Namoi Cotton Limited Annual Report 2017

Plain-text annual report

2017 ANNUAL REPORT 2017 ANNUAL REPORT | 1 For personal use only2017 ANNUAL REPORT | 2 For personal use onlyCONTENTS 1. Co-operative Profile ......................................................................................................................... 3 The 2017 Financial Year in Review ................................................................................................... 4 2. 3. Chairman & Chief Executive Officer Report .................................................................................... 6 4. Board of Directors .......................................................................................................................... 10 5. Executive Management Team ........................................................................................................ 11 6. Financial Report ............................................................................................................................. 12 7. Corporate Governance Statement ................................................................................................. 90 8. ASX Additional Information ...........................................................................................................100 9. ASX Announcements .....................................................................................................................102 10. Directory ........................................................................................................................................103 2017 ANNUAL REPORT | 1 For personal use only2017 ANNUAL REPORT | 2 For personal use onlyCO- OPE RATIVE PRO FILE Namoi Cotton was established in 1962 and today is Australia’s leading cotton processing and marketing organisation. Namoi Cotton has an extensive network of origination, ginning, marketing and logistics operations throughout the cotton growing regions of New South Wales and southern Queensland. As part of its business operations Namoi Cotton is a participant in the Namoi Cotton Alliance joint venture, which owns and operates warehouse and commodity packing facilities in Wee Waa, Warren and Goondiwindi. CO -OP ERATIVE O BJE CTIV ES Our Vision – To be the leading processor, marketer and service provider to cotton farmers and customers of the Australian cotton industry. Our Mission – To deliver quality products and services to our customers and members. OU R VALUES Shareholder Value – To deliver superior financial results and build wealth for stakeholders. Quality – Continuously improve the reliability and consistency of our processes, products and services. People – Create an environment where people are satisfied and motivated to achieve high levels of performance. Safety – Working safely is more important than time, production and costs. Customer Service – Deliver products and services that meet and exceed customer expectations. Environment – Ensure we respect and protect the environment. 2017 ANNUAL REPORT | 3 For personal use onlyTHE 2017 FINANCIAL YEAR IN R EV IEW F Y 2 0 1 7 S U M M A R Y Financial Summary Revenue from continuing operations EBITDA1 EBIT2 Income Tax Benefit/(Expense) Net profit/(loss) after tax Earnings per Namoi Capital Stock Distribution per Namoi Capital Stock (unfranked) Rebate payable to Grower Members Total assets Interest bearing debt Term (core) debt Stakeholders equity Net tangible assets per Namoi Capital Stock Capital expenditure3 FY2017 ($,000) 355,344 8,855 2,649 245 283 FY2016 ($,000) 279,713 (1,877) (8,048) 3,140 (7,558) 0.3 cents (6.9) cents Nil Nil 210,713 59,920 47,481 123,828 113 cents 5,267 Nil Nil 199,852 60,679 47,481 123,545 112 cents 6,093 1EBITDA defined as earnings before interest, tax, depreciation and amortisation. 2EBIT defined as earnings before interest and tax. Both of the above terms are non IFRS financial information. 3Includes $821k (FY2017) and $418k (FY2016) acquisitions by means of finance leases. 2017 ANNUAL REPORT | 4 For personal use onlyC O T T O N P R O D U C T I O N Region NSW Upper Namoi Lower Namoi Gwydir Mungindi Walgett Macquarie Bourke Lachlan Tandou Murrumbidge TOTAL NSW QLD MacIntyre Valley Central Queensland Dawson-Callide Darling Downs St George Dirranbandi TOTAL QLD 2017 Season Forecast(1) Production Bales 2016 Season Actual(2) Production Bales 233,500 429,000 580,000 86,000 163,500 254,000 90,000 124,000 - 425,500 2,385,500 504,000 162,500 42,000 490,000 177,000 139,250 1,514,750 239,030 238,375 327,120 94,050 37,970 146,505 32,003 118,020 - 513,172 1,746,245 232,358 132,561 33,005 407,380 126,000 35,000 966,304 GRAND TOTAL 3,900,250 2,712,548 (1) Namoi Cotton’s estimate of the total Australian production for 2017 as at 1st June 2017 (2) 2016 Adjusted Figures from The Australian Cotton Grower, Cotton Yearbook 2016 2017 ANNUAL REPORT | 5 For personal use onlyCHAIRMAN & CHIEF EXECUTIVE OFFICER REPORT RESULT IN RE VIEW FO R 2 0 16/17 SEASON OPERATIONS IN REV IEW Namoi Cotton recorded a consolidated net profit after tax and rebate from continuing operations of $0.3 million for the full year ended 28 February 2017, compared to a net loss of $7.6 million for the year ending 29 February 2016. Positive cash flows from operating activities were recorded at $5.5 million. Overall financial performance has improved substantially year on year. Cotton ginning and seed volumes improved as a function of the national crop size increase to 2.7m bales and targeted market share strategies. This delivered an improvement in net contribution for the ginning segment despite facing heavy competition for bales in central growing regions. Consistent ginning throughput rates and scaled work systems ensured effective management of ginning variable costs. Seed trading margins were again strong supported by domestic feed demand and Chinese imports. The challenging market conditions facing Namoi Cotton Alliance’s (NCA’s) lint marketing business for the prior 2015 crop eased slightly through the year generating improved margins on a greater volume of bales marketed from the 2016 crop. NCA’s commodity packing operations benefitted from increased volumes associated with a large chick pea harvest associated with record prices. Finance costs have remained constant year on year, with the continuing low interest rate environment prevailing throughout the period. During the year Namoi Cotton’s term debt facilities with CBA were extended until 2020 with amortisations to recommence in FY2018. 2016 AUSTRALIAN COTTON PRODUCTION The 2016 Australian cotton crop had overall production recorded at 2.7 million bales up 17% from the 2.3 million bales produced in 2015. The volume of planted crop was again impacted by a general lack of available irrigation water in public dams and on farm water storages. The crop benefited from excellent pre-planting and in crop growing conditions resulting in historically high yields for both irrigated and dryland crops. 2017 ANNUAL REPORT | 6 2016 Ginning Season Namoi Cotton ginned 689,000 bales including 100% of joint venture bales of the 2016 crop compared to 535,000 bales of the 2015 crop. The 29% increase in volumes demonstrated the impact of a considered market share campaign for irrigated cotton and increased dryland volumes in core areas, underpinned by consistent throughput rates and scaled works systems allowing effective management of ginning variable costs. Overall ginning contribution improved by 27% year-on-year on the back of improved volumes. Key ginning achievements for 2016 included: • • • • • • • • maintenance of comprehensive occupational health, safety and environmental standards; improved capture of important safety related statistics; Boggabri gin recording its second highest ginning volume in the past 15 years; several gins bettered their previously achieved record daily ginning throughputs; successful commissioning of a $1 million press upgrade at the Mungindi gin; installation of Uster Intellegin units at Wathagar and MacIntyre II gins; Australian industry first successful installation and operation of an automated bale bagging system at Wathagar gin; and extensive offseason maintenance and downtime reduction projects. These achievements are a credit to our ginning and operations employee teams and our continued investment in the ginning network to deliver industry leading services. Market Performance The cotton market opened the financial year with the spot May 2016 cotton futures contract trading above 56 US cents per pound. These were the lowest levels cotton futures had posted since July 2009 and when combined with the Australian dollar, grower harvest prices were around $430 per bale. This compares to the previous year when growers achieved $500 per bale at the start of harvest. Growers on average achieved pricing for the 2016 season between $420 and $525 per bale. Cotton posted its lows in the first quarter as a risk off sentiment saw commodities including cotton move lower. By the start of the second quarter cotton had started its move higher. Cotton futures found support from the speculative buying in the commodities complex generally. This move provided Australian cotton growers the opportunity to market their crop at $450+ per bale by mid harvest. This was a welcome relief as growers marketed their excess bales from the record yielding season. By the end of the second quarter cotton futures had steadily gained 10 US cents per pound. For personal use onlyThe start of the third quarter saw cotton futures appreciate another 10 US cents per pound in the 1st month. The Dec’16 contract fell just short of 78 US cents per pound as it posted its calendar year high. The market found support from the uptake of cotton offered under the Chinese reserve selling program and the continuing increase in open interest supported by speculator buying. The sustained break higher saw the last of the Australian old crop and a proportion of new crop transfer to merchants as prices reached the low AUD$500 per bale in both crop years. Cotton futures finished the year at the mid seventy US cents per pound levels. reduction of 10% in trade cotton seed volume offset by increased grower cotton seed procurement, up 31% on the prior year. Prices have remained higher than historical levels supported by local feed demand associated with the dry conditions and import demand from China. The latter resulting from a reduction in China’s own cotton seed production creating demand from the dairy sector, turning to Australia for imports to meet the demand requirement. This import demand has ultimately led to margins widening despite high prices and again resulted in cotton seed trading being a strong contributor to the overall financial result. As the fourth quarter commenced grower’s attention moved to the new crop being planted. Grower pricing steadily rose over this period in line with cotton futures and by the end of the quarter, grower pricing was again above $500 for the current and new crops. The trend higher was continued in the first quarter and by mid-February, the May17 cotton futures contract pushed through 78 US cents and finished February some 20 US cents per pound higher than 12 months earlier. This rally higher was credited to an increase in global demand, the speculators large long position and US sales pace, which was reducing the US carry out even with a better than expected US crop. The Australian dollar (AUD) spent the end of the first quarter and the start of the second quarter moving higher and posted its highs for the year above 78 cents. The AUD was supported by a dovish tone from the US Federal reserve and the market adjusting for the 1st rate rise in the US. Australia was also supported with firmer commodity prices, which included iron ore and coal. The Australian dollar then moved into a sideways pattern for the third quarter. As momentum for the first US rate raise built, the Australian economy continued to perform above expectations with support from firmer commodity prices. The fourth quarter saw the US elections concluded, which was the catalyst for a US dollar (USD) rally as Trumps pro- growth campaign was priced into the market. The start of the first quarter saw the AUD drift back to pre-election levels as the administration’s inability to follow through on its campaign promises saw the USD par back its gains. The AUD finished the year 4 cents higher and 2 cents off its high. Cotton Seed Business and Cargill Oilseeds Australia Partnership Our cotton seed business traded 172,000mt compared with 158,000mt the previous year. This incorporated a Namoi Cotton’s 15% interest in the Cargill Oilseeds Australia contributed a loss of $0.8 million compared to a loss of $0.3 million in the previous year. This was primarily a function of lower cotton seed crush volumes and competing demand for whole cotton seed exports. The continuing higher domestic cotton seed prices has challenged operating margins with pressure also evident from declining meal demand within the dairy and beef sectors. Namoi Cotton Alliance (NCA) NCA’s total cotton lint marketing volumes procured for the 2016 season reflected 507,000 bales compared with 378,000 bales for the 2015 season reflecting a 2.3% improvement in market share. The improvement in market share was achieved through effective basis position management despite a competitive origination environment with the lower than optimum volume Australian crop. The challenging cotton marketing conditions impacting NCA in the prior year arising from the eroding basis for Australian cotton whilst persisting into FY2017 subsided during the year with improved trading results leading to widening margins. This resulted in a $3.5 million improvement in Namoi Cotton’s share of NCA’s lint marketing business over the prior year. The NCA commodity packing business delivered a significant contribution from record packing volumes of 226,000mt compared with 150,000mt in the preceding year. Commodities packed included cotton seed, coarse grain and pulses, principally chick peas. The prevailing environment of high prices encouraged growers into large plantings of chick peas, a crop also presenting agronomic and crop rotational benefits. Prior year investments in storage and intake capability have been instrumental in ensuring record volumes, efficient operations and a sound financial result. 2017 ANNUAL REPORT | 7 For personal use onlyLOOK ING FO RWARD 2017 Season The widespread rainfall throughout the 2016 winter and spring filled many cotton area public dams and majority of on farm storages in addition to providing excellent soil moisture profiles. These events supported an increased planted area to 472,000 hectares nationally. Post planting however, there were patchy rainfall events along with exceptionally hot and dry conditions in January and February 2017. These post planting conditions have significantly impacted dryland cotton crops and reduced yields of irrigated crops. Despite these factors, Namoi Cotton currently estimates the 2017 Australian cotton crop will produce 3.9 million bales. Namoi Cotton presently anticipates that it will gin between 1.05 million and 1.1 million bales of the 2017 crop, including 100% of joint venture gins. This represents an improvement of between 52% and 60% from the previous year. In advance of the commencement of operations for the 2017 season, Namoi Cotton intends to deliver on the following projects in its ginning business: • • • • • a yard upgrade at the Merah North gin doubling seed cotton intake storage capacity; completion of a major press upgrade at Merah North gin delivering improved operating and utility efficiencies; installation of a third gin stand and associated line of processing and cleaning equipment at the North Bourke gin; installation of a fourth gin stand and associated line of processing and cleaning equipment and significant press upgrade at the Boggabri gin providing greater capacity for the expansion of production in the upper Namoi valley, particularly to the south; and installation of a new gin stand and associated Australian industry first cleaning equipment at the Ashley gin. It is expected that our cotton seed business will trade more than 290,000mt in the coming financial year, up 69% from the prior year. Cotton seed trading margins continue to be supported by local demand and trading opportunities with China, albeit early yield indications reflect production decreases which are expected to pressure cotton seed contributions over the course of the year. NCA’s lint marketing volumes are now estimated to be between 600,000 and 650,000 bales from the 2017 crop, representing an increase of between 18% and 28% from the prior crop. Lint marketing margins are anticipated to be supported by strong demand from the sub-continent markets of Bangladesh and India, whilst China will continue to be the major importer of Australian cotton. NCA’s containerised commodity packing volumes are again anticipated to be underpinned by a solid chickpea plant. Namoi Cotton’s operations in 2017 are predicted to deliver improved financial result predominantly flowing an from volume increases. Production efficiencies from commissioning key gin upgrades, undertaken post the 2016 season, are expected to assist in the efficient and cost effective processing of the increased volumes ahead. 2018 Season and Beyond The excessive hot conditions that occurred in the first two months of 2017 resulted in irrigated cotton growers utilising significantly more on farm water than planned. In the southern valleys, public water storages remain reasonably close to full, however in the central and northern valleys dam and river systems have been drawn down through utilisation of allocations. Coming out of the summer cropping season all public dams servicing cotton growing regions remain at percentage full levels greater than this time in 2016 which is positive for 2018 crop plantings. The current industry outlook for the 2018 Australian cotton crop reflects approximately 4 million to 4.5 million bales of production. Namoi Cotton is targeting maximising market share in both ginning and cotton seed trading volumes. NCA is focused on increasing its lint cotton marketing volumes from the current year through effective basis position management and strong export market access. The commodity packing business will be looking to increase volumes and broader commodity exposure. A strong focus will be on improving financial performance in the 2018 season. Board and Strategy During the year, the Board advised of the key elements of Namoi Cotton’s strategic plan and that a single ASX listed class of share structure which recognizes growers is the most suitable future corporate structure for the Namoi Cotton business to facilitate the outcomes contemplated by the strategic plan. The Board worked through a consultative process via stakeholder briefing meetings with Grower Members and CCU holders to discuss the proposed restructure in more detail. Based on generally supportive feedback Namoi Cotton has moved to the next phase in its journey towards a single ASX listed ordinary share structure which recognizes growers. Detailed documentation drafting has commenced and is required before regulatory approvals can be sought. Namoi Cotton is targeting Grower Member and CCU holder meetings around the middle of this financial year to approve the restructure. The restructure remains at this stage subject to stakeholder and regulatory approval. 2017 ANNUAL REPORT | 8 For personal use only2016 ANNUAL REPORT | 9 For personal use onlyBOARD OF DIRECTORS Stuart Boydell – Chairman, Non- Executive Director – 70 joined the Board as a Mr Boydell Grower Director in June 1994 and has been Chairman since December 1995. He was most recently re-elected at the 2014 general meeting. He has grown cotton on “Cooma” near Moree, NSW for over 20 years and is Chairman of the Remuneration Committee, and a member of the Audit and Compliance Committee and MFRM Committee. Michael Boyce – Non-Executive Director – 74 FCA, FAICD, B Com, HDA Mr Boyce joined the Board as a Non- Grower Director in October 2002. He was most recently re-elected at the 2015 general meeting. He was founding partner of BOYCE the Chartered Accountants. He is currently a director of Monbeef Pty Ltd, Birdnest Pty Ltd, Hazeldean Pty Ltd and Fugen Hardware Group. Mr Boyce is a member of the Audit and Compliance Committee and Remuneration Committee. Richard Anderson – Non-Executive Director – 71 OAM, B.Com, FCA, FCPA Mr. Anderson joined the Board as a Non-Grower Director in July 2001. He was most recently re-elected at the 2016 general meeting. Mr Anderson previously held the position of managing partner of PricewaterhouseCoopers in QLD. Mr Anderson is the Chairman of the Audit and Compliance Committee and the MFRM Committee and he is a member of the Remuneration Committee. During the past three years Mr Anderson has held ASX listed company directorships at Data#3 Limited (current – appointed 27 October 1997), Lindsay Australia Ltd (current – appointed 16 December 2002). He is also currently president of the Guide Dogs for the Blind Association of QLD. Ben Coulton – Non-Executive Director – 62 Mr Coulton joined the Board in July 2006 as a Grower Director. He was most recently re-elected at the 2015 general meeting. Mr Coulton has been growing cotton in the MacIntyre region since 1976. He brings with him extensive industry and commercial expertise. 2017 ANNUAL REPORT | 10 Namoi has seven Directors, comprising four Grower Directors and three non Grower Directors, in accordance with the Rules and the Co-operatives Act. All Directors are Non-Executive Directors with appropriate experience, skills and qualifications. A brief profile of each Director is included below. Robert Green – Non-Executive Director – 60 B Bus (QAC), MAICD Mr Green was appointed to the Board as a Non-Grower Director on 27 May 2013. He was most recently re-elected to the board at the 2016 general meeting. Mr Green has considerable board relevant experience working as a Senior Executive and General Manager in the Australian and International agricultural industry for more than 28 years. Key areas of experience include trading, marketing, operations management and business development, including his current role as Chief Executive Officer of Louis Dreyfus Company Australia Pty Ltd. Mr Green is a member of the Audit and Compliance Committee and MFRM Committee and the Remuneration Committee. He has been past President of the Australian Oilseeds Federation and Australian Grain Exporters Association. Glen Price – Non-Executive Director – 61 B Rural Science (Hons), GAICD Mr Price joined the Board in July 2009 as a Grower Director. He was most recently re-elected at the 2015 general meeting. Mr Price grows cotton in both the Mungindi and St George regions and has been involved in the cotton industry since 1978. He brings with him extensive industry and commercial expertise. Mr Price is a member of the MFRM committee. Tim Watson – Non-Executive Director – 55 GAICD Mr. Watson joined the Board in December 2014 as a Grower Director. He was most recently re-elected at the 2015 general meeting. He grows cotton in the Hillston Region and has been involved in the cotton industry since 2000 and is a member of the Hillston District Irrigators Association and the Lachlan River Customer Service Committee. Currently he is also a representative of the Lachlan Valley Water Users Association. He brings with him extensive industry and commercial expertise for the cotton and general agricultural industry. He was also recognised by the cotton industry by being the recipient of the 2014 Australian Cotton Grower of the Year Award. For personal use onlyEXECUTIVE MANAGEMENT TEAM Bailey Garcha - Company Secretary / General Counsel BLLB, BFA, GAICD, ACIS, FACIS Sparke Bailey joined Namoi Cotton in 2003. He has previously held legal and corporate positions with Helmore Lawyers, Minter Ellison Lawyers and the NSW Treasury. His duties include major contract negotiations, management of litigation, ASIC and ASX compliance, insurance, superannuation, employment law management, joint venture, board and investor relations, corporate governance, internal legal advice, commercial law and management of transactions for Namoi Cotton. Bailey is involved in the implementation of commercial, corporate and operational projects for Namoi. Bailey brings over 20 years of legal, corporate and commercial experience to the senior management team. David Lindsay - General Manager Grower Services and Marketing BAppSci, Dip Exp Man, MBA in David joined Namoi Cotton in 1991. David has previously held a number of positions with Namoi Cotton the Grower Services and Trading departments. Prior to joining Namoi Cotton David held an agricultural management position with National Mutual Rural Enterprises. David is responsible for domestic marketing, grower finance, risk management with growers, pool management, joint venture management and trading. David brings over 25 years of specialised cotton industry experience to the senior management team. Shane McGregor - Chief Operations Officer MBA - Master Business Admin, MPM - Masters of Project Management, USDA Accredited Cotton Classifier Shane joined Namoi Cotton in 1999. Shane has previously held cotton and cottonseed management positions with Cotton Trading Corporation Pty Ltd and has been involved in the cotton industry in various management capacities since 1991. He has significant management experience in domestic marketing, commodities exports, logistics, cotton classing and commodities packing operations and brings over 20 years of specialised cotton industry experience to the senior management team. Shane was previously the General Manager Commodities for Namoi Cotton and in November 2013 became the Chief Operations Officer with responsibility for the performance of the ginning, ginning technical support services, cotton seed trading, commodities packing services, occupational health and safety, human resources and environmental business functions. 2017 ANNUAL REPORT | 11 Jeremy Callachor – Chief Executive Officer BFA (Hons), CA, MAICD Appointed Chief Executive Officer in November 2010 and responsible for all of Namoi Cotton’s business operations. Between January 2008 and November 2010, Jeremy held the role of General Manager – Operations & Human Resources and was responsible for all Namoi Cotton’s ginning operations, occupational health & safety and human resources management. Jeremy also holds the role of CEO for the Namoi Cotton Alliance Joint Venture. Between June 2003 and January 2008 Jeremy was Namoi Cotton’s Chief Financial Officer managing all financial, taxation, treasury and statutory reporting activities. Jeremy has had previous financial management experience with Harvest Haul Australia and Rolls Royce Marine in Scotland, UK. Jeremy has been involved with Namoi Cotton for more than 20 years and brings a strong knowledge of Namoi Cotton’s various business operations and strategic capability to the Co- operative. Jeremy is also on the board of Cotton Australia. Stuart Greenwood – Chief Financial Officer B.FIN. Admin, CA Stuart joined Namoi Cotton in 2001. He was appointed Chief Financial Officer in January 2008, following four years as Financial Controller, prior to this holding various senior accounting positions within Namoi Cotton. Stuart has previously held financial management positions within the cotton industry for CSD and Pursehouse Rural. Stuart oversees and manages all financial, taxation, treasury and statutory reporting activities for Namoi Cotton. Stuart brings over 25 years of agricultural financial and management experience to the senior management team. For personal use onlyNAMO I COTTON CO-O PE RATIVE LT D ABN 76 010 485 588 FIN ANCIAL REP ORT – YEAR E NDE D 28 FEB RU A RY 2 01 7 2017 ANNUAL REPORT | 12 For personal use onlyFINAN CIAL REPORT – CONTENT S Appendix 4E .......................................................................................................................... 14 Directors’ Report .................................................................................................................. 15 Auditor’s Independence Declaration .................................................................................... 28 Independent Auditor’s Report .............................................................................................. 29 Directors’ Declaration .......................................................................................................... 35 Statement of Profit and Loss and Other Comprehensive Income ......................................... 36 Balance Sheet ....................................................................................................................... 37 Statement of Cash Flows ...................................................................................................... 38 Statement of Changes in Equity ............................................................................................ 39 Notes to the Financial Statements ....................................................................................... 40 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. Summary of Significant Accounting Policies ............................................................. 40 Revenue and Expenses.............................................................................................. 51 Income Tax ................................................................................................................ 52 Earnings per Unit ...................................................................................................... 54 Distributions Paid or Provided on Co-operative Capital Units .................................. 55 Cash and Cash Equivalents ....................................................................................... 56 Trade and Other Receivables..................................................................................... 57 Inventories ................................................................................................................ 59 Derivative Financial Instruments .............................................................................. 59 Investments in Associates and Joint Ventures using the equity method .................. 60 Interest in Joint Operations ....................................................................................... 63 Interest in Jointly Controlled Assets ......................................................................... 63 Property, Plant and Equipment ................................................................................. 64 Trade and Other Payables ......................................................................................... 66 Interest Bearing Liabilities ........................................................................................ 67 Provisions .................................................................................................................. 69 Co-operative Grower Member Shares ...................................................................... 69 Contributed Equity .................................................................................................... 70 Nature and Purpose of Reserves .............................................................................. 71 Segment Information ................................................................................................ 72 Commitments and Contingencies ............................................................................. 75 Significant Events after Balance Date ....................................................................... 76 Related Party Disclosures ......................................................................................... 77 Directors’ and Executive Disclosure .......................................................................... 78 Remuneration of Auditors ......................................................................................... 79 Financial Risk Management Objectives and Policies ................................................ 79 Other Non-Financial Information .............................................................................. 89 2017 ANNUAL REPORT | 13 For personal use onlyNamoi Cotton Co-operative Limited APPENDIX 4E The information contained in this report is for the full-year ended 28 February 2017 and the previous corresponding period, 29 February 2016. RESULTS FOR ANNOUNCEMENT TO MARKET Revenues from ordinary activities Profit/(Loss) from ordinary activities after tax attributable to members Net profit/(loss) for the period attributable to members Dividends (distributions) Final distribution - (Refer Note 5) Interim distribution % Change $'000 Up 27% to 355,344 n/c n/c 283 283 Amount per Security Unfranked Amount per Security Nil - - - Record date for determining entitlements to the final dividend N/A Brief explanation of any of the figures reported above and short details of any bonus or cash issue or other item(s) of importance not previously released to the market: Overall financial performance has improved substantially year on year. Cotton ginning and seed volumes have improved through the crop size increase to 2.7m bales and targeted market share strategies delivering an improvement in a net contribution for the ginning segment despite facing heavy competition for bales in central growing regions. Consistent ginning throughput rates and scaled work systems ensured effective management of ginning variable costs. Seed trading margins again were strong supported by domestic feed demand and Chinese imports. The challenging market conditions facing Namoi Cotton Alliance’s (NCA’s) lint marketing business for the prior 2015 crop eased slightly through the year generating improved margins on the greater volume of bales marketed from the 2016 crop. NCA’s commodity packing operations benefitted from increased volumes associated with a large chick pea harvest associated with record prices. For further explanation of the annual financial results please refer to the Review of Operations shown in Page 4 of this report. Earnings per share 28 February 2017 29 February 2016 Basic earnings per ordinary security 0.3 cents (6.9 cents) Net tangible assets per security Net tangible asset backing per ordinary security 113 cents 112 cents 28 February 2017 29 February 2016 The above specific requirements of Appendix 4E should be read in conjunction with the complete final report. This financial report has been audited. Namoi Cotton Co-operative Limited DIRECTORS’ REPORT Financial report for the year ended 28 February 2017 Your directors present their report on the consolidated entity consisting of Namoi Cotton Co-operative Limited and the entities it controlled at the end of or during the year ended 28 February 2017. Principal activities marketing cotton. Namoi Cotton is a co-operative listed on the Australian Stock Exchange Ltd that is domiciled in Australia. The principal activities of the entities in the economic entity during the course of the year were ginning and 2016-2017 full year financial results Namoi Cotton recorded a consolidated net profit after tax and rebate from continuing operations of $0.3 million for the full year ended 28 February 2017 (2016: a net loss of $7.6 million). Positive cash flows from operating activities were recorded at $5.5 million. Overall financial performance has improved substantially year on year. Cotton ginning and seed volumes have improved through the crop size increase to 2.7m bales and targeted market share strategies delivering an improvement in a net contribution for the ginning segment despite facing heavy competition for bales in central growing regions. Consistent ginning throughput rates and scaled work systems ensured effective management of ginning variable costs. Seed trading margins again were strong supported by domestic feed demand and Chinese imports. The challenging market conditions facing Namoi Cotton Alliance’s (NCA’s) lint marketing business for the prior 2015 crop eased slightly through the year generating improved margins on the greater volume of bales marketed from the 2016 crop. NCA’s commodity packing operations benefitted from increased volumes associated with a large chick pea harvest associated with record prices. Net assets during the period have increased by $0.3 million (2016: decreased by $1.1 million) representing a net tangible asset backing of $1.13 per unit of Namoi Capital Stock (2016: $1.12). Dividends and rebates The directors have announced that Namoi Cotton will not pay a final distribution per unit of Namoi Capital Stock, nor was an interim distribution declared in respect of the year (2016: nil cents) per unit of Namoi Capital Stock amounting to $nil (2016: $nil million). The Directors have determined not to pay a rebate to grower members in respect to the period (2016: $nil). Review of operations The 2016 Australian cotton crop had overall production recorded at 2.7 million bales (2015 crop: 2.3 million bales) an increase of 17%. The volume of planted crop was again impacted by a general lack of available irrigation water in public dams and on farm water storages. The crop benefited from excellent pre-planting and in crop growing conditions resulting in historically high yields for both irrigated and dryland crops. Namoi Cotton ginned 689,000 bales (including 100% of joint venture bales) of the 2016 crop (2015 crop: 535,000 bales). The 29% increase in volumes demonstrated the impact of a considered market share campaign for irrigated cotton and increased dryland volumes in core areas which has been underpinned by consistent throughput rates and scaled works systems allowing effective management of ginning variable costs. Overall ginning contribution improved by 27% on the back of improved volumes. The Boggabri facility increased ginning volumes by 33% from the 2015 crop due to the increased dryland crops in the Upper Namoi valley and recorded its second highest annual production year in the last 15 years. Namoi Cotton has continued to invest in its core infrastructure introducing the latest technology to provide improved services to growers. The Mungindi gin successfully commissioned a $1m upgrade to its press delivering greater reliability to ginning operations whilst Uster Intellegin units were installed at Wathagar and Macintyre II along with an automated bagging system also at Wathagar. Post season investment in our ginning network has continued with the more significant undertakings including a yard upgrade at Merah North doubling existing capacity along with a further major press upgrade at that site, the installation of a third gin stand and associated line of processing equipment at North Bourke, the installation of a fourth gin stand and associated line of processing equipment and press upgrade at Boggabri along with installation of an upgraded gin stand and Year Ended 28 February 2017 Appendix 4E 2017 ANNUAL REPORT | 14 Page 3 Year Ended 28 February 2017 Directors’ Report Page 4 For personal use onlyNamoi Cotton Co-operative Limited APPENDIX 4E The information contained in this report is for the full-year ended 28 February 2017 and the previous corresponding period, 29 February 2016. RESULTS FOR ANNOUNCEMENT TO MARKET Revenues from ordinary activities Profit/(Loss) from ordinary activities after tax attributable to members Net profit/(loss) for the period attributable to members Dividends (distributions) Final distribution - (Refer Note 5) Interim distribution % Change $'000 Up 27% to 355,344 n/c n/c 283 283 Amount Unfranked Amount per Security per Security Nil - - - Record date for determining entitlements to the final dividend N/A Brief explanation of any of the figures reported above and short details of any bonus or cash issue or other item(s) of importance not previously released to the market: Overall financial performance has improved substantially year on year. Cotton ginning and seed volumes have improved through the crop size increase to 2.7m bales and targeted market share strategies delivering an improvement in a net contribution for the ginning segment despite facing heavy competition for bales in central growing regions. Consistent ginning throughput rates and scaled work systems ensured effective management of ginning variable costs. Seed trading margins again were strong supported by domestic feed demand and Chinese imports. The challenging market conditions facing Namoi Cotton Alliance’s (NCA’s) lint marketing business for the prior 2015 crop eased slightly through the year generating improved margins on the greater volume of bales marketed from the 2016 crop. NCA’s commodity packing operations benefitted from increased volumes associated with a large chick pea harvest associated with record prices. For further explanation of the annual financial results please refer to the Review of Operations shown in Page 4 of this report. Earnings per share Net tangible assets per security Basic earnings per ordinary security 0.3 cents (6.9 cents) 28 February 2017 29 February 2016 Net tangible asset backing per ordinary security 113 cents 112 cents 28 February 2017 29 February 2016 The above specific requirements of Appendix 4E should be read in conjunction with the complete final report. This financial report has been audited. Namoi Cotton Co-operative Limited DIRECTORS’ REPORT Financial report for the year ended 28 February 2017 Your directors present their report on the consolidated entity consisting of Namoi Cotton Co-operative Limited and the entities it controlled at the end of or during the year ended 28 February 2017. Principal activities Namoi Cotton is a co-operative listed on the Australian Stock Exchange Ltd that is domiciled in Australia. The principal activities of the entities in the economic entity during the course of the year were ginning and marketing cotton. 2016-2017 full year financial results Namoi Cotton recorded a consolidated net profit after tax and rebate from continuing operations of $0.3 million for the full year ended 28 February 2017 (2016: a net loss of $7.6 million). Positive cash flows from operating activities were recorded at $5.5 million. Overall financial performance has improved substantially year on year. Cotton ginning and seed volumes have improved through the crop size increase to 2.7m bales and targeted market share strategies delivering an improvement in a net contribution for the ginning segment despite facing heavy competition for bales in central growing regions. Consistent ginning throughput rates and scaled work systems ensured effective management of ginning variable costs. Seed trading margins again were strong supported by domestic feed demand and Chinese imports. The challenging market conditions facing Namoi Cotton Alliance’s (NCA’s) lint marketing business for the prior 2015 crop eased slightly through the year generating improved margins on the greater volume of bales marketed from the 2016 crop. NCA’s commodity packing operations benefitted from increased volumes associated with a large chick pea harvest associated with record prices. Net assets during the period have increased by $0.3 million (2016: decreased by $1.1 million) representing a net tangible asset backing of $1.13 per unit of Namoi Capital Stock (2016: $1.12). Dividends and rebates The directors have announced that Namoi Cotton will not pay a final distribution per unit of Namoi Capital Stock, nor was an interim distribution declared in respect of the year (2016: nil cents) per unit of Namoi Capital Stock amounting to $nil (2016: $nil million). The Directors have determined not to pay a rebate to grower members in respect to the period (2016: $nil). Review of operations The 2016 Australian cotton crop had overall production recorded at 2.7 million bales (2015 crop: 2.3 million bales) an increase of 17%. The volume of planted crop was again impacted by a general lack of available irrigation water in public dams and on farm water storages. The crop benefited from excellent pre-planting and in crop growing conditions resulting in historically high yields for both irrigated and dryland crops. Namoi Cotton ginned 689,000 bales (including 100% of joint venture bales) of the 2016 crop (2015 crop: 535,000 bales). The 29% increase in volumes demonstrated the impact of a considered market share campaign for irrigated cotton and increased dryland volumes in core areas which has been underpinned by consistent throughput rates and scaled works systems allowing effective management of ginning variable costs. Overall ginning contribution improved by 27% on the back of improved volumes. The Boggabri facility increased ginning volumes by 33% from the 2015 crop due to the increased dryland crops in the Upper Namoi valley and recorded its second highest annual production year in the last 15 years. Namoi Cotton has continued to invest in its core infrastructure introducing the latest technology to provide improved services to growers. The Mungindi gin successfully commissioned a $1m upgrade to its press delivering greater reliability to ginning operations whilst Uster Intellegin units were installed at Wathagar and Macintyre II along with an automated bagging system also at Wathagar. Post season investment in our ginning network has continued with the more significant undertakings including a yard upgrade at Merah North doubling existing capacity along with a further major press upgrade at that site, the installation of a third gin stand and associated line of processing equipment at North Bourke, the installation of a fourth gin stand and associated line of processing equipment and press upgrade at Boggabri along with installation of an upgraded gin stand and Year Ended 28 February 2017 Appendix 4E Page 3 Year Ended 28 February 2017 Directors’ Report Page 4 2017 ANNUAL REPORT | 15 For personal use onlyIt is expected that our cotton seed business will trade more than 260,000mt in the coming financial year, up 31% from the prior year. Cotton seed trading margins continue to be supported by local and export demand particularly from China, albeit early yield indications reflect production decreases which are expected to pressure cotton seed contributions over the course of the year. NCA’s lint marketing volumes are estimated to be between 600,000 and 700,000 bales from the 2017 crop, representing an increase of between 18% and 38% from the prior crop. Lint marketing margins are anticipated to be supported by strong demand from the sub-continent markets of Bangladesh and India, whilst China will continue to be the major importer of Australian cotton. The containerised commodity packing volumes are forecast to be consistent with the current record year, again underpinned by a large chickpea plant. Namoi Cotton’s operations in 2017 are predicted to deliver an improved financial result from the foregoing volume increases. Production efficiencies from commissioning key gin upgrades, undertaken post the 2016 season, are expected to assist in the efficient and cost effective processing of volumes ahead. 2018 Season The excessive hot conditions that occurred in the first two months of this year resulted in irrigated cotton growers utilising significantly more on farm water than planned. In the southern valleys, public water storages remain reasonably close to full, however in the central and northern valleys dam and river systems have been drawn down through utilisation of allocations. Despite this the current industry outlook for the 2018 Australian cotton crop reflects approximately 4.5 million bales of production. Namoi Cotton is targeting maximising market share in both ginning and cotton seed trading volumes. NCA is focused on increasing its lint cotton marketing volumes from the current year through effective basis position management and strong export market access. The commodity packing business will be looking to increase volumes and broader commodity exposure. A strong focus will be on improving financial performance in the 2018 season. Rebate Namoi Cotton will not pay a rebate to active grower members for the 2016 crop (2015 crop: $0.0m). Significant events after balance date There have been no significant events after balance date other than as disclosed in Note 22 in this report. There has been no significant change in the state of affairs of the consolidated entity during the year other than Significant changes in the state of affairs as disclosed elsewhere in this report. Namoi Cotton Co-operative Limited Namoi Cotton Co-operative Limited associated lint cleaning equipment at Ashley. These projects are all destined to deliver improved services for growers and variable cost savings for the business. Our cotton seed trading business shipped and handled 172,000mt (2015 crop: 158,000mt) incorporating a reduction of 10% in trade seed volume and increased grower seed procurement, up 31% on the prior year. Prices have remained higher than historical levels supported by local feed demand associated with the dry conditions and import demand from China. The latter resulting from a reduction in China’s own cotton production in turn creating a shortfall in available cotton seed volumes and the dairy sector turning to Australia for imports to meet the demand requirement. This import demand has ultimately led to margins widening despite high prices and again resulted in cotton seed trading being a strong contributor to the overall financial result. Namoi Cotton’s 15% interest in the Cargill Oilseeds Australia business contributed a loss of $0.8million (2016: loss of $0.3 million). This was primarily a function of lower cotton seed crush volumes and competing demand for whole cotton seed exports. The continuing higher domestic cotton seed prices has challenged operating margins with pressure also evident from declining meal demand within the dairy and beef sectors. NCA’s total cotton lint marketing volumes procured for the 2016 season reflected 507,000 bales (2015 season: 378,000 bales). This reflects a 2.3% improvement in market share, achieved through effective basis offerings and management, despite a competitive environment through the continuing lower overall available Australian crop volumes. The challenging cotton marketing conditions impacting NCA in 2015 arising from the eroding basis for Australian cotton whilst persisting into FY2017 have subsided with improved trading results now leading to widening margins. This resulted in a $3.5m improvement in Namoi Cotton’s share of NCA’s lint business in the financial results over the prior year. During the year, the NCA commodity packing business delivered a significant contribution from a record packing volume of 225,856mt (2015 crop: 150,000mt) including coarse grain and pulses principally chick peas. The prevailing environment of high prices encouraged growers into large plantings of chick peas, a crop also presenting agronomic and crop rotational benefits. Prior year investments in storage and intake capability have been instrumental in ensuring efficient operations and a sound financial result. Finance costs have remained constant year on year, with the continuing low interest rate environment prevailing throughout the period. Namoi Cotton was not required to complete any term debt amortisation during the financial year. Term debt facilities were extended until 2020 during the year with amortisations to recommence in FY2018. During the year, the Board advised of the key elements of Namoi Cotton’s strategic plan and that a single ASX listed class of share structure which recognizes growers is the most suitable future corporate structure for the Namoi Cotton business to facilitate the outcomes contemplated by the strategic plan. The Board worked through a consultative process via stakeholder briefing meetings with Grower Members and CCU holders to discuss the proposed restructure in more detail. Based on generally supportive feedback Namoi Cotton has moved to the next phase in its journey towards a single ASX listed ordinary share structure which recognizes growers. Detailed documentation drafting has commenced and is required before regulatory approvals can be sought. Namoi Cotton is targeting Grower Member and CCU holder meetings around the middle of this financial year to approve the restructure. The restructure remains at this stage subject to stakeholder and regulatory approval. Likely developments 2017 Season The widespread rainfall throughout the 2016 winter and spring filled many cotton area public dams and majority of on farm storages in addition to providing excellent soil moisture profiles. These events supported an increased planted area to 472,000 hectares nationally. Since planting however, there have been patchy rainfall events along with exceptionally hot and dry conditions in January and February. These post planting conditions have significantly impacted dryland cotton crops and tempered yield expectations of irrigated crops. Despite these factors, Namoi Cotton estimates the 2017 Australian cotton crop will at this stage still produce a little over 4.0 million bales. Namoi Cotton anticipates that it will gin between 1.05 million and 1.15 million bales from the 2017 crop, including 100% of joint venture gins. This represents an improvement of between 52% and 67% from the previous year. Year Ended 28 February 2017 Directors’ Report 2017 ANNUAL REPORT | 16 Page 5 Year Ended 28 February 2017 Directors’ Report Page 6 For personal use onlyNamoi Cotton Co-operative Limited Namoi Cotton Co-operative Limited associated lint cleaning equipment at Ashley. These projects are all destined to deliver improved services for growers and variable cost savings for the business. Our cotton seed trading business shipped and handled 172,000mt (2015 crop: 158,000mt) incorporating a reduction of 10% in trade seed volume and increased grower seed procurement, up 31% on the prior year. Prices have remained higher than historical levels supported by local feed demand associated with the dry conditions and import demand from China. The latter resulting from a reduction in China’s own cotton production in turn creating a shortfall in available cotton seed volumes and the dairy sector turning to Australia for imports to meet the demand requirement. This import demand has ultimately led to margins widening despite high prices and again resulted in cotton seed trading being a strong contributor to the overall financial result. Namoi Cotton’s 15% interest in the Cargill Oilseeds Australia business contributed a loss of $0.8million (2016: loss of $0.3 million). This was primarily a function of lower cotton seed crush volumes and competing demand for whole cotton seed exports. The continuing higher domestic cotton seed prices has challenged operating margins with pressure also evident from declining meal demand within the dairy and beef sectors. NCA’s total cotton lint marketing volumes procured for the 2016 season reflected 507,000 bales (2015 season: 378,000 bales). This reflects a 2.3% improvement in market share, achieved through effective basis offerings and management, despite a competitive environment through the continuing lower overall available Australian crop volumes. The challenging cotton marketing conditions impacting NCA in 2015 arising from the eroding basis for Australian cotton whilst persisting into FY2017 have subsided with improved trading results now leading to widening margins. This resulted in a $3.5m improvement in Namoi Cotton’s share of NCA’s lint business in the financial results over the prior year. During the year, the NCA commodity packing business delivered a significant contribution from a record packing volume of 225,856mt (2015 crop: 150,000mt) including coarse grain and pulses principally chick peas. The prevailing environment of high prices encouraged growers into large plantings of chick peas, a crop also presenting agronomic and crop rotational benefits. Prior year investments in storage and intake capability have been instrumental in ensuring efficient operations and a sound financial result. Finance costs have remained constant year on year, with the continuing low interest rate environment prevailing throughout the period. Namoi Cotton was not required to complete any term debt amortisation during the financial year. Term debt facilities were extended until 2020 during the year with amortisations to recommence in FY2018. During the year, the Board advised of the key elements of Namoi Cotton’s strategic plan and that a single ASX listed class of share structure which recognizes growers is the most suitable future corporate structure for the Namoi Cotton business to facilitate the outcomes contemplated by the strategic plan. The Board worked through a consultative process via stakeholder briefing meetings with Grower Members and CCU holders to discuss the proposed restructure in more detail. Based on generally supportive feedback Namoi Cotton has moved to the next phase in its journey towards a single ASX listed ordinary share structure which recognizes growers. Detailed documentation drafting has commenced and is required before regulatory approvals can be sought. Namoi Cotton is targeting Grower Member and CCU holder meetings around the middle of this financial year to approve the restructure. The restructure remains at this stage subject to stakeholder and regulatory approval. Likely developments 2017 Season The widespread rainfall throughout the 2016 winter and spring filled many cotton area public dams and majority of on farm storages in addition to providing excellent soil moisture profiles. These events supported an increased planted area to 472,000 hectares nationally. Since planting however, there have been patchy rainfall events along with exceptionally hot and dry conditions in January and February. These post planting conditions have significantly impacted dryland cotton crops and tempered yield expectations of irrigated crops. Despite these factors, Namoi Cotton estimates the 2017 Australian cotton crop will at this stage still produce a little over 4.0 million bales. Namoi Cotton anticipates that it will gin between 1.05 million and 1.15 million bales from the 2017 crop, including 100% of joint venture gins. This represents an improvement of between 52% and 67% from the previous year. Year Ended 28 February 2017 Directors’ Report It is expected that our cotton seed business will trade more than 260,000mt in the coming financial year, up 31% from the prior year. Cotton seed trading margins continue to be supported by local and export demand particularly from China, albeit early yield indications reflect production decreases which are expected to pressure cotton seed contributions over the course of the year. NCA’s lint marketing volumes are estimated to be between 600,000 and 700,000 bales from the 2017 crop, representing an increase of between 18% and 38% from the prior crop. Lint marketing margins are anticipated to be supported by strong demand from the sub-continent markets of Bangladesh and India, whilst China will continue to be the major importer of Australian cotton. The containerised commodity packing volumes are forecast to be consistent with the current record year, again underpinned by a large chickpea plant. Namoi Cotton’s operations in 2017 are predicted to deliver an improved financial result from the foregoing volume increases. Production efficiencies from commissioning key gin upgrades, undertaken post the 2016 season, are expected to assist in the efficient and cost effective processing of volumes ahead. 2018 Season The excessive hot conditions that occurred in the first two months of this year resulted in irrigated cotton growers utilising significantly more on farm water than planned. In the southern valleys, public water storages remain reasonably close to full, however in the central and northern valleys dam and river systems have been drawn down through utilisation of allocations. Despite this the current industry outlook for the 2018 Australian cotton crop reflects approximately 4.5 million bales of production. Namoi Cotton is targeting maximising market share in both ginning and cotton seed trading volumes. NCA is focused on increasing its lint cotton marketing volumes from the current year through effective basis position management and strong export market access. The commodity packing business will be looking to increase volumes and broader commodity exposure. A strong focus will be on improving financial performance in the 2018 season. Rebate Namoi Cotton will not pay a rebate to active grower members for the 2016 crop (2015 crop: $0.0m). Significant events after balance date There have been no significant events after balance date other than as disclosed in Note 22 in this report. Significant changes in the state of affairs There has been no significant change in the state of affairs of the consolidated entity during the year other than as disclosed elsewhere in this report. Page 5 Year Ended 28 February 2017 Directors’ Report Page 6 2017 ANNUAL REPORT | 17 For personal use onlyNamoi Cotton Co-operative Limited Namoi Cotton Co-operative Limited Directors Directors The names, qualifications and experience of the co-operative’s directors that held office throughout the financial The names, qualifications and experience of the co-operative’s directors that held office throughout the financial year and up to the date of this report, unless otherwise indicated, are as follows. year and up to the date of this report, unless otherwise indicated, are as follows. Stuart C Boydell, Chairman, Non-executive Director, 70 Stuart C Boydell, Chairman, Non-executive Director, 70 Mr. Boydell joined the board of directors as a grower director in June 1994 and has been chairman since Mr. Boydell joined the board of directors as a grower director in June 1994 and has been chairman since December 1995. He was most recently re-elected at the 2014 general meetings. He has grown cotton on December 1995. He was most recently re-elected at the 2014 general meetings. He has grown cotton on “Cooma” near Moree, NSW for over 20 years and is chairman of the remuneration committee and a member of “Cooma” near Moree, NSW for over 20 years and is chairman of the remuneration committee and a member of the audit and compliance committee and marketing and financial risk management committee. the audit and compliance committee and marketing and financial risk management committee. Richard Anderson, Non-executive Director, 71, OAM, B.Com, FCA, FCPA Richard Anderson, Non-executive Director, 71, OAM, B.Com, FCA, FCPA Mr. Anderson joined the board as a non-grower director in July 2001. He was most recently re-elected at the Mr. Anderson joined the Board as a Non-Grower Director in July 2001. He was most recently re-elected at the 2016 Mr. Anderson joined the board as a non-grower director in July 2001. He was most recently re-elected at the the position of managing partner of 2013 general meeting. Mr Anderson previously held general meeting. Mr Anderson previously held the position of managing partner of PricewaterhouseCoopers in 2013 general meeting. Mr Anderson previously held the position of managing partner of PricewaterhouseCoopers in Queensland. He is the chairman of both the audit and compliance committee and QLD. Mr Anderson is the Chairman of the Audit and Compliance Committee and the MFRM Committee and he is a PricewaterhouseCoopers in Queensland. He is the chairman of both the audit and compliance committee and the marketing and financial risk management committee and is a member of the remuneration committee. member of the Remuneration Committee. During the past three years Mr Anderson has held ASX listed company the marketing and financial risk management committee and is a member of the remuneration committee. During the past three years Mr Anderson has held ASX listed company directorships at Data#3 Limited (current directorships at Data#3 Limited (current – appointed 27 October 1997), Lindsay Australia Ltd (current – appointed During the past three years Mr Anderson has held ASX listed company directorships at Data#3 Limited (current – appointed 27 October 1997) and Lindsay Australia Ltd (current – appointed 16 December 2002). He is also 16 December 2002). He is also currently president of the Guide Dogs for the Blind Association of QLD. – appointed 27 October 1997) and Lindsay Australia Ltd (current – appointed 16 December 2002). He is also currently president of the Guide Dogs for the Blind Association of Queensland. currently president of the Guide Dogs for the Blind Association of Queensland. Michael Boyce, Non-executive Director, 74, FCA, FAICD, B Com, HDA Michael Boyce, Non-executive Director, 74, FCA, FAICD, B Com, HDA Mr. Boyce joined the board as a non-grower director in October 2002. He was most recently re-elected at the Mr. Boyce joined the board as a non-grower director in October 2002. He was most recently re-elected at the 2015 general meeting. He was the founding partner of BOYCE Chartered Accountants. He is currently a director 2015 general meeting. He was the founding partner of BOYCE Chartered Accountants. He is currently a director of Monbeef Pty Ltd, Hazeldean Pty Ltd, Fugen Hardware Group and Birdnest Pty Ltd. Mr. Boyce is a member of of Monbeef Pty Ltd, Hazeldean Pty Ltd, Fugen Hardware Group and Birdnest Pty Ltd. Mr. Boyce is a member of the audit and compliance committee and the remuneration committee. the audit and compliance committee and the remuneration committee. Ben Coulton, Non-executive Director, 62 Ben Coulton, Non-executive Director, 62 Mr Coulton joined the board of directors in July 2006 as a grower director. He was most recently re-elected at Mr Coulton joined the board of directors in July 2006 as a grower director. He was most recently re-elected at the 2015 general meeting. Mr Coulton has been growing cotton in the MacIntyre region since 1976. He brings the 2015 general meeting. Mr Coulton has been growing cotton in the MacIntyre region since 1976. He brings with him extensive industry and commercial expertise. with him extensive industry and commercial expertise. Glen Price, Non-executive Director, 61, B Rural Science (Hons), GAICD Glen Price, Non-executive Director, 61, B Rural Science (Hons), GAICD Mr Price joined the board of directors in July 2009 as a grower director. He was most recently re-elected at the Mr Price joined the board of directors in July 2009 as a grower director. He was most recently re-elected at the 2015 general meeting. Mr Price grows cotton in both the Mungindi and St George regions and has been involved 2015 general meeting. Mr Price grows cotton in both the Mungindi and St George regions and has been involved in the cotton industry since 1978. He brings with him extensive industry and commercial expertise. Mr. Price is in the cotton industry since 1978. He brings with him extensive industry and commercial expertise. Mr. Price is a member of the marketing and financial risk management committee. a member of the marketing and financial risk management committee. Robert L Green, Non-executive Director, 60, B Bus (QAC) MAICD Robert L Green, Non-executive Director, 60, B Bus (QAC) MAICD Mr Green was appointed to the Board as a Non-Grower Director on 27 May 2013. He was elected to the Board Mr Green was appointed to the Board as a Non-Grower Director on 27 May 2013. He was most recently Mr Green was appointed to the Board as a Non-Grower Director on 27 May 2013. He was elected to the Board at the 2013 general meeting. Mr Green has considerable board relevant experience working as a Senior re-elected to the board at the 2016 general meeting. Mr Green has considerable board relevant experience at the 2013 general meeting. Mr Green has considerable board relevant experience working as a Senior Executive and General Manager in the Australian and International agricultural industry for more than 28 years. working as a Senior Executive and General Manager in the Australian and International agricultural industry for Executive and General Manager in the Australian and International agricultural industry for more than 28 years. Key areas of experience include trading, marketing, operations management and business development, more than 28 years. Key areas of experience include trading, marketing, operations management and business Key areas of experience include trading, marketing, operations management and business development, development, including his current role as Chief Executive Officer of Louis Dreyfus Company Australia Pty Ltd. including his current role as Chief Executive Officer of Louis Dreyfus Commodities Australia Pty Ltd. Mr Green is including his current role as Chief Executive Officer of Louis Dreyfus Commodities Australia Pty Ltd. Mr Green is Mr Green is a member of the Audit and Compliance Committee and MFRM Committee and the Remuneration a member of the audit and compliance committee and the remuneration committee. He has been past President a member of the audit and compliance committee and the remuneration committee. He has been past President Committee. He has been past President of the Australian Oilseeds Federation and Australian Grain Exporters of the Australian Oilseeds Federation and Australian Grain Exporters Association. Association. of the Australian Oilseeds Federation and Australian Grain Exporters Association. Tim Watson, Non-executive Director, 55 Tim Watson, Non-executive Director, 55 Mr Watson joined the Board in December 2014 as a Grower Director. He was elected to the Board at the 2015 Mr Watson joined the Board in December 2014 as a Grower Director. He was elected to the Board at the 2015 general meeting. He grows cotton in the Hillston Region and has been involved in the cotton industry since 2000 general meeting. He grows cotton in the Hillston Region and has been involved in the cotton industry since 2000 and is a member of the Hillston District Irrigators Association and the Lachlan River Customer Service Committee. and is a member of the Hillston District Irrigators Association and the Lachlan River Customer Service Committee. Currently he is also a representative of the Lachlan Valley Water Users Association. He brings with him extensive Currently he is also a representative of the Lachlan Valley Water Users Association. He brings with him extensive industry and commercial expertise for the cotton and general agricultural industry. He was also recognised by industry and commercial expertise for the cotton and general agricultural industry. He was also recognised by the cotton industry by being the recipient of the 2014 Australian Cotton Grower of the Year Award. the cotton industry by being the recipient of the 2014 Australian Cotton Grower of the Year Award. Namoi Cotton Co-operative Limited Company secretary Bailey Garcha, 43, BLLB, BFA, Dip Legal Studies, Dip Legal Practice, ACIS, GAICD Mr Garcha joined Namoi Cotton in July 2003 and has previously held legal and commercial positions with Minter Ellison Lawyers, Sparke Helmore Lawyers and NSW Treasury. Board & committee meeting attendance Meetings held and attended by each of the directors during the financial year were as follows: Committee Meetings1 Marketing and Directors' Meetings1 Audit and Financial Risk Compliance Management Remuneration 15 15 16 15 15 16 16 4 4 4 - - 4 - 3 3 3 - - - - 1 1 1 - - 1 - SC Boydell (Chairman) RA Anderson M Boyce B Coulton G Price R Green T Watson 1 All board members were available to attend directors’ meetings and relevant committee meetings. Committee membership As at the date of this report, the co-operative had an audit and compliance committee, a marketing and financial risk management committee and a remuneration committee. Members acting on the committees of the Board during the year were: Audit and Compliance Marketing and Financial Risk Remuneration RA Anderson (Chairman) RA Anderson (Chairman) SC Boydell (Chairman) Management SC Boydell G Price RA Anderson R Green M Boyce M Boyce SC Boydell R Green There have been no changes to the CEO or other KMP in the period after the reporting date and prior to the date when this financial report was authorised for issue. Remuneration report (audited) This remuneration report outlines the director and executive remuneration arrangements of the co-operative and the consolidated entity in accordance with the requirements of the Corporations Act 2001 and its Regulations. For the purposes of this report Key Management Personnel (KMP) of the group are defined as those having the authority and responsibility either directly or indirectly for planning, directing and controlling the major activities of the co-operative and the group, including any director of the co-operative. Year Ended 28 February 2017 Year Ended 28 February 2017 Directors’ Report Directors’ Report 2017 ANNUAL REPORT | 18 Page 7 Page 7 Year Ended 28 February 2017 Directors’ Report Page 8 For personal use onlyNamoi Cotton Co-operative Limited Namoi Cotton Co-operative Limited Directors Directors The names, qualifications and experience of the co-operative’s directors that held office throughout the financial The names, qualifications and experience of the co-operative’s directors that held office throughout the financial year and up to the date of this report, unless otherwise indicated, are as follows. year and up to the date of this report, unless otherwise indicated, are as follows. Stuart C Boydell, Chairman, Non-executive Director, 70 Stuart C Boydell, Chairman, Non-executive Director, 70 Mr. Boydell joined the board of directors as a grower director in June 1994 and has been chairman since Mr. Boydell joined the board of directors as a grower director in June 1994 and has been chairman since December 1995. He was most recently re-elected at the 2014 general meetings. He has grown cotton on December 1995. He was most recently re-elected at the 2014 general meetings. He has grown cotton on “Cooma” near Moree, NSW for over 20 years and is chairman of the remuneration committee and a member of “Cooma” near Moree, NSW for over 20 years and is chairman of the remuneration committee and a member of the audit and compliance committee and marketing and financial risk management committee. the audit and compliance committee and marketing and financial risk management committee. Richard Anderson, Non-executive Director, 71, OAM, B.Com, FCA, FCPA Richard Anderson, Non-executive Director, 71, OAM, B.Com, FCA, FCPA Mr. Anderson joined the board as a non-grower director in July 2001. He was most recently re-elected at the Mr. Anderson joined the board as a non-grower director in July 2001. He was most recently re-elected at the 2013 general meeting. Mr Anderson previously held the position of managing partner of 2013 general meeting. Mr Anderson previously held PricewaterhouseCoopers in Queensland. He is the chairman of both the audit and compliance committee and the position of managing partner of PricewaterhouseCoopers in Queensland. He is the chairman of both the audit and compliance committee and the marketing and financial risk management committee and is a member of the remuneration committee. the marketing and financial risk management committee and is a member of the remuneration committee. During the past three years Mr Anderson has held ASX listed company directorships at Data#3 Limited (current During the past three years Mr Anderson has held ASX listed company directorships at Data#3 Limited (current – appointed 27 October 1997) and Lindsay Australia Ltd (current – appointed 16 December 2002). He is also – appointed 27 October 1997) and Lindsay Australia Ltd (current – appointed 16 December 2002). He is also currently president of the Guide Dogs for the Blind Association of Queensland. currently president of the Guide Dogs for the Blind Association of Queensland. Michael Boyce, Non-executive Director, 74, FCA, FAICD, B Com, HDA Michael Boyce, Non-executive Director, 74, FCA, FAICD, B Com, HDA Mr. Boyce joined the board as a non-grower director in October 2002. He was most recently re-elected at the Mr. Boyce joined the board as a non-grower director in October 2002. He was most recently re-elected at the 2015 general meeting. He was the founding partner of BOYCE Chartered Accountants. He is currently a director 2015 general meeting. He was the founding partner of BOYCE Chartered Accountants. He is currently a director of Monbeef Pty Ltd, Hazeldean Pty Ltd, Fugen Hardware Group and Birdnest Pty Ltd. Mr. Boyce is a member of of Monbeef Pty Ltd, Hazeldean Pty Ltd, Fugen Hardware Group and Birdnest Pty Ltd. Mr. Boyce is a member of the audit and compliance committee and the remuneration committee. the audit and compliance committee and the remuneration committee. Ben Coulton, Non-executive Director, 62 Ben Coulton, Non-executive Director, 62 Mr Coulton joined the board of directors in July 2006 as a grower director. He was most recently re-elected at Mr Coulton joined the board of directors in July 2006 as a grower director. He was most recently re-elected at the 2015 general meeting. Mr Coulton has been growing cotton in the MacIntyre region since 1976. He brings the 2015 general meeting. Mr Coulton has been growing cotton in the MacIntyre region since 1976. He brings with him extensive industry and commercial expertise. with him extensive industry and commercial expertise. Glen Price, Non-executive Director, 61, B Rural Science (Hons), GAICD Glen Price, Non-executive Director, 61, B Rural Science (Hons), GAICD Mr Price joined the board of directors in July 2009 as a grower director. He was most recently re-elected at the Mr Price joined the board of directors in July 2009 as a grower director. He was most recently re-elected at the 2015 general meeting. Mr Price grows cotton in both the Mungindi and St George regions and has been involved 2015 general meeting. Mr Price grows cotton in both the Mungindi and St George regions and has been involved in the cotton industry since 1978. He brings with him extensive industry and commercial expertise. Mr. Price is in the cotton industry since 1978. He brings with him extensive industry and commercial expertise. Mr. Price is a member of the marketing and financial risk management committee. a member of the marketing and financial risk management committee. Robert L Green, Non-executive Director, 60, B Bus (QAC) MAICD Robert L Green, Non-executive Director, 60, B Bus (QAC) MAICD Mr Green was appointed to the Board as a Non-Grower Director on 27 May 2013. He was elected to the Board Mr Green was appointed to the Board as a Non-Grower Director on 27 May 2013. He was elected to the Board at the 2013 general meeting. Mr Green has considerable board relevant experience working as a Senior at the 2013 general meeting. Mr Green has considerable board relevant experience working as a Senior Executive and General Manager in the Australian and International agricultural industry for more than 28 years. Executive and General Manager in the Australian and International agricultural industry for more than 28 years. Key areas of experience include trading, marketing, operations management and business development, Key areas of experience include trading, marketing, operations management and business development, including his current role as Chief Executive Officer of Louis Dreyfus Commodities Australia Pty Ltd. Mr Green is including his current role as Chief Executive Officer of Louis Dreyfus Commodities Australia Pty Ltd. Mr Green is a member of the audit and compliance committee and the remuneration committee. He has been past President a member of the audit and compliance committee and the remuneration committee. He has been past President of the Australian Oilseeds Federation and Australian Grain Exporters Association. of the Australian Oilseeds Federation and Australian Grain Exporters Association. Tim Watson, Non-executive Director, 55 Tim Watson, Non-executive Director, 55 Mr Watson joined the Board in December 2014 as a Grower Director. He was elected to the Board at the 2015 Mr Watson joined the Board in December 2014 as a Grower Director. He was elected to the Board at the 2015 general meeting. He grows cotton in the Hillston Region and has been involved in the cotton industry since 2000 general meeting. He grows cotton in the Hillston Region and has been involved in the cotton industry since 2000 and is a member of the Hillston District Irrigators Association and the Lachlan River Customer Service Committee. and is a member of the Hillston District Irrigators Association and the Lachlan River Customer Service Committee. Currently he is also a representative of the Lachlan Valley Water Users Association. He brings with him extensive Currently he is also a representative of the Lachlan Valley Water Users Association. He brings with him extensive industry and commercial expertise for the cotton and general agricultural industry. He was also recognised by industry and commercial expertise for the cotton and general agricultural industry. He was also recognised by the cotton industry by being the recipient of the 2014 Australian Cotton Grower of the Year Award. the cotton industry by being the recipient of the 2014 Australian Cotton Grower of the Year Award. Namoi Cotton Co-operative Limited Company secretary Bailey Garcha, 43, BLLB, BFA, Dip Legal Studies, Dip Legal Practice, ACIS, GAICD Mr Garcha joined Namoi Cotton in July 2003 and has previously held legal and commercial positions with Minter Ellison Lawyers, Sparke Helmore Lawyers and NSW Treasury. Board & committee meeting attendance Meetings held and attended by each of the directors during the financial year were as follows: Committee Meetings1 Marketing and Financial Risk Management Remuneration Audit and Compliance Directors' Meetings1 15 15 16 15 15 16 16 4 4 4 - - 4 - 3 3 - - 3 - - 1 1 1 - - 1 - SC Boydell (Chairman) RA Anderson M Boyce B Coulton G Price R Green T Watson 1 All board members were available to attend directors’ meetings and relevant committee meetings. Committee membership As at the date of this report, the co-operative had an audit and compliance committee, a marketing and financial risk management committee and a remuneration committee. Members acting on the committees of the Board during the year were: Audit and Compliance RA Anderson (Chairman) M Boyce SC Boydell R Green Marketing and Financial Risk Management RA Anderson (Chairman) SC Boydell G Price Remuneration SC Boydell (Chairman) RA Anderson R Green M Boyce There have been no changes to the CEO or other KMP in the period after the reporting date and prior to the date when this financial report was authorised for issue. Remuneration report (audited) This remuneration report outlines the director and executive remuneration arrangements of the co-operative and the consolidated entity in accordance with the requirements of the Corporations Act 2001 and its Regulations. For the purposes of this report Key Management Personnel (KMP) of the group are defined as those having the authority and responsibility either directly or indirectly for planning, directing and controlling the major activities of the co-operative and the group, including any director of the co-operative. Year Ended 28 February 2017 Year Ended 28 February 2017 Directors’ Report Directors’ Report Page 7 Page 7 Year Ended 28 February 2017 Directors’ Report Page 8 2017 ANNUAL REPORT | 19 For personal use onlyNamoi Cotton Co-operative Limited a) Details of Directors and Executives Directors Mr S C Boydell Mr R A Anderson Mr M Boyce Mr B Coulton Mr G Price Mr R Green Mr T J Watson Executives Chairman, non-executive Director, non-executive Director, non-executive Director, non-executive Director, non-executive Director, non-executive Director, non-executive Chief Executive Officer (CEO) Mr J Callachor Mr S Greenwood Chief Financial Officer (CFO) Mr D Lindsay Mr B Garcha Mr S McGregor General Manager – Grower Services and Marketing General Counsel and Company Secretary Chief Operations Officer b) Compensation of KMP Non-executive directors have been encouraged by the board to hold shares in the company purchased by the Compensation Policy The performance of Namoi Cotton depends upon the quality of its directors and executives. To prosper and deliver maximised stakeholder returns, Namoi Cotton must attract, motivate and retain highly skilled and qualified directors and executives. A non-executive director who has served at least two full terms in office is entitled to a retirement benefit equal to twice the director’s fees in their last year of service. The compensation of non-executive directors for the period ending 28 February 2017 is detailed on page 14 of To this end, Namoi Cotton embodies the following principles in its compensation framework: � • � • � • Provide competitive rewards to attract high calibre executives; Link executive rewards to company performance and shareholder value; A portion of executive compensation is ‘at risk’, dependent upon the company and individual executive meeting pre-determined performance benchmarks; and Establish performance hurdles in relation to variable executive compensation. � • Remuneration Committee The remuneration committee of the board of directors of Namoi Cotton is responsible for determining and reviewing compensation arrangements for all KMP, including the directors, the CEO and other members of the senior executive team. The remuneration committee assesses compensation arrangements of KMP annually, by reference to relevant employment market conditions and available independent external remuneration data. The overall objective of this assessment is to ensure maximisation of stakeholder returns from the retention of a high quality board and executive team employees. The Remuneration Committee engaged Mercer Consulting to provide recommendations relating to the renewal of the CEO’s contract during the year. Those charged with governance are satisfied that the advice received was free from undue influence from the KMP to whom the remuneration recommendations applied, as Mercer Consulting reported directly to the Remuneration Committee. The recommendations along with other factors were considered in the negotiation of the contract renewal. The fees paid to Mercer consulting totalled $8,000. Compensation Structure In accordance with best practice corporate governance, the structure of non-executive director and executive compensation is separate and distinct. Year Ended 28 February 2017 Directors’ Report 2017 ANNUAL REPORT | 20 Page 9 Year Ended 28 February 2017 Directors’ Report Page 10 Namoi Cotton Co-operative Limited i) Non-executive Director Compensation Objective Structure The board seeks to set aggregate compensation at a level that provides the company with the ability to attract and retain directors of the highest calibre, whilst incurring a cost that is acceptable to shareholders. The co-operative rules specify that the Members at each general meeting shall determine compensation of non- executive directors. The latest amendment was at the general meeting held on 27 July 2005 when the Members approved an aggregate compensation of $310,000 per year plus applicable committee fees. The amount of compensation sought to be approved by Members and the manner in which it is apportioned amongst directors is reviewed annually. The board may consider advice from external consultants as well as the fees paid to non-executive directors of comparable companies when undertaking the annual review process. Each director receives a fee for being a director of the company. An additional fee ($2,500 per committee, $7,500 to chair a committee) is also paid for each board committee on which a director sits. The payment of additional fees for serving on a committee recognises the additional time commitment required by directors who serve on one or more sub-committees. director on market. ii) Executive Compensation this report. Objective The co-operative aims to reward executives with a level and mix of compensation commensurate with their position and responsibilities within the co-operative so as to: reward executives for performance against targets set by reference to appropriate benchmarks; align the interest of executives with those of shareholders; link rewards with the strategic goals and performance of the co-operative; and ensure total compensation is competitive by market standards. Employment agreements have been negotiated with the CEO and other KMP. Details of these contracts are provided on pages 12 and 13 of this report. Each KMP agreement includes compensation which consists of the following key elements: Fixed Compensation; Variable Compensation comprising Short Term Incentives (STI) The remuneration committee establishes the proportion of fixed and variable (potential STI) compensation for Structure � � � � � � KMP. Objective iii) Fixed Compensation The remuneration committee reviews fixed compensation annually. The process consists of a review of companywide, business unit and individual performance, relevant internal and market comparative compensation and, where appropriate, independent external remuneration data of equivalent industry sectors. For personal use onlyNamoi Cotton Co-operative Limited i) Non-executive Director Compensation Objective The board seeks to set aggregate compensation at a level that provides the company with the ability to attract and retain directors of the highest calibre, whilst incurring a cost that is acceptable to shareholders. Structure The co-operative rules specify that the Members at each general meeting shall determine compensation of non- executive directors. The latest amendment was at the general meeting held on 27 July 2005 when the Members approved an aggregate compensation of $310,000 per year plus applicable committee fees. The amount of compensation sought to be approved by Members and the manner in which it is apportioned amongst directors is reviewed annually. The board may consider advice from external consultants as well as the fees paid to non-executive directors of comparable companies when undertaking the annual review process. Each director receives a fee for being a director of the company. An additional fee ($2,500 per committee, $7,500 to chair a committee) is also paid for each board committee on which a director sits. The payment of additional fees for serving on a committee recognises the additional time commitment required by directors who serve on one or more sub-committees. Non-executive directors have been encouraged by the board to hold shares in the company purchased by the director on market. The performance of Namoi Cotton depends upon the quality of its directors and executives. To prosper and deliver maximised stakeholder returns, Namoi Cotton must attract, motivate and retain highly skilled and A non-executive director who has served at least two full terms in office is entitled to a retirement benefit equal to twice the director’s fees in their last year of service. The compensation of non-executive directors for the period ending 28 February 2017 is detailed on page 14 of this report. 23 ii) Executive Compensation Objective The co-operative aims to reward executives with a level and mix of compensation commensurate with their position and responsibilities within the co-operative so as to: � • � • � • � • reward executives for performance against targets set by reference to appropriate benchmarks; align the interest of executives with those of shareholders; link rewards with the strategic goals and performance of the co-operative; and ensure total compensation is competitive by market standards. Namoi Cotton Co-operative Limited a) Details of Directors and Executives Directors Mr S C Boydell Mr R A Anderson Mr M Boyce Mr B Coulton Mr G Price Mr R Green Mr T J Watson Executives Chairman, non-executive Director, non-executive Director, non-executive Director, non-executive Director, non-executive Director, non-executive Director, non-executive Mr J Callachor Chief Executive Officer (CEO) Mr S Greenwood Chief Financial Officer (CFO) Mr D Lindsay Mr B Garcha Mr S McGregor General Manager – Grower Services and Marketing General Counsel and Company Secretary Chief Operations Officer b) Compensation of KMP Compensation Policy qualified directors and executives. To this end, Namoi Cotton embodies the following principles in its compensation framework: Provide competitive rewards to attract high calibre executives; Link executive rewards to company performance and shareholder value; A portion of executive compensation is ‘at risk’, dependent upon the company and individual executive meeting pre-determined performance benchmarks; and Establish performance hurdles in relation to variable executive compensation. � � � � Remuneration Committee senior executive team. The remuneration committee of the board of directors of Namoi Cotton is responsible for determining and reviewing compensation arrangements for all KMP, including the directors, the CEO and other members of the The remuneration committee assesses compensation arrangements of KMP annually, by reference to relevant employment market conditions and available independent external remuneration data. The overall objective of this assessment is to ensure maximisation of stakeholder returns from the retention of a high quality board and executive team employees. The Remuneration Committee engaged Mercer Consulting to provide recommendations relating to the renewal of the CEO’s contract during the year. Those charged with governance are satisfied that the advice received was free from undue influence from the KMP to whom the remuneration recommendations applied, as Mercer Consulting reported directly to the Remuneration Committee. Each KMP agreement includes compensation which consists of the following key elements: � • � • Fixed Compensation; Variable Compensation comprising Short Term Incentives (STI) The remuneration committee establishes the proportion of fixed and variable (potential STI) compensation for KMP. The recommendations along with other factors were considered in the negotiation of the contract renewal. The fees paid to Mercer consulting totalled $8,000. iii) Fixed Compensation Compensation Structure In accordance with best practice corporate governance, the structure of non-executive director and executive compensation is separate and distinct. Objective The remuneration committee reviews fixed compensation annually. The process consists of a review of internal and market comparative individual performance, relevant companywide, business unit and compensation and, where appropriate, independent external remuneration data of equivalent industry sectors. Year Ended 28 February 2017 Directors’ Report Page 9 Year Ended 28 February 2017 Directors’ Report Page 10 2017 ANNUAL REPORT | 21 Structure Employment agreements have been negotiated with the CEO and other KMP. Details of these contracts are provided on pages 12 and 13 of this report. 22 23 For personal use onlyNamoi Cotton Co-operative Limited Structure Executives are given the opportunity to receive their fixed remuneration in a variety of forms including cash, superannuation, remote rent, motor vehicles, housing, income protection insurance and any associated fringe benefits. The form chosen will be optimal for the recipient without creating undue cost for the co-operative. iv) Variable Compensation – STI Objective The objective of the STI program is to link the achievement of the co-operative’s operational and financial targets with the compensation received by the executives charged with meeting those targets. Structure Actual STI payments depend on the achievement of specific operating targets set at the beginning of the financial year. The operational targets consist of a number of Key Performance Indicators (KPI’s) covering both financial and non-financial measures of performance. STI compensation includes an ‘at risk’ element which constitutes fifty percent of the executives’ overall available STI compensation. This element is wholly dependent on Namoi Cotton achieving a pre-determined level of financial performance, is discretionary, is additional to the fixed compensation noted below and is not subject to any predefined KPI’s. The remaining fifty percent of each executive’s STI compensation was dependent upon the achievement of financial and non-financial KPI’s in the prior year. The review of individual performance usually occurs within two months of the balance date. The financial and non-financial KPI’s include but are not limited to critical operational, profit, safety and developmental targets. KMP STI payments are ultimately subject to the discretion of the remuneration committee. For the 2017 financial year, 0% (2016: 0% amounting to $nil) of the STI compensation (both components) was accrued in the financial statements. v) Contract for Services Major provisions of KMP employment agreements are set out below. Mr Jeremy Callachor, Chief Executive Officer � • � • Term of agreement - open Fixed compensation, inclusive of superannuation, for the year ended 28 February 2017 of $450,000 (29 February 2016: $450,000) Variable compensation, for the year ended 28 February 2017 of $nil (29 February 2016: $nil) Payment of a retention benefit in the event of takeover, acquisition or merger, equal to 50% of annual commencing fixed compensation Payment of a termination benefit on termination equal to 50% of annual commencing fixed compensation Period of notice to be given by employee or employer - 12 weeks Mr Stuart Greenwood, Chief Financial Officer � • � • Term of agreement – open Fixed compensation, inclusive of superannuation, for the year ended 28 February 2017 of $260,595 (29 February 2016: $260,595) Variable compensation, for the year ended 28 February 2017 of $nil (29 February 2016: $nil) Payment of a retention benefit in the event of takeover, acquisition or merger, equal to 1.1 times annual fixed compensation Payment of a termination benefit on termination equal to 50% of annual fixed compensation Period of notice to be given by employee or employer – 4 weeks � • � • � • � • � • � • � • � • Namoi Cotton Co-operative Limited Mr Bailey Garcha, General Counsel and Company Secretary � � � � � � � � � � � � � � � � � � Term of agreement – open February 2016: $265,423) fixed compensation Term of agreement – open February 2016: $286,307) fixed compensation Fixed compensation, inclusive of superannuation, for the year ended 28 February 2017 of $265,423 (29 Variable compensation, for the year ended 28 February 2017 of $nil (29 February 2016: $nil) Payment of a retention benefit in the event of takeover, acquisition or merger, equal to 1.1 times annual Payment of a termination benefit on termination equal to 50% annual fixed compensation Period of notice to be given by employee or employer – 4 weeks Mr David Lindsay, General Manager - Grower Services and Marketing Fixed compensation, inclusive of superannuation, for the year ended 28 February 2017 of $286,307 (29 Variable compensation, for the year ended 28 February 2017 of $nil (29 February 2016: $nil) Payment of a retention benefit in the event of takeover, acquisition or merger, equal to 1.1 times annual Payment of a termination benefit on termination equal to 50% of annual fixed compensation Period of notice to be given by employee or employer – 4 weeks Mr Shane McGregor, Chief Operations Officer Term of Agreement - open Fixed compensation, inclusive of superannuation, for the year ended 28 February 2017 of $293,839 (29 February 2016: $293,725) fixed compensation Variable compensation, for the year ended 28 February 2017 of $nil (29 February 2016: $nil) Payment of a retention benefit in the event of takeover, acquisition or merger, equal to 1.1 times annual Payment of a termination benefit on termination equal to 50% of annual fixed compensation Period of notice to be given by employee or employer – 4 weeks Details of the nature and amount of each element of the emoluments of each director and each of the executive officers of Namoi Cotton and the consolidated entity for the financial year are as follows: vi) Compensation of Key Management Personnel for the Year Ended 28 February 2017 Short-term Employee benefits Post-employment Benefits Salary & Fees Cash Bonus Benefits Superannuation Non- Monetary Long-term Benefits Employee Leave Benefits Retirement Benefits 1 Termination Benefits Total % Performance Related Directors SC Boydell RA Anderson M Boyce B Coulton G Price R Green T Watson Executives J Callachor 2 D Lindsay 2 B Garcha S Greenwood S McGregor 75,288 60,231 47,683 35,135 37,644 47,683 35,135 432,803 257,863 249,482 223,874 270,305 1,773,126 - - - - - - - - - - - - - - - - - - - - (2,044) 14,884 816 17,763 4,047 35,466 7,152 5,722 4,530 3,338 3,576 4,530 3,338 17,974 24,176 16,599 14,825 25,283 14,250 7,000 - - - - - - - - - - 131,043 21,250 - - - - - - - (12,312) (1,730) 7,522 4,515 4,960 2,955 - - - - - - - - - - - - - 82,440 65,953 52,213 38,473 41,220 66,463 45,473 436,421 295,193 274,419 260,977 304,595 1,963,840 - - - - - - - - - - - - 1. Movement in accrued retirement benefits for the year ended 28 February 2017. 2. Negatives relate to the taking of accumulated leave greater than one year's entitlement. Year Ended 28 February 2017 Directors’ Report 2017 ANNUAL REPORT | 22 Page 11 Year Ended 28 February 2017 Directors’ Report Page 12 For personal use onlyNamoi Cotton Co-operative Limited Structure iv) Variable Compensation – STI Objective Structure Executives are given the opportunity to receive their fixed remuneration in a variety of forms including cash, superannuation, remote rent, motor vehicles, housing, income protection insurance and any associated fringe benefits. The form chosen will be optimal for the recipient without creating undue cost for the co-operative. The objective of the STI program is to link the achievement of the co-operative’s operational and financial targets with the compensation received by the executives charged with meeting those targets. Actual STI payments depend on the achievement of specific operating targets set at the beginning of the financial year. The operational targets consist of a number of Key Performance Indicators (KPI’s) covering both financial and non-financial measures of performance. STI compensation includes an ‘at risk’ element which constitutes fifty percent of the executives’ overall available STI compensation. This element is wholly dependent on Namoi Cotton achieving a pre-determined level of financial performance, is discretionary, is additional to the fixed compensation noted below and is not subject to any predefined KPI’s. The remaining fifty percent of each executive’s STI compensation was dependent upon the achievement of financial and non-financial KPI’s in the prior year. The review of individual performance usually occurs within two months of the balance date. The financial and non-financial KPI’s include but are not limited to critical operational, profit, safety and developmental targets. KMP STI payments are ultimately subject to the discretion of the remuneration committee. For the 2017 financial year, 0% (2016: 0% amounting to $nil) of the STI compensation (both components) was accrued in the financial statements. v) Contract for Services Major provisions of KMP employment agreements are set out below. Mr Jeremy Callachor, Chief Executive Officer Term of agreement - open February 2016: $450,000) Fixed compensation, inclusive of superannuation, for the year ended 28 February 2017 of $450,000 (29 Variable compensation, for the year ended 28 February 2017 of $nil (29 February 2016: $nil) Payment of a retention benefit in the event of takeover, acquisition or merger, equal to 50% of annual commencing fixed compensation Payment of a termination benefit on termination equal to 50% of annual commencing fixed compensation Period of notice to be given by employee or employer - 12 weeks Mr Stuart Greenwood, Chief Financial Officer Term of agreement – open Fixed compensation, inclusive of superannuation, for the year ended 28 February 2017 of $260,595 (29 February 2016: $260,595) fixed compensation Variable compensation, for the year ended 28 February 2017 of $nil (29 February 2016: $nil) Payment of a retention benefit in the event of takeover, acquisition or merger, equal to 1.1 times annual Payment of a termination benefit on termination equal to 50% of annual fixed compensation Period of notice to be given by employee or employer – 4 weeks � � � � � � � � � � � � Namoi Cotton Co-operative Limited Mr Bailey Garcha, General Counsel and Company Secretary � • � • Term of agreement – open Fixed compensation, inclusive of superannuation, for the year ended 28 February 2017 of $265,423 (29 February 2016: $265,423) Variable compensation, for the year ended 28 February 2017 of $nil (29 February 2016: $nil) Payment of a retention benefit in the event of takeover, acquisition or merger, equal to 1.1 times annual fixed compensation Payment of a termination benefit on termination equal to 50% annual fixed compensation Period of notice to be given by employee or employer – 4 weeks � • � • � • � • Mr David Lindsay, General Manager - Grower Services and Marketing � • � • Term of agreement – open Fixed compensation, inclusive of superannuation, for the year ended 28 February 2017 of $286,307 (29 February 2016: $286,307) Variable compensation, for the year ended 28 February 2017 of $nil (29 February 2016: $nil) Payment of a retention benefit in the event of takeover, acquisition or merger, equal to 1.1 times annual fixed compensation Payment of a termination benefit on termination equal to 50% of annual fixed compensation Period of notice to be given by employee or employer – 4 weeks � • � • � • � • Mr Shane McGregor, Chief Operations Officer � • � • Term of Agreement - open Fixed compensation, inclusive of superannuation, for the year ended 28 February 2017 of $293,839 (29 February 2016: $293,725) Variable compensation, for the year ended 28 February 2017 of $nil (29 February 2016: $nil) Payment of a retention benefit in the event of takeover, acquisition or merger, equal to 1.1 times annual fixed compensation Payment of a termination benefit on termination equal to 50% of annual fixed compensation Period of notice to be given by employee or employer – 4 weeks � • � • � • � • Details of the nature and amount of each element of the emoluments of each director and each of the executive officers of Namoi Cotton and the consolidated entity for the financial year are as follows: vi) Compensation of Key Management Personnel for the Year Ended 28 February 2017 Short-term Employee benefits Post-employment Benefits Salary & Fees Cash Bonus Non- Monetary Benefits Superannuation Retirement Benefits 1 Long-term Benefits Employee Leave Benefits Termination Benefits Total % Performance Related Directors SC Boydell RA Anderson M Boyce B Coulton G Price R Green T Watson Executives J Callachor 2 D Lindsay 2 B Garcha S Greenwood S McGregor 75,288 60,231 47,683 35,135 37,644 47,683 35,135 432,803 257,863 249,482 223,874 270,305 1,773,126 - - - - - - - - - - - - - - - - - - - - (2,044) 14,884 816 17,763 4,047 35,466 7,152 5,722 4,530 3,338 3,576 4,530 3,338 17,974 24,176 16,599 14,825 25,283 - - - - - 14,250 7,000 - - - - - - - - - - - - (12,312) (1,730) 7,522 4,515 4,960 131,043 21,250 2,955 - - - - - - - - - - - - - 82,440 65,953 52,213 38,473 41,220 66,463 45,473 436,421 295,193 274,419 260,977 304,595 1,963,840 - - - - - - - - - - - - 1. Movement in accrued retirement benefits for the year ended 28 February 2017. 2. Negatives relate to the taking of accumulated leave greater than one year's entitlement. Year Ended 28 February 2017 Directors’ Report Page 11 Year Ended 28 February 2017 Directors’ Report Page 12 2017 ANNUAL REPORT | 23 For personal use onlyNamoi Cotton Co-operative Limited vii) Compensation of Key Management Personnel for the Year Ended 29 February 2016 Namoi Cotton Co-operative Limited d) Loans to KMP Short-term Employee benefits Post-employment Benefits Salary & Fees Cash Bonus Non- Monetary Benefits Superannuation Retirement Benefits 1 Long-term Benefits Employee Leave Benefits Termination Benefits Total % Performance Related Directors SC Boydell RA Anderson M Boyce B Coulton G Price R Green T Watson Executives J Callachor D Lindsay 2 B Garcha S Greenwood 2 S McGregor 2 75,288 60,231 47,683 35,135 37,644 47,683 35,135 416,516 265,195 249,510 234,413 270,596 1,775,029 - - - - - - - - - - - - - - - - - - - - 3,108 215 705 7,451 (12,002) 7,152 5,722 4,530 3,338 3,576 4,530 3,338 36,005 21,322 16,142 15,742 24,415 5,000 - - - - 9,500 14,000 - - - - - - - - - - - - 5,838 (5,377) (34) (23,997) 408 (523) 145,812 28,500 (23,162) - - - - - - - - - - - - - 87,440 65,953 52,213 38,473 41,220 61,713 52,473 461,467 281,355 266,323 233,609 283,417 1,925,656 - - - - - - - - - - - - 1. Movement in accrued retirement benefits for the year ended 29 February 2016. 2. Negatives relate to the taking of accumulated leave greater than one year's entitlement. c) Shareholdings of KMP1 Balance held 1 March 2016 Granted as Remuneration Year ended 28 February 2017 CCU's Grower Member Shares Grower Member Shares CCU's On Exercise of Option Grower Member Shares CCU's Net Change Other Balance held 28 February 2017 Grower Member Shares CCU's Grower Member Shares CCU's Directors SC Boydell (Chairman) RA Anderson M Boyce B Coulton G Price R Green T Watson Executives J Callachor D Lindsay B Garcha S Greenwood S McGregor 555,883 - 775,272 - 373,292 - 320,000 4,000 25,000 - 6,000 2,000 800 - - 800 1,600 - 800 - - - - - 2,061,447 4,000 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 87,720 - - - - - 87,720 - - - - - - - - - - - - - 555,883 - 775,272 - 373,292 - 407,720 4,000 25,000 - 6,000 2,000 800 - - 800 1,600 - 800 - - - - - 2,149,167 4,000 of retaining their seed for a handling fee. f) Other transactions with KMP 1Includes CCU/shares that are held directly, indirectly and beneficially by KMP. All shares above are held in the disclosing parent entity Namoi Cotton Co-operative Limited. All Co-operative Capital Unit (CCU) transactions by the co-operative with KMP are made through the ASX on normal commercial terms other than those issued to executives through participation in the distribution reinvestment plan and to directors through participation in the distribution reinvestment plans. The following loans remain outstanding from KMP as part of the Employee Incentive Scheme that was suspended in August 2004 (refer to note 18 to the financials). The amounts owed by KMP at year end were D. Lindsay $2,630 (2016: $2,630) and S. McGregor $30 (2016: $30). e) Marketing and ginning transactions and balances with KMP Transactions with directors and their related parties were in accordance with the rules of the co-operative, under terms and conditions applicable to all members. Under the rules of the co-operative, grower directors are required to conduct a minimum of 20% of their total cotton business with Namoi Cotton. In accordance with that rule, directors entered into marketing contracts and ginning contracts with Namoi Cotton. Amounts paid/received or payable/receivable from/to directors and their respective related parties were as follows: Name Mr SC Boydell Mr B Coulton Mr G Price Mr T Watson Consolidated and Parent entity Cotton Purchases Ginning Charges Levied Grain & Seed Purchases 28 Feb 2017 308,479 3,489,599 2,120,215 752,413 29 Feb 2016 - 2,504,480 1,867,212 852,807 28 Feb 2017 38,633 569,508 267,297 543,066 29 Feb 2016 - 501,343 259,795 793,748 28 Feb 2017 64,388 899,036 395,138 455,345 29 Feb 2016 - 698,271 373,761 409,546 6,670,706 5,224,499 1,418,504 1,554,886 1,813,907 1,481,578 The nature of the terms and conditions of the above other transactions with directors and director related entities are consistent with the terms of Namoi Cotton’s standard products, and are as follows: � Marketing contracts require delivery of a quantity of lint cotton. The contract price per bale may be fixed in Australian or United States dollars, determined under a pool arrangement, set as a guaranteed minimum price or by way of basis fixations, cotton futures and foreign currency hedging. Price is adjusted for grade. Payment may be made by Namoi Cotton either within 14 days of ginning, or on a deferred schedule. The actual sales to spinning mills are made by the NCA joint venture. � Ginning contracts require the delivery of a quantity or acreage of seed cotton gin landed. The price is a fixed amount per bale. Payment is either effected by the grower as an offset against marketing proceeds, or collected from the marketing merchant in the case of contract ginning with Namoi Cotton. � Seed contracts require the delivery of a quantity or acreage of seed gin landed. The price is a fixed amount per bale. Payment is either made by Namoi Cotton in conjunction with marketing proceeds, or in conjunction with ginning costs in the case of contract ginning with Namoi Cotton. Growers have the option Directors and director related entities also entered into transactions with the economic entity which occurred within a normal customer or supplier relationship on terms and conditions no more favourable than those which it is reasonable to expect the entity would have adopted if dealing with the director or director-related entity at arm's length in the same circumstances, which do not have the potential to adversely affect decisions about the allocation of scarce resources made by users of the financial report, or the discharge of accountability by the directors. These transactions include: Buybacks of marketing contracts as a result of production shortfalls; Currency, cotton futures, options and brokerage costs, losses and profits charged or credited directly to the � � � � account of the director; Purchase of grower supplies; � Marketing and ginning rebate; Costs associated with the provision of crop finance; and � Grower member share fixed capital entitlement in aggregate $10,800 (2016: $10,800). Year Ended 28 February 2017 Directors’ Report 2017 ANNUAL REPORT | 24 Page 13 Year Ended 28 February 2017 Directors’ Report Page 14 For personal use onlyNamoi Cotton Co-operative Limited vii) Compensation of Key Management Personnel for the Year Ended 29 February 2016 Namoi Cotton Co-operative Limited d) Loans to KMP The following loans remain outstanding from KMP as part of the Employee Incentive Scheme that was suspended in August 2004 (refer to note 18 to the financials). The amounts owed by KMP at year end were D. Lindsay $2,630 (2016: $2,630) and S. McGregor $30 (2016: $30). e) Marketing and ginning transactions and balances with KMP Transactions with directors and their related parties were in accordance with the rules of the co-operative, under terms and conditions applicable to all members. Under the rules of the co-operative, grower directors are required to conduct a minimum of 20% of their total cotton business with Namoi Cotton. In accordance with that rule, directors entered into marketing contracts and ginning contracts with Namoi Cotton. Amounts paid/received or payable/receivable from/to directors and their respective related parties were as follows: Name Mr SC Boydell Mr B Coulton Mr G Price Mr T Watson Cotton Purchases Consolidated and Parent entity Ginning Charges Levied 28 Feb 2017 308,479 3,489,599 2,120,215 752,413 6,670,706 29 Feb 2016 - 2,504,480 1,867,212 852,807 5,224,499 28 Feb 2017 38,633 569,508 267,297 543,066 1,418,504 29 Feb 2016 - 501,343 259,795 793,748 1,554,886 Grain & Seed Purchases 28 Feb 2017 29 Feb 2016 64,388 899,036 395,138 455,345 1,813,907 - 698,271 373,761 409,546 1,481,578 The nature of the terms and conditions of the above other transactions with directors and director related entities are consistent with the terms of Namoi Cotton’s standard products, and are as follows: � Marketing contracts require delivery of a quantity of lint cotton. The contract price per bale may be fixed • in Australian or United States dollars, determined under a pool arrangement, set as a guaranteed minimum price or by way of basis fixations, cotton futures and foreign currency hedging. Price is adjusted for grade. Payment may be made by Namoi Cotton either within 14 days of ginning, or on a deferred schedule. The actual sales to spinning mills are made by the NCA joint venture. � Ginning contracts require the delivery of a quantity or acreage of seed cotton gin landed. The price is a fixed • amount per bale. Payment is either effected by the grower as an offset against marketing proceeds, or collected from the marketing merchant in the case of contract ginning with Namoi Cotton. Seed contracts require the delivery of a quantity or acreage of seed gin landed. The price is a fixed amount per bale. Payment is either made by Namoi Cotton in conjunction with marketing proceeds, or in conjunction with ginning costs in the case of contract ginning with Namoi Cotton. Growers have the option of retaining their seed for a handling fee. � • f) Other transactions with KMP Short-term Employee benefits Post-employment Benefits Salary & Fees Cash Bonus Superannuation Non- Monetary Benefits Retirement Benefits 1 Termination Benefits Total % Performance Related Directors SC Boydell RA Anderson M Boyce B Coulton G Price R Green T Watson Executives J Callachor D Lindsay 2 B Garcha S Greenwood 2 S McGregor 2 75,288 60,231 47,683 35,135 37,644 47,683 35,135 416,516 265,195 249,510 234,413 270,596 - - - - - - - 3,108 215 705 7,451 (12,002) - - - - - - - - - - - - - 7,152 5,722 4,530 3,338 3,576 4,530 3,338 36,005 21,322 16,142 15,742 24,415 5,000 9,500 14,000 - - - - - - - - - Long-term Benefits Employee Leave Benefits - - - - - - - 5,838 (5,377) (34) (23,997) 408 87,440 65,953 52,213 38,473 41,220 61,713 52,473 461,467 281,355 266,323 233,609 283,417 - - - - - - - - - - - - 1,775,029 (523) 145,812 28,500 (23,162) 1,925,656 1. Movement in accrued retirement benefits for the year ended 29 February 2016. 2. Negatives relate to the taking of accumulated leave greater than one year's entitlement. c) Shareholdings of KMP1 Balance held 1 March 2016 Granted as Remuneration On Exercise of Option Net Change Other Balance held 28 February 2017 Year ended 28 February 2017 CCU's CCU's CCU's CCU's CCU's Grower Member Shares Grower Member Shares Grower Member Shares Grower Member Shares Grower Member Shares Directors SC Boydell (Chairman) RA Anderson M Boyce B Coulton G Price R Green T Watson Executives J Callachor D Lindsay B Garcha S Greenwood S McGregor 555,883 800 775,272 373,292 800 1,600 320,000 800 - - - - 4,000 25,000 6,000 2,000 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 555,883 800 775,272 373,292 800 1,600 - - - - 4,000 25,000 6,000 2,000 - - - - - - - - 2,061,447 4,000 87,720 2,149,167 4,000 87,720 407,720 800 - - - - - - - - - - - - - - - - - - - - - - - - - - 1Includes CCU/shares that are held directly, indirectly and beneficially by KMP. All shares above are held in the disclosing parent entity Namoi Cotton Co-operative Limited. All Co-operative Capital Unit (CCU) transactions by the co-operative with KMP are made through the ASX on normal commercial terms other than those issued to executives through participation in the distribution reinvestment plan and to directors through participation in the distribution reinvestment plans. Directors and director related entities also entered into transactions with the economic entity which occurred within a normal customer or supplier relationship on terms and conditions no more favourable than those which it is reasonable to expect the entity would have adopted if dealing with the director or director-related entity at arm's length in the same circumstances, which do not have the potential to adversely affect decisions about the allocation of scarce resources made by users of the financial report, or the discharge of accountability by the directors. These transactions include: � • � • Buybacks of marketing contracts as a result of production shortfalls; Currency, cotton futures, options and brokerage costs, losses and profits charged or credited directly to the account of the director; Purchase of grower supplies; � • � Marketing and ginning rebate; • � • � Grower member share fixed capital entitlement in aggregate $10,800 (2016: $10,800). • Costs associated with the provision of crop finance; and Year Ended 28 February 2017 Directors’ Report Page 13 Year Ended 28 February 2017 Directors’ Report Page 14 2017 ANNUAL REPORT | 25 For personal use onlyNamoi Cotton Co-operative Limited g) Compensation Options Namoi Cotton does not currently and has not historically offered any options over its shares. As such, no options have either been granted or exercised during the period or are on offer at the end of the period. Group financial performance and position The following table highlights key components of the group’s financial performance for the last 5 years. Earnings per CCU (cents) Distribution per CCU (cents) CCU price at year end (cents) CCU buyback average (cents) Net assets ($m) Net assets per share (cents) 2017 2016 2015 2014 2013 0.3 - 49.0 N/a 123.8 112.7 (6.9) - 34.0 N/a 123.5 112.5 5.7 0.5 31.0 N/a 124.6 113.4 (0.1) - 29.0 N/a 118.8 110.4 (70.7) - 35.5 N/a 109.9 115.0 Directors’ interests in the grower member shares and capital stock of the co-operative As at the date of this report, the interest of the directors and their related parties in the grower member shares and capital stock of the co-operative were as set out on page 15. Environmental performance & regulation The directors regularly review the business activities of the co-operative to ensure it operates within the environmental laws established by regulatory authorities. Indemnification and insurance of directors and officers Under the Rules of Namoi Cotton, every person who is or has been a director of the co-operative is indemnified, to the maximum extent permitted by law, out of the property of the co-operative against any liability to another person (other than the co-operative) as such a director unless the liability arises out of conduct involving any negligence, default, breach of duty or breach of trust of which that person may be guilty in relation to the co- operative. During the financial year, Namoi Cotton has paid a premium in respect of a contract providing insurance for every person who is or has been a director or officer against losses arising from any actual or alleged breach of duty, breach of trust, neglect, error, misstatement, misleading statement, omission, breach of warranty of authority, or other act done or wrongfully attempted, or any liability asserted against them solely because of their status as directors or officers of the economic entity. Disclosure of the premium paid is not permitted under the terms of the insurance contract. Indemnification of auditors To the extent permitted by law, the Company has agreed to indemnify its auditors, Ernst & Young, as part of the terms of its audit engagement agreement against claims by third parties arising from the audit (for an unspecified amount). No payment has been made to indemnify Ernst & Young during or since the financial year. Risk management The board includes a marketing and financial risk management committee (MFRMC), which identifies and monitors the co-operative’s risk profile on a timely basis in addition to reviewing management of portfolio exposures. The MFRMC ensures Namoi Cotton’s financial and risk management policies are aligned to its corporate philosophies and principles. The MFRMC regularly reports to the full board. Given the nature of our business, Namoi Cotton has a potential exposure to a number of business risks, including movements in commodity and currency markets. To prudently manage these exposures, the MFRMC has developed comprehensive policies and procedures to monitor, assess and manage all our major business risks. Namoi Cotton Co-operative Limited Key responsibilities of the MFRMC include: � Monitoring and reviewing the policies and limits in the Risk Management Policy; � Monitoring and reviewing the performance of management’s marketing committee; � Monitoring and reviewing procedures for treasury and hedging functions; � Monitoring and reviewing marketing products; � Monitoring and reviewing hedging strategies; � Monitoring and reviewing co-operative wide value at risk results; � Receiving external reports relative to risk management activities; � Monitoring and reviewing funding and liquidity structure and management; and � Monitoring the development of long-term strategic initiatives for marketing and risk management. Corporate governance In recognising the need for the highest standards of corporate behaviour and accountability, the directors of Namoi Cotton support and have complied with the principles of corporate governance. The company’s corporate governance statement is to be published in the 2017 Annual Report due in June 2017 and is also available on Namoi Cotton’s public website at www.namoicotton.com.au Non-audit services Non-audit services were provided by the entity’s auditor, Ernst & Young, as described in Note 25 of the financial report. The directors are satisfied that the provision of non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The nature and scope of each type of non-audit service provided means that auditor independence was not compromised. Auditor’s independence declaration The auditor’s independence declaration is included on page 19 of the financial report. Rounding The amounts contained in this report and in the financial statements have been rounded to the nearest thousand dollars (where rounding is applicable) in accordance with clause 10(6) of the Co-operatives (Accounts and Audit) Regulations and ASIC Corporations (Rounding in Financial Directors Reports) Instrument 2016/191. The co- operative is an entity to which this legislative instrument applies. Signed in accordance with a resolution of the directors on behalf of the board. On behalf of the board S C BOYDELL Director Toowoomba 27 April 2017 Year Ended 28 February 2017 Directors’ Report 2017 ANNUAL REPORT | 26 Page 15 Year Ended 28 February 2017 Directors’ Report Page 16 For personal use onlyNamoi Cotton Co-operative Limited g) Compensation Options Namoi Cotton does not currently and has not historically offered any options over its shares. As such, no options have either been granted or exercised during the period or are on offer at the end of the period. Group financial performance and position The following table highlights key components of the group’s financial performance for the last 5 years. Earnings per CCU (cents) Distribution per CCU (cents) CCU price at year end (cents) CCU buyback average (cents) Net assets ($m) Net assets per share (cents) 2017 2016 2015 2014 2013 0.3 - 49.0 N/a 123.8 112.7 (6.9) - 34.0 N/a 123.5 112.5 5.7 0.5 31.0 N/a 124.6 113.4 (0.1) (70.7) - 29.0 N/a 118.8 110.4 - 35.5 N/a 109.9 115.0 Directors’ interests in the grower member shares and capital stock of the co-operative As at the date of this report, the interest of the directors and their related parties in the grower member shares and capital stock of the co-operative were as set out on page 15. Environmental performance & regulation The directors regularly review the business activities of the co-operative to ensure it operates within the environmental laws established by regulatory authorities. Indemnification and insurance of directors and officers Under the Rules of Namoi Cotton, every person who is or has been a director of the co-operative is indemnified, to the maximum extent permitted by law, out of the property of the co-operative against any liability to another person (other than the co-operative) as such a director unless the liability arises out of conduct involving any negligence, default, breach of duty or breach of trust of which that person may be guilty in relation to the co- operative. During the financial year, Namoi Cotton has paid a premium in respect of a contract providing insurance for every person who is or has been a director or officer against losses arising from any actual or alleged breach of duty, breach of trust, neglect, error, misstatement, misleading statement, omission, breach of warranty of authority, or other act done or wrongfully attempted, or any liability asserted against them solely because of their status as directors or officers of the economic entity. Disclosure of the premium paid is not permitted under the terms of the insurance contract. Indemnification of auditors To the extent permitted by law, the Company has agreed to indemnify its auditors, Ernst & Young, as part of the terms of its audit engagement agreement against claims by third parties arising from the audit (for an unspecified amount). No payment has been made to indemnify Ernst & Young during or since the financial year. Risk management The board includes a marketing and financial risk management committee (MFRMC), which identifies and monitors the co-operative’s risk profile on a timely basis in addition to reviewing management of portfolio exposures. The MFRMC ensures Namoi Cotton’s financial and risk management policies are aligned to its corporate philosophies and principles. The MFRMC regularly reports to the full board. Given the nature of our business, Namoi Cotton has a potential exposure to a number of business risks, including movements in commodity and currency markets. To prudently manage these exposures, the MFRMC has developed comprehensive policies and procedures to monitor, assess and manage all our major business risks. Namoi Cotton Co-operative Limited Key responsibilities of the MFRMC include: � Monitoring and reviewing the policies and limits in the Risk Management Policy; • � Monitoring and reviewing the performance of management’s marketing committee; • � Monitoring and reviewing procedures for treasury and hedging functions; • � Monitoring and reviewing marketing products; • � Monitoring and reviewing hedging strategies; • � Monitoring and reviewing co-operative wide value at risk results; • • � Receiving external reports relative to risk management activities; • • � Monitoring and reviewing funding and liquidity structure and management; and • � Monitoring the development of long-term strategic initiatives for marketing and risk management. • Corporate governance In recognising the need for the highest standards of corporate behaviour and accountability, the directors of Namoi Cotton support and have complied with the principles of corporate governance. The company’s corporate governance statement is to be published in the 2017 Annual Report due in June 2017 and is also available on Namoi Cotton’s public website at www.namoicotton.com.au Non-audit services Non-audit services were provided by the entity’s auditor, Ernst & Young, as described in Note 25 of the financial report. The directors are satisfied that the provision of non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The nature and scope of each type of non-audit service provided means that auditor independence was not compromised. Auditor’s independence declaration The auditor’s independence declaration is included on page 19 of the financial report. 28 Rounding The amounts contained in this report and in the financial statements have been rounded to the nearest thousand dollars (where rounding is applicable) in accordance with clause 10(6) of the Co-operatives (Accounts and Audit) Regulations and ASIC Corporations (Rounding in Financial Directors Reports) Instrument 2016/191. The co- operative is an entity to which this legislative instrument applies. Signed in accordance with a resolution of the directors on behalf of the board. On behalf of the board S C BOYDELL Director Toowoomba 27 April 2017 Year Ended 28 February 2017 Directors’ Report Page 15 Year Ended 28 February 2017 Directors’ Report Page 16 2017 ANNUAL REPORT | 27 For personal use onlyErnst & Young 111 Eagle Street Brisbane QLD 4000 Australia GPO Box 7878 Brisbane QLD 4001 Ernst & Young 111 Eagle Street Brisbane QLD 4000 Australia GPO Box 7878 Brisbane QLD 4001 Tel: +61 7 3011 3333 Fax: +61 7 3011 3100 ey.com/au Tel: +61 7 3011 3333 Fax: +61 7 3011 3100 ey.com/au Independent Auditor’s Report to the members of Namoi Cotton Co-operative Ltd Report on the Audit of the Financial Report Independent Auditor’s Report to the members of Namoi Cotton Co-operative Ltd Report on the Audit of the Financial Report We have audited the financial report of Namoi Cotton Co-operative Ltd (the company), including its subsidiaries (the Group), Opinion which comprises: Opinion the Group consolidated and Company balance sheets as at 28 February 2017, We have audited the financial report of Namoi Cotton Co-operative Ltd (the company), including its subsidiaries (the Group), the Group consolidated and Company statements of comprehensive income, statements of changes in equity and • which comprises: statements of cash flows for the year then ended, notes to the financial statements, including a summary of significant accounting policies; and the Group consolidated and Company balance sheets as at 28 February 2017, the directors’ declaration. the Group consolidated and Company statements of comprehensive income, statements of changes in equity and In our opinion, the accompanying financial report is in accordance with the Co-operatives National Law (NSW) and the statements of cash flows for the year then ended, notes to the financial statements, including a summary of significant accounting policies; and Corporations Act 2001, including: the directors’ declaration. • • • • • • • giving a true and fair view of the Company’s and the Group’s financial position as at 28 February 2017 and of their In our opinion, the accompanying financial report is in accordance with the Co-operatives National Law (NSW) and the financial performance for the year ended on that date; and Corporations Act 2001, including: complying with Australian Accounting Standards and the Corporations Regulations 2001. giving a true and fair view of the Company’s and the Group’s financial position as at 28 February 2017 and of their financial performance for the year ended on that date; and Basis for opinion complying with Australian Accounting Standards and the Corporations Regulations 2001. We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are Basis for opinion independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES110 Code of Ethics for Professional Accountants (the Code) that are relevant We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are to our audit of the financial report in Australia. We have fulfilled our other ethical responsibilities in accordance with the Code. further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Professional and Ethical Standards Board’s APES110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have fulfilled our other ethical responsibilities in accordance with the Code. (i) (ii) (i) (ii) We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Ernst & Young 111 Eagle Street Brisbane QLD 4000 Australia GPO Box 7878 Brisbane QLD 4001 Ernst & Young 111 Eagle Street Brisbane QLD 4000 Australia GPO Box 7878 Brisbane QLD 4001 Tel: +61 7 3011 3333 Fax: +61 7 3011 3100 ey.com/au Tel: +61 7 3011 3333 Fax: +61 7 3011 3100 ey.com/au Auditor’s independence declaration to the directors of Namoi Cotton Co-Operative Ltd As lead auditor for the audit of Namoi Cotton Co-operative Ltd for the financial year ended 28 February 2017, I declare to the Auditor’s independence declaration to the directors of Namoi Cotton Co-Operative Ltd 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; As lead auditor for the audit of Namoi Cotton Co-operative Ltd for the financial year ended 28 February 2017, I declare to the best of my knowledge and belief, there have been: b) no contraventions of any applicable code of professional conduct in relation to the audit. and a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; This declaration is in respect of Namoi Cotton Co-Operative Ltd and the entities it controlled during the financial year. and b) no contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of Namoi Cotton Co-Operative Ltd and the entities it controlled during the financial year. Ernst & Young Ernst & Young Paula McLuskie Partner 27 April 2017 Paula McLuskie Partner 27 April 2017 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 2017 ANNUAL REPORT | 28 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation For personal use only Ernst & Young 111 Eagle Street Brisbane QLD 4000 Australia GPO Box 7878 Brisbane QLD 4001 Ernst & Young 111 Eagle Street Brisbane QLD 4000 Australia GPO Box 7878 Brisbane QLD 4001 Tel: +61 7 3011 3333 Fax: +61 7 3011 3100 ey.com/au Tel: +61 7 3011 3333 Fax: +61 7 3011 3100 ey.com/au Independent Auditor’s Report to the members of Namoi Cotton Co-operative Ltd Report on the Audit of the Financial Report Independent Auditor’s Report to the members of Namoi Cotton Co-operative Ltd Opinion Report on the Audit of the Financial Report We have audited the financial report of Namoi Cotton Co-operative Ltd (the company), including its subsidiaries (the Group), which comprises: Opinion • • the Group consolidated and Company balance sheets as at 28 February 2017, We have audited the financial report of Namoi Cotton Co-operative Ltd (the company), including its subsidiaries (the Group), the Group consolidated and Company statements of comprehensive income, statements of changes in equity and which comprises: statements of cash flows for the year then ended, notes to the financial statements, including a summary of significant accounting policies; and the Group consolidated and Company balance sheets as at 28 February 2017, the directors’ declaration. the Group consolidated and Company statements of comprehensive income, statements of changes in equity and statements of cash flows for the year then ended, In our opinion, the accompanying financial report is in accordance with the Co-operatives National Law (NSW) and the notes to the financial statements, including a summary of significant accounting policies; and Corporations Act 2001, including: the directors’ declaration. giving a true and fair view of the Company’s and the Group’s financial position as at 28 February 2017 and of their financial performance for the year ended on that date; and (i) In our opinion, the accompanying financial report is in accordance with the Co-operatives National Law (NSW) and the Corporations Act 2001, including: (ii) (i) complying with Australian Accounting Standards and the Corporations Regulations 2001. giving a true and fair view of the Company’s and the Group’s financial position as at 28 February 2017 and of their financial performance for the year ended on that date; and • • • • • • complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for opinion (ii) We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are Basis for opinion independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES110 Code of Ethics for Professional Accountants (the Code) that are relevant We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are to our audit of the financial report in Australia. We have fulfilled our other ethical responsibilities in accordance with the Code. further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Professional and Ethical Standards Board’s APES110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 2017 ANNUAL REPORT | 29 For personal use only Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current year. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context. We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial report. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial report. 1. Fair value of ginning assets Why significant How our audit addressed the key audit matter We evaluated the input assumptions and estimates made by the Group in the valuation methodology including sustainable bales and earnings against average production and earnings over the previous six years (covering a broad spread of high and low production seasons) to take into account the seasonal variations. We compared the assumptions to those used in prior year. We involved our valuation specialists to assist in assessing the modelling used by the Group to support the valuation, by evaluating the model calculation methodology and discount rates used. In the prior year we involved our valuation specialists to assess the independence and competencies of the external valuers and the prior year external valuation report’s methodology and content. We also assessed the adequacy of the disclosures relating to the assumptions utilised and related sensitivity disclosures. The Company and the Group have adopted a fair value policy in measuring ginning infrastructure assets (“ginning assets”) as disclosed in Note 1(m) to the financial statements. The Group’s ginning assets represents a significant portion of the total assets (60.4% of Group and 59.0% of the Company) and are valued at an amount of $127.3million ($127.3 million for the Company). The Group uses management’s discounted cash flow model to determine the fair value of the ginning assets supported by an external valuation performed every three years. The latest external valuation was performed as at 29 February 2016. The valuation of the ginning assets at fair value is highly dependent on estimates and assumptions, such as sustainable bales, discount rates, market knowledge, bale contributions and revenue growth rates. The assumptions relating to the valuations are disclosed in note 13 and policy note 1(m), given the estimation uncertainty and sensitivity of the valuations. Given the quantum and complexity of the valuation of ginning assets and the level of the disclosures relating to the assumptions used in the valuation, this was determined to be a key audit matter. 2. Investment in Namoi Cotton Alliance Joint Venture Why significant How our audit addressed the key audit matter At 28 February 2017 the Group held a 51% stake in the Namoi Cotton Alliance (“NCA)” joint venture. As explained in Note 1 to the financial report, this investment was accounted for under the equity method in accordance with Australian Accounting Standards. An equity accounted In order to obtain sufficient audit evidence over the carrying value of Namoi’s investment in NCA and the equity accounted result, we: ► Assessed the audited financial statements of NCA for the year ended 28 February 2017; 2017 ANNUAL REPORT | 30 A member firm of Ernst & Young Global Limited A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Liability limited by a scheme approved under Professional Standards Legislation For personal use only investment of $40.01m was recorded on the Group’s consolidated balance sheet and an equity accounted profit of $0.06m contributed to the overall result of the Group. We performed the audit of the financial statements of NCA. This is a key audit matter due to the financial significance of the investment and its contribution to Group profit, and its significance to the valuation of assets. Details of the Group’s investment in this joint venture are outlined in note 10 to the financial report. ► ► ► ► Evaluated scoping of key audit areas, planning and execution of audit procedures, significant areas of estimation and judgement, and audit findings for the year ended 28 February 2017; Enquired of NCA management in relation to updates on key accounting issues and areas of judgements and movements in the balance sheet and income statement at year-end and subsequently up to the date of the auditor’s report of Namoi; Assessed monthly management reporting during the year; and Recalculated Namoi’s share of the equity-accounted result and dividends for the year ended 28 February 2017. Why significant How our audit addressed the key audit matter 3. Reassessment of depreciation useful life of Ginning Infrastructure assets Why significant How our audit addressed the key audit matter The change in estimate has been disclosed in Note 13 to the financial report. In performing audit procedures over the useful life estimation of Ginning Infrastructure assets, we: The estimation of the useful life of ginning infrastructure assets requires significant estimation. The useful life estimate is a key input into the calculation of depreciation expense. Ginning infrastructure assets are depreciated on a units of production basis over their rolling estimated remaining useful lives of 20 years (previously 16 years). The ginning infrastructure assets represent a significant portion of the Group’s total assets. • Reviewed the Group’s accounting paper on the re-estimate and assessed their assumptions; • Assessed whether any change should be classified as a change in accounting estimate; • Tested the calculation with the re-estimate in the fixed asset register; and • Assessed the adequacy of the disclosures relating to the change in estimate in the financial report. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current year. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context. We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial report. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial report. 1. Fair value of ginning assets The Company and the Group have adopted a fair value policy We evaluated the input assumptions and estimates made by the in measuring ginning infrastructure assets (“ginning assets”) Group in the valuation methodology including sustainable bales as disclosed in Note 1(m) to the financial statements. The and earnings against average production and earnings over the Group’s ginning assets represents a significant portion of the previous six years (covering a broad spread of high and low total assets (60.4% of Group and 59.0% of the Company) production seasons) to take into account the seasonal variations. and are valued at an amount of $127.3million ($127.3 We compared the assumptions to those used in prior year. million for the Company). We involved our valuation specialists to assist in assessing the The Group uses management’s discounted cash flow model modelling used by the Group to support the valuation, by to determine the fair value of the ginning assets supported by evaluating the model calculation methodology and discount rates an external valuation performed every three years. The latest used. In the prior year we involved our valuation specialists to assess the independence and competencies of the external valuers and the prior year external valuation report’s methodology and content. We also assessed the adequacy of the disclosures relating to the assumptions utilised and related sensitivity disclosures. external valuation was performed as at 29 February 2016. The valuation of the ginning assets at fair value is highly dependent on estimates and assumptions, such as sustainable bales, discount rates, market knowledge, bale contributions and revenue growth rates. The assumptions relating to the valuations are disclosed in note 13 and policy note 1(m), given the estimation uncertainty and sensitivity of the valuations. Given the quantum and complexity of the valuation of ginning assets and the level of the disclosures relating to the assumptions used in the valuation, this was determined to be a key audit matter. 2. Investment in Namoi Cotton Alliance Joint Venture Why significant How our audit addressed the key audit matter At 28 February 2017 the Group held a 51% stake in the Namoi Cotton Alliance (“NCA)” joint venture. In order to obtain sufficient audit evidence over the carrying value of Namoi’s investment in NCA and the equity accounted result, As explained in Note 1 to the financial report, this investment we: was accounted for under the equity method in accordance with ► Assessed the audited financial statements of NCA for the Australian Accounting Standards. An equity accounted year ended 28 February 2017; A member firm of Ernst & Young Global Limited A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Liability limited by a scheme approved under Professional Standards Legislation 2017 ANNUAL REPORT | 31 For personal use only Information Other than the Financial Statements and Auditor’s Report The directors are responsible for the other information. The other information comprises the information in the Company’s 2017 Annual Report other than the financial report and our auditor’s report thereon. We obtained the Directors’ Report that is Information Other than the Financial Statements and Auditor’s Report to be included in the Annual Report prior to the date of this auditor’s report and we expect to obtain the remaining sections of the Annual Report after the date of this auditor’s report. The directors are responsible for the other information. The other information comprises the information in the Company’s 2017 Annual Report other than the financial report and our auditor’s report thereon. We obtained the Directors’ Report that is Our opinion on the financial report does not cover the other information and we do not express any form of assurance to be included in the Annual Report prior to the date of this auditor’s report and we expect to obtain the remaining sections of conclusion thereon. the Annual Report after the date of this auditor’s report. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider Our opinion on the financial report does not cover the other information and we do not express any form of assurance whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or conclusion thereon. otherwise appears to be materially misstated. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider If, based upon the work we have performed on the other information obtained prior to the date of this auditor’s report, we whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or conclude that there is a material misstatement of this other information; we are required to report that fact. We have nothing to otherwise appears to be materially misstated. report in this regard. If, based upon the work we have performed on the other information obtained prior to the date of this auditor’s report, we Directors’ responsibilities for the financial report conclude that there is a material misstatement of this other information; we are required to report that fact. We have nothing to report in this regard. The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards, the Co-operatives National Law (NSW) and the Corporations Act 2001 and Directors’ responsibilities for the financial report for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards, the Co-operatives National Law (NSW) and the Corporations Act 2001 and In preparing the financial report, the directors are responsible for assessing the Company’s and Group’s ability to continue as a for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting true and fair view and is free from material misstatement, whether due to fraud or error. unless the directors either intend to liquidate the Group or cease operations, or have no realistic alternative but to do so. In preparing the financial report, the directors are responsible for assessing the Company’s and Group’s ability to continue as a Auditor’s responsibilities for the audit of the financial report going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or cease operations, or have no realistic alternative but to do so. Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is Auditor’s responsibilities for the audit of the financial report a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is taken on the basis of this financial report. a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered professional scepticism throughout the audit. We also: material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. • Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to professional scepticism throughout the audit. We also: provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and override of internal control. perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the override of internal control. Company’s or the Group’s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are disclosures made by the directors. appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s or the Group’s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. • • • • • • • • • • • Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s or Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt date of our auditor’s report. However, future events or conditions may cause the Company or the Group to cease to on the Company’s or Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we continue as a going concern. are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether date of our auditor’s report. However, future events or conditions may cause the Company or the Group to cease to the financial report represents the underlying transactions and events in a manner that achieves fair presentation. continue as a going concern. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and the financial report represents the underlying transactions and events in a manner that achieves fair presentation. performance of the Group audit. We remain solely responsible for our audit opinion. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and audit findings, including any significant deficiencies in internal control that we identify during our audit. performance of the Group audit. We remain solely responsible for our audit opinion. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on audit findings, including any significant deficiencies in internal control that we identify during our audit. our independence, and where applicable, related safeguards. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding From the matters communicated to the directors, we determine those matters that were of most significance in the audit of the independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on financial report of the current year and are therefore the key audit matters. We describe these matters in our auditor’s report our independence, and where applicable, related safeguards. unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be From the matters communicated to the directors, we determine those matters that were of most significance in the audit of the expected to outweigh the public interest benefits of such communication. financial report of the current year and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine Report on the remuneration report that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Opinion on the remuneration report Report on the remuneration report We have audited the remuneration report included in pages 19 to 26 of the directors' report for the year ended 28 February Opinion on the remuneration report 2017. 2017. In our opinion, the remuneration report of Namoi Cotton Co-operative Ltd for the year ended 28 February 2017, complies with We have audited the remuneration report included in pages 19 to 26 of the directors' report for the year ended 28 February section 300A of the Corporations Act 2001. In our opinion, the remuneration report of Namoi Cotton Co-operative Ltd for the year ended 28 February 2017, complies with section 300A of the Corporations Act 2001. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation A member firm of Ernst & Young Global Limited A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Liability limited by a scheme approved under Professional Standards Legislation 2017 ANNUAL REPORT | 32 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation A member firm of Ernst & Young Global Limited A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Liability limited by a scheme approved under Professional Standards Legislation For personal use only Information Other than the Financial Statements and Auditor’s Report The directors are responsible for the other information. The other information comprises the information in the Company’s 2017 Annual Report other than the financial report and our auditor’s report thereon. We obtained the Directors’ Report that is Information Other than the Financial Statements and Auditor’s Report to be included in the Annual Report prior to the date of this auditor’s report and we expect to obtain the remaining sections of the Annual Report after the date of this auditor’s report. The directors are responsible for the other information. The other information comprises the information in the Company’s 2017 Annual Report other than the financial report and our auditor’s report thereon. We obtained the Directors’ Report that is Our opinion on the financial report does not cover the other information and we do not express any form of assurance to be included in the Annual Report prior to the date of this auditor’s report and we expect to obtain the remaining sections of conclusion thereon. the Annual Report after the date of this auditor’s report. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider Our opinion on the financial report does not cover the other information and we do not express any form of assurance whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or conclusion thereon. otherwise appears to be materially misstated. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider If, based upon the work we have performed on the other information obtained prior to the date of this auditor’s report, we whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or conclude that there is a material misstatement of this other information; we are required to report that fact. We have nothing to otherwise appears to be materially misstated. report in this regard. If, based upon the work we have performed on the other information obtained prior to the date of this auditor’s report, we Directors’ responsibilities for the financial report conclude that there is a material misstatement of this other information; we are required to report that fact. We have nothing to report in this regard. The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards, the Co-operatives National Law (NSW) and the Corporations Act 2001 and Directors’ responsibilities for the financial report for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards, the Co-operatives National Law (NSW) and the Corporations Act 2001 and In preparing the financial report, the directors are responsible for assessing the Company’s and Group’s ability to continue as a for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting true and fair view and is free from material misstatement, whether due to fraud or error. unless the directors either intend to liquidate the Group or cease operations, or have no realistic alternative but to do so. In preparing the financial report, the directors are responsible for assessing the Company’s and Group’s ability to continue as a Auditor’s responsibilities for the audit of the financial report going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or cease operations, or have no realistic alternative but to do so. Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is Auditor’s responsibilities for the audit of the financial report a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is taken on the basis of this financial report. a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered professional scepticism throughout the audit. We also: material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to professional scepticism throughout the audit. We also: provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and override of internal control. perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the override of internal control. Company’s or the Group’s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are disclosures made by the directors. appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s or the Group’s internal control. disclosures made by the directors. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related • • • • • • • • • • • Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s or Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt date of our auditor’s report. However, future events or conditions may cause the Company or the Group to cease to on the Company’s or Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we continue as a going concern. are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether date of our auditor’s report. However, future events or conditions may cause the Company or the Group to cease to the financial report represents the underlying transactions and events in a manner that achieves fair presentation. continue as a going concern. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and the financial report represents the underlying transactions and events in a manner that achieves fair presentation. performance of the Group audit. We remain solely responsible for our audit opinion. • We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on audit findings, including any significant deficiencies in internal control that we identify during our audit. our independence, and where applicable, related safeguards. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding From the matters communicated to the directors, we determine those matters that were of most significance in the audit of the independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on financial report of the current year and are therefore the key audit matters. We describe these matters in our auditor’s report our independence, and where applicable, related safeguards. unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be From the matters communicated to the directors, we determine those matters that were of most significance in the audit of the expected to outweigh the public interest benefits of such communication. financial report of the current year and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine Report on the remuneration report that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Opinion on the remuneration report Report on the remuneration report We have audited the remuneration report included in pages 19 to 26 of the directors' report for the year ended 28 February 2017. Opinion on the remuneration report In our opinion, the remuneration report of Namoi Cotton Co-operative Ltd for the year ended 28 February 2017, complies with We have audited the remuneration report included in pages 19 to 26 of the directors' report for the year ended 28 February section 300A of the Corporations Act 2001. 2017. In our opinion, the remuneration report of Namoi Cotton Co-operative Ltd for the year ended 28 February 2017, complies with section 300A of the Corporations Act 2001. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation A member firm of Ernst & Young Global Limited A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Liability limited by a scheme approved under Professional Standards Legislation A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation A member firm of Ernst & Young Global Limited A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Liability limited by a scheme approved under Professional Standards Legislation 2017 ANNUAL REPORT | 33 For personal use only Responsibilities The directors of the company are responsible for the preparation and presentation of the remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based Responsibilities on our audit conducted in accordance with Australian Auditing Standards. The directors of the company are responsible for the preparation and presentation of the remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Ernst & Young Ernst & Young Paula McLuskie Partner Brisbane 27 April 2017 Paula McLuskie Partner Brisbane 27 April 2017 Namoi Cotton Co-operative Limited DIRECTORS’ DECLARATION In the opinion of the directors: In accordance with a resolution of the directors of Namoi Cotton Co-operative Limited, I state that: a) the financial statement, notes and the additional disclosures included in the directors’ report designated as audited, of the co-operative and of the consolidated entity are in accordance with the Co-operatives National Law (NSW) and the Corporations Act 2001, including: i) giving a true and fair view of the co-operative’s and consolidated entity’s financial position as at 28 February 2017 and of their performance for the year ended on that date; and ii) complying with Accounting Standards and Corporations Regulations 2001; b) the financial statements and notes also comply with International Financial Reporting Standards as disclosed in note 1(a); they become due and payable. c) there are reasonable grounds to believe that the co-operative will be able to pay its debts as and when This declaration has been made after receiving the declarations required to be made to the directors in accordance with section 295A of the Corporations Act 2001 for the financial year ended 28 February 2017. On behalf of the board S C BOYDELL Director Toowoomba 27 April 2017 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 2017 ANNUAL REPORT | 34 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Year Ended 28 February 2017 Directors’ Declaration Page 24 For personal use only The directors of the company are responsible for the preparation and presentation of the remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based Responsibilities on our audit conducted in accordance with Australian Auditing Standards. The directors of the company are responsible for the preparation and presentation of the remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Responsibilities Ernst & Young Ernst & Young Paula McLuskie Partner Brisbane 27 April 2017 Paula McLuskie Partner Brisbane 27 April 2017 Namoi Cotton Co-operative Limited DIRECTORS’ DECLARATION In accordance with a resolution of the directors of Namoi Cotton Co-operative Limited, I state that: In the opinion of the directors: a) the financial statement, notes and the additional disclosures included in the directors’ report designated as audited, of the co-operative and of the consolidated entity are in accordance with the Co-operatives National Law (NSW) and the Corporations Act 2001, including: i) giving a true and fair view of the co-operative’s and consolidated entity’s financial position as at 28 February 2017 and of their performance for the year ended on that date; and ii) complying with Accounting Standards and Corporations Regulations 2001; b) c) the financial statements and notes also comply with International Financial Reporting Standards as disclosed in note 1(a); there are reasonable grounds to believe that the co-operative will be able to pay its debts as and when they become due and payable. This declaration has been made after receiving the declarations required to be made to the directors in accordance with section 295A of the Corporations Act 2001 for the financial year ended 28 February 2017. On behalf of the board S C BOYDELL Director Toowoomba 27 April 2017 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Year Ended 28 February 2017 Directors’ Declaration Page 24 2017 ANNUAL REPORT | 35 For personal use only Namoi Cotton Co-operative Limited STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME for the year ended 28 February 2017 Namoi Cotton Co-operative Limited BALANCE SHEET as at 28 February 2017 Consolidated $'000 Parent $'000 Note 28 Feb 2017 29 Feb 2016 28 Feb 2017 29 Feb 2016 Revenue 2a 355,344 279,713 355,043 279,476 Financial instrument gains/(losses) Currency derivatives Cottonseed purchase contracts Cottonseed sales contracts Net financial instrument gains/(losses) Other income Share of profit/(loss) of associates and joint ventures Changes in inventories of finished goods Raw materials and consumables used Employee benefits expense Depreciation Finance costs Other expenses Profit/(loss) before income tax Income tax (expense)/benefit Profit/(loss) attributable to the members of Namoi Cotton Co-operative Ltd. 557 19,400 (18,471) 1,486 (121) (5,218) 5,027 (312) 557 19,400 (18,471) 1,486 60 26 (90) (4,139) 60 56 (121) (5,218) 5,027 (312) 26 (78) 993 (320,203) (18,309) (6,206) (2,611) (10,426) 38 (2,771) (249,855) (15,712) (6,171) (2,650) (8,827) (10,698) 1,011 (320,169) (18,309) (6,206) (2,639) (10,424) (91) (2,771) (249,767) (15,712) (6,171) (2,671) (8,826) (6,806) 245 3,140 26 2,024 283 (7,558) (65) (4,782) 2b 10 2c 2d 2e 3 Other comprehensive income items that will not be reclassified subsequently to profit and loss: Increment/(decrement) to asset revaluation reserve (net of tax) Profit/(loss) and total comprehensive income attributable to the members of Namoi Cotton Co-operative Ltd - 6,504 - 6,504 283 (1,054) (65) 1,722 The above statement of profit and loss and other comprehensive income should be read in conjunction with the accompanying notes. Year Ended 28 February 2017 Statement of Profit and Loss and Other Comprehensive Income Page 25 Year Ended 28 February 2017 Balance Sheet Page 26 2017 ANNUAL REPORT | 36 The above balance sheet should be read in conjunction with the accompanying notes. Current assets Cash and cash equivalents Trade and other receivables Inventories Prepayments Derivative financial instruments Total current assets Non-current assets Trade and other receivables Investments in associates and joint ventures Property, plant and equipment Total non-current assets Total assets Current liabilities Trade and other payables Interest bearing liabilities Provisions Derivative financial instruments Total current liabilities Non-current liabilities Trade and other payables Interest bearing liabilities Provisions Deferred tax liabilities (net) Co-operative grower member shares Total non-current liabilities Total liabilities NET ASSETS Equity Parent entity interest Contributed equity Reserves Retained earnings Total parent entity interest in equity TOTAL EQUITY Consolidated $'000 Parent $'000 Note 28 Feb 2017 29 Feb 2016 28 Feb 2017 29 Feb 2016 6 7 8 9 7 10 13 14 15 16 9 15 16 3 17 18 19 2,256 5,288 7,614 541 14,665 30,364 1,790 4,561 5,901 372 4,352 16,976 2,135 10,540 7,614 541 14,665 35,495 1,785 9,992 5,882 372 4,352 22,383 - 41,876 138,473 180,349 - 41,966 140,910 182,876 41,820 155 138,473 180,448 41,820 99 140,910 182,829 210,713 199,852 215,943 205,212 8,401 16,590 1,979 14,141 41,111 - 43,330 863 1,134 447 45,774 5,022 59,270 2,062 5,463 71,817 456 1,409 799 1,379 447 4,490 26,131 16,590 1,979 14,141 58,841 - 45,379 863 394 447 22,753 59,270 2,062 5,463 89,548 456 3,458 799 420 447 47,083 5,580 86,885 76,307 105,924 95,128 123,828 123,545 110,019 110,084 1,098 101,845 20,885 123,828 1,098 101,845 20,602 123,545 1,098 101,845 7,076 110,019 1,098 101,845 7,141 110,084 123,828 123,545 110,019 110,084 For personal use onlyNamoi Cotton Co-operative Limited STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME for the year ended 28 February 2017 Namoi Cotton Co-operative Limited BALANCE SHEET as at 28 February 2017 Revenue 2a 355,344 279,713 355,043 279,476 Consolidated $'000 Parent $'000 Note 28 Feb 2017 29 Feb 2016 28 Feb 2017 29 Feb 2016 557 19,400 (18,471) 1,486 (121) (5,218) 5,027 (312) 557 19,400 (18,471) 1,486 60 26 (90) (4,139) 60 56 (121) (5,218) 5,027 (312) 26 (78) 993 (2,771) 1,011 (2,771) (320,203) (249,855) (320,169) (249,767) (18,309) (15,712) (18,309) (15,712) (6,206) (2,611) (10,426) (6,171) (2,650) (8,827) (6,206) (2,639) (10,424) 38 (10,698) 245 3,140 (91) 26 (6,171) (2,671) (8,826) (6,806) 2,024 283 (7,558) (65) (4,782) 2b 10 2c 2d 2e 3 Financial instrument gains/(losses) Currency derivatives Cottonseed purchase contracts Cottonseed sales contracts Net financial instrument gains/(losses) Other income Share of profit/(loss) of associates and joint ventures Changes in inventories of finished goods Raw materials and consumables used Employee benefits expense Depreciation Finance costs Other expenses Profit/(loss) before income tax Income tax (expense)/benefit Profit/(loss) attributable to the members of Namoi Cotton Co-operative Ltd. Other comprehensive income items that will not be reclassified subsequently to profit and loss: Increment/(decrement) to asset revaluation Profit/(loss) and total comprehensive income attributable to the members of Namoi Cotton Co-operative Ltd reserve (net of tax) - 6,504 - 6,504 283 (1,054) (65) 1,722 The above statement of profit and loss and other comprehensive income should be read in conjunction with the accompanying notes. Current assets Cash and cash equivalents Trade and other receivables Inventories Prepayments Derivative financial instruments Total current assets Non-current assets Trade and other receivables Investments in associates and joint ventures Property, plant and equipment Total non-current assets Total assets Current liabilities Trade and other payables Interest bearing liabilities Provisions Derivative financial instruments Total current liabilities Non-current liabilities Trade and other payables Interest bearing liabilities Provisions Deferred tax liabilities (net) Co-operative grower member shares Total non-current liabilities Total liabilities NET ASSETS Equity Parent entity interest Contributed equity Reserves Retained earnings Total parent entity interest in equity TOTAL EQUITY Consolidated $'000 Parent $'000 Note 28 Feb 2017 29 Feb 2016 28 Feb 2017 29 Feb 2016 6 7 8 9 7 10 13 14 15 16 9 15 16 3 17 18 19 2,256 5,288 7,614 541 14,665 30,364 1,790 4,561 5,901 372 4,352 16,976 2,135 10,540 7,614 541 14,665 35,495 1,785 9,992 5,882 372 4,352 22,383 - 41,876 138,473 180,349 - 41,966 140,910 182,876 41,820 155 138,473 180,448 41,820 99 140,910 182,829 210,713 199,852 215,943 205,212 8,401 16,590 1,979 14,141 41,111 - 43,330 863 1,134 447 45,774 5,022 59,270 2,062 5,463 71,817 456 1,409 799 1,379 447 4,490 26,131 16,590 1,979 14,141 58,841 - 45,379 863 394 447 47,083 22,753 59,270 2,062 5,463 89,548 456 3,458 799 420 447 5,580 86,885 76,307 105,924 95,128 123,828 123,545 110,019 110,084 1,098 101,845 20,885 123,828 1,098 101,845 20,602 123,545 1,098 101,845 7,076 110,019 1,098 101,845 7,141 110,084 123,828 123,545 110,019 110,084 Year Ended 28 February 2017 Statement of Profit and Loss and Other Comprehensive Income Page 25 Year Ended 28 February 2017 Balance Sheet Page 26 2017 ANNUAL REPORT | 37 The above balance sheet should be read in conjunction with the accompanying notes. For personal use onlyNamoi Cotton Co-operative Limited STATEMENT OF CASH FLOWS for the year ended 28 February 2017 Cash flows from operating activities Receipts from customers Currency derivative flows Payments to suppliers and employees Payments to growers Interest received Borrowing costs Rebates paid to grower members Net cash inflow from operating activities Cash flows from investing activities Payments for property, plant and equipment Proceeds from sale of property, plant and equipment Loans advanced Proceeds from loans receivable Distributions received (partnership and JV) Net cash outflow from investing activities Cash flows from financing activities Proceeds from issue of grower member shares Payments for repurchases of grower member shares Proceeds from borrowings Repayment of borrowings Loans advanced to growers Proceeds from repayment of grower loans Repayment of finance lease and hire purchase Net cash inflow from financing activities Consolidated $'000 Parent $'000 Note 28 Feb 2017 29 Feb 2016 28 Feb 2017 29 Feb 2016 391,605 165 (66,742) (316,437) 1 (3,114) - 306,374 (365) (62,924) (238,027) 6 (2,741) (502) 391,300 165 (66,507) (316,455) 1 (3,142) - 306,128 (365) (62,652) (238,028) 1 (2,762) (502) 6b 5,478 1,821 5,362 1,820 (4,446) (5,675) (4,446) (5,675) 195 (23) 16 - 165 (4) 33 3,570 195 (23) 16 - 165 (4) 33 3,570 (4,258) (1,911) (4,258) (1,911) - 9 - 9 - 28,530 (28,027) (2,287) 2,287 (4) (9) 9,555 (8,059) (5,360) 5,360 (201) - 28,530 (28,026) (2,287) 2,287 (5) (9) 9,555 (8,059) (5,360) 5,360 (201) 499 1,295 499 1,295 Net increase in cash Add cash at the beginning of the financial year Cash at end of the financial year 6a 1,719 (282) 1,437 1,205 (1,487) (282) 1,603 (287) 1,316 1,204 (1,491) (287) Namoi Cotton Co-operative Limited STATEMENT OF CHANGES IN EQUITY for the year ended 28 February 2017 Consolidated $'000 Total equity at 1 March 2016 Net profit for the period Total equity at 28 February 2017 Parent $'000 Total equity at 1 March 2016 Net profit for the period Total equity at 28 February 2017 Consolidated $'000 CCU Asset Premium Revaluation Issued Capital Reserve (Note 19) Reserve (Note 19) Retained Earnings Total Equity 35,382 66,463 20,602 123,545 35,382 66,463 283 20,885 283 123,828 CCU Asset Premium Revaluation Issued Capital Reserve (Note 19) Reserve (Note 19) Retained Earnings Total Equity 35,382 66,463 7,141 110,084 35,382 66,463 (65) 7,076 (65) 110,019 CCU Asset Premium Revaluation Issued Capital Reserve (Note 19) Reserve (Note 19) Retained Earnings Total Equity - - 1,098 - 1,098 1,098 - 1,098 - - - - - - - - - - Total equity at 1 March 2015 1,098 35,382 59,959 28,160 124,599 Net loss for the period Asset Revaluation (net of tax) Total equity at 29 February 2016 1,098 35,382 20,602 123,545 - (7,558) (7,558) 6,504 6,504 66,463 CCU Asset Premium Revaluation Issued Capital Reserve (Note 19) Reserve (Note 19) Retained Earnings Total Equity Parent $'000 Total equity at 1 March 2015 1,098 35,382 59,959 11,923 108,362 Net loss for the period Asset Revaluation (net of tax) Total equity at 29 February 2016 1,098 35,382 7,141 110,084 - (4,782) (4,782) 6,504 6,504 66,463 - - The above statement of cash flows should be read in conjunction with the accompanying notes. Year Ended 28 February 2017 Statement of Cash Flows 2017 ANNUAL REPORT | 38 The above statement of changes in equity should be read in conjunction with the accompanying notes. Page 27 Year Ended 28 February 2017 Statement of Changes in Equity Page 28 For personal use onlyNamoi Cotton Co-operative Limited STATEMENT OF CASH FLOWS for the year ended 28 February 2017 Cash flows from operating activities Receipts from customers Currency derivative flows Payments to suppliers and employees Payments to growers Interest received Borrowing costs Rebates paid to grower members Net cash inflow from operating activities Cash flows from investing activities Consolidated $'000 Parent $'000 Note 28 Feb 2017 29 Feb 2016 28 Feb 2017 29 Feb 2016 391,605 306,374 391,300 306,128 165 (365) 165 (365) (66,742) (62,924) (66,507) (62,652) (316,437) (238,027) (316,455) (238,028) (3,114) 1 - 6 (2,741) (502) (3,142) 1 - 1 (2,762) (502) 6b 5,478 1,821 5,362 1,820 Payments for property, plant and equipment (4,446) (5,675) (4,446) (5,675) Proceeds from sale of property, plant and equipment Loans advanced Proceeds from loans receivable Distributions received (partnership and JV) Net cash outflow from investing activities Cash flows from financing activities Proceeds from issue of grower member shares Payments for repurchases of grower member shares Proceeds from borrowings Repayment of borrowings Loans advanced to growers Proceeds from repayment of grower loans Repayment of finance lease and hire purchase Net cash inflow from financing activities Net increase in cash Add cash at the beginning of the financial year Cash at end of the financial year 6a 195 (23) 16 - 165 (4) 33 3,570 195 (23) 16 - 165 (4) 33 3,570 (4,258) (1,911) (4,258) (1,911) - - 28,530 (28,027) (2,287) 2,287 (4) 9 (9) 9,555 (8,059) (5,360) 5,360 (201) - - 28,530 (28,026) (2,287) 2,287 (5) 9 (9) 9,555 (8,059) (5,360) 5,360 (201) 499 1,295 499 1,295 1,719 (282) 1,437 1,205 (1,487) (282) 1,603 (287) 1,316 1,204 (1,491) (287) Namoi Cotton Co-operative Limited STATEMENT OF CHANGES IN EQUITY for the year ended 28 February 2017 Consolidated $'000 Total equity at 1 March 2016 Net profit for the period Total equity at 28 February 2017 Parent $'000 Total equity at 1 March 2016 Net profit for the period Total equity at 28 February 2017 Consolidated $'000 Total equity at 1 March 2015 Net loss for the period Asset Revaluation (net of tax) Total equity at 29 February 2016 Parent $'000 Total equity at 1 March 2015 Net loss for the period Asset Revaluation (net of tax) Total equity at 29 February 2016 Issued Capital 1,098 - 1,098 Issued Capital 1,098 - 1,098 Issued Capital 1,098 - - 1,098 Issued Capital 1,098 - - 1,098 CCU Asset Premium Revaluation Reserve (Note 19) Reserve (Note 19) Retained Earnings Total Equity 35,382 - 35,382 66,463 - 66,463 20,602 123,545 283 20,885 283 123,828 CCU Asset Premium Revaluation Reserve (Note 19) Reserve (Note 19) 35,382 - 35,382 66,463 - 66,463 CCU Asset Premium Revaluation Reserve (Note 19) Reserve (Note 19) 35,382 - - 35,382 59,959 - 6,504 66,463 CCU Asset Premium Revaluation Reserve (Note 19) Reserve (Note 19) 35,382 - - 35,382 59,959 - 6,504 66,463 Retained Earnings Total Equity 7,141 110,084 (65) 7,076 (65) 110,019 Retained Earnings Total Equity 28,160 124,599 (7,558) - 20,602 (7,558) 6,504 123,545 Retained Earnings Total Equity 11,923 108,362 (4,782) - 7,141 (4,782) 6,504 110,084 The above statement of cash flows should be read in conjunction with the accompanying notes. Year Ended 28 February 2017 Statement of Cash Flows Page 27 Year Ended 28 February 2017 Statement of Changes in Equity Page 28 2017 ANNUAL REPORT | 39 The above statement of changes in equity should be read in conjunction with the accompanying notes. For personal use onlyNamoi Cotton Co-operative Limited NOTES TO THE FINANCIAL STATEMENTS 1. Summary of Significant Accounting Policies The principal accounting policies adopted in the preparation of the financial report are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. The financial report includes separate financial statements for Namoi Cotton Co-operative Limited as an individual entity (under CO 10/654) and the consolidated entity consisting of Namoi Cotton Co-operative Limited and its subsidiaries. For the purposes of disclosure of events occurring after balance date the Directors have authorised this financial report for issue on 27 April 2017 in accordance with a resolution of the Board of Directors. The nature of the operations and principal activities of the group are described in the Directors’ Report. AASB 2014-10 Amendments to Australian Accounting Standards – Sale or Contribution of Assets between a) Basis of preparation The financial report is a general purpose financial report, which has been prepared in accordance with standards, other authoritative pronouncements of the Australian Accounting Standards Board, the Co-operatives National Law (NSW) and Corporations Act 2001. The financial statements have been prepared under the historical cost convention, except for ginning assets, derivative financial instruments, and cotton seed inventory which are measured at fair value. A workshop has been undertaken in relation to AASB 9 and 15 as part of commencing a project to assess the impacts of these new standards, however, the actual impacts and the quantum of any impacts has yet to be Deficiency of Current Assets to Current Liabilities The Group’s current liabilities exceed current assets. The net current liability position is mainly caused by the classification of the working capital facility as current. This facility is renewed each year for seasonal reasons and is not expected to be repaid in the next 12 months. • Prior to balance date Namoi Cotton completed execution of its 2017 finance facility renewal. The renewal included the extension of term debt maturity dates from February 2018 to February 2020, the extension of the • working capital facility from March 2017 to March 2018 and other minor reporting obligations (refer to note 15). • Statement of compliance The financial report complies with Australian Accounting Standards and International Financial Reporting Standards as issued by the International Accounting Standards Board. � � � � � � � � � � � � � � � Namoi Cotton Co-operative Limited AASB 2014-9 Amendments to Australian Accounting Standards – Equity Method in Separate Financial Statements effective 1 March 2016; AASB 2015-1 Amendments to Australian Accounting Standards – Annual Improvements to Australian Accounting Standards 2012-2014 Cycle [AASB 5, AASB 7, AASB 119, AASB 134] effective 1 March 2016; AASB 2015-2 Amendments to Australian Accounting Standards – Disclosure Initiative: Amendments to AASB 101 effective 1 March 2016; Certain new accounting standards and interpretations have been published that are not mandatory for 28 February 2017 reporting periods and have not yet been applied in the consolidated Financial statements. These are: AASB 9 Financial Instruments effective 1 March 2018; AASB 15 Revenue from Contracts with Customers effective 1 March 2018; an Investor and its Associate or Joint Venture effective 1 March 2018; AASB 16 Leases effective 1 March 2019. AASB 2016-1 Amendments to Australian Accounting Standards – Recognition of Deferred Tax Assets for Unrealised Losses [AASB 112] effective 1 March 2017; AASB 2016-2 Amendments to Australian Accounting Standards – Disclosure Initiative: Amendments to AASB 107 Statement of Cash Flows effective 1 March 2017; finalised. b) Seasonality of operations Cotton Ginning, one of Namoi Cottons business segments, operates on a seasonal basis whereby ginning normally occurs between March to July each year. Accordingly, that segment traditionally generates profits in the first half year and incurs losses in the second half year during the ensuing maintenance period. Namoi Cotton’s marketing segment, represented by sales to NCA and its residual 51% share in the joint venture, generally takes delivery of lint cotton from growers in the first half of the year predominately from March to August. Under NCA’s accounting policies, profits on lint marketing occur when the joint venture takes delivery of the lint cotton from the grower. c) Basis of consolidation The consolidated financial statements comprise the financial statements of Namoi and its subsidiaries as at 28 February 2017. Control is achieved when Namoi is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, Namoi controls an investee if and only if the group has: Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee); Exposure, or rights, to variable returns from its involvement with the investee; and The ability to use its power over the investee to affect its returns. When Namoi has less than a majority of the voting or similar rights of an investee, Namoi considers all relevant facts and circumstances in assessing whether it has power over an investee, including: The contractual arrangement with the other vote holders of the investee; Rights arising from other contractual arrangements; and The Namoi’s voting rights and potential voting rights. Namoi re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when Namoi obtains control over the subsidiary and ceases when Namoi loses control of the subsidiary. Assets, liabilities, Determination of fair value on cotton seed inventory (refer to Note 1) and derivative financial instruments (refer to Note 1); Impairment testing of property plant and equipment (refer to Note 1m); Fair value of ginning assets (refer Note 1m); Classification of associates (refer to Note 1c); Treatment of deferred tax balances including tax loss recognition (refer to Note 1f); and Assessment of the useful lives of assets (refer to Note 1m) New accounting standards and interpretations New standards and amendments to standards that are mandatory for the first time for the financial year beginning 1 March 2016 have been adopted by the Group. The adoption of these standards had no material financial impact on the current period or any prior period and is not likely to affect future periods. � • Significant accounting judgments, estimates and assumptions The preparation of the financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts in the financial statements over the following primary areas: � • AASB 2015-3 Amendments to Australian Accounting Standards arising from the Withdrawal of AASB 1031 Materiality effective 1 March 2016; AASB 2014-4 Amendments to Clarification of Acceptable Methods of Depreciation and Amortisation (Amendments to AASB 116 & AASB 138) effective 1 March 2016; AASB 1057 Amendments to Australian Accounting Standards – Annual Improvements to Australian Accounting Standards 2012-14 Cycle effective 1 March 2016; � • � • � • � • � • � • � • Year Ended 28 February 2017 Notes to the Financial Statements 2017 ANNUAL REPORT | 40 Page 29 Year Ended 28 February 2017 Notes to the Financial Statements Page 30 For personal use onlyNamoi Cotton Co-operative Limited NOTES TO THE FINANCIAL STATEMENTS 1. Summary of Significant Accounting Policies The principal accounting policies adopted in the preparation of the financial report are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. The financial report includes separate financial statements for Namoi Cotton Co-operative Limited as an individual entity (under CO 10/654) and the consolidated entity consisting of Namoi Cotton Co-operative Limited and its subsidiaries. For the purposes of disclosure of events occurring after balance date the Directors have authorised this financial report for issue on 27 April 2017 in accordance with a resolution of the Board of Directors. The nature of the operations and principal activities of the group are described in the Directors’ Report. a) Basis of preparation The financial report is a general purpose financial report, which has been prepared in accordance with standards, other authoritative pronouncements of the Australian Accounting Standards Board, the Co-operatives National Law (NSW) and Corporations Act 2001. The financial statements have been prepared under the historical cost convention, except for ginning assets, derivative financial instruments, and cotton seed inventory which are measured at fair value. Deficiency of Current Assets to Current Liabilities The Group’s current liabilities exceed current assets. The net current liability position is mainly caused by the classification of the working capital facility as current. This facility is renewed each year for seasonal reasons and is not expected to be repaid in the next 12 months. Prior to balance date Namoi Cotton completed execution of its 2017 finance facility renewal. The renewal included the extension of term debt maturity dates from February 2018 to February 2020, the extension of the working capital facility from March 2017 to March 2018 and other minor reporting obligations (refer to note 15). Statement of compliance The financial report complies with Australian Accounting Standards and International Financial Reporting Standards as issued by the International Accounting Standards Board. Significant accounting judgments, estimates and assumptions The preparation of the financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts in the financial statements over the following primary areas: Determination of fair value on cotton seed inventory (refer to Note 1) and derivative financial instruments (refer to Note 1); Impairment testing of property plant and equipment (refer to Note 1m); Fair value of ginning assets (refer Note 1m); Classification of associates (refer to Note 1c); Treatment of deferred tax balances including tax loss recognition (refer to Note 1f); and Assessment of the useful lives of assets (refer to Note 1m) New accounting standards and interpretations New standards and amendments to standards that are mandatory for the first time for the financial year beginning 1 March 2016 have been adopted by the Group. The adoption of these standards had no material financial impact on the current period or any prior period and is not likely to affect future periods. AASB 2015-3 Amendments to Australian Accounting Standards arising from the Withdrawal of AASB 1031 Materiality effective 1 March 2016; AASB 2014-4 Amendments to Clarification of Acceptable Methods of Depreciation and Amortisation (Amendments to AASB 116 & AASB 138) effective 1 March 2016; AASB 1057 Amendments to Australian Accounting Standards – Annual Improvements to Australian Accounting Standards 2012-14 Cycle effective 1 March 2016; � � � � � � � � � Namoi Cotton Co-operative Limited � • � • � • AASB 2014-9 Amendments to Australian Accounting Standards – Equity Method in Separate Financial Statements effective 1 March 2016; AASB 2015-1 Amendments to Australian Accounting Standards – Annual Improvements to Australian Accounting Standards 2012-2014 Cycle [AASB 5, AASB 7, AASB 119, AASB 134] effective 1 March 2016; AASB 2015-2 Amendments to Australian Accounting Standards – Disclosure Initiative: Amendments to AASB 101 effective 1 March 2016; Certain new accounting standards and interpretations have been published that are not mandatory for 28 February 2017 reporting periods and have not yet been applied in the consolidated Financial statements. These are: � • � • � • AASB 9 Financial Instruments effective 1 March 2018; AASB 15 Revenue from Contracts with Customers effective 1 March 2018; AASB 2014-10 Amendments to Australian Accounting Standards – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture effective 1 March 2018; AASB 16 Leases effective 1 March 2019. AASB 2016-1 Amendments to Australian Accounting Standards – Recognition of Deferred Tax Assets for Unrealised Losses [AASB 112] effective 1 March 2017; AASB 2016-2 Amendments to Australian Accounting Standards – Disclosure Initiative: Amendments to AASB 107 Statement of Cash Flows effective 1 March 2017; � • � • � • A workshop has been undertaken in relation to AASB 9 and 15 as part of commencing a project to assess the impacts of these new standards, however, the actual impacts and the quantum of any impacts has yet to be finalised. b) Seasonality of operations Cotton Ginning, one of Namoi Cottons business segments, operates on a seasonal basis whereby ginning normally occurs between March to July each year. Accordingly, that segment traditionally generates profits in the first half year and incurs losses in the second half year during the ensuing maintenance period. Namoi Cotton’s marketing segment, represented by sales to NCA and its residual 51% share in the joint venture, generally takes delivery of lint cotton from growers in the first half of the year predominately from March to August. Under NCA’s accounting policies, profits on lint marketing occur when the joint venture takes delivery of the lint cotton from the grower. c) Basis of consolidation The consolidated financial statements comprise the financial statements of Namoi and its subsidiaries as at 28 February 2017. Control is achieved when Namoi is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, Namoi controls an investee if and only if the group has: � • Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee); Exposure, or rights, to variable returns from its involvement with the investee; and The ability to use its power over the investee to affect its returns. � • � • When Namoi has less than a majority of the voting or similar rights of an investee, Namoi considers all relevant facts and circumstances in assessing whether it has power over an investee, including: � • � • � • The contractual arrangement with the other vote holders of the investee; Rights arising from other contractual arrangements; and The Namoi’s voting rights and potential voting rights. Namoi re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when Namoi obtains control over the subsidiary and ceases when Namoi loses control of the subsidiary. Assets, liabilities, Year Ended 28 February 2017 Notes to the Financial Statements Page 29 Year Ended 28 February 2017 Notes to the Financial Statements Page 30 2017 ANNUAL REPORT | 41 For personal use onlyNamoi Cotton Co-operative Limited Namoi Cotton Co-operative Limited income and expenses of a subsidiary acquired or disposed of during the year are included in the statement of comprehensive income from the date Namoi gains control until the date Namoi ceases to control the subsidiary. Namoi calculates the amount of impairment as the difference between the recoverable amount of the associate or joint venture and its carrying value, then recognises the loss as ‘Share of profit of an associate and a joint Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity holders of the parent of Namoi and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with Namoi’s accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of Namoi are eliminated in full on consolidation. A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If Namoi loses control over a subsidiary, it: � • � • � • � • � • � • � • De-recognises the assets (including goodwill) and liabilities of the subsidiary; De-recognises the carrying amount of any non-controlling interests; De-recognises the cumulative translation differences recorded in equity; Recognises the fair value of the consideration received; Recognises the fair value of any investment retained; Recognises any surplus or deficit in profit or loss; and Reclassifies the parent’s share of components previously recognised in OCI to profit or loss or retained earnings, as appropriate, as would be required if Namoi had directly disposed of the related assets or liabilities. Investment in associates and joint ventures An associate is an entity over which Namoi has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies. A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control. The considerations made in determining significant influence or joint control are similar to those necessary to determine control over subsidiaries. Namoi’s investments in its associate and joint venture are accounted for using the equity method. Under the equity method, the investment in an associate or a joint venture is initially recognised at cost. The carrying amount of the investment is adjusted to recognise changes in Namoi’s share of net assets of the associate or joint venture since the acquisition date. Goodwill relating to the associate or joint venture is included in the carrying amount of the investment and is neither amortised nor individually tested for impairment. The statement of profit or loss reflects Namoi’s share of the results of operations of the associate or joint venture. Any change in OCI of those investees is presented as part of the Namoi’s OCI. In addition, when there has been a change recognised directly in the equity of the associate or joint venture, Namoi recognises its share of any changes, when applicable, in the statement of changes in equity. Unrealised gains and losses resulting from transactions between Namoi and the associate or joint venture are eliminated to the extent of the interest in the associate or joint venture. The aggregate of Namoi’s share of profit or loss of an associate and a joint venture is shown on the face of the statement of profit or loss outside operating profit and represents profit or loss after tax and non-controlling interests in the subsidiaries of the associate or joint venture. The financial statements of the associate or joint venture are prepared for the same reporting period as Namoi. When necessary, adjustments are made to bring the accounting policies in line with those of Namoi. After application of the equity method, Namoi determines whether it is necessary to recognise an impairment loss on its investment in its associate or joint venture. At each reporting date, Namoi determines whether there is objective evidence that the investment in the associate or joint venture is impaired. If there is such evidence, Year Ended 28 February 2017 Notes to the Financial Statements 2017 ANNUAL REPORT | 42 Page 31 Page 32 venture’ in the statement of profit or loss. Upon loss of significant influence over the associate or joint control over the joint venture, Namoi measures and recognises any retained investment at its fair value. Any difference between the carrying amount of the associate or joint venture upon loss of significant influence or joint control and the fair value of the retained investment and proceeds from disposal is recognised in profit or loss. Joint operations Namoi determines its interest in the assets and liabilities relating to each joint operation on the basis of its rights and obligations in a specified proportion in accordance with the contractual arrangement. Namoi recognises the following at its share: Assets, including its share of any assets held jointly Liabilities, including its share of any liabilities incurred jointly Revenue from the sale of its share of the output arising from the joint operation Share of the revenue from the sale of the output by the joint operation Expenses, including its share of any expenses incurred jointly. � � � � � Interests in jointly controlled assets have been incorporated in the financial statements under the appropriate Jointly controlled assets headings. d) Foreign currency translation Items included in the financial statements of each of the group’s entities are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). The consolidated financial statements are presented in Australian dollars, which is Namoi Cotton Co-operative Limited’s functional and presentation currency. Transactions denominated in foreign currencies are initially recorded in the functional currency at the exchange rates prevailing at the date of the transaction. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of foreign currency denominated monetary assets and liabilities using rates of exchange applicable at balance date are recognised in the statement of comprehensive income. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the date of the initial transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Revenue is recognised to the extent that it is probable that the economic benefits will flow to the entity and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue Sale of lint cotton, cotton seed and grain commodities Sales revenue is brought to account when the terms of delivery under the sales contract have been satisfied. Fair value of forward cotton seed commodity sale contracts is determined with reference to prevailing prices at e) Revenue recognition is recognised. reporting date. Derivatives statement of comprehensive income. Year Ended 28 February 2017 Notes to the Financial Statements Derivatives including forward cotton seed commodity purchase and sale contracts and forward exchange contracts are stated at fair value with any gains or losses arising from changes in fair value taken directly to the For personal use onlyNamoi Cotton Co-operative Limited Namoi Cotton Co-operative Limited income and expenses of a subsidiary acquired or disposed of during the year are included in the statement of comprehensive income from the date Namoi gains control until the date Namoi ceases to control the subsidiary. Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity holders of the parent of Namoi and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with Namoi’s accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of Namoi are eliminated in full on consolidation. A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If Namoi loses control over a subsidiary, it: De-recognises the assets (including goodwill) and liabilities of the subsidiary; De-recognises the carrying amount of any non-controlling interests; De-recognises the cumulative translation differences recorded in equity; Recognises the fair value of the consideration received; Recognises the fair value of any investment retained; Recognises any surplus or deficit in profit or loss; and � � � � � � � Reclassifies the parent’s share of components previously recognised in OCI to profit or loss or retained earnings, as appropriate, as would be required if Namoi had directly disposed of the related assets or liabilities. Investment in associates and joint ventures An associate is an entity over which Namoi has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies. A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control. The considerations made in determining significant influence or joint control are similar to those necessary to determine control over subsidiaries. Namoi’s investments in its associate and joint venture are accounted for using the equity method. Under the equity method, the investment in an associate or a joint venture is initially recognised at cost. The carrying amount of the investment is adjusted to recognise changes in Namoi’s share of net assets of the associate or joint venture since the acquisition date. Goodwill relating to the associate or joint venture is included in the carrying amount of the investment and is neither amortised nor individually tested for impairment. The statement of profit or loss reflects Namoi’s share of the results of operations of the associate or joint venture. Any change in OCI of those investees is presented as part of the Namoi’s OCI. In addition, when there has been a change recognised directly in the equity of the associate or joint venture, Namoi recognises its share of any changes, when applicable, in the statement of changes in equity. Unrealised gains and losses resulting from transactions between Namoi and the associate or joint venture are eliminated to the extent of the interest in the associate or joint venture. The aggregate of Namoi’s share of profit or loss of an associate and a joint venture is shown on the face of the statement of profit or loss outside operating profit and represents profit or loss after tax and non-controlling interests in the subsidiaries of the associate or joint venture. The financial statements of the associate or joint venture are prepared for the same reporting period as Namoi. When necessary, adjustments are made to bring the accounting policies in line with those of Namoi. After application of the equity method, Namoi determines whether it is necessary to recognise an impairment loss on its investment in its associate or joint venture. At each reporting date, Namoi determines whether there is objective evidence that the investment in the associate or joint venture is impaired. If there is such evidence, Namoi calculates the amount of impairment as the difference between the recoverable amount of the associate or joint venture and its carrying value, then recognises the loss as ‘Share of profit of an associate and a joint venture’ in the statement of profit or loss. Upon loss of significant influence over the associate or joint control over the joint venture, Namoi measures and recognises any retained investment at its fair value. Any difference between the carrying amount of the associate or joint venture upon loss of significant influence or joint control and the fair value of the retained investment and proceeds from disposal is recognised in profit or loss. Joint operations Namoi determines its interest in the assets and liabilities relating to each joint operation on the basis of its rights and obligations in a specified proportion in accordance with the contractual arrangement. Namoi recognises the following at its share: � • � • � • � • � • Assets, including its share of any assets held jointly Liabilities, including its share of any liabilities incurred jointly Revenue from the sale of its share of the output arising from the joint operation Share of the revenue from the sale of the output by the joint operation Expenses, including its share of any expenses incurred jointly. Jointly controlled assets Interests in jointly controlled assets have been incorporated in the financial statements under the appropriate headings. d) Foreign currency translation Items included in the financial statements of each of the group’s entities are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). The consolidated financial statements are presented in Australian dollars, which is Namoi Cotton Co-operative Limited’s functional and presentation currency. Transactions denominated in foreign currencies are initially recorded in the functional currency at the exchange rates prevailing at the date of the transaction. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of foreign currency denominated monetary assets and liabilities using rates of exchange applicable at balance date are recognised in the statement of comprehensive income. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the date of the initial transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. e) Revenue recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the entity and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised. Sale of lint cotton, cotton seed and grain commodities Sales revenue is brought to account when the terms of delivery under the sales contract have been satisfied. Fair value of forward cotton seed commodity sale contracts is determined with reference to prevailing prices at reporting date. Derivatives Derivatives including forward cotton seed commodity purchase and sale contracts and forward exchange contracts are stated at fair value with any gains or losses arising from changes in fair value taken directly to the statement of comprehensive income. Year Ended 28 February 2017 Notes to the Financial Statements Page 31 Year Ended 28 February 2017 Notes to the Financial Statements Page 32 2017 ANNUAL REPORT | 43 For personal use onlyNamoi Cotton Co-operative Limited The fair value of forward exchange contracts is calculated by reference to current forward exchange rates for contracts with similar maturity profiles. Ginning revenue Ginning charges are invoiced to growers for services connected with the processing of seed cotton to lint cotton. Revenue is brought to account on all production performed during the period. Interest revenue Interest revenue is brought to account when entitlement to interest occurs using the effective interest method. Dividend revenue Dividend revenue is brought to account when the group’s right to receive is established. Rental revenue Rental income is brought to account when received. f) Taxes Income Tax The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based upon the prevailing income tax rate 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 as to available carried forward taxation losses. The carrying amount of deferred income tax assets is reviewed at each balance date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised deferred income tax assets are reassessed at each balance sheet date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at balance date. Deferred tax assets and deferred tax liabilities are offset only where such offset is enforceable and where the asset and liability relate to the same taxpaying entity and the same taxation authority. Income taxes relating to items recognised directly in equity are recognised in equity and not in the statement of comprehensive income. Cotton seed inventory is carried at fair value less costs to sell. Tax consolidation legislation Namoi Cotton Co-operative Limited is the head entity of the tax consolidated group comprising all wholly owned controlled entities. The group has applied the group allocation method in determining the appropriate amount of current and deferred taxes to allocate to the members of the tax consolidated group. Goods and services tax (GST) Revenues, expenses and assets are recognised net of the amount of GST except: � where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, • in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and receivables and payables are stated with the amount of GST included. � • The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position. Cash flows are included in the statement of cash flows on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority, are classified as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority. Year Ended 28 February 2017 Notes to the Financial Statements 2017 ANNUAL REPORT | 44 Page 33 Year Ended 28 February 2017 Notes to the Financial Statements Page 34 Namoi Cotton Co-operative Limited g) Leases Leases are classified at their inception as either operating or finance leases based on the economic substance of the agreement so as to reflect the risks and benefits incidental to ownership. Finance leases, which transfer to the group substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against income. Capitalised leased assets are depreciated in accordance with the depreciation methodology applicable for the type of asset subject to the lease. However, if no reasonable certainty exists to indicate the asset will be acquired at the end of the lease term the asset is depreciated over the shorter of the estimated useful life of the asset or the lease term. The minimum lease payments of operating leases, where the lessor effectively retains substantially all of the risks and benefits of ownership of the leased item, are recognised as an expense on a straight-line basis over the period of the operating lease. h) Cash and cash equivalents Cash on hand and in banks and short-term deposits are stated at nominal value. For the purposes of the statement of cash flows, cash includes cash on hand and in banks and investments in money market instruments readily convertible to cash within two working days, net of outstanding bank overdrafts. Bank overdrafts are carried at the principal amount. Interest is recognised as an expense as it accrues. i) Trade and other receivables Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less an allowance for impairment for any uncollectible debts. Trade receivables are generally due for settlement within 30 days. They are presented as current assets unless collection is not expected for more than 12 months after the reporting date. The recoverability of trade and grower loans is reviewed on an ongoing basis. An estimate for doubtful debts is made when collection of the full nominal amount is no longer probable. Bad debts are written off as incurred. j) Inventories Cotton seed Fair value reflects the price at which an orderly transaction to settle same inventory in the principle (or most advantageous) market for that inventory would take place between market participants at the measurement date. Costs to sell incorporate anticipated future delivery costs, commissions and brokerage. Fair value less costs to sell may be higher or lower than cost with any differences taken to the statement of comprehensive income. Grain commodities and consumables and net realisable value. Grain commodities and consumables (operating supplies and spares) are carried at the lower of average cost Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale. For personal use onlyThe fair value of forward exchange contracts is calculated by reference to current forward exchange rates for g) Leases Namoi Cotton Co-operative Limited Namoi Cotton Co-operative Limited contracts with similar maturity profiles. Ginning charges are invoiced to growers for services connected with the processing of seed cotton to lint cotton. Revenue is brought to account on all production performed during the period. Interest revenue is brought to account when entitlement to interest occurs using the effective interest method. Dividend revenue is brought to account when the group’s right to receive is established. Rental revenue Rental income is brought to account when received. Ginning revenue Interest revenue Dividend revenue f) Taxes Income Tax The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based upon the prevailing income tax rate 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 as to available carried forward taxation losses. The carrying amount of deferred income tax assets is reviewed at each balance date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised deferred income tax assets are reassessed at each balance sheet date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at balance date. comprehensive income. Tax consolidation legislation Namoi Cotton Co-operative Limited is the head entity of the tax consolidated group comprising all wholly owned controlled entities. The group has applied the group allocation method in determining the appropriate amount of current and deferred taxes to allocate to the members of the tax consolidated group. Goods and services tax (GST) Revenues, expenses and assets are recognised net of the amount of GST except: � where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and � receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position. Cash flows are included in the statement of cash flows on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority, are classified as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority. Leases are classified at their inception as either operating or finance leases based on the economic substance of the agreement so as to reflect the risks and benefits incidental to ownership. Finance leases, which transfer to the group substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against income. Capitalised leased assets are depreciated in accordance with the depreciation methodology applicable for the type of asset subject to the lease. However, if no reasonable certainty exists to indicate the asset will be acquired at the end of the lease term the asset is depreciated over the shorter of the estimated useful life of the asset or the lease term. The minimum lease payments of operating leases, where the lessor effectively retains substantially all of the risks and benefits of ownership of the leased item, are recognised as an expense on a straight-line basis over the period of the operating lease. h) Cash and cash equivalents Cash on hand and in banks and short-term deposits are stated at nominal value. For the purposes of the statement of cash flows, cash includes cash on hand and in banks and investments in money market instruments readily convertible to cash within two working days, net of outstanding bank overdrafts. Bank overdrafts are carried at the principal amount. Interest is recognised as an expense as it accrues. i) Trade and other receivables Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less an allowance for impairment for any uncollectible debts. Trade receivables are generally due for settlement within 30 days. They are presented as current assets unless collection is not expected for more than 12 months after the reporting date. The recoverability of trade and grower loans is reviewed on an ongoing basis. An estimate for doubtful debts is made when collection of the full nominal amount is no longer probable. Bad debts are written off as incurred. Deferred tax assets and deferred tax liabilities are offset only where such offset is enforceable and where the asset and liability relate to the same taxpaying entity and the same taxation authority. j) Inventories Income taxes relating to items recognised directly in equity are recognised in equity and not in the statement of Cotton seed Cotton seed inventory is carried at fair value less costs to sell. Fair value reflects the price at which an orderly transaction to settle same inventory in the principle (or most advantageous) market for that inventory would take place between market participants at the measurement date. Costs to sell incorporate anticipated future delivery costs, commissions and brokerage. Fair value less costs to sell may be higher or lower than cost with any differences taken to the statement of comprehensive income. Grain commodities and consumables Grain commodities and consumables (operating supplies and spares) are carried at the lower of average cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale. Year Ended 28 February 2017 Notes to the Financial Statements Page 33 Year Ended 28 February 2017 Notes to the Financial Statements Page 34 2017 ANNUAL REPORT | 45 For personal use onlyNamoi Cotton Co-operative Limited k) Derivative financial instruments The group uses derivative financial instruments such as foreign exchange contracts to manage the risks associated with foreign currency contracts to manage the risks associated with foreign currency. Such derivative financial instruments are stated at fair value with any gains or losses arising from changes in fair value taken directly to the statement of comprehensive income. The fair value of forward exchange contracts is calculated by reference to current forward exchange rates for contracts with similar maturity profiles. The fair value of cotton futures and options contracts is determined by reference to commodity prices with similar maturity profiles. Forward commodity purchase and sale contracts are classified as derivatives measured at fair value. Fair value is determined with reference to prevailing prices at reporting date. Major depreciation rates are: The group uses interest rate derivatives to manage its risks associated with interest rate fluctuations. These derivatives have not been designated as hedging instruments and are accordingly initially recognised at fair value on the date on which the contract is entered into and are subsequently remeasured to fair value. Changes in fair value are recognised directly in the statement of comprehensive income as finance costs. Fair value is determined by reference to market values for similar instruments. l) Recoverable amounts of assets At each reporting date, the group assesses whether there is any indication that an asset may be impaired. Where an indicator of impairment exists, the group makes a formal estimate of recoverable amount. Where the carrying amount of an asset exceeds its recoverable amount the asset is considered impaired and is written down to its recoverable amount. Recoverable amount is the greater of fair value less costs to sell and value in use. It is determined for an individual asset, unless the asset’s value in use cannot be estimated to be close to its fair value less costs to sell and it does not generate cash inflows that are largely independent of those from other assets or groups of assets, in which case, the recoverable amount is determined for the cash-generating unit to which the asset belongs. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. m) Property, plant and equipment Cost and valuation Gin, warehouse, other infrastructure and major equipment assets are measured at fair value (refer to Note 1x) less accumulated depreciation and any impairments recognised after the date of revaluation. Valuations are performed frequently to ensure that the fair value of revalued assets does not differ materially from its carrying value. Any revaluation surplus is recorded in other comprehensive income and hence, credited to the asset revaluation reserve in equity (less the income tax effect), except to the extent that it reverses a revaluation decrease of the same asset previously recognized in the income statement, in which case, the increase is recognized in the income statement. A revaluation deficit is recognized in the income statement, except to the extent that it offsets an existing surplus on the same asset recognized in the asset revaluation reserve. Upon disposal or derecognition, any revaluation reserve relating to the particular asset being sold is transferred to retained earnings. Other assets are carried at cost less accumulated depreciation and any accumulated impairments in value. Year Ended 28 February 2017 Notes to the Financial Statements 2017 ANNUAL REPORT | 46 Page 35 Page 36 Namoi Cotton Co-operative Limited Depreciation A change in the assessment of the remaining useful life of ginning assets (which is a change in estimate) was made at the start of the 2017 financial year. The change has increased the remaining useful life of the ginning assets with the effect of reducing depreciation for the year from $7.3m to $6.2m. Any impact in the next financial year will be dependent upon actual ginning volumes at the time. Ginning infrastructure assets are depreciated on a units of production basis over their rolling estimated remaining useful lives of 20 years (2016: 10 to 20 years). All other property, plant and equipment, other than freehold land, is depreciated on a straight-line basis at rates calculated to allocate the cost less estimated residual value at the end of the useful lives of the assets against revenue over their estimated useful lives. 20 years (2016: 10 to 20 years) 3 to 44 years Ginning assets Other assets Impairment events. asset. The recoverable amounts of plant and equipment are compared to carrying values when indicators of potential impairment exist. These indicators include but are not limited to significant industry, economic and agronomic The recoverable amounts of plant and equipment are the greater of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. Where the carrying values exceed the estimated recoverable amount, the assets or cash-generating units are An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of comprehensive income in the written down to their recoverable amount. Disposal are expected from its use or disposal. year the asset is derecognised. n) Trade and other payables Liabilities for trade creditors and accruals are carried at cost, which is the fair value of the consideration to be paid in the future for goods and services received, whether or not billed to the entity. o) Interest-bearing loans and borrowings All interest-bearing liabilities are initially measured at fair value of the consideration received less attributable transaction costs and subsequently at amortised cost using the effective interest method. Interest is charged on non-related party borrowings as an expense as it accrues. Provisions are recognised when the economic entity has a legal, equitable or constructive obligation to make a future sacrifice of economic benefits to other entities as a result of past transactions or other past events, it is probable that a future sacrifice of economic benefits will be required and a reliable estimate can be made of the p) Provisions amount of the obligation. Year Ended 28 February 2017 Notes to the Financial Statements For personal use onlyNamoi Cotton Co-operative Limited k) Derivative financial instruments The group uses derivative financial instruments such as foreign exchange contracts to manage the risks associated with foreign currency contracts to manage the risks associated with foreign currency. Such derivative financial instruments are stated at fair value with any gains or losses arising from changes in fair value taken directly to the statement of comprehensive income. The fair value of forward exchange contracts is calculated by reference to current forward exchange rates for contracts with similar maturity profiles. The fair value of cotton futures and options contracts is determined by reference to commodity prices with similar maturity profiles. Namoi Cotton Co-operative Limited Depreciation A change in the assessment of the remaining useful life of ginning assets (which is a change in estimate) was made at the start of the 2017 financial year. The change has increased the remaining useful life of the ginning assets with the effect of reducing depreciation for the year from $7.3m to $6.2m. Any impact in the next financial year will be dependent upon actual ginning volumes at the time. Ginning infrastructure assets are depreciated on a units of production basis over their rolling estimated remaining useful lives of 20 years (2016: 10 to 20 years). All other property, plant and equipment, other than freehold land, is depreciated on a straight-line basis at rates calculated to allocate the cost less estimated residual value at the end of the useful lives of the assets against revenue over their estimated useful lives. Forward commodity purchase and sale contracts are classified as derivatives measured at fair value. Fair value Major depreciation rates are: is determined with reference to prevailing prices at reporting date. Ginning assets Other assets 20 years (2016: 10 to 20 years) 3 to 44 years Impairment The recoverable amounts of plant and equipment are compared to carrying values when indicators of potential impairment exist. These indicators include but are not limited to significant industry, economic and agronomic events. The recoverable amounts of plant and equipment are the greater of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. Where the carrying values exceed the estimated recoverable amount, the assets or cash-generating units are written down to their recoverable amount. Disposal An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of comprehensive income in the year the asset is derecognised. Gin, warehouse, other infrastructure and major equipment assets are measured at fair value (refer to Note 1x) less accumulated depreciation and any impairments recognised after the date of revaluation. Valuations are performed frequently to ensure that the fair value of revalued assets does not differ materially from its carrying n) Trade and other payables Any revaluation surplus is recorded in other comprehensive income and hence, credited to the asset revaluation reserve in equity (less the income tax effect), except to the extent that it reverses a revaluation decrease of the same asset previously recognized in the income statement, in which case, the increase is recognized in the income statement. A revaluation deficit is recognized in the income statement, except to the extent that it offsets an existing surplus on the same asset recognized in the asset revaluation reserve. Upon disposal or derecognition, any revaluation reserve relating to the particular asset being sold is transferred to retained Liabilities for trade creditors and accruals are carried at cost, which is the fair value of the consideration to be paid in the future for goods and services received, whether or not billed to the entity. o) Interest-bearing loans and borrowings All interest-bearing liabilities are initially measured at fair value of the consideration received less attributable transaction costs and subsequently at amortised cost using the effective interest method. Interest is charged on non-related party borrowings as an expense as it accrues. Other assets are carried at cost less accumulated depreciation and any accumulated impairments in value. p) Provisions Provisions are recognised when the economic entity has a legal, equitable or constructive obligation to make a future sacrifice of economic benefits to other entities as a result of past transactions or other past events, it is probable that a future sacrifice of economic benefits will be required and a reliable estimate can be made of the amount of the obligation. Year Ended 28 February 2017 Notes to the Financial Statements Page 35 Year Ended 28 February 2017 Notes to the Financial Statements Page 36 2017 ANNUAL REPORT | 47 The group uses interest rate derivatives to manage its risks associated with interest rate fluctuations. These derivatives have not been designated as hedging instruments and are accordingly initially recognised at fair value on the date on which the contract is entered into and are subsequently remeasured to fair value. Changes in fair value are recognised directly in the statement of comprehensive income as finance costs. Fair value is determined by reference to market values for similar instruments. l) Recoverable amounts of assets At each reporting date, the group assesses whether there is any indication that an asset may be impaired. Where an indicator of impairment exists, the group makes a formal estimate of recoverable amount. Where the carrying amount of an asset exceeds its recoverable amount the asset is considered impaired and is written down to its recoverable amount. Recoverable amount is the greater of fair value less costs to sell and value in use. It is determined for an individual asset, unless the asset’s value in use cannot be estimated to be close to its fair value less costs to sell and it does not generate cash inflows that are largely independent of those from other assets or groups of assets, in which case, the recoverable amount is determined for the cash-generating unit to which the asset belongs. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the m) Property, plant and equipment Cost and valuation asset. value. earnings. For personal use onlyNamoi Cotton Co-operative Limited A provision for distribution is recognised as a liability when the dividends are declared, determined or publicly recommended on or before the reporting date. q) Capital stock Capital stock is recognised at the fair value of the consideration received. Any transaction costs arising on transactions relating to the issue or redemption of capital stock are recognised directly in equity as a reduction of the consideration received or as an increase to the consideration paid. r) Grower member share capital Grower member share (co-operative grower member share) capital is recognised as a liability in the balance sheet due to their fixed entitlement to the return of capital in the amount of $2.70 per grower member share per the co-operative rules. The classification as debt is in strict compliance with AASB 132 Financial Instruments: Presentation. The equitable rights attached to the grower member shares regarding voting capital entitlements and rebate eligibility has not changed as a result of this reclassification. Rebates payable to active grower member shareholders are recorded in the statement of comprehensive income as other expenses. s) Share-based payment transactions The group has provided benefits to permanent employees (not including directors) in the form of participation in the employee share plan after a qualifying period. Shares are issued under the plan at a 5% discount to the average market price of the five days preceding the offer. The plan was suspended in August 2004. t) Employee benefits Provision is made for employee benefits accumulated as a result of employees rendering services up to the reporting date. These benefits include wages and salaries, annual leave, sick leave and long service leave. Liabilities arising in respect of wages and salaries, annual leave and any other employee benefits expected to be settled within twelve months of the reporting date are measured at their nominal amounts based on remuneration rates which are expected to be paid when the liability is settled. All other employee benefit liabilities are measured at the present value of the estimated future cash outflow to be made in respect of services provided by employees up to the reporting date. In determining the present value of future cash outflows, the interest rates attaching to high quality corporate bonds that have terms to maturity approximating the terms of the related liability are used. Employee benefits are recognised against profits when they are respectively paid or payable. u) Finance costs Finance costs are recognised as expenses in the periods in which they are incurred with the exception of interest rate derivatives recognised at fair value and the amortisation of ancillary costs incurred with the arrangement of borrowings, which are amortised over the period of the facility. Finance costs include: � • interest on bank overdrafts and short term and long term borrowings using the effective interest method; and fair value movements in interest rate derivatives. � • v) Earnings per unit Basic earnings per unit is determined by dividing the profit attributable to members, adjusted to exclude costs of servicing equity (other than distributions) by the weighted average number of units. Year Ended 28 February 2017 Notes to the Financial Statements 2017 ANNUAL REPORT | 48 Page 37 For personal use onlyNamoi Cotton Co-operative Limited Namoi Cotton Co-operative Limited A provision for distribution is recognised as a liability when the dividends are declared, determined or publicly recommended on or before the reporting date. q) Capital stock Capital stock is recognised at the fair value of the consideration received. Any transaction costs arising on transactions relating to the issue or redemption of capital stock are recognised directly in equity as a reduction of the consideration received or as an increase to the consideration paid. r) Grower member share capital Grower member share (co-operative grower member share) capital is recognised as a liability in the balance sheet due to their fixed entitlement to the return of capital in the amount of $2.70 per grower member share per the co-operative rules. The classification as debt is in strict compliance with AASB 132 Financial Instruments: Presentation. The equitable rights attached to the grower member shares regarding voting capital entitlements and rebate eligibility has not changed as a result of this reclassification. Rebates payable to active grower member shareholders are recorded in the statement of comprehensive income as other expenses. s) Share-based payment transactions The group has provided benefits to permanent employees (not including directors) in the form of participation in the employee share plan after a qualifying period. Shares are issued under the plan at a 5% discount to the average market price of the five days preceding the offer. The plan was suspended in August 2004. t) Employee benefits Provision is made for employee benefits accumulated as a result of employees rendering services up to the reporting date. These benefits include wages and salaries, annual leave, sick leave and long service leave. Liabilities arising in respect of wages and salaries, annual leave and any other employee benefits expected to be settled within twelve months of the reporting date are measured at their nominal amounts based on remuneration rates which are expected to be paid when the liability is settled. All other employee benefit liabilities are measured at the present value of the estimated future cash outflow to be made in respect of services provided by employees up to the reporting date. In determining the present value of future cash outflows, the interest rates attaching to high quality corporate bonds that have terms to maturity approximating the terms of the related liability are used. Employee benefits are recognised against profits when they are respectively paid or payable. u) Finance costs Finance costs are recognised as expenses in the periods in which they are incurred with the exception of interest rate derivatives recognised at fair value and the amortisation of ancillary costs incurred with the arrangement of borrowings, which are amortised over the period of the facility. Finance costs include: interest on bank overdrafts and short term and long term borrowings using the effective interest method; � � and fair value movements in interest rate derivatives. v) Earnings per unit Basic earnings per unit is determined by dividing the profit attributable to members, adjusted to exclude costs of servicing equity (other than distributions) by the weighted average number of units. Diluted earnings per unit is determined by dividing the profit attributable to members, adjusted to exclude costs of servicing equity (other than distributions) by the weighted average number of units and potential dilutive shares. w) Segment reporting An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity), whose operating results are regularly reviewed by the CEO as the entity’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance and for which discrete financial information is available. This includes start up operations which are yet to earn revenues. Management considered other factors in determining operating segments such as the existence of a line manager and the level of segment information presented to the board of directors. The group aggregates two or more operating segments when they have similar economic characteristics, and the segments are similar in each of the following respects: � Nature of the products and services; • � Nature of the production processes; • � • � Methods used to distribute the products or provide the services; and if applicable • � Nature of the regulatory environment. • Type or class of customer for the products and services; Operating segments that meet the quantitative criteria as prescribed by AASB 8 are reported separately. However, an operating segment that does not meet the quantitative criteria is still reported separately where information about the segment would be useful to users of the financial statements. Information about other business activities and operating segments that are below the quantitative criteria are combined and disclosed in a separate category “unallocated segment”. x) Fair value measurement Namoi measures financial instruments, such as, derivatives, and non-financial assets, at fair value at each balance sheet date. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either: � • � • In the principal market for the asset or liability; or In the absence of a principal market, in the most advantageous market for the asset or liability The principal or the most advantageous market must be accessible to Namoi. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. Namoi uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole: � • � • Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities; Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable; and Year Ended 28 February 2017 Notes to the Financial Statements Page 37 Year Ended 28 February 2017 Notes to the Financial Statements Page 38 2017 ANNUAL REPORT | 49 For personal use onlyNamoi Cotton Co-operative Limited � • Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable. For assets and liabilities that are recognised in the financial statements on a recurring basis, Namoi determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period. Namoi’s Directors determine the policies and procedures for both recurring fair value measurement, such as property, plant and equipment and derivatives, and for non-recurring measurement. External valuers are involved for valuation of significant assets, such as ginning assets and derivatives, and significant liabilities, such as derivatives. Involvement of external valuers is decided upon annually by the Directors after discussions with and approval by the Company’s Audit and Compliance Committee. Selection criteria include market knowledge, reputation, independence and whether professional standards are maintained. The committee decides, after discussions with the Group’s external valuers, which valuation techniques and inputs to use for each case. At each reporting date, the Directors analyse the movements in the values of assets and liabilities which are required to be re-measured or re-assessed as per Namoi’s accounting policies. For this analysis, the Directors verify the major inputs applied in the latest valuation by agreeing the information in the valuation computation to contracts and other relevant documents. The Directors, in conjunction with reports from external valuers, also compares changes in the fair value of each asset and liability with relevant external sources to determine whether the change is reasonable. The Directors present the valuation results to the Audit and Compliance Committee and Namoi’s independent auditors. This includes a discussion of the major assumptions used in the valuations. For the purpose of fair value disclosures, Namoi has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above. y) Rounding of amounts This financial report is presented in Australian dollars and all values have been rounded to the nearest thousand dollars (where rounding is applicable) in accordance with clause 10(6) of the Co-operatives (Accounts and Audit) Regulations and ASIC Corporations (Rounding in Financial Directors Reports) Instrument 2016/191. The co- operative is an entity to which this legislative instrument applies. Namoi Cotton Co-operative Limited 2. Revenue and Expenses a) Revenue from continuing operations Sale of goods at fair value Rendering of services Rental revenue Financial service provider revenue Finance revenue Breakdown of finance revenue: Interest revenue from grower finance Interest revenue from non-related entities b) Other income and equipment Net gain on disposal of property, plant c) Employee benefits expense Salaries, wages, on-costs and other employee benefits Defined contribution benefits expense d) Finance costs Interest on bank loans and overdrafts Interest expense - interest rate derivatives e) Other expenses Maintenance Insurance Motor vehicle Consulting Rent Safety Travel Other Minimum operating lease payments Strategic restructuring-consulting1 Consolidated $'000 Parent $'000 28 Feb 2017 29 Feb 2016 28 Feb 2017 29 Feb 2016 315,310 248,770 315,009 248,533 39,620 30,500 39,620 30,500 355,344 279,713 355,043 279,476 213 200 1 (2) 3 1 60 60 725 964 368 554 447 403 518 620 200 242 1 - 1 1 26 26 874 862 728 539 314 471 503 119 213 200 1 (2) 3 1 60 60 725 964 368 554 447 403 518 620 200 242 1 - 1 1 26 26 874 862 728 539 314 471 503 119 17,116 1,193 18,309 14,670 1,042 15,712 17,116 1,193 18,309 14,670 1,042 15,712 2,596 15 2,611 2,657 (7) 2,650 2,624 15 2,639 2,678 (7) 2,671 3,681 2,926 3,681 2,926 1 Includes the engagement of external corporate, legal and taxation advisors in relation to the corporate restructure proposal. 2,146 10,426 1,491 8,827 2,144 10,424 1,490 8,826 Year Ended 28 February 2017 Notes to the Financial Statements 2017 ANNUAL REPORT | 50 Page 39 Year Ended 28 February 2017 Notes to the Financial Statements Page 40 For personal use onlyNamoi Cotton Co-operative Limited measurement is unobservable. � Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value For assets and liabilities that are recognised in the financial statements on a recurring basis, Namoi determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period. Namoi’s Directors determine the policies and procedures for both recurring fair value measurement, such as property, plant and equipment and derivatives, and for non-recurring measurement. External valuers are involved for valuation of significant assets, such as ginning assets and derivatives, and significant liabilities, such as derivatives. Involvement of external valuers is decided upon annually by the Directors after discussions with and approval by the Company’s Audit and Compliance Committee. Selection criteria include market knowledge, reputation, independence and whether professional standards are maintained. The committee decides, after discussions with the Group’s external valuers, which valuation techniques and inputs to use for each case. At each reporting date, the Directors analyse the movements in the values of assets and liabilities which are required to be re-measured or re-assessed as per Namoi’s accounting policies. For this analysis, the Directors verify the major inputs applied in the latest valuation by agreeing the information in the valuation computation to contracts and other relevant documents. The Directors, in conjunction with reports from external valuers, also compares changes in the fair value of each asset and liability with relevant external sources to determine whether the change is reasonable. The Directors present the valuation results to the Audit and Compliance Committee and Namoi’s independent auditors. This includes a discussion of the major assumptions used in the valuations. For the purpose of fair value disclosures, Namoi has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above. y) Rounding of amounts This financial report is presented in Australian dollars and all values have been rounded to the nearest thousand dollars (where rounding is applicable) in accordance with clause 10(6) of the Co-operatives (Accounts and Audit) Regulations and ASIC Corporations (Rounding in Financial Directors Reports) Instrument 2016/191. The co- operative is an entity to which this legislative instrument applies. Namoi Cotton Co-operative Limited 2. Revenue and Expenses a) Revenue from continuing operations Sale of goods at fair value Rendering of services Rental revenue Financial service provider revenue Finance revenue Breakdown of finance revenue: Interest revenue from grower finance Interest revenue from non-related entities b) Other income Net gain on disposal of property, plant and equipment c) Employee benefits expense Salaries, wages, on-costs and other employee benefits Defined contribution benefits expense d) Finance costs Interest on bank loans and overdrafts Interest expense - interest rate derivatives e) Other expenses Maintenance Insurance Motor vehicle Consulting Rent Safety Travel Minimum operating lease payments Strategic restructuring-consulting1 Other Consolidated $'000 Parent $'000 28 Feb 2017 29 Feb 2016 28 Feb 2017 29 Feb 2016 315,310 39,620 213 200 1 355,344 248,770 30,500 200 242 1 279,713 315,009 39,620 213 200 1 355,043 248,533 30,500 200 242 1 279,476 (2) 3 1 60 60 - 1 1 26 26 (2) 3 1 60 60 - 1 1 26 26 17,116 1,193 18,309 14,670 1,042 15,712 17,116 1,193 18,309 14,670 1,042 15,712 2,596 15 2,611 3,681 725 964 368 554 447 403 518 620 2,146 10,426 2,657 (7) 2,650 2,926 874 862 728 539 314 471 503 119 1,491 8,827 2,624 15 2,639 3,681 725 964 368 554 447 403 518 620 2,144 10,424 2,678 (7) 2,671 2,926 874 862 728 539 314 471 503 119 1,490 8,826 1 Includes the engagement of external corporate, legal and taxation advisors in relation to the corporate restructure proposal. Year Ended 28 February 2017 Notes to the Financial Statements Page 39 Year Ended 28 February 2017 Notes to the Financial Statements Page 40 2017 ANNUAL REPORT | 51 For personal use onlyNamoi Cotton Co-operative Limited Namoi Cotton Co-operative Limited 3. Income Tax Namoi Cotton Co-operative Limited 3. Income Tax Statement of Changes in Equity Income tax expense items debited/(credited) directly to equity: Consolidated $'000 Parent $'000 28 Feb 2017 29 Feb 2016 28 Feb 2017 29 Feb 2016 Net gain on revaluation of assets - (2,787) - (2,787) Deferred Tax Assets Net gain on revaluation of assets - (2,787) (2,787) Statement of Comprehensive Income Accounting profit from continuing operations before income tax expense At the Group's statutory income tax rate of 30% (2015: 30%) Non-assessable income Non-allowable expenditure Tax loss incurred - not recognised Filing differences Tax losses previously not recognised 1 Income tax expense/(benefit) recorded in the statement of comprehensive income 1 Tax l osses previ ously unrecognised for individual entities outsi de the tax consolidated group. 38 (10,698) (91) (6,806) before income tax expense 38 (10,698) (91) (6,806) 11 (20) 52 - (8) (280) (3,210) (1) 18 120 - (67) (245) (3,140) (27) - 28 - (8) (19) (26) (2,042) - 18 - - - (2,024) Net deferred tax assets/(liabilities) At the Group's statutory income tax rate of 30% (1,134) (1,379) (394) (420) (3,210) (669) (353) (27) 457 (2,042) 763 Deferred tax expense/(income) (2015: 30%) Unrecognised deferred tax assets Non-assessable income Unrecognised deferred tax liabilities Non-allowable expenditure Unrecognised tax losses Tax loss incurred - not recognised Unrecognised net deferred tax assets Filing differences Tax losses previously not recognised 1 Income tax expense/(benefit) recorded in the statement of comprehensive income 18 (76) 1,182 1,124 16 (45) 1,435 1,406 11 (20) 52 - (8) - - - - (280) - - - - (1) 18 120 - (67) (245) (3,140) 28 - - (8) (19) Deferred Tax Liabilities Statement of Changes in Equity Accelerated depreciation for tax purposes and revaluations Income tax expense items debited/(credited) Timing of Joint Venture and Investments Income recognition directly to equity: Deferred costs Provisions and accruals Recognised losses available for offsetting against future taxable income 1, 2 Statement of Comprehensive Income Accounting profit from continuing operations Balance Sheet Consolidated $'000 Consolidated $'000 28 Feb 2017 29 Feb 2016 Parent 28 Feb $'000 2017 28 Feb 2017 Statement of Profit and Loss and Other Comprehensive Income Parent $'000 29 Feb 2016 Consolidated 28 Feb $'000 28 Feb 2017 2017 29 Feb 2016 29 Feb Parent $'000 2016 28 Feb 2017 (28,532) (897) (29,429) (28,719) (148) (28,867) 419 1,658 26,218 28,295 550 1,129 25,809 27,488 (28,532) (352) (28,884) 419 1,658 26,413 28,490 29 Feb 2016 (28,720) (418) (29,138) 550 1,129 27,039 28,718 187 (756) (569) (130) 529 (499) (100) 2,690 (483) 2,207 - 155 451 (3,166) (2,560) 187 66 253 (130) 529 (195) 204 18 - - - - 29 Feb 2016 2,690 (102) 2,588 155 451 (2,431) (1,825) 29 Feb 2016 343 2,024 (2,787) (420) Consolidated $'000 Parent $'000 (26) 29 Feb 2016 (2,024) 28 Feb 2017 28 Feb 2017 (1,379) 245 - (1,134) (1,732) 3,140 (2,787) (1,379) (420) 26 - (394) Page 42 Reconciliation of net deferred tax assets/(liabilities) 1 Tax l osses previ ously unrecognised for individual entities outsi de the tax consolidated group. Opening balance as of 1 March Tax income/(expense) during the period recognised in profit or loss Tax income/(expense) during the period recognised in other comprehensive income Closing balance as at 28 February Year Ended 28 February 2017 Notes to the Financial Statements Year Ended 28 February 2017 Notes to the Financial Statements 2017 ANNUAL REPORT | 52 Page 41 Year Ended 28 February 2017 Notes to the Financial Statements Page 41 For personal use onlyNet gain on revaluation of assets - (2,787) - (2,787) Statement of Changes in Equity Income tax expense items debited/(credited) directly to equity: Statement of Comprehensive Income Accounting profit from continuing operations before income tax expense At the Group's statutory income tax rate of 30% (2015: 30%) Non-assessable income Non-allowable expenditure Tax loss incurred - not recognised Filing differences Tax losses previously not recognised 1 Income tax expense/(benefit) recorded in the statement of comprehensive income 1 Tax l osses previ ously unrecognised for individual entities outsi de the tax consolidated group. Consolidated $'000 Parent $'000 28 Feb 2017 29 Feb 2016 28 Feb 2017 29 Feb 2016 38 (10,698) (91) (6,806) 11 (20) 52 - (8) (280) (3,210) (1) 18 120 - (67) (2,042) 18 - - - - (27) 28 - - (8) (19) (26) (245) (3,140) (2,024) Namoi Cotton Co-operative Limited Namoi Cotton Co-operative Limited 3. Income Tax Namoi Cotton Co-operative Limited 3. Income Tax Balance Sheet Consolidated $'000 28 Feb 2017 29 Feb 2016 Consolidated $'000 Parent 28 Feb $'000 2017 28 Feb 2017 29 Feb 2016 29 Feb 2016 Parent $'000 Statement of Profit and Loss and Other Comprehensive Income Parent $'000 Consolidated $'000 28 Feb 2017 29 Feb 2016 29 Feb 2016 28 Feb 2017 Deferred Tax Liabilities Accelerated depreciation for tax purposes and revaluations Timing of Joint Venture and Investments Income recognition Statement of Changes in Equity Income tax expense items debited/(credited) directly to equity: (28,532) (897) (29,429) (28,719) (148) (28,867) (28,532) (352) (28,884) (28,720) (418) (29,138) Net gain on revaluation of assets Deferred Tax Assets Deferred costs Provisions and accruals Recognised losses available for offsetting against future taxable income 1, 2 Statement of Comprehensive Income Accounting profit from continuing operations before income tax expense 419 1,658 26,218 28,295 550 1,129 25,809 27,488 419 1,658 26,413 28,490 - 38 550 1,129 27,039 28,718 (10,698) (2,787) (2,787) Net deferred tax assets/(liabilities) Deferred tax expense/(income) Unrecognised deferred tax assets Unrecognised deferred tax liabilities Unrecognised tax losses Unrecognised net deferred tax assets At the Group's statutory income tax rate of 30% (2015: 30%) Non-assessable income Non-allowable expenditure Tax loss incurred - not recognised Filing differences Tax losses previously not recognised 1 Income tax expense/(benefit) recorded in the statement of comprehensive income (1,134) (1,379) (394) (420) 18 (76) 1,182 1,124 16 (45) 1,435 1,406 11 (20) - 52 - - - - (8) (280) (3,210) (1) 18 120 - (67) - - - - (245) (3,140) Reconciliation of net deferred tax assets/(liabilities) 1 Tax l osses previ ously unrecognised for individual entities outsi de the tax consolidated group. Opening balance as of 1 March Tax income/(expense) during the period recognised in profit or loss Tax income/(expense) during the period recognised in other comprehensive income Closing balance as at 28 February Year Ended 28 February 2017 Notes to the Financial Statements 29 Feb 2016 2,690 (102) 2,588 155 451 (2,431) (1,825) 763 29 Feb 2016 343 2,024 (2,787) (420) 28 Feb 2017 187 (756) (569) (130) 529 (499) (100) (669) 28 Feb 2017 (1,379) 245 - (1,134) 2,690 (483) 2,207 - 155 451 (3,166) (2,560) (91) (27) - 28 - (8) (19) 187 66 253 (130) 529 (195) 204 (6,806) (2,042) - 18 - - - (353) 457 Consolidated $'000 Parent $'000 (26) 29 Feb 2016 (2,024) 28 Feb 2017 (1,732) 3,140 (2,787) (1,379) (420) 26 - (394) Page 42 Year Ended 28 February 2017 Notes to the Financial Statements Page 41 Year Ended 28 February 2017 Notes to the Financial Statements Page 41 2017 ANNUAL REPORT | 53 For personal use onlyNamoi Cotton Co-operative Limited Namoi Cotton Co-operative Limited 1 Tax losses recognised for individual entities in the tax consolidated group 5. Distributions Paid or Provided on Co-operative Capital Units 2 The benefits in respect of tax losses will only be obtained if: a) future assessable income is derived of a nature and of an amount sufficient to enable the benefit to be realised; b) the conditions for deductibility imposed by tax legislation continue to be complied with; and c) no changes in tax legislation adversely affect the consolidated entity in realising the benefit. Tax consolidated group and tax sharing arrangements Namoi Cotton Co-operative Limited is the head entity of the tax consolidated group comprising all wholly owned controlled entities. The group has applied the group allocation method in determining the appropriate amount of current and deferred taxes to allocate to the members of the tax consolidated group. Members of the group have entered into a tax sharing agreement that provides for the allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations. No amounts have been recognised in these financial statements in respect of this agreement on the basis that the possibility of default is remote. 4. Earnings per Unit Basic earnings per unit amounts are calculated by dividing the net profit after rebate (if applicable) for the year attributable to the unit holders of the parent divided by the weighted average number of co-operative capital units outstanding during the year. There were no potentially dilutive equity balances at 28 February 2017 and 29 February 2016. The following reflects the income and equity data used in the basic and diluted earnings per unit computations: Profit attributable to Co-operative capital stock holders of the parent Weighted average number of Co-operative capital stock units Consolidated $'000 28 Feb 2017 283 29 Feb 2016 (7,558) No. 109,843,279 No. 109,843,279 Distributions declared and paid during the year (unfranked) Interim distribution for the year ended 28 February 2017 of 0.0 cents per unit of Capital Stock (2016: 0.0 cents) Final distribution for the year ended 29 February 2016 of 0.0 cents per unit of Capital Stock (2015: 0.0 cents) Net distributions during the year Consolidated $'000 Parent $'000 28 Feb 2017 29 Feb 2016 28 Feb 2017 29 Feb 2016 Franking credits available for subsequent financial years based on a tax rate of 30% (2016: 30%) - - No franking account debits or credits are expected to arise from either the payment of income tax, the payment of distributions nor from the receipt of dividends. Consolidated $'000 28 Feb 2017 29 Feb 2016 - - - - - - - - Year Ended 28 February 2017 Notes to the Financial Statements 2017 ANNUAL REPORT | 54 Page 43 Year Ended 28 February 2017 Notes to the Financial Statements Page 44 For personal use onlyNamoi Cotton Co-operative Limited Namoi Cotton Co-operative Limited 1 Tax losses recognised for individual entities in the tax consolidated group 5. Distributions Paid or Provided on Co-operative Capital Units 2 The benefits in respect of tax losses will only be obtained if: a) future assessable income is derived of a nature and of an amount sufficient to enable the benefit to be realised; b) the conditions for deductibility imposed by tax legislation continue to be complied with; and c) no changes in tax legislation adversely affect the consolidated entity in realising the benefit. Tax consolidated group and tax sharing arrangements Namoi Cotton Co-operative Limited is the head entity of the tax consolidated group comprising all wholly owned controlled entities. The group has applied the group allocation method in determining the appropriate amount of current and deferred taxes to allocate to the members of the tax consolidated group. Members of the group have entered into a tax sharing agreement that provides for the allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations. No amounts have been recognised in these financial statements in respect of this agreement on the basis that the possibility of default is remote. 4. Earnings per Unit Basic earnings per unit amounts are calculated by dividing the net profit after rebate (if applicable) for the year attributable to the unit holders of the parent divided by the weighted average number of co-operative capital units outstanding during the year. There were no potentially dilutive equity balances at 28 February 2017 and 29 February 2016. The following reflects the income and equity data used in the basic and diluted earnings per unit computations: Profit attributable to Co-operative capital stock holders of the parent Weighted average number of Co-operative capital stock units 109,843,279 109,843,279 Consolidated $'000 28 Feb 2017 283 No. 29 Feb 2016 (7,558) No. Distributions declared and paid during the year (unfranked) Interim distribution for the year ended 28 February 2017 of 0.0 cents per unit of Capital Stock (2016: 0.0 cents) Final distribution for the year ended 29 February 2016 of 0.0 cents per unit of Capital Stock (2015: 0.0 cents) Net distributions during the year Consolidated $'000 28 Feb 2017 29 Feb 2016 - - - - - - Consolidated $'000 Parent $'000 28 Feb 2017 29 Feb 2016 28 Feb 2017 29 Feb 2016 Franking credits available for subsequent financial years based on a tax rate of 30% (2016: 30%) - - - - No franking account debits or credits are expected to arise from either the payment of income tax, the payment of distributions nor from the receipt of dividends. Year Ended 28 February 2017 Notes to the Financial Statements Page 43 Year Ended 28 February 2017 Notes to the Financial Statements Page 44 2017 ANNUAL REPORT | 55 For personal use onlyNamoi Cotton Co-operative Limited 6. Cash and Cash Equivalents (a) Reconciliation to Statement of Cash Flows For the purposes of the Statement of Cash Flows, cash comprises the following items: Cash at bank and in hand Bank Overdraft (b) Reconciliation of net cash provided by operating activities to operating profit after income tax. Operating profit/(loss) after income tax Adjustments for non-cash items: Depreciation (Gain)/loss on sale of property, plant and equipment Provision for bad debts Provision for employee benefits Provision other Share of associates (profits)/losses Changes in operating assets and liabilities (Increase)/decrease in accounts receivable (Increase)/decrease in inventories (Increase)/decrease in other assets (Increase)/decrease in derivatives Increase/(decrease) in creditors Increase/(decrease) in other liabilities Increase/(decrease) in deferred tax asset Net cash inflow/(outflow) from operating activities (c) Disclosure of financing activities Refer to Note 15. Consolidated $'000 Parent $'000 28 Feb 2017 29 Feb 2016 28 Feb 2017 29 Feb 2016 2,256 (819) 1,437 1,790 (2,072) (282) 2,135 (819) 1,316 1,785 (2,072) (287) 283 (7,558) (65) (4,782) 6,206 (60) (449) (19) (200) 90 5,568 (272) (1,513) (169) (1,635) 3,329 132 (245) 5,478 6,171 (26) (50) (925) (502) 4,139 8,807 820 2,690 (36) (280) 691 (173) (3,140) 1,821 6,206 (60) (449) (20) (200) (56) 5,421 (92) (1,532) (169) (1,635) 3,328 132 (26) 5,362 6,171 (26) (50) (925) (502) 78 4,746 986 2,689 (36) (280) 694 (173) (2,024) 1,820 (d) Disclosure of non-cash financing and investing activities Equipment Finance Transactions During the financial year, the consolidated entity acquired plant and equipment with an aggregate fair value of $821,261 (2016: $417,652) by means of finance leases. (e) Fair Value All cash balances are reflective of fair value based on observable market data. Namoi Cotton Co-operative Limited 7. Trade and Other Receivables Current Trade debtors1 Less: allowance for impairment loss Trade debtors from an associate Loans to growers2 Less: allowance for impairment loss Funds due from futures brokers3 Less: allowance for impairment loss Loans to associates4 Loans to employees5 Loans to controlled entities6 Non-current Loans to controlled entities6 Consolidated $'000 Parent $'000 28 Feb 2017 29 Feb 2016 28 Feb 2017 29 Feb 2016 4,955 (5) 4,950 302 302 - - - - - - - 3 33 - 4,901 (454) 29 4,476 5 - 5 1 - 1 - - 53 26 - 4,955 4,955 302 302 - - - - - - 3 33 5,247 10,540 4,901 (449) 29 4,481 5 - 5 1 - 1 53 26 5,426 9,992 41,820 41,820 41,820 41,820 5,288 4,561 1 Trade debtors arise from the following: Domestic sales of white cotton seed, grain commodities and ginning by-products. These debtors are settled under a range of agreed payment terms. These debtors are non-interest bearing. The group maintains trade credit insurance over non-related party domestic debtors to minimise credit risk. 2 Grower loans represent interest bearing crop finance facilities offered to growers secured by crop mortgage. Interest rate margins are determined based on the level of risk associated with the individual loan. As at 28 February 2017 Namoi Cotton had committed $nil (2016: $nil) in credit term facilities to growers which had not been drawn. nominal rate of interest. 3 Funds due from futures brokers represent funds on deposit to offset unfavourable futures mark-to-market values and futures contract maintenance margins. Funds are denominated in United States dollars and bear a 4 Loans to associates represent working capital financing provided to Australian Classing Services Pty Ltd. The loan bears interest at a fixed rate of 7.0% (2016: 7.0%) and is repayable on demand. 5 Loans to employees represent non-interest bearing loans advanced under the Namoi Cotton employee incentive share plan (refer note 18) and other staff advances. 6 Loans to controlled entities that are participants in joint ventures, are non-interest bearing and are repayable from the proceeds generated by the joint venture. The loans are carried at amortised cost, however, have not been discounted given that the loan has an undefined term. Year Ended 28 February 2017 Notes to the Financial Statements 2017 ANNUAL REPORT | 56 Page 45 Year Ended 28 February 2017 Notes to the Financial Statements Page 46 For personal use onlyNamoi Cotton Co-operative Limited 6. Cash and Cash Equivalents (a) Reconciliation to Statement of Cash Flows For the purposes of the Statement of Cash Flows, cash comprises the following items: Cash at bank and in hand Bank Overdraft (b) Reconciliation of net cash provided by operating activities to operating profit after income tax. Operating profit/(loss) after income tax Adjustments for non-cash items: Depreciation (Gain)/loss on sale of property, plant and equipment Provision for bad debts Provision for employee benefits Provision other Share of associates (profits)/losses Changes in operating assets and liabilities (Increase)/decrease in accounts receivable (Increase)/decrease in inventories (Increase)/decrease in other assets (Increase)/decrease in derivatives Increase/(decrease) in creditors Increase/(decrease) in other liabilities Increase/(decrease) in deferred tax asset Net cash inflow/(outflow) from operating activities (c) Disclosure of financing activities Refer to Note 15. Consolidated $'000 Parent $'000 28 Feb 2017 29 Feb 2016 28 Feb 2017 29 Feb 2016 2,256 (819) 1,437 1,790 (2,072) (282) 2,135 (819) 1,316 1,785 (2,072) (287) 283 (7,558) (65) (4,782) 6,206 6,171 6,206 6,171 (60) (449) (19) (200) 90 5,568 (272) (1,513) (169) (1,635) 3,329 132 (245) 5,478 (26) (50) (925) (502) 4,139 8,807 820 2,690 (36) (280) 691 (173) (3,140) 1,821 5,421 4,746 (60) (449) (20) (200) (56) (92) (1,532) (169) (1,635) 3,328 132 (26) 5,362 (26) (50) (925) (502) 78 986 2,689 (36) (280) 694 (173) (2,024) 1,820 (d) Disclosure of non-cash financing and investing activities Equipment Finance Transactions During the financial year, the consolidated entity acquired plant and equipment with an aggregate fair value of $821,261 (2016: $417,652) by means of finance leases. (e) Fair Value All cash balances are reflective of fair value based on observable market data. Namoi Cotton Co-operative Limited 7. Trade and Other Receivables Current Trade debtors1 Less: allowance for impairment loss Trade debtors from an associate Loans to growers2 Less: allowance for impairment loss Funds due from futures brokers3 Less: allowance for impairment loss Loans to associates4 Loans to employees5 Loans to controlled entities6 Non-current Loans to controlled entities6 Consolidated $'000 Parent $'000 28 Feb 2017 29 Feb 2016 28 Feb 2017 29 Feb 2016 4,955 (5) - 4,950 302 - 302 - - - 3 33 - 5,288 4,901 (454) 29 4,476 5 - 5 1 - 1 53 26 - 4,561 4,955 - - 4,955 302 - 302 - - - 3 33 5,247 10,540 4,901 (449) 29 4,481 5 - 5 1 - 1 53 26 5,426 9,992 - - - - 41,820 41,820 41,820 41,820 1 Trade debtors arise from the following: Domestic sales of white cotton seed, grain commodities and ginning by-products. These debtors are settled under a range of agreed payment terms. These debtors are non-interest bearing. The group maintains trade credit insurance over non-related party domestic debtors to minimise credit risk. 2 Grower loans represent interest bearing crop finance facilities offered to growers secured by crop mortgage. Interest rate margins are determined based on the level of risk associated with the individual loan. As at 28 February 2017 Namoi Cotton had committed $nil (2016: $nil) in credit term facilities to growers which had not been drawn. 3 Funds due from futures brokers represent funds on deposit to offset unfavourable futures mark-to-market values and futures contract maintenance margins. Funds are denominated in United States dollars and bear a nominal rate of interest. 4 Loans to associates represent working capital financing provided to Australian Classing Services Pty Ltd. The loan bears interest at a fixed rate of 7.0% (2016: 7.0%) and is repayable on demand. 5 Loans to employees represent non-interest bearing loans advanced under the Namoi Cotton employee incentive share plan (refer note 18) and other staff advances. 6 Loans to controlled entities that are participants in joint ventures, are non-interest bearing and are repayable from the proceeds generated by the joint venture. The loans are carried at amortised cost, however, have not been discounted given that the loan has an undefined term. Year Ended 28 February 2017 Notes to the Financial Statements Page 45 Year Ended 28 February 2017 Notes to the Financial Statements Page 46 2017 ANNUAL REPORT | 57 For personal use onlyNamoi Cotton Co-operative Limited Allowance for impairment loss An allowance for impairment loss is recorded where objective evidence exists that an individual receivable is impaired taking into account the likelihood of recovery of any collateral and/or trade credit insurance. Individual receivables are written off only upon exhaustion of all means of recovery and only with Board approval. Impairment losses have been recognised by the group and the parent entity in the current year of $nil (2016: $nil). This amount was included in the other expenses item in the statement of profit and loss and other comprehensive income. At 1 March 2016 Charge for the year Foreign exchange translation Amounts written off Recoveries At 28 February 2017 Consolidated $'000 Parent $'000 28 Feb 2017 29 Feb 2016 28 Feb 2017 29 Feb 2016 454 - (22) (427) - 5 504 - 38 (88) - 454 449 - - (449) - 0 499 - 38 (88) - 449 At balance date the ageing analysis of trade and other receivables is as follows: Total outstanding Unimpaired Within terms Past Due 1 - 30 days Past Due 31 - 60 days Past Due 60+ days Impaired Past Due 60+ days Consolidated $'000 Parent $'000 28 Feb 2017 29 Feb 2016 28 Feb 2017 29 Feb 2016 5,000 5,015 52,067 52,262 4,525 355 5 110 4,535 7 - 19 51,592 355 5 115 51,780 7 - 24 5 454 0 451 Current assets Foreign exchange contracts Cotton seed sale contracts Cotton seed purchase contracts Current liabilities Interest rate swap contracts Cotton seed sale contracts Cotton seed purchase contracts Receivables past due but not considered impaired are: Group $470,115 (2016: $454,068); Parent $474,650 (2016: $449,533). Payment terms on these debts have not been renegotiated however discussions with the counterparties and/or receipts subsequent to reporting date reflect that payment will be received in full. Other balances within trade and other receivables do not contain impaired assets and are not past due. It is expected these other balances will be received when due. entity. Fair value, foreign exchange and credit risk All receivables are carried at fair value based on observable market data. Details regarding foreign exchange and interest rate risk are disclosed in Note 26. The maximum exposure to credit risk is the fair value of receivables less insurance recoverables. Year Ended 28 February 2017 Notes to the Financial Statements 2017 ANNUAL REPORT | 58 Page 47 Page 48 Namoi Cotton Co-operative Limited 8. Inventories Cotton seed (at fair value less costs to sell) Grain (at cost) Operating supplies and spares (at cost) Refer to Note 26 for further information relating to the valuation techniques for determining the fair value of Cotton Seed. 9. Derivative Financial Instruments Consolidated $'000 Parent $'000 28 Feb 2017 29 Feb 2016 28 Feb 2017 29 Feb 2016 1,792 - 5,822 7,614 781 19 5,101 5,901 1,792 - 5,822 7,614 781 - 5,101 5,882 Consolidated $'000 Parent $'000 28 Feb 2017 29 Feb 2016 28 Feb 2017 29 Feb 2016 444 - 14,221 14,665 - - 14,141 14,141 22 4,330 - 4,352 284 - 5,179 5,463 444 - 14,221 14,665 - - 14,141 14,141 22 4,330 - 4,352 284 - 5,179 5,463 Derivatives are used by the group to manage trading and financial risks as detailed in note 26. Fair value of foreign exchange contracts are determined by comparing the contracted rate to the market rates for contracts with the same term to maturity. All movements in fair value are recognised in the profit within the statement of comprehensive income in the period they occur. The net fair value gain on foreign exchange contracts at year end was $444,464 for the group (2016: $22,114) and $444,464 (2016: $22,114) for the parent Cotton seed sales contracts are forward dated and deliverable contracts with customers. The fair value of cotton seed commodity contracts is determined by reference to market prices and foreign exchange rates. The fair value of the open cotton seed sale contracts at year end was a derivative liability (unrealised loss) of $14,141,183 for the group (2016: Gain $4,330,139) and $14,141,183 (2016: Gain $4,330,139) for the parent entity. Cotton seed commodity purchase contracts are forward dated and deliverable contracts with cotton growers or brokers. The fair value of cotton seed commodity contracts is determined by reference to market prices and foreign exchange rates. The fair value of the open cotton seed purchase contracts at year end was a derivative asset (unrealised gain) of $14,220,718 for the group (2016: Loss $5,179,076) and $14,220,718 (2016: Loss $5,179,076) for the parent entity. Year Ended 28 February 2017 Notes to the Financial Statements For personal use only Namoi Cotton Co-operative Limited Allowance for impairment loss An allowance for impairment loss is recorded where objective evidence exists that an individual receivable is impaired taking into account the likelihood of recovery of any collateral and/or trade credit insurance. Individual receivables are written off only upon exhaustion of all means of recovery and only with Board approval. Impairment losses have been recognised by the group and the parent entity in the current year of $nil (2016: $nil). This amount was included in the other expenses item in the statement of profit and loss and other comprehensive income. At balance date the ageing analysis of trade and other receivables is as follows: At 1 March 2016 Charge for the year Foreign exchange translation Amounts written off Recoveries At 28 February 2017 Total outstanding Unimpaired Within terms Past Due 1 - 30 days Past Due 31 - 60 days Past Due 60+ days Impaired Past Due 60+ days Consolidated $'000 28 Feb 2017 29 Feb 2016 454 - (22) (427) - 5 504 38 (88) - - 454 Parent $'000 28 Feb 2017 449 (449) - - - 0 29 Feb 2016 499 38 (88) - - 449 Consolidated $'000 Parent $'000 28 Feb 2017 29 Feb 2016 28 Feb 2017 29 Feb 2016 5,000 5,015 52,067 52,262 4,525 355 5 110 4,535 51,592 51,780 7 - 19 355 5 115 7 - 24 5 454 0 451 Receivables past due but not considered impaired are: Group $470,115 (2016: $454,068); Parent $474,650 (2016: $449,533). Payment terms on these debts have not been renegotiated however discussions with the counterparties and/or receipts subsequent to reporting date reflect that payment will be received in full. Other balances within trade and other receivables do not contain impaired assets and are not past due. It is expected these other balances will be received when due. Fair value, foreign exchange and credit risk All receivables are carried at fair value based on observable market data. Details regarding foreign exchange and interest rate risk are disclosed in Note 26. The maximum exposure to credit risk is the fair value of receivables less insurance recoverables. Namoi Cotton Co-operative Limited 8. Inventories Cotton seed (at fair value less costs to sell) Grain (at cost) Operating supplies and spares (at cost) Consolidated $'000 Parent $'000 28 Feb 2017 29 Feb 2016 28 Feb 2017 29 Feb 2016 1,792 - 5,822 7,614 781 19 5,101 5,901 1,792 - 5,822 7,614 781 - 5,101 5,882 Refer to Note 26 for further information relating to the valuation techniques for determining the fair value of Cotton Seed. 9. Derivative Financial Instruments Current assets Foreign exchange contracts Cotton seed sale contracts Cotton seed purchase contracts Current liabilities Interest rate swap contracts Cotton seed sale contracts Cotton seed purchase contracts Consolidated $'000 Parent $'000 28 Feb 2017 29 Feb 2016 28 Feb 2017 29 Feb 2016 444 - 14,221 14,665 - 14,141 - 14,141 22 4,330 - 4,352 284 - 5,179 5,463 444 - 14,221 14,665 - 14,141 - 14,141 22 4,330 - 4,352 284 - 5,179 5,463 Derivatives are used by the group to manage trading and financial risks as detailed in note 26. Fair value of foreign exchange contracts are determined by comparing the contracted rate to the market rates for contracts with the same term to maturity. All movements in fair value are recognised in the profit within the statement of comprehensive income in the period they occur. The net fair value gain on foreign exchange contracts at year end was $444,464 for the group (2016: $22,114) and $444,464 (2016: $22,114) for the parent entity. Cotton seed sales contracts are forward dated and deliverable contracts with customers. The fair value of cotton seed commodity contracts is determined by reference to market prices and foreign exchange rates. The fair value of the open cotton seed sale contracts at year end was a derivative liability (unrealised loss) of $14,141,183 for the group (2016: Gain $4,330,139) and $14,141,183 (2016: Gain $4,330,139) for the parent entity. Cotton seed commodity purchase contracts are forward dated and deliverable contracts with cotton growers or brokers. The fair value of cotton seed commodity contracts is determined by reference to market prices and foreign exchange rates. The fair value of the open cotton seed purchase contracts at year end was a derivative asset (unrealised gain) of $14,220,718 for the group (2016: Loss $5,179,076) and $14,220,718 (2016: Loss $5,179,076) for the parent entity. Year Ended 28 February 2017 Notes to the Financial Statements Page 47 Year Ended 28 February 2017 Notes to the Financial Statements Page 48 2017 ANNUAL REPORT | 59 For personal use only Namoi Cotton Co-operative Limited Interest bearing loans of the group incurred an average variable interest rate of 3.1% (2016: 3.3%). Swaps in place at the comparative reporting date accounted for approximately nil% (2016: 44.3%) of the principal outstanding. The average fixed interest rates were nil% (2016: 3.0%) and the average variable rates were nil% (2016: 2.59%) at balance date. The net fair value loss on interest rate swaps was $nil (2016: $283,605). Namoi Cotton Co-operative Limited (c) Significant influence Significant influence exists over the Cargill associate’s, despite less than 20% ownership, due to the agreed one third representation upon the Board of Directors and management committees. Namoi Cotton is also a significant supplier of the primary input product for the Narrabri cotton seed crushing facility. (d) Material Investments in Associates (i) Associates results Revenue Profit/(Loss) Group share of associates profit/(loss) (ii) Associates assets and liabilities: Current assets Non-current assets Current liabilities Non-current liabilities Associates net assets Group share of associates net assets (iii) Carrying amount of investments in associates: Balance at the beginning of the financial year Distribution paid out of retained earnings Share of associates profits/(losses) for the financial year Carrying amount of investment in associates at the (iv) Share of contingent liabilities of associate: (iv) Share of associates commitments: Consolidated $'000 28 Feb 2017 COA CPL 29 Feb 2016 COA CPL 250,872 23,417 249,277 21,569 (5,777) (867) 670 101 (2,520) (378) 413 62 52,731 56,112 5,640 19,152 (57,629) (1,955) (55,233) (1,461) (4,899) 22,837 (735) 3,426 879 132 117 - (872) 3,355 - 70 495 - (378) 3,293 - 62 6,460 17,369 - 22,368 3,355 - - - - - - - - - - - - - end of the financial year (755) 3,425 117 3,355 10. Investments in Associates and Joint Ventures using the equity method Investment in associates (material) Investment in joint ventures (material) Investment in joint ventures (non material) (a) Ownership interest Consolidated $'000 Parent $'000 28 Feb 2017 2,671 40,010 (805) 41,876 29 Feb 2016 3,473 39,950 (1,457) 41,966 28 Feb 2017 29 Feb 2016 - - 155 155 - - 99 99 Name Balance Date % Ownership interest held by consolidated entity 28 Feb 2017 29 Feb 2016 Investments in Associates Cargill Oilseeds Australia Partnership (COA) Cargill Processing Ltd (CPL) 1 Investments in Joint Ventures Australian Classing Services Pty Ltd (ACS) 1 Namoi Cotton Alliance (NCA) NC Packing Services Pty Ltd (NCPS) 1 1 Incorporated in Australia 31 May 31 May 28 February 28 February 28 February 15% 15% 50% 51% 51% 15% 15% 50% 51% 51% (b) The principal activities of the associates and joint ventures are: COA processes and markets cotton seed, canola and other oilseeds. CPL owns facilities used in the processing and marketing of cotton seed, canola and other oilseeds by COA. ACS provides independent classing services to the Australian cotton industry. � • � • � • � NCA markets Australian lint cotton and owns significant up-country warehousing and logistics facilities to • support the marketing operations � NCPS operates containerised commodity packing facilities primarily packing cottonseed, coarse grains and • pulses. NCA and NCPS are 51% owned, however, the two entities are jointly controlled due to the joint venture agreement terms in relation to committee decision making etc. Year Ended 28 February 2017 Notes to the Financial Statements 2017 ANNUAL REPORT | 60 Page 49 Year Ended 28 February 2017 Notes to the Financial Statements Page 50 For personal use onlyNamoi Cotton Co-operative Limited Interest bearing loans of the group incurred an average variable interest rate of 3.1% (2016: 3.3%). Swaps in place at the comparative reporting date accounted for approximately nil% (2016: 44.3%) of the principal outstanding. The average fixed interest rates were nil% (2016: 3.0%) and the average variable rates were nil% (2016: 2.59%) at balance date. The net fair value loss on interest rate swaps was $nil (2016: $283,605). Namoi Cotton Co-operative Limited (c) Significant influence Significant influence exists over the Cargill associate’s, despite less than 20% ownership, due to the agreed one third representation upon the Board of Directors and management committees. Namoi Cotton is also a significant supplier of the primary input product for the Narrabri cotton seed crushing facility. (d) Material Investments in Associates (i) Associates results Revenue Profit/(Loss) Consolidated $'000 28 Feb 2017 COA CPL 29 Feb 2016 COA CPL 250,872 (5,777) 23,417 670 249,277 (2,520) 21,569 413 Group share of associates profit/(loss) (867) 101 (378) 62 (ii) Associates assets and liabilities: Current assets Non-current assets Current liabilities Non-current liabilities Associates net assets 52,731 - (57,629) - (4,899) 5,640 19,152 (1,955) - 22,837 56,112 - (55,233) - 879 6,460 17,369 (1,461) - 22,368 Group share of associates net assets (735) 3,426 132 3,355 (iii) Carrying amount of investments in associates: Balance at the beginning of the financial year Distribution paid out of retained earnings Share of associates profits/(losses) for the financial year 117 - (872) 3,355 - 70 495 - (378) 3,293 - 62 Carrying amount of investment in associates at the end of the financial year (755) 3,425 117 3,355 (iv) Share of contingent liabilities of associate: (iv) Share of associates commitments: - - - - - - - - 10. Investments in Associates and Joint Ventures using the equity method Investment in associates (material) Investment in joint ventures (material) Investment in joint ventures (non material) (a) Ownership interest Investments in Associates Cargill Oilseeds Australia Partnership (COA) Cargill Processing Ltd (CPL) 1 Investments in Joint Ventures Australian Classing Services Pty Ltd (ACS) 1 Namoi Cotton Alliance (NCA) NC Packing Services Pty Ltd (NCPS) 1 1 Incorporated in Australia Consolidated $'000 Parent $'000 28 Feb 2017 2,671 40,010 (805) 41,876 29 Feb 2016 3,473 39,950 (1,457) 41,966 28 Feb 2017 29 Feb 2016 - - 155 155 - - 99 99 % Ownership interest held by 28 Feb 2017 29 Feb 2016 15% 15% 50% 51% 51% 15% 15% 50% 51% 51% 31 May 31 May 28 February 28 February 28 February Name Balance Date consolidated entity (b) The principal activities of the associates and joint ventures are: � � � COA processes and markets cotton seed, canola and other oilseeds. CPL owns facilities used in the processing and marketing of cotton seed, canola and other oilseeds by COA. ACS provides independent classing services to the Australian cotton industry. � NCA markets Australian lint cotton and owns significant up-country warehousing and logistics facilities to � NCPS operates containerised commodity packing facilities primarily packing cottonseed, coarse grains and support the marketing operations pulses. NCA and NCPS are 51% owned, however, the two entities are jointly controlled due to the joint venture agreement terms in relation to committee decision making etc. Year Ended 28 February 2017 Notes to the Financial Statements Page 49 Year Ended 28 February 2017 Notes to the Financial Statements Page 50 2017 ANNUAL REPORT | 61 For personal use onlyNamoi Cotton Co-operative Limited (e) Material Investments in Joint Ventures: NCA (i) Joint Venture results (for the period since inception) Revenue Depreciation and Amortisation Interest Expense Interest Income Profit/(loss) before income tax expense Income tax expense(a) Joint Venture net profit/(loss) (a) The Joint Venture is a partnership for tax puposes accordingly is not a taxable entity Group share of joint venture net profit/(loss) (ii) Joint venture assets and liabilities: Current assets Cash and cash equivalents Other Non-current assets Current liabilities Financial liabilities Other Non-current liabilities Financial liabilities Other Joint Venture net assets Group share of joint venture net assets (iii) Carrying amount of investments in joint ventures: Balance at the beginning of the financial year Acquisition of joint venture Contribution to working capital Distribution paid out of retained earnings Share of joint venture profits/(losses) for the financial year Carrying amount of investments in joint ventures at the end of the financial year (iv) Share of contingent liabilities of joint venture: (v) Share of joint venture commitments: Consolidated $'000 28 Feb 2017 29 Feb 2016 281,989 (2,315) (995) 186 118 - 118 202,460 (2,077) (759) 338 (6,707) - (6,707) 60 (3,421) 11,755 58,093 62,027 6,745 42,198 60,111 (47,028) (4,276) (18,710) (9,659) (2,027) (92) 78,452 (2,275) (76) 78,334 40,011 39,950 39,950 - - - 60 46,941 - - (3,570) (3,421) 40,011 39,950 - - - - (f) Share of Non Material Investments in Joint Ventures: ACS and NCPS (i) Non Material Joint Venture Results Profits/(Losses) and total comprehensive income from continuing operations 652 (402) Namoi Cotton Co-operative Limited 11. Interest in Joint Operations (a) Ownership interest % Ownership interest held by 28 Feb 2017 50% 50% 29 Feb 2016 50% 50% Name Balance Date consolidated entity Wathagar Ginning Company (WGC) Moomin Ginning Company (MGC) 28 February 28 February The joint operations provide ginning services to cotton growers in the Gwydir valley located in NSW. No assets employed in the jointly controlled operation were impaired during the year (2016: $nil). (b) Principal activities (c) Impairment (d) Accounting for joint operations method. The joint operations have been accounted for using the share of rights to assets and obligations for liabilities 12. Interest in Jointly Controlled Assets Namoi Cotton holds a 40% joint ownership interest in the white cotton seed handling and storage facilities at Mungindi, with a book carrying value of $2.28m at 28 February 2017 (2016: $2.33m). Namoi cotton pays for their proportion of the operating costs of the facility. There were no material contingent liabilities or capital expenditure commitments in respect of jointly controlled assets at balance date. Year Ended 28 February 2017 Notes to the Financial Statements 2017 ANNUAL REPORT | 62 Page 51 Year Ended 28 February 2017 Notes to the Financial Statements Page 52 For personal use onlyNamoi Cotton Co-operative Limited (e) Material Investments in Joint Ventures: NCA (i) Joint Venture results (for the period since inception) Revenue Depreciation and Amortisation Interest Expense Interest Income Profit/(loss) before income tax expense Income tax expense(a) Joint Venture net profit/(loss) (a) The Joint Venture is a partnership for tax puposes accordingly is not a taxable entity Group share of joint venture net profit/(loss) (ii) Joint venture assets and liabilities: Current assets Cash and cash equivalents Other Non-current assets Current liabilities Financial liabilities Non-current liabilities Financial liabilities Other Other Joint Venture net assets Group share of joint venture net assets (iii) Carrying amount of investments in joint ventures: Balance at the beginning of the financial year Acquisition of joint venture Contribution to working capital Distribution paid out of retained earnings Share of joint venture profits/(losses) for the financial year Carrying amount of investments in joint ventures at the end of the financial year (iv) Share of contingent liabilities of joint venture: (v) Share of joint venture commitments: Consolidated $'000 28 Feb 2017 29 Feb 2016 281,989 202,460 (2,315) (995) 186 118 - 118 (2,077) (759) 338 (6,707) - (6,707) 60 (3,421) 11,755 58,093 62,027 6,745 42,198 60,111 (47,028) (18,710) (4,276) (9,659) (2,027) (2,275) (92) (76) 78,452 40,011 78,334 39,950 39,950 46,941 (3,570) (3,421) 60 40,011 39,950 - - - - - - - - - (f) Share of Non Material Investments in Joint Ventures: ACS and NCPS (i) Non Material Joint Venture Results Profits/(Losses) and total comprehensive income from continuing operations 652 (402) Namoi Cotton Co-operative Limited 11. Interest in Joint Operations (a) Ownership interest Name Wathagar Ginning Company (WGC) Moomin Ginning Company (MGC) % Ownership interest held by consolidated entity 28 Feb 2017 50% 50% 29 Feb 2016 50% 50% Balance Date 28 February 28 February (b) Principal activities The joint operations provide ginning services to cotton growers in the Gwydir valley located in NSW. (c) Impairment No assets employed in the jointly controlled operation were impaired during the year (2016: $nil). (d) Accounting for joint operations The joint operations have been accounted for using the share of rights to assets and obligations for liabilities method. 12. Interest in Jointly Controlled Assets Namoi Cotton holds a 40% joint ownership interest in the white cotton seed handling and storage facilities at Mungindi, with a book carrying value of $2.28m at 28 February 2017 (2016: $2.33m). Namoi cotton pays for their proportion of the operating costs of the facility. There were no material contingent liabilities or capital expenditure commitments in respect of jointly controlled assets at balance date. Year Ended 28 February 2017 Notes to the Financial Statements Page 51 Year Ended 28 February 2017 Notes to the Financial Statements Page 52 2017 ANNUAL REPORT | 63 For personal use onlyNamoi Cotton Co-operative Limited 13. Property, Plant and Equipment Gin Assets Ginning infrastucture and major equipment at fair value Provision for depreciation and impairment Revaluation to fair value Closing written down value at fair value Other ginning equipment Cost Provision for depreciation and impairment Closing written down value at cost Consolidated $'000 Parent $'000 28 Feb 2017 29 Feb 2016 28 Feb 2017 29 Feb 2016 127,388 (4,694) 122,694 - 122,694 119,571 - 119,571 7,818 127,389 127,388 (4,694) 122,694 - 122,694 119,571 - 119,571 7,818 127,389 9,002 (4,430) 4,572 6,909 (3,641) 3,268 9,002 (4,430) 4,572 6,909 (3,641) 3,268 Net Gin Assets 127,266 130,657 127,266 130,657 Other Assets Other infrastucture and major equipment at fair value Provision for depreciation and impairment Revaluation to fair value Closing written down value at fair value Other equipment Cost Provision for depreciation and impairment Closing written down value at cost Net Other Assets Capital work in progress ('CWIP') at cost Total written down value at fair value Total written down value at cost Total written down value for property, plant & equipment 6,353 (243) 6,110 - 6,110 10,183 (8,420) 1,763 7,873 3,334 4,880 - 4,880 1,473 6,353 10,366 (8,154) 2,212 8,565 1,688 6,353 (243) 6,110 - 6,110 10,183 (8,420) 1,763 7,873 3,334 4,880 - 4,880 1,473 6,353 10,366 (8,154) 2,212 8,565 1,688 128,804 9,669 133,742 7,168 128,804 9,669 133,742 7,168 138,473 140,910 138,473 140,910 Namoi Cotton Co-operative Limited be as follows: If the above categories of assets were still measured using the cost model, the carrying amount (WDV) would Consolidated and Parent $'000 $'000 28 Feb 2017 29 Feb 2016 28 Feb 2017 29 Feb 2016 59,891 3,422 63,313 60,633 4,314 64,947 59,891 3,422 63,313 60,633 4,314 64,947 Ginning infrastucture and major equipment Other infrastucture and major equipment Revaluation of Ginning Assets deemed cost to fair value. Effective 29 February 2012, the group changed its accounting policy for the measurement of ginning assets from The methodology used in determining the fair value of the relevant properties and assets was the Discounted Cash Flow (DCF) approach as the primary method and the Net Maintainable Earnings approach as the secondary method. The DCF method provides a valuation based on the formulation of projected future cash flows over a ten-year period (plus a terminal value), which was then discounted at an appropriate discount rate. The Net Maintainable Earnings approach was used to support the DCF method results. Effective 29 February 2016 an independent valuation of the ginning assets was commissioned by the Group to provide external support for the Directors assessment of fair value for financial reporting purposes. Colliers International (“Colliers”) were engaged for this purpose. The methodology applied by Colliers to value the ginning assets was a net maintainable earnings approach. An assessed sustainable EBITDA was multiplied by an appropriate earnings multiple derived from market sources. The external valuation obtained for the ginning assets was then used to support the results of a DCF model for the prior year. The directors continue to utilise this DCF method to determine the fair value of ginning assets. Management calculated the fair value as at 28 February 2017 and determined that the carrying value of the assets is in line with the fair value and, therefore, no further revaluations were recorded. The fair value measurement of ginning assets outlined above uses significant unobservable inputs and are classified as level 3 in the financial reporting fair value measurement hierarchy. Significant unobservable valuation inputs as at 28 February 2017 included: � Sustainable bales. The average annual sustainable ginning bales have been included following a grower by grower assessment of production areas, seasonal rotation, estimated yields and reliability of contracting. The measure is inclusive of Namoi’s respective shares of throughputs of the joint venture cotton gins. The number being approximately a 28 % (2016: 28%) market share of an Australian sustainable crop size of 3.2 million bales (2016: 3.2 million bales) which also approximates the average number of bales achieved over the last 7 years, noting that individual seasons can fluctuate significantly dependent upon water availability; � � � Growth rate - revenues 1.65% (2016 - 1.65%) Growth rate - expenses 2.20% (2016 - 2.20%) Pre-tax discount rate of 16% (2016 – 16.0 %) significantly higher/(lower) fair value. Impairment of Assets at Cost Any significant increases/(decreases) in sustainable bales volumes, changes to EBITDA from ginning revenue per bale, or throughput rate (production cost impact) or changes to the discount rate, in isolation, would result in a Impairment losses are determined with reference to the items recoverable amount calculated as the greater of fair value less costs to sell or its value in use. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. Where the carrying values exceed the estimated recoverable amount (refer to Note 1), the assets or cash-generating units are written down to their recoverable amount. Year Ended 28 February 2017 Notes to the Financial Statements 2017 ANNUAL REPORT | 64 Page 53 Year Ended 28 February 2017 Notes to the Financial Statements Page 54 For personal use onlyClosing written down value at fair value 122,694 127,389 122,694 127,389 Namoi Cotton Co-operative Limited 13. Property, Plant and Equipment Ginning infrastucture and major equipment Gin Assets at fair value Provision for depreciation and impairment Revaluation to fair value Other ginning equipment Cost Provision for depreciation and impairment Closing written down value at cost Net Gin Assets Other Assets at fair value Other infrastucture and major equipment Provision for depreciation and impairment Revaluation to fair value Closing written down value at fair value Other equipment Cost Provision for depreciation and impairment Closing written down value at cost Net Other Assets Capital work in progress ('CWIP') at cost Total written down value at fair value Total written down value at cost Total written down value for property, plant & equipment Consolidated $'000 Parent $'000 28 Feb 2017 29 Feb 2016 28 Feb 2017 29 Feb 2016 127,388 119,571 127,388 119,571 (4,694) - (4,694) - 122,694 119,571 122,694 119,571 - 7,818 - 7,818 9,002 (4,430) 4,572 6,909 (3,641) 3,268 9,002 (4,430) 4,572 6,909 (3,641) 3,268 127,266 130,657 127,266 130,657 6,353 (243) 6,110 - 6,110 10,183 (8,420) 1,763 7,873 3,334 4,880 - 4,880 1,473 6,353 10,366 (8,154) 2,212 8,565 1,688 6,353 (243) 6,110 - 6,110 10,183 (8,420) 1,763 7,873 3,334 4,880 - 4,880 1,473 6,353 10,366 (8,154) 2,212 8,565 1,688 128,804 133,742 128,804 133,742 9,669 7,168 9,669 7,168 138,473 140,910 138,473 140,910 Namoi Cotton Co-operative Limited If the above categories of assets were still measured using the cost model, the carrying amount (WDV) would be as follows: Ginning infrastucture and major equipment Other infrastucture and major equipment Consolidated and Parent $'000 $'000 28 Feb 2017 29 Feb 2016 28 Feb 2017 29 Feb 2016 59,891 3,422 63,313 60,633 4,314 64,947 59,891 3,422 63,313 60,633 4,314 64,947 Revaluation of Ginning Assets Effective 29 February 2012, the group changed its accounting policy for the measurement of ginning assets from deemed cost to fair value. The methodology used in determining the fair value of the relevant properties and assets was the Discounted Cash Flow (DCF) approach as the primary method and the Net Maintainable Earnings approach as the secondary method. The DCF method provides a valuation based on the formulation of projected future cash flows over a ten-year period (plus a terminal value), which was then discounted at an appropriate discount rate. The Net Maintainable Earnings approach was used to support the DCF method results. Effective 29 February 2016 an independent valuation of the ginning assets was commissioned by the Group to provide external support for the Directors assessment of fair value for financial reporting purposes. Colliers International (“Colliers”) were engaged for this purpose. The methodology applied by Colliers to value the ginning assets was a net maintainable earnings approach. An assessed sustainable EBITDA was multiplied by an appropriate earnings multiple derived from market sources. The external valuation obtained for the ginning assets was then used to support the results of a DCF model for the prior year. The directors continue to utilise this DCF method to determine the fair value of ginning assets. Management calculated the fair value as at 28 February 2017 and determined that the carrying value of the assets is in line with the fair value and, therefore, no further revaluations were recorded. The fair value measurement of ginning assets outlined above uses significant unobservable inputs and are classified as level 3 in the financial reporting fair value measurement hierarchy. Significant unobservable valuation inputs as at 28 February 2017 included: � • � • � • � • Sustainable bales. The average annual sustainable ginning bales have been included following a grower by grower assessment of production areas, seasonal rotation, estimated yields and reliability of contracting. The measure is inclusive of Namoi’s respective shares of throughputs of the joint venture cotton gins. The number being approximately a 28 % (2016: 28%) market share of an Australian sustainable crop size of 3.2 million bales (2016: 3.2 million bales) which also approximates the average number of bales achieved over the last 7 years, noting that individual seasons can fluctuate significantly dependent upon water availability; Growth rate - revenues 1.65% (2016 - 1.65%) Growth rate - expenses 2.20% (2016 - 2.20%) Pre-tax discount rate of 16% (2016 – 16.0 %) Any significant increases/(decreases) in sustainable bales volumes, changes to EBITDA from ginning revenue per bale, or throughput rate (production cost impact) or changes to the discount rate, in isolation, would result in a significantly higher/(lower) fair value. Impairment of Assets at Cost Impairment losses are determined with reference to the items recoverable amount calculated as the greater of fair value less costs to sell or its value in use. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. Where the carrying values exceed the estimated recoverable amount (refer to Note 1), the assets or cash-generating units are written down to their recoverable amount. Year Ended 28 February 2017 Notes to the Financial Statements Page 53 Year Ended 28 February 2017 Notes to the Financial Statements Page 54 2017 ANNUAL REPORT | 65 For personal use onlyNamoi Cotton Co-operative Limited Reconciliations Reconciliations of the carrying amounts of each class of property, plant and equipment at the beginning and end of the current financial year are set out below. Namoi Cotton Co-operative Limited 15. Interest Bearing Liabilities The extent to which the economic entity’s finance facilities provided by Commonwealth Bank of Australia (CBA) were utilised at 28 February 2017 is listed below. Year Ended 28 February 2017 ($'000) Gins Other CWIP Consolidated and parent entity Written down value - 1 March 2016 Additions and Transfer to/(from) CWIP Disposals Depreciation1 Written down value - 28 February 2017 130,657 1,968 (39) (5,320) 127,266 8,565 290 (96) (886) 7,873 1,688 1,646 - - 3,334 Year Ended 29 February 2016 ($'000) Gins Other CWIP Consolidated and parent entity Written down value - 1 March 2015 Additions and Transfer to/(from) CWIP Disposals Depreciation Revaluation increments/(decrements) Written down value - 29 February 2016 122,805 5,394 (55) (5,305) 7,818 130,657 6,953 1,111 (107) (865) 1,473 8,565 1,496 192 - - - 1,688 1Change in Depreciation Policy A change in the assessment of the remaining useful life of ginning assets (which is a change in estimate) was made at the start of the 2017 financial year. The change has increased the remaining useful life of the ginning assets with the effect of reducing depreciation for the year from $7.3m to $6.2m. Any impact in the next financial year will be dependent upon actual ginning volumes at the time. Ginning infrastructure assets are depreciated on a units of production basis over their rolling estimated remaining useful lives of 20 years. Current AUD Facility Use Short term Working capital finance 1 Term debt 2 Lease liability Loans from controlled entities Non Current Term debt 2 Lease liability business. Other liabilities Facility Use - AUD $'000 Consolidated 28 Feb 2017 29 Feb 2016 Parent 28 Feb 2017 29 Feb 2016 819 9,500 5,500 15,819 771 771 - 41,980 1,350 43,330 2,072 9,000 47,481 58,553 717 717 - - 1,409 1,409 819 9,500 5,500 15,819 771 771 2,049 41,980 1,350 45,379 2,072 9,000 47,481 58,553 717 717 2,049 - 1,409 3,458 16,590 59,270 16,590 59,270 Total Current and Non-Current 59,920 60,679 61,969 62,728 1 Working capital lines are utilised to fund day to day expenses of the business including specific funding needs for cotton seed inventory and debtors. 2 Term debt lines are utilised to fund capital projects relating to the plant, property and equipment of the 14. Trade and Other Payables Interest bearing liabilities are carried at amortised cost. Current Trade creditors and accruals1 Grower deposits Customer deposits Trade creditors to an associate Loans from controlled entities Consolidated $'000 Parent $'000 28 Feb 2017 29 Feb 2016 28 Feb 2017 29 Feb 2016 7,938 38 132 293 - 8,401 4,988 34 - - - 5,022 7,936 38 132 293 17,732 26,131 4,988 34 - - 17,731 22,753 Hire purchase contracts on equipment have an average term of 2.5 years with the average interest rate implicit in the contracts of 4.9% (2016: 5.7%). Details of interest rate risk, foreign exchange risk and liquidity risk are disclosed in Note 26. Facility limits The seasonal finance facilities limit, excluding term debt, at 28 February 2017 was $12.5 million (2016: $12.5 million) including operating overdrafts. A higher limit of $17.5 million applies from 1 March 2017 to 30 June 2017 At balance date CBA had provided Namoi Cotton with a secured $47.5 million (2016: $47.5 million) debt facility with core components maturing on 28 February 2020. Security is provided by a fixed and floating charge over the assets and undertakings of the group. 1 Trade and other payables are non-interest bearing and are settled under a variety of terms dependent upon the transaction arrangements and the counterparty. The carrying amount of trade and other payables approximates their fair value. Year Ended 28 February 2017 Notes to the Financial Statements 2017 ANNUAL REPORT | 66 Page 55 Year Ended 28 February 2017 Notes to the Financial Statements Page 56 For personal use onlyNamoi Cotton Co-operative Limited Reconciliations Reconciliations of the carrying amounts of each class of property, plant and equipment at the beginning and end of the current financial year are set out below. Year Ended 28 February 2017 ($'000) Gins Other CWIP Year Ended 29 February 2016 ($'000) Gins Other CWIP A change in the assessment of the remaining useful life of ginning assets (which is a change in estimate) was made at the start of the 2017 financial year. The change has increased the remaining useful life of the ginning assets with the effect of reducing depreciation for the year from $7.3m to $6.2m. Any impact in the next financial year will be dependent upon actual ginning volumes at the time. Ginning infrastructure assets are depreciated on a units of production basis over their rolling estimated 130,657 1,968 (39) (5,320) 127,266 8,565 290 (96) (886) 7,873 122,805 5,394 (55) (5,305) 7,818 130,657 6,953 1,111 (107) (865) 1,473 8,565 1,688 1,646 3,334 1,496 192 1,688 - - - - - Consolidated $'000 Parent $'000 28 Feb 2017 29 Feb 2016 28 Feb 2017 29 Feb 2016 7,938 38 132 293 - 4,988 34 - - - 8,401 5,022 7,936 4,988 38 132 293 34 - - 17,732 26,131 17,731 22,753 Consolidated and parent entity Written down value - 1 March 2016 Additions and Transfer to/(from) CWIP Disposals Depreciation1 Written down value - 28 February 2017 Consolidated and parent entity Written down value - 1 March 2015 Additions and Transfer to/(from) CWIP Disposals Depreciation Revaluation increments/(decrements) Written down value - 29 February 2016 1Change in Depreciation Policy remaining useful lives of 20 years. 14. Trade and Other Payables Current Trade creditors and accruals1 Grower deposits Customer deposits Trade creditors to an associate Loans from controlled entities approximates their fair value. Year Ended 28 February 2017 Notes to the Financial Statements Namoi Cotton Co-operative Limited 15. Interest Bearing Liabilities The extent to which the economic entity’s finance facilities provided by Commonwealth Bank of Australia (CBA) were utilised at 28 February 2017 is listed below. Current AUD Facility Use Short term Working capital finance 1 Term debt 2 Lease liability Non Current Loans from controlled entities Term debt 2 Lease liability Facility Use - AUD $'000 Consolidated 28 Feb 2017 29 Feb 2016 Parent 28 Feb 2017 29 Feb 2016 819 9,500 5,500 15,819 771 771 16,590 - 41,980 1,350 43,330 2,072 9,000 47,481 58,553 717 717 59,270 - - 1,409 1,409 819 9,500 5,500 15,819 771 771 16,590 2,049 41,980 1,350 45,379 2,072 9,000 47,481 58,553 717 717 59,270 2,049 - 1,409 3,458 Total Current and Non-Current 59,920 60,679 61,969 62,728 1 Working capital lines are utilised to fund day to day expenses of the business including specific funding needs for cotton seed inventory and debtors. 2 Term debt lines are utilised to fund capital projects relating to the plant, property and equipment of the business. Other liabilities Interest bearing liabilities are carried at amortised cost. Hire purchase contracts on equipment have an average term of 2.5 years with the average interest rate implicit in the contracts of 4.9% (2016: 5.7%). Details of interest rate risk, foreign exchange risk and liquidity risk are disclosed in Note 26. Facility limits The seasonal finance facilities limit, excluding term debt, at 28 February 2017 was $12.5 million (2016: $12.5 million) including operating overdrafts. A higher limit of $17.5 million applies from 1 March 2017 to 30 June 2017 At balance date CBA had provided Namoi Cotton with a secured $47.5 million (2016: $47.5 million) debt facility with core components maturing on 28 February 2020. Security is provided by a fixed and floating charge over the assets and undertakings of the group. 1 Trade and other payables are non-interest bearing and are settled under a variety of terms dependent upon the transaction arrangements and the counterparty. The carrying amount of trade and other payables Page 55 Year Ended 28 February 2017 Notes to the Financial Statements Page 56 2017 ANNUAL REPORT | 67 For personal use onlyNamoi Cotton Co-operative Limited AUD Facility Limit Short term Working capital finance 4 Term debt - A 1 Term debt - B 2 Term debt - C 3 Facility Limit - AUD $'000 Consolidated 28 Feb 2017 29 Feb 2016 Parent 28 Feb 2017 29 Feb 2016 2,500 10,000 35,000 12,480 - 59,980 2,500 10,000 25,000 10,500 11,980 59,980 2,500 10,000 35,000 12,480 - 59,980 2,500 10,000 25,000 10,500 11,980 59,980 Financing arrangements The Sixth Variation Deed was executed on 24 February 2017 consolidating the term debt C into term debts A and B and increasing the seasonal finance facilities inner limit to $17.5 million from 1 March 2017 to 30 June 2017. Finance renewal Finance facility limits negotiated with CBA as per above: 1Committed term debt facility (non-amortising) - facility limit of AUD$35 million (2016: AUD$25 million) with a facility end date of 28 February 2020; 2Committed term debt facility (amortising) - facility limit of AUD$12.5 million (2016: AUD$10.5 million) with a facility end date of 28 February 2020; 3Committed term debt facility (non-amortising) - facility limit of AUD$nil as consolidated into term debt A and B (2016: AUD$11.98 million); and 4Committed cotton seed, ginning consumables and general working capital needs under a multi option working capital facility (non-amortising) - facility limit of AUD$10 million (2016: AUD$10 million) with a facility end date of 17 March 2018. With the exception of the maturity of the facilities, the terms and conditions are materially consistent with the previous facilities. The group has agreed to certain financial covenants with CBA under the new finance facilities at what are considered appropriate levels to meet the needs of the business. Financial covenants under the previous agreements were complied with during the year. The Directors at the date of this report expect the working capital facility will be renewed thereafter and at appropriate levels for FY 2019 operations. Namoi Cotton Co-operative Limited 16. Provisions Current Employee leave entitlements Employee variable compensation Non-current Employee leave entitlements 17. Co-operative Grower Member Shares Consolidated $'000 Parent $'000 28 Feb 2017 29 Feb 2016 28 Feb 2017 29 Feb 2016 1,979 - 1,979 863 863 2,040 22 2,062 799 799 1,979 - 1,979 863 863 2,040 22 2,062 799 799 Consolidated $'000 Parent $'000 28 Feb 2017 29 Feb 2016 28 Feb 2017 29 Feb 2016 No. No. 28 Feb 2017 29 Feb 2016 28 Feb 2017 29 Feb 2016 Grower member shares - fixed capital entitlement 447 447 447 447 1 cent Grower member shares (fully paid) Shares at the beginning of the financial year 165,600 165,600 165,600 165,600 Shares issued during the year Shares repurchased/forfeited during the year Shares at the end of the financial year - - - - - - - - 165,600 165,600 165,600 165,600 Terms and conditions Grower shares may only be held by active members; � � � � � � Grower shareholders have one vote at member meetings, regardless of the number of grower shares held; Grower shares can be issued and are redeemable for a fixed amount of $2.70 per share, but have no entitlement to surplus repayments; Grower shares have no dividend entitlement; up to three non-grower directors; with Namoi Cotton. Grower shareholders appoint the directors of Namoi Cotton, subject to the stockholders right to nominate Grower shareholders are entitled to a rebate, if applicable, for each bale of cotton ginned and/or marketed Year Ended 28 February 2017 Notes to the Financial Statements 2017 ANNUAL REPORT | 68 Page 57 Year Ended 28 February 2017 Notes to the Financial Statements Page 58 For personal use onlyNamoi Cotton Co-operative Limited AUD Facility Limit Short term Working capital finance 4 Term debt - A 1 Term debt - B 2 Term debt - C 3 Financing arrangements 2017. Finance renewal Facility Limit - AUD $'000 Consolidated 28 Feb 2017 29 Feb 2016 Parent 28 Feb 2017 29 Feb 2016 2,500 10,000 35,000 12,480 - 59,980 2,500 10,000 25,000 10,500 11,980 59,980 2,500 10,000 35,000 12,480 - 59,980 2,500 10,000 25,000 10,500 11,980 59,980 The Sixth Variation Deed was executed on 24 February 2017 consolidating the term debt C into term debts A and B and increasing the seasonal finance facilities inner limit to $17.5 million from 1 March 2017 to 30 June Finance facility limits negotiated with CBA as per above: 1Committed term debt facility (non-amortising) - facility limit of AUD$35 million (2016: AUD$25 million) with a 2Committed term debt facility (amortising) - facility limit of AUD$12.5 million (2016: AUD$10.5 million) with a 3Committed term debt facility (non-amortising) - facility limit of AUD$nil as consolidated into term debt A and B facility end date of 28 February 2020; facility end date of 28 February 2020; (2016: AUD$11.98 million); and 4Committed cotton seed, ginning consumables and general working capital needs under a multi option working capital facility (non-amortising) - facility limit of AUD$10 million (2016: AUD$10 million) with a facility end date With the exception of the maturity of the facilities, the terms and conditions are materially consistent with the of 17 March 2018. previous facilities. The group has agreed to certain financial covenants with CBA under the new finance facilities at what are considered appropriate levels to meet the needs of the business. Financial covenants under the previous agreements were complied with during the year. The Directors at the date of this report expect the working capital facility will be renewed thereafter and at appropriate levels for FY 2019 operations. Namoi Cotton Co-operative Limited 16. Provisions Current Employee leave entitlements Employee variable compensation Non-current Employee leave entitlements Consolidated $'000 Parent $'000 28 Feb 2017 29 Feb 2016 28 Feb 2017 29 Feb 2016 1,979 - 1,979 863 863 2,040 22 2,062 799 799 1,979 - 1,979 863 863 2,040 22 2,062 799 799 17. Co-operative Grower Member Shares Consolidated $'000 Parent $'000 28 Feb 2017 29 Feb 2016 28 Feb 2017 29 Feb 2016 Grower member shares - fixed capital entitlement 447 447 447 447 1 cent Grower member shares (fully paid) Shares at the beginning of the financial year Shares issued during the year Shares repurchased/forfeited during the year Shares at the end of the financial year No. No. 28 Feb 2017 29 Feb 2016 28 Feb 2017 29 Feb 2016 165,600 - - 165,600 165,600 - - 165,600 165,600 - - 165,600 165,600 - - 165,600 Terms and conditions � • � • � • Grower shares may only be held by active members; Grower shareholders have one vote at member meetings, regardless of the number of grower shares held; Grower shares can be issued and are redeemable for a fixed amount of $2.70 per share, but have no entitlement to surplus repayments; Grower shares have no dividend entitlement; Grower shareholders appoint the directors of Namoi Cotton, subject to the stockholders right to nominate up to three non-grower directors; Grower shareholders are entitled to a rebate, if applicable, for each bale of cotton ginned and/or marketed with Namoi Cotton. � • � • � • Year Ended 28 February 2017 Notes to the Financial Statements Page 57 Year Ended 28 February 2017 Notes to the Financial Statements Page 58 2017 ANNUAL REPORT | 69 For personal use onlyThere were no transactions under the rebate reinvestment plan during the year ended 28 February 2017 (2016: Capital stock issued under the distribution reinvestment plan is issued at a discount of 5% to the weighted average market price of Namoi capital stock sold on the ASX on the first day on which Namoi capital stock is quoted ex distribution in relation to the distribution to which the allotment relates and the following four Namoi Cotton Co-operative Limited Rebate reinvestment plan $nil). Distribution reinvestment plan business days. Capital management Namoi Cotton manages capital through the payment of dividends and participation in the on-market buy back of its Namoi Capital Stock. Decisions on capital management are made having regard to compliance with externally imposed capital requirements principally through maintaining a minimum level of net assets. 19. Nature and Purpose of Reserves Capital stock (CCU) premium reserve By virtue of rule 15.2 of the co-operative rules, the capital stock premium reserve is used to record amounts received in respect of capital stock issued at a premium and are to be regarded as paid up capital of the co- operative. operative; � � � The balance standing to the credit of this account may be applied in any one or more of the following ways: In the payment of dividends if those dividends are satisfied by the issue of shares to the members of the co- In writing off the preliminary expenses of the co-operative; or In providing for the premium payable on redemption of shares, debentures or co-operative capital units. Asset revaluation reserve The asset revaluation reserve is used to record increases in the fair value of ginning assets and decreases to the extent that such decreases relates to an increase on the same asset previously recognised in equity. The reserve can only be used to pay dividends in limited circumstances. Namoi Cotton Co-operative Limited Minimum holding and forfeiture rules Rule 6 of the rules of the co-operative requires active members to hold 800 shares, produce cotton from a minimum 40 hectares and conduct a minimum 20% of the member’s cotton business with the co-operative in order to be eligible for a rebate of ginning and marketing charges levied by the co-operative. The board may declare membership of a member cancelled where the grower is inactive for two years, whereby grower shares are forfeited and the grower is repaid an amount equal to the initial issue price. 18. Contributed Equity Capital Stock Consolidated $'000 Parent $'000 28 Feb 2017 29 Feb 2016 28 Feb 2017 29 Feb 2016 1,098 1,098 1,098 1,098 Consolidated and Parent No. '000 $'000 28 Feb 2017 29 Feb 2016 28 Feb 2017 29 Feb 2016 1 cent Capital Stock (fully paid) Capital stock at the beginning of the financial year Issued during the year Redeemed through on-market buy-back Capital stock at the end of the financial year 109,843 - - 109,843 109,843 - - 109,843 1,098 - - 1,098 1,098 - - 1,098 Net tangible assets per co-operative capital unit $ 1.13 $ 1.12 Terms and conditions � • � • � Matters relating to the appointment of the non-grower directors must be approved by capital stock holders • Capital stock holders are entitled to distributions as declared by the directors; Capital stock holders have no right to vote at any general meeting of Namoi Cotton; prior to submission to a general meeting of Namoi Cotton for approval; � On winding up, capital stock holders are entitled to the proceeds from surplus assets after payment of • grower paid up share capital. Namoi Cotton Employee Incentive Share Plan The Employee Incentive Share Plan was suspended in August 2004. All full time employees who were continuously employed by Namoi Cotton for a period of one year were eligible to participate in the plan after the finalisation of the full year results for the year ended 29 February 2004. The issue price was at a 5% discount to the average market price of Namoi capital stock over the 5 trading days preceding the offer date. Under the terms of the plan, employees are provided with an interest free loan to finance the issue price of the units. A minimum of 75% of the amount of all distributions paid in relation to units issued under the plan must be applied as a repayment of the loan. In any event, the loan must be repaid on the earlier to occur of termination of employment and 10 years. At the end of the financial year employee loans totalled $24,441 (2016: $25,188). Units issued under the plan are placed in escrow until the later to occur of three years from issue and when the employee loan has been fully repaid. At the end of the financial year there were 141,000 units (2016: 141,000 units) under escrow. Year Ended 28 February 2017 Notes to the Financial Statements 2017 ANNUAL REPORT | 70 Page 59 Year Ended 28 February 2017 Notes to the Financial Statements Page 60 For personal use onlyNamoi Cotton Co-operative Limited Minimum holding and forfeiture rules Rule 6 of the rules of the co-operative requires active members to hold 800 shares, produce cotton from a minimum 40 hectares and conduct a minimum 20% of the member’s cotton business with the co-operative in order to be eligible for a rebate of ginning and marketing charges levied by the co-operative. The board may declare membership of a member cancelled where the grower is inactive for two years, whereby grower shares are forfeited and the grower is repaid an amount equal to the initial issue price. 18. Contributed Equity Capital Stock Consolidated $'000 Parent $'000 28 Feb 2017 29 Feb 2016 28 Feb 2017 29 Feb 2016 1,098 1,098 1,098 1,098 Consolidated and Parent No. '000 $'000 28 Feb 2017 29 Feb 2016 28 Feb 2017 29 Feb 2016 1 cent Capital Stock (fully paid) Capital stock at the beginning of the financial year 109,843 109,843 1,098 1,098 Issued during the year Redeemed through on-market buy-back - - - - - - - - Capital stock at the end of the financial year 109,843 109,843 1,098 1,098 Net tangible assets per co-operative capital unit $ 1.13 $ 1.12 Terms and conditions � � Capital stock holders are entitled to distributions as declared by the directors; Capital stock holders have no right to vote at any general meeting of Namoi Cotton; � Matters relating to the appointment of the non-grower directors must be approved by capital stock holders prior to submission to a general meeting of Namoi Cotton for approval; � On winding up, capital stock holders are entitled to the proceeds from surplus assets after payment of grower paid up share capital. Namoi Cotton Employee Incentive Share Plan The Employee Incentive Share Plan was suspended in August 2004. All full time employees who were continuously employed by Namoi Cotton for a period of one year were eligible to participate in the plan after the finalisation of the full year results for the year ended 29 February 2004. The issue price was at a 5% discount to the average market price of Namoi capital stock over the 5 trading days preceding the offer date. Under the terms of the plan, employees are provided with an interest free loan to finance the issue price of the units. A minimum of 75% of the amount of all distributions paid in relation to units issued under the plan must be applied as a repayment of the loan. In any event, the loan must be repaid on the earlier to occur of termination of employment and 10 years. At the end of the financial year employee loans totalled $24,441 (2016: $25,188). units) under escrow. Units issued under the plan are placed in escrow until the later to occur of three years from issue and when the employee loan has been fully repaid. At the end of the financial year there were 141,000 units (2016: 141,000 Namoi Cotton Co-operative Limited Rebate reinvestment plan There were no transactions under the rebate reinvestment plan during the year ended 28 February 2017 (2016: $nil). Distribution reinvestment plan Capital stock issued under the distribution reinvestment plan is issued at a discount of 5% to the weighted average market price of Namoi capital stock sold on the ASX on the first day on which Namoi capital stock is quoted ex distribution in relation to the distribution to which the allotment relates and the following four business days. Capital management Namoi Cotton manages capital through the payment of dividends and participation in the on-market buy back of its Namoi Capital Stock. Decisions on capital management are made having regard to compliance with externally imposed capital requirements principally through maintaining a minimum level of net assets. 19. Nature and Purpose of Reserves Capital stock (CCU) premium reserve By virtue of rule 15.2 of the co-operative rules, the capital stock premium reserve is used to record amounts received in respect of capital stock issued at a premium and are to be regarded as paid up capital of the co- operative. The balance standing to the credit of this account may be applied in any one or more of the following ways: � • In the payment of dividends if those dividends are satisfied by the issue of shares to the members of the co- operative; In writing off the preliminary expenses of the co-operative; or In providing for the premium payable on redemption of shares, debentures or co-operative capital units. � • � • Asset revaluation reserve The asset revaluation reserve is used to record increases in the fair value of ginning assets and decreases to the extent that such decreases relates to an increase on the same asset previously recognised in equity. The reserve can only be used to pay dividends in limited circumstances. Year Ended 28 February 2017 Notes to the Financial Statements Page 59 Year Ended 28 February 2017 Notes to the Financial Statements Page 60 2017 ANNUAL REPORT | 71 For personal use onlyNamoi Cotton Co-operative Limited 20. Segment Information Identification of reportable segments The group has identified its operating segments based on the internal reports that are reviewed and used by the chief executive officer (the chief operating decision maker) with the executive management team in assessing performance and in determining the allocation of resources. The operating segments are identified by management based on the manner in which the product is sold, whether retail or wholesale, and the nature of the services provided, the identity of service line manager and country of origin. Discrete financial information about each of these operating businesses is reported to the executive management team on at least a monthly basis. The reportable segments are based on aggregated operating segments determined by the similarity of the products and sold and/or the services provided, as these are the sources of the group’s major risks and have the most effect on the rates of return. Types of products and services Ginning The ginning business operates 12 cotton gins (incorporating 2 joint venture gins, referred to in note 11) located in the key growing areas of NSW and Queensland. The ginning service provided to the growers during the production process includes the separation of lint cotton from seed and other foreign matter and the conversion of cotton in module form to bale form. Grower customers are also able to sell the white cotton seed by-product to Namoi Cotton or elect to retain their white cotton seed. Marketing The marketing business involves the purchase of lint cotton from Australian growers using a variety of forward contracts that offer differing combinations of price, delivery and risk characteristics. Subsequent to the formation of NCA, bales procured by Namoi from growers are on-sold to NCA with approximately 99% of NCA sales ultimately being to Asia. The NCA joint venture manages its marketing risks by utilising cotton futures and options and foreign currency contracts under strict risk management policies. Commodities The controlled entity Namoi Cotton Commodities Pty Ltd procures various grain and pulse crops from Australian growers and sells these into various domestic and international markets. Accounting policies The accounting policies used by the group in reporting segments internally are the same as those contained in note 1 to the accounts and in the prior period. The following items (or a portion thereof) of income and expenditure are not allocated to operating segments as they are not considered part of the core operations of any segment: Interest Revenue; Rental Revenue; Share of profit from associate (other than NCA and Cargill); Finance costs; Corporate employee benefits expense; Corporate depreciation; and � • � • � • � • � • � • � Other corporate administrative expenses. • A segment balance sheet and cashflow is not reported to the chief operating decision makers and are not disclosed as part of this report. Year Ended 28 February 2017 Notes to the Financial Statements 2017 ANNUAL REPORT | 72 Page 61 Page 62 Business Segments Year ended 28 February 2017 Ginning Marketing 1,2 Commodities Unallocated Consolidated $'000 $'000 $'000 $'000 $'000 112,222 200 112,422 242,407 242,407 112,422 242,407 - - - - 1,291 712 2,003 - - 8,054 (2,556) (802) 4,696 301 301 - - - 301 105 28 - 133 - - - 1 213 214 (6,710) (84) - (6,794) (5,684) (35) (142) (345) (6,206) 1 Marketing revenue remains inclusive of lint sales values upon transfer of bales from Namoi to NCA. 2 Marketing results include the net result for the NCA joint venture. Business Segments Year ended 29 February 2016 Ginning $'000 Marketing Commodities Unallocated Consolidated $'000 $'000 $'000 $'000 98,241 242 98,483 180,791 180,791 - - 98,483 180,791 3,238 (2,616) (316) 306 (909) (3,823) (4,732) - - - - 237 237 - - - 237 30 21 - 51 - - - 1 200 201 (6,269) (55) - (6,324) (i) Included in the unallocated results for the period are: (5,648) (34) (117) (371) (6,170) Namoi Cotton Co-operative Limited Revenue Sales to external customers Other revenues from external customers Total consolidated revenue Non-segment revenues Interest revenue Rental revenue Results Profit/(loss) before tax and finance costs Finance costs Share of profit from associates Net Profit before tax Other segment information Depreciation Included in the unallocated results for the period are: Interest Revenue Rental Revenue Total Unallocated Revenue Share of profit/(loss) of other associates Employee benefits expense Depreciation Finance costs Other corporate administrative expenses Total Unallocated Result Revenue Sales to external customers Other revenues from external customers Total consolidated revenue Non-segment revenues Interest revenue Rental revenue Results Profit/(loss) before tax and finance costs Finance costs Share of profit from associates Net Profit before tax Other segment information Depreciation Interest Revenue Rental Revenue Total Unallocated Revenue Share of profit/(loss) of associates Employee benefits expense Depreciation Finance costs Other corporate administrative expenses Total Unallocated Result Year Ended 28 February 2017 Notes to the Financial Statements 354,930 200 355,130 1 213 355,344 2,740 (2,612) (90) 38 1 213 214 - (3,426) (345) (84) (3,153) (6,794) 279,269 242 279,511 1 200 279,712 (3,910) (2,650) (4,139) (10,699) 1 200 201 - (3,397) (371) (55) (2,702) (6,324) For personal use onlyNamoi Cotton Co-operative Limited 20. Segment Information Identification of reportable segments The group has identified its operating segments based on the internal reports that are reviewed and used by the chief executive officer (the chief operating decision maker) with the executive management team in assessing performance and in determining the allocation of resources. The operating segments are identified by management based on the manner in which the product is sold, whether retail or wholesale, and the nature of the services provided, the identity of service line manager and country of origin. Discrete financial information about each of these operating businesses is reported to the executive management team on at least a monthly basis. The reportable segments are based on aggregated operating segments determined by the similarity of the products and sold and/or the services provided, as these are the sources of the group’s major risks and have the most effect on the rates of return. Types of products and services Ginning The ginning business operates 12 cotton gins (incorporating 2 joint venture gins, referred to in note 11) located in the key growing areas of NSW and Queensland. The ginning service provided to the growers during the production process includes the separation of lint cotton from seed and other foreign matter and the conversion of cotton in module form to bale form. Grower customers are also able to sell the white cotton seed by-product to Namoi Cotton or elect to retain their white cotton seed. Marketing The marketing business involves the purchase of lint cotton from Australian growers using a variety of forward contracts that offer differing combinations of price, delivery and risk characteristics. Subsequent to the formation of NCA, bales procured by Namoi from growers are on-sold to NCA with approximately 99% of NCA sales ultimately being to Asia. The NCA joint venture manages its marketing risks by utilising cotton futures and options and foreign currency contracts under strict risk management policies. The controlled entity Namoi Cotton Commodities Pty Ltd procures various grain and pulse crops from Australian growers and sells these into various domestic and international markets. Commodities Accounting policies The accounting policies used by the group in reporting segments internally are the same as those contained in note 1 to the accounts and in the prior period. The following items (or a portion thereof) of income and expenditure are not allocated to operating segments as they are not considered part of the core operations of any segment: Share of profit from associate (other than NCA and Cargill); Interest Revenue; Rental Revenue; Finance costs; � � � � � � Corporate employee benefits expense; Corporate depreciation; and � Other corporate administrative expenses. disclosed as part of this report. Year Ended 28 February 2017 Notes to the Financial Statements A segment balance sheet and cashflow is not reported to the chief operating decision makers and are not Page 61 Namoi Cotton Co-operative Limited Business Segments Year ended 28 February 2017 Revenue Sales to external customers Other revenues from external customers Total consolidated revenue Non-segment revenues Interest revenue Rental revenue Results Profit/(loss) before tax and finance costs Finance costs Share of profit from associates Net Profit before tax Other segment information Depreciation Ginning Marketing 1,2 Commodities Unallocated Consolidated $'000 $'000 $'000 $'000 $'000 112,222 200 112,422 - - 112,422 8,054 (2,556) (802) 4,696 242,407 - 242,407 - - 242,407 1,291 - 712 2,003 301 - 301 - - 301 105 28 - 133 - - - 1 213 214 (6,710) (84) - (6,794) 354,930 200 355,130 1 213 355,344 2,740 (2,612) (90) 38 (5,684) (35) (142) (345) (6,206) Included in the unallocated results for the period are: Interest Revenue Rental Revenue Total Unallocated Revenue Share of profit/(loss) of other associates Employee benefits expense Depreciation Finance costs Other corporate administrative expenses Total Unallocated Result 1 Marketing revenue remains inclusive of lint sales values upon transfer of bales from Namoi to NCA. 2 Marketing results include the net result for the NCA joint venture. 1 213 214 - (3,426) (345) (84) (3,153) (6,794) Business Segments Year ended 29 February 2016 Ginning $'000 Marketing Commodities Unallocated Consolidated $'000 $'000 $'000 $'000 Revenue Sales to external customers Other revenues from external customers Total consolidated revenue Non-segment revenues Interest revenue Rental revenue Results Profit/(loss) before tax and finance costs Finance costs Share of profit from associates Net Profit before tax Other segment information Depreciation 98,241 242 98,483 - - 98,483 3,238 (2,616) (316) 306 180,791 - 180,791 - - 180,791 (909) - (3,823) (4,732) 237 - 237 - - 237 30 21 - 51 - - - 1 200 201 (6,269) (55) - (6,324) 279,269 242 279,511 1 200 279,712 (3,910) (2,650) (4,139) (10,699) (5,648) (34) (117) (371) (6,170) (i) Included in the unallocated results for the period are: Interest Revenue Rental Revenue Total Unallocated Revenue Share of profit/(loss) of associates Employee benefits expense Depreciation Finance costs Other corporate administrative expenses Total Unallocated Result Year Ended 28 February 2017 Notes to the Financial Statements 1 200 201 - (3,397) (371) (55) (2,702) (6,324) Page 62 2017 ANNUAL REPORT | 73 For personal use onlyNamoi Cotton Co-operative Limited Geographic Area The economic entity operates in two separate geographic areas. Namoi Cotton procures lint cotton and white cotton seed and provides cotton ginning activities to and from growers located solely within Australia. A portion of cotton seed sales are made to a variety of countries in Asia with similar trading terms and conditions and risk profiles. As such for the purposes of this note Namoi Cotton’s geographic areas are considered to be Australia and Asia with consolidated revenues as follows: Geographic Areas Year ended 28 February 2017 Revenue Sales to external customers Other revenues from external customers Total consolidated revenue Geographic Areas Year ended 29 February 2016 Revenue Sales to external customers Other revenues from external customers Total consolidated revenue Australia $'000 Asia $'000 Consolidated $'000 338,109 200 338,309 16,821 - 16,821 354,930 200 355,130 Australia $'000 Asia $'000 Consolidated $'000 266,925 242 267,167 12,345 - 12,345 279,270 242 279,512 Namoi Cotton Co-operative Limited 21. Commitments and Contingencies Commitments for capital expenditure Property, plant and equipment Estimated capital expenditure contracted for at balance date but not provided for: Payable within one year Operating lease commitments – group as lessee Consolidated $'000 Parent $'000 28 Feb 2017 29 Feb 2016 28 Feb 2017 29 Feb 2016 5,870 591 5,870 591 The group has entered into commercial leases in respect of land and buildings which have an average life of less than 1 year. Options to renew are included in the contracts for commercial buildings only. There are no restrictions placed upon the lessee by entering into these leases. The future minimum rentals payable under the non-cancellable operating leases are as follows: Operating lease commitments - Group as lessee Not later than 1 year Later than 1 year and not later than 5 years Operating lease commitments receivable – group as lessor 307 - 307 656 289 945 307 - 307 656 289 945 The group has entered into non-cancellable commercial property leases on its surplus office building and into cancellable residential accommodation leases for certain employees in remote areas. The commercial lease allows for an annual increase in line with Consumer Price Index movements while residential leases are subject to periodic market assessment. Future minimum rentals receivable under non-cancellable operating leases as at 28 February 2017 are as follows: Operating lease commitments receivable - Group as lessor Not later than 1 year Later than 1 year and not later than 5 years 44 - 44 88 39 127 44 - 44 88 39 127 Finance lease and hire purchase commitments – group as lessee The group has finance leases and hire purchase contracts for gin packaging and logistics supply chain equipment with a carrying value of $2,701,735 (2016: $2,525,241) for both the group and the co-operative. The equipment is mainly presented in Gin Assets in Note 13. Property, Plant and Equipment. Year Ended 28 February 2017 Notes to the Financial Statements 2017 ANNUAL REPORT | 74 Page 63 Year Ended 28 February 2017 Notes to the Financial Statements Page 64 For personal use onlyNamoi Cotton Co-operative Limited Geographic Area Geographic Areas Year ended 28 February 2017 Revenue Sales to external customers Other revenues from external customers Total consolidated revenue Geographic Areas Year ended 29 February 2016 Revenue Sales to external customers Other revenues from external customers Total consolidated revenue The economic entity operates in two separate geographic areas. Namoi Cotton procures lint cotton and white cotton seed and provides cotton ginning activities to and from growers located solely within Australia. A portion of cotton seed sales are made to a variety of countries in Asia with similar trading terms and conditions and risk profiles. As such for the purposes of this note Namoi Cotton’s geographic areas are considered to be Australia and Asia with consolidated revenues as follows: Australia $'000 Asia $'000 Consolidated $'000 338,109 200 338,309 16,821 16,821 354,930 200 355,130 Australia $'000 Asia $'000 Consolidated $'000 266,925 242 267,167 12,345 12,345 279,270 242 279,512 - - Namoi Cotton Co-operative Limited 21. Commitments and Contingencies Commitments for capital expenditure Consolidated $'000 Parent $'000 28 Feb 2017 29 Feb 2016 28 Feb 2017 29 Feb 2016 Property, plant and equipment Estimated capital expenditure contracted for at balance date but not provided for: Payable within one year 5,870 591 5,870 591 Operating lease commitments – group as lessee The group has entered into commercial leases in respect of land and buildings which have an average life of less than 1 year. Options to renew are included in the contracts for commercial buildings only. There are no restrictions placed upon the lessee by entering into these leases. The future minimum rentals payable under the non-cancellable operating leases are as follows: Operating lease commitments - Group as lessee Not later than 1 year Later than 1 year and not later than 5 years Operating lease commitments receivable – group as lessor 307 - 307 656 289 945 307 - 307 656 289 945 The group has entered into non-cancellable commercial property leases on its surplus office building and into cancellable residential accommodation leases for certain employees in remote areas. The commercial lease allows for an annual increase in line with Consumer Price Index movements while residential leases are subject to periodic market assessment. Future minimum rentals receivable under non-cancellable operating leases as at 28 February 2017 are as follows: Operating lease commitments receivable - Group as lessor Not later than 1 year Later than 1 year and not later than 5 years 44 - 44 88 39 127 44 - 44 88 39 127 Finance lease and hire purchase commitments – group as lessee The group has finance leases and hire purchase contracts for gin packaging and logistics supply chain equipment with a carrying value of $2,701,735 (2016: $2,525,241) for both the group and the co-operative. The equipment is mainly presented in Gin Assets in Note 13. Property, Plant and Equipment. Year Ended 28 February 2017 Notes to the Financial Statements Page 63 Year Ended 28 February 2017 Notes to the Financial Statements Page 64 2017 ANNUAL REPORT | 75 For personal use onlyNamoi Cotton Co-operative Limited Future minimum lease payments under finance leases and hire purchase contracts together with the present value of the net minimum lease payments are as follows: Namoi Cotton Co-operative Limited 23. Related Party Disclosures Within one year After one year but within five years After five years Total minimum lease payments Unexpired finance charges Present value of minimum lease payments Consolidated $'000 Parent $'000 28 Feb 2017 844 1,379 44 2,267 (146) 2,121 29 Feb 2016 818 1,498 - 2,316 (191) 2,125 28 Feb 2017 844 1,379 44 2,267 (146) 2,121 29 Feb 2016 818 1,498 - 2,316 (191) 2,125 The weighted average interest rate implicit in the contracts for both the group and parent is 4.9% (2016: 5.7%). Contingent liabilities Namcott Investments Pty Ltd, a controlled entity of the co-operative, is a partner of the COA, Namcott Investments Pty Ltd is jointly and severally liable for the COA liabilities. At 28 February 2017 the liabilities of COA exceeded its assets. Refer to Note 10. Investments in Associates and Joint Ventures. 22. Significant Events after Balance Date No events of a material nature have occurred between balance date and the date of this report, other than as disclosed elsewhere in this report (refer to Note 15). The consolidated financial statements include the financial statements of Namoi Cotton Co-operative Limited and the subsidiaries listed in the following table. All subsidiaries were incorporated in Australia. Namoi Cotton Co-operative Limited is the ultimate parent entity of the group. Ownership and investment Name of entity Australian Raw Cotton Marketing Corp. Pty Ltd Namcott Investments Pty Limited Namoi Cotton Superannuation Pty Ltd Namoi Cotton Pty Ltd Namcott Marketing Pty Ltd Namoi Cotton Commodities Pty Ltd Namoi Cotton Finance Pty Ltd Cotton Trading Corporation Pty Limited Investments held in controlled entities Equity Interest % Investment $'000 28 Feb 2017 29 Feb 2016 28 Feb 2017 29 Feb 2016 100% 100% 100% 100% 100% 96% 100% 100% 100% 100% 100% 100% 100% 96% 100% 100% - - - - - - - - - - - - - - - - 1,830 1,830 1,830 1,830 (1,830) (1,830) Principal activities � Namcott Investments Pty Ltd, a subsidiary of Namoi Cotton, is the beneficial owner of the interests in CPL and COA Partnership. Namoi Oilseeds Trust formerly held the interest in the partnership. � Namoi Cotton Superannuation Pty Ltd is trustee of the co-operative’s former superannuation fund, which was wound up in June 2000. � Namoi Cotton Pty Ltd is a non-trading company. shares and NCA Partnership. � Namoi Cotton Finance Pty Ltd secures funding for the group. � Namcott Marketing Pty Ltd, a subsidiary of Namoi Cotton, is the beneficial owner of the interests in NCPS � Namoi Cotton Commodities Pty Ltd has main trading activities of sale and logistics of plastic waste from ginning activities. � � Cotton Trading Corporation Pty Limited is controlled by Namcott Investments Pty Ltd. Australian Raw Cotton Marketing Corp Pty Ltd is a non-trading company. Transactions with subsidiaries Transactions between members of the wholly owned group were minimal. Amounts receivable by and payable to the parent entity are included in the respective notes to this financial report. Transactions with other related parties ACS leased HVI machines from the parent during the period for $35,906 (2016: $89,978). Sales of white cotton seed to the COA Partnership were $19,454,562 (2016: $18,473,678) and purchases of white cotton seed from the COA Partnership were $nil (2016: $1,002,982). Transactions with NCA handling fees) (2016: $0.2m). Management fees received by Namoi for services provided to Namoi Cotton Alliance $2.5m (inclusive of bale Lint Cotton Sales from Namoi to Namoi Cotton Alliance $239.9m (2016: $187.2m). Insurance on-charged by Namoi to Namoi Cotton Alliance $0.4m (2016: $0.4m). Year Ended 28 February 2017 Notes to the Financial Statements 2017 ANNUAL REPORT | 76 Page 65 Year Ended 28 February 2017 Notes to the Financial Statements Page 66 For personal use onlyNamoi Cotton Co-operative Limited Future minimum lease payments under finance leases and hire purchase contracts together with the present value of the net minimum lease payments are as follows: Namoi Cotton Co-operative Limited 23. Related Party Disclosures Within one year After five years After one year but within five years Total minimum lease payments Unexpired finance charges Present value of minimum lease payments Consolidated $'000 Parent $'000 28 Feb 2017 844 1,379 44 2,267 (146) 2,121 29 Feb 2016 818 1,498 - 2,316 (191) 2,125 28 Feb 2017 844 1,379 44 2,267 (146) 2,121 29 Feb 2016 818 1,498 - 2,316 (191) 2,125 The weighted average interest rate implicit in the contracts for both the group and parent is 4.9% (2016: 5.7%). Contingent liabilities Namcott Investments Pty Ltd, a controlled entity of the co-operative, is a partner of the COA, Namcott Investments Pty Ltd is jointly and severally liable for the COA liabilities. At 28 February 2017 the liabilities of COA exceeded its assets. Refer to Note 10. Investments in Associates and Joint Ventures. 22. Significant Events after Balance Date No events of a material nature have occurred between balance date and the date of this report, other than as disclosed elsewhere in this report (refer to Note 15). The consolidated financial statements include the financial statements of Namoi Cotton Co-operative Limited and the subsidiaries listed in the following table. All subsidiaries were incorporated in Australia. Namoi Cotton Co-operative Limited is the ultimate parent entity of the group. Ownership and investment Name of entity Australian Raw Cotton Marketing Corp. Pty Ltd Namcott Investments Pty Limited Namoi Cotton Superannuation Pty Ltd Namoi Cotton Pty Ltd Namcott Marketing Pty Ltd Namoi Cotton Commodities Pty Ltd Namoi Cotton Finance Pty Ltd Cotton Trading Corporation Pty Limited Investments held in controlled entities Equity Interest % 28 Feb 2017 29 Feb 2016 100% 100% 100% 100% 100% 96% 100% 100% 100% 100% 100% 100% 100% 96% 100% 100% Investment $'000 28 Feb 2017 - - - - - - - 1,830 1,830 (1,830) - 29 Feb 2016 - - - - - - - 1,830 1,830 (1,830) - Principal activities � Namcott Investments Pty Ltd, a subsidiary of Namoi Cotton, is the beneficial owner of the interests in CPL • and COA Partnership. Namoi Oilseeds Trust formerly held the interest in the partnership. � Namoi Cotton Superannuation Pty Ltd is trustee of the co-operative’s former superannuation fund, which • was wound up in June 2000. � Namoi Cotton Pty Ltd is a non-trading company. • � Namcott Marketing Pty Ltd, a subsidiary of Namoi Cotton, is the beneficial owner of the interests in NCPS • shares and NCA Partnership. � Namoi Cotton Finance Pty Ltd secures funding for the group. • � Namoi Cotton Commodities Pty Ltd has main trading activities of sale and logistics of plastic waste from • ginning activities. Cotton Trading Corporation Pty Limited is controlled by Namcott Investments Pty Ltd. Australian Raw Cotton Marketing Corp Pty Ltd is a non-trading company. � • � • Transactions with subsidiaries Transactions between members of the wholly owned group were minimal. Amounts receivable by and payable to the parent entity are included in the respective notes to this financial report. Transactions with other related parties ACS leased HVI machines from the parent during the period for $35,906 (2016: $89,978). Sales of white cotton seed to the COA Partnership were $19,454,562 (2016: $18,473,678) and purchases of white cotton seed from the COA Partnership were $nil (2016: $1,002,982). Transactions with NCA Management fees received by Namoi for services provided to Namoi Cotton Alliance $2.5m (inclusive of bale handling fees) (2016: $0.2m). Lint Cotton Sales from Namoi to Namoi Cotton Alliance $239.9m (2016: $187.2m). Insurance on-charged by Namoi to Namoi Cotton Alliance $0.4m (2016: $0.4m). Year Ended 28 February 2017 Notes to the Financial Statements Page 65 Year Ended 28 February 2017 Notes to the Financial Statements Page 66 2017 ANNUAL REPORT | 77 For personal use only152,293 2,955 152,293 2,955 174,312 (23,162) Namoi Cotton Co-operative Limited Contingent liabilities Namcott Investments Pty Ltd, a controlled entity of the co-operative, is a partner of the COA, Namcott Investments Pty Ltd is jointly and severally liable for the COA liabilities. At 28 February 2017 the liabilities of COA exceeded its assets and therefore has contributed to a negative investment in COA. Refer to Note 10. Investments in Associates and Joint Ventures. Namoi Cotton Co-operative Limited 25. Remuneration of Auditors 1,808,592 1,774,506 1,808,592 1,774,506 174,312 (23,162) 1,963,840 1,925,656 1,963,840 1,925,656 24. Directors’ and Executive Disclosure Compensation by category of KMP Short-term Post Employment Other Long-term Consolidated 28 Feb 2017 29 Feb 2016 Parent 28 Feb 2017 29 Feb 2016 Remuneration for other services provided to the parent entity and the consolidated entity: - Other assurance services Remuneration for the audit and review of the financial reports of the parent entity and the consolidated entity 173,900 165,500 Consolidated and Parent Entity 28 Feb 2017 29 Feb 2016 27,000 19,500 200,900 185,000 26. Financial Risk Management Objectives and Policies The nature of Namoi Cotton’s business involves the potential exposure to a number of major financial and non- financial risks. The major financial market business risks exposed to by Namoi or later by the NCA joint venture Lint cotton, cotton seed and grains commodities price risk; are: � � � � � � � Cotton basis risk; Cotton spread risk; Foreign exchange risk; Interest rate risk; Credit risk; Funding and liquidity risk. Accordingly, Namoi Cotton conducts its business with a focus on risk management in order to ensure the alignment of returns achieved from its business activities for stakeholders with the risk capital applied to fund these activities. The key elements of Namoi Cotton’s risk management policy that facilitate the management of these risks include various derivative financial instruments, physical risk position limits and techniques and Value at Risk modelling. Namoi Cotton is exposed to price risks through entering commodity purchase and sale transactions. To limit potential impacts upon the trading margin achieved on those transactions Namoi Cotton and later NCA enters into derivative transactions, including principally cotton futures and options contracts and forward currency contracts. Where derivatives instruments do not exist for a particular commodity the risk management policy sets physical limits over trading positions. Forward rate agreements and interest rate swaps are entered into to manage interest rate risks that exist in Namoi Cotton’s financing activities. The MFRMC ensures the effective management of each of these risks through the implementation and adherence to a risk management policy. The risk management policy of Namoi Cotton requires all risk to be managed at a crop (i.e. season) level. The key extracts from the risk management policy for managing Namoi Cotton’s major financial market business risks are summarised below. Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each derivative financial instrument are disclosed in note 1e to the financial statements. Marketing and ginning transactions and balances with KMP Transactions with directors and their related parties were in accordance with the rules of the co-operative, under terms and conditions applicable to all members. Under the rules of the co-operative, grower directors are required to conduct a minimum of 20% of their total cotton business with Namoi Cotton. In accordance with that rule, directors entered into marketing contracts and ginning contracts with Namoi Cotton. Amounts paid/received or payable/receivable from/to directors and their respective related parties were as follows: Cotton Purchases 28 Feb 2017 6,670,705 29 Feb 2016 5,224,500 Consolidated and Parent entity Ginning Charges Levied 28 Feb 2017 1,418,504 29 Feb 2016 1,554,886 Grain & Seed Purchases 28 Feb 2017 1,813,908 29 Feb 2016 1,481,578 The nature of the terms and conditions of the above other transactions with directors and director related entities are consistent with the terms of Namoi Cotton’s standard products. Refer to the Remuneration Report within the Directors’ Report for more information. Year Ended 28 February 2017 Notes to the Financial Statements 2017 ANNUAL REPORT | 78 Page 67 Year Ended 28 February 2017 Notes to the Financial Statements Page 68 For personal use onlyNamoi Cotton Co-operative Limited Contingent liabilities Namcott Investments Pty Ltd, a controlled entity of the co-operative, is a partner of the COA, Namcott Investments Pty Ltd is jointly and severally liable for the COA liabilities. At 28 February 2017 the liabilities of COA exceeded its assets and therefore has contributed to a negative investment in COA. Refer to Note 10. Investments in Associates and Joint Ventures. Namoi Cotton Co-operative Limited 25. Remuneration of Auditors Consolidated and Parent Entity 28 Feb 2017 29 Feb 2016 24. Directors’ and Executive Disclosure Compensation by category of KMP Short-term Post Employment Other Long-term Consolidated 28 Feb 2017 29 Feb 2016 Parent 28 Feb 2017 29 Feb 2016 1,808,592 1,774,506 1,808,592 1,774,506 152,293 174,312 152,293 174,312 2,955 (23,162) 2,955 (23,162) 1,963,840 1,925,656 1,963,840 1,925,656 Marketing and ginning transactions and balances with KMP Transactions with directors and their related parties were in accordance with the rules of the co-operative, under terms and conditions applicable to all members. Under the rules of the co-operative, grower directors are required to conduct a minimum of 20% of their total cotton business with Namoi Cotton. In accordance with that rule, directors entered into marketing contracts and ginning contracts with Namoi Cotton. Amounts paid/received or payable/receivable from/to directors and their respective related parties were as follows: Consolidated and Parent entity Cotton Purchases Ginning Charges Levied Grain & Seed Purchases 28 Feb 2017 29 Feb 2016 28 Feb 2017 29 Feb 2016 28 Feb 2017 29 Feb 2016 6,670,705 5,224,500 1,418,504 1,554,886 1,813,908 1,481,578 The nature of the terms and conditions of the above other transactions with directors and director related entities are consistent with the terms of Namoi Cotton’s standard products. Refer to the Remuneration Report within the Directors’ Report for more information. Remuneration for the audit and review of the financial reports of the parent entity and the consolidated entity 173,900 165,500 Remuneration for other services provided to the parent entity and the consolidated entity: - Other assurance services 27,000 19,500 200,900 185,000 26. Financial Risk Management Objectives and Policies The nature of Namoi Cotton’s business involves the potential exposure to a number of major financial and non- financial risks. The major financial market business risks exposed to by Namoi or later by the NCA joint venture are: � • � • � • � • � • � • � • Lint cotton, cotton seed and grains commodities price risk; Cotton basis risk; Cotton spread risk; Foreign exchange risk; Interest rate risk; Credit risk; Funding and liquidity risk. Accordingly, Namoi Cotton conducts its business with a focus on risk management in order to ensure the alignment of returns achieved from its business activities for stakeholders with the risk capital applied to fund these activities. The key elements of Namoi Cotton’s risk management policy that facilitate the management of these risks include various derivative financial instruments, physical risk position limits and techniques and Value at Risk modelling. Namoi Cotton is exposed to price risks through entering commodity purchase and sale transactions. To limit potential impacts upon the trading margin achieved on those transactions Namoi Cotton and later NCA enters into derivative transactions, including principally cotton futures and options contracts and forward currency contracts. Where derivatives instruments do not exist for a particular commodity the risk management policy sets physical limits over trading positions. Forward rate agreements and interest rate swaps are entered into to manage interest rate risks that exist in Namoi Cotton’s financing activities. The MFRMC ensures the effective management of each of these risks through the implementation and adherence to a risk management policy. The risk management policy of Namoi Cotton requires all risk to be managed at a crop (i.e. season) level. The key extracts from the risk management policy for managing Namoi Cotton’s major financial market business risks are summarised below. Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each derivative financial instrument are disclosed in note 1e to the financial statements. Year Ended 28 February 2017 Notes to the Financial Statements Page 67 Year Ended 28 February 2017 Notes to the Financial Statements Page 68 2017 ANNUAL REPORT | 79 For personal use onlyNamoi Cotton Co-operative Limited Risk Exposure and Responses Price risk Namoi Cotton is potentially exposed to movements in the price of lint cotton as a result of fixed price purchases and sales of lint cotton respectively in contracts with growers and mills principally through its investment in the NCA JV. The co-operative is also exposed to movements to price of cotton seed through fixed price purchases and sale contracts. Cotton seed price risk is managed principally through imposition of physical trading limits. It is a risk management requirement to utilise foreign currency derivatives to minimise the impact of USD/AUD fluctuations on fixed price sales contracts. It is the risk management policy that no derivatives will be entered into until such time as a fixed price purchase or sale commitment exists. Financial Assets Derivatives Financial Liabilities Derivatives Net Exposure Consolidated $'000 Parent $'000 28 Feb 2017 29 Feb 2016 28 Feb 2017 29 Feb 2016 14,221 14,221 4,330 4,330 14,221 14,221 4,330 4,330 (14,141) (14,141) (5,179) (5,179) (14,141) (14,141) (5,179) (5,179) 80 (849) 80 (849) Namoi Cotton Co-operative Limited Cotton seed price risk Cotton seed price risk potentially arises when Namoi Cotton enters into a forward commitment to purchase or sell physical cotton seed without simultaneously entering into the opposing transaction. Namoi Cotton managed cotton seed price risk by adhering to physical limits in respect of its cotton seed open positions. The following sensitivity analysis is based upon seed pricing that existed at 28 February 2017 and 29 February 2016, whereby if the cotton seed price had moved, as illustrated in the table below, with all other variables held constant, post-tax profit and equity (excluding the effect of net profit) would have changed as follows: At reporting date, the group had the following financial assets and liabilities exposed to Australian variable Consolidated +$10/Mt (cotton seed) -$5/Mt (cotton seed) Parent entity +$10/Mt (cotton seed) -$5/Mt (cotton seed) Interest rate risk interest rate risk. Financial Assets Cash and cash equivalents Trade and other receivables Financial Liabilities Interest bearing loans and borrowings Derivatives Net Exposure Post Tax Profit Higher/(Lower) $'000 Higher/(Lower) Equity $'000 28 Feb 2017 29 Feb 2016 28 Feb 2017 29 Feb 2016 51 (25) 51 (25) 115 (58) 115 (58) - - - - - - - - Consolidated $'000 Parent $'000 28 Feb 2017 29 Feb 2016 28 Feb 2017 29 Feb 2016 2,176 349 2,525 1,790 59 1,849 2,055 349 2,404 1,785 59 1,844 (59,840) (60,678) (59,840) (60,678) - (284) - (284) (59,840) (60,962) (59,840) (60,962) (57,315) (59,113) (57,436) (59,118) Year Ended 28 February 2017 Notes to the Financial Statements 2017 ANNUAL REPORT | 80 Interest rate swap contracts, with a fair value loss of $nil (2016 $283,605) at reporting date to both the group and parent, are exposed to value movements if interest rates change. At reporting date, after taking into account the effect of interest rate swaps, nil% (2016: 44.3%) of the group’s borrowings are at a fixed rate of interest nil% (2016: 3.0%). The group continually monitors its interest rate exposure with regard to existing and forecast working capital and term debt requirements. Page 70 Page 69 Year Ended 28 February 2017 Notes to the Financial Statements For personal use onlyNamoi Cotton Co-operative Limited Risk Exposure and Responses Price risk Namoi Cotton is potentially exposed to movements in the price of lint cotton as a result of fixed price purchases and sales of lint cotton respectively in contracts with growers and mills principally through its investment in the NCA JV. The co-operative is also exposed to movements to price of cotton seed through fixed price purchases and sale contracts. Cotton seed price risk is managed principally through imposition of physical trading limits. It is a risk management requirement to utilise foreign currency derivatives to minimise the impact of USD/AUD fluctuations on fixed price sales contracts. It is the risk management policy that no derivatives will be entered into until such time as a fixed price purchase or sale commitment exists. Financial Assets Derivatives Financial Liabilities Derivatives Net Exposure Consolidated $'000 Parent $'000 28 Feb 2017 29 Feb 2016 28 Feb 2017 29 Feb 2016 14,221 14,221 4,330 4,330 14,221 14,221 4,330 4,330 (14,141) (14,141) (5,179) (5,179) (14,141) (14,141) (5,179) (5,179) 80 (849) 80 (849) Namoi Cotton Co-operative Limited Cotton seed price risk Cotton seed price risk potentially arises when Namoi Cotton enters into a forward commitment to purchase or sell physical cotton seed without simultaneously entering into the opposing transaction. Namoi Cotton managed cotton seed price risk by adhering to physical limits in respect of its cotton seed open positions. The following sensitivity analysis is based upon seed pricing that existed at 28 February 2017 and 29 February 2016, whereby if the cotton seed price had moved, as illustrated in the table below, with all other variables held constant, post-tax profit and equity (excluding the effect of net profit) would have changed as follows: Post Tax Profit Higher/(Lower) $'000 Equity Higher/(Lower) $'000 28 Feb 2017 29 Feb 2016 28 Feb 2017 29 Feb 2016 51 (25) 51 (25) 115 (58) 115 (58) - - - - - - - - Consolidated +$10/Mt (cotton seed) -$5/Mt (cotton seed) Parent entity +$10/Mt (cotton seed) -$5/Mt (cotton seed) Interest rate risk At reporting date, the group had the following financial assets and liabilities exposed to Australian variable interest rate risk. Financial Assets Cash and cash equivalents Trade and other receivables Financial Liabilities Interest bearing loans and borrowings Derivatives Net Exposure Consolidated $'000 Parent $'000 28 Feb 2017 29 Feb 2016 28 Feb 2017 29 Feb 2016 2,176 349 2,525 1,790 59 1,849 2,055 349 2,404 1,785 59 1,844 (59,840) - (59,840) (60,678) (284) (60,962) (59,840) - (59,840) (60,678) (284) (60,962) (57,315) (59,113) (57,436) (59,118) Interest rate swap contracts, with a fair value loss of $nil (2016 $283,605) at reporting date to both the group and parent, are exposed to value movements if interest rates change. At reporting date, after taking into account the effect of interest rate swaps, nil% (2016: 44.3%) of the group’s borrowings are at a fixed rate of interest nil% (2016: 3.0%). The group continually monitors its interest rate exposure with regard to existing and forecast working capital and term debt requirements. Year Ended 28 February 2017 Notes to the Financial Statements Page 69 Year Ended 28 February 2017 Notes to the Financial Statements Page 70 2017 ANNUAL REPORT | 81 For personal use onlyNamoi Cotton Co-operative Limited The following sensitivity analysis is based upon interest rate exposures that existed at 28 February 2017 and 29 February 2016, whereby if interest rates had moved, as illustrated in the table below, with all other variables held constant, post tax profit and equity (excluding the effect of net profit) would have changed as follows: Namoi Cotton Co-operative Limited flow hedges: At reporting date, the group had the following exposure to USD foreign currency that is not designated as cash Consolidated +100 basis points -50 basis points Parent entity +100 basis points -50 basis points Post Tax Profit Higher/(Lower) $'000 Equity Higher/(Lower) $'000 28 Feb 2017 29 Feb 2016 28 Feb 2017 29 Feb 2016 (576) 288 (576) 288 (335) 168 (335) 168 - - - - - - - - The movements in post tax profit and equity are due to higher/lower finance costs from variable rate debt offset by fixed rate derivatives and interest bearing financial assets. Sensitivity analysis was performed by applying a 100 basis point movement in interest rates to all non-fixed interest bearing assets and liabilities at reporting date. As a result of recent global market volatility, 100 basis points has been utilised in the absence of reliable data predicting reasonably possible movements of interest rates. Year end balances are not reflective of interest bearing assets and liabilities throughout the year, due to the seasonal nature of the business. Foreign exchange risk Namoi Cotton has transactional currency exposures predominantly arising from some cotton seed sales being denominated in United States dollars (USD) as opposed to the group’s functional Australian dollar (AUD) currency, which denominates all payments to growers. Potentially foreign currency denominated financial assets and liabilities may be adversely affected by a change in the value of foreign exchange rates. Namoi Cotton requires all net foreign exchange exposures to be managed with either forward currency contracts or foreign exchange options contracts. The group’s policy is to enter into forward exchange contracts at the time it enters into a firm purchase commitment for lint cotton (through NCA) or a US dollar cotton seed sale commitment. Financial Assets Cash and cash equivalents Trade and other receivables Derivatives Financial Liabilities Trade and other payables Derivatives Consolidated AUD/USD +100 basis points AUD/USD -50 basis points Parent entity AUD/USD +100 basis points AUD/USD -50 basis points Consolidated $'000 Parent $'000 28 Feb 2017 29 Feb 2016 28 Feb 2017 29 Feb 2016 464 659 444 1,567 (118) - (118) 284 1,289 30 1,603 - (8) (8) 464 659 444 1,567 (118) - (118) 284 1,289 30 1,603 - (8) (8) Post Tax Profit Higher/(Lower) $'000 Higher/(Lower) Equity $'000 28 Feb 2017 29 Feb 2016 28 Feb 2017 29 Feb 2016 (34) 17 (34) 17 (41) 21 (41) 21 - - - - - - - - Net Exposure 1,449 1,595 1,449 1,595 Foreign exchange contracts that are subject to fair value movements through the statement of comprehensive income as foreign exchange rates move. Priced cotton seed sales contracts are treated as financial instruments under AASB 139. Year Ended 28 February 2017 Notes to the Financial Statements 2017 ANNUAL REPORT | 82 Page 71 Year Ended 28 February 2017 Notes to the Financial Statements Page 72 For personal use onlyNamoi Cotton Co-operative Limited Namoi Cotton Co-operative Limited The following sensitivity analysis is based upon interest rate exposures that existed at 28 February 2017 and 29 February 2016, whereby if interest rates had moved, as illustrated in the table below, with all other variables held constant, post tax profit and equity (excluding the effect of net profit) would have changed as follows: At reporting date, the group had the following exposure to USD foreign currency that is not designated as cash flow hedges: Consolidated +100 basis points -50 basis points Parent entity +100 basis points -50 basis points Post Tax Profit Higher/(Lower) $'000 Higher/(Lower) Equity $'000 28 Feb 2017 29 Feb 2016 28 Feb 2017 29 Feb 2016 (576) 288 (576) 288 (335) 168 (335) 168 - - - - - - - - Financial Assets Cash and cash equivalents Trade and other receivables Derivatives Financial Liabilities Trade and other payables Derivatives Consolidated $'000 Parent $'000 28 Feb 2017 29 Feb 2016 28 Feb 2017 29 Feb 2016 464 659 444 1,567 (118) - (118) 284 1,289 30 1,603 - (8) (8) 464 659 444 1,567 (118) - (118) 284 1,289 30 1,603 - (8) (8) The movements in post tax profit and equity are due to higher/lower finance costs from variable rate debt offset by fixed rate derivatives and interest bearing financial assets. Sensitivity analysis was performed by applying a 100 basis point movement in interest rates to all non-fixed interest bearing assets and liabilities at reporting date. As a result of recent global market volatility, 100 basis points has been utilised in the absence of reliable data predicting reasonably possible movements of interest rates. Year end balances are not reflective of interest bearing assets and liabilities throughout the year, due to the seasonal nature of the business. Foreign exchange risk Namoi Cotton has transactional currency exposures predominantly arising from some cotton seed sales being denominated in United States dollars (USD) as opposed to the group’s functional Australian dollar (AUD) currency, which denominates all payments to growers. Potentially foreign currency denominated financial assets and liabilities may be adversely affected by a change in the value of foreign exchange rates. Namoi Cotton requires all net foreign exchange exposures to be managed with either forward currency contracts or foreign exchange options contracts. The group’s policy is to enter into forward exchange contracts at the time it enters into a firm purchase commitment for lint cotton (through NCA) or a US dollar cotton seed sale commitment. Net Exposure 1,449 1,595 1,449 1,595 Foreign exchange contracts that are subject to fair value movements through the statement of comprehensive income as foreign exchange rates move. Consolidated AUD/USD +100 basis points AUD/USD -50 basis points Parent entity AUD/USD +100 basis points AUD/USD -50 basis points Post Tax Profit Higher/(Lower) $'000 Equity Higher/(Lower) $'000 28 Feb 2017 29 Feb 2016 28 Feb 2017 29 Feb 2016 (34) 17 (34) 17 (41) 21 (41) 21 - - - - - - - - Priced cotton seed sales contracts are treated as financial instruments under AASB 139. Year Ended 28 February 2017 Notes to the Financial Statements Page 71 Year Ended 28 February 2017 Notes to the Financial Statements Page 72 2017 ANNUAL REPORT | 83 For personal use onlyNamoi Cotton Co-operative Limited The following sensitivity analysis is based upon foreign currency exposures that existed at 28 February 2017 and 29 February 2016, whereby if the AUD had moved (relative to the USD), as illustrated in the table below, with all other variables held constant, post tax profit and equity (excluding the effect of net profit) would have changed as follows: Namoi Cotton Co-operative Limited Funding and liquidity risk Consolidated AUD/USD +100 basis points AUD/USD -50 basis points Parent entity AUD/USD +100 basis points AUD/USD -50 basis points Post Tax Profit Higher/(Lower) $'000 Equity Higher/(Lower) $'000 28 Feb 2017 29 Feb 2016 28 Feb 2017 29 Feb 2016 (34) 17 (34) 17 (41) 21 (41) 21 - - - - - - - - The sensitivity results in the table are considered immaterial to the group. It is the group’s risk management policy to maintain foreign exchange contracts to a 95% to 105% band relative to exposures. Management believe the reporting date risk exposures are representative of the risk exposure inherent in the financial instruments. Sensitivity analysis was performed by taking the USD foreign exchange rate as at balance date, moving this rate by 100 basis points and then converting all USD denominated assets and liabilities. This calculation reflects the translation methodology undertaken by the group. As a result of recent global market volatility, 100 basis points has been utilised in the absence of reliable data predicting reasonably possible movements in foreign exchange rates. Credit risk Namoi Cotton and later NCA exports the majority of lint cotton and some cotton seed to international counterparties. These export sales are concluded under contract and the potential risk exists for a counterparty to default on its contractual obligations and expose Namoi Cotton (seed) or NCA (lint cotton) to a financial loss. Trade receivables outstanding from international counterparties are settled through high-ranking credit instruments such as irrevocable letters of credit and cash against documents. In respect of its cotton seed and grain commodity sales to major domestic counterparties, Namoi Cotton has trade credit indemnity insurance policies for non-related parties. The group is normally entitled to recover loans to growers and deferred costs through an offset to lint cotton, seed proceeds and other credits to a growers account. Where a formal finance facility has been established, the exposures are typically covered by crop mortgage and in some cases by real estate mortgages and/or guarantee. In addition, trade debtor balances are monitored frequently, minimising Namoi Cotton’s exposure to bad debts. Namoi Cotton’s maximum exposure to credit risk at balance date in relation to each class of recognised financial asset is the carrying amount of these assets as indicated in the balance sheet less relevant trade credit insurance recoverables. The group utilises only recognised and creditworthy third parties in respect to derivative transactions. These parties are regularly reviewed by the Board. Year Ended 28 February 2017 Notes to the Financial Statements 2017 ANNUAL REPORT | 84 Page 73 Year Ended 28 February 2017 Notes to the Financial Statements The group’s objective in managing liquidity is to maintain a balance between continuity of funding, competitive pricing and flexibility so as to ensure sufficient liquidity exists to meet all short, medium and long term financial obligations. This is achieved through the utilisation of working capital facilities, term debt and bank overdrafts. Year ended 28 February 2017 $'000 $'000 $'000 ≤6 Months 6-12 Months 1-5 Years >5 Years $'000 Total $'000 Consolidated Financial Assets Cash and cash equivalents Trade and other receivables Derivatives1 Financial Liabilities Trade and other payables Interest bearing loans and borrowings2 Derivatives1 Co-operative grower member shares 2,256 5,264 14,566 22,086 - 24 99 123 (8,244) (157) (10,736) (9,192) (5,853) (4,949) (43,288) (43) Net Exposure (6,086) (10,836) (43,288) - - (28,172) (10,959) (43,288) (447) (490) (490) Year ended 29 February 2016 $'000 $'000 $'000 ≤6 Months 6-12 Months 1-5 Years >5 Years $'000 Total $'000 Consolidated Financial Assets Cash and cash equivalents Trade and other receivables Derivatives1 Financial Liabilities Trade and other payables Interest bearing loans and borrowings2 Derivatives1 Co-operative grower member shares Net Exposure (4,359) (121) 1,790 4,536 2,837 9,163 (58,896) (3,650) - (66,905) (57,742) - 25 1,516 1,541 (373) (1,813) - (2,307) (766) (2,408) (2,408) (2,408) (447) (447) (447) - - - - - - - - - - - - - - - - - - - - - - - - - - - 2,256 5,288 14,665 22,209 (8,401) (59,920) (14,141) (447) (82,909) (60,700) 1,790 4,561 4,353 10,704 (4,480) (61,677) (5,463) (447) (72,067) (61,363) Page 74 For personal use onlyNamoi Cotton Co-operative Limited The following sensitivity analysis is based upon foreign currency exposures that existed at 28 February 2017 and 29 February 2016, whereby if the AUD had moved (relative to the USD), as illustrated in the table below, with all other variables held constant, post tax profit and equity (excluding the effect of net profit) would have changed as follows: Consolidated AUD/USD +100 basis points AUD/USD -50 basis points Parent entity AUD/USD +100 basis points AUD/USD -50 basis points Post Tax Profit Higher/(Lower) $'000 Higher/(Lower) Equity $'000 28 Feb 2017 29 Feb 2016 28 Feb 2017 29 Feb 2016 (34) 17 (34) 17 (41) 21 (41) 21 - - - - - - - - The sensitivity results in the table are considered immaterial to the group. It is the group’s risk management policy to maintain foreign exchange contracts to a 95% to 105% band relative to exposures. Management believe the reporting date risk exposures are representative of the risk exposure inherent in the financial instruments. Sensitivity analysis was performed by taking the USD foreign exchange rate as at balance date, moving this rate by 100 basis points and then converting all USD denominated assets and liabilities. This calculation reflects the translation methodology undertaken by the group. As a result of recent global market volatility, 100 basis points has been utilised in the absence of reliable data predicting reasonably possible movements in foreign exchange rates. Credit risk Namoi Cotton and later NCA exports the majority of lint cotton and some cotton seed to international counterparties. These export sales are concluded under contract and the potential risk exists for a counterparty to default on its contractual obligations and expose Namoi Cotton (seed) or NCA (lint cotton) to a financial loss. Trade receivables outstanding from international counterparties are settled through high-ranking credit instruments such as irrevocable letters of credit and cash against documents. In respect of its cotton seed and grain commodity sales to major domestic counterparties, Namoi Cotton has trade credit indemnity insurance policies for non-related parties. The group is normally entitled to recover loans to growers and deferred costs through an offset to lint cotton, seed proceeds and other credits to a growers account. Where a formal finance facility has been established, the exposures are typically covered by crop mortgage and in some cases by real estate mortgages and/or guarantee. In addition, trade debtor balances are monitored frequently, minimising Namoi Cotton’s exposure to bad debts. Namoi Cotton’s maximum exposure to credit risk at balance date in relation to each class of recognised financial asset is the carrying amount of these assets as indicated in the balance sheet less relevant trade credit insurance recoverables. The group utilises only recognised and creditworthy third parties in respect to derivative transactions. These parties are regularly reviewed by the Board. Namoi Cotton Co-operative Limited Funding and liquidity risk The group’s objective in managing liquidity is to maintain a balance between continuity of funding, competitive pricing and flexibility so as to ensure sufficient liquidity exists to meet all short, medium and long term financial obligations. This is achieved through the utilisation of working capital facilities, term debt and bank overdrafts. Year ended 28 February 2017 $'000 $'000 ≤6 Months 6-12 Months 1-5 Years $'000 >5 Years $'000 Total $'000 Consolidated Financial Assets Cash and cash equivalents Trade and other receivables Derivatives1 Financial Liabilities Trade and other payables Interest bearing loans and borrowings2 Derivatives1 Co-operative grower member shares 2,256 5,264 14,566 22,086 - 24 99 123 (8,244) (157) (10,736) (9,192) - (28,172) (5,853) (4,949) - (10,959) - - - - - (43,288) - - (43,288) Net Exposure (6,086) (10,836) (43,288) - - - - - (43) - (447) (490) (490) 2,256 5,288 14,665 22,209 (8,401) (59,920) (14,141) (447) (82,909) (60,700) Year ended 29 February 2016 $'000 $'000 ≤6 Months 6-12 Months 1-5 Years $'000 >5 Years $'000 Total $'000 Consolidated Financial Assets Cash and cash equivalents Trade and other receivables Derivatives1 Financial Liabilities Trade and other payables Interest bearing loans and borrowings2 Derivatives1 Co-operative grower member shares Net Exposure 1,790 4,536 2,837 9,163 - 25 1,516 1,541 (4,359) (121) - - - - - (58,896) (3,650) - (66,905) (57,742) (373) (1,813) - (2,307) (766) (2,408) - - (2,408) (2,408) - - - - - - - (447) (447) (447) Year Ended 28 February 2017 Notes to the Financial Statements Page 73 Year Ended 28 February 2017 Notes to the Financial Statements 1,790 4,561 4,353 10,704 (4,480) (61,677) (5,463) (447) (72,067) (61,363) Page 74 2017 ANNUAL REPORT | 85 For personal use onlyNamoi Cotton Co-operative Limited Year ended 28 February 2017 $'000 $'000 ≤6 Months 6-12 Months 1-5 Years $'000 >5 Years $'000 Total $'000 Namoi Cotton Co-operative Limited Fair value hierarchy Parent Financial Assets Cash and cash equivalents Trade and other receivables Derivatives1 Financial Liabilities Trade and other payables Interest bearing loans and borrowings2 Derivatives1 Co-operative grower member shares 2,135 10,516 14,566 27,217 - 24 99 123 (8,242) (17,889) (10,736) (9,192) - (28,170) (5,853) (4,949) - (28,691) - - - - - (43,288) - - (43,288) Net Exposure (953) (28,568) (43,288) - - - - - (2,092) - (447) (2,539) (2,539) 2,135 10,540 14,665 27,340 (26,131) (61,969) (14,141) (447) (102,688) (75,348) Year ended 29 February 2016 $'000 $'000 ≤6 Months 6-12 Months 1-5 Years $'000 >5 Years $'000 Total $'000 Parent Financial Assets Cash and cash equivalents Trade and other receivables Derivatives1 Financial Liabilities Trade and other payables Interest bearing loans and borrowings2 Derivatives1 Co-operative grower member shares 1,785 9,966 4,352 16,103 - 25 - 25 (4,358) (17,853) (59,596) (3,650) - (67,604) (373) (1,813) - (20,039) Net Exposure (51,501) (20,014) - - - - - - - - - - (1,708) - - (1,708) (1,708) (2,049) - (447) (2,496) (2,496) 1,785 9,991 4,352 16,128 (22,211) (63,726) (5,463) (447) (91,847) (75,719) 1 Derivatives reflect the actual cashflow and are net settled. 2 In addition to the maturity profile of interest bearing loans and borrowings, there are actual cashflows in relation to interest for the 6-month period of $1.32 million (2016: $0.30 million), for the 6-12 month period of $1.09 million (2016: nil) and for the 1-5 year period $3.77 million (2016: nil). Namoi Cotton’s risk management policy in respect to funding and liquidity risk reflects actual and forecast seasonal borrowing requirements not exceeding 95% of the group’s total approved banking facilities. Namoi Cotton is unable at this time to provide guidance on individual components of liquidity for the financial year ended 28 February 2017 due to the cash flow components being contingent on forward crop commodity purchase and sale contracts. Year Ended 28 February 2017 Notes to the Financial Statements 2017 ANNUAL REPORT | 86 Page 75 Year Ended 28 February 2017 Notes to the Financial Statements The group uses various methods in estimating the fair value of a financial instrument. The methods comprise: The fair value is calculated using quoted prices in active markets. Quoted market price represents the fair value determined based on quoted prices on active markets as at the reporting date without any deduction for transaction costs. The fair value is estimated using inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices). For financial instruments not quoted in active markets, the group uses various valuation techniques that compare to other similar instruments for which market observable prices exist and also other relevant models used by market participants. These valuation techniques use both observable and unobservable market inputs. Level 1 Level 2 Level 3 The fair value is estimated using inputs for the asset or liability that are not based on observable market data. Application of fair value hierarchy to Namoi’s financial statements The carrying amounts of cash and cash equivalents, trade and other receivables, trade and other payables, and interest bearing liabilities approximate their fair value. The fair value of Cotton Seed Contracts (Purchase and Sale) and Cotton Seed Inventory (at fair value less cost to sell) is determined with reference to an observable market, reports and adjustments for freight premiums and discounts which are unobservable. During the period there has not been a change in unobservable inputs (i.e. freight premiums, discounts and cost to sell), accordingly no gains or losses have been recognised as a result in changes of unobservable inputs during the year. (2016: nil). The nature of the market used to determine the Cotton Seed Price is assessed as being illiquid given the low volume of transactions, accordingly the contracts are classified as level 3. The fair value of unlisted debt securities are based on valuation techniques using market data that is not observable. The grower shares are issued and can be redeemed for a fixed amount of $2.70 per share. Disclosures of movements in member shares are reconciled in note 17 of the financial accounts. The fair value of the financial instruments as well as the methods used to estimate the fair value are summarised in the table below: Year ended 28 February 2017 Consolidated Current assets Foreign exchange contracts Cotton seed purchase contracts Current liabilities Cotton seed sale contracts Level 1 Quoted market prices $'000 Level 2 Market observable inputs $'000 Level 3 Non-market observable inputs $'000 - - - - - 444 444 - - - - 14,221 14,221 (14,141) (14,141) Total $'000 444 14,221 14,665 (14,141) (14,141) Page 76 For personal use onlyNamoi Cotton Co-operative Limited Year ended 28 February 2017 $'000 $'000 $'000 ≤6 Months 6-12 Months 1-5 Years >5 Years $'000 Total $'000 Parent Financial Assets Cash and cash equivalents Trade and other receivables Derivatives1 Financial Liabilities Trade and other payables Interest bearing loans and borrowings2 Derivatives1 Co-operative grower member shares 2,135 10,516 14,566 27,217 - 24 99 123 (8,242) (17,889) (10,736) (9,192) (5,853) (4,949) (43,288) (2,092) Net Exposure (953) (28,568) (43,288) - - (28,170) (28,691) (43,288) (447) (2,539) (2,539) (447) (102,688) (75,348) Year ended 29 February 2016 $'000 $'000 $'000 ≤6 Months 6-12 Months 1-5 Years >5 Years $'000 Total $'000 Parent Financial Assets Cash and cash equivalents Trade and other receivables Derivatives1 Financial Liabilities Trade and other payables Interest bearing loans and borrowings2 Derivatives1 Co-operative grower member shares Net Exposure 1,785 9,966 4,352 16,103 25 - - 25 (4,358) (17,853) (59,596) (3,650) (373) (1,813) - - (67,604) (20,039) (51,501) (20,014) (1,708) (2,049) (1,708) (1,708) (447) (2,496) (2,496) - - - - - - - - - - - - 2,135 10,540 14,665 27,340 (26,131) (61,969) (14,141) 1,785 9,991 4,352 16,128 (22,211) (63,726) (5,463) (447) (91,847) (75,719) - - - - - - - - - - - - - - 1 Derivatives reflect the actual cashflow and are net settled. 2 In addition to the maturity profile of interest bearing loans and borrowings, there are actual cashflows in relation to interest for the 6-month period of $1.32 million (2016: $0.30 million), for the 6-12 month period of $1.09 million (2016: nil) and for the 1-5 year period $3.77 million (2016: nil). Namoi Cotton’s risk management policy in respect to funding and liquidity risk reflects actual and forecast seasonal borrowing requirements not exceeding 95% of the group’s total approved banking facilities. Namoi Cotton is unable at this time to provide guidance on individual components of liquidity for the financial year ended 28 February 2017 due to the cash flow components being contingent on forward crop commodity purchase and sale contracts. Year Ended 28 February 2017 Notes to the Financial Statements Namoi Cotton Co-operative Limited Fair value hierarchy The group uses various methods in estimating the fair value of a financial instrument. The methods comprise: Level 1 The fair value is calculated using quoted prices in active markets. Quoted market price represents the fair value determined based on quoted prices on active markets as at the reporting date without any deduction for transaction costs. Level 2 The fair value is estimated using inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices). For financial instruments not quoted in active markets, the group uses various valuation techniques that compare to other similar instruments for which market observable prices exist and also other relevant models used by market participants. These valuation techniques use both observable and unobservable market inputs. Level 3 The fair value is estimated using inputs for the asset or liability that are not based on observable market data. Application of fair value hierarchy to Namoi’s financial statements The carrying amounts of cash and cash equivalents, trade and other receivables, trade and other payables, and interest bearing liabilities approximate their fair value. The fair value of Cotton Seed Contracts (Purchase and Sale) and Cotton Seed Inventory (at fair value less cost to sell) is determined with reference to an observable market, reports and adjustments for freight premiums and discounts which are unobservable. During the period there has not been a change in unobservable inputs (i.e. freight premiums, discounts and cost to sell), accordingly no gains or losses have been recognised as a result in changes of unobservable inputs during the year. (2016: nil). The nature of the market used to determine the Cotton Seed Price is assessed as being illiquid given the low volume of transactions, accordingly the contracts are classified as level 3. The fair value of unlisted debt securities are based on valuation techniques using market data that is not observable. The grower shares are issued and can be redeemed for a fixed amount of $2.70 per share. Disclosures of movements in member shares are reconciled in note 17 of the financial accounts. The fair value of the financial instruments as well as the methods used to estimate the fair value are summarised in the table below: Year ended 28 February 2017 Consolidated Current assets Foreign exchange contracts Cotton seed purchase contracts Current liabilities Cotton seed sale contracts Page 75 Year Ended 28 February 2017 Notes to the Financial Statements Level 1 Quoted market prices $'000 Level 2 Market observable inputs $'000 Level 3 Non-market observable inputs $'000 - - - - - 444 - 444 - - - 14,221 14,221 (14,141) (14,141) Total $'000 444 14,221 14,665 (14,141) (14,141) Page 76 2017 ANNUAL REPORT | 87 For personal use onlyNamoi Cotton Co-operative Limited Namoi Cotton Co-operative Limited 27. Other Non-Financial Information Namoi Cotton Co-operative Limited ABN 76 010 485 588 AFSL 267863 Registered Office Pilliga Road Wee Waa NSW 2388 Principal place of business Pilliga Road Wee Waa NSW 2388 Phone: Facsimile: 61 2 6790 3000 61 2 6790 3087 Computershare Investor Services Pty Ltd Share Register GPO Box 7045 Sydney NSW 1115 Investor Inquiries: 1300 855 080 Bankers Commonwealth Bank of Australia Auditors Ernst & Young Brisbane, Australia Level 1 Quoted market prices $'000 Level 2 Market observable inputs $'000 Level 3 Non-market observable inputs $'000 Total $'000 Level 1 Quoted market prices $'000 Level 1 Quoted market prices $'000 - - - - - - - - - - - - - - - - - 22 - 22 (284) - (284) - 4,330 4,330 - (5,179) (5,179) 22 4,330 4,352 (284) (5,179) (5,463) Level 2 Market observable inputs $'000 Level 3 Non-market observable inputs $'000 Total $'000 444 - 444 - - - 14,221 14,221 444 14,221 14,665 (14,141) (14,141) (14,141) (14,141) Level 2 Market observable inputs $'000 Level 3 Non-market observable inputs $'000 Total $'000 22 - 22 (284) - (284) - 4,330 4,330 - (5,179) (5,179) 22 4,330 4,352 (284) (5,179) (5,463) Page 77 Year Ended 28 February 2017 Notes to the Financial Statements Page 78 Year ended 29 February 2016 Consolidated Current assets Foreign exchange contracts Lint cotton and cotton seed sale contracts Current liabilities Interest rate swap contracts Cotton seed purchase contracts Year ended 28 February 2017 Parent Current assets Foreign exchange contracts Cotton seed purchase contracts Current liabilities Cotton seed sale contracts Year ended 29 February 2016 Parent Current assets Foreign exchange contracts Cotton seed sale contracts Current liabilities Interest rate swap contracts Cotton seed purchase contracts Year Ended 28 February 2017 Notes to the Financial Statements 2017 ANNUAL REPORT | 88 For personal use onlyNamoi Cotton Co-operative Limited Namoi Cotton Co-operative Limited 27. Other Non-Financial Information Namoi Cotton Co-operative Limited ABN 76 010 485 588 AFSL 267863 Registered Office Pilliga Road Wee Waa NSW 2388 Principal place of business Pilliga Road Wee Waa NSW 2388 Phone: Facsimile: 61 2 6790 3000 61 2 6790 3087 Share Register Computershare Investor Services Pty Ltd GPO Box 7045 Sydney NSW 1115 Investor Inquiries: 1300 855 080 Bankers Commonwealth Bank of Australia Auditors Ernst & Young Brisbane, Australia Year ended 29 February 2016 Consolidated Current assets Foreign exchange contracts Lint cotton and cotton seed sale contracts Current liabilities Interest rate swap contracts Cotton seed purchase contracts Year ended 28 February 2017 Parent Current assets Foreign exchange contracts Cotton seed purchase contracts Current liabilities Cotton seed sale contracts Year ended 29 February 2016 Parent Current assets Foreign exchange contracts Cotton seed sale contracts Current liabilities Interest rate swap contracts Cotton seed purchase contracts Level 1 Quoted market prices $'000 Level 2 Market observable inputs $'000 Level 3 Non-market observable inputs $'000 Total $'000 22 - 22 (284) - (284) 4,330 4,330 - - (5,179) (5,179) 22 4,330 4,352 (284) (5,179) (5,463) Level 1 Quoted market prices $'000 Level 2 Market observable inputs $'000 Level 3 Non-market observable inputs $'000 Total $'000 444 444 - - - - 14,221 14,221 444 14,221 14,665 (14,141) (14,141) (14,141) (14,141) Level 1 Quoted market prices $'000 Level 2 Market observable inputs $'000 Level 3 Non-market observable inputs $'000 Total $'000 22 - 22 (284) - (284) 4,330 4,330 - - (5,179) (5,179) 22 4,330 4,352 (284) (5,179) (5,463) - - - - - - - - - - - - - - - - - Year Ended 28 February 2017 Notes to the Financial Statements Page 77 Year Ended 28 February 2017 Notes to the Financial Statements Page 78 2017 ANNUAL REPORT | 89 For personal use only2017 CORPORATE GOVERNANCE STATEMENT The Board has established a number of sub Committees to assist the Board in discharging its responsibilities. The sub Committees review certain matters designated within its Charter and make recommendations to the Board. The Committees include: • • • Audit and Compliance Committee; Marketing and Financial Risk Management Committee (“MFRM Committee”); and Nomination and Remuneration Committee. The various Board Committees are governed by the relevant adopted Charter which sets out the Committee’s purpose, responsibilities, role, membership, meeting process, Board reporting obligations and assessment of performance. During the 2017 Financial Year the various Committees composition and attendance is set out in the Directors Report. Namoi Cotton’s corporate governance practices are outlined in this Corporate Governance Statement. In developing the governance framework for Namoi Cotton the Board has taken into account the Corporate Governance Principles and Recommendations (“Best Practice Recommendations”) published by the ASX Corporate Governance Council (“ASX CGC”). Namoi Cotton believes that its corporate governance practices comply in all substantial respects with the Best Practice Recommendations released by the ASX CGC. However, where Namoi Cotton has not followed a recommendation, this has been identified along with reasons why it has not been followed. Copies of all of the Namoi Cotton Key Policies and Charters for Namoi Cotton and the Board and its current Board Committees referred to in the statement are available in the Corporate Governance section of Namoi Cotton’s website at www.namoicotton. com.au (collectively such policies known as the “Corporate Governance Documents”). The 2017 Corporate Governance Statement is dated 20 June 2017 and covers the corporate governance practices and policies in place during the 2017 Financial Year. The 2017 Corporate Governance was approved by the Board on 20 June 2017. 2017 ANNUAL REPORT | 90 For personal use onlyPRINCIPLE 1: LAY SO LID FOUNDAT I ONS FO R MANAGEMEN T AND OV ERSI GHT Recommendation 1.1 – Recognise and publish the respective roles of the Board and Management Fundamentally, the Board operates in accordance with the principles set out in the National Co-operatives Law, Namoi Cotton Rules and Board Charter. The Board of Directors for Namoi Cotton are responsible to its stakeholders, which includes Grower Members and Namoi Capital Stockholders. The Board’s main responsibilities and reserved decision making parameters are set out in the Board Charter. The roles and responsibilities of the Board are defined in the Board Charter, Audit and Compliance Committee Charter, Marketing & Financial Risk Management Charter and the Nomination and Remuneration Committee Charter. The Board has delegated the day to day management, operation and administration of Namoi Cotton to the Chief Executive Officer, Mr Jeremy Callachor who sub-delegates duties to various members of the Management team. The Chief Executive Officer has the authority to sub-delegate and is accountable to the Board. The Board is responsible for reviewing the performance of the Chief Executive Officer. Namoi Cotton has written agreements with all Directors and Senior Executive setting out the key terms of such appointment. Recommendation 1.2 – Undertake appropriate background checks on Directors and information to be given for election of directors The Board will undertake appropriate checks before appointing a person or putting forward a person for election as director. If Grower Members or Namoi Capital Stockholders are making a decision whether to elect or not to elect or re-elect the Board will provide the Grower Members and/or the Namoi Capital Stockholders with all the relevant information in its possession. Recommendation 1.3 – A listed entity should have a written agreement with each Director and Senior Executive Namoi Cotton has written agreements with all Directors and Senior Executives setting out the key terms of such appointment. These documents in conjunction with Corporate Governance Documents and the Namoi Cotton delegation matrix outline the responsibilities and duties. Recommendation 1.4 – The Company Secretary accountable to the Board, through the Chair, on matters with proper functioning of the Board The Company Secretary has access to all Board members. The role of the Company Secretary is outlined in the Board Charter. The Company Secretary does assist and advises the Board on governance and compliance from time to time. Recommendation 1.5 – The listed entity should have a diversity policy with set parameters Namoi Cotton has a diversity and inclusive strategy. Diversity within Namoi Cotton is created by an inclusive working environment. Namoi Cotton has a publicly released Diversity Policy on its website which promotes gender, cultural and leadership diversity. The intention is to achieve the objectives over time as employment positions become available. Namoi Cotton’s Workplace Gender Equality Act public report for 2016 is available on its website. Namoi Cotton at the time of this report has 26% of women employed on a full time basis across all sites and locations. Namoi Cotton does not currently have any women in senior executive positions or on its Board. However Namoi Cotton is committed to a diversity strategy aimed to promote the appointment of qualified, experienced and diverse Directors, Management and Employees in order to achieve Namoi Cotton’s objectives on diversity. The Namoi Cotton Diversity Policy also sets out measurable objectives. In respect of the diversity strategy the Board and Management will: • • • • promote diversity in the Namoi Cotton workplace; support equal opportunity in the recruitment, selection and promotion of employees from different backgrounds, knowledge, gender and experience. The Namoi Cotton recruitment process is structured to provide equality in recruitment and unbiased selection and promotion decisions; reward excellence on agreed goals to remove bias and promote equality; and identify and implement initiatives that encourage development of careers and enhance skills. The Namoi Cotton existing diversity policies include the recruitment policy, paid parental leave, carer’s leave, flexible work arrangements and mentoring programs. The Board in consultation with the Nomination and Remuneration Committee will set measurable objectives for achieving diversity, in particular gender diversity. 2017 ANNUAL REPORT | 91 For personal use onlyPRINCI PLE 2: STRUCTURE T HE BOARD TO A DD VALUE Recommendation 2.1 – The Board should have a Nomination and Remuneration Committee Namoi Cotton has established a Nomination and Remuneration Committee to assist the Board in reviewing Namoi Cotton’s succession planning, remuneration policies and practices. The Board has adopted a Charter for the Nomination and Remuneration Committee which sets out the Committees responsibilities, structure, access to resources and information, meeting processes and performance evaluation. In addition the Board has adopted a Remuneration Policy which is available on the Namoi Cotton website. The Nomination and Remuneration Committee conducts an annual assessment of the performance of the Board, Committees, the Directors, the Chief Executive Officer and Senior Management. It is the Board’s responsibility to ensure that Namoi Cotton has the appropriate remuneration policies in place, which are designed to meet the needs of Namoi Cotton and enhance corporate and individual performance. The primary function of the Nomination and Remuneration Committee is to assist the Board in fulfilling its corporate governance responsibilities that: • • • • • executive remuneration and incentive policies take into account market practices and trends; remuneration packages for the Chief Executive Officer and Management are fair and reasonable; incentive schemes align with the interest of Namoi Cotton performance; the remuneration framework for Directors is fair and reasonable; and ensure appropriate succession planning and retention is taking place for Namoi Cotton. Namoi Cotton may pay retirement benefits to directors from time to time in accordance with Namoi Cotton Rules and the Co-operatives Act. It meets at least six monthly and comprises of four independent directors and an independent chairperson. The qualifications of members of the Committee are set out in the Directors Report and Annual Report for 2016 and attendance at meetings is included in the Directors Report. Measurable diversity metrics may include: • • • • representation of roles by age and gender for Management and Board levels; gender salary comparison in same role and same level positions; gender representation in talent and succession planning; and setting diversity targets. Measurable diversity metrics may include: • • • • representation of roles by age and gender for Management and Board levels; gender salary comparison in same role and same level positions; gender representation in talent and succession planning; and setting diversity targets. Namoi Cotton at present have the following Diversity Measurable Objectives: 1. 2. 3. 4. Ensure employees are selected from a diverse pool. Candidates to be interviewed with equality and unbiased – Completed - Ongoing Provide flexible work practices where possible and as required – Completed - Ongoing Increase improve women in Management and Board positions – one senior executive by February 2019, as Namoi Cotton is a small group and comprises of long term employees this objective will be assessed against position criteria and applicant qualifications Have current second line female Management employees participate in a formal mentoring program – February 2019 Recommendation 1.6 – Board Performance and Evaluation The Board conducts annual evaluations of its performance and the performance of its Committees. The process of performance review enables the Board to identify areas for improvement. The Board performance evaluation, amongst other things, is based on Namoi Cotton’s performance against long term objectives, the business plan and budgeted performance. An internal performance evaluation for the Board and its Committees has taken place in the reporting period in accordance with the process disclosed. Recommendation 1.7 – Management Performance and Evaluation Namoi Cotton’s Corporate Governance Documents details the procedures for performance review and evaluation. Senior Management are evaluated against individual performance and business measures on an ongoing basis. 2017 ANNUAL REPORT | 92 For personal use onlyRecommendation 2.2, 2.3, 2.4, 2.5 and 2.6 - Board skills matrix, Board Independence, Majority of Board being Independent, the Chairperson being Independent and Inducting New Directors and provide professional development opportunities Composition of the Board The Board is to be comprised of individuals with an appropriate mix of skills, knowledge, qualifications and experience. The Namoi Cotton Rules provide that the Board may comprise a maximum of seven (7) Directors and a minimum of five (5) Directors. The Namoi Cotton Rules provide that the Board may include two but not more than three Non Grower Directors, with the balance to be made up of Grower Directors, with the overriding requirement that at all times the majority of Directors must be Grower Directors. The composition of the Board is reviewed annually by the Board, to ensure it meets the requirements of the Namoi Cotton Rules and the National Co-operatives Law. The qualifications and experience of each Director is set out in the Directors Report. With the Board composition requirements of the Namoi Cotton Rules, Namoi Cotton aims to achieve a mix of industry, finance, governance, trading, risk management, compliance, IT and strategy experience. Independence The Board supports the principle that a majority of the Board should be independent. When determining the independent status of a Director, the Board considers whether the Director: • • • • • is a substantial shareholder of Namoi Cotton or an officer of, or otherwise associated directly with, a substantial shareholder of Namoi Cotton; is employed, or has previously been employed in an executive capacity by Namoi Cotton or another member of the Namoi Cotton group, and there has not been a period of at least three years between ceasing such employment and serving on the Board; has within the last three years been a principal of a material professional adviser or a material consultant to Namoi Cotton or another member of the Namoi Cotton group, or an employee materially associated with the service provided; is a material supplier or customer of Namoi Cotton or another member of the Namoi Cotton group, or an officer of or otherwise associated directly or indirectly with a material supplier or customer; and has a material contractual relationship with Namoi Cotton or another member of the Namoi Cotton group other than as a director. independent Directors but also recognises that Board members must add value in context of Namoi Cotton’s business. The Board recognises the need for the Board to comprise Directors that have a strong understanding of the Namoi Cotton business, cotton industry and co-operative principles, however with the ability to bring independent views and judgement to Board decision making and deliberations. As a co-operative the Board must have Grower Directors who are required to have business relationships with Namoi Cotton for the ginning and marketing of cotton and related commodities. Additionally the Grower directors do have skills, knowledge, qualifications and experience necessary to the proper functioning of the Board. Each of Mr Boydell, Mr Coulton, Mr Watson and Mr Price, as Grower Directors, are cotton producers and sell cotton to Namoi Cotton and use Namoi Cotton’s ginning services. The Board regularly assesses whether or not the nature and extent of those transactions would cause these Directors not to be independent. The Board is satisfied each of these Directors are independent as the nature and magnitude of their dealings with Namoi Cotton do not cause the Board to consider that the relationship could materially interfere with the independent exercise of their judgment. Mr Green is Chief Executive Officer of Louis Dreyfus Company Australia Pty Limited, a related entity of Namoi Cotton’s joint venture partner in Namoi Cotton Alliance and which also holds 13% of Namoi Capital Stock. The Board considers that Mr Green’s experience with the Louis Dreyfus Group and business expertise in a range of soft commodity products will be invaluable to Namoi Cotton in advancing its business activities. Having considered Mr Green’s relationship with the Louis Dreyfus Group and the principle of independence referred to above, the Board does not consider Mr Green to be an independent Director having regard to the significance of Namoi Cotton’s relationship with the Louis Dreyfus Group. However the Board is confident that Mr Green will be able to exercise an independent judgment on all Board decisions. The appointment of Mr Robert Green as a Director of Namoi Cotton is an integral part of the overall arrangements between Louis Dreyfus and Namoi Cotton which the Board believes will continue to be of significant benefit to Namoi Cotton. Since the appointment of Mr Robert Green as a Director of Namoi Cotton the Board considers that Mr Robert Green has shown independent judgment on all Board decisions. Chairperson The Board Charter provides that the Chairperson is to be appointed by the Board and must be a Non-Executive Grower Director. Mr Stuart Boydell is the Chairman, he is a Non-Executive Grower Director and has been determined by the Board as independent. The Board, when assessing materiality, takes a qualitative approach rather than setting quantitative thresholds. In accordance with the Namoi Cotton policies a relationship will be assessed as “material” in context of the nature, circumstance and activities of Namoi Cotton and in context of the Director’s activities or its affiliates’ activities. The Board recognises the need to have a majority of Director Induction Namoi Cotton has a program and process to induct new Directors. New Directors and existing Directors are offered to undertake professional development opportunities and training internally and externally. Each Director may take independent legal advice at the expense of Namoi Cotton in accordance with the Corporate Governance Documents. 2017 ANNUAL REPORT | 93 For personal use onlyPRINCIPLE 3: PRO MOTE E THICA L A ND RE S PONSI B LE DEC ISI ON MAKIN G Recommendation 3.1 – Listed entity should have a code of conduct and securities trading policy Code of Conduct The Board has established a Code of Conduct, which guides and applies to the Directors, the Chief Executive Officer, Management, employees and third parties dealing with Namoi Cotton. The Code of Conduct is to guide the practices necessary to maintain confidence in Namoi Cotton’s integrity and ethical practice. The Board is committed to ensuring that all business affairs of Namoi Cotton must be conducted legally, ethically, honestly and with integrity. The Code of Conduct is available on the Namoi Cotton website. The Code of Conduct addresses Namoi Cotton’s position on ethical conduct requirements, compliance with laws, privacy, safety, conflicts of interest, gifts and gratuities. The Board of Namoi Cotton has adopted the Code of Conduct which sets out the conduct and behaviour expected for employees, consultants, contractors and business partners of Namoi Cotton. Share Trading Policy The Board has adopted a Namoi Capital Stock Trading Policy, which regulates dealing in Namoi Cotton Securities by Key Management Personnel (including Directors) and employees. Directors, Management and employees must comply with the Namoi Capital Stock Trading Policy. Key Management Personnel, employees and other persons must not deal in Namoi Cotton Securities if they are in possession of unpublished information that, if generally available, might affect the price of Namoi Cotton Securities. Under the Namoi Capital Stock Trading Policy Key Management Personnel and employees must not buy, sell or subscribe for Namoi Capital Stock except during permitted periods. Key Management Personnel and employees may only trade in Namoi Capital Stock in accordance with the Namoi Capital Stock Trading Policy. The Namoi Capital Stock Trading Policy is available on the Namoi Cotton website. The Namoi Capital Stock Trading Policy provides: The Directors, Key Management Personnel, Employees and Related Parties may only deal in Namoi Capital Stock during the following periods: • • • • 30 Business Days commencing 48 hours after the date the full year financial results for Namoi Cotton are received and announced to the general market by the ASX; 30 Business Days commencing 48 hours after the date the half year financial results are received and announced to the general market by the ASX; 30 Business Days commencing 48 hours after the close of the Annual General Meeting of Namoi Cotton; and at any other time for a specified period determined by the Board of Namoi Cotton. Prior to any Director or Key Management Personnel dealing in Namoi Capital Stock or options or other securities for Namoi Cotton, they must advise the relevant Notification Officer (Company Secretary or as otherwise listed). The Director or Key Management Personnel proposing to deal in Namoi Capital Stock (or enter into an agreement to do so) must first complete and forward to the Company Secretary the notification form to deal. If a Director or Key Management Personnel deal in Namoi Capital Stock, then the individual must notify the Company Secretary the details for the deal which includes: • • the number of Namoi Capital Stock for the trade; and the unit price paid or received for the Namoi Capital Stock. A breach of the Namoi Capital Stock Trading Policy will be regarded by Namoi Cotton as serious misconduct which may lead to disciplinary action and/or dismissal. Whistleblower Policy Namoi Cotton has adopted a Whistleblowing Policy, under its Whistleblowing Policy Namoi Cotton encourages all Employees to report to the Whistleblower Protection Officer, misconduct and unethical behaviour in relation to Namoi Cotton. Such reports can be made by anonymous reporting to ally fear of retribution. The Namoi Cotton Whistleblower Policy is available on the Namoi Cotton website. 2017 ANNUAL REPORT | 94 For personal use onlyPRINCIPLE 4: SAF EGUARD INT E GRIT Y IN F INAN CIAL RE PORTING Recommendation 4.1, 4.2 and 4.3 – Listed entity should have an Audit Committee, CEO and CFO declarations and Auditors available at the AGM to answer questions Audit and Compliance Committee The Board has established an Audit and Compliance Committee which is governed by the Audit and Compliance Committee Charter. The Charter for the Audit and Compliance Committee sets out its authority, objectives, structure, responsibilities, membership, meeting protocols, access to company personnel and information, reporting requirements and performance evaluation. The Committee’s Charter provides that the Committee be structured to have at least three (3) members and that at least one (1) member has financial expertise. The Committee Chairperson, Mr Richard Anderson and Committee members Mr Michael Boyce and Mr Robert Green have previously held senior executive accounting roles. Details of member qualifications can be found in the Directors Report and Annual Report. The Audit and Compliance Committee is to assist the Board on: • • • • • the systems of control which Management have established effectively safeguard the assets of Namoi Cotton; the accounting records are properly maintained in accordance with statutory requirements; financial information provided to the Board, shareholders, potential investors and to the public is relevant and reliable and to review, assess and approve the annual report and make the appropriate recommendations to the Board ; the full-year and half-year audits are conducted appropriately; the accounting policies and practices adopted by Namoi Cotton are appropriate, up-to-date and relevant; • • • • • make appropriate recommendations to the Board as to whether the financial statements should be approved; review and discuss with the External Auditors any relationship that may impact on the auditors objectivity and independence; review and approve the level of non-audit services provided by the External Auditor and ensure it does not impact the independence of the External Auditor; review and monitor related party transactions; and review the External Auditors performance. The Audit and Compliance Committee receives updates from the Chief Executive Officer, Chief Financial Officer, Management and the External Auditor. The Committee meets with the External Auditor at least three times a year. Ernst and Young was appointed as the External Auditor for Namoi Cotton for the Financial Year ending 28th February 2017. In accordance with the Corporations Act 2001, the lead audit partner and the review partner of the external auditor will be rotated every five years. The external auditor as previously is invited to the Namoi Cotton Annual General Meeting to be available to answer questions from Namoi Stockholders and Grower Members. Prior to approving Namoi Cotton’s financial statements for FY2017 (28 February 2017) the Board received from the CEO and CFO a declaration in their opinion, the financial records of the entity have been properly maintained and the financial statements comply with the appropriate accounting standards and give a true and fair view of the financial position and performance of Namoi Cotton, and the that the opinion has been formed on the basis of a sound system of risk management and control which is operating effectively. The Auditors independence declaration forms part of the Director’s Report. 2017 ANNUAL REPORT | 95 For personal use onlyPRINCIPLE 5: MAK E TIMELY AN D BALANCED D ISCLOSURE Recommendation 5.1 – Make timely exposure and set policies to meet ASX Listing Rule Disclosure The Board respects the rights of its Grower Members and Namoi Capital Stockholders to receive effective communications, having access to balanced and up to date information about Namoi Cotton. The Company Secretary has been nominated as the person responsible for communication with the ASX. The Board, with a Disclosure Committee, authorises all disclosures necessary to ensure compliance with the ASX Listing Rules. Namoi Cotton has a Disclosure and Communications Policy which is available on the Namoi Cotton website. The Board is committed to complying with its continuous disclosure obligations under the ASX Listing Rules and the Corporations Act. Namoi Cotton’s Disclosure and Communications Policy has been adopted to ensure: • the timely release of accurate information to all Grower Members, Namoi Capital Stockholders and market participants regarding Namoi Cotton including its financial performance, strategy and material activities; and • the Grower Members and Namoi Capital Stockholders have equal access to the information issued by Namoi Cotton and it is disseminated fairly, is cost efficient to access and is delivered in a timely manner. Namoi Cotton’s website contains copies of ASX releases covering such publications as market updates, annual and half yearly financial statements and material business updates. Significant ASX announcements are to be approved by the Board. The Namoi Cotton Disclosure and Communications Policy is to establish guidelines to facilitate compliance with the ASX Listing Rules by: • • • • identifying the requirements and types of information subject to disclosure under the ASX Listing Rules; providing quantitative and qualitative materiality guidance on whether information should be considered material; guidance on whether information is subject to the ASX Listing Rules Confidentiality Exception; and establishing procedures and processes for evaluating whether information is market sensitive which may require disclosure. PRINCIPLE 6: RE SP ECT THE RI GHT S OF GROWE R MEMBERS AND N AMO I CAPITA L STOC KH OL DE RS The Board is committed to enabling Grower Members and Namoi Capital Stockholders to effectively participate in general meetings by: • • Namoi Cotton adopting in all substantial respects ASX Corporate Governance Principles and Guidelines for improving stakeholder communication and participation; and attendance of its external auditors at the Annual General Meeting to answer questions about the Namoi Cotton audit and contents of the Auditor’s Report. Notice of Meetings are provided to Grower Members and Namoi Capital Stockholders and posted on the Namoi Cotton website, both classes of stakeholders are encouraged to attend the Annual General Meeting. Recommendation 6.1, 6.2, 6.3 and 6.4 – Respect rights of security holders The Board and Management are committed to Grower Members and Namoi Capital Stockholders are informed and kept up to date with Namoi Cotton’s activities. All information disclosed to the ASX is posted to Namoi Cotton’s website www.namoicotton.com.au after is disclosed to the ASX. A copy of Namoi Cotton’s Annual Report is issued to Grower Members and Namoi Capital Stockholders who have requested one. The financial and annual reports for the past five years for Namoi Cotton are archived and available on the Namoi Cotton website. it Namoi Cotton has established a Disclosure and Communication Policy which is available on the Namoi Cotton website. The Disclosure and Communication Policy requires communication with Grower Members and Namoi Capital Stockholders in an open, balanced, timely manner in order for market participants to make informed decisions on Namoi Cotton. The Board is committed to improving Grower Member and Namoi Capital Stockholder communication practices with technological developments and regulatory changes. 2017 ANNUAL REPORT | 96 For personal use onlyPRINCIPLE 7: RECOG NISE AND MANAGE RISK Recommendation 7.1. 7.2 and 7.3 – Risk Management Committee, Review of Risk Management Framework and Internal Audit Function The Board has established a Marketing and Financial Risk Management Committee (MFRM Committee). The MFRM Committee has adopted a Charter which sets out its role, responsibilities, access to management and information protocols, meeting processes and performance evaluation. The general function of the Committee is to review the risk management policies and framework for Namoi Cotton and make recommendations to the Board. At Namoi Cotton risk management is a continuous and ongoing process. The Chief Executive Officer and Chief Financial Officer provide written statements on the financial accounts to the Board that: • • the integrity of Namoi Cotton’s financial statements are prepared on the basis that there are appropriate internal controls and that there is sufficient compliance with their controls to ensure no material misstatement of Namoi Cotton’s affairs and financial position; and Namoi Cotton’s risk management and control systems are operating effectively in all material aspects. Namoi Cotton’s management has reported to the Board as to the effectiveness of Namoi Cotton’s management of its material business risks. The CEO and CFO have given the Board their declaration in accordance with section 295A of the Corporations Act 2001. The CEO and CFO have confirmed that the declarations are founded on a sound system of risk management and internal control and also that the system is operating effectively in all material respects in relation to financial risks. Namoi Cotton has established policies for the management and governance of material business risks for Namoi Cotton. The risk management framework for Namoi Cotton covers: • • • financial risk – risks associated with financial outcomes. These risks include market risk, credit risk, liquidity risk; operational risk – risks associated with normal operations. These risks include project management, systems, fraud and day to day running risks; and regulatory and compliance risk – failure to comply with legislative requirements corporate and operational. the Namoi Cotton recognises the environment and occupational health and safety issues and is committed to advancements of safety systems, protective equipment and capital expenditure to mitigate environmental, occupational health and safety risks. importance of Broadly the MFRM Committee is responsible for: • • • • reviewing and monitoring the policies and limits in the risk management policy; reviewing and monitoring the procedures adopted for treasury functions; reviewing and monitoring hedging strategies adopted by Namoi Cotton; receiving external reports relating to risk management activities. 2017 ANNUAL REPORT | 97 For personal use onlyThe Namoi Cotton Alliance joint venture (in which Namoi Cotton is a substantial 51% shareholder), has the potential exposure to a number of market and financial risks associated primarily with its cotton lint marketing business, which may include movements in commodity and currency markets. The MFRM Committee and the Namoi Cotton Board regularly receives reporting on the risk positions held by Namoi Cotton Alliance. The MFRM Committee will review and monitor these risk positions and provide guidance on these matters to the Namoi Cotton Board. The Namoi Cotton Alliance business comprises a Joint Venture Committee and Risk Management Committee to monitor that, Namoi Cotton Alliance Management is complying with the comprehensive Namoi Cotton Alliance Risk Management Policy. The risks governed by the Namoi Cotton Alliance Risk Management Policy includes cotton price risk, cotton basis risk, cotton futures spread risk, foreign exchange risk, interest rate risk, credit risk, cotton grade risk and funding and liquidity risks. The Namoi Cotton Alliance Risk Management Committee and Namoi Cotton Alliance Joint Venture Committee, along with Namoi Cotton Co-operative Ltd (indirectly) monitor compliance with the Namoi Cotton Alliance Risk Management Policy from time to time to ensure risks are managed within the appropriate risk parameters. The MFRM Committee, Management and the Board reviews Namoi Cotton’s risk management framework annually to satisfy itself the framework continues to be sound. Namoi Cotton does not have an internal audit function. The Board considers that due to the size of Namoi Cotton such function would not be cost effective. However certain employee task segregation for example back office and front office treasury and payment functions. The Board may engage an independent third party to undertake an internal audit if necessary at any time. Recommendation 7.4 – Should disclose whether it has material exposure to economic, environmental and social sustainability risks and if so how such risks are intended to be managed Namoi Cotton is committed to identifying and managing economic, environment, and social sustainability risks which may create material exposure for Namoi Cotton in the short, medium and long term. Economic Sustainability risks for Namoi Cotton are financial management, maintaining market share, retaining existing ginning clients and obtaining new ginning clients, managing and trading the cotton seed business prudently. In addition a major economic risk is the performance and distribution pursuant to the Namoi Cotton Alliance Joint Venture. Namoi Cotton Alliance key economic risks are supply and demand risks which can be impacted by cotton futures and foreign exchange trading conditions, overseas demand and regulatory conditions. Namoi Cotton and Namoi Cotton Alliance have risk management policies (“RMP’s”) which considers and provides limits for economic risk exposures. The Board exercise economic risk management by fiscal control on capital projects and approval of budgets. Namoi Cotton manages risks in relation to environmental sustainability include spills at gin sites, air and noise pollution or EPA license breaches. Namoi Cotton during 2014 and 2015 conducted independent environmental risk assessments for each ginning site. Internally Namoi Cotton on an annual basis conducts environmental audits. Namoi Cotton does not believe it has any material exposure to such environmental risks. Namoi Cotton is primarily based in regional locations, the sustainability of these communities is important to Namoi Cotton. When possible Namoi Cotton supports local communities and organisations. Namoi Cotton has various charity events in which it supports local regional schools, clubs, hospitals and emergency services. 2017 ANNUAL REPORT | 98 For personal use onlyPRINCIPLE 8: REMU NE RATE FAIRLY AN D RESPO NSIBLY Namoi Cotton is committed to ensuring that remuneration packages for Directors and Management are fair and reasonable. Namoi Cotton has established a Nomination and Remuneration Committee to assist the Board in reviewing Namoi Cotton remuneration policies and practices. The Board has adopted a Charter for the Nomination and Remuneration Committee which sets out the Committees responsibilities, structure, access to resources and information, meeting processes and performance evaluation. In addition the Board has adopted a Remuneration Policy which is available on the Namoi Cotton website. The Nomination and Remuneration Committee conducts an annual assessment of the performance of the Board, Committees, the Directors, the Chief Executive Officer and Senior Management. It is the Board’s responsibility to ensure that Namoi Cotton has the appropriate remuneration policies in place, which are designed to meet the needs of Namoi Cotton and enhance corporate and individual performance. The primary function of the Nomination and Remuneration Committee is to assist the Board in fulfilling its corporate governance responsibilities that: • executive remuneration and incentive policies take into account market practices and trends; • • • • remuneration packages for the Chief Executive Officer and Management are fair and reasonable; incentive schemes align with the interest of Namoi Cotton performance; the remuneration framework for Directors is fair and reasonable; and ensure appropriate succession planning and retention is taking place for Namoi Cotton. Namoi Cotton may pay retirement benefits to directors from time to time in accordance with Namoi Cotton Rules and the Co-operatives Act. The Directors Remuneration is subject to annual approval by Namoi Capital Stockholders for Non-Grower Directors and then by the Grower Members and Grower Directors Remuneration is subject to annual approval by Grower Members. Senior Executive remuneration for any increase is reviewed on an annual basis. To assist in Director or Senior Executive remuneration reviews the Board may seek bench marking from external advisers. 2017 ANNUAL REPORT | 99 For personal use onlyASX ADD ITION AL IN FO RMATION FOR T HE YE A R E ND ED 28 F EBRUARY 2017 Additional information required by the Australian Stock Exchange. This information is current as at 2 June 2017. DIS TRIBUTIO N OF N AM OI CAPITA L S TOCKHOLDE RS 1 -1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 and over Total Number of holders 140 515 264 480 133 1,532 Number of Namoi Capital Stock 66,860 1,544,695 2,132,402 16,298,572 89,800,750 109,843,279 % 0.06 1.41 1.94 14.84 81.75 100.00 TOP 20 NAMO I CAP ITAL STOCKHOLDE RS Rank Name Number of Namoi Capital Stock % held 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. LOUIS DREYFUS COMMODITIES ASIA PTE LTD AUSTRALIAN RURAL CAPITAL LIMITED NATIONAL NOMINEES LIMITED CITICORP NOMINEES PTY LIMITED JVH COTTON PTY LIMITED BRAZIL FARMING PTY LTD MR ROSS ALEXANDER MACPHERSON J P MORGAN NOMINEES AUSTRALIA LIMITED MRS FRANCES CLAIRE FOX ‹THOMAS J BERESFORD WILL A/C› MR ALBERT JOHN PANIZZA + MS KIM DIANNA BROADFOOT ‹ALKIRA SUPER FUND A/C› HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED BELFORT INVESTMENT ADVISORS LIMITED GRANTULLY INVESTMENTS PTY LIMITED BRUCE CLYDE BAILEY + JANET BEATRICE SHAFIK BAILEY DUDDY MANAGEMENT PTY LTD MR MARK JOSEPH PANIZZA + MRS SUSAN KATHLEEN PANIZZA ‹SUMA SUPER FUND A/C› AVENUE 8 PTY LIMITED ‹GAN SUPER FUND A/C› MR PETER SINCLAIR GURNER ‹GIT A/C› BOYCE FAMILY SUPERANNUATION FUND PTY LIMITED ‹BOYCE FAMILY S/F A/C› GIBBS FAMILY SUPER PTY LTD ‹MICHAEL GIBBS FAMILY S/F A/C› 14,327,384 11,857,249 8,915,981 5,827,664 4,110,353 2,279,803 1,250,000 1,057,828 1,009,386 903,344 880,395 840,929 839,000 820,122 809,720 802,734 800,000 790,041 775,272 740,291 13.04 10.79 8.12 5.31 3.74 2.08 1.14 0.96 0.92 0.82 0.80 0.77 0.76 0.75 0.74 0.73 0.73 0.72 0.71 0.67 Total 59,637,469 54.29 2017 ANNUAL REPORT | 100 For personal use onlyRESTRICTED SECURITIES Namoi Cotton Employee Incentive Plan The Board of Namoi Cotton suspended the Namoi Cotton Employee Incentive Plan indefinitely from 28 August 2004. Namoi Capital Stock previously issued under the Plan is subject to a three year restriction period from the date of allotment (or until the interest free loan provided under the Plan to acquire the Namoi Capital Stock has been repaid in full.) The following Namoi Capital Stock was allotted pursuant to offers made under Employee Incentive Plan and quoted on the ASX. No. of Namoi Capital Stock allotted and issued Issue Price - $ Allotment Date 141,000 151,000 140,000 99,500 104,000 69,000 55,000 50,000 34,000 57,000 TOTAL 900,500 0.8000 0.7500 0.6700 0.5024 0.3700 0.2213 0.2480 0.2150 0.2906 0.3895 31 March 1998 31 December 1998 31 January 2000 6 December 2000 19 June 2001 End of restriction date* 31 March 2001 31 January 2001 31 January 2003 6 December 2003 19 June 2004 13 December 2001 13 December 2004 12 June 2002 4 December 2002 29 May 2003 18 June 2004 12 June 2005 4 December 2005 29 May 2006 18 June 2007 *The Namoi Capital Stock remains restricted after this time if the interest free loan has not been repaid in full. THE AN NUAL G EN ERAL MEETING Namoi Cotton’s Annual General Meeting will be held at the Wee Waa Bowling Club, 69 Alma Street, Wee Waa, NSW on Friday, 28 July 2017 at 10am. NAMO I CAP ITAL STOCKH OLDE RS ME E T ING A meeting of Namoi Capital Stockholders will be held at the Wee Waa Bowling Club, 69 Alma Street, Wee Waa, NSW on Friday, 28 July 2017 at 10am in conjunction with the Annual General Meeting. DIS TRIBUTIO N No final distribution will be paid to Namoi Capital Stockholders for the year ended 28 February 2017. 2017 ANNUAL REPORT | 101 For personal use onlyOTHER SHAREHO LDER INFORM AT ION Distribution - lodge your tax file number (TFN), Australian Business Number (ABN) or exemption You are strongly recommended to lodge your TFN, ABN or exemption with our Share Registry. If you choose not to provide these details to the Share Registry, then we are required to deduct tax at the highest marginal tax rate (plus the Medicare levy) from any distribution payment. To lodge your details, you should contact our Share Registry or download a form from the Computershare website at www.computershare.com.au (under investors/investorservices/downloadableforms). Change of Address Changes of address of shareholders or other key details should be notified to the Share Registry in writing without delay. Change of address and other forms can be downloaded from the Computershare website at www.computershare.com.au (under investors/investorservices/downloadableforms). Shareholdings, which are broker sponsored on the CHESS sub- register, should contact their broker without delay. Distribution Payments Dividend and distribution payments can be credited directly into any nominated bank, building society or credit union account in Australia. To request this service, you should contact our Share Registry or download a form from the Computershare website at www.computershare.com.au (under investors/investorservices/downloadableforms). MA JOR ASX ANN OUN CEMENTS FOR 2 01 6 - 20 1 7 Date ASX Releases 30/05/2017 Change of Directors Interest – Appendix 3Y – Tim Watson 30/05/2017 2017 AGM Notice of Meeting 30/05/2017 Namoi Cotton Full Year 2016/17 Financial Results 30/05/2017 Full Year Accounts Financial Year 2017 21/10/2016 Stakeholder Briefing – Corporate Structure 2016 24/06/2016 Grower Member Proxy Form 24/06/2016 Namoi Stockholders Proxy Form 24/06/2016 Annual Report 2016 21/06/2016 App 4G Corporate Govenance 20/06/2016 2016 AGM Notice of Meeting 27/04/2016 Namoi Cotton Full Year 2015/16 Financial Results 29/02/2016 Full Year Accounts Financial Year 2016 2017 ANNUAL REPORT | 102 For personal use onlyDIRE CTORY OFFICES Wee Waa (Head Office) Pilliga Road Wee Waa NSW 2388 Telephone: 02 6790 3000 Fax: 02 6790 3087 Goondiwindi 139 Marshall St Goondiwindi QLD 4390 Telephone: 07 4671 6900 Fax: 07 4671 6999 Moree 49 Greenbah Rd Moree NSW 2400 Telephone: 02 6752 5599 Fax: 02 6752 5357 Trangie Trangie Gin Old Warren Road Trangie NSW 2823 Telephone: 02 6888 9611 Fax: 02 6888 9678 Toowoomba (Corporate Office) 1B Kitchener St Toowoomba QLD 4350 Telephone: 07 4631 6100 Fax: 07 4631 6184 GINS Ashley Cotton Gin Mungindi Road Ashley NSW 2400 Telephone: 02 6754 2150 Boggabri Cotton Gin Blairmore Road Boggabri NSW 2382 Telephone: 02 6743 4084 Hillston Cotton Gin Roto Road Hillston NSW 2675 Telephone: 02 6967 2951 Macintyre Cotton Gin Kildonan Road Goondiwindi QLD 4390 Telephone: 07 4671 2277 Merah North Cotton Gin Middle Route Merah North NSW 2385 Telephone: 02 6795 5124 Mungindi Cotton Gin Boomi Road Mungindi NSW 2406 Telephone: 02 6753 2145 North Bourke Cotton Gin Wanaaring Road North Bourke NSW 2840 Telephone: 02 6872 1453 Trangie Cotton Gin Old Warren Road Trangie NSW 2823 Telephone: 02 6888 9729 Yarraman Cotton Gin Burren Road Wee Waa NSW 2388 Telephone: 02 6795 5196 NAMOI COTTON ALLIANCE JOINT VENTURE Macintyre Warehouse Kildonan Road Goondiwindi QLD 4390 Telephone: 07 4671 1449 Warren Warehouse Red Hill, Warren NSW 2824 Telephone: 02 6847 3746 Wee Waa Warehouse Pilliga Road Wee Waa NSW 2388 Telephone: 02 6790 3139 Jakarta, Indonesia Jakarta Representative Office Gedung Manggala Wanabakti Blok IV, Lantai 5, Ruang no. 511 B Jln. Gatot Subroto, Senayan Jakarta 10270 Indonesia Telephone: 62 21 5790 2977 Fax: 62 21 5790 2945 JOINT VENTURE GINS Moomin Cotton Gin Moomin Ginning Co (Namoi Cotton/Harris Parties Joint Venture) Merrywinebone Via Rowena NSW 2387 Telephone: 02 6796 5102 Wathagar Cotton Gin Wathagar Ginning Co (Namoi Cotton/ Sundown Pastoral Co Pty Ltd) Collarenebri Road Moree NSW 2400 Telephone: 02 6752 5200 CLASSING ROOMS Australian Classing Services (Namoi Cotton/Twynam Agricultural Group Joint Venture) Pilliga Road Wee Waa NSW 2388 Telephone: 02 6790 3053 Fax: 02 6790 3030 2017 ANNUAL REPORT | 103 For personal use only REGISTE RED OFF ICE Registered Office Namoi Cotton Co-operative Ltd ABN 76 010 485 588 AFSL 267863 Pilliga Road Wee Waa NSW 2388 Australia Telephone: 61 2 6790 3000 Facsimile: 61 2 6790 3087 www.namoicotton.com.au Share Registry Computershare Investor Services Pty Ltd GPO Box 7045 Sydney NSW 1115 Investor inquiries: 1300 855 080 Facsimile: 61 2 8234 5050 Auditors Ernst & Young Key Bankers Commonwealth Bank of Australia 2017 ANNUAL REPORT | 104 For personal use only2017 ANNUAL REPORT | 105 For personal use only2017 ANNUAL REPORT | 106 For personal use only

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