National HealthCare Corporation
Annual Report 2013

Plain-text annual report

2013 ANNUAL REPORT & FINANCIAL STATEMENTS NEW HOPE CORPORATION LIMITED AND CONTROLLED ENTITIES CORPORATE DIRECTORY DIRECTORS Robert D. Millner Chairman of Directors Peter R. Robinson Non Executive Director David J. Fairfull Non Executive Director William H. Grant Non Executive Director Susan J. Palmer Non Executive Director Ian M. Williams Non Executive Director MANAGING DIRECTOR Robert C. Neale COMPANY SECRETARY Matthew J. Busch AUDITORS PricewaterhouseCoopers Level 15, Riverside Centre 123 Eagle Street BRISBANE QLD 4000 PRINCIPAL ADMINISTRATION & REGISTERED OFFICE 3/22 Magnolia Drive BROOKWATER QLD 4300 Telephone: (07) 3418 0500 Facsimile: (07) 3418 0355 SHARE REGISTER Computershare Investor Services Pty Limited 117 Victoria Street WEST END QLD 4101 Telephone: 1300 552 270 www.computershare.com ASX Code: NHC WEBSITE ADDRESS www.newhopegroup.com.au CONTENTS CHAIRMAN’S LETTER FINANCIAL SUMMARY DIRECTORS’ REPORT AUDITOR’S INDEPENDENCE DECLARATION CORPORATE GOVERNANCE STATEMENT ANNUAL FINANCIAL REPORT DIRECTORS’ DECLARATION INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF NEW HOPE CORPORATION LIMITED SHAREHOLDER INFORMATION i 1 2 23 24 29 78 79 81 CHAIRMAN’S REVIEW Dear Shareholders, I am pleased to present the 2013 Annual Report for New Hope Corporation Limited on behalf of the Board of Directors of the company. The company produced a robust operational performance given the weak coal price and high Australian dollar which persisted throughout the past financial year. Net profit after tax, before non-recurring items, for the year ended 31st July 2013 was $125.0 million. This included a net profit contribution of $80.2 million from coal mining, marketing and logistics, which is down 29.0% from $113.1 million achieved last year. Before non-recurring items, basic earnings per share totalled 15.0 cents, after non- recurring items basic earnings per share were 8.9 cents. New Hope has an enviable record of dividend payment to shareholders. Dividends paid or declared upon the performance of the 2013 financial year totalled 5 cents per share. Dividends paid during the financial year totalled $257.5 million. Over the past five years the company has paid a total of $1.5 billion to shareholders in dividends - all fully franked at the 30% rate. Directors have declared a final dividend of 5 cents per share (2012 – 5.0 cents per share) and a special dividend of 5 cents per share (2012 – 20 cents per share). As foreshadowed in my previous Chairman’s Review the past year has been a challenging one for the coal industry with a high exchange rate and lower coal prices impacting revenues. New Hope, however, is comparatively well positioned with defensive investments in infrastructure through QBH, and the continuing cost reduction efforts across its operations. The Australian dollar/US dollar exchange rate remained above parity for most of the financial year with some relief from this historically high exchange rate only occurring during the final quarter of the financial year. The Newcastle benchmark thermal coal price dropped from US$89.95/tonne to US$77.55/tonne or 14% during the course of the last financial year. I believe that these challenging times for the coal industry are likely to continue for some time and certainly into the 2013/14 financial year. Although production performance from operations during the year was not at the record levels of previous years, last year’s coal sales of 5.99 million tonnes was our second best sales performance on record and was achieved whilst reducing cost of sales by $36.0 million, a reduction of 10.1% on 2012. The cost focus on the business is evidenced by the reduction of $9.9 million (37.9%) in administration costs in comparison to the 2012 financial year. Importantly, safety performance improved across the group during the course of the year with a reduction in Total Reportable Injuries of 47%. The number of Lost Time Injuries reduced by over 30% from that recorded in 2012. Further safety performance improvements are being encouraged following the successful implementation of a behavioural safety program called “i-Safe/We-Safe” across the business. The current coal industry economic climate has the potential to create acquisition opportunities for the company, however sellers have thus far had unrealistic value expectations. Our investment in conventional oil production through Bridgeport Energy has led to drilling success at both the Inland and Utopia oilfields in the Cooper/Eromanga Basin during the past year. Oil production is planned to expand further in the future. Progress with project approvals remains challenging. The Australian coal industry is currently being targeted by a well-resourced, internationally funded campaign seeking to stop coal development in this country. Activist groups, often using unfounded environmental concerns, have successfully manipulated some elements of the media and the approval processes to serve their objectives. They have launched spurious legal claims, trained individuals in civil disobedience and sought to create investor uncertainty, all with the objective of stopping coal mining. The essential fact is that the quality of life as we know it is dependent upon electricity. According to the International Energy Agency (IEA), more than 40% of the world’s energy comes from coal. The IEA forecasts that global electricity demand will increase by 70% by 2035 with more than half of that increase being from China and India alone. In its 2012 World Energy Outlook, the IEA stated that: “Coal remains the backbone fuel for electricity generation globally.” I urge shareholders and all people associated with the coal industry to communicate to our political leadership and the media the importance of a strong coal industry in Australia, not only to assist in countering world poverty, but to maintain our own standard of living. to occur in February 2014 upon the retirement of the company’s current Managing Director, Mr Rob Neale. Rob has been instrumental in the evolution of New Hope from a one mine, half billion dollar company to its position today as an ASX 100 company with a market capitalisation of $3.5 billion. From Rob’s retirement, the senior management team will comprise; Shane Stephan, Chief Executive Officer; Bruce Denney, Chief Operating Officer; and Matthew Busch, Chief Financial Officer. Shane Stephan has a unique mix of operational, commercial and financial qualifications and experience in the resources sector which will enable him to lead the company successfully into the future. The management transition is part of the company’s long term succession plan and ensures we continue to have a strong leadership team. On behalf of the Board I wish Rob all the best in his well earned, and no doubt active, retirement. I thank my Board colleagues for their efforts and commitment during the year. In particular I would like to note the contributions made by two new directors appointed during the past year, Ms Susan Palmer and Mr Ian Williams. Also, I take this opportunity on behalf of the Board, to thank the management and staff of the company for their continuing efforts in cost reduction and safety improvement over the past year, and finally I would also like to thank you, the shareholders, for your continued support. Recently the company announced a senior management transition R D MILLNER Chairman i ANNUAL REPORT & FINANCIAL STATEMENTS 2013NEW HOPE CORPORATION LIMITED AND CONTROLLED ENTITIESFINANCIAL SUMMARY New Hope Corporation Limited and Controlled Entities FINANCIAL SUMMARY Financial Summary 2013 $000 2012 $000 2011 $000 2010 $000 Total revenue 652,097 767,525 662,404 744,982 Profit before tax Income tax and petroleum resource rent tax expense Profit after tax Profit\(Loss) attributable to minority interests Net profit attributable to NHCL members 121,984 (47,856) 74,128 (1) 74,129 198,819 (31,694) 167,125 (1) 167,126 719,097 (215,998) 503,099 (135) 503,234 244,583 (60,751) 183,832 - 183,832 Profit after tax from continuing operations 74,128 167,125 503,099 183,832 Total assets employed Shareholders' funds 2,268,564 2,016,456 2,459,419 2,252,916 2,749,248 2,367,383 2,652,498 2,339,525 Dividends paid during the financial year 257,466 215,871 197,180 679,650 2013 2012 2011 2010 Weighted average shares on issue Net profit attributable to NHCL members as a % of shareholders' funds 830,551,140 3.68% 830,335,876 7.42% 830,127,809 21.26% 825,292,601 7.86% Earnings per share (cents) Earnings per share (cents) from continuing operations Normal dividends per share (cents) Special dividends per share (cents) 8.9 8.9 11.00 5.00 20.1 20.1 11.00 20.00 60.6 60.6 10.25 15.00 22.3 22.3 9.50 14.00 Net tangible asset backing per share (cents) 239.66 268.80 278.55 281.79 1 1 ANNUAL REPORT & FINANCIAL STATEMENTS 2013 DIRECTORS’ REPORT 31 JULY 2013 New Hope Corporation Limited and Controlled Entities Directors Report - 31st July 2013 Your Directors present their report on the consolidated entity consisting of New Hope Corporation Limited and the entities it controlled at the end of, or during, the year ended 31 July 2013. Directors The following persons were Directors of New Hope Corporation Limited during the whole of the financial year and up to the date of this report: Mr R.D. Millner Mr P.R. Robinson Mr D.J. Fairfull Mr W.H. Grant Mr R.C. Neale The following persons were appointed as Directors of New Hope Corporation Limited on the 1 November 2012: Ms S.J. Palmer Mr I.M. Williams Consolidated results Revenue from operations 2013 $000 2012 $000 % Change 652,097 767,525 - 15.0% Profit before income tax (before non recurring items)* Gain on sale of WICET Subscription Impairment of investment in associate Impairment of available for sale investments (refer to Note 7) Impairment of goodwill (refer to Note 7) Profit before income tax (after non recurring items) Profit from ordinary activities after income tax (before non recurring items)* Gain on sale of WICET Subscription Impairment of investment in associate Impairment of available for sale investments Impairment of goodwill Tax Benefit from DTL recognised on acquisition Profit from ordinary activities after income tax (after non recurring items) Non-controlling interests Profit attributable to New Hope Shareholders Basic earnings per share (cents) (before non recurring items)* Gain on sale of WICET Subscription Impairment of investment in associate Impairment of available for sale investments Impairment of goodwill Tax Benefit from DTL recognised on acquisition Basic earnings per share (cents) (after non recurring items) 172,575 786 (13,286) (38,091) - 121,984 124,955 550 (13,286) (38,091) - - 74,128 (1) 74,129 15.0 0.1 (1.6) (4.6) - - 8.9 238,010 - - (5,804) (33,387) 198,819 171,080 - - (5,804) (33,387) 35,236 167,125 (1) 167,126 20.6 - - (0.7) (4.0) 4.2 20.1 - 27.5% - 38.6% - 27.0% - 55.6% - 27.0% - 55.7% * The profit before non recurring items and the earnings per share before non recurring items contained within this Directors' Report have not been audited in accordance with Australian Auditing Standards. Principal activities The principal continuing activities of the consolidated entity and associated companies consisted of: Coal mining - exploration, development, production and processing Marketing and logistics h h h Investments 2 2 ANNUAL REPORT & FINANCIAL STATEMENTS 2013NEW HOPE CORPORATION LIMITED AND CONTROLLED ENTITIES New Hope Corporation Limited and Controlled Entities Directors Report - 31st July 2013 Dividends Dividends paid to members during the financial year were: h h h A final dividend for the year ended 31 July 2012 of 5.00 cents per share paid on 6 November 2012 A special dividend for the year ended 31 July 2012 of 20.00 cents per share paid on 6 November 2012 An interim ordinary dividend for the year ended 31 July 2013 of 6.0 cents per share paid on 1 May 2013 $000 41,526 166,106 49,834 In addition to the above dividends, since the end of the financial year, the Directors have declared a final ordinary dividend of 5.0 cents per share, and a special dividend of 5.0 cents per share. Both of these dividends are fully franked, to be paid on 5 November 2013 out of retained profits at 31 July 2013, the record date for such dividend to be 22 October 2013. This will provide shareholders of New Hope with total dividends for the year of 16.0 cents per share (6.0 cents interim) compared with total dividends for the 2012 year of 31.00 cents per share, including a special dividend of 20.0 cents per share. Review of operations New Hope Corporation Limited (New Hope or the Company) has reported a net profit after tax and before non-recurring items of $125.0 million for the year ended 31 July 2013. The result comprises $80.2 million from coal mining, marketing and logistics operations and $44.7 million from investments. The result is down 27% on the 2012 result of $171.1 million ($113.1 million from coal mining, marketing and logistics operations and $58.0 million from investments). Due to the weak market conditions prevailing as at 31st July 2013, the company has written down the carrying value of its investment in Dart Energy Limited, Westside Corporation Limited and the Quantex group of companies. These represent one off, unrealised impairments to the book carrying value of the investments which totalled $51.4 million on an after tax basis. Net profit after tax and non-recurring items for the year ended 31st July 2013 was $74.1 million, 55.6% lower than the $167.1 million recorded in 2012. Before non-recurring items, basic earnings per share for 2013 were 15.0 cents per share, compared to 20.6 cents per share in 2012. After non- recurring items basic earnings were 8.9 cents per share for 2013 against 20.1 cents in 2012. Directors have declared a final dividend of 5.0 cents per share (2012 - 5.0 cents per share) and a special dividend of 5.0 cents per share (2012 - 20.0 cents per share). Both of these dividends are fully franked and payable on 5 November 2013 to shareholders registered as at 22 October 2013. Compared to the previous corresponding period, the 2013 full year result was impacted by: h h h h h h Lower clean coal production (down 7%) Lower sales (down 4%) Lower cost of sales (down 10.1%), albeit on lower volumes of 4% Lower revenue from operations (down 15%) Lost sales due to flooding in early 2013, resultant impacts to rail infrastructure and mine operations Improved health and safety performance across all operations Mining Operations Production for the year was adversely impacted by three significant events, namely: h h h Higher than normal rainfall across south east Queensland which culminated in localised flooding in early 2013, and resulted in the western rail line infrastructure being inoperative for 3 weeks Cessation of mining at Oakleigh following the recovery of all economic coal reserves in the first quarter of 2013 The scaling back of operations at the high cost Jeebropilly mine due to difficult market conditions Despite this, production for the year was 5.8 million tonnes (only slightly below management's internal forecast), compared to the record 6.3 million tonnes produced during 2012. Total group employees have been reduced by 5% from 601 in 2012 to 573 in 2013. Sales were also impacted by the above events and 2013 saw total sales volumes of 6.0 million tonnes, down 4% on the 6.3 million tonnes delivered in 2012. 3 3 ANNUAL REPORT & FINANCIAL STATEMENTS 2013DIRECTORS REPORT - 31 JULY 2013 New Hope Corporation Limited and Controlled Entities Directors Report - 31st July 2013 New Acland Coal Mine The New Acland open cut mine produced 4.7 million tonnes of product coal in FY2013. This was a decrease of 0.4 million tonnes compared to FY2012. The mine lost 3 weeks of railings in FY13 due to rain damaged rail lines in February 2013. The lost railings resulted in a 2 week mine closure at Easter, due to stockpile capacity limitations. Key activities at the Acland operations in 2013 have included: h h h h h h Veneering and profiling systems installed at the Jondaryan Rail Loading Facility 92.9 hectares of mining lease were seeded for a total of 214.4 hectares of mining lease that has been rehabilitated by the end of July 2013 250 million Bench Cubic Metres of material (BCM) moved and 75 million tonnes of Run Of Mine (ROM) coal produced for project to date Entire workforce attended I-Safe/We-Safe safety cultural change program Proximity detection devices installed in the majority of the mobile fleet to reduce the risk of vehicle collision Implementation of cost effectiveness initiatives including 24 hour equipment servicing, change of operational structure in production, planning and scheduling to create a flatter production line with a reduction in haul distances and employee hours Two full site closures for a total of three weeks that delivered a reduction in total mine site costs whilst maintaining adequate stocks New Acland Community Reference Group commenced providing further opportunities for community engagement Delivery of five Cat 793F trucks to increase efficiency of excavator fleets Supervisor Development Program was undertaken to further improve the quality of minesite supervision New Acland celebrated its tenth year of operation with an employee’s family open day New Acland hosted numerous site visits by community, business and industry groups, as well as representatives from educational, environmental and agricultural organisations Employment opportunities and queries regarding New Hope’s Community Sponsorship and Donation Program dominated enquiries at New Hope’s Community Information Centre in Oakey h h h h h h h West Moreton Mines The West Moreton operations, comprising Jeebropilly and New Oakleigh open cut coal mines, produced 1.14 million tonnes of product coal in 2013 (Jeebropilly 0.87 million tonnes and Oakleigh 0.27 million tonnes). This is compared to 1.20 million tonnes in 2012. Key activities at the West Moreton operations in 2013 have included: h h h Introduction of 5 day mining operations in response to current market conditions Further mining of the Washplant Pit at Jeebropilly, and undertaking geotechnical reviews of the 7186 pit Completion of mining at New Oakleigh in February 2013. Final coal was processed in May 2013. Rehabilitation works at this site are being undertaken Introduction of the i-Safe/We-Safe safety culture change program to all West Moreton employees Replacement of mobile equipment including a bull dozer and haul trucks h h Queensland Bulk Handling QBH, New Hope’s 100% owned coal terminal at the Port of Brisbane, exported 8.73 million tonnes of coal on 113 vessels. This result was similar to last year and within reforecast budget expectations despite difficult market conditions imposed on QBH’s customer base. Another contributing factor on overall performance was the severe weather experienced in January 2013 which caused rail outages due to landslides on the Toowoomba range. QBH remains essentially a demurrage free port. Key activities in 2013 included: h Successful negotiations with the Port of Brisbane for access to additional land for potential expansion of coal port facilities (should additional rail capacity become available) Commencement of engineering and other studies required for expansion of port infrastructure Targeted business improvement programs, to reduce costs and improve operational efficiencies, commenced with several key projects completed h h h 14 months free of Lost Time Injury safety milestone achieved 4 4 ANNUAL REPORT & FINANCIAL STATEMENTS 2013NEW HOPE CORPORATION LIMITED AND CONTROLLED ENTITIESNew Hope Corporation Limited and Controlled Entities Directors Report - 31st July 2013 New Hope Exploration New Hope continues an active exploration program utilising three New Hope drilling rigs plus contract rigs as required. The exploration focus during 2013 has continued with resource definition in the Bowen Basin (Lenton, Bee Creek and Yamala) and Surat Basin (MDL244 for the revised New Acland Coal Mine Stage 3 Project) as well as Colton in the Maryborough Basin. Exploration on the mineral tenures has been focused on the eastern edge of the Mount Isa block. The exploration programs consisted of seismic, aeromagnetic, gravity and electro-magnetic surveys in addition to drilling. The drilling program consisted of 151 open holes and 79 core holes, totalling 28,709 metres. Deposit New Acland Ownaview West Moreton Lenton (1) Bee Creek Elimatta Yamala (2) Maryborough Ashford (3) Status Mine Exploration Mine Exploration Exploration Exploration Exploration Exploration Exploration Coal Resources (million tonnes) (Coal resources are inclusive of the reserves reported below) Inferred 2 38 11 524 104 50 187 60 5 981 Indicated Measured 390 119 72 134 - 101 23 16 8 864 440 - 44 83 - 108 13 - - 687 2013 Total 832 157 127 741 104 259 223 76 13 2,532 2012 Total 857 157 129 693 104 259 223 76 13 2,511 Notes: (1) Figures shown are 100% of total resources. New Hope share is 90%. (2) Figures shown are 100% of total resources. New Hope share is 83%. Figures shown are 100% of total resources. New Hope share is 50%. (3) Deposit New Acland (1) Lenton (2) Elimatta Maryborough (Colton) Total Status Mine Exploration Exploration Exploration Coal Reserves (million tonnes) Probable 149 31 40 11 231 Proved 292 21 100 - 413 Total 2013 441 52 139 11 643 Total 2012 495 52 191 15 753 Notes: (1) The year on year reduction is due to reserve depletion plus the impact of revised plans for the Acland Stage 3 Project. (2) (3) Figures shown are 100% of total resources. New Hope share is 90% Small differences are due to rounding JORC Declaration - Coal Resources The estimates of coal resources herein have been prepared in accordance with the guidelines of the “Australian Code for Reporting of Exploration Results, Mineral Resources and Ore Resources – The JORC Code. These resources are inclusive of the reserves reported in the Reserves Statement. The work has been undertaken internally and reviewed by Mr Phillip Bryant who is a Member of AusIMM. Mr Bryant has sufficient experience which is relevant to the style of mineralization and type of deposit under consideration and to the activity which he is undertaking, to qualify as a Competent Person as defined in the 2004 Edition of the JORC Code. Mr Bryant consents to the inclusion in this report of the matter based on this information in the form and context in which it appears. JORC Declaration – Coal Reserves The information in this Coal Reserves Statement that relates to coal reserves is based on information compiled by Mr Brett Domrow, who is a Member of AusIMM. Mr Domrow is a full time employee of the company. Mr Domrow has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent person as defined in the 2004 Edition of the ‘Australian Code for Reporting Exploration Results, Mineral Resources and Ore Reserves’. Mr Domrow consents to the inclusion in the report of the matters based on his information in the form and context in which it appears. 5 5 ANNUAL REPORT & FINANCIAL STATEMENTS 2013DIRECTORS REPORT - 31 JULY 2013New Hope Corporation Limited and Controlled Entities Directors Report - 31st July 2013 New Acland New Hope Corporation has made a public commitment that the town of Acland will be left untouched under the revised New Acland Coal Mine Stage 3 Project. Subsequently the model has been adjusted to allow for an exclusion zone around the township, and reserves in this area have been excluded from the 2013 figures. In addition, the amended mine plan excludes mining of the Lagoon Creek area which has the effect of sterilising approximately 29 million tonnes of coal which was included in the previous reserve estimates. There has been additional drilling carried out over the project area since the previous Reserves Statement was developed in 2012, specifically in the area between the Sabine and Willeroo resource areas. This new drilling information has partially reduced the resource thickness in this area compared with previous stratigraphy models. This has led to a reduction in area being mined as a result of the increased strip ratio and a corresponding reduction in the reserve tonnes included within the new pit boundary. Mining economics have also been updated within the southern resource areas based on New Hope Corporation’s latest prediction of long term coal prices and operating costs. This has resulted in additional areas included within the mine design, previously not considered economically viable. Due to the ongoing extraction of coal from the project area, there was also a reduction in reserve tonnages associated with depletion over the past 12 month period. Lenton There has been no change to the coal reserves estimated for Lenton since the previous JORC statement. This is a result of there being no refinement to the mine plan over the previous year. Elimatta The Elimatta reserves have decreased from the previous year as a result of an updated financial evaluation on the deposit. There has been no update to the geological model associated with this resource compared with what was previously used to develop the 2012 JORC Statement. The latest reserve tonnages have been developed taking into account the long term price forecasts, to determine a reasonable break-even strip ratio. In addition, some of the lower This mining ratio was used to define the pit boundary which is smaller than the boundary of the previous model. seam has now been excluded due to the high incremental strip ratio required to mine this coal. Maryborough (Colton) The Maryborough reserves have declined by a total of 4 million tonnes from that identified in 2012 to the current value of 11 million tonnes. For the most part this change has resulted from updated economic assumptions. For the full ASX Coal Reserves and Resources Statement please refer to our website. Details of the 2013 exploration program are as follows: Lenton (EPC 766, EPC 865 and ML 70337) Exploration throughout the period focused on coal quality, infill drilling and fault delineation. A total of 61 holes were drilled comprising of 47 open holes and 14 core holes. A further 2 kilometres of 2D seismic survey was undertaken to better define the Burton Thrust fault in the region in conjunction with a 3D seismic survey to better delineate the complex faulted area within the existing ML 70337. Coal quality analysis was undertaken to better understand the Rangal coal measures that are present within the open cut footprint. The Lenton geological model was updated in May 2013. New Acland (MDL 244, ML 50216) While wet weather had a minor impact on drilling, 59 open holes and 40 core holes were drilled during the year totalling 6,590 metres. This allowed improved resource definition for the revised New Acland Coal Mine Stage 3 Project. The New Acland geological model was updated in February 2013. Darling Downs (EPC’s 758, 759, 760, 761, 763, 918, 970, 1154 & 1158) The uncertainty surrounding the State Government’s finalisation of Strategic Cropping Land and the Darling Downs Statutory Regional Plan legislation has resulted in New Hope Exploration reducing work programs on these tenures to a minimum. 6 6 ANNUAL REPORT & FINANCIAL STATEMENTS 2013NEW HOPE CORPORATION LIMITED AND CONTROLLED ENTITIESNew Hope Corporation Limited and Controlled Entities Directors Report - 31st July 2013 Maryborough (EPC 923) Wet weather (1,296 millimetres of rain) combined with the low topographic relief and poor drainage of the Maryborough area had major impacts on drilling in the Maryborough Basin. Five open holes and 21 core holes were drilled during the year totalling 2,126 metres. Exploration throughout the period focused on geotechnical, coal quality and large diameter core for coke oven testing. Mineral Tenures Yanko (EPM 18582) A programme of three drill holes is planned based on a 50 square kilometre gravity survey completed in 2011. Cultural heritage clearance for this work is complete and drilling is expected to commence in August 2013. Moonamarra (EPM 18589) A 350 point gravity survey has been completed covering 150 square kilometres. Based on the gravity survey results and the regional magnetics, a 3 hole drilling programme was completed totalling 1,356 metres of drilling, inclusive of 433 metres of HQ core. Stage 2 of this exploration program is scheduled to be undertaken late in FY14. Sherwood (EPM 18592) A gravity survey of 325 points covering 20 square kilometres was completed. A drilling program of three holes is planned for early FY14 in conjunction with the drilling at Yanko. Courtenay and Courtenay West (EPM’s 18581 & 19508) A gravity survey of 307 points covering 45 square kilometres has been completed. identified anomalies to optimize drilling targets. Assuming favourable results, a drilling program is being planned for the 2014 field season. Induced polarisation surveys are planned covering two of the Laura (EPM 19342) The tenure is in application. Pastoral Operations During the year the company continued cattle grazing trials on rehabilitated land with early encouraging results. Core focus areas remain: h h effective utilisation of all Acland land, both pre and post mining active rehabilitation of disturbed land as soon as possible after mining with a view to return it to a quality that is at least equal to, or better than, the pre-disturbed land condition ongoing scientific trials to demonstrate the ability and commercial viability of returning disturbed land to a productive state h During the year the company sold 2,570 head of cattle compared to 2,138 in 2012, and increased the total herd size from 1,996 to 2,460 head. Development Projects Approvals (mining & environmental) for New Hope’s portfolio of coal projects continue to be progressed. These include the brownfield revised New Acland Coal Mine Stage 3 Project and greenfield projects at Lenton, Colton and Elimatta. The current status of these projects is discussed below: New Acland Development on the Environmental Impact Statement (EIS) progressed, based on the new Terms of Reference issued by the Queensland State Government in March 2013. Project work has included studies on a revised mine plan, coal preparation and handling plant and mine site infrastructure. Following the compilation of the EIS and all the supporting studies, the EIS will be submitted to the Co-ordinator General released in late 2013 for public comment. in September and Lenton In addition to the exploration program, work on Lenton has included gaining an understanding of both coal and coke quality, mine planning (including geotechnical considerations), submission of the EPBC referral, preparation of the EIS Terms of Reference and EIS baseline studies (for MLA 70456). Colton Exploration and project development work on the Colton open cut coking coal project has continued during 2013. Assessment of the Project Environmental Management Plan continued with water management being the main focus. The impact of the Queensland Biodiversity Offset Policy on the project is still being assessed, given that the Government Review of the Policy is ongoing. A large scale coke oven test program was nearing the reporting stage at year end. 7 7 ANNUAL REPORT & FINANCIAL STATEMENTS 2013DIRECTORS REPORT - 31 JULY 2013New Hope Corporation Limited and Controlled Entities Directors Report - 31st July 2013 Elimatta Project development work on the Elimatta project has continued during 2013. The EIS was submitted during the year and work has commenced on a Supplementary EIS, which is planned for submission in early 2014. Carbon Conversion Projects During the year the company continued to investigate two different processes, with a view of commercialising a coal to liquids process. The construction of the 1 tonne per hour proof of concept plant at Jeebropilly continued throughout the year. Most site infrastructure and the gasifiers are now in place, however delays have been incurred in delivery and installation of the liquefaction units. These delays will likely see the company undertake commissioning of the gasification process in late 2013, ahead of the liquefaction process. While encouraging technical results have been achieved at the Quantex facilities in West Virginia USA, progress has been slow in identifying a potentially commercial configuration. Due to Quantex requiring additional capital to continue testing, management is currently re-assessing options, with a view to either delivering a commercially viable business case within a defined period or ceasing investment in this venture. As a result of the uncertainty surrounding this investment, management has impaired the entire $13.3 million carrying value of the Quantex investment. Bridgeport Energy New Hope Corporation Limited completed the acquisition of Bridgeport Energy Limited in August 2012. New Hope has provided capital to Bridgeport to facilitate organic growth and acquisition activities. Five new development wells were successfully drilled, completed and placed on production in the Inland and Utopia fields during the year. A sixth well was drilled, cased and suspended in the Utopia field. A service rig was acquired and a number of workovers of existing wells were undertaken in order to boost production rates. During the past year, Bridgeport successfully executed the purchase of the conventional upstream exploration and production assets of Arrow Energy. This purchase remains subject to final government approvals. The company was also successful in a competitive bid for PELA 630 in the western flank of the Cooper/Eromanga Basin. Bridgeport has achieved in excess of 600 days without a reportable safety incident. Management remains focussed on improving safety systems through standardisation of operating practices and procedures. Planning is underway for an additional five wells plus three potential wells to occur from September 2013. Outlook New Hope’s Australian coal assets remain well positioned to weather the current soft market conditions facing Australian thermal coal producers. Cost reduction initiatives across all sites have already delivered significant savings during the 2013 financial year and management remains focussed on delivering further prudent savings during the 2014 financial year. Production and sales for 2014 are likely to be slightly lower due to the cessation of mining at Oakleigh (contributed 273,000 tonnes in 2013), scaling back of operations at Jeebropilly from the rate of 1 million tonnes per annum to 0.7 million tonnes per annum, slightly offset by Acland producing at the maximum allowable rate of 4.8 million tonnes compared to 4.68 million tonnes in 2013. Port operations are expected to achieve marginally increased exports in 2014 nearing nameplate capacity of 10 million tonnes per annum. Spot thermal coal prices are forecast to remain weak in US dollar terms over the coming twelve months, however the recent devaluation of the Australian dollar has lifted the average price achieved in Australian dollar terms. As a vertically integrated, low cost Australian coal producer New Hope remains well positioned to continue generating operating profits, albeit at lower levels than those recorded in the previous financial year. A strong balance sheet provides flexibility to take advantage of acquisition opportunities that may present themselves during the current soft market. At the same time the company can take a longer term view of coal markets in respect of our development portfolio. This will ensure that prudent expenditure continues on exploration and approvals work so that development can occur swiftly once market conditions improve. Insurance of officers In accordance with the provisions of the Corporations Act, New Hope Corporation Limited has a Directors' and Officers' Liability policy covering Directors and Officers of the parent company and its controlled entities. The insurance policy prohibits disclosure of the nature of the liability insured against and the amount of the premium. 8 8 ANNUAL REPORT & FINANCIAL STATEMENTS 2013NEW HOPE CORPORATION LIMITED AND CONTROLLED ENTITIESNew Hope Corporation Limited and Controlled Entities Directors Report - 31st July 2013 Proceedings on behalf of the Corporation No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Corporation, or to intervene in any proceedings to which the Corporation is a party, for the purpose of taking responsibility on behalf of the Corporation for all or part of those proceedings. No proceedings have been brought or intervened in on behalf of the Corporation with leave of the Court under section 237 of the Corporations Act 2001 . Significant changes in the state of affairs Except as disclosed in the review of operations, there has not arisen any item, transaction or event of a material and unusual nature likely, in the opinion of the Directors of the parent entity, to affect substantially the operations or results of the consolidated entity in subsequent financial years. Matters subsequent to the end of financial year Since the end of the financial year no matters or circumstances not referred to elsewhere in this report have arisen that have or will significantly affect the operations of the consolidated entity, the results of those operations or the state of affairs of the consolidated entity in subsequent financial years. During the final quarter, New Hope Corporation Limited entered into a contract to acquire a 15% interest in the Cuisinier tenement from Arrow Energy subject to government approvals and transfer of title. This additional tenement will increase oil production by approximately 240 barrels of oil per day, based on current rates. Likely developments and expected results of operations The activities of the continuing operations in the consolidated entity in the next financial year are expected to be similar to those of the financial year just ended. The consolidated entity will continue to pursue a policy of increasing its strength in its major business sectors including the development and operation of additional mineral resource projects in Australia and is regularly reviewing potential new opportunities. The Company will disclose further information on likely developments in the operations of the consolidated entity and the expected results of operations as appropriate. However, Directors are mindful that premature release of information may be prejudicial to the best interests of the Company and its shareholders. Environmental compliance The majority of the Company’s operations are in Queensland and are regulated by various regulatory authorities: h h h Coal mining operations and exploration tenements are regulated under Queensland’s Environmental Protection Act 1994 Queensland Bulk Handling (QBH) coal export port facility and Jondaryan rail loading facility are regulated under the Sustainable Planning Oil & gas operations are regulated under the Queensland Department of Environment and Heritage Protection (DEHP) During the 2013 financial year, the company has not been prosecuted for any breach of environmental laws. QBH has historically monitored dust levels within the site boundaries and no evidence of excessive dust has been identified. However, QBH has now undertaken to expand the monitoring program to include areas further from the QBH boundary, including within the suburb of Wynnum North. QBH will continue to work with DEHP and the Port of Brisbane to ensure all aspects of the company’s licence conditions continue to be met. The Company’s operational sites have submitted reports under the National Pollutant Inventory program. For the purposes of National Greenhouse and Energy Reporting and the Energy Efficiency Opportunities program the Company reports as part of the corporate group of Washington H Soul Pattinson. During the 2013 financial year the Company has commenced implementation of its Environmental Management System (EMS). The EMS assists the Company to improve its environmental performance by increasing environmental awareness, optimising operational control, monitoring compliance and facilitating continuous improvement. Bridgeport Energy executed various documentation through the year including Cultural Heritage Management Agreements and Landowner Access Agreements on some of its new permits acquired through the period. Bridgeport operates its permits under an Environmental Management System prepared and issued in accordance with legislation. 9 9 ANNUAL REPORT & FINANCIAL STATEMENTS 2013DIRECTORS REPORT - 31 JULY 2013New Hope Corporation Limited and Controlled Entities Directors Report - 31st July 2013 Information on Directors Mr R.D. MILLNER (Non executive Chairman) Experience Mr Millner is Chairman of the Company's holding Company, Washington H. Soul Pattinson and Company Limited. Mr Millner joined the Board of New Hope Corporation in 1995 and was appointed Chairman in 1998. Other current Directorships Washington H. Soul Pattinson and Company Limited TPG Telecom Limited Brickworks Limited (including Bristile Limited) BKI Investment Company Limited (incl PSI Limited) Australian Pharmaceutical Industries Limited Milton Corporation Limited (includes Choiseul Investments Limited) Appointed 1984 Appointed 2000 Appointed 1997 Appointed 2003 Appointed 2000 Appointed 1998 Former Directorships in last 3 years Choiseul Investments Limited Souls Private Equity Limited Northern Energy Corporation Limited Special responsibilities Chairman of the Board. Interests in shares and options Appointed 1995 Resigned 2010 Appointed 2004 Resigned 2012 Appointed 2011 Resigned 2012 3,681,962 ordinary shares in New Hope Corporation Limited Nil options or rights over ordinary shares in New Hope Corporation Limited Mr P.R. ROBINSON - BCom (Non executive Director) Experience Mr Robinson is Executive Director of Washington H. Soul Pattinson and Company Limited. He commenced with Washington H. Soul Pattinson and Company Limited in 1978 and was appointed as a Director in 1984. He joined the Board of New Hope Corporation in 1997. Other current Directorships Washington H. Soul Pattinson and Company Limited Clover Corporation Limited Australian Pharmaceutical Industries Limited Appointed 1984 Appointed 1997 Appointed 2000 Former Directorships in last 3 years KH Foods Limited Northern Energy Corporation Limited Appointed 2008 Resigned 2009 Appointed 2011 Resigned 2012 Special responsibilities Member of the Remuneration and Nomination Committee. Interests in shares and options 119,234 ordinary shares in New Hope Corporation Limited Nil options or rights over ordinary shares in New Hope Corporation Limited 10 10 ANNUAL REPORT & FINANCIAL STATEMENTS 2013NEW HOPE CORPORATION LIMITED AND CONTROLLED ENTITIESNew Hope Corporation Limited and Controlled Entities Directors Report - 31st July 2013 Information on Directors (continued) Mr D.J. FAIRFULL - BCom, ACIS, CPA, ASIA (Non executive Director) Experience Mr Fairfull has extensive experience in finance, investment and merchant banking. He was appointed to the New Hope Corporation Board in 1997. Other current Directorships Washington H. Soul Pattinson and Company Limited Souls Private Equity Limited Shinewing Hall Chadwick National Association Drill Torque Limited Appointed 1997 Appointed 2004 Appointed 2009 Appointed 2011 Former Directorships in last 3 years KH Foods Limited Northern Energy Corporation Limited Special responsibilities Appointed 2008 Resigned 2009 Appointed 2011 Resigned 2012 Member of the Audit Committee, and a member of the Remuneration and Nomination Committee. Interests in shares and options 11,000 ordinary shares in New Hope Corporation Limited Nil options or rights over ordinary shares in New Hope Corporation Limited Mr W.H. GRANT - FAICD, Assoc. Diploma in Local Government (Non executive Director) Experience Mr Grant has over 35 years experience in project management, corporate and fiscal governance, local government administration and strategic planning. He was the CEO of the South Bank Corporation in Brisbane from 1997 to 2005, and prior to that he was the General Manager/CEO of the Newcastle City Council from 1992 to 1997. He joined the Board of New Hope Corporation in 2006. Other current Directorships Brisbane Development Association Brisbane Airport Corporation Northern Energy Corporation Limited Former Directorships in last 3 years Appointed 2006 Appointed 2007 Appointed 2011 Urban Land Development Authority Life Without Barriers Williams Hall Chadwick Chartered Accountants and Business Advisors Queensland Performing Arts Centre Trust (QPAC) Appointed 2007 Resigned 2009 Appointed 2002 Resigned 2011 Appointed 2009 Resigned 2011 Appointed 2006 Resigned 2013 Special responsibilities Chairman of the Remuneration and Nomination Committee, and a member of the Audit Committee. Interests in shares and options 30,000 ordinary shares in New Hope Corporation Limited Nil options or rights over ordinary shares in New Hope Corporation Limited 11 11 ANNUAL REPORT & FINANCIAL STATEMENTS 2013DIRECTORS REPORT - 31 JULY 2013New Hope Corporation Limited and Controlled Entities Directors Report - 31st July 2013 Information on Directors (continued) Ms S.J. PALMER - BCom (Non executive Director) Experience Ms Palmer is a Chartered Accountant with over 30 years of extensive experience in the financial and resources fields. Ms Palmer brings a current knowledge to the New Hope board in all aspects of accounting, finance, financial reporting, risk management, and corporate governance. Ms Palmer was appointed to the New Hope Corporation Board on 1 November 2012. Other current Directorships Thiess Pty Ltd Former Directorships in last 3 years MSF Sugar Special responsibilities Chairman of the Audit Committee Interests in shares and options Appointed 2011 Appointed 2008 Resigned 2012 Nil ordinary shares in New Hope Corporation Limited Nil options or rights over ordinary shares in New Hope Corporation Limited Mr I.M.WILLIAMS - BEc, LLB (Non-Executive Director) Experience As a legal and strategic adviser to International investors in the energy & resources sectors, Mr Williams has been involved in every aspect of the Australian coal industry. Mr Williams was appointed to the New Hope Corporation Board on 1 November 2012. Other current Directorships Ashurst Australia Appointed 2011 Former Directorships in last 3 years Nil Interests in shares and options Nil ordinary shares in New Hope Corporation Limited Nil options or rights over ordinary shares in New Hope Corporation Limited 12 12 ANNUAL REPORT & FINANCIAL STATEMENTS 2013NEW HOPE CORPORATION LIMITED AND CONTROLLED ENTITIESDIRECTORS REPORT - 31 JULY 2013 New Hope Corporation Limited and Controlled Entities Directors Report - 31st July 2013 Information on Directors (continued) Mr R.C. NEALE - BSc.(Hons) MAICD, MAIMM, (Managing Director) Experience Mr Neale has more than 40 years experience in the mining and exploration industries covering coal, base metals, gold, synthetic fuels, bulk materials shipping, and power generation. He joined New Hope in 1996 as General Manager, and has been Chief Executive Officer since 2005. He was appointed to the board in November 2008. Appointed 2005 Appointed 2005 Appointed 2006 Appointed 2009 Appointed 2010 Appointed 2009 Appointed 2011 Appointed 2011 Other current Directorships Australian Coal Association Australian Coal Research Limited Australian Coal Association Low Emissions Technologies Ltd Planet Gas Limited WestSide Corporation Limited Queensland Resources Council Northern Energy Corporation Limited Bridgeport Energy Limited Former Directorships in last 3 years Nil Special responsibilities Managing Director and Chief Executive Officer. Interests in shares and options 2,287,736 ordinary shares in New Hope Corporation Limited 303,423 rights over ordinary shares in New Hope Corporation Limited Company Secretary The Company Secretary is Mr Matthew Busch who was appointed to the position on 16 March 2009. Mr Busch has a Bachelor of Business from Queensland University of Technology and is a member of CPA Australia. He has more than 15 years of experience in the coal industry and holds the dual role of Financial Controller and Company Secretary. 13 13 ANNUAL REPORT & FINANCIAL STATEMENTS 2013New Hope Corporation Limited and Controlled Entities Directors Report - 31st July 2013 Remuneration report The information provided in this remuneration report has been audited as required by section 308(3C) of the Corporations Act 2001. a. Remuneration Policies and Principles The performance of the group depends upon the quality of its Directors and executives. appropriately qualified and experienced Directors and executives. It is the Company’s objective to attract and retain During the year the Directors have separated the roles and composition of the Remuneration and Nomination Committee into distinct functions. The Nomination Committee now comprises those Non-Executive Directors who are not required to stand for re-election at the forthcoming Annual General Meeting. The Remuneration Committee comprises Messrs Grant (Chair), Robinson and Williams. The Remuneration Committee is responsible for reviewing and making recommendations to the board regarding adjustments to the remuneration packages for Directors and executives on an annual basis. The Remuneration Committee engages independent consultants, utilises data from independent surveys and reviews other market information and reports to ensure that remuneration is consistent with current industry practices. The Remuneration Committee also makes recommendations to the board on the salary package of the Chief Executive Officer. The Chief Executive Officer reports to the Committee on executive performance and remuneration arrangements. During the last 12 months the Remuneration Committee engaged PricewaterhouseCoopers to undertake a review of the Company’s incentive plan. The purpose of the report was to provide the Remuneration Committee with information for consideration. The report did not contain a recommendation in relation to executive remuneration. The key contents of the report included: 1. A summary of the existing incentive plan; 2. The alignment of the existing incentive plan with the current market and perspectives; 3. Alternate structures for short term and long term incentive plans; and, 4. Succession planning PricewaterhouseCoopers provided their report directly to the Remuneration Committee to ensure that it remained free from any undue influence of the key management personnel. PricewaterhouseCoopers received consideration of $32,000 for the above engagement. Details of other fees paid to PricewaterhouseCoopers are disclosed on page 21 of this report. The structure of non-executive Director and senior executive remuneration is separate and distinct. Non-executive Director remuneration It is intended that remuneration paid to non-executive Directors reflects the demands and responsibilities of Directors. Non-Executive Directors fees are reviewed annually after taking into consideration the Company’s performance, market rates and level of responsibility. Non-executive Directors receive a fixed fee that is paid within an aggregate limit as approved by the shareholders from time to time. The current maximum aggregate is set at $1,750,000 (2012 - $1,000,000) per annum. Executive remuneration The Company aims to ensure that remuneration packages properly reflect the person's duties, experience and responsibilities and are aligned so that management is rewarded in creating value for shareholders. Remuneration of senior executives is reviewed annually after taking into consideration the Company’s performance, market rates and level of responsibility. Executive remuneration may comprise a mix of base remuneration, short term incentives (STIs), long term incentives (LTIs) and retention payments. The detail of each component is as follows: Base remuneration Base remuneration for senior executives is fixed annually by the Remuneration Committee. It comprises a cash salary, superannuation, and other non-cash benefits such as a company vehicle. Executives may elect to take a vehicle allowance in lieu of a company vehicle and may salary sacrifice a portion of their cash salary into superannuation or other benefits. Short Term Incentives STIs are designed to motivate and reward senior executives to achieve the short term goals of the Company as set by the board. 14 14 ANNUAL REPORT & FINANCIAL STATEMENTS 2013NEW HOPE CORPORATION LIMITED AND CONTROLLED ENTITIESNew Hope Corporation Limited and Controlled Entities Directors Report - 31st July 2013 Remuneration report (continued) a. Remuneration Policies and Principles (continued) STIs are not provided for in senior executive employment contracts. The Remuneration Committee sets the maximum STI payable to each senior executive at the start of the relevant period having due regard to each executives role, responsibility and contribution to achieving the Company’s goals. STIs are offered at the absolute discretion of the Remuneration Committee. At the end of each period the Remuneration Committee will award executives a percentage of their maximum allowable STI having regard to the performance of the executive and the Company during the period. STIs are paid in the form of a cash bonus, with 50% payable immediately and 50% being deferred for 12 months. Payment of the deferred component is conditional upon the executive remaining an employee of the company until the vesting date. Long Term Incentives LTI are designed to motivate and reward senior executives to achieve the strategic goals set by the board, align shareholder and executive objectives, and to retain the services of senior executives. LTIs are not provided for in senior executive employment contracts. The Remuneration Committee sets the maximum value of the LTI payable to each senior executive at the start of the relevant period having due regard to the each executive's role, responsibility and contribution to achieving the Company’s strategic goals. LTIs are offered at the absolute discretion of the Remuneration Committee. At the end of each period the Remuneration Committee will award executives a percentage of their maximum allowable LTI having regard to the performance of the executive and the Company during the period. LTIs are paid in the form of Performance Rights at the discretion of the Remuneration Committee. The value of an executive’s LTI is converted into Performance Rights by reference to the 5 day volume weighted average share price of the company over the 5 days immediately preceding issue. The Remuneration Committee has the discretion to select alternative equity instruments for the award of LTI's in the event that Performance Rights do not align to the strategic goals set by the Remuneration Committee of Board. Performance Rights are issued subject to a service condition. Performance Rights vest in equal annual tranches over the period of the service condition. Upon satisfaction of the service conditions Performance Rights automatically convert to ordinary shares in the Company. Retention Payments Retention payments are not provided for in senior executive employment contracts. The Remuneration Committee may offer Retention Payments to senior executives during periods of unusual corporate activity where there exists a material risk of increased staff turnover. The recipients, quantum, timing and delivery of the retention payments are directly linked to the underlying event that has elicited the need for the retention payment. b. CEO Remuneration CEO employment contract Remuneration and other terms of employment for Mr Neale are governed by an individual employment contract. The agreement is of no fixed term. The contract outlines the components of remuneration paid to Mr Neale but does not prescribe how remuneration levels are modified from year to year. The agreement with the Mr Neale provides for a cash salary, superannuation and a fully maintained motor vehicle. The CEO may elect to take a vehicle allowance in lieu of a company vehicle and may salary sacrifice a portion of their cash salary into superannuation or other benefits. The contract provides that Mr Neale is eligible to participate in the Company's STI and LTI programme at the sole discretion of the Remuneration Committee. Either party may terminate the agreement by giving the other party two months notice. The contract provides for the payment of a separation allowance upon retirement or if the contract is terminated by the Company. The separation allowance is for a sum of $200,000 (indexed annually at CPI from the employment commencement date in 1996). The Company may terminate the agreement without notice at any time for cause. No payment in lieu of notice, nor any payment in respect of STI or LTI is payable under the agreement in this circumstance. 15 15 ANNUAL REPORT & FINANCIAL STATEMENTS 2013DIRECTORS REPORT - 31 JULY 2013New Hope Corporation Limited and Controlled Entities Directors Report - 31st July 2013 Remuneration report (continued) b. CEO Remuneration (continued) Deferred award of outstanding LTI entitlements At the Company’s Annual General Meeting in November 2011, shareholders approved the issue of Performance Rights to Mr Neale in respect of outstanding LTI performance payments relating to the 2008, 2009 and 2010 years. The payments had previously been deferred pending finalisation of the Employee Performance Rights Share Plan which governs the administration of the Performance Rights and subsequent approval of the issue of the Performance Rights at the Annual General Meeting. At the Company’s Annual General Meeting in November 2012, shareholders approved the issue of Performance Rights to Mr Neale in respect of outstanding LTI performance payments relating to the 2011 financial year. The payments had been deferred pending shareholder approval at the Annual General Meeting. Upon the satisfaction of a service condition, Performance Rights issued to the CEO will automatically convert to ordinary shares in the company. However, given the deferrals noted above, the Remuneration Committee elected to align the service condition and vesting dates with the dates that would have prevailed had the Performance Rights been issued in the ordinary course. The deferral of the Performance Right issue and re-alignment of vesting conditions has had an effect on the quantum of Share Based Payment Expense recognised in this year’s remuneration report, and is summarised as follows: Performance Period to which LTI relates Date Performance Rights Issued Number of Performance Rights Issued Vesting Date in the Ordinary Course Amended Vesting Date Impact on 2012 Share Based Payment Expense Impact on 2013 Share Based Payment Expense 2008 2008 2008 2008 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011 2012 2012 2012 September 2011 September 2011 September 2011 September 2011 September 2011 September 2011 September 2011 September 2011 September 2011 September 2011 September 2011 September 2011 November 2012 November 2012 November 2012 Pending approval at the 2013 Annual General Meeting 30,775 30,775 30,775 30,775 24,601 24,601 24,601 24,601 24,398 24,398 24,398 24,398 36,537 36,537 36,538 52,317 52,317 52,317 1 August 2009 1 August 2010 1 August 2011 1 August 2012 1 August 2010 1 August 2011 1 August 2012 1 August 2013 1 August 2011 1 August 2012 1 August 2013 1 August 2014 1 August 2012 1 August 2013 1 August 2014 1 August 2013 1 August 2014 1 August 2015 1 January 2012 1 January 2012 1 January 2012 No change 1 January 2012 1 January 2012 No change No change 1 January 2012 No change No change No change 1 December 2012 No change No change 1 December 2013 No change No change $ 159,107 159,107 159,107 159,107 127,187 127,187 127,187 57,812 126,138 126,138 57,335 37,099 146,635 87,981 54,990 Nil Nil Nil 1,712,117 $ - - - - - - - 69,375 - - 68,803 44,519 73,318 131,972 82,485 140,558 129,746 67,468 808,244 Retention Payment offered in 2012 During the 2012 financial year the company announced that the Board of Directors had received a number of preliminary and incomplete proposals from third parties in relation to potential change of control transactions. As a result of this interest, the Board decided it was appropriate to undertake a formal sale process to determine whether a proposal for New Hope was available at a price, and on terms, that were in the best interests of all shareholders. In order to prevent the loss of key executive personnel during the offer period the Board offered a retention payment to Mr Neale equating to approximately 60% of his base remuneration. The terms of the Retention Payment stipulated that payment would trigger at the earliest of: h h h h Mr Neale being retrenched before 31 July 2012; or at the time of the transaction completion date plus 90 days; or at the time of the Company withdrawing from the formal sale process plus 90 days; or 31 July 2012. 16 16 ANNUAL REPORT & FINANCIAL STATEMENTS 2013NEW HOPE CORPORATION LIMITED AND CONTROLLED ENTITIES New Hope Corporation Limited and Controlled Entities Directors Report - 31st July 2013 Remuneration report (continued) b. CEO Remuneration (continued) CEO Retirement With the impending retirement of Mr Neale, the Board considered the outstanding contribution Mr Neale has made to the company during his tenure as Chief Executive Officer and Managing Director, and it was agreed that upon his retirement all outstanding performance rights would In addition, it was agreed that Mr Neale's STI entitlement for the 2012/13 financial year would be paid in one instalment on or before his vest. retirement date. c. Executive Remuneration On 1 March 2012 the company announced that the formal sale process had been concluded. Mr Neale was subsequently paid the Retention Payment in June 2012, being still employed by the Company 90 days from the conclusion of the sale process. The Retention Payment to Mr Neale has been classified as a Cash Bonus in the Remuneration Note for 2012 and is aggregated with other cash bonuses paid in accordance with normal STI entitlements. Executive employment contracts The agreements with the senior executives provide for a cash salary, superannuation and a fully maintained motor vehicle. Executives may elect to take a vehicle allowance in lieu of a company vehicle and may salary sacrifice a portion of their cash salary into superannuation or other benefits. Contracts with executives may be terminated by either party giving notice as specified in their contract of employment. The contract with Mr Denney requires two months notice, the contract with Mr Stephan requires ten weeks notice, and the contract with Mr Busch requires one months notice The contracts with Mr Denney and Mr Stephan include provision for a separation payment in the event of their termination as a result of a takeover or merger of the Company. The allowances are for less than one year’s remuneration. The Company may terminate the agreements without notice at any time for cause. No payment in lieu of notice, nor any payment in respect of STI or LTI is payable under the agreement in this circumstance. Retention Payments offered in 2012 During the 2012 financial year the company announced that the Board of Directors had received a number of preliminary and incomplete proposals from third parties in relation to potential change of control transactions. As a result of this interest, the Board decided it was appropriate to undertake a formal sale process to determine whether a proposal for New Hope was available at a price, and on terms, that were in the best interests of all shareholders. In order to prevent the loss of key executive personnel during the offer period the Board offered a retention payment to certain senior executives (including Messrs Denney, Stephan and Busch) equating to approximately 60% of their base remuneration. The terms of the Retention Payment stipulated that payment would trigger at the earliest of: h h h h The executive being retrenched before 31 July 2012; or at the time of the transaction completion date plus 90 days; or at the time of the Company withdrawing from the formal sale process plus 90 days; or 31 July 2012. On 1 March 2012 the company announced that the formal sale process had been concluded. Executives were subsequently paid the Retention Payment in June 2012, being still employed by the Company 90 days from the conclusion of the sale process. The Retention Payment to Messrs Denney, Stephan and Busch has been classified as a Cash Bonus in the Remuneration Note for 2012 and is aggregated with other cash bonuses paid in accordance with normal STI entitlements. 17 17 ANNUAL REPORT & FINANCIAL STATEMENTS 2013DIRECTORS REPORT - 31 JULY 2013New Hope Corporation Limited and Controlled Entities Directors Report - 31st July 2013 Remuneration report (continued) d. Details of Remuneration (continued) Details of remuneration of Directors and the key management personnel of New Hope Corporation Limited are set out below. The key management personnel include the Directors and the following executives: Mr R.C. Neale, Managing Director and Chief Executive Officer Mr B.D. Denney, Chief Operations Officer Mr S.O. Stephan, Chief Financial Officer Mr M.J. Busch, Financial Controller and Company Secretary Comparatives are also disclosed for the 2012 year. Short-term employee benefits Cash bonus $ Cash salary and fees $ Non cash benefits $ Long- term benefits Post employment benefits Share based payments LSL $ Super- annuation $ Termination Benefits $ Rights $ Total $ Performance related % 2013 Non-Executive Directors Mr R.D. Millner Mr P.R. Robinson Mr D.J. Fairfull Mr W.H. Grant Ms S.J. Palmer Mr I.M. Williams Executive Directors Mr R.C. Neale Key Management Personnel Mr B.D. Denney Mr S.O. Stephan Mr M.J. Busch 293,000 135,000 135,000 150,000 120,000 101,250 - - - - - - - - - - - - - - - 16,579 12,178 12,178 13,531 10,833 9,141 1,443,559 550,000 44,631 24,074 16,579 611,770 596,942 416,114 191,250 201,375 106,250 22,941 2,873 28,964 - - 6,981 16,579 16,579 16,579 Total Remuneration - 2013 4,002,635 1,048,875 99,409 31,055 140,756 2012 Non-Executive Directors Mr R.D. Millner Mr P.R. Robinson Mr D.J. Fairfull Mr D.C. Williamson Mr W.H. Grant Executive Directors Mr R.C. Neale Key Management Personnel Mr B.D. Denney Mr S.O. Stephan Mr M.J. Busch 276,334 126,667 126,667 151,667 141,667 - - - - - - - - - - - - - - - 15,833 11,400 11,400 13,650 12,750 1,340,213 1,368,000 47,169 24,074 15,833 568,124 564,801 374,055 450,875 557,000 321,750 18,948 2,398 21,487 - - 6,747 15,833 15,833 15,833 Total Remuneration - 2012 3,670,195 2,697,625 90,002 30,821 128,365 - - - - - - - - - - - - - - - - - - - - - - - - - 309,579 147,178 147,178 163,531 130,833 110,391 0% 0% 0% 0% 0% 0% 808,244 2,887,087 47% 142,927 192,730 115,469 985,467 1,010,499 690,357 1,259,370 6,582,100 - - - - - 292,167 138,067 138,067 165,317 154,417 34% 39% 32% 0% 0% 0% 0% 0% 1,712,117 4,507,406 68% 88,331 235,659 115,502 1,142,111 1,375,691 855,374 47% 58% 51% 2,151,609 8,768,617 18 18 ANNUAL REPORT & FINANCIAL STATEMENTS 2013NEW HOPE CORPORATION LIMITED AND CONTROLLED ENTITIES New Hope Corporation Limited and Controlled Entities Directors Report - 31st July 2013 Remuneration report (continued) e. Information in respect of share based compensation (continued) Share based compensation – rights Rights are granted under the New Hope Corporation Limited Employee Performance Share Rights Plan (Rights Plan). Membership of the Rights Plan is open to those senior employees and those Directors of New Hope Corporation Limited, its subsidiaries and associated bodies corporate whom the Directors believe have a significant role to play in the continued development of the Group’s activities. Rights will be granted for no consideration. Rights to be granted in accordance with the Rights Plan will be allotted at the sole discretion of the Directors of the Company and in accordance with the Group’s reward and retention strategy. Rights will vest and automatically convert to ordinary shares in the company following the satisfaction of the relevant service conditions. Service conditions applicable to each issue of Rights are determined by the board at the time of grant. The assessed fair value at grant date of Rights granted to the individuals is allocated equally over the period from grant date to vesting date and the amount will be included in the remuneration of the executive. Fair values at grant date are determined by reference to the relevant volume weighted average price as determined by the Directors. The terms and conditions of each grant of rights affecting remuneration of key management personnel in the previous, this or future reporting periods and the associated pricing model inputs are as follows: Performance Period to which LTI relates Grant Date Vesting Date Value of a Right at Grant Date 2008 2008 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011 2011 2011 2012 2012 2012 2012 2012 2012 2012 January 2012 August 2012 January 2012 August 2012 August 2013 January 2012 August 2012 August 2013 August 2014 August 2012 October 2011 October 2011 October 2011 October 2011 October 2011 October 2011 October 2011 October 2011 October 2011 December 2011 December 2011 December 2012 December 2011 December 2011 December 2011 December 2012 December 2012 December 2013 January 2014 December 2012 August 2014 December 2012 January 2015 December 2012 August 2015 December 2012 August 2016 December 2012 August 2013 August 2014 August 2015 August 2013 $5.17 $5.17 $5.17 $5.17 $5.17 $5.17 $5.17 $5.17 $5.17 $6.02 $6.02 $6.02 $6.02 $6.02 $4.03 $4.03 $4.03 $4.03 $4.03 $4.03 $4.03 Share Rights granted to Directors and key management personnel Details of Rights over ordinary shares in the Company as at 31 July 2013, provided as remuneration to each Director of New Hope Corporation Limited and each of the key management personnel of the Group are set out below. Upon satisfaction of the performance conditions each right will automatically vest and convert into one ordinary share in New Hope Corporation Limited. Further information on the Rights is set out in note 30 to the financial statements. 19 19 ANNUAL REPORT & FINANCIAL STATEMENTS 2013DIRECTORS REPORT - 31 JULY 2013New Hope Corporation Limited and Controlled Entities Directors Report - 31st July 2013 Remuneration report (continued) e. Information in respect of share based compensation (continued) Share Rights granted to Directors and key management personnel (continued) Number of rights granted during the year Number of rights vested during the year Number of ordinary shares issued on the vesting of rights during the year 2013 2012 2013 2012 2013 2012 156,951 428,708 116,311 165,925 116,311 165,925 44,843 44,843 33,632 32,040 73,888 36,100 8,010 18,472 9,025 - 10,040 5,020 8,010 18,472 9,025 - 10,040 5,020 Directors Mr R.C. Neale Key Management Personnel Mr B.D. Denney Mr S.O. Stephan Mr M.J. Busch No Rights have been issued to R.D. Millner, P.R. Robinson, D.J. Fairfull, W.H. Grant, S.J. Palmer, or I.M. Williams. There were 209,378 rights issued over ordinary shares of New Hope Corporation Limited at the date of this report. f. Additional information Other information relating to equity based compensation A Remuneration consisting of equity based compensation 28% 15% 19% 17% B Value at grant date $ C Value at exercise date $ D Value at lapse date $ E Total of columns B-D $ 2,942,103 373,598 591,387 335,791 632,484 48,220 102,667 50,064 - - - - 3,574,587 421,818 694,054 385,855 Name Mr R.C. Neale Mr B.D. Denney Mr S.O. Stephan Mr M.J. Busch A = The percentage of the value of remuneration consisting of rights, based on the value of rights expensed during the current year. B = The value at grant date calculated in accordance with AASB2 Share Based Payment of rights granted during the year as part of remuneration. C = The value at exercise date of the rights that were granted as part of remuneration and were exercised during the year, being the intrinsic value of the rights at that date. D = The value at lapse date of the rights that were granted as part of remuneration and that lapsed during the year. Consequences of performance on shareholder wealth The Company's performance is not only impacted by market factors, but also by employee performance. The financial performance for the last five years is shown below. Net profit attributable to shareholders (A$000's) Profit after tax from continuing operations (A$000's) Dividends paid during the year (cents / share) Share price as at 31 July ($ / share) Shareholders funds (A$000's) Year ended 31 July 2013 74,129 74,128 31.00 3.76 2,016,456 2012 167,126 167,125 26.00 4.07 2,252,916 2011 503,234 503,099 23.75 5.37 2,367,383 2010 183,832 183,832 82.25 4.71 2,339,525 2009 1,950,392 1,950,392 16.25 5.34 2,748,498 20 20 ANNUAL REPORT & FINANCIAL STATEMENTS 2013NEW HOPE CORPORATION LIMITED AND CONTROLLED ENTITIES DIRECTORS REPORT - 31 JULY 2013 New Hope Corporation Limited and Controlled Entities Directors Report - 31st July 2013 Shares issued on the vesting of rights Since the end of the financial year 151,873 rights have been granted and converted to ordinary shares in the company. Loans to directors and executives There were no loans to directors and executives granted during the reporting period, nor were there any outstanding loans as at balance date. Non-audit services The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor's expertise and experience with the Company are important. Details of the amounts paid or payable to the auditor (PricewaterhouseCoopers) for non-audit services provided during the year are set out below. The Board of Directors has considered the position, and in accordance with the advice received from the audit committee, is satisfied that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001 . The Directors are satisfied that the provision of non-audit services by the auditor, as set out below, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons: h h the types of non-audit services have been reviewed by the audit committee to ensure they do not impact the impartiality and objectivity of the auditor; none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants . During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related practices and non- related audit firms (refer note 32): Audit Services PricewaterhouseCoopers Australian firm for audit and review of financial reports and other audit work under the Corporations Act 2001 Non PricewaterhouseCoopers audit firms for the audit or review of financial reports of any entity in the Group Total remuneration for audit services Non-audit services PricewaterhouseCoopers Australian firm: Transaction tax & advisory services General advisory services Tax compliance services Tax compliance services - MRRT Tax compliance services - PRRT Research and development compliance services Non PricewaterhouseCoopers firms: Taxation services Total remuneration for non-audit services Total auditors remuneration Consolidated 2013 2012 355,629 279,232 - - 355,629 279,232 421,090 63,397 160,752 192,670 43,795 270,348 908,441 266,971 217,272 419,498 - 282,984 - - 1,152,052 2,095,166 1,507,681 2,374,398 Auditor's independence declaration A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 23. Rounding of amounts The Company is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments Commission, relating to the "rounding off" of amounts in the Directors' report. Amounts in the Directors' report have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, to the nearest dollar. 21 21 ANNUAL REPORT & FINANCIAL STATEMENTS 2013 DIRECTORS REPORT - 31 JULY 2013 New Hope Corporation Limited and Controlled Entities Directors Report - 31st July 2013 Meetings of Directors The following table sets out the number of meetings of the Company's Directors held during the year ended 31 July 2013 and the number of meetings attended by each Director: Mr R.D. Millner Mr P.R. Robinson Mr D.J. Fairfull Mr W.H. Grant Ms S.J. Palmer Mr I.M. Williams Mr R.C. Neale Full meetings of Directors Held 14 14 14 14 11 11 14 Attended 14 14 14 14 11 10 14 Audit Committee Remuneration Committee Held - - 2 2 1 - - Attended - - 2 1 1 - - Held - 4 2 4 - 2 - Attended - 4 2 4 - 2 - Signed at Sydney this 16th day of September 2013 in accordance with a resolution of Directors. R.D. Millner Director S.J. Palmer Director 22 22 ANNUAL REPORT & FINANCIAL STATEMENTS 2013AUDITOR’S INDEPENDENCE DECLARATION Auditor's Independence Declaration As lead auditor for the audit of New Hope Corporation Limited for the year ended 31 July 2013, I declare that, to the best of my knowledge and belief, there have been: (a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (b) no contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of New Hope Corporation Limited and the entities it controlled during the period. Simon Neill Partner PricewaterhouseCoopers Sydney 16 September 2013 PricewaterhouseCoopers, ABN 52 780 433 757 Riverside Centre, 123 Eagle Street, BRISBANE QLD 4000, GPO Box 150, BRISBANE QLD 4001 T: +61 7 3257 5000, F: +61 7 3257 5999, www.pwc.com.au 23 23 ANNUAL REPORT & FINANCIAL STATEMENTS 2013 CORPORATE GOVERNANCE STATEMENT New Hope Corporation Limited Corporate Governance Statement This Corporate Governance Statement has been summarised into sections in line with the eight core corporate governance principles as specified in the Australian Securities Exchange (ASX) Corporate Governance Council's revised Corporate Governance Principles and Recommendations. Foundations for management and oversight The Board is ultimately responsible for the operations, management and performance of the Company. In discharging this responsibility, the Board delegates to senior management, whose role is to manage the Company in accordance with the directions and policies set by the Board. The Board monitors the activities of senior management in the performance of their delegated duties. It is the responsibility of the Board to determine policies, practices, management and the operations of the Company and to ensure that the Company is compliant with statutory, legal and other regulatory obligations. Details of these policies can be accessed through the Company Secretary. Responsibilities of the Board include the following: h h Determining corporate strategies, policies and guidelines for the successful performance of the Company in the present and the future; Monitoring the Company's overall performance and financial results, adopting annual budgets and approving New Hope Corporation Limited's financial statements; Accountability to shareholders; Ensuring that risk management procedures and compliance and control systems are in place and operating effectively; Monitoring the performance and conduct of senior management and ensuring adequate succession plans are in place; and Ensuring the Company continually builds an honest and ethical culture. h h h h The performance of non-executive Directors is reviewed by the Remuneration and Nomination Committee with any unsatisfactory performance referred to the remainder of the Board. This review was undertaken during the year. The efficiency, effectiveness and operations of the Board are continuously subjected to informal monitoring by the Remuneration and Nomination Committee and the Board as a whole. The performance of senior management was reviewed by the Remuneration and Nomination Committee during the year in accordance with its established procedures. Board structure At the date of this report the Board consists of six non-executive Directors and one executive Director. Details of the Directors of the Company, their experience, expertise, qualifications, and attendance at meetings are set out in the Directors' Report. Key elements of the Board composition include: h h h h h In accordance with the Company's Constitution, the Board should comprise no less than three or more than ten Directors. The Chairman of the Board is a non-executive Director. The non-executive Chairman and Chief Executive Officer roles are separate. The Board comprises a mix of Directors from different backgrounds with complementary skills and experience. The size of the Board and membership represents an appropriate balance between Directors with experience and knowledge of the Group and Directors with an external perspective. The Company has not strictly complied with ASX Best Practice Recommendations in that not all of the non-executive Directors are independent. Mr Robert Millner (Chairman of Directors), Mr Peter Robinson and Mr David Fairfull are Directors of New Hope Corporation Limited's major shareholder, Washington H. Soul Pattinson and Company Limited. Ms Sue Palmer, Mr Ian Williams and Mr William Grant are considered independent. Whilst all the non-executive Directors cannot be considered "independent" in accordance with the ASX Best Practice Recommendations, all Directors are expected to bring their independent views and judgement to the Board and, in accordance with the Corporations Act 2001, must inform the Board if they have any interest that could conflict with those of the Company. Where the Board considers that a significant conflict exists, it may exercise its discretion to determine whether the Director concerned may be present at the meeting while the item is considered. Also, the Board considers that due to the extensive experience and knowledge that these Directors have of the business, it would be contrary to shareholders' best interests if the Directors were precluded from holding the position of Director on these grounds. 24 24 ANNUAL REPORT & FINANCIAL STATEMENTS 2013NEW HOPE CORPORATION LIMITED AND CONTROLLED ENTITIESNew Hope Corporation Limited Corporate Governance Statement In the discharge of their duties and responsibilities, the Directors individually (as well as the Board) have the right to seek independent professional advice at the Company's expense. However, for advice to individual Directors, prior approval of the Chairman is required, which is not to be unreasonably withheld. The Remuneration and Nomination Committee consists of non-executive Directors who periodically review the membership and performance of the Board having regard to the Company's particular needs, both present and future. These periodic reviews are conducted at least annually or more frequently if deemed appropriate. The Board sets goals and objectives for the Board, its Committees and Directors. Performance is measured against these goals and objectives in such manner deemed appropriate by the Board. The performance of the Board and its Committees was reviewed during the year in accordance with established procedures. Directors are initially appointed by the full Board, subject to election by shareholders at the next Annual General Meeting. Under the Constitution, one third of the Board (excluding any Managing Director) retire from office each year and if eligible submit themselves for re-election by shareholders at the Annual General Meeting. Ethical and responsible decision making The Company has an established Code of Conduct dealing with matters of integrity and ethical standards. The code is designed to comply with the legal and other obligations of legitimate stakeholders and other interested parties and to foster a culture of compliance. All Directors, executives and employees are expected to abide by the code of conduct and specific policies in place, and to bring to the attention of senior management or the Board instances of unethical practices. The code and policies cover: h h h h h h h h Professional conduct; Ethical standards; Standards of workplace behaviour and equal opportunity; Relationships with customers, suppliers and competitors; Confidentiality and continuous disclosure; Anti-discrimination and harassment; Trading in Company securities; and The environment. The Company's diversity policy is contained in the Code of Conduct, the Equal Employment Opportunity Policy, and the Recruitment and Selection Policy. Through these principles based documents the Company aims to foster a workplace where employees feel that they are a valued member of the organisation; that they are treated fairly and that inappropriate behaviour does not take place. The company is also committed to ensuring that employees and all other individuals involved in its operations are provided with equal opportunity in all aspects of recruitment, selection and employment. It is the Company’s policy that when recruiting and selecting staff that the best person for the position is chosen in each case. This is achieved by basing selection decisions on the merit principle whereby individuals shall be selected based on their capability to meet the requirements of the position and who have the right position related attributes. Unlawful discrimination of either a positive or negative bias (including gender) is not tolerated. The Company is an equal opportunity employer and is committed to ensuring that all applicants for selection (employees, Officers and Directors) are not unlawfully discriminated against. The Company seeks to attract and retain employees across a broad experience base relevant to the individuals to reach their full potential, whilst Company. The Company aims to remunerate people fairly and provide opportunities for all understanding the need to be flexible to each individual’s personal circumstances. 25 25 ANNUAL REPORT & FINANCIAL STATEMENTS 2013CORPORATE GOVERNANCE STATEMENTNew Hope Corporation Limited Corporate Governance Statement The Company believes that the most appropriate measurable objectives in addressing gender diversity will deliver outcomes that are aligned to the principles outlined above. The following table outlines the Company’s measurable objectives in achieving diversity. Measurable Objective Progress Achieved Develop a culture that embraces diversity that is supported by corporate policy. Policies are in place and readily available to all employees at all times. Policies are formally communicated to employees during their induction and periodic formal refresher training is also conducted. The Company’s recruitment processes and documents ensure the Company appeals to, and targets, a diverse pool of potential employees. Formal recruitment procedures are in place that necessitates the involvement of the Human Resources Department in all stages of the recruitment process which ensures that corporate policy is adhered to and that the recruitment and selection process is free from unlawful bias. Ensure policies, procedures and guidelines support the delivery of a flexible, tolerant and accommodating work environment. Through various policies and guidelines (Education Assistance, Training and Development, Leave, Parental Leave, Salary Packaging, Flexibility and Wellbeing) the Company has acknowledged the need for, and provides opportunities for employees to achieve, flexibility in their work environment. to pay A commitment equity whereby remuneration is set based on the market based data and each individual’s qualifications and experience. This includes flexible working arrangements for new parents returning to work in the form of: - the ability to work from home - the option to have non-standard working hours - the ability to work part-time for a period before returning to full time work Remuneration is initially set (and reviewed at least annually) by reference to independent market data which accounts for both the skills required for the role, the industry, and employment location. This is further linked to each employee’s qualifications and experience. Procedures dictate that the Human Resources Department are involved in all steps of the remuneration setting process, including the final executive review and annual “norming” process which ensures that all employees are remunerated fairly, reasonably and without fear of undue bias. The following table shows the proportion of women employed by the Company. Role Directors Senior executives Total employees Number of women Number of men Total employees Female percentage 1 2 75 6 12 523 7 14 598 14% 14% 13% Integrity in financial reporting New Hope Corporation Limited has an established Audit Committee, which has its own charter outlining the committee's function, composition, authority, responsibilities and reporting. The current members of the Audit Committee are non-executive Directors Ms S.J. Palmer (Chairperson), Mr W.H. Grant and Mr D.J. Fairfull. The Company's non-executive Chairman Mr R.D. Millner is not a member of the Audit Committee. The non- executive Chairman and other Directors, Chief Executive Officer, Chief Financial Officer, Company Secretary and the internal auditor may attend Audit Committee meetings by invitation. On 7 September 2012 the Company announced that Ms Sue Palmer would assume the role of non-executive Director and Audit Committee Chairperson with effect from 1 November 2012. Ms Palmer’s appointment follows the sad passing of Mr David Williamson (independent non- executive Director and Audit Committee Chairperson) in July 2012. 26 26 ANNUAL REPORT & FINANCIAL STATEMENTS 2013NEW HOPE CORPORATION LIMITED AND CONTROLLED ENTITIESCORPORATE GOVERNANCE STATEMENT New Hope Corporation Limited Corporate Governance Statement During the period from July 2012 to 1 November 2012 the Company notes that it has not complied with the best practice recommendations in that the Audit Committee: h h h Did not consist of a majority of independent Directors; Did not have at least three members; and The acting Chairperson was not an independent Director. Despite these non-compliances, the Company believes that the integrity of the Audit Committee and the governance of the Company have been fully maintained at all times. Further details of the Directors' qualifications, terms of office, and attendance at audit committee meetings are set out in the Directors' report on pages 10 to 13 and 22. The external auditors (PricewaterhouseCoopers) are requested by the Audit Committee to attend the appropriate meetings to report on the results of their review and audit for the half year and full year respectively. The external and internal auditors both have direct access to the Audit Committee if required. The function of the Audit Committee is to assist the Board in fulfilling its statutory and fiduciary responsibilities relating to: h h The external reporting of financial information, including the selection and application of accounting policies; The independence and effectiveness of the external auditors. The Audit Committee regularly evaluates the performance of its external auditors, considers the appropriateness of the external audit engagement partners including their rotation, and considers the need and timing for putting the external audit role out to tender; The effectiveness of internal control processes and management information systems; Compliance with the Corporations Act, ASX Listing Rules and any other applicable requirements; and The application and adequacy of risk management systems within the Company. h h h The Chief Executive Officer and Chief Financial Officer are required to state in writing to the Board, by submission to the Audit Committee, that the Company's financial statements present a true and fair view, in all material respects, of the Company's financial position and operational results and that they are in accordance with relevant accounting standards. Timely and balanced disclosure The Company has a Continuous Disclosure Policy to ensure compliance with the ASX Listing Rules and Corporations Act continuous disclosure requirements. The policy requires timely disclosure through the ASX company announcement platform of information concerning the Company that a reasonable person would expect to have a material effect on the price or value of the Company's securities. The Board is responsible for determining disclosure obligations and the Company Secretary is the nominated Continuous Disclosure Officer for the Company. Respect the rights of shareholders The Board is committed to ensuring that shareholders, the stock market and other interested parties are fully informed of all material matters affecting the Company. The dissemination of information is mainly achieved as follows: h h h An annual report is available to be distributed to shareholders in October each year and is placed on the Company's website; Where possible, significant information is posted on the Company's internet website as soon as it is disclosed to the market; and The external auditor is requested to attend the Annual General Meeting to answer shareholders' questions about the conduct of their audit and the content of the auditor's report. Risk recognition and management The Company is committed to identifying and managing areas of significant business risk to protect shareholders, employees, earnings and the environment. The framework to achieve this objective is promulgated in the Company's Risk Management policy. The Risk Management and Internal Audit function within the Company is responsible for the oversight and monitoring of performance of the policy. Arrangements in place, as set out in the company's Risk Management policy, include: h h h Regular detailed financial, budgetary and management reporting; Procedures to manage financial, operational, strategic, market, and regulatory risks; Established organisational structures, procedures and policies dealing with the areas of health and safety, environmental issues, industrial relations and legal and regulatory matters; Comprehensive insurance and risk management programs; Procedures requiring Board approval for all borrowings and capital expenditure beyond minor levels; and Where applicable, the utilisation of specialised staff and external advisors. h h h 27 27 ANNUAL REPORT & FINANCIAL STATEMENTS 2013CORPORATE GOVERNANCE STATEMENT CORPORATE GOVERNANCE STATEMENT New Hope Corporation Limited Corporate Governance Statement The Chief Executive Officer and Chief Financial Officer are required to state in writing to the Board, by submission to the audit committee, that the risk management and internal control compliance systems implemented by the Board are operating efficiently and effectively and that the directors declaration given under section 259A Corporations Act 2001 (Cth) is founded on a sound system of risk management and control. The required statement has been received from the Chief Executive Officer and Chief Financial Officer relative to the year of income. Remunerate fairly and responsibly The Remuneration and Nomination Committee consists of non-executive Directors who are responsible for reviewing and proposing remuneration and other terms of employment for non-executive Directors. Details of the attendance at meetings of the Remuneration and Nomination Committee is included on page 22 of the Directors' report. Non-executive Directors' fees are reviewed annually after taking into consideration the Company's performance, market rates and level of responsibility. The aggregate amount of fees which may be paid to non-executive Directors is subject to the approval of shareholders at the Annual General Meeting and is currently set at $1,750,000 (2012 - $1,000,000) per annum. Remuneration of senior executives is reviewed annually by the Remuneration and Nomination Committee, taking into consideration the Company's performance, market rates and levels of responsibility. Further information of Directors' and executives' remuneration is set out in the Directors Report and in the Notes to the Financial Statements. The Company’s Share Trading Policy has been disclosed to the market via the ASX Company Announcement Platform. The policy provides that: h Trading is prohibited when Directors and employees are in possession of price sensitive information which is not available to the public; h Trading is prohibited during the period of four weeks prior to the announcement of the Company’s half year and full year results; h The Company has established the following share trading windows each for a period of six weeks commencing from: o The release of the Company's annual result to the Australian Securities Exchange; o The release of the Company's half yearly result to the Australian Securities Exchange; o The date of the Annual General Meeting; and o The release of a prospectus; h At times other than those referred to above, Directors and employees may trade after seeking approval from the Chairman of the Board, or in his absence, the Managing Director of New Hope Corporation Limited. New Hope Corporation Limited is a company limited by shares on the Australian Securities Exchange (ASX). The Company is incorporated and domiciled in Australia, and its registered office and principal place of business is: New Hope Corporation Limited Annual Financial Report for the year ended 31st July 2013 Contents Financial Report Consolidated Statement of Comprehensive Income Consolidated Balance Sheet Consolidated Statement of Changes in Equity Consolidated Cash Flow Statement Notes to the financial statements Directors' declaration Independent audit report to the members Page 30 31 32 33 34 78 79 The financial report is the consolidated financial statements of the consolidated entity consisting of New Hope Corporation Limited and its subsidiaries. The financial report is presented in the Australian currency. New Hope Corporation Limited 3/22 Magnolia Drive BROOKWATER QLD 4300 A description of the nature of the consolidated entity's operations and its principal activities is included in the Directors' report on pages 2 to 9, which is not part of this financial report. The financial report was authorised for issue by the Directors on 16 September 2013. The Company has the power to amend and reissue the financial report. Through the use of the internet, the Company has ensured that corporate reporting is timely, complete and available globally at minimum cost to the Company. All financial reports and other announcements to the ASX are available on the Investor Relations pages of the website: www.newhopegroup.com.au. 28 28 29 ANNUAL REPORT & FINANCIAL STATEMENTS 2013ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 31 JULY 2013 New Hope Corporation Limited Annual Financial Report ANNUAL FINANCIAL REPORT for the year ended 31st July 2013 FOR THE YEAR ENDED 31 JULY 2013 Contents Financial Report Consolidated Statement of Comprehensive Income Consolidated Balance Sheet Consolidated Statement of Changes in Equity Consolidated Cash Flow Statement Notes to the financial statements Directors' declaration Independent audit report to the members Page 30 31 32 33 34 78 79 The financial report is the consolidated financial statements of the consolidated entity consisting of New Hope Corporation Limited and its subsidiaries. The financial report is presented in the Australian currency. New Hope Corporation Limited is a company limited by shares on the Australian Securities Exchange (ASX). The Company is incorporated and domiciled in Australia, and its registered office and principal place of business is: New Hope Corporation Limited 3/22 Magnolia Drive BROOKWATER QLD 4300 A description of the nature of the consolidated entity's operations and its principal activities is included in the Directors' report on pages 2 to 9, which is not part of this financial report. The financial report was authorised for issue by the Directors on 16 September 2013. The Company has the power to amend and reissue the financial report. Through the use of the internet, the Company has ensured that corporate reporting is timely, complete and available globally at minimum cost to the Company. All financial reports and other announcements to the ASX are available on the Investor Relations pages of the website: www.newhopegroup.com.au. 29 29 ANNUAL REPORT & FINANCIAL STATEMENTS 2013STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 JULY 2013 New Hope Corporation Limited and Controlled Entities STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 JULY 2013 Consolidated Statement of Comprehensive Income for the year ended 31st July 2013 Revenue from continuing operations Other income Expenses Cost of sales Marketing and transportation Administration Other expenses Impairment of assets Share of net profit / (loss) of associate Profit before income tax Petroleum resources rent tax expense Income tax expense Profit after income tax for the year Profit attributable to: New Hope Shareholders Non-controlling interests Other comprehensive income Items that may be reclassified to profit and loss: Changes to the fair value of cash flow hedges, net of tax Transfer to the P&L - Cashflow Hedges, net of tax Changes to the fair value of available for sale financial assets, net of tax Other comprehensive income for the year, net of tax Total comprehensive income for the year Total comprehensive income attributable to: New Hope Shareholders Non-controlling interests Notes 5 6 7 38 8 8 27 27 27 2013 $000 2012 $000 652,097 4,328 656,425 (319,933) (139,327) (16,213) (7,205) (51,377) (386) 121,984 1,509 (49,365) 74,128 767,525 149 767,674 (355,901) (140,932) (26,101) (6,083) (39,191) (647) 198,819 - (31,694) 167,125 74,129 (1) 74,128 167,126 (1) 167,125 (39,824) (10,431) (4,729) (54,984) 19,144 19,145 (1) 19,144 10,708 (17,934) (11,242) (18,468) 148,657 148,658 (1) 148,657 Earnings per share for profit attributed to ordinary equity holders of the Company Basic earnings per share (cents / share) Diluted earnings per share (cents / share) 34 34 8.9 8.9 20.1 20.1 The above statement of comprehensive income should be read in conjunction with the accompanying notes. 30 30 ANNUAL REPORT & FINANCIAL STATEMENTS 2013 BALANCE SHEET AS AT 31 JULY 2013 New Hope Corporation Limited and Controlled Entities BALANCE SHEET AS AT 31 JULY 2013 Consolidated Balance Sheet as at 31st July 2013 Current assets Cash and cash equivalents Receivables Inventories Held to maturity investments Derivative financial instruments Other Total current assets Non-current assets Receivables Investments accounted for using the equity method Available for sale financial assets Derivative financial instruments Property, plant and equipment Exploration and evaluation assets Intangible assets Total non-current assets Total assets Current liabilities Accounts payable Current tax liabilities Derivative financial instruments Provisions Total current liabilities Non-current liabilities Deferred tax liabilities Provisions Derivative financial instruments Total non-current liabilities Total liabilities Net assets Equity Contributed equity Reserves Retained profits Capital and reserves attributable to New Hope Shareholders Non-controlling interests Total equity Notes 2013 $000 2012 $000 10 11 12 13 35 14 15 38 16 35 17 18 20 21 35 24 23 25 35 26 27(a) 27(b) 21,564 57,905 58,673 1,229,608 - 614 1,368,364 2,775 - 30,215 - 764,037 77,210 25,963 900,200 2,268,564 46,758 18,924 29,721 32,148 127,551 67,733 45,117 11,707 124,557 252,108 2,016,456 93,342 (3,988) 1,925,767 2,015,121 1,335 2,016,456 70,990 17,124 59,560 1,446,975 20,393 299 1,615,341 9,208 32,530 73,140 9,971 659,202 39,228 20,799 844,078 2,459,419 40,460 18,490 - 28,845 87,795 82,917 35,791 - 118,708 206,503 2,252,916 92,509 50,570 2,109,104 2,252,183 733 2,252,916 The above balance sheet should be read in conjunction with the accompanying notes. 31 31 ANNUAL REPORT & FINANCIAL STATEMENTS 2013 STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 JULY 2013 New Hope Corporation Limited and Controlled Entities STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 JULY 2013 Consolidated Statement of Changes in Equity for the year ended 31st July 2013 Contributed Equity Notes $000 Reserves $000 Retained Earnings $000 Non-controlling Interests $000 Total $000 Balance at 1 August 2011 91,500 73,851 2,157,849 44,183 2,367,383 Profit for the year Other comprehensive income Total comprehensive income for the year - - - - (18,468) (18,468) 167,126 - 167,126 (1) - (1) 167,125 (18,468) 148,657 Transactions with owners in their capacity as owners Contributions of equity, net of transaction costs Dividends provided for or paid Special dividend paid Transfer from share based payment reserve to equity Net movement in share based payment reserve Premium paid on acquisition of non-controlling interest Acquisition of non-controlling interests Non controlling interests on acquisition of subsidiary Balance at 31 July 2012 Profit for the year Other comprehensive income Total comprehensive income for the year Transactions with owners in their capacity as owners Contributions of equity, net of transaction costs Dividends provided for or paid Special dividend paid Transfer from share based payment reserve to equity Net movement in share based payment reserve Premium paid on acquisition of non-controlling interest Acquisition of non-controlling interests Share of non-controlling interests equity contributions 26 9 9 27 27 27 37 26 9 9 27 27 27 37 - - - 1,009 - - - 1,009 - - - (1,009) 2,225 (6,029) - - (4,813) - (91,337) (124,534) - - - - - (215,871) - - - - - - (44,177) 728 (43,449) - (91,337) (124,534) - 2,225 (6,029) (44,177) 728 (263,124) 92,509 50,570 2,109,104 733 2,252,916 - - - - - - 833 - - - - 833 - (54,984) (54,984) 74,129 - 74,129 - - - (833) 1,259 - - - 426 - (91,360) (166,106) - - - - - (257,466) (1) - (1) - - - - - - - 603 603 74,128 (54,984) 19,144 - (91,360) (166,106) - 1,259 - - 603 (255,604) Balance at 31 July 2013 93,342 (3,988) 1,925,767 1,335 2,016,456 The above statement of changes in equity should be read in conjunction with the accompanying notes. 32 32 ANNUAL REPORT & FINANCIAL STATEMENTS 2013 CASH FLOW STATEMENT FOR THE YEAR ENDED 31 JULY 2013 CASH FLOW STATEMENT FOR THE YEAR ENDED 31 JULY 2013 Consolidated Cash Flow Statement for the year ended 31st July 2013 New Hope Corporation Limited and Controlled Entities Cash flows from operating activities Receipts from customers inclusive of GST Payments to suppliers and employees inclusive of GST Income taxes paid Net cash inflow / (outflow) from operating activities Cash flows from investing activities Payments for property, plant and equipment Payments for exploration and evaluation activities Payments for purchase of subsidiary, net of cash acquired Payments for available for sale financial assets Payments for investments in associates Refunds of / (payments for) security and bond guarantees Proceeds from / (payments for) held to maturity investments Proceeds from sale of property, plant and equipment Proceeds from sale of non-current assets Interest received on held to maturity investments Net cash inflow / (outflow) from investing activities Cash flows from financing activities Joint venture partner contributions Payments for purchase of non-controlling interest, net of cash acquired Dividends paid Net cash inflow / (outflow) from financing activities Net increase / (decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Effects of exchange rate changes on cash and cash equivalents Cash and cash equivalents at the end of the financial year Notes 2013 $000 2012 $000 560,422 (425,439) 134,983 (42,345) 92,638 (106,584) (21,174) (44,260) - (731) (55) 216,901 936 5,813 61,060 111,906 601 - (257,466) (256,865) (52,321) 70,990 2,895 21,564 718,050 (466,509) 251,541 (208,516) 43,025 (39,045) (31,143) - (5,305) (2,008) 864 137,486 58,748 - 101,741 221,338 1,736 (50,207) (215,871) (264,342) 21 75,149 (4,180) 70,990 33 10 The above cash flow statement should be read in conjunction with the accompanying notes. 33 33 ANNUAL REPORT & FINANCIAL STATEMENTS 2013 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 JULY 2013 NOTES TO THE FINANCIAL STATEMENTS Notes to the financial statements FOR THE YEAR ENDED 31 JULY 2013 for the year ended 31st July 2013 New Hope Corporation Limited and Controlled Entities 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. The financial report covers New Hope Corporation Limited and its subsidiaries as the consolidated entity. a. Basis of preparation of accounts This general purpose financial pronouncements of the Australian Accounting Standards Board, Australian Accounting Interpretations and the Corporations Act 2001. report has been prepared in accordance with Australian Accounting Standards, other authoritative The accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period. Effective from 1 August 2012 major work carried out on mining plant and machinery has been capitalised. This has resulted in $21,625,000 being capitalised in the balance sheet and amortised over its useful life. There has been no material impact on existing assets. (i) Compliance with International Financial Reporting Standards (IFRS) The consolidated financial statements of the New Hope Corporation Limited Group also comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). (ii) Historical cost convention These financial statements have been prepared under the historical cost convention, as modified by the revaluation of available for sale financial assets and derivative instruments carried at fair value. (iii) Critical accounting estimates The preparation of financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 3. b. Principles of consolidation (i) Subsidiaries The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of New Hope Corporation Limited ("Company" or "parent entity") as at 31st July 2013 and the results of all subsidiaries for the year then ended. New Hope Corporation Limited and its subsidiaries together are referred to in this financial report as the Group or the consolidated entity. Subsidiaries are all those entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one-half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases. The acquisition method of accounting is used to account for the acquisition of subsidiaries by the Group (note 1(h)). Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated income statement, statement of comprehensive income, statement of changes in equity and balance sheet respectively. (ii) Associates Associates are all entities over which the group has significant influence but not control or joint control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting, after initially being recognised at cost. The Group's investment in associates includes goodwill (net of any accumulated impairment loss) identified on acquisition (refer to note 38). The Group's share of its associates' post-acquisition profits or losses is recognised in profit or loss, and its share of post-acquisition other comprehensive income is recognised in other comprehensive income. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. Dividends receivable from associates are recognised as reduction in the carrying amount of the investment. 34 34 ANNUAL REPORT & FINANCIAL STATEMENTS 2013New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31st July 2013 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) b. Principles of consolidation (continued) (ii) Associates (continued) When the Group's share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured long-term receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate. Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group's interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group. As the group only has significant influence, it is unable to obtain reliable information at year end on a timely basis. The results of associates are equity-accounted from their most recent audited annual financial statements or unaudited interim financial statements, all within three months of the year end of the group. Adjustments are made to the associates’ financial results for material transactions and events in the intervening period. (iii) Joint Ventures The proportionate interests in the assets, liabilities and expenses of a joint venture activity have been incorporated in the financial statements under the appropriate headings. Details of the joint venture are set out in note 39. Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as comprising of the Board, Chief Executive Officer (CEO), Chief Operating Officer (COO) and Chief Financial Officer (CFO). Foreign currency translation (i) Functional and presentation currency 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 New Hope Corporation Limited's functional and presentation currency. c. d. (ii) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement, except when deferred in equity as qualifying cash flow hedges and qualifying net investment hedges. Translation differences on non-monetary items, such as equities held at fair value through profit or loss, are reported as part of the fair value gain or loss. Translation differences on non-monetary items, such as equities classified as available for sale financial assets, are included in the fair value reserve in equity. (iii) Group companies The results and financial position of all of the Group entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows: h h assets and liabilities for each balance sheet presented are translated at the closing rates at the date of that balance sheet; income and expenses for each income statement and statement of comprehensive income are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and h all resulting exchange differences are recognised in other comprehensive income. On consolidation, exchange differences arising from the translation of any net in foreign entities, are recognised in other comprehensive income. When a foreign operation is sold, a proportionate share of such exchange differences is reclassified to profit or loss as part of the gain or loss on sale where applicable. investment e. Revenue recognition Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, trade allowances, rebates and amounts collected on behalf of third parties. 35 35 ANNUAL REPORT & FINANCIAL STATEMENTS 2013NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 JULY 2013New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31st July 2013 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) e. Revenue recognition (continued) The Group recognises revenue where the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and specific criteria have been met for each of the Group's activities as described below. The Group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement. Revenue is recognised for the major business activities as follows: h Coal sales revenue is recognised at the time the risks and benefits of ownership have been transferred to the customer in accordance with the sales terms. For export sales this is normally at the time of loading the shipment, and for domestic sales this is generally at the time the coal is delivered to the customer. Service fee income and management fee income is recognised as the services are performed. Interest income is recognised as it accrues using the effective interest method. Rental income is recognised on a straight line basis over the lease term. Dividend income is taken into profit when the right to receive payment is established. This applies even if they are paid out of pre- acquisition profits. However, the investment may need to be tested for impairment as a consequence (note 1(i)). h h h h f. Income tax The income tax expense or revenue for the period is the tax payable on the current period's taxable income, based on the national income tax rate for each jurisdiction, adjusted by changes in deferred tax assets and liabilities attributable to temporary differences, and to unused tax losses. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the company’s subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred tax assets are recognised for the deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the company is able to control the timing of the reversal of the temporary difference and it is probable that the differences will not reverse in the foreseeable future. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively. Investment allowances Companies within the Group may be entitled to claim special tax deductions for investments in qualifying assets (investment allowances). The Group accounts for such allowances as tax credits, which means that the allowance reduces income tax payable and current tax expense. A deferred tax asset is recognised for unclaimed tax credits that are carried forward as deferred tax assets. Tax consolidation legislation New Hope Corporation Limited and its wholly owned Australian controlled entities implemented the tax consolidation legislation as of 1 August 2003. 36 36 ANNUAL REPORT & FINANCIAL STATEMENTS 2013NEW HOPE CORPORATION LIMITED AND CONTROLLED ENTITIESNew Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31st July 2013 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) f. Income tax (continued) The head entity, New Hope Corporation Limited, and the controlled entities in the tax consolidation Group account for their own current and deferred tax amounts. These tax amounts are measured as if each entity in the tax consolidation Group continues to be a stand alone tax payer in its own right. g. h. In addition to its own current and deferred tax amounts, the Company also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax consolidated Group. Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts receivable from or payable to other entities in the Group. Details about the tax funding agreement are disclosed in note 8. Any difference between the amounts assumed and amounts receivable or payable under the tax funding agreement are recognised as a contribution to (or distribution from) wholly-owned tax consolidated entities. Exploration and evaluation expenditure Exploration, evaluation and relevant acquisition costs are accumulated separately for each area of interest. They comprise acquisition costs, direct exploration and evaluation costs and an appropriate portion of related overhead expenditure. Costs are carried forward only if they relate to an area of interest for which rights of tenure are current and such costs are expected to be recouped through successful development and exploitation or from sale of the area. Exploration and evaluation expenditure which does not satisfy these criteria is written off. Business combinations The acquisition method of accounting is used to account for all business combinations regardless of whether equity instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred also includes the fair value of any contingent consideration arrangement and the fair value of any pre-existing equity interest in the subsidiary. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured at fair values at the acquisition date. On an acquisition-by-acquisition basis, the Group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest's proportionate share of the acquiree's net identifiable assets. The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the subsidiary acquired and the measurement of all amounts has been reviewed, the difference is recognised directly in profit or loss as a bargain purchase. Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity's incremental borrowing rate, being the rate at which similar borrowings could be obtained from an independent financier under comparable terms and conditions. Contingent consideration is classified either as equity or a financial remeasured to fair value with changes in fair value recognised in profit or loss. liability. Amounts classified as a financial liability are subsequently i. Impairment of assets Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less cost to sell and its value in use. For the purposes of assessing impairment under value in use testing, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash- generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period. 37 37 ANNUAL REPORT & FINANCIAL STATEMENTS 2013NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 JULY 2013New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31st July 2013 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) j. k. Cash and cash equivalents Cash and cash equivalents include cash on hand, deposits held at call with financial institutions and other short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value, excluding funds on deposit for which there is no short term identified use in the operating cashflows of the Group. Trade receivables Trade receivables are recognised initially at fair value and subsequently at amortised cost, less provision for doubtful debts. Trade receivables are due for settlement no more than thirty days from the date of recognition. Collectability of trade debtors is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off by reducing the carrying amount directly. An allowance account (provision for impairment of trade receivables) is used when there is objective evidence that the Group will not be able to collect all of the amounts due according to the original terms of receivables. The amount of the provision is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. The amount of the impairment loss is recognised in profit or loss within other expenses. When a trade receivable for which an impairment allowance has been recognised becomes uncollectible in a subsequent period, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against other expenses in profit or loss. l. Inventories Coal stocks are valued at the lower of cost and net realisable value in the normal course of business. Cost comprises direct materials, direct labour and an appropriate proportion of variable and fixed overhead expenditure, the latter being allocated on the basis of normal operating capacity. Inventories of consumable supplies and spare parts expected to be used in production are valued at cost. Work in progress is stated at the lower of cost and net realisable value. m. Non-current assets held for sale and discontinued operations Non-current assets (or disposal Groups) are classified as held for sale and stated at the lower of their carrying amount and fair value less cost to sell if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. An impairment loss is recognised for any initial or subsequent write down of the asset (or disposal Group) to fair value less cost to sell. A gain is recognised for any subsequent increases in fair value less cost to sell of an asset (or disposal Group), but not in excess of any cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of the sale of the non-current asset (or disposal Group) is recognised at the date of derecognition. Assets (including those that are part of a disposal Group) are not depreciated or amortised while they are classified as held for sale. Assets classified as held for sale and the assets of a disposal Group classified as held for sale are presented separately from other assets in the balance sheet. A discontinued operation is a component of the entity that has been disposed of, or is classified as held for sale and that represents a separate major line of the business or geographical area of operations, is part of a single coordinated plan to dispose of such a line of the business or area of operations, or a subsidiary acquired exclusively with the view to resale. The results of discontinued operations are presented separately in the income statement. n. Available for sale financial assets Investments and other financial assets The Group classifies its financial assets in the following categories: (i) Available for sale financial assets, comprising principally marketable securities, are non-derivatives that are either designated in this category or not classified in any other category. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the balance sheet date. Available for sale financial assets are initially recognised at fair value. Unrealised gains and losses arising from changes in the fair value of non- monetary securities classified as available for sale are recognised in equity in the available for sale investments revaluation reserve. When securities classified as available for sale are sold or impaired, the accumulated fair value adjustments are included in the income statement as gains and losses from investment securities. 38 38 ANNUAL REPORT & FINANCIAL STATEMENTS 2013NEW HOPE CORPORATION LIMITED AND CONTROLLED ENTITIESNew Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31st July 2013 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) n. Investments and other financial assets (continued) (ii) Held to maturity investments Held to maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Group's management has the positive intention and ability to hold to maturity. Held to maturity investments are carried at amortised cost using the effective interest method. (iii) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are initially recognised at fair value, and subsequently at amortised cost less provisions for doubtful debts. They are included in current assets, except for those with maturities greater than 12 months after the reporting date which are classified as non-current assets. Loans and receivables are included in trade and other receivables (note 11) and receivables (note 15) in the balance sheet. Impairment The group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a "loss event") and that loss event (or In the events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. case of equity investments classified as available for sale, a significant or prolonged decline in the fair value of the security below its cost is considered an indicator that the assets are impaired. (iv) Assets classified as available for sale If there is objective evidence of impairment for available for sale financial assets, the cumulative loss, measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss, is removed from equity and recognised in profit or loss. Impairment losses on equity instruments that were recognised in profit or loss are not reversed through profit or loss in a subsequent period. o. Derivatives - Forward foreign exchange contracts Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value at each reporting date. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group designates derivatives as hedges of highly probable forecast transactions (cash flow hedges). The Group documents at the inception of the transaction, the relationship between hedging instruments and hedged items, as well as its risk management objectives and strategy for undertaking various hedge transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions have been and will continue to be highly effective in offsetting changes in fair values or cash flows of hedged items. The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in the hedging reserve. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss. Amounts accumulated in equity are recycled in the income statement in the periods when the hedged item will affect profit or loss (for instance when the forecast sale that is hedged takes place). However, when the forecast transaction that is hedged, results in the recognition of a non- financial asset (for example, inventory) or a non-financial liability, the gains and losses previously deferred in equity are transferred from equity and included in the measurement of the initial cost or carrying amount of the asset or liability. When a hedging instrument expires, is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in profit or loss. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately reclassified to profit or loss. 39 39 ANNUAL REPORT & FINANCIAL STATEMENTS 2013NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 JULY 2013New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31st July 2013 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) p. Fair value estimation The fair value of financial assets and financial liabilities must be estimated for recognition and measurement for disclosure purposes. The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined using valuation techniques. The Group uses a variety of methods and makes assumptions that are based on market conditions existing at each balance date. The fair value of forward exchange contracts is determined using forward exchange market rates at the balance sheet date. The carrying value less the estimated credit adjustments of trade receivables and payables is assumed to approximate their fair values due to their short term nature. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments. q. Property, plant and equipment Property, plant and equipment, excluding investment property, is stated at historical cost less applicable depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Cost may also include transfers from equity of any gains/losses on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment. Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to profit or loss during the financial period in which it is incurred. Depreciation is calculated so as to write off the cost of each item of property, plant and equipment during its expected economic life to the consolidated entity. Each item's useful life has due regard both to its own physical life limitations and to present assessments of economically recoverable resources of the mine property at which the item is located. Estimates of residual values and remaining useful lives are made on an annual basis. Straight line method is predominately used. The expected useful life of plant and equipment is 4 to 20 years, buildings is 25 to 40 years and motor vehicles is 4 years. Land is not depreciated. An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its recoverable amount (note 1(i)). Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in profit or loss. r. Mine properties, mine development costs, mining reserves and mining leases Development expenditure incurred by the consolidated entity is accumulated separately for each area of interest in which economically recoverable mineral resources have been identified to the satisfaction of the Directors. Direct development expenditure, pre-operating mine start-up costs and an appropriate portion of related overhead expenditures are capitalised as mine development costs up until the relevant mine is in commercial production. Mining reserves, leases and mine development costs are amortised over the estimated productive life of each applicable mine on either a unit of production basis or years of operation basis, as appropriate. Amortisation commences when a mine commences commercial production. The cost of acquiring mineral reserves and mineral resources are capitalised on the statement of financial position as incurred. s. IT development and software Intangible assets (i) Costs incurred in developing products or systems and costs incurred in acquiring software and licenses that will contribute to future period financial benefits through revenue generation and/or cost reduction are capitalised to software and systems. Costs capitalised are external direct costs of materials and services. Amortisation is calculated on a straight line basis over periods generally ranging from 3 to 5 years. (ii) Goodwill is measured as described in note 1(h). Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill on Goodwill acquisitions of associates is included in investments in associates. Goodwill is tested for impairment annually, and is carried at cost less accumulated impairment losses. Gains or losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. is not amortised. Instead, goodwill Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or Groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose, identified according to operating segments (note 4). 40 40 ANNUAL REPORT & FINANCIAL STATEMENTS 2013NEW HOPE CORPORATION LIMITED AND CONTROLLED ENTITIESNew Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31st July 2013 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) t. u. v. Trade and other payables These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year and which are unpaid. The amounts are unsecured and usually paid within forty five days of recognition. Borrowing costs Borrowing costs incurred for the construction of a qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its intended use or sale. Other borrowing costs are recognised as expenses in the period in which they are incurred. Employee benefits (i) Short-term obligations Liabilities for wages and salaries, including non-monetary benefits, annual leave and vesting sick leave expected to be settled within twelve months after the end of the period in which the employees render the related service are recognised in respect of employees' services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liability of annual leave and accumulating sick leave is recognised in the provision for employee benefits. All other short-term employee benefit obligations are presented as payables. (ii) Other long-term employee benefit obligations The liability for long service leave and annual leave which is not expected to be settled within twelve months after the end of the period in which the employees render the related service is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the end of the reporting period on national government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows. (iii) Share-based payments Share-based compensation benefits are provided to employees via the New Hope Corporation Limited Employee Share Option Plan and the New Hope Corporation Ltd Employee Performance Rights Share Plan. Information relating to these schemes is set out in note 36. The fair value of options granted under the New Hope Corporation Limited Employee Share Option Plan and the New Hope Corporation Ltd Employee Performance Rights Share Plan is recognised as an employee benefit expense with a corresponding increase in equity. The fair value is measured at grant date and recognised over the period during which the employee becomes unconditionally entitled to the options or rights. Options and rights are exercisable by current employees during the nominated vesting period or by Directors' consent. Detailed vesting conditions are set out in the Directors' report. The fair value of rights at grant date is calculated as the number of rights offered at the share price at offer date. The fair value of options at grant date is independently determined using a monte carlo option pricing model that takes into account the exercise price, the term of the option, the vesting criteria, the impact of dilution, the non-tradeable nature of the option, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option. The fair value of the options granted is adjusted to reflect the market vesting condition, but excludes the impact of any non-market vesting conditions. Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. At each reporting date, the entity revises its estimate of the number of options that are expected to become exercisable. The employee benefit expense recognised each period takes into account the most recent estimate. The impact of the revision to the original estimates, is recognised in profit or loss with a corresponding adjustment to equity. w. Contributed equity Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction net of tax, from the proceeds. The amounts of any capital returns are applied against contributed equity. x. Dividends Provision is made for the amount of any dividend declared on or before the end of the financial year but not distributed at balance date. 41 41 ANNUAL REPORT & FINANCIAL STATEMENTS 2013NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 JULY 2013New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31st July 2013 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) y. z. Rounding of amounts The Company is of a kind referred to in Class Order 98/0100, issued by the Australian Securities and Investment Commission, relating to the "rounding off" of amounts in the financial statements. Amounts in the financial statements have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, to the nearest dollar. Earnings per share (i) Basic earnings per share Basic earnings per share is calculated by dividing the profit attributable to equity holders of the company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the year, adjusted for bonus element in ordinary shares issued during the year. (ii) Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financial costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. aa. Restoration, rehabilitation and environmental expenditure Provisions are raised for restoration, rehabilitation and environmental expenditure as soon as an obligation exists, with the cost being charged to profit or loss in respect of ongoing rehabilitation. Where the obligation relates to decommissioning of assets and restoring the sites on which they are located, the costs are carried forward in the value of the asset and amortised over its useful life. Provisions are measured at the present value of expected future cash outflows with future cash outflows reassessed on a regular basis. The present value is determined using an appropriate discount rate. The obligations include profiling, stabilisation and revegetation of the completed area, with cost estimates based on current statutory requirements and current technology. ab. Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the balance sheet. Cash flows are presented on a gross basis. The GST component of cash flows arising from investing or financing activities which are recoverable from, or payable to the taxation authority, are presented as operating cash flows. Leases Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Group as lessee are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight line basis over the period of the lease. New accounting standards and interpretations Certain new accounting standards and interpretations have been published that are not mandatory for 31 July 2013 reporting periods. The Group’s assessment of the impact of these new standards and interpretations is set out below. The group does not expect to adopt the new standards before their operative date. They would therefore be first applied in the financial statements for the annual reporting period ending 31 July 2014. (i) AASB 9 Financial Instruments, AASB 2009-11 Amendments to Australian Accounting Standards arising from AASB 9 and AASB 2010-7 Amendments to Australian Accounting Standards arising from AASB 9 (December 2010) (effective for annual reporting periods beginning on or after 1 January 2013) AASB 9 Financial Instruments addresses the classification, measurement and derecognition of financial assets and financial liabilities. The standard is not applicable until 1 January 2013 but is available for early adoption. There will be no impact on the group's accounting for financial liabilities, as the new requirements only affect the accounting for financial liabilities that are designated as at fair value through profit or loss and the group does not have any such liabilities. The derecognition rules have been transferred from AASB 139 Financial Instruments: Recognition and Measurement and have not been changed. The group has not yet decided when to adopt AASB 9. 42 ac. ad. 42 ANNUAL REPORT & FINANCIAL STATEMENTS 2013NEW HOPE CORPORATION LIMITED AND CONTROLLED ENTITIESNew Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31st July 2013 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) ad. New accounting standards and interpretations (continued) (ii) AASB 10 Consolidated Financial Statements, AASB 11 Joint Arrangements, AASB 12 Disclosure of Interests in Other Entities and revised AASB 127 Separate Financial Statements and AASB 128 Investments in Associates and Joint Ventures (effective 1 January 2013) In August 2011, the AASB issued a suite of five new and amended standards which address the accounting for joint arrangements, consolidated financial statements and associated disclosures. AASB 10 replaces all of the guidance on control and consolidation in AASB 127 Consolidated and Separate Financial Statements , and Interpretation 12 Consolidation – Special Purpose Entities . The core principle that a consolidated entity presents a parent and its subsidiaries as if they are a single economic entity remains unchanged, as do the mechanics of consolidation. However, the standard introduces a single definition of control that applies to all entities. It focuses on the need to have both power and rights or exposure to variable returns before control is present. Power is the current ability to direct the activities that significantly influence returns. Returns must vary and can be positive, negative or both. There is also new guidance on participating and protective rights and on agent/principal relationships. While the group does not expect the new standard to have a significant impact on its composition, it has yet to perform a detailed analysis of the new guidance in the context of its various investees that may or may not be controlled under the new rules. AASB 11 introduces a principles based approach to accounting for joint arrangements. The focus is no longer on the legal structure of joint arrangements, but rather on how rights and obligations are shared by the parties to the joint arrangement. Based on the assessment of rights and obligations, a joint arrangement will be classified as either a joint operation or joint venture. Joint ventures are accounted for using the equity method, and the choice to proportionately consolidate will no longer be permitted. Parties to a joint operation will account their share of revenues, expenses, assets and liabilities in much the same way as under the previous standard. AASB 11 also provides guidance for parties that participate in joint arrangements but do not share joint control. The group is currently assessing the full impact upon adopting this standard. AASB 12 sets out the required disclosures for entities reporting under the two new standards, AASB 10 and AASB 11, and replaces the disclosure requirements currently found in AASB 128. Application of this standard by the group will not affect any of the amounts recognised in the financial statements, but will impact the type of information disclosed in relation to the group's investments. AASB 127 is renamed Separate Financial Statements and is now a standard dealing solely with separate financial statements. Application of this standard by the group and parent entity will not affect any of the amounts recognised in the financial statements, but may impact the type of information disclosed in relation to the parent's investments in the separate parent entity financial statements. (iii) AASB 13 Fair Value Measurement (effective 1 January 2013) AASB 13 was released in September 2011. AASB 13 explains how to measure fair value and aims to enhance fair value disclosures. The group has yet to determine which, if any, of its current measurement techniques will have to change as a result of the new guidance. It is therefore not possible to state the impact, if any, of the new rules on any of the amounts recognised in the financial statements. However, application of the new standard will impact the type of information disclosed in the notes to the financial statements. The group does not intend to adopt the new standard before its operative date, which means that it would be first applied in the annual reporting period ending 30 June 2014. (iv) Int 20 Accounting for stripping costs and AASB 2011-12 (effective 1 January 2013) Production phase stripping costs will be attributed to an identifiable component of an ore body and amortised over the useful life of the identified component. On transition, existing production phase stripping costs will be written off to retained earnings if they cannot be attributed to an identifiable component of an ore body. Entities will no longer be able to amortise production phase stripping costs over the life of mine. Entities may need to make significant changes to processes, procedures and systems in order for the accounting to mirror the mining activity. Entities will need to directly attribute its carried forward stripping cost to components of ore bodies to avoid a write-off on adoption of the interpretation. The group is currently assessing the full impact upon adopting this standard. 43 43 ANNUAL REPORT & FINANCIAL STATEMENTS 2013NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 JULY 2013New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31st July 2013 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) ae. Parent entity financial information The financial information for the parent entity, New Hope Corporation Limited, disclosed in note 41 has been prepared on the same basis as the consolidated financial statements, except as set out below. Investments in subsidiaries, associates and joint ventures Investments in subsidiaries, subsidiaries and joint ventures are accounted for at cost in the financial report of New Hope Corporation Limited. Dividends received from subsidiaries are recognised in the parent entity’s income statement rather than being deducted from the carrying amount of these investments. Tax consolidation legislation New Hope Corporation Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation as of 1 July 2002. The head entity, New Hope Corporation Limited, and the controlled entities in the tax consolidated group continue to account for their own current and deferred tax amounts. These tax amounts are measured as if each entity in the tax consolidated group continues to be a stand alone taxpayer in its own right. In addition to its own current and deferred tax amounts, New Hope Corporation Limited also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax consolidated group. The entities have also entered into a tax funding agreement under which the wholly-owned entities fully compensate New Hope Corporation Limited for any current tax payable assumed and are compensated by New Hope Corporation Limited for any current tax receivable and deferred tax assets relating to unused tax losses or unused tax credits that are transferred to New Hope Corporation Limited under the tax consolidation legislation. The funding amounts are determined by reference to the amounts recognised in the wholly-owned entities’ financial statements. The amounts receivable/payable under the tax funding agreement are due upon receipt of the funding advice from the head entity, which is issued as soon as practicable after the end of each financial year. The head entity may also require payment of interim funding amounts to assist with its obligations to pay tax instalments. Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as current amounts receivable from or payable to other entities in the group. Any difference between the amounts assumed and amounts receivable or payable under the tax funding agreement are recognised as a contribution to (or distribution from) wholly-owned tax consolidated entities. af. Comparative Figures When required, comparative figures have been adjusted to conform to changes in presentation for the current financial year. 2. FINANCIAL RISK MANAGEMENT The Group's activities expose it to a variety of financial risks: market risk (including currency risk, price risk and interest rate risk), credit risk and liquidity risk. The Group's overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. The Group uses derivative financial instruments such as foreign exchange contracts to hedge certain risk exposures. Derivatives are used exclusively for hedging purposes, i.e. not as trading or other speculative instruments. The Group uses different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate, foreign exchange and other price risks and aging analysis for credit risk. Risk management is carried out in accordance with written policies approved by the Board of Directors. These written policies cover specific areas, such as mitigating foreign exchange, interest rate and credit risks, use of forward exchange contracts and investment of excess liquidity. 44 44 ANNUAL REPORT & FINANCIAL STATEMENTS 2013NEW HOPE CORPORATION LIMITED AND CONTROLLED ENTITIESNew Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31st July 2013 2. FINANCIAL RISK MANAGEMENT (continued) The Group holds the following financial instruments: Available for Sale Derivatives used for hedging Financial Assets/Liabilities amortised at cost Total $000 $000 $000 $000 Financial assets 2013 Cash and cash equivalents Trade and other receivables Available for sale financial assets Held to maturity investments Other financial assets 2012 Cash and cash equivalents Trade and other receivables Derivative financial instruments Available for sale financial assets Held to maturity investments Other financial assets Financial liabilities 2013 Trade and other payables Derivative financial instruments 2012 Trade and other payables - - 30,215 - - 30,215 - - - 73,140 - - 73,140 - - - - - - - - - - - - - 30,364 - - - 30,364 - 41,428 41,428 - - 21,564 60,680 - 1,229,608 614 1,312,466 70,990 26,332 - - 1,446,975 299 1,544,596 46,758 46,758 40,460 40,460 21,564 60,680 30,215 1,229,608 614 1,342,681 70,990 26,332 30,364 73,140 1,446,975 299 1,648,100 46,758 41,428 88,186 40,460 40,460 a. Market risk (i) Foreign exchange risk Foreign exchange risk arises when future commercial transactions and recognised assets and liabilities are denominated in a currency that is not the entity's functional currency. The Group is exposed to foreign exchange risk arising from currency exposures to the US dollar. Forward contracts are used to manage foreign exchange risk. Senior management is responsible for managing exposures in each foreign currency by using external forward currency contracts. Contracts are designated as cash flow hedges. External foreign exchange contracts are designated at Group level as hedges of foreign exchange risk on specific future transactions. The Group's risk management policy is to hedge up to 65% of anticipated transactions (export coal sales) in US dollars for the subsequent year, up to 57% of anticipated revenue beyond a year but less than two years and up to 50% for revenue beyond two years but less than three years. All hedges of projected export coal sales qualify as "highly probable" forecast transactions for hedge accounting purposes. 45 45 ANNUAL REPORT & FINANCIAL STATEMENTS 2013NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 JULY 2013 New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31st July 2013 2. FINANCIAL RISK MANAGEMENT (continued) a. Market risk (i) Foreign exchange risk (continued) The Group's exposure to foreign currency risk at the reporting date was as follows: Cash and cash equivalents Trade receivables Forward exchange contracts - sell foreign currency (cash flow hedges) Trade payables 2013 USD $000 5,927 18,617 412,000 - 2012 USD $000 37,590 - 275,000 750 Group sensitivity Based on the trade receivables, cash and trade payables held at 31 July 2013, had the Australian dollar weakened/strengthened by 10% against the US dollar with all other variables held constant, the Group's post-tax profit for the year would have increased/(decreased) by $2,112,000/($1,728,000) (2012 - $2,833,000/($2,318,000)), mainly as a result of foreign exchange gains/losses on translation of US dollar receivables and cash balances as detailed in the above table. The Group's equity as at balance date would have increased/(decreased) by the same amounts. Based on the forward exchange contracts held at 31 July 2013, had the Australian dollar weakened/strengthened by 10% against the US dollar with all other variables held constant, the Group's equity would have increased/(decreased) by $41,820,000/($46,003,000) (2012 - $23,751,000/($26,126,000)). There is no effect on post-tax profits. Equity in 2013 is more sensitive to movements in the Australian dollar / USD exchange rates than in 2012 because of the increased value of forward exchange contracts in 2013. (ii) Price risk The Group is exposed to equity securities price risk arising from certain investments held by the Group and classified on the balance sheet as available for sale. The majority of the Group's equity investments are publicly traded and are included in the All Ordinaries Index. The table below summarises the impact of increases/decreases in the index on the Group's equity as at balance date. The analysis is based on the assumption that the equity index had increased/decreased by 10% with all other variables held constant and all the Group's equity instruments moved according to the historical correlation with the index. Index All Ordinaries - 10% increase All Ordinaries - 10% decrease Impact on post-tax profit 2013 $000 - (3,099) 2012 $000 - (2,295) Impact on equity 2013 $000 3,518 (420) 2012 $000 5,335 (3,041) The price risk for unlisted securities is immaterial in terms of the possible impact on total equity. sensitivity analysis. It has therefore not been included in the (iii) Fair value interest rate risk Refer to (e) below. 46 46 ANNUAL REPORT & FINANCIAL STATEMENTS 2013NEW HOPE CORPORATION LIMITED AND CONTROLLED ENTITIES New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31st July 2013 2. FINANCIAL RISK MANAGEMENT (continued) b. Credit risk Credit risk is managed on a Group basis. Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions, as well as credit exposure to export and domestic customers, including outstanding receivables and committed transactions. The Group has no significant concentrations of credit risk. The Group has policies in place to ensure that sales of products and services are made to customers with an appropriate credit history. The majority of customers, both export and domestic have long term relationships with the Group and sales are secured with long term supply contracts. Sales are secured by letters of credit when deemed appropriate. Derivative counterparties, held to maturity investments and cash transactions are limited to financial institutions with a rating of at least BBB. The Group has policies that limit the maximum amount of credit exposure to any one financial institution. Credit risk further arises in relation to financial guarantees given to certain parties (see note 22). Such guarantees are only provided in exceptional circumstances and are subject to specific board approval. The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to historical counterparty default rates. The table below summarises the assets which are subject to credit risk. information about Trade receivables Cash at bank and short term bank deposits Held to maturity investments Derivative financial instruments 2013 $000 57,905 21,564 1,229,608 - 2012 $000 17,124 70,990 1,446,975 30,364 c. Liquidity risk Prudent liquidity risk management is adopted through maintaining sufficient cash and marketable securities, the ability to borrow funds from credit providers and to close-out market positions. The Group manages liquidity risk by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. Surplus funds are generally only invested in instruments that are tradeable in highly liquid markets. (i) Financing arrangements The Group has no current need of external funding lines. 47 47 ANNUAL REPORT & FINANCIAL STATEMENTS 2013NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 JULY 2013 New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31st July 2013 2. FINANCIAL RISK MANAGEMENT (continued) d. Maturity of financial liabilities Non-derivative financial liabilities of the Group all mature within one year. The maturity groupings of derivative financial instruments are detailed in note 35. e. Cash flow and fair value interest rate risk The Group currently has significant interest-bearing assets which are placed with reputable investment counterparties for up to 12 months. The company has a treasury investment policy approved by the Board which stipulates the maximum dollar exposure to each financial institution, and the maximum percentage of funds that can be invested with an individual institution. Significant changes in market interest rates may have an effect on the Group's income and operating cash flows. The Group manages its cash flow interest rate risk by placing excess funds in term deposits and other fixed interest bearing assets. Refer to note 13 for details. Based on the deposits held at balance date, the sensitivity to a 1% increase or decrease in interest rates would increase/(decrease) after tax profit by $9,225,000 (2012 - $10,968,000). As the Group has no significant borrowings, its income statement and operating cash flows are substantially independent of changes in market interest lending rates. f. Fair value measurements The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes. AASB 7 Financial Instruments: Disclosures requires disclosure of fair value measurements by level of the following fair value measurement hierarchy: a. b. quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1) inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices) (level 2), and inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3). c. The following table presents the group's assets measured and recognised at fair value at 31 July 2013 and 31 July 2012. 2013 Assets Available for sale financial assets Equity securities Total assets Liabilities Derivatives used for hedging Total liabilities 2012 Assets Derivatives used for hedging Available for sale financial assets Equity securities Total assets Level 1 $000 Level 2 $000 Level 3 $000 Total $000 30,215 30,215 - - - - 30,215 30,215 - - 41,428 41,428 - - 41,428 41,428 Level 1 $000 Level 2 $000 Level 3 $000 Total $000 - 30,364 - 30,364 26,659 26,659 46,481 76,845 - - 73,140 103,504 The fair value of financial instruments traded in active markets (such as available for sale securities) is based on quoted market prices at the reporting date. The quoted market price used for financial assets held by the Group is the last sale price. During the current year, an equity security has been transferred from level 1 to level 2 as the quoted market price has not been deemed to represent fair value. The fair value of forward exchange contracts is determined using forward exchange market rates at the reporting date. The carrying value less impairment provisions of trade receivables and payables are assumed to approximate their fair values due to their short term nature. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments. 48 48 ANNUAL REPORT & FINANCIAL STATEMENTS 2013NEW HOPE CORPORATION LIMITED AND CONTROLLED ENTITIESNew Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31st July 2013 3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under the circumstances. a. Critical accounting estimates and assumptions The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. (i) Rehabilitation The Group makes estimates about the future cost of rehabilitating tenements which are currently disturbed, based on legislative requirements and current costs. Cost estimates take into account past experience and expectations of future events that are expected to alter past experiences. Any changes to legislative requirements could have a significant impact on the expenditure required to restore these areas. (ii) Determination of coal reserves and coal resources The Group estimates its coal reserves and coal resources based on information compiled by Competent Persons as defined in accordance with the Australasian Code for Reporting of Mineral Resources and Ore Reserves of December 2004 (the “JORC code”). Reserves determined in this way are used in the calculation of depreciation, amortisation and impairment charges, the assessment of mine lives and for forecasting the timing of the payment of decommissioning and restoration costs. (iii) Mineral Resource Rent Tax (MRRT) During the year, as a result of the MRRT legislation that was substantively enacted on 19 March 2012 and that is effective from 1 July 2012, additional and offsetting deferred tax balances have been recognised. Judgement is required in assessing whether deferred tax assets and deferred tax liabilities arising from MRRT are recognised on the balance sheet. Deferred tax assets are recognised only when it is considered probable that they will be recovered. Recoverability is dependent on the generation of sufficient future taxable profits. Assumptions about the generation of future taxable profits depend on management’s estimates of future cash flows. These in turn depend on estimates of future sales volumes, operating costs, capital expenditure and government royalties' payable. Judgements are also required about the application of the MRRT tax legislation for example in relation to the hypothetical valuation point. The judgements and assumptions made by management are subject to risk and uncertainty; hence, there is a possibility that changes in circumstances will alter expectations, which may impact the amount of deferred tax assets and deferred tax liabilities recognised on the balance sheet. In such circumstances, some or all of the carrying amounts of recognised deferred tax assets and liabilities may require adjustment, resulting in a corresponding credit or charge to the income statement. (iii) Petroleum Resource Rent Tax (PRRT) As a result of the 100% acquisition of Bridgeport Energy Limited during the year, the New Hope Group is subject to Petroleum Resource Rent Tax (PRRT) effective 1 July 2012 being the date of the extension of the PRRT to onshore petroleum projects. The New Hope Group has accounted for the current and deferred tax impact of PRRT in accordance with the requirements outlined above in relation to income tax. As such, the New Hope Group has recorded current and deferred tax assets and liabilities relating to PRRT at the prevailing PRRT rate at 31 July 2013. New Hope Corporation Limited, as head company of the income tax consolidated has made a PRRT consolidation election and as such the New Hope Group includes several PRRT consolidated groups at 31 July 2013. The New Hope Group is intending to enter a Tax Sharing and Funding Agreement for each PRRT consolidated group adopting a separate taxpayer in the group approach in line with income tax. The New Hope Group has accounted for its PRRT tax balances in accordance with this methodology at 31 July 2013. b. Critical judgements in applying the entity's accounting policies (i) Exploration and development expenditure During the year the entity capitalised various items of expenditure to the mine development and exploration expenditure asset account. The relevant items of expenditure were deemed to be part of the capital cost of developing future mining operations, which would then be amortised over the useful life of the mine. The key judgement applied in considering whether the costs should be capitalised, is that costs are expected to be recovered through either successful development or sale of the relevant mining interest. 49 49 ANNUAL REPORT & FINANCIAL STATEMENTS 2013NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 JULY 2013New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31st July 2013 3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (continued) Critical judgements in applying the entity's accounting policies (continued) b. (ii) Impairment of available for sale financial assets In the 2013 financial statements, the Group made a significant judgement about the impairment of a number of its available for sale financial assets. The Group follows the guidance of AASB 139 Financial Instruments: Recognition and Measurement financial asset is impaired. This determination requires significant judgement. factors, the duration and extent to which the fair value of an investment is less than its cost. to determine when an available for sale In making this judgement, the Group evaluates, among other 4. FINANCIAL REPORTING SEGMENTS a. Description of segments The Group has three reportable segments, namely Coal mining (including exploration, development, production and processing), Marketing and logistics (transport infrastructure and marketing activities) and Treasury and investments (including cash, held to maturity investments and available for sale financial assets). Operating segments have been determined based on the analysis provided in the reports reviewed by the Board, CEO, COO and CFO (being the Chief Operating Decision Maker, “CODM”). The reportable segments reflect how performance is measured, and decisions regarding allocations of resources are made by the CODM. Other immaterial coal mining and related operations that do not meet the quantitative thresholds requiring separate disclosure in AASB 8 Operating Segments have been combined with the current coal mining operations. Segment information is presented on the same basis as that used for internal reporting purposes. Sales between segments are carried out at arm’s length and are eliminated on consolidation. b. Segment information Year ended 31 July 2013 Total segment revenue Inter-segment revenue Total segment revenue - external customers Reportable segment profit before income tax Total segment profit before income tax includes: Interest revenue Depreciation and amortisation Share of net profit / (loss) of associate Reportable segment assets Total segment assets includes: Additions to non-current assets Year ended 31 July 2012 Total segment revenue Inter-segment revenue Total segment revenue - external customers Reportable segment profit before income tax Total segment profit before income tax includes: Interest revenue Depreciation and amortisation Share of net profit / (loss) of associate Reportable segment assets Total segment assets includes: Investments accounted for using the equity method Additions to non-current assets 50 5 5 7 38 5 5 7 38 38 50 Notes Coal mining $000 Marketing & Logistics $000 Treasury & Investments $000 Total $000 957,281 (305,184) 652,097 172,575 60,594 48,498 (386) 322,832 (305,184) 17,648 61,336 - 39,164 - 569,746 - 569,746 47,594 - 9,334 - 64,703 - 64,703 63,645 60,594 - (386) 794,642 192,536 1,281,386 2,268,564 183,446 9,964 - 193,410 385,734 (381,597) 4,137 91,935 - 35,008 - 676,691 - 676,691 62,084 - 9,036 - 86,697 - 86,697 83,991 86,650 - (647) 1,149,122 (381,597) 767,525 238,010 86,650 44,044 (647) 634,659 201,125 1,623,635 2,459,419 - 61,551 - 8,444 32,530 - 32,530 69,995 ANNUAL REPORT & FINANCIAL STATEMENTS 2013NEW HOPE CORPORATION LIMITED AND CONTROLLED ENTITIES New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31st July 2013 4. FINANCIAL REPORTING SEGMENTS (continued) b. Segment information (continued) Reconciliation of reportable segment profit and loss Total profit for reportable segments Non regular items Gain on sale of WICET Subscription Impairment of investment in associates Impairment of available for sale investments Impairment of goodwill Consolidated profit before income tax c. Other segment information (i) Segment revenue Total segment revenue Japan Taiwan / China Chile Korea Australia Investment income - Australia 2013 $000 2012 $000 172,575 238,010 786 (13,286) (38,091) - 121,984 195,088 316,195 4,390 5,995 65,726 587,394 64,703 652,097 - - (5,804) (33,387) 198,819 218,443 390,250 13,432 - 58,703 680,828 86,697 767,525 Included within revenue for the marketing and logistics segment are customers that represent more than 10 per cent of the Group's total revenue. For the year ended 31 July 2013, one customer contributed $308,466,859 in sales revenue (2012 - $353,001,000) whilst another customer contributed $185,150,680 in sales revenue (2012 - $193,095,000). Sales between segments are carried out at arm's length and are eliminated on consolidation. The revenue reported from external parties is measured in a manner consistent with that in the income statement. (ii) Segment assets The amounts provided to the CODM with respect to total assets are measured in a manner consistent with that of the financial statements. These assets are allocated based on the operations of the segment. All non-current assets are located in Australia. 51 51 ANNUAL REPORT & FINANCIAL STATEMENTS 2013NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 JULY 2013 New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31st July 2013 5. REVENUE From continuing operations Sales revenue Sale of goods Services Other revenue Property rent Interest Sundry revenue 6. OTHER INCOME Gain on Bridgeport previously held interest Gain on sale of WICET Subscription Gain/(loss) on sale of property, plant and equipment 7. EXPENSES Profit before income tax includes the following specific expenses: Foreign exchange gains and losses Net foreign exchange (gains)/losses Depreciation Buildings Plant and equipment Amortisation Mining reserves and mine development Software Oil producing assets Other charges against assets Bad and doubtful debts Impairment of investment in associates Impairment of available for sale investments Impairment of goodwill Accretion expense Exploration costs expensed Defined contribution superannuation expense Employee benefits expensed Operating lease costs expensed 52 52 2013 $000 2012 $000 560,211 26,092 586,303 750 60,594 4,450 652,097 4,109 786 (567) 4,328 650,318 25,286 675,604 778 86,650 4,493 767,525 - - 149 149 (2,895) 4,180 413 40,716 41,129 5,033 1,285 1,051 7,369 - 13,286 38,091 - 51,377 901 420 36,142 36,562 6,408 1,074 - 7,482 - - 5,804 33,387 39,191 - 13,419 11,338 6,449 6,118 96,624 98,004 4,171 3,556 ANNUAL REPORT & FINANCIAL STATEMENTS 2013NEW HOPE CORPORATION LIMITED AND CONTROLLED ENTITIES New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31st July 2013 8. INCOME TAX EXPENSE a. Tax consolidation legislation New Hope Corporation Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation as of 1 August 2003. The accounting policy in relation to this legislation is set out in note 1(f). On adoption of the tax consolidation legislation, the entities in the tax consolidated group entered into a tax sharing agreement which, in the opinion of the Directors, limits the joint and several liability of the wholly-owned entities in the case of a default by the head entity, New Hope Corporation Limited. The entities have also entered into a tax funding agreement under which the wholly-owned entities fully compensate New Hope Corporation Limited for any current tax payable assumed and are compensated by New Hope Corporation Limited for any tax receivable and deferred tax assets relating to unused tax losses or unused tax credits that are transferred to New Hope Corporation Limited under the tax consolidation legislation. The funding amounts are determined by reference to the amounts recognised in the wholly-owned entities financial statements. The amounts receivable / payable under the tax funding agreement are due upon receipt of the funding advice from the head entity, which is issued as soon as practicable after the end of each financial year. The head entity may also require payment of interim funding amounts to assist with its obligations to pay tax instalments. The funding amounts are recognised as current intercompany receivables or payables. b. Income Tax Expense Current tax Deferred tax Adjustments for current tax of prior periods Petroleum Resource Rent Tax Expense Deferred income tax expense / (revenue) included in income tax expense comprises: Decrease / (increase) in deferred tax assets (note 19) (Decrease) / increase in deferred tax liabilities (note 23) c. Numerical reconciliation of income tax expense to prima facie tax payable Profit from continuing operations before income tax Income tax calculated at 30% (2012 - 30%) Tax effect of amounts which are not deductible (taxable) in calculating taxable income: Foreign tax loss not recognised Net capital gains Share based payment expense Impairment expense Income tax on PRRT Sundry items Under / (over) provided in prior year Tax consolidation benefit Petroleum Resource Rent Tax Income tax expense d. Tax expense relating to items of other comprehensive income Cash flow hedges (note 27(a)) Available for sale financial assets (note 27(a)) 53 2013 $000 48,593 6,587 (5,815) (1,509) 47,856 2012 $000 63,897 (29,134) (3,069) - 31,694 1,135 3,943 5,078 (9,331) (19,803) (29,134) 121,984 198,819 36,595 59,646 164 - 131 15,413 453 (412) 52,344 (2,979) - (1,509) 47,856 21,537 105 21,642 - 75 365 11,757 - 1,094 72,937 (3,069) (38,174) - 31,694 3,097 7,418 10,515 53 ANNUAL REPORT & FINANCIAL STATEMENTS 2013NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 JULY 2013 New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31st July 2013 2013 $000 2012 $000 9. DIVIDENDS - New Hope Corporation Limited a. Ordinary dividend paid 2011 final dividend of 5.00 cents per share - 100% franked at a tax rate of 30% (paid on 8 Nov 2011) 2011 special dividend of 15.00 cents per share - 100% franked at a tax rate of 30% (paid on 8 Nov 2011) 2012 interim dividend of 6.00 cents per share - 100% franked at a tax rate of 30% (paid on 2 May 2012) 2012 final dividend at 5.00 cents per share - 100% franked at a tax rate of 30% (paid on 6 Nov 2012) 2012 special dividend at 20.00 cents per share - 100% franked at a tax rate of 30% (paid on 6 Nov 2012) 2013 interim dividend at 6.0 cents per share - 100% franked at a tax rate of 30% (paid on 1 May 2013) Total dividends paid - - - 41,526 166,106 49,834 257,466 41,512 124,534 49,825 - - - 215,871 b. Proposed dividends In addition to the above dividends, since the end of the financial year, the Directors have declared a final dividend of 5.0 cents and a special dividend of 5.0 cents per fully paid share, (2012 - 5.0 cents per share and 20.0 cents per share respectively). Both dividends are fully franked based on tax paid at 30%. The aggregate amount of the proposed dividend expected to be paid on 5 November 2013 but not recognised as a liability at year end is $83,072,000 (2012 - $207,632,000). c. Franked dividends The franked portions of the final dividends recommended after 31 July 2013 will be franked out of existing franking credits or out of franking credits arising from the payment of income tax in the year ending 31 July 2013. 2013 $000 2012 $000 Franking credits available for subsequent financial years based on a tax rate of 30% (2012 - 30%) 565,512 632,772 The above amounts represent the balances of the franking accounts as at the end of the financial year, adjusted for franking credits that will arise from the payment of provision for income tax, franking debits that will arise from the payment of dividends recognised as a liability at the reporting date and franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date. The impact on the franking account of the dividend recommended by the Directors since year end, but not recognised as a liability at year end, will be a reduction in the franking account of $35,602,000 (2012 - $88,985,000). d. Dividend reinvestment plans There were no dividend reinvestment plans in operation at any time during or since the end of the financial year. 10. CURRENT ASSETS - Cash and cash equivalents Cash at bank and on hand 2013 $000 21,564 21,564 2012 $000 70,990 70,990 a. Cash at bank and on hand Cash at bank and on hand includes deposits for which there is a short term identified use in the operating cashflows of the group, and attracts interest at rates between 0% and 2.75% (2012 - 0% to 3.7%). b. Risk exposure Information about the Group's exposure to foreign exchange risk and credit risk is detailed in note 2. 54 54 ANNUAL REPORT & FINANCIAL STATEMENTS 2013NEW HOPE CORPORATION LIMITED AND CONTROLLED ENTITIES New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31st July 2013 11. CURRENT ASSETS - Receivables Trade receivables (a) Other receivables (b) Prepayments 2013 $000 35,801 16,072 6,032 57,905 2012 $000 4,017 10,104 3,003 17,124 a. Past due but not impaired As of 31 July 2013, no trade receivables were past due but not impaired. These relate to customers who have no recent history of default. b. Other receivables These amounts relate to long service leave payments recoverable from the Coal Mining Industry Long Service Leave Fund, diesel fuel rebates receivable and GST refunds receivable. None of these receivables are impaired or past due but not impaired. c. Foreign exchange and interest rate risk Information about the Group's exposure to foreign currency risk and interest rate risk in relation to trade and other receivables is provided in note 2. d. Fair value and credit risk Due to the short term nature of these receivables, their carrying value is assumed to approximate their fair value. Information about the Group's exposure to fair value and credit risk in relation to trade and other receivables is provided in note 2. 12. CURRENT ASSETS - Inventories Coal stocks at cost Raw materials and stores at cost Inventory expense a. Inventories recognised as an expense during the year ended 31 July 2013 amounted to $240,732,000 (2012 - $239,961,000). Write-downs of inventory to net realisable value recognised as an expense during the year amounted to $nil (2012 - $nil) 13. CURRENT ASSETS - Held to maturity investments Term Deposits The term deposits are held to their maturity of less than one year and carry a weighted average fixed interest rate of 4.54% (2012 - 5.10%). Due to their short-term nature their carrying value is assumed to approximate their fair value. Information about the Group's exposure to credit risk is disclosed in note 2. 34,308 24,365 58,673 39,924 19,636 59,560 1,229,608 1,229,608 1,446,975 1,446,975 55 55 ANNUAL REPORT & FINANCIAL STATEMENTS 2013NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 JULY 2013 New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31st July 2013 14. CURRENT ASSETS - Other Security deposits 15. NON-CURRENT ASSETS - Receivables Prepayments Other receivables Interest rate risk a. In both the current and prior year all non-current receivables are non-interest bearing. b. Fair value of receivables The fair value of receivables approximates their carrying amounts. None of the non-current receivables are impaired or past due but not impaired. 16. NON-CURRENT ASSETS - Available for sale financial assets Listed securities Equity securities Unlisted securities Equity securities An impairment expense of $38,091,000 (2012 - $5,804,000) has been recognised on listed equity securities held and is included in other expenses at note 7. 17. NON-CURRENT ASSETS - Property, plant and equipment Land and buildings - non-mining Freehold land at cost Buildings at cost Accumulated depreciation Leasehold improvements Accumulated depreciation Total land and buildings - non-mining Land and buildings - held for mining Freehold land at cost Buildings at cost Accumulated depreciation Total land and buildings - held for mining Plant and equipment Plant and equipment at cost Accumulated depreciation 56 56 2013 $000 614 614 1,244 1,531 2,775 2012 $000 299 299 1,759 7,449 9,208 30,212 73,137 3 30,215 3 73,140 1,049 8,930 (1,099) 7,831 384 (80) 304 9,184 132,766 5,495 (997) 4,498 137,264 1,049 8,957 (838) 8,119 - - - 9,168 127,770 5,620 (874) 4,746 132,516 551,031 (251,801) 299,230 478,725 (217,010) 261,715 ANNUAL REPORT & FINANCIAL STATEMENTS 2013NEW HOPE CORPORATION LIMITED AND CONTROLLED ENTITIES New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31st July 2013 17. NON-CURRENT ASSETS - Property, plant and equipment (continued) Motor vehicles Motor vehicles at cost Accumulated depreciation Mining reserves and leases Mining reserves and leases at cost Accumulated amortisation Mine properties, mine development Mine properties, mine development at cost Accumulated amortisation Oil Producing assets Oil Producing assets at cost Accumulated amortisation Plant and equipment under construction Total Property, plant and equipment Reconciliations Land and buildings - non-mining Carrying amount at beginning of year Additions Disposals Depreciation Transfers in / (out) Carrying amount at end of year Land and buildings - held for mining Carrying amount at beginning of year Additions Disposals Depreciation Transfers in / (out) Carrying amount at end of year Plant and equipment Carrying amount at beginning of year Additions Additions on acquisition of subsidiary Disposals Depreciation Transfers in / (out) Carrying amount at end of year Motor vehicles Carrying amount at beginning of year Additions Disposals Depreciation Transfers in / (out) Carrying amount at end of year 37 57 2013 $000 2012 $000 6,784 (3,765) 3,019 230,710 (7,713) 222,997 59,286 (47,623) 11,663 62,483 (1,051) 61,432 19,248 5,717 (2,951) 2,766 228,297 (7,379) 220,918 59,286 (42,923) 16,363 - - - 15,756 764,037 659,202 9,168 383 (40) (340) 13 9,184 132,516 4,946 (165) (73) 40 137,264 261,715 22,512 1,118 (880) (39,432) 54,197 299,230 2,766 - (184) (1,284) 1,697 2,995 8,544 - - (264) 888 9,168 115,660 16,966 - (156) 46 132,516 265,981 89 - (27) (34,992) 30,664 261,715 2,653 53 (342) (1,150) 1,552 2,766 57 ANNUAL REPORT & FINANCIAL STATEMENTS 2013NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 JULY 2013 New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31st July 2013 17. NON-CURRENT ASSETS - Property, plant and equipment (continued) Note 2013 $000 2012 $000 Reconciliations (continued) Mining reserves and leases Carrying amount at beginning of year Additions Amortisation Carrying amount at end of year Mine properties and mine development Carrying amount at beginning of year Amortisation Carrying amount at end of year Oil Producing assets Carrying amount at beginning of year Additions Additions on acquisition of subsidiary Amortisation Transfers in / (out) Carrying amount at end of year Plant and equipment under construction Carrying amount at beginning of year Additions Transfers in / (out) Carrying amount at end of year 18. NON-CURRENT ASSETS - Exploration and evaluation Exploration and evaluation at cost Reconciliation Carrying amount at beginning of year Additions Additions on acquisition of subsidiary Disposals Carrying amount at end of year 19. NON-CURRENT ASSETS - Deferred tax assets The balance comprises temporary differences attributed to : Amounts recognised in profit and loss Accrued expenses Employee benefits Mine site rehabilitation provision Tax Losses Other Amounts recognised directly in equity Cashflow hedges 37 37 220,918 2,412 (333) 222,997 16,363 (4,700) 11,663 - 14,971 47,512 (1,051) - 61,432 221,280 - (362) 220,918 22,409 (6,046) 16,363 - - - - - ` 15,756 61,575 (58,083) 19,248 27,674 21,744 (33,662) 15,756 77,210 77,210 39,228 21,175 16,807 - 77,210 916 9,634 13,545 9,563 3,095 36,753 12,428 39,228 39,228 8,085 31,143 - 39,228 90 6,047 11,408 8,563 5,091 31,199 - Set-off of deferred tax liabilities pursuant to set-off provisions (note 23) Net deferred tax assets (49,182) - (31,199) - 58 58 ANNUAL REPORT & FINANCIAL STATEMENTS 2013NEW HOPE CORPORATION LIMITED AND CONTROLLED ENTITIES New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31st July 2013 19. NON-CURRENT ASSETS - Deferred tax assets (continued) Movements Carrying amount at beginning of year Credited / (charged) to the income statement (note 8(b)) Charged / (credited) to equity Amounts recognised on acquisition of subsidiary Carrying amount at end of year Deferred tax assets to be recovered after more than 12 months Deferred tax assets to be recovered within 12 months 20. NON-CURRENT ASSETS - Intangibles Software Software at cost (i) Accumulated amortisation Goodwill Goodwill at cost Total Intangibles Reconciliation Software (i) Carrying amount at beginning of year Additions Transfers in / (out) Amortisation (ii) Carrying amount at end of year 2013 $000 2012 $000 31,199 (1,135) 12,428 6,690 49,182 44,208 4,974 49,182 12,538 (8,599) 3,939 22,024 22,024 25,963 2,932 156 2,137 (1,285) 3,939 13,305 9,331 - 8,563 31,199 30,505 694 31,199 10,246 (7,314) 2,932 17,867 17,867 20,799 3,494 - 512 (1,074) 2,932 (i) Software includes capitalised development costs, being an intangible asset. (ii) Amortisation is included in cost of sales in profit or loss. Goodwill Carrying amount at beginning of year Acquisition of subsidiary Impairment expense (i) Carrying amount at end of year 37 17,867 4,157 - 22,024 51,254 - (33,387) 17,867 (i) Impairment relates to goodwill previously recognised on the acquisition of Northern Energy Corporation Limited. Brought forward goodwill relates to the acquisition of Northern Energy Corporation Limited. The increase in goodwill in the current year relates to the acquisition of Bridgeport Energy Limited (Bridgeport) in an arm's length transaction. The recoverable amount of the NEC cash generating units have been based on fair values less cost to sell. This assessment is based on observable external market data for reserve and resource trading and transaction multiples, and is based on similar coal exploration companies. The Bridgeport recoverable amount of the cash generating units have been based on fair value less cost to sell. These calculations used a post-tax cash flow projection over the remaining life of the fields (8 - 11 years) discounted using a post-tax nominal discount rate, average long term oil price of approximately US$108/bbl and an AUD/USD exchange rate of $0.88. The equivalent pre- discount tax rate is 13%. These assumptions are consistent with external sources of information. 59 59 ANNUAL REPORT & FINANCIAL STATEMENTS 2013NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 JULY 2013 New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31st July 2013 21. CURRENT LIABILITIES - Accounts payable Trade payables and accruals 22. CURRENT LIABILITIES - Financing Arrangements a. Financing arrangements Unrestricted access was available at balance date to the following lines of credit: Total facilities Other facilities (i) Used at balance date Other facilities Unused at balance date Other facilities (i) Other facilities are only in relation to bank guarantees, are unsecured, for no fixed term and bear variable rates. b. Guarantees The parent entity has given unsecured guarantees in respect of: (i) Mining restoration and rehabilitation The liability has been recognised by the consolidated entity in relation to its rehabilitation obligations. See notes 24, 25 and 1(aa). 2013 $000 2012 $000 46,758 46,758 40,460 40,460 75,000 75,000 63,101 63,101 11,899 11,899 85,317 85,317 61,635 61,635 23,682 23,682 38,230 37,474 (ii) Statutory body suppliers 24,871 24,161 No liability was recognised by the consolidated entity in relation to these guarantees as no losses are foreseen on these contingent liabilities. 23. NON-CURRENT LIABILITIES - Deferred tax liabilities The balance comprises temporary differences attributed to: Amounts recognised in profit and loss Other accounts receivable Inventories Capitalised exploration Property plant and equipment Mine reserves Arising on Petroleum Rent Resource Tax Other Amounts recognised directly in other comprehensive income Cash flow hedges Property plant and equipment Available for sale financial assets Total deferred tax liabilities Set-off of deferred tax assets pursuant to set-off provisions (note 19) Net deferred tax liabilities 60 60 295 5,989 14,789 14,951 66,899 4,701 2,131 109,755 - 7,160 - 7,160 7,257 5,170 4,542 14,401 66,275 - 96 97,741 9,109 7,160 106 16,375 116,915 114,116 (49,182) 67,733 (31,199) 82,917 ANNUAL REPORT & FINANCIAL STATEMENTS 2013NEW HOPE CORPORATION LIMITED AND CONTROLLED ENTITIES New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31st July 2013 23. NON-CURRENT LIABILITIES - Deferred tax liabilities (continued) Carrying amount at beginning of year Charged / (credited) to the income statement (note 8(b)) Charged / (credited) to other comprehensive income (note 8(d)) Amounts recognised on acquisition of subsidiary Carrying amount at end of year Deferred tax liabilities to be settled after more than 12 months Deferred tax liabilities to be settled within 12 months 24. CURRENT LIABILITIES - Provisions Employee benefits (c) Mining restoration and rehabilitation (note 1(aa)) Native title claim a. Mining restoration and rehabilitation Current Non-current Movements Carrying amount at beginning of year Additional provision recognised Carrying amount at end of year 2013 $000 2012 $000 114,116 3,943 (9,215) 8,071 116,915 110,631 6,284 116,915 25,616 6,415 117 32,148 6,415 42,093 48,508 38,027 10,481 48,508 135,871 (19,803) (10,515) 8,563 114,116 101,689 12,427 114,116 22,830 6,015 - 28,845 6,015 32,012 38,027 19,818 18,209 38,027 b. Amounts not expected to be settled within the next 12 months Long service leave obligations expected to be settled after 12 months 6,619 4,931 c. The current provision for employee benefits includes accrued annual leave, vested sick leave and long service leave for all unconditional settlements where employees have completed the required period of service and also those where employees are entitled to pro-rata payment in certain circumstances. The entire amount is presented as current, since the group does not have an unconditional right to defer settlement. However, based on past experience, the Group does not expect all employees to take the full amount of accrued long service leave or require payment within the next 12 months. 25. NON-CURRENT LIABILITIES - Provisions Employee benefits Mining restoration and rehabilitation (note 1(aa)) Native title claim 2013 $000 3,004 42,093 20 45,117 2012 $000 3,779 32,012 - 35,791 61 61 ANNUAL REPORT & FINANCIAL STATEMENTS 2013NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 JULY 2013 New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31st July 2013 a. 26. CONTRIBUTED EQUITY Ordinary shares Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the company in proportion to the number of and amounts paid on the shares held. On a show of hands every holder of ordinary shares present at a meeting in person or by proxy is entitled to one vote, and upon a poll each share is entitled to one vote. Ordinary shares have no par value and the company does not have a limited amount of authorised capital. b. Rights Information relating to the New Hope Corporation Employee Performance Rights Share Plan, including details of rights granted, vested and lapsed during the financial year and rights outstanding at the end of the financial year, is set out in note 36. c. Share Capital Issued and paid up capital d. Movements in share capital 2013 No. of shares 2013 2012 $000 No. of shares 2012 $000 830,563,352 93,342 830,411,534 92,509 Date 1 August 2011 1 January 2012 31 July 2012 Details Opening Balance Vesting of performance rights Transfer from SBP reserve to Equity (note 27(a)) Number of Shares 830,230,549 Issue Price 180,985 $0.0000 31 July 2012 Balance 830,411,534 1 August 2012 1 December 2012 31 July 2013 Vesting of performance rights Vesting of performance rights Transfer from SBP reserve to Equity (note 27(a)) 115,281 36,537 $0.0000 $0.0000 31 July 2013 Balance 830,563,352 $000 91,500 - 1,009 92,509 833 93,342 e. Capital risk management The Group's objectives when managing capital are to safeguard their ability to continue as a going concern, so that they can continue to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares, or source debt to fund growth projects. 27. RESERVES a. Reserves Capital profits Available-for-sale investments revaluation Property, plant and equipment revaluation Hedging Share-based payments Premium paid on non-controlling interest acquisition 62 62 2013 $000 2012 $000 1,343 644 27,412 (29,000) 1,642 (6,029) (3,988) 1,343 5,373 27,412 21,255 1,216 (6,029) 50,570 ANNUAL REPORT & FINANCIAL STATEMENTS 2013NEW HOPE CORPORATION LIMITED AND CONTROLLED ENTITIES New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31st July 2013 Note 2013 $000 2012 $000 27. RESERVES (continued) a. Reserves (continued) Movements Capital profits Carrying amount at beginning of year Carrying amount at end of year Available for sale investments revaluation Carrying amount at beginning of year Revaluation - gross Revaluation - deferred tax Carrying amount at end of year Property, plant and equipment revaluation Carrying amount at beginning of year Carrying amount at end of year Hedging Carrying amount at beginning of year Transfer to net profit - gross Transfer to net profit - deferred tax Revaluation - gross Revaluation - deferred tax Carrying amount at end of year Share-based payment Carrying amount at beginning of year Share based payment expense Transfer to contributed equity Carrying amount at end of year Premium paid on non-controlling interest acquisition Carrying amount at beginning of year Acquisition of subsidiary - Northern Energy Corporation Limited Carrying amount at end of year 8(d) 8(d) 8(d) 30(c) 26(d) 1,343 1,343 5,373 (4,834) 105 644 1,343 1,343 16,615 (18,660) 7,418 5,373 27,412 27,412 27,412 27,412 21,255 (14,901) 4,470 (56,891) 17,067 (29,000) 1,216 1,259 (833) 1,642 (6,029) - (6,029) 28,481 (25,620) 7,686 15,297 (4,589) 21,255 - 2,225 (1,009) 1,216 - (6,029) (6,029) 63 63 ANNUAL REPORT & FINANCIAL STATEMENTS 2013NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 JULY 2013 New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31st July 2013 27. RESERVES (continued) a. Reserves (continued) Nature and purpose of reserves Capital profits This reserve represents amounts allocated from retained profits that were profits of a capital nature. Available for sale investments revaluation Changes in the fair value of investments classified as available for sale financial assets are taken to this reserve, as described in note 1(n). Amounts are recognised in profit and loss when the associated assets are sold or impaired. Property, plant and equipment revaluation This reserve represents the revaluation arising on the fair value uplift of property, plant and equipment on the initial holding of Queensland Bulk Handling Pty Ltd further to the acquisition of the remaining 50% of this company. Hedging The hedging reserve is used to record the gains and losses on a hedging instrument in a cash flow hedge that are recognised directly in equity, as described in note 1(o). Amounts are recognised in profit and loss when the associated hedged transaction affects profit and loss. Share based payment reserve The share based payment reserve is used to recognise the fair value of options and rights issued, but not yet exercised. Premium paid on non-controlling interest acquisition The premium paid on non-controlling interest acquisition is used to recognise any excess paid on the acquisition of a non-controlling interest in a subsidiary. b. Retained profits Carrying amount at beginning of year Net profit after income tax Dividends paid (note 9) Carrying amount at end of year 2013 $000 2012 $000 2,109,104 74,129 (257,466) 1,925,767 2,157,849 167,126 (215,871) 2,109,104 28. CONTINGENT LIABILITIES Details and estimates of maximum amounts of contingent liabilities for which no provision is included in the accounts, are as follows: Controlled entities The bankers of the consolidated entity have issued undertakings and guarantees to the Department of Natural Resources and Mines, Statutory Power Authorities and various other entities. The bankers of the consolidated entity have issued undertakings and guarantees in relation to stages 1 and 2 of the Wiggins Island Coal Export Terminal expansion project and expansion of rail facilities. No losses are anticipated in respect of any of the above contingent liabilities. 14,822 14,857 10,049 10,317 29. COMMITMENTS a. Capital commitments Capital expenditure contracted for at the reporting date but not recognised as liabilities is as follows: Property plant and equipment Within one year Later than one year but not later than five years Later than five years 9,885 - - 9,885 7,334 - - 7,334 64 64 ANNUAL REPORT & FINANCIAL STATEMENTS 2013NEW HOPE CORPORATION LIMITED AND CONTROLLED ENTITIES New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31st July 2013 29. COMMITMENTS (continued) b. Lease commitments: Group as lessee (i) Non-cancellable operating leases The Group leases port facilities under non-cancellable operating leases expiring within one to fifteen years. The leases have varying terms, escalation clauses and renewal rights. On renewal, the terms of the leases are renegotiated. Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows: Within one year Later than one year but not later than five years Later than five years 2013 $000 2012 $000 3,497 15,508 48,012 67,017 3,095 14,491 52,141 69,727 30. KEY MANAGEMENT PERSONNEL DISCLOSURES a. Directors The following persons were Directors of New Hope Corporation Limited during the financial year: Chairman - non-executive Mr R.D. Millner Non executive Directors Mr P.R. Robinson Mr D.J. Fairfull Mr W.H. Grant Ms S. Palmer Mr I.Williams Executive Directors Mr R.C. Neale Commenced 1 November 2012 Commenced 1 November 2012 Chief Executive Officer and Managing Director b. Other key management personnel The following persons also had authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly, during the financial year: Name Mr S.O. Stephan Mr B.D. Denney Mr M. J. Busch Position Chief Financial Officer Chief Operations Officer Financial Controller and Company Secretary c. Key management personnel compensation Short-term employee benefits Long-term employee benefits Post employment benefits Share based payment Employer New Hope Corporation Limited New Hope Corporation Limited New Hope Corporation Limited 2013 $ 5,150,919 31,055 140,756 1,259,370 6,582,100 2012 $ 6,457,823 30,821 128,365 2,151,608 8,768,617 Detailed remuneration disclosures can be found in sections (a) to (f) of the remuneration report on pages 14 to 20. 65 65 ANNUAL REPORT & FINANCIAL STATEMENTS 2013NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 JULY 2013 New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31st July 2013 30. KEY MANAGEMENT PERSONNEL DISCLOSURES (continued) d. Equity instrument disclosures relating to key management personnel (continued) (i) Options and rights provided as remuneration and shares issued on exercise of such options and rights Details of options and rights provided as remuneration and shares issued on the exercise of such options and rights, together with the terms and conditions, can be found in section (d) of the remuneration report on pages 13 to 20. (iii) Rights holdings The numbers of rights over ordinary shares in the Company held during the financial year by each Director of New Hope Corporation Limited and other key management personnel of the Group, including their personally related entities are as follows: Movements during the year Purchased / (Sold) Granted Exercised Closing balance Vested & exercisable - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - (116,311) 303,423 (18,472) (8,010) (9,025) 90,219 68,873 55,687 - - - - - - - - - (165,925) 262,783 (10,040) - (5,020) 63,848 32,040 31,080 - - - - - - - - - - - - - - - - - - - Directors of New Hope Corporation Ltd - 2013 Mr R.D. Millner Mr P.R. Robinson Mr D.J. Fairfull Mr W.H. Grant Ms S. Palmer Mr I.Williams Mr R.C. Neale Opening balance - - - - - - - - - - - - 262,783 156,951 Other key management personnel of the Group - 2013 Mr S.O. Stephan Mr B.D. Denney Mr M.J. Busch 63,848 32,040 31,080 44,843 44,843 33,632 Directors of New Hope Corporation Ltd - 2012 Mr R.D. Millner Mr P.R. Robinson Mr D.J. Fairfull Mr D.C. Williamson Mr W.H. Grant Mr R.C. Neale - - - - - - Other key management personnel of the Group - 2012 - - - Mr S.O. Stephan Mr B.D. Denney Mr M.J. Busch - - - - - 428,708 73,888 32,040 36,100 66 66 ANNUAL REPORT & FINANCIAL STATEMENTS 2013NEW HOPE CORPORATION LIMITED AND CONTROLLED ENTITIES New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31st July 2013 30. KEY MANAGEMENT PERSONNEL DISCLOSURES (continued) d. (iv) Equity instrument disclosures relating to key management personnel (continued) Share holdings The number of shares in the company held during the financial year by each Director of New Hope Corporation Limited and other key management personnel of the Group, including their personally related parties, is set out below. There were no shares granted during the reporting period as compensation. Opening balance Purchased / (sold) Movements during the year Received from rights or options exercised Directors of New Hope Corporation Ltd - 2013 Mr R.D. Millner Mr P.R. Robinson Mr D.J. Fairfull Mr W.H. Grant Ms S. Palmer Mr I.Williams Mr R.C. Neale Other key management personnel of the Group - 2013 Mr S.O. Stephan Mr B.D. Denney Mr M.J. Busch Directors of New Hope Corporation Ltd - 2012 Mr R.D. Millner Mr P.R. Robinson Mr D.J. Fairfull Mr D.C. Williamson Mr W.H. Grant Mr R.C. Neale Other key management personnel - 2012 Mr S.O. Stephan Mr B.D. Denney Mr M.J. Busch 3,681,962 109,234 11,000 30,000 - - 2,171,425 10,040 - 655,020 3,670,573 109,234 11,000 20,000 30,000 2,005,500 - - 650,000 - 10,000 - - - - - 14,200 - - 11,389 - - - - - - - - - - - - - - 116,311 18,472 8,010 9,025 - - - - - 165,925 10,040 - 5,020 Other Closing balance - - - - - - - - - - - - - - - - - - - 3,681,962 119,234 11,000 30,000 - - 2,287,736 42,712 8,010 664,045 3,681,962 109,234 11,000 20,000 30,000 2,171,425 10,040 - 655,020 e. Other transactions of key management personnel Mr D.J. Fairfull is a Director of New Hope Corporation Limited. Mr Fairfull also had an interest in Pitt Capital Partners Limited which acted as Financial Advisor to the Company for various corporate transactions during the 2013 and 2012 financial years. All transactions are at prices similar to those with other customers. Mr K.P. Standish is a Director of certain subsidiaries of New Hope Corporation Limited. Mr Standish is a partner in the firm Campbell Standish Partners Solicitors which has provided legal services to New Hope Corporation Limited and its subsidiaries for several years. All transactions are at prices similar to those with other customers. 67 67 ANNUAL REPORT & FINANCIAL STATEMENTS 2013NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 JULY 2013 New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31st July 2013 30. KEY MANAGEMENT PERSONNEL DISCLOSURES (continued) e. Other transactions of key management personnel (continued) Aggregate amounts of each of the above types of transactions with key management personnel were as follows: Legal advice Financial advice fees paid f. Loans to key management personnel No loans have been made available to the key management personnel of the Group. 31. RELATED PARTY TRANSACTIONS a. Parent entities 2013 $ 900,885 579,871 2012 $ 984,556 1,120,870 The parent entity within the Group is New Hope Corporation Limited. The ultimate Australian parent entity and controlling entity is Washington H. Soul Pattinson & Company Limited (WHSP) which at 31st July 2013 owned 59.68% (2012 - 59.69%) of the issued ordinary shares of New Hope Corporation Limited. b. Key management personnel Disclosures relating to key management personnel are set out in note 30. c. Transactions with related parties Other transactions Dividends paid to ultimate Australian controlling entity (WHSP) 2013 $ 2012 $ 153,665,890 128,881,069 d. Outstanding balances arising from sales / purchases of goods and services No provision for impairment of receivables has been raised to any outstanding balances. An impairment expense of $nil (2012 - $nil) has been recognised in the books of the parent entity in respect of amounts owing from subsidiaries. This has no effect on the Group result. e. Terms and conditions Transactions relating to dividends were on the same terms and conditions that applied to other shareholders. 32. REMUNERATION OF AUDITORS During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related practices and non-related audit firms: a. Audit services PricewaterhouseCoopers Australian firm for audit and review of financial reports and other audit work under the Corporations Act 2001 Non PricewaterhouseCoopers audit firms for the audit or review of financial reports of any entity in the Group Total remuneration for audit services b. Other services PricewaterhouseCoopers Australian firm Transaction tax & advisory services General advisory services Tax compliance services Tax compliance services - MRRT Tax compliance services - PRRT Research and development compliance services Non PricewaterhouseCoopers firms Taxation services Total remuneration for other services Total auditors' remuneration 68 68 2013 $ 2012 $ 355,629 279,232 - - 355,629 279,232 421,090 63,397 160,752 192,670 43,795 270,348 908,441 266,971 217,272 419,498 - 282,984 - - 1,152,052 2,095,166 1,507,681 2,374,398 ANNUAL REPORT & FINANCIAL STATEMENTS 2013NEW HOPE CORPORATION LIMITED AND CONTROLLED ENTITIES New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31st July 2013 33. RECONCILIATION OF NET CASH INFLOW / (OUTFLOW) FROM OPERATING ACTIVITIES TO PROFIT AFTER INCOME TAX Profit after income tax Depreciation and amortisation Non-cash employee benefit expense - share based payments Impairment costs of associates Impairment costs of available for sale assets Impairment costs of goodwill Net foreign exchange (gain) / loss Fair value adjustment on acquisition of subsidiary Net (profit) / loss on sale of non-current assets Investment interest income Income taxes paid Income tax expense in accounts Share of (profits) / losses of associates Changes in operating assets and liabilities (Increase) / decrease in debtors Increase / (decrease) in creditors (Increase) / decrease in other receivables (Increase) / decrease in other assets (Increase) / decrease in inventories Increase / (decrease) in provisions and employee entitlements (Increase) / decrease in prepayments Net cash provided by operating activities 34. EARNINGS PER SHARE a. b. Basic earnings per share from continuing operations attributable to ordinary equity holders of the Company Diluted earnings per share from continuing operations attributable to ordinary equity holders of the Company 2013 $000 2012 $000 74,128 48,484 1,259 13,286 38,091 - (2,893) (4,109) (219) (60,594) (42,345) 47,856 386 (33,727) 750 (3,385) 1,406 974 16,156 (2,866) 92,638 167,125 44,044 1,216 - 5,804 33,387 4,180 - (149) (86,650) (208,516) 31,694 647 36,144 (4,696) (7,906) 1,186 3,848 22,752 (1,085) 43,025 Earnings per share (cents) 2012 2013 8.9 8.9 20.1 20.1 Basic and Diluted 2013 $000 2012 $000 c. Reconciliation of adjusted profits Profit from continuing operations attributable to the ordinary equity holders of the Company 74,129 167,126 d. Weighted average number of shares used as the denominator Weighted average number of ordinary shares (basic) Rights Weighted average number of ordinary shares (diluted) Consolidated 2013 2012 830,551,140 326,839 830,877,979 830,335,876 349,853 830,685,729 e. Rights granted to employees are considered to be potential ordinary shares and have been included in the determination of diluted earnings per share to the extent to which they are dilutive. The rights have not been included in the determination of basic earnings per share. Details relating to the rights are set out in note 36. 69 69 ANNUAL REPORT & FINANCIAL STATEMENTS 2013NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 JULY 2013 New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31st July 2013 35. DERIVATIVE FINANCIAL INSTRUMENTS CURRENT ASSETS Forward foreign exchange contracts NON-CURRENT ASSETS Forward foreign exchange contracts CURRENT LIABILITIES Forward foreign exchange contracts NON-CURRENT LIABILITIES Forward foreign exchange contracts 2013 $000 2012 $000 - - 29,721 11,707 20,393 9,971 - - a. Instruments used by the Group New Hope Corporation Limited and certain of its controlled entities are parties to derivative financial instruments in the normal course of business in order to hedge exposure to fluctuations in foreign exchange rates. These instruments are used in accordance with the Group's financial risk management policies (refer to note 2). The portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognised directly in equity. When the cash flows occur, the Group reclassifies the gain or loss into the income statement. At balance date these contracts was a liability with a fair value of $41,428,000 (2012 - asset with a fair value of $30,364,000). At balance date the details of outstanding contracts are: Maturity 0 to 6 months 6 to 12 months 1 to 2 years 2 to 5 years b. Credit risk exposures Buy Australian Dollars Average exchange rate 2013 $000 129,884 121,122 130,854 45,955 427,815 2012 $000 106,225 83,397 29,483 84,568 303,673 2013 2012 1.00090 0.98250 0.94760 0.84870 0.93198 0.91130 0.91579 0.86321 Credit risk also arises from the potential failure of counterparties to meet their obligations under the respective contracts at maturity. A material exposure arises from forward exchange contracts and the consolidated entity is exposed to loss in the event that counterparties fail to deliver the contracted amount. At balance date $427,815,147 (2012 - $303,673,000) was receivable (AUD equivalents). 36. SHARE-BASED PAYMENTS Rights are granted under the New Hope Corporation Limited Employee Performance Rights Share Plan. Membership of the Plans is open to those senior employees and those Directors of New Hope Corporation Limited, its subsidiaries and associated bodies corporate whom the Directors believe have a significant role to play in the continued development of the Group's activities. Rights are granted for no consideration. Rights will vest and automatically convert to ordinary shares in the company following the satisfaction of the relevant service conditions. Service conditions applicable to each issue of rights are determined by the board at the time of grant. Total expense arising from rights issued under the employee performance share rights plan during the financial year was $1,259,000 (2012 - $2,225,000). 70 70 ANNUAL REPORT & FINANCIAL STATEMENTS 2013NEW HOPE CORPORATION LIMITED AND CONTROLLED ENTITIES New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31st July 2013 36. SHARE-BASED PAYMENTS (continued) Rights Set out below are the summaries of rights granted under the plan: Grant date Vesting Date Value of Right at Grant Date Balance at beginning of the year Number Granted during the year Number Vested during the year Number Expired during the year Number Balance at the end of the year Number 2013 27 Oct 2011 27 Oct 2011 27 Oct 2011 17 Dec 2011 17 Dec 2011 17 Dec 2011 17 Dec 2011 17 Dec 2011 28 Nov 2012 28 Nov 2012 28 Nov 2012 28 Nov 2012 Total 1 Aug 2012 1 Aug 2013 1 Aug 2014 1 Aug 2012 1 Dec 2012 1 Aug 2013 1 Aug 2014 1 Aug 2015 1 Aug 2013 1 Aug 2014 1 Aug 2015 1 Aug 2016 $5.170 $5.170 $5.170 $6.020 $6.020 $6.020 $6.020 $6.020 $4.140 $4.140 $4.140 $4.140 94,834 64,059 39,458 20,447 36,537 56,984 56,985 20,447 - - - - - - - - - - - - 30,830 30,830 30,830 30,828 (94,834) - - (20,447) (36,537) - - - - - - - 389,751 123,318 (151,818) Weighted average exercise price 4.1400 5.4890 2012 27 Oct 2011 27 Oct 2011 27 Oct 2011 27 Oct 2011 17 Dec 2011 17 Dec 2011 17 Dec 2011 17 Dec 2011 17 Dec 2011 Total 1 Jan 2012 1 Aug 2012 1 Aug 2013 1 Aug 2014 1 Aug 2012 1 Dec 2012 1 Aug 2013 1 Aug 2014 1 Aug 2015 $5.170 $5.170 $5.170 $5.170 $6.020 $6.020 $6.020 $6.020 $6.020 Weighted average exercise price - - - - - - - - - - 180,985 94,834 64,059 39,458 20,447 36,537 56,984 56,985 20,447 (180,985) - - - - - - - - 570,736 (180,985) 5.4551 5.1700 - - - - - - - - - - - - - - - - - - - - - - - - 64,059 39,458 - - 56,984 56,985 20,447 30,830 30,830 30,830 30,828 361,251 5.1347 - 94,834 64,059 39,458 20,447 36,537 56,984 56,985 20,447 389,751 5.5874 The weighted average share price at the date of exercise of rights vested during the 2013 year was $4.02 (2012 - $5.57). The weighted average remaining contractual life of share rights outstanding at the end of the period was 2.2 years (2012 - 1.7 years). 71 71 ANNUAL REPORT & FINANCIAL STATEMENTS 2013NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 JULY 2013 New Hope Corporation Limited and Controlled Entities Notes to the Financial Statements for the year ended 31st July 2013 37. BUSINESS COMBINATION a. Summary of acquisition On 1 August 2012, New Hope Corporation Limited's wholly owned subsidiary, Mattvale Pty Ltd, acquired 69.62% of the issued share capital and options on issue of Bridgeport Energy Limited. Bridgeport Energy Limited is an oil and gas exploration company with interests in a portfolio of projects in Queensland that are being progressed towards development. Details of the purchase consideration and the net assets acquired are as follows: Purchase consideration (refer to b. below): Previously held interest Cash paid - current year Gain on previously held interest to 0.41 cents per share Total purchase consideration The assets and liabilities recognised as a result of the acquisition are as follows: $000 18,876 45,488 4,109 68,473 Fair value 38 Cash Trade receivables Held to maturity investments Other receivables and prepayments Inventory Oil producing assets Exploration assets Property, plant and equipment Accounts payables Provisions Deferred tax liabilities Net identifiable assets acquired Add: goodwill Net assets acquired $000 1,228 685 838 157 87 47,512 16,807 1,118 (968) (1,768) (1,380) 64,316 4,157 68,473 Goodwill arising on consolidation of $4,156,952 is calculated in accordance with the requirement in IFRS to recognise a deferred tax liability on the difference between the fair value of newly consolidated assets and liabilities and their tax base. None of the goodwill is expected to be deductible for tax purposes. (ii) Revenue and profit contribution The acquired business contributed revenues of $6,074,501 and net loss before tax of $1,874,172 to the Group for the period from 1 August 2012 to 31 July 2013. b. Purchase consideration Outflow of cash to acquire subsidiary, net of cash acquired Total cash consideration Less: Balances acquired Cash Outflow of cash - investing activities $000 45,488 (1,228) 44,260 Acquisition related costs Acquisition costs of $3,198,664 are included in other expenses in profit or loss and in operating cash flows in the statement of cash flows. 72 72 ANNUAL REPORT & FINANCIAL STATEMENTS 2013NEW HOPE CORPORATION LIMITED AND CONTROLLED ENTITIES New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31st July 2013 38. INVESTMENTS IN ASSOCIATES a. Movements in carrying amounts Carrying amount at the beginning of the financial year Additions Share of profits after income tax Impairment Transfer due to business combination Carrying amount at the end of the financial year 2013 $000 2012 $000 32,530 49,615 (386) (13,286) (68,473) - 31,825 1,352 (647) - - 32,530 37 b. Summarised financial information of associates The Group's share of the results of its principal associates and its aggregated assets and liabilities are as follows: 2013 Quantex Energy Inc. Quantex Research Corporation 2012 Quantex Energy Inc. Quantex Research Corporation Bridgeport Energy Limited Ownership Interest % 25 25 25 25 36 Company's share of: Assets Liabilities Revenues $000 $000 $000 Profit / (Loss) after income tax $000 - - - 524 2,918 12,691 16,133 - - - 1,624 (4) 662 2,282 - - - - - 2,325 2,325 (363) (23) (386) (955) (86) 394 (647) 73 73 ANNUAL REPORT & FINANCIAL STATEMENTS 2013NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 JULY 2013 NEW HOPE CORPORATION LIMITED AND CONTROLLED ENTITIES New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31st July 2013 39. INTERESTS IN JOINT VENTURES a. Lenton Joint Venture New Hope Corporation Limited has entered into a joint venture to develop the Lenton project. The subsidiary has a 90% participating interest in this joint venture and is entitled to 90% of the output of the Lenton project. The group's interests employed in the joint venture are included in the balance sheet, in accordance with the accounting policy described in note 1(b). b. Taroom-Yamala Joint Venture In March 2006, New Hope Corporation Limited entered into a joint venture in relation to its Yamala (EPC927) project on the following terms: An external company will earn a 30% Joint Venture interest in the Yamala project (EPC927) through sole funding a three-stage $5.30 million exploration and evaluation programme designed to take the project from its current status as an exploration target to completion of a bankable feasibility study for establishment of a mine within the tenement. On completion of the funding of the $5.30 million farm-in, the external company will have the option to acquire a further 19% joint venture interest for $6.65 million. As at 31 July 2013, the first two stages had been completed by funding of $3.00 million and had earned a 17% interest in the project. At 31 July 2013, $nil is carried as exploration expenditure in relation to EPC927. c. Ashford Joint Venture In February 2005, New Hope Corporation Limited entered into a joint venture in relation to the Ashford project. This project allows for the exploration and evaluation, and if warranted, development and exploitation of the tenements and all of the minerals within the tenements. Northern Energy acquired a 50% participating interest in the tenements with an option to acquire a further 25% participating interest in the tenements by sole funding certain expenditure. d. Oilwells Inc. of Kentucky Joint Venture New Hope Corporation Limited has a 60% interest in the Oilwells Inc. of Kentucky Joint Venture. The principle activity of this joint venture is to extract oil from PL 214 of which the subsidiary is entitled to 60% of the output. The group's interests employed in the joint venture are included in the balance sheet, in accordance with the accounting policy described in note (b). e. Bridgeport Bounty Exploration Joint Venture New Hope Corporation Limited has a 60% interest in the Bridgeport Bounty Exploration Joint Venture. The principle activity of this joint venture is to conduct exploration on ATP 560 of which the subsidiary is entitled to 60% of the output. The group's interests employed in the joint venture are included in the balance sheet, in accordance with the accounting policy described in note 1(b). 74 74 ANNUAL REPORT & FINANCIAL STATEMENTS 2013NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 JULY 2013 New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31st July 2013 40. PARENT ENTITY FINANCIAL INFORMATION a. Summary financial information The individual financial statements for the parent entity show the following aggregate amounts: Balance Sheet Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Shareholders' equity Issued capital Reserves Share-based payments Retained earnings Profit for the year Total comprehensive income b. Guarantees entered into by parent entity Bank guarantees issued in relation to rehabilitation and utility obligations 2013 $000 2012 $000 2,026,667 1,963,160 13,806 13,932 2,040,473 1,977,092 520,899 229,613 1,388 6,164 522,287 235,777 93,342 92,509 1,642 1,423,202 1,518,186 1,216 1,647,590 1,741,315 33,078 375,019 33,078 375,019 38,230 38,230 37,474 37,474 The parent entity has given unsecured guarantees in respect of mining restoration and rehabilitation. The liability has been recognised by the parent entity in relation to its rehabilitation obligations. See notes 24, 25 and 1(aa). Further guarantees are provided in respect of statutory body suppliers with no liability being recognised by the parent entity as no losses are foreseen on these contingent liabilities. c. Contingent liabilities of the parent entity Details and estimates of maximum amounts of contingent liabilities for which no provision is included in the accounts, are as follows: Controlled entities The bankers of the consolidated entity have issued undertakings and guarantees to the Department of Natural Resources and Mines, Statutory Power Authorities and various other entities. No losses are anticipated in respect of any of the above contingent liabilities. For information about guarantees given by the parent entity, please see above. 2013 $000 2012 $000 14,822 14,857 d. Contractual commitments for the acquisition of property, plant and equipment As at 31 July 2013, the parent entity had contractual commitments for the acquisition of property, plant or equipment totalling $95,000 (2012 - $74,000). These commitments are not recognised as liabilities as the relevant assets have not yet been received. 75 75 ANNUAL REPORT & FINANCIAL STATEMENTS 2013 NEW HOPE CORPORATION LIMITED AND CONTROLLED ENTITIES New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31st July 2013 41. DEED OF CROSS GUARANTEE During 2012, a number of entities within the group entered into a deed of cross guarantee. New Hope Corporation Limited, Jeebropilly Collieries Pty Ltd, Acland Pastoral Co. Pty Ltd, New Oakleigh Coal Pty Ltd, New Acland Coal Pty Ltd, New Lenton Coal Pty Ltd, Andrew Wright Holdings Pty Ltd, Arkdale Pty Ltd and Queensland Bulk Handling Pty Ltd are parties to a deed of cross guarantee under which each company guarantees the debts of the others. By entering into the deed, the wholly-owned entities have been relieved from the requirement to prepare a financial report and directors' report under Class Order 98/1418 (as amended) issued by the Australian Securities and Investments Commission. Consolidated statement of comprehensive income a. The above companies represent a "closed group" for the purposes of the Class Order, and as there are no other parties to the deed of cross guarantee that are controlled by New Hope Corporation Limited, they also represent the "extended closed group". Set out below is the consolidated statement of comprehensive income for the year ended 31 July 2013 for the closed group consisting of New Hope Corporation Limited, Jeebropilly Collieries Pty Ltd, Acland Pastoral Co. Pty Ltd, New Oakleigh Coal Pty Ltd, New Acland Coal Pty Ltd, New Lenton Coal Pty Ltd, Andrew Wright Holdings Pty Ltd, Arkdale Pty Ltd and Queensland Bulk Handling Pty Ltd. Revenue from continuing operations Other income Expenses Cost of sales Marketing and transportation Administration Other expenses Profit before income tax Income tax expense Profit after income tax for the year Other comprehensive income Items to be reclassified to profit and loss Changes in the fair value of cash flow hedges, net of tax Net transfer to profit and loss Other comprehensive income for the year, net of tax Total comprehensive income for the year 2013 $000 2012 $000 610,852 - 610,852 (282,870) (139,314) (13,287) - 175,381 (52,015) 123,366 739,883 151 740,034 (335,587) (140,846) (26,101) (1) 237,499 (64,616) 172,883 (39,824) (10,431) (50,255) 73,111 10,708 (17,934) (7,226) 165,657 76 76 ANNUAL REPORT & FINANCIAL STATEMENTS 2013 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 JULY 2013 New Hope Corporation Limited and Controlled Entities Notes to the financial statements for the year ended 31st July 2013 41. DEED OF CROSS GUARANTEE (continued) Consolidated balance sheet b. Set out below is a consolidated balance sheet as at 31 July 2013 of the closed group consisting of New Hope Corporation Limited, Jeebropilly Collieries Pty Ltd, Acland Pastoral Co. Pty Ltd, New Oakleigh Coal Pty Ltd, New Acland Coal Pty Ltd, New Lenton Coal Pty Ltd, Andrew Wright Holdings Pty Ltd, Arkdale Pty Ltd and Queensland Bulk Handling Pty Ltd. Current assets Cash and cash equivalents Trade and other receivables Inventories Held to maturity investments Derivative financial instruments Other Total current assets Non-current assets Receivables Other financial assets Derivative financial instruments Property, plant and equipment Exploration and evaluation assets Deferred tax assets Intangible assets Total non-current assets Total assets Current liabilities Trade and other payables Current tax liabilities Provisions Derivative financial instruments Total current liabilities Non-current liabilities Deferred tax liabilities Provisions Derivative financial instruments Total non-current liabilities Total liabilities Net assets Equity Contributed equity Reserves Retained earnings Total equity 2013 $000 2012 $000 18,746 331,158 58,604 1,228,995 - 106 1,637,609 2,775 248,183 - 405,809 29,295 38,752 9,411 734,225 2,371,834 123,102 54,258 28,434 29,721 235,515 - 41,853 11,707 53,560 289,075 2,082,759 89,246 9,112 1,984,401 2,082,759 69,025 218,913 59,560 1,435,961 20,392 116 1,803,967 4,181 248,183 9,971 370,715 17,148 - 8,525 658,723 2,462,690 58,952 54,345 27,592 - 140,889 23,699 32,246 - 55,945 196,834 2,265,856 88,413 58,941 2,118,502 2,265,856 42. EVENTS OCCURRING AFTER THE REPORTING PERIOD During the final quarter, New Hope Corporation Limited entered into a contract to acquire a 15% interest in the Cuisinier tenement from Arrow Energy subject to government approvals and transfer of title. This additional tenement will increase oil production by approximately 240 barrels of oil per day, based on current rates. 77 77 ANNUAL REPORT & FINANCIAL STATEMENTS 2013 DIRECTORS DECLARATION DIRECTORS’ DECLARATION In the Directors' opinion: New Hope Corporation Limited and Controlled Entities Directors Declaration a. the financial statements and notes set out on pages 29 to 77 are in accordance with the Corporations Act 2001 , including: (i) (ii) complying with Accounting Standards , requirements; and the Corporations Regulations 2001 and other mandatory professional reporting giving a true and fair view of the consolidated entity's financial position as at 31 July 2013 and of their performance, for the financial year ended on that date; and b. there are reasonable grounds to believe that the Company will be able to pay its debts, as and when they become due and payable; and Note 1(a) confirms that the financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board. The Directors have been given the declarations by the chief executive officer and chief financial officer required by section 295A of the Corporations Act 2001. This declaration is made in accordance with a resolution of the Directors. R.D. Millner Director S.J.Palmer Director Sydney 16 September 2013 78 78 ANNUAL REPORT & FINANCIAL STATEMENTS 2013 78 ANNUAL REPORT & FINANCIAL STATEMENTS 2013INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF NEW HOPE CORPORATION LIMITED Independent auditor’s report to the members of New Hope Corporation Limited Report on the financial report We have audited the accompanying financial report of New Hope Corporation Limited (the company), which comprises the consolidated balance sheet as at 31 July 2013, and the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated cashflow statement for the year ended on that date, a summary of significant accounting policies, other explanatory notes and the directors’ declaration for the New Hope Corporation Limited Group (the consolidated entity). The consolidated entity comprises the company and the entities it controlled at the year's end or from time to time during the financial year. Directors’ responsibility for the financial report The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements , that the financial statements comply with International Financial Reporting Standard s. Auditor’s responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Independence In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. PricewaterhouseCoopers, ABN 52 780 433 757 Riverside Centre, 123 Eagle Street, BRISBANE QLD 4000, GPO Box 150, BRISBANE QLD 4001 T: +61 7 3257 5000, F: +61 7 3257 5999, www.pwc.com.au 79 79 ANNUAL REPORT & FINANCIAL STATEMENTS 2013NEW HOPE CORPORATION LIMITED AND CONTROLLED ENTITIES Auditor's opinion In our opinion: (a) the financial report of New Hope Corporation Limited is in accordance with the Corporations Act 2001 , including: (i) (ii) giving a true and fair view of the consolidated entity’s financial position as at 31 July 2013 and of its performance for the year ended on that date; and complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001 ; and (b) the financial report and notes also comply with International Financial Reporting Standards as disclosed in Note 1. Report on the Remuneration Report We have audited the remuneration report included in pages 14 to 21 of the directors’ report for the year ended 31 July 2013. 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. Auditor's opinion In our opinion, the remuneration report of New Hope Corporation Limited for the year ended 31 July 2013, complies with section 300A of the Corporations Act 2001. PricewaterhouseCoopers Simon Neill Partner Sydney 16 September 2013 80 80 ANNUAL REPORT & FINANCIAL STATEMENTS 2013 80 ANNUAL REPORT & FINANCIAL STATEMENTS 2013SHAREHOLDER INFORMATION AS AT 14 SEPTEMBER 2013 SHAREHOLDER INFORMATION AS AT 14 SEPTEMBER 2013 New Hope Corporation Limited Shareholder Information as at 13 September 2013 As at 13 September 2013 there were 9,192 holders of ordinary shares in the Company. Voting entitlement is one vote per fully paid ordinary share. Distribution of equity securities 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 and over Number of shareholders 2,259 3,600 2,045 1,201 87 9,192 Fully paid ordinary shares 1,194,984 10,536,618 14,446,979 29,193,255 775,343,389 830,715,225 Number of rights holders Ordinary rights - - - - 4 4 - - - 209,378 - 209,378 Holding less than a marketable parcel 349 14,836 The names of substantial shareholders as disclosed in substantial shareholder notices received by the Company: Shareholder Washington H Soul Pattinson And Company Limited Mitsubishi Materials Corporation Perpetual Limited and subsidiaries 20 largest shareholders as disclosed on the share register as at 13 September 2013 Farjoy Pty Ltd J P Morgan Nominees Australia Limited 1 Washington H Soul Pattinson And Company Limited 2 Mitsubishi Materials Corporation 3 4 RBC Investor Services Australia Nominees Pty Limited (Pi Pooled A/C) 5 Domer Mining Co Pty Limited 6 7 BKI Investment Company Limited 8 National Nominees Limited 9 HSBC Custody Nominees (Australia) Limited 10 Ubs Nominees Pty Ltd 11 Citicorp Nominees Pty Limited 12 Taiheiyo Kouhatsu Inc 13 Pacific Custodians Pty Limited (New Hope Employee S/P A/C) 14 BNP Paribas Noms Pty Ltd (Drp) 15 BNP Paribas Nominees Pty Ltd (Agency Lending Drp A/C) 16 RBC Investor Services Australia Nominees Pty Limited (PIIC A/C) 17 J S Millner Holdings Pty Limited 18 RBC Investor Services Australia Nominees Pty Ltd (Piselect A/C) 19 Milton Corporation Limited 20 Dixson Trust Pty Limited Number of shares 495,696,418 91,490,000 67,674,630 495,696,418 93,240,000 26,942,434 24,391,120 22,000,000 15,500,000 14,760,452 12,062,646 11,930,130 10,187,046 6,750,337 4,054,000 3,750,000 3,262,289 2,867,517 2,090,464 2,009,197 1,763,500 1,290,107 1,225,596 755,773,253 % 59.67% 11.01% 8.15% 59.67% 11.22% 3.24% 2.94% 2.65% 1.87% 1.78% 1.45% 1.44% 1.23% 0.81% 0.49% 0.45% 0.39% 0.35% 0.25% 0.24% 0.21% 0.16% 0.15% 90.99% Unquoted equity securities Rights issued under the New Hope Corporation Limited Employee Performance Rights Share Plan to take up ordinary shares Number on issue Number of holders 209,378 4 81 81 ANNUAL REPORT & FINANCIAL STATEMENTS 2013 ABN: 38 010 653 844 

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