 1 April 2020 1 April 2020 31 March 2023 31 March 2023 2.7 years $3.49 32% 4.7% 0.29% $3.08 2.7 years $3.49 32% 4.7% 0.29% $1.06 Further details on the LTI plan and the terms of the grants during the year are detailed in the remuneration report on pages 63 to 66. 107 NOTES TO THE FINANCIAL REPORT | OTHER 28 Employee benefits (continued) ii) Share-based payments (continued) Deferred shares Under the STI deferral plan, 40% of any STI earned by senior executives is delivered in CSR shares. These shares must be held in trust subject to trading restrictions and 50% are deferred for one year and 50% are deferred for two years. Deferred shares are administered by the CSR Share Plan Trust. The shares are acquired on market at the grant date and are held as treasury shares until such time as they vest. Forfeited shares are reallocated in subsequent grants. The number of shares to be granted is determined based on the weighted average price at which the company’s shares are traded on the Australian Stock Exchange. Number of rights to deferred shares granted Fair value of rights at grant date Other plans 2021 – – 2020 207,502 $3.29 Universal Share Option Plan (USOP): eligible employees can buy shares to a maximum value of $1,000 and receive an equivalent number of shares for no cash consideration. The shares are acquired on market prior to issue with the cost of acquisition recognised in employee benefit expense. Employee Share Acquisition Plan (ESAP): directors and employees can forgo up to $5,000 of their cash remuneration annually to acquire shares in the company. The shares are purchased on market by the CSR Share Plan trustee, who acts on instructions given in accordance with the plan rules and the company’s Share Trading Policy. Number of shares issued under the plans USOP1 ESAP 2021 531,674 109,573 2020 406,692 89,321 1 Number of shares issued includes the number of purchased shares issued to employees under the plan. Each participant was issued with shares to a maximum value of $1,000 based on the weighted average market price of $3.49 (2020: $4.27). For further details on the USOP and the ESAP, refer to page 66 of the remuneration report. Expenses arising from share-based payment transactions $ Long-term incentive plan (PRP) Deferred shares Other plans Total expense 2021 1,106,453 598,766 928,369 2020 (351,685) 682,886 867,926 2,633,588 1,199,127 Recognition and measurement Share-based payments can either be equity settled or cash settled.  Equity settled: the fair value determined at the grant date of the equity settled share-based payments is expensed on a straight-line basis over the vesting period (with a corresponding increase to the employee share reserve), based on the CSR group’s estimate of shares that will eventually vest.  Cash settled: the ultimate expense recognised in relation to cash settled transactions will be equal to the actual cash paid to the employees, which will be the fair value at settlement date. The expected cash payment is estimated at each reporting date and a liability recognised to the extent that the vesting period has expired and in proportion to the amount of the awards that are expected to ultimately vest. 108 CSR LIMITED ANNUAL REPORT 2021 NOTES TO THE FINANCIAL REPORT | OTHER 29 Related party disclosures i) Transactions with directors or other key management personnel Transactions entered into during the financial year with directors of CSR Limited and other key management personnel of the CSR group and with their closely related entities which are within normal customer or employee relationships on terms and conditions no more favourable than those available to other customers, employees or shareholders included:  contracts of employment (see section ii) and reimbursement of expenses;  acquisition of shares in CSR Limited under the employee share plans and the dividend reinvestment plan;  dividends from shares in CSR Limited; and  sale and purchase of goods and services. No new loans, loan repayments or loan balances occurred between the CSR group and directors and other key management personnel of the CSR group during the financial year ended 31 March 2021 (2020: nil). ii) Key management personnel remuneration Total remuneration paid or payable to directors and key management personnel is set out below: $ Short-term employee benefits Share-based payments expense Total 2021 4,505,319 508,978 5,014,297 2020 3,846,034 (236,622) 3,609,412 Details of remuneration and the CSR Limited equity holdings of directors and other key management personnel are shown in the remuneration report on pages 50 to 70. iii) Other related parties Other than transactions with joint venture entities disclosed in note 26, no material amounts were receivable from, or payable to, other related parties as at 31 March 2021 (2020: nil), and no material transactions with other related parties occurred during those years. Details of payments to superannuation defined benefit plans are shown in note 28. 30 Subsequent events Except for the items disclosed below, there has not arisen in the interval between 31 March 2021 and the date of this report, any other matter or circumstance that has significantly affected or may significantly affect the operations of the CSR group, the results of those operations or the state of affairs of the CSR group in subsequent financial years. Dividends For dividends resolved to be paid after 31 March 2021, refer to note 19. 109 NOTES TO THE FINANCIAL REPORT | OTHER 31 Commitments and contingencies i) Commitments $million Contracted capital expenditure comprises: Payable within one year ii) Contingencies 2021 2020 8.6 16.1 Contingencies for CSR Limited are outlined in the parent entity note 27. There are no other contingencies in relation to controlled entities within the CSR group. 32 Other non-current assets $million Loans to joint venture entities1 Other loans and receivables Total non-current receivables Other assets Superannuation defined benefit plans – fair value of surplus Total other non-current assets 1 The CSR group has provided facilities to joint venture entities on arm’s length terms. 33 Auditor’s remuneration $ Deloitte Touche Tohmatsu and related network firms Audit or review of financial reports Other assurance and agreed-upon procedures under other legislation or contractual arrangements Total auditor’s remuneration Note 26 28 2021 8.4 15.0 23.4 1.3 11.1 12.4 2020 7.7 7.3 15.0 0.7 – 0.7 2021 2020 657,000 37,080 657,000 41,200 694,080 698,200 110 CSR LIMITED ANNUAL REPORT 2021 NOTES TO THE FINANCIAL REPORT | OTHER 34 Other accounting policies Cash and cash equivalents: net cash is defined as cash at bank and on hand and cash equivalents, net of bank overdrafts. Cash equivalents include highly liquid investments which are readily convertible to cash, and loans which are not subject to a term facility. Cash and cash equivalents held at 31 March 2021 included $95.8 million of cash at bank and on hand (2020: $299.8 million) and $155.0 million short-term deposits (2020: $115.0 million). Tax consolidation: Australian tax legislation allows groups, comprising a parent entity and its Australian resident wholly owned entities, to elect to consolidate and be treated as a single entity for income tax purposes. The CSR group has elected for those entities within the CSR group that are wholly owned Australian resident entities to be taxed as a single entity from 1 April 2004. Prior to the adoption of the tax consolidation system, CSR Limited, as the head entity in the tax consolidated group, agreed to compensate or be compensated by its wholly owned controlled entities for the balance of their current tax liability/(asset) and any tax loss related deferred tax asset assumed by CSR Limited. Due to the existence of a tax funding arrangement between the entities in the tax consolidated group, amounts are recognised as payable to or receivable by CSR Limited and each member of the group in relation to the tax contribution amounts paid or payable between CSR Limited and the other members of the tax consolidated group in accordance with the arrangement. Foreign currency: all foreign currency transactions during the financial year have been 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. Exchange differences are brought to account in profit or loss in the year in which they arise except if designated as cash flow hedges. On consolidation, the results and financial position of foreign operations are translated as follows:  assets and liabilities are translated using exchange rates prevailing at the end of the reporting period;   exchange differences arising, if any, are recognised in the foreign currency translation reserve and recognised in profit or loss on disposal of income and expense items are translated at the average exchange rates for the period; and the operation. Put option liabilities on non-controlling interests: contracts that contain an obligation to pay cash in the future to purchase minority shares held by non-controlling interests, even if the payment is conditional on the option being exercised by the holder, are recorded as a financial liability. The initial redemption liability is recorded against equity. The financial liability is recognised at the present value of the expected redemption amount. Goods and services tax: revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except where the amount of GST incurred is not recoverable from the taxation authority. In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or as part of the expense. Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from or payable to the taxation authority is included as a current asset or liability. Cash flows are included in the statement of cash flows on a gross basis. The GST components of cash flows arising from investing and financing activities which are recoverable from or payable to the taxation authority are classified as operating cash flows. 111 DIRECTORS DECLARATION CSR LIMITED ABN 90 000 001 276 Directors declaration The directors declare that: 1 2 3 4 5 in the directors’ opinion, there are reasonable grounds to believe that CSR Limited will be able to pay its debts as and when they become due and payable; in the directors’ opinion, the attached financial statements are in compliance with International Financial Reporting Standards, as disclosed in note 1; 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 the CSR group; the directors have been given the declarations required by section 295A of the Corporations Act 2001 from the managing director and chief financial officer for the financial year ended 31 March 2021; and there are reasonable grounds to believe that CSR Limited and the group entities identified in note 23 will be able to meet any obligations or liabilities to which they are or may become subject to by virtue of the deed of cross guarantee between CSR Limited and those group entities pursuant to ASIC Corporations (Wholly-owned Companies) Instrument 2016/785. Signed in accordance with a resolution of the directors made pursuant to section 295(5) of the Corporations Act 2001. John Gillam Chair of the board 12 May 2021 Julie Coates Managing Director and CEO 12 May 2021 112 CSR LIMITED ANNUAL REPORT 2021 INDEPENDENT AUDITOR’S REPORT 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 Independent Auditor’s Report to the Members of CSR Limited Report on the Audit of the Financial Report Opinion We have audited the financial report of CSR Limited (“CSR” or the Company) and its subsidiaries (the “Group”), which comprises the consolidated statement of financial position as at 31 March 2021, the consolidated statement of financial performance, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and the directors’ declaration. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: (i) (ii) giving a true and fair view of the Group’s financial position as at 31 March 2021 and of its financial performance for the year then ended; and complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of this report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the “Code”) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report for the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key audit matter How the scope of our audit responded to the key audit matter Product Liability Provision (Refer to Note 16 Product Liability) CSR has recognised a product liability provision of $231.0 million as at 31 March 2021. The provision is in respect of all known and reasonably foreseeable future asbestos claims. The provision is determined after considering the advice provided by management appointed external experts in Australia and the United States of America (“USA”), being the countries giving rise to the liabilities. The determination of the provision is subject to significant judgement as to expected settlement amounts and likelihood of future claims. In addition, the assumption in respect of discount rates has a significant impact on the estimate of provisions. In conjunction with actuarial specialists, our procedures included, but were not limited to:  assessing the objectivity, independence and competence of management appointed external experts;  assessing the appropriateness of the assumptions and methodology used in the reports prepared by the management appointed external experts; including: - evaluating the reasonableness of the methodology used to calculate the provision; - benchmarking of the discount rates; and - comparison of historical claims experience to assumptions used to estimate future claims;  testing on a sample basis, the accurate inclusion and exclusion of asbestos claims in management’s liability database, which is provided to management appointed external experts and forms the basis for the reports;  enquiring of management appointed external experts and the company’s internal and external legal counsel in respect of their conclusions;  agreeing the provision breakdown between liabilities relating to Australia and  the USA, to the respective external experts’ reports; testing the translation of the USA liability to Australian dollars at the appropriate foreign currency exchange rate;  assessing the basis for the determination of the prudential margin through enquiries of management and their consideration of the external experts’ reports; and  assessing the appropriateness of the relevant disclosures in the Notes to the financial statements. Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Asia Pacific Limited and the Deloitte organisation 113 INDEPENDENT AUDITOR’S REPORT Key audit matter Asset valuation (Refer to Note 12 Property, plant and equipment and intangible assets and Note 14 Leases) At 31 March 2021 the Group’s consolidated statement of financial position includes goodwill amounting to $58.3 million, other intangible assets amounting to $13.8 million, property, plant and equipment amounting to $693.7 million and right-of- use lease assets amounting to $127.2 million, comprised of several cash generating units (CGUs). The assessment of impairment of the company’s goodwill, other intangible assets, property, plant and equipment and right-of-use lease asset balances involved the exercise of significant judgement in respect of key assumptions such as discount rates, inflation, growth rates, forecast changes in the building cycle, and forecast future cash flows, including the impact of the COVID-19 pandemic. Management prepare an impairment trigger analysis to identify which CGUs should be considered further for impairment analysis. Based on the analysis performed, no impairments have been recognised. The AFS CGU was identified by management as the CGU requiring additional disclosure due to its sensitivity to changes in specific assumptions. How the scope of our audit responded to the key audit matter In conjunction with valuation specialists, our procedures included, but not limited to:  evaluating the process used by management in the determination of those CGUs requiring further impairment analysis as a consequence of an impairment trigger by: - assessing management’s determination of the company’s CGUs based on our understanding of the business and consistency with the segment reporting; - evaluating management’s impairment trigger analysis based on a number of factors including annual financial performance and external market conditions; and - confirming that each CGU containing goodwill had been included in management’s impairment testing;  evaluating the analysis performed by management and the conclusions drawn in relation to the AFS CGU by: - assessing the appropriateness of the impairment model methodology, key inputs and assumptions used in the model using our knowledge of the business and the industry, including assessment of:  the discount rate;  the terminal growth rate;  the inflation rate;  forecast changes in the business cycle; and  forecast cash flows, including the impact of the COVID-19 pandemic. - testing on a sample basis, the mathematical accuracy of the cash flow model; - agreeing relevant data in the cash flow model to the latest Board approved forecasts, including the impact of the COVID-19 pandemic; - assessing the historical accuracy of forecasting of the CGU; - obtaining and reading the position papers prepared by management to support the model for this CGU; - evaluating management’s process, including testing design and implementation of controls in respect of the preparation and review of forecasts; and - assessing the appropriateness of the relevant disclosures in the Notes to the financial statements. Other Information The directors are responsible for the other information. The other information comprises the information included in the Group’s annual report for the year ended 31 March 2021, but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Directors for the Financial Report The directors of the Company 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 gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. 114 CSR LIMITED ANNUAL REPORT 2021 INDEPENDENT AUDITOR’S REPORT As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:       Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit 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 Group’s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Group’s audit. We remain solely responsible for our audit opinion. We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied. From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial report of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report which forms part of the directors’ report and is included in pages 50 to 70 of the CSR Limited annual report for the year ended 31 March 2021. In our opinion, the Remuneration Report of CSR Limited for the year ended 31 March 2021, complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. DELOITTE TOUCHE TOHMATSU J L Gorton Partner Chartered Accountants Sydney, 12 May 2021 Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Asia Pacific Limited and the Deloitte organisation 115 SHAREHOLDER INFORMATION Shareholder information 20 LARGEST HOLDERS OF ORDINARY SHARES As at 30 April 2021 RANK NAME 1. 2. 3. 4. 5. 6. 7. 8. 9. HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED CITICORP NOMINEES PTY LIMITED J P MORGAN NOMINEES AUSTRALIA PTY LIMITED NATIONAL NOMINEES LIMITED HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED BNP PARIBAS NOMINEES PTY LTD BNP PARIBAS NOMS PTY LTD CITICORP NOMINEES PTY LIMITED BNP PARIBAS NOMINEES PTY LTD 10. PRUDENTIAL NOMINEES PTY LTD 11. BNP PARIBAS NOMINEES PTY LTD SIX SIS LTD 12. AMP LIFE LIMITED 13. MR ALLAN ERNEST ORMES 14. NATIONAL NOMINEES LIMITED 15. HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2 16. CSR SHARE PLAN PTY LIMITED 17. HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - GSCO ECA 18. HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 19. V M NOMINEES PTY LTD 20. CS THIRD NOMINEES PTY LIMITED Top 20 holders of issued capital Remaining holders balance SUBSTANTIAL SHAREHOLDERS OF CSR LIMITED UNITS % OF UNITS 141,541,384 71,116,406 69,989,742 31,236,903 10,195,133 9,711,424 8,499,769 4,046,962 2,882,000 2,500,000 1,511,637 1,382,087 1,066,667 1,008,237 646,908 599,791 568,988 551,293 550,000 511,020 360,116,351 125,266,425 29.2 14.7 14.4 6.4 2.1 2.0 1.8 0.8 0.6 0.5 0.3 0.3 0.2 0.2 0.1 0.1 0.1 0.1 0.1 0.1 74.2 25.8 Dimensional Entities and its subsidiaries advised that as of 20 June 2013, it and its associates had an interest in 30.4 million shares, which represented 6.01% of CSR’s issued capital at that time. The Vanguard Group Inc. and its subsidiaries advised that as of 31 March 2020, it and its associates had an interest in 29.2 million shares, which represented 6.01% of CSR’s issued capital at that time. SHAREHOLDINGS BY GEOGRAPHIC LOCATION Location AUSTRALIA NEW ZEALAND UNITED KINGDOM UNITED STATES OF AMERICA SINGAPORE Other Total Units 481,874,898 2,229,786 290,928 184,389 94,085 708,690 Units % 99.3 0.5 0.1 0.0 0.0 0.1 Holders 44,140 1,097 222 93 44 185 Holders % 96.4 2.4 0.5 0.2 0.1 0.4 485,382,776 100.0 45,781 100.0 116 CSR LIMITED ANNUAL REPORT 2021 SHAREHOLDER INFORMATION DISTRIBUTION OF SHAREHOLDINGS Range 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over Total UNMARKETABLE PARCELS Holders 22,758 18,033 3,061 1,860 69 45,781 Units 11,087,745 40,997,648 21,859,050 40,679,076 370,759,257 485,382,776 Minimum $ 500.00 parcel at $5.97 per unit 84 Minimum parcel size Holders 1,274 RECENT CSR DIVIDENDS Date paid December 2015 July 2016 December 2016 July 2017 December 2017 July 2018 December 2018 July 2019 December 2019 December 2019 December 2020 December 2020 Type of dividend Dividend per share Franking Interim Final Interim Final Interim Final Interim Final Interim ordinary Interim special Interim ordinary Interim special 11.5 cents 12.0 cents 13.0 cents 13.0 cents 13.5 cents 13.5 cents 13.0 cents 13.0 cents 10.0 cents 4.0 cents 8.5 cents 4.0 cents 0% 0% 0% 50% 50% 75% 100% 50% 50% 50% 100% 100% Registry information All inquiries and correspondence regarding shareholdings should be directed to CSR’s share registry: Computershare Investor Services Pty Limited GPO Box 2975 Melbourne VIC 3001 Australia Telephone International Facsimile International 1800 676 061 +61 3 9415 4033 (03) 9473 2500 +61 3 9473 2500 www.investorcentre.com/contact Investor relations and news The CSR Annual Report, Corporate Governance Statement and Sustainability Report are available to view online or download, visit www.csr.com.au Email investorrelations@csr.com.au CSR Limited CSR Limited ABN 90 000 001 276 Triniti 3, Level 5, 39 Delhi Road North Ryde NSW 2113 Australia Locked Bag 1345 North Ryde BC NSW 1670 Australia Telephone (02) 9235 8000 International +61 2 9235 8000 www.csr.com.au % of issued capital 2.3 8.4 4.5 8.4 76.4 100.0 Units 30,928 Franked amount per share at 30% NA NA NA 6.5 cents 6.75 cents 10.125 cents 13.0 cents 6.5 cents 5.0 cents 2.0 cents 8.5 cents 4.0 cents 117 C S R L I M I T E D A N N U A L R E P O R T 2 0 2 1 CSR.COM.AU 

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