Milton
Annual Report 2012

Plain-text annual report

MILTON CORPORATION LIMITED ABN 18 000 041 421 An Australian Listed Investment Company Listed since 1958 ANNUAL REPORT 2012 Profile Milton was established as a private investment vehicle for four shareholders in 1938. It became a public company in 1950 and listed on the Sydney Stock Exchange in 1958. Milton is now an investment vehicle for its’ more than 18,000 shareholders and it is listed on the Australian Securities Exchange (ASX) under the code MLT. Objective Milton’s objective is to hold a diversified portfolio of assets that generates a growing income stream for distribution to shareholders in the form of increasing fully franked dividends and provides capital growth in the value of the shareholders’ investments. Investment philosophy Milton is predominantly a long term investor in companies and trusts that are well managed, with a profitable history and an expectation of increasing dividends and distributions. Turnover of investments is low and capital gains arising from disposals are reinvested. Milton also invests in hybrid securities, liquid assets such as cash and term deposits and real property development through joint ventures. Milton’s Investment Committee, which includes three non-executive directors and the managing director, meets regularly to review the investment portfolio and to consider executives’ investment recommendations. Equity Investment portfolio Milton’s $1.8 billion equity investment portfolio, which represents 91% of total assets, comprises companies and trusts which are expected to provide an increase in investment revenue over the long term. Its composition has been determined by consistent application of its investment philosophy over many years and consequently the portfolio is not aligned with any stock exchange index. A list of investments by sector commences on page 7 and the classification of investments is detailed in the Chairman’s Review on page 4. Dividend policy Ordinary fully franked dividends are paid out of profit after tax excluding special investment revenue and acquisition related costs of subsidiaries. Milton has paid a dividend every year since listing and since the introduction of franking they have all been fully franked. Refer to the dividend history graph on page 3. Internal management Milton’s directors oversee the performance of its executives who manage the company and its investments to maximise returns to its shareholders. This internal management structure helps to maintain low operating costs. Contents Key Performance Indicators Chairman’s Review of the 2012 Financial Year Dividend History Classification of Investments Five Year Financial Summary Milton Corporation Foundation Listed Investments by Sector at 30 June 2012 1 2 3 4 6 6 7 Directors’ Report Corporate Governance Statement Financial Statements Directors’ Declaration Independent Auditor’s Report Directory ASX Information 11 19 22 45 46 48 49 Calendar Final dividend: - Ex dividend date - Payment date Annual General Meeting: - To be held at 15 August 2012 4 September 2012 16 October 2012 at 3 pm The Lyceum Room, Wesley Conference Centre 220 Pitt Street, Sydney Key performance indicators Profit after tax This represents the ordinary profit from the investments and includes special investment revenue and acquisition related costs of subsidiaries. 2012 2011 $103.4 million $93.9 million Weighted average earnings per share 85.0 cents 83.9 cents Underlying operating profit after tax $102.7 million $90.5 million This represents the ordinary profit from the investments and excludes special investment revenue and acquisition related costs of subsidiaries. Weighted average underlying operating earnings per share 84.4 cents 80.8 cents The underlying operating profit after tax expressed on a per share basis after taking into account additional shares issued during the year. Fully franked ordinary dividends per share Ordinary fully franked dividends are paid out of underlying operating profit after tax. Interim dividend per share Final dividend per share Full year dividend per share 38 cents 40 cents 78 cents 37 cents 39 cents 76 cents Full year ordinary dividend as a percentage of underlying operating profit after tax. 92% 92% Fully franked special dividend - 5.0 cents Special fully franked dividends are paid out of receipts of special investment revenue. Net tangible asset value at 30 June $2.0 billion $2.1 billion The net tangible asset value before providing for tax on unrealised capital gains. Net tangible asset backing per share at 30 June $16.42 $17.36 The net tangible asset backing per share is the net tangible asset value expressed on a per share basis. Management expense ratio 0.16% 0.17% The management expense ratio is the total cost of running Milton expressed as a percentage of the average Total Assets for the year. Total Shareholder Return (TSR) over 10 years 6.7% 7.8% This compound return measures the change in the value of an investment in Milton by considering the movement in the market price and assuming dividends are reinvested in Milton shares. See commentary on page 4. 1 Chairman’s Review of the 2012 financial year Milton’s underlying operating profit for the year increased to $102.7 million, with growth in dividend income from Milton’s portfolio of listed investments being the main driver of the improved return. The dividend income growth is partly attributable to the increased size of the portfolio following the December 2010 merger with Choiseul Investments Limited and partly due to higher dividends from many of the companies in the portfolio. The Choiseul merger also lifted Milton’s average cash balances for the year and the earnings on the additional cash more than offset the effect of lower interest rates on offer during the year so that interest income of $7.2 million was 5.8% higher than the previous year. The weighted average earnings per share, based on underlying operating profit, increased by 4.5% to 84.4 cents per share. Dividends and distributions 100.9 Up 13.6% $ million Change Interest income Joint venture profits Other income Administration expenses Underlying operating profit Income tax expense Underlying operating profit after tax 7.2 3.7 0.5 112.3 (3.2) 109.1 (6.4) 102.7 Up 13.5% Weighted ave shares on issue (million) 121.6 The underlying operating profit excludes special investment revenue as this revenue typically results from one off dividends and distributions. In the 2012 financial year there was a significant reduction in the size and number of special dividends received, with just $0.8 million recorded in 2012 compared with $3.6 million the year before. (1) based on underlying operating profit Weighted ave eps (1) 84.4 Milton’s net profit, which is a combination of underlying operating profit and the special revenue, increased by 10.2% to $103.4 million. Milton aims to provide its investors with a growing stream of fully franked ordinary dividends which are paid out of underlying operating profits. Since the introduction of franking, all dividends have been fully franked and Milton currently has sufficient franking credits to ensure that all dividends paid in the forseeable future will continue to be fully franked. In 2012 Milton’s shareholders received an increase in both the interim and final dividends. The fully franked interim dividend paid in February 2012 was increased by 1 cent per share to 38 cents per share and the fully franked final dividend to be paid in September 2012 was increased by 1 cent per share to 40 cents per share. The franking credits attached to the dividends can enhance the after tax return for shareholders who pay tax in Australia. Under the dividend imputation system a fully franked dividend of 78 cents per share equates to pre tax income of 111.4 cents per share. The total dividend payment for the year of $94.9 million was 92.4% of underlying operating profit for the 2012 financial year. This payout ratio allows Milton to retain some funds for future investment and it assists Milton to at least maintain future dividends. Milton currently aims to pay out between 90% and 95% of full year underlying operating profit each year. UOP(1) (1) Ordinary dividend 120 100 80 60 40 20 0 2009 2010 2011 2012 (1) Underlying operating profit 2 Chairman’s Review of the 2012 financial year (continued) The following graph shows the growth in Milton’s dividends since the company was listed in 1958. It assumes 1,000 shares were purchased for £1,000 in 1958 and dividends have NOT been reinvested and no further shares have been purchased. Through the sub-division of shares on the introduction of decimal currency and bonus share issues, the number of shares held would have increased to 5,706. At 30 June 2012 these shares would have been valued at $86,788. The annual dividend has increased from $160 in 1959 to $4,451 in 2012. The growth in Milton’s dividends reflects strong growth in investment income from its long term investment portfolio as well as an increase in the payout ratio. Ordinary dividend Special dividend Fully franked since 1987 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 The value of Milton’s net assets before provision for tax on unrealised capital gains at 30 June 2012 was $2 billion, which equated to $16.42 per share. As a long term equity investor, Milton remained quite fully invested throughout the year with 91% of its assets invested in Australian equities at 30 June 2012. Milton also held $131 million in cash and other liquid assets which could be utilised to invest in companies that have predictable earnings and dividends when opportunities arise. Milton took advantage of such opportunities in the 2012 financial year and outlaid a total of $49 million to increase its investment in 45 companies that were already held by Milton. Larger increases to the investment portfolio were AGL Energy, Amcor, Bank of Queensland, BHP Billiton, and Cardno. The increased investments were funded from the proceeds from disposals, which amounted to $34 million, and existing cash balances. The takeovers of Coal & Allied Industries, Foster’s Group and Macarthur Coal provided funds of $27 million. A further $7 million were received from the sale of a number of smaller holdings. Milton’s investment portfolio, at 30 June 2012, included exposure to 92 listed companies and 14 listed trusts. These companies and trusts, which are listed on the Australian Securities Exchange, operate in a variety of sectors and geographies. A full list of investments is shown on pages 7 to 10. The table on the following page shows the classification of assets by sector and how Milton’s exposure to each sector changed over the year. 3 Chairman’s Review of the 2012 financial year (continued) Total assets classified by sector Classification(1) Opening position Additions Disposals Change in value Closing position Income $ million $ million $ million $ million $ million $ million Banks Diversified financials Materials Consumer staples Commercial services Insurance Energy Telecommunications Capital goods Real estate Healthcare Other shares Utilities Retailing Media Total listed investments Cash & liquids(2) Other assets(3) Total assets 667.3 204.3 268.7 214.0 113.5 101.9 73.7 37.0 54.0 46.1 38.1 36.4 31.8 22.2 19.2 5.9 1.3 7.7 6.2 0.4 1.9 1.9 3.8 6.6 0.3 2.0 2.8 5.8 1.7 0.7 - - (6.5) (16.9) (0.4) (0.3) (4.9) - (3.0) (0.4) - - (0.5) (0.4) (1.1) (36.6) (2.9) (67.4) (6.4) 14.8 (11.8) (14.9) 9.1 (8.5) (1.4) 3.9 1.0 2.3 7.7 (6.5) 636.6 202.7 202.5 196.9 128.3 91.7 55.8 49.9 49.1 44.6 44.0 40.2 39.4 31.2 12.3 45.7 8.6 7.4 9.6 5.4 5.1 2.4 3.3 2.7 3.4 1.3 1.9 1.6 1.5 1.4 1,928.2 49.0 (34.4) (117.6) 1,825.2 101.3 142.7 42.5 2113.4 132.2 45.4 7.2 4.2 2002.8 113.1 (1) Investments are grouped according to their asset classes using the Global Industry Classification Standard (“GICS”) codes. Full details of the investments at 30 June 2012 are reported on pages 7 to 10. (2) Cash & liquid assets include cash, term deposits and hybrid securities. (3) Other assets include Receivables and investments in real property development through joint ventures. Milton’s total return is a combination of its profit after expenses and tax together with the revaluation of its investment portfolio. Milton’s total return for the 2012 financial year was minus $14.1 million, which equated to minus 0.7% of net assets at 30 June 2011. The performance of the equity market as measured by the movement in the accumulation return of the All Ordinaries Index was minus 7%. If the Index included costs and tax, then Milton’s outperformance of the market over the year would have been greater. Movement in Net Assets (1) for the year ended 30 June 2012 Income before provision for tax Expenses Tax expense Change in value of investments Total return Net assets 30 June 11 Dividends paid during the year Net assets(1) 30 June 12 Net assets(1) per share 30 June 12 $ millions 113.1 (3.2) (6.4) (117.6) (14.1) 2,111.2 (99.7) 1,997.4 $16.42 (1) before provision for tax on unrealised capital gains 4 Chairman’s Review of the 2012 financial year (continued) Top 20 Investments at 30 June 2012 Company Westpac Banking Corporation Commonwealth Bank Washington H. Soul Pattinson Campbell Brothers National Australia Bank BHP Billiton Wesfarmers Woolworths ANZ Banking Group Telstra Corporation Outlook Company Fair value $ million % of total assets Fair value $ million % of total assets 220.1 159.9 125.4 117.6 102.4 101.1 85.6 69.3 62.4 43.4 11.0 Bank of Queensland 8.0 Bendigo and Adelaide Bank 6.3 QBE Insurance Group 5.9 5.1 5.0 AGL Energy Brickworks Rio Tinto 4.3 Woodside Petroleum 3.5 3.1 2.2 CSL Suncorp-Metway Perpetual Trustees 43.4 42.3 36.2 34.0 32.6 25.5 24.5 23.1 22.9 18.8 2.2 2.1 1.8 1.7 1.6 1.3 1.2 1.2 1.1 0.9 Total market value of Top 20 1,390.5 69.5 In the short term the Australian equity market is likely to continue to be affected by news regarding Euro zone issues, China growth and the strength of the US recovery. Until there is a clear solution to the Euro zone debt issues and investors have considered its implications for global economic growth equity markets are likely to remain volatile. Under these conditions share price movements can often be a reaction to macro factors and unrelated to the economic performance of the companies themselves and this can provide Milton with the opportunity to invest in well managed companies that have predictable earnings and dividends. Milton has a strong balance sheet and is well placed to take advantage of these opportunities. Milton’s objective for the 2013 financial year is to at least maintain the fully franked, full year dividend of 78 cents per share. Board changes Mr John Aitken retired as a director of Milton at the conclusion of the annual general meeting in October 2011. Mr Aitken joined the Milton board in 2001 and served on the Investment and Audit Committees. I would like to thank Mr Aitken for his contribution over more than a decade. In December 2011, Mr Kevin Eley became a director of Milton. Mr Eley has extensive experience in the investment industry and is a member of the Investment and Audit Committees. Mr Eley will stand for election at the annual general meeting which is to be held on 16 October 2012. R. D. MILLNER Chairman Sydney, 9 August 2012 5 Five Year Financial Summary Underlying operating profit after tax(1) ($million) Underlying earnings per share (cents) Profit after tax ($million) Earnings per share (cents) Administration costs as % of average total assets Interim dividend (cents per share) Final dividend (cents per share)* Full year ordinary dividend (cents per share) Special dividend (cents per share) *LIC Capital Gain paid as part of final dividend (cents per share) Net assets(2) at 30 June ($million) Net asset backing per share(2) at 30 June($) Net asset backing per share(3) at 30 June($) Last sale price at 30 June ($) All Ordinaries Index at 30 June 2012 102.7 84.4 103.4 85.0 0.16 38 40 78 - - 2011 2010 2009 2008 90.5 80.8 93.9 83.9 0.17 37 39 76 5 - 68.9 73.7 73.1 78.2 0.17 35 36 71 - 2 73.6 85.0 69.4 80.1 0.19 43 35 78 - - 82.8 98.5 122.0 145.2 0.17 43 45 88 8 12 1,997 2,112 1,603 1,338 1,609 16.42 17.36 16.51 15.04 19.03 15.46 16.11 15.17 13.98 16.78 15.21 15.60 15.98 14.50 19.38 4135 4660 4325 3948 5333 Ten year Total Shareholder Return (% per annum) 6.7 7.8 Five year Total Shareholder Return (% per annum) (3.0) (0.4) 10.7 4.0 9.8 6.0 Shares on issue(4) (million) Number of shareholders 121.6 123.3 97.1 88.9 19,008 19,490 15,890 14,578 13,890 13.4 12.4 84.5 (1) Underlying operating profit after tax excludes special investment revenue, acquisition related costs of subsidiaries and realised capital gains and losses. (2) Before provision for tax on unrealised capital gains net of tax on unrealised capital losses and before providing for the ordinary final dividend. (3) After provision for tax on unrealised capital gains net of tax on realised capital losses and before providing for the ordinary final dividend. (4) In October 2011, shareholders approved the cancellation of 1,700,000 Milton shares that were held by Choiseul Investments Limited. Milton Corporation Foundation (ABN 95 051 921 133) The Foundation was established in 1988 to support charitable organisations, particularly those which direct assistance to persons that are disadvantaged in the community. The objective was to create a vehicle with sufficient capital that could, over time, make regular meaningful donations from the earnings derived from its investments. Contributions from Milton and others over the years have helped to grow the Foundation’s total assets to $1.7 million. This financial year earnings from these assets enabled the Foundation to support 13 organisations through donations that totalled $100,000. The Foundation has provided $1.6 million of assistance to the community since its establishment. Shareholders who wish to support the Foundation are invited to make tax deductible donations of $2 or more by forwarding them to The Trustees, Milton Corporation Foundation, PO Box R1836, Royal Exchange NSW 1225. 6 LISTED INVESTMENTS BY SECTOR AT 30 JUNE 2012 Automobiles & Components Fleetwood Corporation Limited Schaffer Corporation Limited Banks Australia & New Zealand Banking Group Limited Australia & New Zealand Banking Group Limited convertible preference shares Australia & New Zealand Banking Group Limited – CPS 1 Bendigo and Adelaide Bank Limited Bank of Queensland Limited Commonwealth Bank of Australia Commonwealth Bank of Australia – PERLS V National Australia Bank Limited MyState Limited Wide Bay Australia Limited Westpac Banking Corporation Capital Goods Bradken Limited Cardno Limited CSR Limited GWA International Limited Hills Holdings Limited Leighton Holdings Limited Reece Australia Limited Sedgman Limited UGL Limited Commercial Services Brambles Limited Cabcharge Australia Limited Campbell Brothers Limited Transfield Services Limited Consumer Services Crown Limited InvoCare Limited Tatts Group Limited 7 Holding 177,000 68,999 Fair Value $'000 2,078 248 2,326 2,830,380 62,353 19,500 2,000 5,709,709 6,550,276 3,012,075 500 4,348,688 444,992 433,570 10,417,683 704,338 751,090 208,741 2,275,000 1,051,478 757,865 130,916 1,521,674 1,352,191 1,167,966 134,711 2,168,165 1,519,032 267,301 1,695,526 658,000 1,935 199 42,309 43,363 159,941 102 102,368 1,357 2,519 220,126 636,572 3,656 5,678 292 4,778 1,115 12,330 2,356 2,115 16,781 49,101 7,195 674 117,623 2,757 128,249 2,269 13,666 1,724 17,659 Holding 1,367,184 310,099 4,784,560 161,862 1,023,271 2,501,866 340,685 2,586,473 809,094 394,202 1,304,250 1,147,375 354,809 270,400 235,503 161,067 494,118 818,126 2,940,394 9,094,840 47,700 1,290,107 387,106 1,407,057 790,175 230,612 372,166 31,800 587,062 104,942 522,563 Fair Value $'000 18,293 2,946 16,124 210 4,451 74,806 10,752 69,318 196,900 4,167 11,755 5,426 1,325 5,606 641 2,605 974 12,847 18,735 13,202 125,418 202,701 645 5,173 4,723 14,985 24,511 5,788 55,825 9,769 2,094 23,142 2,373 6,637 44,015 LISTED INVESTMENTS BY SECTOR AT 30 JUNE 2012 (continued) Consumer Staples Coca-Cola Amatil Limited Graincorp Limited Metcash Limited Select Harvests Limited Treasury Wine Estates Limited Wesfarmers Limited Wesfarmers Limited Partially Protected Woolworths Limited Diversified Financials Argo Investments Limited ASX Limited Australian Foundation Investment Company Limited BKI Investment Company Limited Carlton Investments Limited Diversified United Investment Limited Equity Trustees Limited IOOF Holdings Limited Macquarie Group Limited Perpetual Limited The Trust Company Limited Washington H Soul Pattinson & Company Limited Energy Caltex Limited New Hope Corporation Limited Origin Energy Limited Santos Limited Woodside Petroleum Limited Worley Parsons Limited Healthcare Blackmores Limited Cochlear Limited CSL Limited Ramsay Health Care Limited Sonic Healthcare Limited 8 LISTED INVESTMENTS BY SECTOR AT 30 JUNE 2012 (continued) Insurance AMP Limited Austbrokers Holdings Limited Insurance Australia Group Limited IAG Convertible Preference Shares IAG Finance (NZ) Limited perpetual reset exchangeable notes QBE Insurance Group Limited Suncorp Group Limited Suncorp Group Limited convertible preference shares Materials Adelaide Brighton Limited Alumina Limited Amcor Limited Arrium Limited (previously OneSteel Limited) BHP Billiton Limited Boral Limited Brickworks Limited Fletcher Building Limited Incitec Pivot Limited Orica Limited Rio Tinto Limited Sims Metal Management Limited Media Amalgamated Holdings Ltd APN News & Media Limited Consolidated Media Limited Fairfax Media Limited Seven Group Holdings Limited – TELYS4 preference shares Seven West Media Limited Ten Network Holdings Limited Holding 2,021,110 984,795 3,657,575 3,000 12,000 2,705,729 2,832,882 38,000 1,863,440 1,121,919 1,160,322 3,995,301 3,215,996 1,627,462 3,224,567 803,229 1,529,770 176,987 450,888 793,037 740,667 1,309,855 267,301 3,231,643 7,000 1,619,110 1,260,246 Fair Value $'000 7,781 6,834 12,728 294 1,192 36,203 22,918 3,730 91,680 5,926 886 8,227 3,456 101,143 4,801 32,568 3,695 4,360 4,370 25,475 7,621 202,528 4,777 865 901 1,794 546 2,825 636 12,344 9 LISTED INVESTMENTS BY SECTOR AT 30 JUNE 2012 (continued) Real Estate Australand Property Group BWP Trust CFS Retail Property Trust Charter Hall Retail REIT Commonwealth Property Office Fund FKP Property Group Goodman Group Lend Lease Corporation Limited Mirvac Group Stockland Group Westfield Group Westfield Retail Trust Retailing A P Eagers Limited ARB Corporation Limited Automotive Holdings Group Limited David Jones Limited Noni B Limited Premier Investments Limited Telecommunication Telstra Corporation Limited TPG Telecom Limited Transport Lindsay Australia Limited Qube Logistics Holdings Limited Sydney Airport (previously MAP Group) Transurban Group Toll Holdings Limited Utilities AGL Energy Limited APA Group Holding 832,732 1,363,394 9,102,979 613,350 1,724,537 3,630,448 184,756 448,216 327,380 2,150,940 477,895 590,873 5,448,670 744,741 1,039,260 356,090 867,396 385,250 11,767,253 3,731,553 1,600,000 1,268,000 432,301 2,157,081 1,098,679 2,304,752 1,083,833 Fair Value $'000 2,057 2,543 17,660 2,030 1,750 1,380 678 3,227 417 6,625 4,540 1,684 44,591 18,525 6,777 2,567 922 577 1,791 31,159 43,421 6,513 49,934 272 1,965 1,254 12,274 4,372 20,138 34,042 5,408 39,450 Total Listed Investments by Sector 1,825,171 10 Directors’ Report For the year ended 30 June 2012 The directors present their report together with the financial statements of the consolidated entity (“Milton”) consisting of Milton Corporation Limited and its subsidiaries for the financial year ended 30 June 2012 and the independent auditor’s report thereon. Directors The directors of Milton at any time during or since the end of the financial year are: Robert D. Millner FAICD Independent non-executive chairman. Director of Milton Corporation Limited since 1998 and appointed chairman in 2002. Chairman of the Investment and Remuneration Committees. Extensive experience in the investment industry. Other current directorships: Director of Brickworks Limited since 1997 and appointed chairman in 1999. Director of New Hope Corporation Limited since 1995 and appointed chairman in 1998. Director of Washington H. Soul Pattinson & Company Limited since 1984 and appointed chairman in 1998. Chairman of BKI Investment Company Limited since 2003. Director of Australian Pharmaceutical Industries Limited since 2000 and TPG Telecom Limited since 2000. Former directorships in the last three years: Choiseul Investments Limited from 1995 to 2010. Souls Private Equity Limited from 2004 to 2012 Northern Energy Corporation Limited from February 2011 and the company was delisted in October 2011. John F. Church FCSA, F Fin, FAICD Independent non-executive director. Director of Milton Corporation Limited since 1986. Member of the Investment Committee. A Solicitor and Notary Public and over 39 years experience in the investment industry. Graeme L. Crampton B.Ec, FCA, FAICD Independent non-executive director. Director of Milton Corporation Limited since 2009. Chairman of the Audit Committee and a member of the Remuneration Committee . A Chartered Accountant and former partner of a major firm of Chartered Accountants for more than 29 years and has extensive experience in the investment industry. Former directorships in the last three years: Souls Private Equity Limited from 2011 to 2012. Kevin J. Eley CA, F Fin Independent non-executive director. Director of Milton Corporation Limited appointed 1 December 2011. Member of the Investment and Audit Committees. A Chartered Accountant and has extensive experience in the investment industry. Other current directorships: Director of Equity Trustees Limited since 2011, Kresta Holdings Limited since 2011, HGL Limited since 1985 and PO Valley Energy Limited since 2012. Francis G. Gooch B.Bus, CPA Managing director. Managing Director of Milton Corporation Limited since 2004 and chief executive since 1999. Member of the Investment Committee. A Certified Practising Accountant and over 27 years experience in the finance and investment industries. Ian A. Pollard BA (Macq), MA (Oxon), D Phil (IMC), FIA, FIAA, FAICD Independent non-executive director. Director of Milton Corporation Limited since 1998. Member of the Audit and Remuneration Committees. An Actuary and over 35 years of involvement in the investment industry. Former directorships in the last three years: Corporate Express Australia Limited from 2004 to 2010. John N. Aitken CA, F Fin Independent non-executive director. Director of Milton Corporation Limited since 2001. Member of the Investment and Audit Committees. Over 38 years experience in the investment management industry. Retired as a director on 13 October 2011. 11 Directors’ meetings The number of directors’ meetings (including meetings of committees of directors) and the number of meetings attended by each of the directors of Milton during the financial year were: Director Directors’ Meetings Investment Committee Meetings R.D. Millner J.F. Church G.L. Crampton K.J. Eley(1) F.G. Gooch I.A. Pollard J.N. Aitken(2) A 6 7 7 3 7 7 2 B 7 7 7 3 7 7 2 A 20 20 * 8 21 * 10 B 21 21 * 8 21 * 11 Audit Committee Meetings B A Nomination Committee Meetings B A Remuneration Committee Meetings B A * * 6 3 * 6 2 * * 6 3 * 6 2 1 * 1 * 1 1 1 1 * 1 * 1 1 1 1 * 1 * * 1 * 1 * 1 * * 1 * A - Number of meetings attended. B - Number of meetings held during the time the director held office or was a member of the committee during the year. * - Not a member of the relevant committee. (1) Appointed 1 December 2011 (2) Retired on 13 October 2011 Principal activities The principal activity of Milton is investment. Milton invests in companies and trusts, real property development, fixed interest securities, and liquid assets such as cash and term deposits. There has been no significant change in the nature of this activity during the financial year. Operating and financial review The consolidated profit after income tax of Milton for the year was $103.4 million (2011: $93.9 million). Milton is in a sound financial position with net assets at 30 June 2012 of $1.9 billion (2011: $2.0 billion) and no debt. The operating and financial reviews are contained in the Chairman’s Review on page 2. Significant changes in the state of affairs There were no significant changes in the state of affairs of Milton during the past financial year other than as disclosed in the financial statements. Dividends Dividends paid or declared by Milton to members since the end of the previous financial year were: Declared and paid during the year - Final 2011 ordinary fully franked - Special 2011 fully franked - Interim 2012 ordinary fully franked Declared after end of year and not provided for - Final 2012 ordinary fully franked Cents per share Total amount $’000 Date of payment 39 5 38 40 47,434 6,081 46,218 20 September 2011 20 September 2011 29 February 2012 48,650 4 September 2012 No LIC capital gain was included in the above dividends. All the dividends paid by Milton since franking was introduced in 1987 have been fully franked. Events subsequent to reporting date Apart from the information contained in note 24 to the financial statements, no matter or circumstance has arisen since the end of the financial year that has or may significantly affect the operations, results or state of affairs of Milton in subsequent financial years. 12 Likely developments Milton will continue its investment activities consistent with its objective of generating increasing revenue for distribution to its shareholders from its diversified portfolio of assets. The performance of Milton’s investments is subject to and influenced by many external factors and therefore it is not appropriate to predict the future results of the investments and Milton’s performance. The Chairman’s Review commencing on page 2 of the Annual Report contains information relating to Milton’s past performance, operations and outlook. Environmental regulations There are no significant environmental regulations that apply directly to Milton. Directors’ relevant interests No director has or has had any interest in a contract entered into since the last Directors’ Report or any contract or proposed contract with Milton or any subsidiary or any related entity other than as disclosed in note 22 to the financial statements. The relevant interest of each director in the capital of Milton at the date of this report is as follows: Director R.D. Millner J.F. Church G.L. Crampton K.J. Eley F.G. Gooch I.A. Pollard No. of Shares 2,558,105 5,726,492 27,307 5,932 130,013 14,724 Indemnification and insurance of directors, officers and auditors Neither Milton nor any related entity has indemnified or agreed to indemnify, paid or agreed to pay any insurance premium which would be prohibited under Section 199A or Section 199B of the Corporations Act 2001 during or since the financial year ended 30 June 2012. The directors have not included details of the nature of the liabilities covered or the amount of the premium paid in respect of the directors’ and officers’ liability and legal expenses insurance contracts as such disclosure is prohibited under the terms of the contracts. Secretary Mr A.R. Davison, B.Bus, CA, FCSA was appointed secretary in August 1999. He previously held the role of group financial controller and secretary with a private group of companies for five years and prior to that worked in chartered accounting and corporate finance roles. He is a fellow of Chartered Secretaries Australia. Non-audit services During the year, a related practice of Moore Stephens Sydney, Milton’s auditor, has performed certain non-audit services. Details of the amounts paid to the auditors are disclosed in note 4 to the consolidated financial statements. The board has considered the non-audit services provided during the year by the related practice of the auditor and is satisfied that the provision of those non-audit services during the year by the related practice of the auditor is compatible with, and did not compromise, the auditor independence requirements of the Corporations Act 2001 for the following reasons: - All non-audit services were subject to the corporate governance procedures adopted by Milton and have been reviewed and approved by the Audit Committee to ensure they do not impact on the integrity and objectivity of the auditor, and - The non-audit services provided do not undermine the general principles relating to auditor independence as set out in Professional Statement APES110 Code of Ethics for Professional Accountants, as they did not involve reviewing or auditing the auditor’s own work, acting in a management or decision making capacity for Milton, acting as an advocate for Milton or jointly sharing risks and rewards. The auditor’s independence declaration as required under Section 307C of the Corporations Act 2001 is set out on page 18. 13 Remuneration Report This report, which is audited, details the policy for determining the remuneration of directors and executives and provides specific detail of their remuneration. Remuneration of non-executive directors Non-executive directors are paid base fees, committee fees and superannuation contributions. Fees are not linked to Milton’s performance and no bonuses are paid or options issued. Each year the base fees and committee fees are determined by the board of directors who take into account the demands made on directors and the remuneration of non executive directors of comparable Australian companies. Base fees and committee fees (including superannuation contributions) Chairman base fee Director base fee Chairman of the Audit Committee fee Member of the Audit Committee fee Member of the Investment Committee fee 2011 113,000 56,500 5,000 2,825 5,000 2012 118,650 59,325 5,250 2,975 5,250 The total remuneration paid to non executive directors in 2012 was $373,980 (2011: $364,650). In October 2011 shareholders approved the fixed maximum sum of $700,000. Non-executive directors, who were appointed before 30 June 2003, are entitled to retirement benefits in accordance with a shareholder approved scheme. In June 2003 the board resolved to cap retirement benefits for all directors at the amounts provided as at 30 June 2003. The total balance provided at 30 June 2012 is $190,905 (2011: $204,405). Remuneration of executives Executive remuneration is a key element of Milton’s staff retention strategy which is designed to attract and retain appropriately qualified and experienced professionals who share Milton’s goals and values and will seek to deliver superior long term returns to Milton shareholders. The remuneration of the managing director and senior executives is reviewed annually by the Remuneration Committee which then makes recommendations to the board for its consideration and approval. In formulating its recommendations the Remuneration Committee considers: • the short term and long term performance of the Company, • the contribution of the managing director and the senior executives to this performance, • market trends in remuneration in terms of both quantum and structure and • the remuneration of key management personnel of other listed investment companies with similar long term investment philosophies and objectives. Executive remuneration includes a component known as the Total Employment Cost Package (TECP), and it may include a cash bonus component and an equity component. The TECP includes cash salary, company contributions to superannuation and it may include non monetary benefits such as the provision of a motor vehicle and car parking. No executive is entitled to a guaranteed bonus however the board may award a cash bonus to reward an executive’s outstanding contribution to the achievement of Milton’s objectives. The board will consider qualitative measures such as contribution to the investment process, participation in board discussions, timeliness and accuracy of reports and staff development when assessing executive performance. In determining the amount of any bonus the board has regard to quantitative measures such as underlying operating earnings per share, dividends per share and total returns relative to the market as a whole. The cash bonus is normally less than 10% of each executive’s TECP. The equity component of the remuneration package encourages executives to have an investment in Milton so that their interests are aligned with the shareholders’ interests. The equity component is delivered through participation in the Senior Staff Share Plan (“SSSP”), which was approved by shareholders at Milton’s Annual General Meeting on 9 October 2001 (refer note 17b to the financial statements). In accordance with the terms of the SSSP, the directors determine the maximum number of shares for which the executive may apply. All SSSP shares are acquired on the market and held on behalf of the executives by the trustee of the SSSP. The price offered to the executive shall be at a discount of one cent per share to the market value of the shares. 14 Executives are required to hold the SSSP shares for a minimum period of three years however the benefit to the executive is increased through long term ownership as dividends are paid and the Milton share price appreciates. Milton provides an interest free loan to the executives to fund the acquisition of each parcel of SSSP shares. Each loan is repaid by the application of the after tax proceeds from the dividends paid on the SSSP shares. The opportunity cost to Milton of providing the loan is the notional interest. The Remuneration Committee includes this cost when it reviews each executive’s TECP. SSSP shares may not be sold, transferred, mortgaged or otherwise dealt with by the executive for a period of three years from the date of issue or until the executive ceases employment with Milton. If the executive’s employment ceases, the executive may within 30 days repay the loan and direct the trustee to transfer the shares to the executive or, provided the value of the shares is greater than the loan outstanding, direct the trustee to sell the shares, repay the loan and distribute the balance to the executive. Otherwise the trustee will sell the shares when so directed by Milton and apply the proceeds to the repayment of the loan. The board considers that the SSSP is appropriately designed to encourage long term ownership of shares by executives, which then aligns their interests with that of Milton’s predominantly long term shareholder base. Executives, other than the managing director, may participate in the Employee Share Plan (“ESP”) which provides for a bonus of up to $1,000 to be paid in the form of Milton shares (refer note 17a to the financial statements). Eligible executives are provided with life, total and permanent disablement and salary continuance insurance. The overall level of executive reward takes into account the performance of Milton over a number of years. Key performance indicators for Milton over five years are tabled below. Key performance indicators Profitability Underlying operating profit ($million) Growth in underlying operating profit (%) Underlying earnings per share (cents) Growth in underlying earnings per share (%) Dividend Full year ordinary dividend (cents per share) Growth in full year dividend (%) Special dividend (cents per share) Capital Net asset backing per share(1) at 30 June($) (Decline) growth in net asset backing per share (%) Net assets(1) at 30 June ($million) Total Return Ten year Total Shareholder Return Ten year Total Portfolio Return 2012 2011 2010 2009 2008 102.7 13.5 84.4 4.5 78.0 2.6 - 16.42 (5.4) 1,997 6.7 7.5 90.5 31.3 80.8 9.6 76.0 7.0 5.0 17.36 5.1 2,112 7.8 8.5 68.9 (6.4) 73.7 (13.3) 71.0 (9.0) - 16.51 9.3 1,603 73.6 (11.1) 85.0 (13.8) 78.0 (11.4) - 15.04 (20.6) 1,338 82.8 17.4 98.5 8.2 88.0 8.6 8.0 19.03 (18.7) 1,609 10.7 10.2 9.8 9.4 13.4 14.2 Ten year accumulation return of the All Ordinaries Index (1) Before provision for tax on unrealised capital gains net of tax on realised capital losses and before providing for the 7.1 7.4 7.1 7.3 11.5 ordinary final dividend. 15 Details of remuneration Amounts of remuneration Details of the remuneration of each non-executive director of Milton Corporation Limited, the managing director and specified executives of Milton for the years ended 30 June 2011 and 2012 are set out in the following tables. Non-executive directors of Milton Corporation Limited R.D. Millner Chairman J.F. Church Director G.L. Crampton Director K.J. Eley(2) Director I.A. Pollard Director J.N. Aitken(3) Director Total Remuneration 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 Short Term Benefits Fees $ 113,670 108,257 59,243 56,422 19,575 13,500 27,574 - 57,156 54,427 12,831 44,325 290,049 276,931 Post Employment Superannuation Total paid Retirement Provision(1) $ 10,230 9,743 5,332 5,078 45,000 48,000 11,830 - 5,144 4,898 6,395 20,000 83,931 87,719 $ 123,900 118,000 64,575 61,500 64,575 61,500 39,404 - 62,300 59,325 19,226 64,325 373,980 364,650 $ 55,905 55,905 90,000 90,000 - - - - 45,000 45,000 - 13,500 190,905 204,405 (1) The directors’ retirement benefits have been capped at the balance provided at 30 June 2003. (2) Mr K. J. Eley’s appointment as a director was effective from 1 December 2011. (3) Mr J.N. Aitken retired as a director on 13 October 2011. In addition to the directors fees paid in 2012, he received a payment in respect of a retirement provision of $13,500 previously provided. Managing director and executives of Milton Corporation Limited and its subsidiaries Short Term Benefits Salary Cash bonus (1) $ $ Non monetary benefits (2) $ Post Employ- ment Super- annuation Other long term benefits (3) $ $ Total Share based payments (4) $ $ F.G. Gooch Managing director A.R. Davison CFO, secretary Total remuneration (1) Represents 100% of cash bonus paid or payable which vested in the year. (2) Non monetary benefits include the provision of a motor vehicle, parking, the cost of life, total & permanent disablement 131,819 97,526 52,369 41,228 184,188 138,754 388,497 369,331 181,999 187,081 570,496 556,412 12,422 9,557 4,626 5,541 17,048 15,098 20,500 40,000 5,000 5,000 25,500 45,000 49,788 45,239 3,552 3,552 53,340 48,791 45,065 45,704 46,000 32,919 91,065 78,623 2012 2011 2012 2011 2012 2011 648,091 607,357 293,546 275,321 941,637 882,678 insurance and salary continuance insurance provided through the superannuation fund. (3) Other long term benefits are comprised of long service leave provisions. (4) Represents the notional value of interest on loans provided to acquire shares in Milton under the Senior Staff Share Plan. There are no fixed term employment contracts between Milton and its employees. Employment may be terminated with four weeks notice by either Milton or the employee. There are no provisions for any termination payments other than for unpaid annual and long service leave. 16 Share based compensation, Senior Staff Share Plan equity holdings and loans The movements during the reporting period are as follows: Executives’ shareholdings in relation to the Senior Staff Share Plan - Number of shares held F.G. Gooch Managing director A.R. Davison CFO, secretary 2012 2011 2012 2011 Opening Balance 105,000 95,000 42,500 37,500 Received as Remuneration 20,000 10,000 5,000 5,000 Closing Balance 125,000 105,000 47,500 42,500 Loans in relation to the Senior Staff Share Plan Details regarding loans outstanding at the reporting date to specified directors and specified executives, where the individual’s aggregate loan balance exceeded $100,000 at any time in the reporting period, are as follows: F.G. Gooch Managing director A.R. Davison CFO, secretary 2012 2011 2012 2011 Opening Balance Net change $ 1,460,406 1,360,242 620,126 564,465 $ 223,526 100,164 45,698 55,661 Closing Balance $ 1,683,932 1,460,406 665,824 620,126 Highest balance in the period $ 1,762,271 1,516,238 695,593 642,463 Notional Interest (1) $ 131,819 97,526 52,369 41,228 (1) The notional interest has been included under “Share Based Payment” in the remuneration of the managing director and the executive disclosed on page 16. Terms and conditions of the loans are referred to in note 17b to the financial statements. Rounding off The company is of a kind referred to in Class Order 98/100 issued by the Australian Securities & Investments Commission and in accordance with that Class Order, amounts in the Directors’ Report and financial report have been rounded off to the nearest thousand dollars, unless otherwise stated. Signed in accordance with a resolution of the directors. R. D. MILLNER Chairman Sydney, 9 August 2012 17 Level 7, 20 Hunter Street Sydney NSW 2000 T +61 (0)2 8236 7700 F +61 (0)2 9233 4636 www.moorestephens.com.au Auditor’s Independence Declaration to the Directors of Milton Corporation Limited In accordance with the requirements of section 307C of the Corporations Act 2001 , as lead auditor for the audit of Milton Corporation Limited for the year ended 30 June 2012, I declare that, to the best of my knowledge and belief, there have been: a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and b) no contraventions of any applicable code of professional conduct in relation to the audit. Moore Stephens Sydney Chartered Accountants Martin J. (Joe) Shannon Partner Dated in Sydney this 9th day of August 2012. Liability limited by a scheme approved under Professional Standards Legislation* Moore Stephens Sydney ABN 90 773 984 843. *Other than for the acts or omissions of financial services licensees. An independent member of Moore Stephens International Limited - members in principal cities throughout the world The Sydney Moore Stephens firm is not a partner or agent of any other Moore Stephens firm. 18 Corporate Governance Statement This statement outlines Milton’s main corporate governance practices which have been in place throughout the financial year. The board considers it essential that directors and staff of Milton employ sound corporate governance practices in carrying out their duties and responsibilities. Accordingly a code of conduct has been issued to detail the expected behaviour required to ensure Milton acts with integrity and objectivity. A number of committees, which operate in accordance with their respective charters, have been established to assist the board in carrying out its responsibilities. Milton has placed its corporate governance statement on its website: www.milton.com.au. The board charter, code of conduct, audit, nomination and remuneration committee charters and share trading, communication, disclosure, performance evaluation and risk management policies are available on this website. The ASX Corporate Governance Council released its “Principles of Good Corporate Governance and Best Practice Recommendations” (“Recommendations”) in March 2003 and these were revised in August 2007 and in June 2010. The directors of Milton support the thrust of the Recommendations and, whilst the Recommendations are not prescriptive, the ASX Listing Rules require listed companies to identify those Recommendations that have not been followed and the reasons for not following them. The directors consider that Milton’s corporate governance practices do comply with the Recommendations. Board of directors The board charter details the composition and the role and responsibilities of the board and their relationship with management to accomplish the board's primary role of promoting the long-term success of Milton. The board is accountable to shareholders for the performance of Milton. It oversees the activities and performance of management and provides an independent and objective view of Milton’s performance. The board is comprised of a majority of independent non-executive directors and one executive director with a mix of skills and considerable experience in the investment industry. The details of the directors, their experience, qualifications, term of office and independent status are set out in the Directors’ Report. The Recommendations state that to be considered independent, director must be “a non-executive director who is not a member of management and who is free of any business or other relationship that could materially interfere with (or could reasonably be perceived to materially interfere with) the independent exercise of their judgement.” All directors except Mr R. D. Millner would satisfy all the tests of the Recommendations and are considered as being independent. The Recommendations state that the determination of the independence of a director is to be dealt with by the board of directors who are to consider all relevant facts and circumstances on a case by case basis. Milton’s chairman, Mr R. D. Millner, is also chairman of Washington H Soul Pattinson & Co Limited, a substantial shareholder of Milton. The Washington H Soul Pattinson holding of less than 6% of Milton’s issued capital represents less than 5% of Washington H Soul Pattinson’s assets and therefore the board considers it is unlikely to impact the chairman’s independence. The board is strongly of the opinion that the thinking and actions of Mr R. D. Millner and his commitment to represent the interests of all shareholders is not impaired, and he is considered by the board as a whole to be independent. In accordance with the Corporations Act 2001, any director who has an interest of any kind in relation to any matter dealt with at a board or committee meeting is required to advise the meeting and abstain from participation in the decision process. All non-executive directors are subject to re-election at least every three years. Independent professional advice may be sought by a director at Milton’s expense with the prior approval of the chairman. A copy of advice received by the director is made available to the chairman to be dealt with at his discretion. The board meets regularly to review management reports on the investment portfolio and on the operational and financial performance of Milton. 19 The directors agreed in 2003 to phase out retirement benefits, with the amount to be paid to each director upon retirement limited to the provision in the financial statements as at 30 June 2003, details of which are disclosed on page 16. Board committees The board has established committees to assist it in carrying out its responsibilities. The charters that identify the roles and responsibilities of the following committees have been approved by the board and are available on Milton’s web site. The Audit Committee, consisting of at least three independent non-executive directors, reviews the effectiveness of the risk management and internal controls, the reliability of financial information and the appointment and effectiveness of the external auditor. To assist in this function the committee may invite the external auditor and senior executives to report to meetings. Any significant non-audit services to be provided by the external auditors must be approved in advance by the Audit Committee. The Audit Committee considers that the provision of those non-audit services provided to date by the external auditor would not affect the auditor’s independence. The Investment Committee, consisting of three independent non-executive directors and the managing director, meets regularly to review the investment portfolio and to make investment decisions within defined limits. All directors may attend the Investment Committee meetings. The defined limits are reviewed by the board from time to time. The Nomination Committee consists of those directors who are not seeking re-election. This committee reviews the composition of the board annually and makes recommendations on the appropriate skill mix, personal qualities, expertise and diversity. The committee having reviewed the performance of the directors recommended Messrs R.D. Millner, G.L. Crampton and K.J. Eley for election at the 2012 annual general meeting. The Remuneration Committee, consisting of three independent non-executive directors, advises the board on remuneration policies and practices generally, and makes specific recommendations to the board annually on remuneration packages and other terms of employment for senior executives and directors. Trading policy in relation to listed securities This trading policy is provided to all directors and employees so that they are aware of the restrictions that apply to them in relation to their dealing in securities. The policy has been developed to ensure that directors and employees comply with insider trading provisions of the Corporations Act and to avoid the risk that they are perceived to have traded while in the possession of insider information. Milton encourages directors and employees to have a personal financial interest in Milton by acquiring and holding shares on a long term basis. Short term dealing in and short selling of Milton securities by its directors and employees is not permitted. The buying or selling of shares is not permitted by any director or employee of Milton or their immediate family when that person is in possession of price sensitive information in relation to those shares that is not available to the market. This trading restriction is a requirement of the Corporations Act and it applies to dealing in Milton securities and other listed securities. Price sensitive information must be treated as confidential and must not be communicated to third parties who may use the information inappropriately. The following trading restrictions apply regardless of whether the director or employee or their immediate family is in possession of price sensitive information. Directors and employees of Milton or their immediate family may not purchase or sell Milton shares in the following blackout periods:- i) from the end of the month until the day after the announcement of the monthly net tangible asset backing per share (NTA) for that month and ii) from the end of the half year or full year until the day after the results for the half year or full year are announced to the market. It is the responsibility of directors and employees to advise the secretary of any intention to deal in Milton’s securities and the secretary must be advised when the dealing occurs. 20 Directors or employees or their immediate family who intend to deal in Milton shares during the closed periods must receive prior approval from the Chairman. Such requests, which must be made in writing, will only be approved in exceptional circumstances, which include severe financial hardship. The restrictions on buying or selling Milton shares by directors or employees or their immediate family in the blackout periods do not apply in the following situations of passive trading in Milton shares: a. the transfer of securities already held by directors or employees or their immediate family into a superannuation fund or similar scheme where the above are a beneficiary; b. the acceptance of a takeover offer; c. trading under an offer or invitation made to all or most of the company’s security holders, such as a rights issue, a security purchase plan, a dividend or distribution reinvestment plan and an equal access buy-back, where the plan that determines the timing and structure of the offer has been approved by the board. This includes decisions relating to whether or not to take up the entitlements and the sale of entitlements required to provide for the take up of the balance of entitlements under a renounceable pro rata issue; d. accepting an offer to participate in an employee securities plan; and e. any such similar transaction determined by the directors to be a passive dealing. Continuous disclosure and shareholder communication The secretary has been nominated as the person responsible for communications with the ASX. This role includes responsibility for ensuring compliance with the continuous disclosure requirements in the ASX listing rules. The board reviews and approves all announcements to the ASX, except for the monthly net asset backing announcements which are reviewed by the chief financial officer and the managing director. Milton has established a website to enhance communication with its shareholders and potential investors. The website contains historical information, copies of all information disclosed to the ASX and a corporate governance section that includes details of the various committee charters and policies. Shareholders, who have advised Milton of their email addresses, are notified by email of all announcements to the ASX. The Milton communications policy is available on Milton’s website. Risk management The managing director and chief financial officer report annually to the Audit Committee on Milton’s risk management system and provide written confirmation to the board that the integrity of the financial statements are founded on a sound system of risk management and internal control which is operating effectively in all material respects in relation to financial reporting. The board considers an internal audit function is not necessary due to the nature and size of Milton’s operations. The external auditors report to the Audit Committee on risk management issues identified during the course of the audit. The risk management policy is available on Milton’s website. Diversity The board has established a diversity policy which is available on Milton’s website. The key element of the diversity policy in that Milton will seek the best person available for the position which will not be influenced by gender, age, ethnicity or cultural background. In relation to the appointment of a new director, the board will seek male and female candidates with the appropriate skills and investment experience to complement the current directors. At 30 June 2012 the proportion of women employed by Milton was: total Milton employees, 50%; board of directors, 0%; and senior positions, 12.5%. 21 Milton Corporation Limited Consolidated income statement for the year ended 30 June 2012 Ordinary dividends and distributions 2a 100,907 Note 2012 $'000 Interest Net gains on trading portfolio Other revenue Operating Revenue 2011 $'000 88,789 6,782 362 239 7,179 258 257 108,601 96,172 Share of net profits of joint ventures – equity accounted Special dividends and distributions Income from operating activities 19b 2b 3,696 772 2,164 3,628 113,069 101,964 Administration expenses Acquisition related costs of subsidiaries Profit before income tax expense 3,241 - 109,828 3,211 284 98,469 Income tax expense thereon 3 (6,411) (4,585) Profit attributable to shareholders of Milton 103,417 93,884 Basic and diluted earnings per share 7 85.0 83.9 Cents Cents The consolidated income statement is to be read in conjunction with the notes to the consolidated financial statements. 22 Milton Corporation Limited Consolidated statement of comprehensive income for the year ended 30 June 2012 2012 $’000 2011 $'000 Profit 103,417 93,884 Other comprehensive income (Devaluation) revaluation of investments (117,649) 62,258 Provision for tax benefit (expense) on (devaluation) revaluation of investments Reduction of deferred tax on Choiseul consolidation 34,818 (18,478) - 10,323 Other comprehensive income (82,831) 54,103 Total comprehensive income attributable to shareholders of Milton 20,586 147,987 The consolidated statement of comprehensive income is to be read in conjunction with the notes to the consolidated financial statements. 23 Milton Corporation Limited Consolidated statement of financial position as at 30 June 2012 Current assets Cash Receivables Other financial assets Total current assets Non-current assets Receivables Investments Joint ventures – equity accounted Plant and equipment Deferred tax assets Total non-current assets Total assets Current liabilities Payables Current tax liabilities Provisions Total current liabilities Non-current liabilities Deferred tax liabilities Provisions Total non-current liabilities Total liabilities Net assets Shareholders’ equity Issued capital Capital profits reserve Asset revaluation reserve Retained profits Note 2012 $’000 2011 $'000 8 9a 10 9b 11 19c 12 13 14 117,618 22,237 14,951 154,806 3,433 1,825,344 18,341 66 786 1,847,970 127,479 19,188 15,889 162,556 2,947 1,928,404 18,277 113 1,067 1,950,808 2,002,776 2,113,364 2,938 1,767 163 4,868 116,901 334 117,235 122,103 188 1,075 89 1,352 151,792 400 152,192 153,544 1,880,673 1,959,820 1,373,857 98,411 259,373 149,032 1,373,857 99,084 341,531 145,348 Total equity attributable to shareholders of Milton 1,880,673 1,959,820 The consolidated statement of financial position is to be read in conjunction with the notes to the consolidated financial statements. 24 Milton Corporation Limited Consolidated statement of changes in equity for the year ended 30 June 2012 Issued capital $’000 Capital profits reserve $’000 Asset revaluation reserve $’000 Retained profits $’000 Total shareholders equity $’000 Balance at 1 July 2011 1,373,857 99,084 341,531 145,348 1,959,820 - 103,417 103,417 - - - (82,831) (82,831) - 103,417 (82,831) 20,586 - (673) 673 - 1,373,857 - 98,411 - 259,373 (99,733) 149,032 (99,733) 1,880,673 Balance at 1 July 2010 963,192 70,080 318,373 120,663 1,472,308 - - - - - - - - - - Profit Other Comprehensive Income: Net revaluation of investments Total comprehensive income Net realised losses Transactions with shareholders: Dividends paid Balance at 30 June 2012 Profit Other Comprehensive Income: Net revaluation of investments Reduction of deferred tax on Choiseul consolidation Total comprehensive income Net realised losses Gains on initial investment on Choiseul consolidation Transactions with shareholders: Share issues LIC dividends paid Dividends paid Balance at 30 June 2011 - 93,884 93,884 - - 10,323 10,323 43,780 - 43,780 - - 93,884 (8,058) 8,058 28,680 (28,680) - 43,780 10,323 147,987 - - 410,665 - - 1,373,857 - (1,941) - 99,084 - - - 341,531 - - (69,199) 145,348 410,665 (1,941) (69,199) 1,959,820 The consolidated statement of changes in equity is to be read in conjunction with the notes to the consolidated financial statements. 25 Milton Corporation Limited Consolidated statement of cash flows for the year ended 30 June 2012 Cash flows from operating activities Dividends and distributions received Interest received Distributions received from joint venture entities Other receipts in the course of operations Proceeds from sales of trading securities Payments for trading securities Other payments in the course of operations Income taxes paid Note 2012 $’000 99,833 7,695 4,237 257 4,540 (4,077) (2,527) (5,480) Net cash provided by operating activities 18a 104,478 Cash flows from investing activities Proceeds from disposal of investments Payments for investments Cash on acquisition of subsidiaries Payments for acquisition of subsidiaries Payments for pre acquisition liabilities of subsidiary Proceeds from sales of plant and equipment Payments for plant and equipment Loans (advanced) repaid by other entities Net cash provided by (used in) investing activities Cash flows from financing activities Payments for issue of shares Ordinary dividends paid Special dividends paid Net cash used in financing activities Net (decrease) increase in cash assets held Cash assets at the beginning of the year Cash assets at the end of the year 8 34,777 (48,910) - - - 25 (12) (486) (14,606) - (93,652) (6,081) (99,733) 2011 $’000 90,450 6,840 2,350 587 1,146 (500) (3,354) (4,582) 92,937 21,537 (37,333) 47,078 (284) (26,522) - (20) 753 5,209 (164) (71,140) - (71,304) (9,861) 26,842 127,479 117,618 100,637 127,479 The consolidated statement of cash flows is to be read in conjunction with the notes to the consolidated financial statements. 26 Milton Corporation Limited Notes to the consolidated financial statements for the year ended 30 June 2012 1. Summary of significant accounting policies The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. The financial statements include the consolidated entity (“Milton”) consisting of Milton Corporation Limited and its subsidiaries. a. Basis of preparation These general purpose financial statements have been prepared in accordance with Australian Accounting Standards, Australian accounting interpretations, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001. These financial statements have been prepared on an accruals basis and are based on the historical cost basis except as modified by the revaluation of certain financial assets and liabilities measured at fair value. The financial statements are presented in Australian dollars and all values are rounded to the nearest thousand dollars ($'000) unless otherwise stated under the option available in ASIC Class Order 98/100. b. Basis of consolidation The consolidated financial statements include the financial statements of Milton, being the parent entity and its subsidiaries. The balances and effects of transactions between subsidiaries included in the consolidated financial statements have been eliminated in full. The financial statements of subsidiaries are prepared for the same reporting period as the parent entity, using consistent accounting policies. Where entities have come under the control of the parent entity during the year, their operating results have been included in the group from the date control was obtained. Entities cease to be consolidated from the date on which control is transferred out of the group and the consolidated financial statements include the result for the part of the reporting period during which the parent entity had control. c. Income tax The income tax expense is the tax payable on the current year’s taxable income based on the current income tax rate applicable for the year adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses. Deferred tax is recognised using the balance sheet method. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in subsidiaries 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. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities. Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss. 27 1. Summary of significant accounting policies (continued) c. Income tax (continued) Deferred tax balances attributable to revaluation amounts are recognised directly in equity through the asset revaluation reserve. Milton Corporation Limited (the parent entity) and its wholly-owned subsidiaries have formed an income tax consolidated group. Each entity in the group recognises its own current and deferred tax, except for any deferred tax assets arising from unused tax losses from subsidiaries, which are immediately assumed by the parent entity. The current tax liability of each group entity is subsequently assumed by the parent entity. There is no tax funding agreement between Milton Corporation Limited and its subsidiaries. d. Cash Cash includes cash at bank, deposits at call and term deposits, and is recognised at fair value. Interest from deposits and bank accounts is brought to account on an accruals basis as it is earned. e. Trading securities Trading securities are recognised initially at cost and subsequently measured at fair value. Changes in fair value are taken directly through the income statement. Dividends are brought to account on the date that the shares are traded "ex-dividend". f. Other liquid securities Other liquid securities include listed securities such as reset preference shares which are classified as equity instruments and may be realised within 12 months. Other liquid securities are recognised initially at cost and Milton has elected to present subsequent changes in fair value in other comprehensive income through the asset revaluation reserve after deducting a provision for the potential deferred capital gains tax liability. On disposal, the cumulative gain or loss net of tax thereon, is transferred from the asset revaluation reserve to the capital profits reserve. Distribution income from these securities is brought to account on the day that these securities trade “ex-dividend”. g. Investments Subsidiaries Investments in subsidiaries are carried at net asset value which approximates fair value of the controlled entities. Income from dividends is brought to account when they are declared. Other companies Investments are recognised initially at cost and Milton has elected to present subsequent changes in fair value of equity instruments in other comprehensive income through the asset revaluation reserve after deducting a provision for the potential deferred capital gains tax liability as these investments are long term holdings of equity instruments. Quoted investments are valued continuously at fair value, which is the price quoted on the Australian Securities Exchange. When an investment is disposed, the cumulative gain or loss, net of tax thereon, is transferred from the asset revaluation reserve to the capital profits reserve. Dividends and distributions are brought to account on the date that the investment trades "ex- dividend". De-merger dividends arising from company de-consolidations are treated as a return of capital and not as a dividend. 28 1. Summary of significant accounting policies (continued) h. Employee benefits The provision for employee entitlements relates to amounts expected to be paid to employees for long service leave and annual leave (including on-costs) and is based on legal and contractual entitlements and assessments having regard to experience in relation to staff departures and leave utilisation. Employees are not paid on termination for untaken personal/carer’s leave. Under the Employee Share Plan, shares are acquired for employees as part of their remuneration and the cost of the shares is recorded in employee benefit expenses (refer note 17a). Under the Senior Staff Share Plan, shares are acquired for eligible employees as part of their remuneration and held on their behalf by the trustee of the Plan. The purchase of the Plan Shares is financed by a loan from Milton (refer note 17b). i. Operating segments The consolidated entity operates in Australia only and the principal activity is investment. j. Business Combinations The acquisition method of accounting has been used to account for all business combinations, regardless of equity instruments or other assets acquired. The business combinations have been accounted from the date Milton attained control of the subsidiaries. The considerations transferred for the acquisitions comprise of the fair values of the identifiable assets transferred and the liabilities assumed. Costs related to the acquisitions, other than those associated with the issue of equity securities, are expensed to the consolidated income statement as incurred. k. Critical accounting estimates and judgments Judgements, estimates and assumptions are required to prepare financial statements. Deferred tax liabilities have been recognised for capital gains tax on the unrealised gain in the investment portfolio at current tax rates. As Milton does not intend to dispose of the investment portfolio this tax may not be payable at the amount disclosed in note 13. Any tax liability that may arise on disposal of investments is subject to tax legislation relating to the treatment of capital gains and the applicable tax rate at the time of disposal. Deferred tax assets have been recognised relating to carried forward capital losses, based on current tax rates. Utilisation of the tax losses requires the realisation of capital gains in subsequent years and the ability to satisfy certain tests at the time the losses are recouped. The deferred tax assets related to carried forward capital losses have been offset against the related deferred tax liabilities as disclosed in note 13. Apart from this, there are no key assumptions or sources of estimation uncertainty that have a risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year. l. New standards and interpretations not yet adopted No new accounting standards and interpretations, that are available for early adoption at 30 June 2012, but not yet adopted, will result in any material change in relation to the financial statements. 29 2. Revenue a. Ordinary dividends and distributions Investments held in portfolio at 30 June Investments sold during the year b. Special dividends and distributions Investments held in portfolio at 30 June Investments sold during the year 3. Income tax expense Prima facie income tax expense calculated at 30% on the profit before income tax expense Increase (decrease) in income tax expense due to: Tax offset for franked dividends Non taxable distributions Under (over) provision in prior year Other differences Income tax expense on profit 4. Auditor’s remuneration Auditors of the company Audit and review services Liquidation of non-operating subsidiaries Due diligence for acquisition of subsidiaries Related practice of the auditor Liquidation of non-operating subsidiary 5. Ordinary and special fully franked dividends a. Recognised in the current year A final dividend in respect of the 2011 year of 39 cents per share paid on 20 September 2011 (2011: a final dividend in respect of the 2010 year of 36 cents per share paid on 1 September 2010) A special dividend of 5 cents per share paid on 20 September 2011 (2011: nil) An interim dividend of 38 cents per share paid on 29 February 2012 (2011: 37 cents per share paid on 5 January 2011) b. Not recognised in the current year Since the end of the financial year, the directors declared a fully franked ordinary final dividend in respect of the 2012 year of 40 cents per share payable on 4 September 2012. (2011: final ordinary of 39 cents per share and a special dividend of 5 cents per share paid on 20 September 2011). 30 2012 $’000 2011 $’000 99,227 1,680 100,907 326 446 772 87,995 794 88,789 2,899 729 3,628 32,948 29,540 (26,502) (24,260) (360) 320 5 6,411 111 - - 111 7 118 (502) (199) 6 4,585 115 18 28 161 - 161 47,434 34,946 6,081 46,218 99,733 - 36,194 71,140 48,650 53,515 5. Ordinary and special fully franked dividends (continued) c. Dividend franking account The amount of franking credits available to shareholders for the subsequent financial year, adjusted for franking credits that will arise from the payment of the current tax liability Subsequent to year end, the franking account will be reduced by the proposed final ordinary dividend to be paid on 4 September 2012 (2011: final ordinary and special dividends) 2012 $’000 2011 $’000 105,182 103,859 (20,850) 84,332 (22,935) 80,924 The franking account balance would allow Milton to frank additional dividend payments up to an amount of $196,773,586 (2011:$188,823,534) which represents 162 cents per share (2011: 155 cents per share). 6. Listed Investment Company capital gain account Balance of the Listed Investment Company (LIC) capital gain account available to shareholders for the subsequent financial year 1,179 1,156 Distributed LIC capital gains may entitle certain shareholders to a special deduction in their income tax return. LIC capital gains available for distribution are dependent upon the disposal of investment portfolio holdings which qualify for LIC capital gains and the receipt of LIC capital gain distributions. 7. Earnings per share Basic earnings per share Profit attributable to shareholders of the parent entity Weighted average number of ordinary shares used in the calculation of basic earnings per share Diluted earnings per share figures are the same because there are no dilutive potential ordinary shares. 8. Cash Cash at bank Deposits at call Term deposits cents cents 85.0 83.9 $’000 103,417 $’000 93,884 No. No. 121,625,655 111,964,506 $’000 $’000 1,510 10,511 105,597 117,618 1,607 16,266 109,606 127,479 The weighted average interest rate for cash and deposits at call as at 30 June 2012 is 3.4% p.a. (2011: 5.7% p.a.). Term deposits have an average maturity date of August 2012 (2011: September 2011) and an average interest rate of 5.4% (2011: 5.9% pa). 31 9. a. Receivables Receivables – current Income receivable Sundry debtors b. Receivables – non-current 2012 $’000 20,481 1,756 22,237 2011 $’000 19,183 5 19,188 Senior staff share plan loans (refer note 17b) 3,433 2,947 c. Terms and conditions Sundry debtors are due within 30 days and no interest is charged. 10. Other financial assets Other liquid securities - at fair value Trading securities - at fair value Prepaid expenses 11. Investments – non-current Quoted investments - at fair value Unquoted investments - at fair value a. Included in quoted investments are: Shares in other corporations Stapled securities in other corporations Units in trusts b. Included in unquoted investments are: Securities in other corporations Units in trusts d. Investments disposed of during the year Fair value at disposal date Equity investments Loss on disposal after tax Equity investments 14,535 184 232 14,951 15,247 389 253 15,889 1,825,171 1,928,224 173 180 1,825,344 1,928,404 1,764,871 1,867,718 36,317 23,983 36,178 24,328 1,825,171 1,928,224 6 167 173 6 174 180 36,181 33,785 (4,960) (7,129) The disposals occurred in the normal course of Milton’s operations as a listed investment company or as a result of takeovers or mergers. 32 12. Deferred tax assets The balance comprises temporary differences attributable to : Revenue tax losses carried forward Provisions Retirement benefit obligations Share issue expenses Other Total deferred tax assets Movements: Balance at 1 July (charged) credited to the income statement (charged) to equity Balance at 30 June To be recovered within 12 months To be recovered after more than 12 months 13. Deferred tax liabilities The balance comprises temporary differences attributable to: Amounts recognised directly in equity: Revaluation of investments Realised capital losses Amounts recognised in profit: Realised capital gains Income receivable which is not assessable for tax until receipt Movements: Balance at 1 July Charged (credited) to income statement Charged (credited) to other comprehensive income Charged (credited) to equity Balance at 30 June To be settled within 12 months To be settled beyond 12 months 2012 $’000 22 255 57 140 312 786 1,067 (281) - 786 265 521 786 2011 $’000 38 248 61 281 439 1,067 908 208 (49) 1,067 86 981 1,067 115,316 (15,510) 147,365 (12,860) 832 832 16,263 116,901 151,792 49 (34,818) (122) 116,901 - 16,455 151,792 130,757 30 18,478 2,527 151,792 - 116,901 151,792 33 14. Issued capital a. Movement in share capital Balance at 1 July 2011: 121,625,655 shares (1 July 2010: 97,075,280 shares) (2011: 26,250,375 shares issued as consideration for acquisitions) (2011: Elimination of 1,700,000 shares in Milton held by Choiseul (1)) Share issue costs net of tax Balance at 30 June 2012: 121,625,655 shares (30 June 2011: 121,625,655 shares) 2012 $’000 2011 $’000 1,373,857 963,192 - - - 439,341 (28,560) (116) 1,373,857 1,373,857 (1) 1,700,000 shares held by Choiseul Investments Limited (Choiseul) in Milton were cancelled through a selective capital reduction approved at Milton’s annual general meeting held on 13 October 2011. b. Ordinary shares All capital consists of fully paid ordinary shares which are listed on the ASX and carry one vote per share and the right to receive dividends. 15. Nature and purpose of reserves Changes in fair value of investments are presented in other comprehensive income through the asset revaluation reserve as referred to in note 1g. Upon disposal of investments, the net gain or loss is transferred from the asset revaluation reserve to the capital profits reserve as referred to in note 1g. 16. Management of financial risk The risks associated with the financial instruments, such as investments and cash include market risk, credit risk and liquidity risk. The Audit Committee has approved policies and procedures established to manage these risks. The effectiveness of these policies and procedures is continually reviewed by management and annually by the Audit Committee. a. Financial instruments’ terms, conditions and accounting policies Milton’s significant accounting policies are included in note 1, while the terms and conditions of each class of financial asset, financial liability and equity instrument, both recognised and unrecognised at the reporting date, are included under the appropriate note for that instrument. b. Net fair values The carrying amounts of financial instruments in the consolidated statement of financial position approximate their net fair value. 34 16. c. Management of financial risk (continued) Credit risk exposures Milton’s principal credit risk exposures arise from the investment in liquid assets, such as cash, bank term deposits and income receivable. The risk that a financial loss will occur because a counterparty to a financial instrument fails to discharge an obligation is known as credit risk. The credit risk on Milton’s financial assets, excluding investments, is the carrying amount of those assets. Individual bank limits have been approved by the board for the investment of cash. Income receivable is comprised of accrued interest and dividends and distributions which were brought to account on the date the shares or units traded ex-dividend. There are no financial instruments overdue. All financial assets and their recoverability are continuously monitored by management and reviewed by the board on a quarterly basis. d. Market risk Market risk is the risk that changes in market prices will affect the fair value of the financial instrument. Milton is exposed to market risk through the movement of the security prices of the companies and trusts in which it is invested. The market value of individual companies fluctuates every day and the fair value of the portfolio changes continuously, with this change in the fair value recognised through the asset revaluation reserve. Investments represent 91% (2011: 91%) of total assets. A 5% fall in movement in the market value of investments in each of the companies and trusts within the portfolio would result in a 4.6% (2011: 4.6%) movement in the net assets before provision for tax on unrealised capital gains at 30 June 2012 (2011: 30 June 2011). The net asset backing before provision for tax on unrealised capital gains would move by 75 cents per share at 30 June 2012 (2011: 79 cents at 30 June 2011). Milton’s management regularly monitor the performance of the companies within its portfolio and make portfolio recommendations which are considered by the Investment Committee. The Milton board reviews the portfolio on a quarterly basis. Milton is not exposed to foreign currency risk as all its investments are quoted in Australian dollars. The fair value of Milton’s other financial instruments is unlikely to be materially affected by a movement in interest rates as they generally have short dated maturities and variable interest rates. e. Liquidity risk Liquidity risk is the risk that Milton is unable to meet its financial obligations as they fall due. Milton manages liquidity risk by monitoring forecast and actual cashflows. f. Capital risk management The parent entity invests its equity in a diversified portfolio of assets that generates a growing income stream for distribution to shareholders in the form of fully franked dividends. The capital base is managed to ensure there are funds available for investment as opportunities arise. Capital may be increased through the issue of shares under the Share Purchase Plan. Other means of increasing capital could include rights issues and acquisitions of unlisted investment companies. g. Fair value measurement Financial instruments carried at fair value are comprised of investments and other financial assets. The fair value of these financial instruments is the quoted prices (unadjusted) in active markets for identical assets. The Australian Securities Exchange is the active market for all financial instruments. 35 17. a. Employee entitlements Employee Share Plan The Employee Share Plan ("ESP") is available to all eligible employees to acquire ordinary shares in Milton in lieu of a cash bonus of up to $1,000 per year as part of the employee’s remuneration. The transaction and administration costs of acquiring the shares and administering the plan are paid by Milton. During the year, 260 shares (2011: nil shares) were acquired by Milton on behalf of eligible employees under the ESP at a cost of $3,955 with a total market value at 30 June 2012 of $3,955. Any shares acquired cannot be disposed of or transferred until the earlier of 3 years from the date of issue or acquisition or on the date that the employee's employment ceases with Milton. b. Senior Staff Share Plan The Senior Staff Share Plan ("SSSP") was approved by shareholders at Milton's Annual General Meeting on 9 October 2001. Eligible employees are given the opportunity to apply for Plan Shares in Milton which are subscribed for or acquired and held on their behalf by the trustee of the plan. The purchase of these Plan Shares is financed by an interest-free limited recourse loan from Milton with recourse only to Plan Shares. The loan will be repaid partially from any dividends received. Milton administers the SSSP and meets the transactional and administration costs. During the year, 42,500 shares (2011: 21,000 shares) were acquired by the trustee of the plan on behalf of eligible employees under the SSSP at a cost of $641,464 (2011: $327,590). The loans to eligible employees are as disclosed in note 10b. The shares acquired by the trustee during the year had a market value of $646,425 at $15.21 per share as at 30 June 2012. Any shares acquired are held in the name of the trustee and classified as Restricted Shares which cannot become Unrestricted Shares until the earlier of 3 years from the date of issue to the trustee or acquisition by the trustee or on the date that the employee’s employment ceases with Milton. The trustee may transfer Unrestricted Shares to the participant provided that any outstanding loan has been repaid in full. 18. Note to the cash flow statements a. Reconciliation of net profit to net cash provided by operating activities Profit Share of net profits of joint ventures – equity accounted Distributions received from joint venture entities Depreciation of non-current assets Increase in receivables Decrease (increase) in payables and provisions Increase in income taxes payable Net cash provided by operating activities b. Non-cash financing and investing activities 2012 $’000 2011 $’000 103,417 (3,696) 4,237 35 (1,126) 679 932 104,478 93,884 (2,164) 2,350 32 (1,108) (59) 2 92,937 During the year ended 30 June 2012 there were no non-cash financing and investing activities. (2011: As described in note 21b, Milton acquired an unlisted investment company through the issue of 2,446,521 new Milton shares with a fair value of $41,413,000 and acquired 88.1% of Choiseul through the issue of 23,803,854 new Milton shares with a fair value of $397,928,000). 36 19. a. Investment in joint venture entities Details of joint venture entities Companies in the consolidated entity have entered into joint ventures to develop real property. These joint ventures which are held by subsidiaries have been accounted for using the equity accounting principles. b. Contribution from joint venture entities Milton has interests in the following joint venture entities: 33.33% interest in the Ellenbrook Syndicate Joint Venture contribution to operating profit before tax 23.33% interest in the Mews Joint Venture contribution to operating profit before tax 50% interest in the LWP Huntlee Syndicate No 2 Joint Venture Share of net profits of joint ventures c. Consolidated interest in the assets and liabilities of the joint ventures Current assets Non-current assets Current liabilities Non-current liabilities Provision for diminution in value Net assets 2012 $’000 3,451 245 - 3,696 16,790 13,538 (1,741) (9,703) 18,884 (543) 18,341 2011 $’000 2,001 163 - 2,164 17,413 9,315 (1,233) (6,675) 18,820 (543) 18,277 d. Contingent liabilities and commitments Each venturer is liable for its share of the debts of the joint ventures. The finance facilities have recourse only to the assets of the joint ventures. The LWP Huntlee Syndicate No 2 Joint Venture was formed in June 2010 and Milton is committed to providing further capital of $1.009 million over the next year (2011: $1.484 million). Apart from this commitment there are no further financial commitments. 20. Parent entity disclosures In accordance with the Corporations Amendment (Corporate Reporting Reform) Act 2010 and the Corporations Act 2001 the following summarised parent entity information is set out below. As at, and throughout, the financial year ended 30 June 2012 the parent entity is Milton Corporation Limited. Profit of the parent entity Profit for the year Total comprehensive income for the year 100,822 17,991 90,505 138,296 37 20. Parent entity disclosures (continued) Financial position (Balance Sheet) of the parent entity Current assets Total assets Current liabilities Total liabilities Net assets Total equity of the parent entity comprising of Issued capital Capital profits reserves Asset revaluation reserve Retained profits 2012 $’000 2011 $’000 154,732 2,075,651 75,778 194,978 1,880,673 162,234 2,636,901 493,171 658,843 1,978,058 1,373,857 1,402,417 106,989 298,354 101,473 69,407 405.850 100,384 Total equity attributable to shareholders of the parent entity 1,880,673 1,978,058 21. Particulars in relation to subsidiaries a. Milton Corporation Limited’s subsidiaries The following subsidiaries have been included in the consolidated accounts: 85 Spring Street Properties Pty Ltd Chatham Investment Co. Pty Limited Incorporated Nominees Pty Limited Milhunt Pty Limited Choiseul Investments Limited (Choiseul) (refer note 21b and c) The parent entity and all subsidiaries are incorporated in Australia. Interest held % 100 100 100 100 - 100 100 100 100 100 b. Acquisition of subsidiaries During the year ended 30 June 2012 there were no acquisitions of subsidiaries. Previous comparative period – 30 June 2011 In August 2010 Milton acquired 100% of the shares in an unlisted investment company with the consideration consisting of the issue of 2,446,521 new Milton shares with a fair value of $41,413,000. In December 2010 Milton increased its ownership of Choiseul to 100% when it acquired 88.1% of the issued capital of Choiseul with the consideration consisting of 23,803,854 new Milton shares with a fair value of $397,928,000. The main activity of the companies is investing in listed securities. The operating results of the companies from the date of acquisition have been included in the consolidated income statement, while the assets and liabilities have been included in the consolidated statement of financial position. Choiseul contributed revenues of $2,212,000 and net profit of $1,571,000 to Milton for the period from 3 December 2010 to 30 June 2011. If the merger had occurred on 1 July 2010 consolidated revenue and consolidated profit for the year ended 30 June 2011 would have been $108,975,000 and $99,267,000 respectively. 38 21. b. Particulars in relation to subsidiaries (continued) Acquisition of subsidiaries (continued) The results of the unlisted investment company from 1 July 2010 to the date of acquisition and subsequent to that are not considered material to warrant separate disclosure. The basis of fair value of the net assets acquired is the price quoted in an active market being the Australian Securities Exchange. The assets and liabilities recognised as a result of the acquisitions are as follows: Choiseul Fair value of the net assets acquired: Investments Fair value of Milton’s holding in Choiseul Liquid and other assets Liabilities Unlisted Investment company Fair value of the net assets acquired: Investments Liquid and other assets Liabilities 2012 $’000 2011 $’000 - - - - - - - - - 439,661 (53,524) 51,634 (39,843) 397,928 39,621 2,781 (989) 41,413 Total acquisition costs of $284,000 are included in the consolidated income statement and share issue costs of $165,000 have been included in issued capital. c. Disposal of subsidiaries In November 2011, Choiseul was placed into voluntary liquidation. (2011: In December 2010 the unlisted investment company that was acquired and referred to in note 21b was placed into voluntary liquidation). 22. a. Related parties Directors and Key Management Personnel compensation Short-term benefits Other long-term benefits Post-employment benefits Share-based payments 939 17 175 184 1,315 927 15 166 139 1,247 Information regarding individual director’s and executives’ compensation and equity instruments disclosures, as permitted by Corporations Regulations 2M.3.03, are provided in the Remuneration Report section of the Directors’ Report on pages 14 to 17. 39 22. Related parties (continued) b. Shareholdings of non-executive directors and their related parties – number of shares held R.D. Millner J.F. Church G.L. Crampton K.J. Eley (1) I.A. Pollard J.N. Aitken (2) (1) Appointed on 1 December 2011 (2) Retired on 13 October 2011 Balance 1 July Acquisition 9,581,822 4,747,967 5,901,400 5,664,451 27,307 20,307 - - 27,437 25,455 21,400 21,400 103,721 4,833,855 7,383 236,949 - 7,000 - - - 1,982 - - Balance 30 June 9,685,543 9,581,822 5,908,783 5,901,400 27,307 27,307 5,932 - 27,437 27,437 - 21,400 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 c. Executives’ and their related parties shareholdings – number of shares held F.G. Gooch Managing director A.R. Davison CFO, secretary Balance 1 July Received as Remuneration Other Acquisitions 2012 2011 2012 2011 162,737 128,967 43,012 20,000 10,000 5,000 38,012 5,000 1,000 23,770 - - Balance 30 June 183,737 162,737 48,012 43,012 d. Loans to executives in relation to the Senior Staff Share Plan Details regarding loans outstanding at the reporting date to specified directors and specified executives, where the individual’s aggregate loan balance exceeded $100,000 at any time in the reporting period, are as follows: Balance 1 July Net change Balance 30 June Highest balance in the period $ 1,762,271 1,516,238 Notional Interest $ 131,819 97,526 $ 1,683,932 1,460,406 665,824 695,593 52,369 620,126 642,463 41,228 F.G. Gooch Managing director A.R. Davison CFO, secretary $ 2012 2011 2012 2011 1,460,406 1,360,242 620,126 564,465 $ 223,526 100,164 45,698 55,661 Terms and conditions of the loans are referred to in note 17b. 40 22. Related parties (continued) e. Other related party transactions All non-executive directors have entered into the Deed of Indemnity, Insurance and Access that was approved at the Annual General Meeting held on 10 October 2000. Milton has a Remuneration and Retirement Benefits Deed with each of the non-executive directors except Messrs G.L Crampton and K.J. Eley. During the 30 June 2004 year, Milton and the directors varied the Remuneration and Retirement Benefits Deed, whereby the maximum retirement benefit payable to a non-executive director on retirement will be the provision for the director as at 30 June 2003. Apart from the details disclosed in this note no director has entered into a material contract with the parent entity or Milton since the end of the previous financial year and there were no material contracts involving directors’ interests subsisting at the end of the year. Loans to and from subsidiaries Loans have been made to and by the parent entity to wholly owned subsidiaries for capital transactions. The loans between the parent and its subsidiaries have no fixed date of repayment and are non-interest bearing. During the year ended 30 June 2012, such loans to subsidiaries totalled $424,943,333 (2011: $76,392,021) and loans from subsidiaries totalled $4,237,499 (2011: $426,333,493). Other arrangement with non executive director Mr J.F. Church rented office space from Milton at commercial rates from 1 July 2011 to 30 June 2012 and rental income received by Milton during the financial year was $13,191 (2011: $12,911). 23. Contingencies At the reporting date the directors are not aware of any material contingent liabilities. 24. Events subsequent to reporting date Since the end of the financial year, the directors declared a fully franked final dividend of 40 cents per share, payable on 4 September 2012. This financial report was authorised for issue in accordance with a resolution of directors on 9 August 2012. 41 25. Holdings at Fair Value through Other Comprehensive Income at 30 June 2012 The following holdings are valued at fair value through Other Comprehensive Income. 2012 $’000 Investments in equity instruments Adelaide Brighton Limited AGL Energy Limited Alumina Limited Amalgamated Holdings Limited Amcor Limited AMP Limited A P Eagers Limited APA Group APN News & Media Limited ARB Corporation Limited Argo Investments Limited Arrium Limited (previously OneSteel Limited) ASX Limited Austbrokers Holdings Limited Australand Property Group Australia & New Zealand Banking Group Limited - ordinary shares - convertible preference shares - CPS 1 Australian Foundation Investment Company Limited Automotive Holdings Group Limited Bank of Queensland Limited Bendigo & Adelaide Bank Limited BHP Billiton Limited Billabong International Limited BKI Investment Company Limited Blackmores Limited Bluescope Steel Limited Boral Limited Bradken Limited Brambles Limited Brickworks Limited BWP Trust Cabcharge Australia Limited Caltex Australia Limited Campbell Brothers Limited Cardno Limited Carlton Investments Limited CFS Retail Property Trust Charter Hall Office Trust Charter Hall Retail REIT Coal & Allied Industries Limited Coca-Cola Amatil Limited Cochlear Limited Coffey International Limited Commonwealth Bank of Australia - ordinary shares - PERLS V Commonwealth Property Office Fund Consolidated Media Holdings Limited Crown Limited CSL Limited CSR Limited David Jones Limited Diversified United Investment Limited Equity Trustees Limited Fletcher Building Limited 42 5,926 34,042 886 4,777 8,227 7,781 18,525 5,408 865 6,777 4,167 3,456 11,755 6,834 2,057 62,353 1,935 199 5,426 2,567 43,363 42,309 101,143 - 1,325 9,769 - 4,801 3,656 7,195 32,568 2,543 674 645 117,623 5,678 5,606 17,660 - 2,030 - 18,293 2,094 - 159,941 102 1,750 901 2,269 23,142 292 922 641 2,605 3,695 2011 $’000 4,986 27,432 2,156 3,598 6,274 9,658 10,839 3,964 1,722 5,374 4,539 6,901 11,178 5,582 2,382 61,168 2,004 202 5,765 1,019 47,797 50,588 136,844 575 1,388 9,267 1,195 7,161 4,460 8,433 32,891 2,495 694 561 99,215 1,792 6,014 16,522 764 1,963 4,436 13,917 2,290 419 157,532 104 1,621 698 2,387 19,408 605 1,446 733 3,273 5,325 25. Holdings at Fair Value through Other Comprehensive Income at 30 June 2012 (continued) Fairfax Media Limited FKP Property Group Fleetwood Corporation Limited Foster's Group Limited Goodman Fielder Limited Goodman Group Goldman Sachs JB Were Collateral Mezzanine Fund Goldman Sachs JB Were Private Equity Fund Graincorp Limited Gresham Private Equity Co-Investment Fund GWA International Limited Hills Holdings Limited Insurance Australia Group Limited - ordinary shares - convertible preference shares IAG Finance(NZ) Limited Perpetual Reset Exchangeable Notes Incitec Pivot Limited Infigen Energy InvoCare Limited IOOF Holdings Limited Leighton Holdings Limited Lend Lease Corporation Limited Lindsay Australia Limited Macarthur Coal Limited Macquarie Group Limited Metcash Limited Mirvac Group MyState Limited National Australia Bank Limited New Hope Corporation Limited Noni B Limited Orica Limited Origin Energy Limited Perpetual Limited Plantation Land Limited Premier Investments Limited QBE Insurance Group Limited Qube Logistics Holdings Limited Reece Australia Limited Ramsay Health Care Limited Rio Tinto Limited Santos Limited Schaffer Corporation Limited Sedgman Limited Select Harvests Limited Seven Group Holdings Limited - Transferable Equity Linked Yield Shares 4 Seven West Media Limited Sims Metal Management Limited Sonic Healthcare Limited Stockland Group Suncorp Group Limited - ordinary shares - convertible preference shares Sydney Airport (previously MAP Group) Tatts Group Limited Telstra Corporation Limited Ten Network Holdings Limited 43 2012 $’000 1,794 1,380 2,078 - - 678 97 9 2,946 60 4,778 1,115 12,728 294 1,192 4,360 - 13,666 974 12,330 3,227 272 - 12,847 16,124 417 1,357 102,368 5,173 577 4,370 4,723 18,735 6 1,791 36,203 1,965 2,356 2,373 25,475 14,985 248 2,115 210 546 2,825 7,621 6,637 6,625 22,918 3,730 1254 1,724 43,421 636 2011 $’000 4,637 2,541 1,660 15,810 339 651 104 9 2,558 60 6,256 3,012 11,579 303 1,236 5,349 431 12,508 495 17,209 3,653 288 3,860 15,441 18,760 409 1,562 110,901 6,734 564 4,350 5,101 20,396 6 2,342 46,674 964 2,334 1,362 37,419 19,052 225 1,515 461 630 6,557 13,997 5,817 7,335 23,060 3,857 1,444 624 30,695 1,336 25. Holdings at Fair Value through Other Comprehensive Income at 30 June 2012 (continued) Toll Holdings Limited TPG Telecom Limited Transfield Services Limited Transurban Group The Trust Company Limited Treasury Wine Estates Limited UGL Limited Washington H Soul Pattinson & Company Limited Wesfarmers Limited - ordinary shares - partially protected shares Westfield Group Westfield Retail Trust Westpac Banking Corporation Wide Bay Australia Limited Woodside Petroleum Limited Woolworths Limited Worley Parsons Limited Other liquid securities Adelaide Managed Funds AMP - notes Bank of Queensland- perpetual equity preference 07 Colonial Group – subordinated notes Commonwealth Bank of Australia - Perls III - Perls IV Goodman Funds Management – perpetual listed unsecured securities Macquarie CPS Trust – convertible preference shares Orica Limited – step-up preference shares Suncorp convertible preference shares Westpac Banking Corporation - preference shares (stapled preferred securities) Woolworths Limited - notes Woolworths notes II 2012 $’000 4,373 6,513 2,757 12,274 13,202 4,451 16,781 125,418 74,806 10,752 4,540 1,684 220,126 2,519 24,511 69,318 5,788 1,825,344 - 2,723 4,525 995 893 1,200 985 1,025 - 982 1,000 - 207 14,535 2011 $’000 4,824 6,288 4,737 11,282 16,172 3,479 16,836 119,142 77,837 10,987 4,139 1,601 231,898 3,538 32,192 69,821 5,603 1,928,404 375 2,803 4,665 - 929 1,181 855 1,045 808 1,015 1,012 559 - 15,247 44 DIRECTORS’ DECLARATION 1. In the opinion of the directors of Milton Corporation Limited: (a) the consolidated financial statements and notes that are set out on pages 22 to 44 and the Remuneration report, that is set out on pages 14 to 17 in the Directors’ report are in accordance with the Corporations Act 2001, including: (i) giving a true view of the consolidated entity’s financial position as at 30 June 2012 and of its performance for the financial year ended on that date; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and (b) there are reasonable grounds to believe that Milton Corporation Limited will be able to pay its debts as and when they become due and payable. 2. The directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the chief executive officer and chief financial officer for the financial year ended 30 June 2012. Signed in accordance with a resolution of the directors. R. D. MILLNER Chairman Sydney, 9 August 2012 45 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF MILTON CORPORATION LIMITED Level 7, 20 Hunter Street Sydney NSW 2000 T +61 (0)2 8236 7700 F +61 (0)2 9233 4636 www.moorestephens.com.au We have audited the accompanying financial report of Milton Corporation Limited and its Controlled Entities (the consolidated entity), which comprises the consolidated statement of financial position as at 30 June 2012, the consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year ended on that date, a summary of significant accounting policies and other explanatory notes and the directors’ declaration of the consolidated entity comprising Milton Corporation Limited and the entities it controlled at the year ended or from time to time during the financial year. Directors’ Responsibility for the Financial Report The directors of Milton Corporation Limited are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to the entity’s preparation of the financial report that gives a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Independence In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. Moore Stephens Sydney ABN 90 773 984 843. *Other than for the acts or omissions of financial services licensees. An independent member of Moore Stephens International Limited - members in principal cities throughout the world The Sydney Moore Stephens firm is not a partner or agent of any other Moore Stephens firm. Liability limited by a scheme approved under Professional Standards Legislation* 46 Auditor’s Opinion In our opinion the financial report of Milton Corporation Limited and its Controlled Entities is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of Milton Corporation Limited’s consolidated financial position as at 30 June 2012 and of their performance for the year ended on that date; and (ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001. Report on the Remuneration Report We have audited the Remuneration Report included in pages 14 to 17 of the directors’ report for the year ended 30 June 2012. The directors of Milton Corporation Limited 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. Auditor’s Opinion In our opinion the Remuneration Report of Milton Corporation Limited for the year ended 30 June 2012, complies with section 300A of the Corporations Act 2001. Matters Relating to the Electronic Publication of the Audited Financial Report the consolidated entity for the year ended 30 June 2012 This auditor’s report relates to the financial report of included on Milton Corporation Limited ’s website. The company’s directors are responsible for the integrity of Milton Corporation Limited’s website. We have not been engaged to report on the integrity of the Milton Corporation Limited’s website. The auditor’s report refers only to the subject matter described above. It does not provide an opinion on any other information which may have been hyperlinked to/from these statements. If users of the financial report are concerned with the inherent risks arising from publication on a website, they are advised to refer to the hard copy of the audited financial report to confirm the information contained in this website version of the financial report. Moore Stephens Sydney Chartered Accountants Martin J. (Joe) Shannon Partner Dated in Sydney this 9th day of August 2012. 47 DIRECTORY DIRECTORS MANAGEMENT R. D. MILLNER - Chairman F. G. GOOCH - Managing director J. F. CHURCH G.L. CRAMPTON K.J. ELEY F. G. GOOCH - Managing director I. A. POLLARD A. R. DAVISON - CFO, secretary REGISTERED OFFICE AUDITORS LEVEL 2, 50 PITT STREET MOORE STEPHENS SYDNEY SYDNEY NSW 2000 CHARTERED ACCOUNTANTS PHONE: (02) 8006 5357 LEVEL 7 FAX: (02) 9251 7033 20 HUNTER STREET EMAIL: general@milton.com.au SYDNEY NSW 2000 INTERNET: www.milton.com.au INTERNET: www.moorestephens.com.au SHARE REGISTRY LINK MARKET SERVICES LIMITED LOCKED BAG A14 SYDNEY SOUTH NSW 1235 PHONE: (02) 8280 7111 FAX: (02) 9261 8489 TOLL FREE: 1800 641 024 EMAIL: registrars@linkmarketservices.com.au INTERNET: www.linkmarketservices.com.au 48 TOP 20 SHAREHOLDERS AS AT 31 JULY 2012 ASX INFORMATION NAME Argo Investments Limited Washington H. Soul Pattinson & Company Limited Myora Pty Limited Australian Foundation Investment Company Limited Chickenfeed Pty Limited Griffinna Pty Ltd Danwer Investments Pty Limited Bortre Pty Limited Otterpaw Pty Ltd JBF Holdings Pty Ltd HSBC Custody Nominees (Australia) Limited National Nominees Limited Jamama Nominees Pty Limited Macdawley Proprietary Limited J S Millner Holdings Pty Limited Hexham Holdings Pty Limited Gartfern Pty Limited Chickenfeed Pty Ltd Millane Pty Limited A V L Investments Proprietary Limited Djaldar Pty Ltd SHARES HELD 8,260,028 6,717,060 4,554,622 2,880,585 1,390,280 1,271,004 1,213,725 1,213,725 1,168,105 1,050,000 1,022,594 912,908 838,353 695,923 686,527 643,840 641,190 635,834 630,878 595,816 584,946 On 31 July 2012, there were 18,981 holders of ordinary shares in the capital of Milton. Holders of ordinary shares are entitled to one vote per share. Number of shares held Number of shareholders 1-1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over The number of holders of less than a marketable parcel of 31 shares % 6.79 5.52 3.74 2.37 1.14 1.05 1.00 1.00 0.96 0.86 0.84 0.75 0.69 0.57 0.56 0.53 0.53 0.52 0.52 0.49 0.48 7,106 8,653 1,934 1,185 103 614 SUBSTANTIAL SHAREHOLDINGS As at 31 July 2012 the names and holdings of substantial shareholders as disclosed in notices received by Milton are as follows:- Substantial shareholders Argo Investments Limited Washington H Soul Pattinson & Company Limited Date of Notice 20 December 2010 20 December 2010 No. of shares 8,260,028 6,717,060 OTHER INFORMATION Milton is taxed as a public company. There is no current on-market buy-back. The total number of transactions in securities undertaken by Milton was 350 and the total brokerage paid or accrued was $211,772. 49 ISSUES TO SHAREHOLDERS SINCE 19TH SEPTEMBER, 1985 (Commencement of Capital Gains Tax) 1 for 10 Bonus Issue from Capital Profits Reserve Bonus in lieu of Dividend from Capital Profits Reserve 1 for 10 Bonus Issue from Capital Profits Reserve Bonus in lieu of Dividend from Capital Profits Reserve 1 for 20 Bonus from Share Premium Reserve 1 for 20 Bonus from Capital Profits Reserve - a fully franked dividend 1 for 20 Cash Issue at $3 per share 1 for 10 Bonus from Share Premium Reserve 1 for 20 Cash Issue at $3 per share 1 for 20 Cash Issue at $3 per share 1 for 10 Bonus from Capital Profits Reserve - a fully franked dividend 1 for 10 Cash Issue at $4 per share 1 for 10 Bonus from Share Premium Reserve 1 for 10 Cash Issue at $4.75 per share 1 for 10 Bonus from Share Premium Reserve 3 Milton shares for 10 Chatham shares at $7.756022 per Milton share 3 Milton shares for 10 Matine shares at $7.756022 per Milton share 9 Milton shares for 40 Milkirk shares at $7.756022 per Milton share 1 for 10 cash issue at $8.20 per share Share Purchase Plan at $8.75 per share Share Purchase Plan at $8.86 per share Share Purchase Plan at $10.79 per share Acquired Cambooya Investments Limited on the basis of 1.55 Milton shares for every 10 Cambooya shares - 8,273,502 Milton shares issued 2,287,200 Milton shares for the acquisition of an unlisted investment company Share Purchase Plan at $11.70 per share 1,739,112 Milton shares for the acquisition of an unlisted investment company Share Purchase Plan at $13.21 per share 2,742,777 Milton shares for the acquisition of an unlisted investment company 496,809 Milton shares for the acquisition of an unlisted investment company Share Purchase Plan at $14.10 per share Share Purchase Plan at $17.11 per share 1,000,322 Milton shares for the acquisition of an unlisted investment company 1,476,254 Milton shares for the acquisition of an unlisted investment company 382,404 Milton shares issued for the acquisition of an unlisted investment company 278,103 Milton shares issued for the acquisition of an unlisted investment company Share Purchase Plan at $19.60 per share 1,888,353 Milton shares issued for the acquisition of an unlisted investment company 1,895,976 Milton shares issued for the acquisition of an unlisted investment company 2,424,582 Milton shares issued for the acquisition of an unlisted investment company 252,477 Milton shares issued for the acquisition of an unlisted investment company 1,223,252 Milton shares issued for the acquisition of an unlisted investment company Share Purchase Plan at $22.48 per share Share Purchase Plan at $17.85 per share 3,555,958 Milton shares issued for the acquisition of an unlisted investment company Share Purchase Plan at $16.08 per share 4,132,711 Milton shares issued for the acquisition of unlisted investment companies 23,803,854 Milton shares issued for the acquisition of Choiseul Investments Limited 15.11.1985 19.05.1986 05.06.1987 05.06.1987 15.11.1988 15.11.1988 26.05.1989 10.11.1989 08.06.1990 24.05.1991 23.04.1992 11.05.1992 23.11.1994 12.12.1994 15.11.1995 06.07.1998 06.07.1998 06.07.1998 21.06.1999 10.11.1999 13.11.2000 13.11.2001 31.12.2001 28.06.2002 08.11.2002 31.12.2002 31.10.2003 11.03.2004 01.04.2004 29.10.2004 21.10.2005 17.08.2006 23.08.2006 28.08.2006 21.09.2006 16.10.2006 10.11.2006 23.03.2007 14.05.2007 20.06.2007 24.09.2007 19.10.2007 03.10.2008 19.02.2009 09.10.2009 26.02.2010 16.12.2010 50 "CPI" FOR CAPITAL GAINS TAX 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 March - 74.4 81.4 87.0 92.9 100.9 105.8 107.6 108.9 110.4 114.7 119.0 120.5 120.3 121.8 June - 75.6 82.6 88.5 95.2 102.5 106.0 107.3 109.3 111.2 116.2 119.8 120.2 121.0 122.3 September 71.3 77.6 84.0 90.2 97.4 103.3 106.6 107.4 109.8 111.9 117.6 120.1 119.7 121.3 123.4 December 72.7 79.8 85.5 92.0 99.2 106.0 107.6 107.9 110.0 112.8 118.5 120.3 120.0 121.9 51 

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