Select Harvests Limited
Annual Report 2008

Plain-text annual report

Contents Our mission, strategy, activities and outlook Our business model Key financial results From the Chairman and Managing Director Our board of directors Our executive team Orchard development Orchard management Processing - Almond division Processing - Sales division Sales and marketing Environment, community and people Statistical summary Financial report contents Directors’ report Auditors’ independence declaration Corporate governance statement Directors’ declaration Independent auditor’s report ASX additional information 1 2 3 4 6 7 8 9 10 11 12 14 15 16 17 29 30 85 87 88 2 Select Harvests Annual Report 2008 Our mission is to continue to develop and expand our business, generating sustainable earnings growth and delivering increased shareholder value. Our strategy is to develop a fully-integrated agri-food company via ongoing diversification and expansion of our income streams, leveraging our core strengths – almond growing and knowledge of edible nuts and their markets – to develop sustained earnings growth and reduced volatility from agricultural risk. Our activities include operating our own orchards, managing orchards for investors, marketing almonds in domestic and export markets, and processing and marketing an extensive range of nuts and associated health food products to all market sectors. We have developed over 36,000 acres of new almond orchards over the last 10 years positioning us as a major global player. Our outlook Shareholder Information World demand for almonds continues to match production increases. Revenues will increase in coming years as orchards mature and we recommence new development activity. The recent consolidation of the operations of our food division will reduce overheads and provide a focus on sales growth and cost control as we work to rebuild the profit contribution from the division. Annual General Meeting 2008/2009 Calendar The annual general meeting will be held on Wednesday, 5 November 2008, at the RACV Club, 501 Bourke Street, Melbourne, commencing at 2:00 pm. A separate notice of meeting has been posted to all shareholders. Feb Announcement of interim results Apr Payment of interim dividend Aug Announcement of preliminary full year results Sept Annual report to shareholders Oct Payment of final dividend Oct Annual general meeting Select Harvests Annual Report 2008 1 Our business model OPERATING EBIT SELECT HARVESTS 2007: $44.2M 2008: $32.3M ORCHARD DEVELOPMENT NURSERY ORCHARD ESTABLISHMENT EBIT 2007: $5.1M 2008: $2.7M INVESTOR ORCHARDS EBIT 2007: $16.1M 2008: $18.7M ACRES: 35,296 ORCHARD MANAGEMENT ALMOND GROWING HARVESTING COMPANY OWNED ORCHIDS EBIT 2007: $11.6M 2008: $2.8M ACRES: 3,368 EBIT 2007: $4.0M 2008: $5.3M 2008 CROP: 15,000 tonnes EBIT 2007: $1.7M 2008: $2.1M PROCESSING ALMOND PROCESSING VALUE-ADDED PROCESSING SALES AND MARKETING ALMOND POOL SALES VALUE-ADDED PRODUCT SALES EBIT 2007:$5.7M 2008: $0.7M 2008 revenue: $123M 2 Select Harvests Annual Report 2008 Key fi nancial results “Revenues will increase in the coming years as orchards mature and we recommence new almond developments”. John Bird, Managing Director Key fi nancial results A $’000’s YEAR ENDED 30 JUNE 2008 YEAR ENDED 30 JUNE 2007 % INCREASE (DECREASE) Sales revenue (A$’000’s) 224,655 229,498 (2.1)% EBIT - Management services - Almond orchards - Temporary water costs Almond division Food division Operating EBIT Corporate costs EBIT - before restructuring Food division restructuring costs EBIT Net profit after tax 26,661 5,860 (3,007) 29,514 2,770 32,284 (3,320) 28,964 (1,845) 27,119 18,130 25,260 11,567 - 36,827 7,422 44,249 (3,700) 40,549 - 40,549 28,098 5.5% (49.3)% - (19.9)% (62.7)% (27.0)% (10.3)% (28.6)% - (33.1)% (35.5)% ORDINARY DIVIDEND PER SHARE EARNINGS PER SHARE +8% +26% +62% -21% CENTS 60 50 40 30 +41% 20 +37% 10 0 +6% +18% +42% -34% +28% +23% CENTS 70 60 50 40 30 20 10 0 2003 2004 2005 2006 2007 2008 2003 2004 2005 2006 2007 2008 Select Harvests Annual Report 2008 3 From the Chairman and Managing Director Our outlook: Key growth areas INCREASE IN MANAGEMENT SERVICES REVENUE AS ORCHARDS MATURE AND CROPS INCREASE 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 2008 2009 2010 2011 2012 2013 2014 2015 (Estimated fee revenue based on current plantings) INCREASE IN COMPANY TONNAGES AS NEW ORCHARDS MATURE 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 4 Select Harvests Annual Report 2008 “We have progressed a number of initiatives during the year aimed at improved performance and future growth”. Curt Leonard, Chairman The year in review The company faced a number of challenges during the year which have impacted performance. We have put strategies in place to address these challenges and have progressed a number of initiatives aimed at improved performance and future growth. Key issues and outcomes for the year • Water restrictions, higher farming costs and a strong Australian dollar impacted results • 2008 almond crop up 25% using 20% less water and reduced farm inputs • Tree health and productive capacity maintained • New almond processing facility established to cater for future crop increases • Approval received to establish a new almond development in Western Australia in 2009 • Completion of decommissioning of Brisbane plant and consolidation of Food Division operations at a single site. Water management Water is one of our most important resources and we have taken a number of actions to address increased costs and supply constraints from the River Murray system. Supply management Water restrictions look set to continue for 2008/2009 and our orchards are again operating on a reduced water plan. The purchase of additional permanent water licenses and carrying over water entitlements from last year will allow company orchards to operate at 50% allocations in 2008/09. Investor Orchards have put similar arrangements in place. Water usage Last year we commenced a program to reduce annual water applications by 20% over a three year period while maintaining crop yields. To this end we adopted a number of new technologies and commenced a range of irrigation trials aimed at more efficient and lower water use. The successful implementation of a reduced water strategy for the 2008 crop has verified and enhanced our research and we continue to invest in and focus on improving irrigation efficiency. Alternative water source In recent years as part of a diversification strategy we have investigated the suitability of alternative water sources for almond growing. As a result of this work we have recently received approval for an almond project in Western Australia which will commence in 2009. New Almond Developments New almond developments have been the key plank of the company’s growth strategy. Over the last ten years we have developed 36,600 acres of new almond orchards. This has consolidated our position as a major global player and has allowed us to develop a substantial management services business. Australia remains a world competitive almond grower and increasing world consumption continues to provide growth opportunities. We are committed to the development and management of new almond orchards in the future. We will establish our first orchards in Western Australia in 2009 and are planning additional developments over the next few years. In our view water supply from the Murray Darling Basin will stabilise over the next few years delivering more certainty of supply which in turn will provide new development opportunities. We are confident that almonds are an attractive long term investment for both corporate and private investors. The availability of MIS structure for future projects is subject to an upcoming court ruling, the result of which may require a restructure of investment products. We will continue to support our existing partners to develop and manage new projects and at the same time develop alternative investment structures. Food Division Our Food Division remains an important component of our almond sales and distribution business. The recent consolidation of operations will reduce overheads and provide a focus on cost control. Range rationalisation is continuing with a focus on almond sales. This will position the division to effectively market increased volumes in the future. Debt Levels Debt levels increased during the year as a result of investments in the new almond processing facility, permanent water licenses and share buyback. Following completion of the processing plant on- going capital requirements for existing operations will be modest. Our plan is to develop Western Australian projects on behalf of outside investors but we may require short term finance during the development stage and are currently looking at options to achieve this. Outlook World demand for almonds continues to match production increases. USA growers are facing similar water and cost pressures as Australian growers and new orchard development has stalled. As a result we expect a plateauing of supply in coming years which, together with increased costs in both USA and Australia, has the potential to apply upward price pressure. Almond returns have been impacted by an Australian dollar trading at 20 year highs however a recent correction has the Australian dollar trading at lower levels. Our orchards have retained health and productive capacity through the drought conditions and have entered the blossom period with large bud populations setting the base for a good 2009 crop. Water supply remains tight and we have put short and long term strategies in place to manage this. Revenues will increase in the coming years as orchards mature and we recommence new almond developments. The recent consolidation of our food division will reduce overheads and provide a focus on sales growth and cost control as we work to rebuild the profit contribution from the division. As always we thank our directors and staff for their efforts in a challenging environment and the communities in which we operate for their support. Chairman 1996 to 2008 On behalf of our Board, shareholders and staff, we thank Max Fremder for his vision, drive and commitment in guiding Select Harvests through a period of sustained business development. During his tenure as Chairman the company has led the expansion of the Australian almond industry becoming a major global player and annual revenues have grown from $12 million to over $220 million. J C Leonard, Chairman John Bird, Managing Director Select Harvests Annual Report 2008 5 Our board of directors J C LEONARD B.Mktng & Bus. Admin, MBA Chairman J BIRD Managing Director G F DAN O’BRIEN B.Sc, B.VMS, MBA Non-Executive Director Became the CEO of Select Harvests Limited in January 1998. Has had many years’ experience in the food industry and international trade. Formerly Managing Director of Jorgenson Waring Foods. Appointed Managing Director and joined the Board in September 2001. Member of the Nomination Committee. Joined the Board on 21 July 2004. Has held senior management positions with the Mars group of companies in Australia including General Manager of Mars Confectionery, Managing Director of Uncle Ben’s, and Managing Director of Mars Australia and New Zealand. In addition, he has served as President, Asia Pacific of all Mars businesses, and a Director of the Managing Board of Mars Incorporated global business. Is a Director of Patties Foods Limited. Member of the Audit and Risk Committee, and Nomination Committee. Since the end of the financial year, was elected Chairman of the Board, effective 15 August 2008, and became a member of the Remuneration Committee. R M HERRON FCA & FAICD Non-Executive Director Joined the Board on 27 January 2005. A Chartered Accountant, Mr Herron retired as a Senior Partner of PriceWaterhouseCoopers in December 2002. He was a member of the Coopers & Lybrand (now PricewaterhouseCoopers) Board of Partners where he was National Deputy Chairman and was the Melbourne office Managing Partner for six years. He also served on several international committees within Coopers & Lybrand. He is a Non-Executive Director of GUD Holdings Ltd, Heemskirk Consolidated Ltd, Royal Automobile Club Of Victoria (RACV) Ltd and a major industry superannuation fund. Chairman of the Audit and Risk Committee, and member of the Nomination Committee. Joined the Board on 29 March 2004. Dan is the principal of Dromoland Capital, a private equity group, non-executive director of Thomas & Coffey Limited, and is also the Chairman of Hexima Limited. Mr O’Brien has significant commercial experience having held CEO positions for BIL Australia Limited, Mattel Asia Pacific, and The King Island Company. He holds an MBA, having graduated with distinction from Harvard Business School and is a qualified veterinary surgeon. Member of the Audit and Risk Committee, Chairman of the Remuneration Committee, and member of the Nomination Committee. Mr O’Brien was a director of SPC Ardmona Limited between 9 January 2002 and 4 March 2005, and a director of Coates Hire Limited between 15 September 2003 and 9 January 2008. M A FREMDER Non Executive Director Joined the board in March 1996 and from that time was Chairman of The Board until retiring from this position on 15 August, 2008. Formerly a director of IAMA Limited, and founder of Nufarm, one of Australia’s largest chemical manufacturers for the rural industry. Mr Fremder also was a Non-Executive Director of Tassal Limited between 3 October 2003 and 18 March 2005. Member of the Remuneration Committee and Chairman of the Nomination Committee. 6 Select Harvests Annual Report 2008 Our executive team TIM MILLEN Dip Hort (Distinction) Horticultural Manager PETER ROSS Operations Manager Almond Division KIM MARTIN B. Bus ( Accounting) Operations Manager Food Division Joined Select Harvests in 1996. Tim has over 18 years’ experience in horticulture. He has held senior horticultural positions in operations management, as well as holding the roles of Technical Officer and Horticulturist. Prior to commencing with Select Harvests, Tim was Orchard Manager for an Australian and New Zealand Nashi, Stonefruit and Pipfruit operation. Joined Select Harvests in 1999. Peter held the position of Plant and then Project Manager for the processing area of the Almond Division before being appointed to his current role in July of this year. Prior to commencing with Select Harvests, Peter ran his own maintenance and fabrication business servicing agriculture, mining and heavy industry. Joined Select Harvests in 2007. Kim has spent the majority of her career with Mars Confectionery and Masterfoods, part of Mars Inc. She started her career as an accountant before moving to manufacturing. In the last 10 years, Kim has held various senior manufacturing and supply chain management roles. Prior to joining Mars, Kim worked with PriceWaterhouseCoopers in the Audit division. LAURENCE VAN DRIEL Trading Manager Joined Select Harvests in 2000. Laurence has over 20 years’ experience in trading edible nuts and dried fruits. He has a comprehensive knowledge of international trade and deep insights into the trading cultures of the various countries in which these commodities are sold. He has held senior purchasing and sales management positions with internationally recognised companies. MICHAEL BARTHOLOMEW B.Bus & Comm (Marketing) Sales & Marketing Manager Joined Select Harvests in 2008. Michael has 30 years’ experience in the FMCG industry, having held senior sales and management roles with Patties Foods, Herbert Adams Bakeries, Cottees Foods, Coca-Cola Amatil and Coles Myer. CEO JOHN BIRD PAUL CHAMBERS Bsc Hons, ACA Chief Financial Officer & Company Secretary Joined Select Harvests in 2007. Paul is a Chartered Accountant and has over 20 years’ experience in senior financial management roles in Australian and European organisations. Most recently, he was CFO, Henkel ANZ and prior to that he held corporate positions with the Fosters Group. He has managed complex change, acquisition and business integration projects. HORTICULTURAL MANAGER TIM MILLEN OPERATIONS MANAGER ALMOND DIVISION PETER ROSS OPERATIONS MANAGER FOOD DIVISION KIM MARTIN TRADING MANAGER LAURENCE VAN DRIEL SALES & MARKETING MANAGER MICHAEL BARTHOLOMEW CFO & COMPANY SECRETARY PAUL CHAMBERS Select Harvests Annual Report 2008 7 Orchard development SELECT HARVESTS HAS DEVELOPED 36,600 ACRES OF NEW ALMOND ORCHARDS OVER THE LAST 10 YEARS CONSOLIDATING OUR POSITION AS A MAJOR GLOBAL PLAYER AND ONE OF THE LARGEST GROWERS IN THE WORLD Developments stalled in 2008 due to uncertainty around water supply for the Murray Darling Basin. A new development in Western Australia in 2009 will recommence this program and we expect to participate in further expansion in WA in future years. CUMULATIVE DEVELOPMENT ANNUAL DEVELOPMENT Water supply from the Murray Darling Basin will stabilise over the next few years delivering more certainty which in turn will provide new development opportunities. Australia remains a world competitive almond grower and increasing world consumption continue to provide growth opportunities. Almond farming is highly mechanised requiring scale and capital to maximize efficiencies. The development of corporate farming in recent years has provided this investment and currently accounts for over 70% of Australian orchards. Almonds remain an attractive long term investment and we are aiming to undertake new orchard developments on an annual basis. (cid:55)(cid:33) (cid:48)(cid:69)(cid:82)(cid:84)(cid:72) (cid:46)(cid:52) (cid:51)(cid:33) (cid:49)(cid:44)(cid:36) (cid:46)(cid:51)(cid:55) (cid:50)(cid:79)(cid:66)(cid:73)(cid:78)(cid:86)(cid:65)(cid:76)(cid:69) (cid:33)(cid:35)(cid:52) (cid:54)(cid:41)(cid:35) (cid:37)(cid:46)(cid:37)(cid:33)(cid:34)(cid:34)(cid:33) (cid:52)(cid:55)(cid:41)(cid:46)(cid:223)(cid:40)(cid:41)(cid:44)(cid:44)(cid:51) (cid:36)(cid:33)(cid:46)(cid:36)(cid:33)(cid:50)(cid:39)(cid:33)(cid:46) (cid:55)(cid:33) Our key activities Tree supply Orchard feasibility studies Land acquisition Orchard design Irrigation installation Land preparation Tree planting ORCHARD DEVELOPMENT (ACRES) 40000 30000 20000 10000 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 (cid:48)(cid:37)(cid:50)(cid:52)(cid:40) OUR PROPOSED WESTERN AUSTRALIAN ALMOND PROJECTS IN THE TWIN HILLS AND DANDARGAN IRRIGATION DISTRICTS. 8 Select Harvests Annual Report 2008 Orchard management Our key activities Irrigation and nutrition Pest and disease management Tree care and pruning Bee supply Harvesting Environmental management Maintaining competitive position We are a competitive almond grower with significant advantage in crop yield and product quality, allowing us to compete effectively in global markets. Increased water costs are impacting our competitive position. We have set an objective to reduce annual water applications by 20% over a three year period while maintaining yields. The trial work we have undertaken in recent years on more efficient and reduced water usage has been invaluable for managing current water restrictions. We have increased our investment and focus in this area and are currently running a range of trials and collaborations with partners including the Australian almond industry, government, irrigation suppliers and horticultural specialists. THE MAJOR ACHIEVEMENT FOR 2008 WAS TO DELIVER A NORMAL CROP AND MAINTAIN TREE HEALTH AND PRODUCTIVE CAPACITY ON REDUCED WATER AND FARM INPUTS Select Harvests manages 38,300 acres of almond trees representing 60% of Australia’s acreage and is one of the largest growers worldwide. Approximately 90% of these orchards are managed on behalf of external investors and 10% are company orchards. The majority of trees were planted over the last seven years and are in various stages of maturity. In full production annual crops should increase to around 50,000 tonnes. Managing reduced water allocations Farm operations were confronted with substantial water restrictions and increased farm costs. A drought management plan was adopted reducing water applications by around 20%, and some farm inputs to partially offset increased costs. The program proved successful producing a crop of 15,000 tonnes which was within normal yield expectations and as a result of maturing trees was up 25% on the previous year. Our trees have maintained health and productive capacity through the reduced water program and carried large bud populations into the recent blossom period setting the base for a good 2009 crop. In the short term water supply remains a challenge and we are again operating our orchards under a drought management plan. Select Harvests Annual Report 2008 9 Processing - Almond division Activities Select Harvests processes almonds harvested from both company and investor-owned orchards. Activities include receipt and storage of field product after harvest; removal of outer hull and shell; sizing and grading; and packing ready for shipment to domestic or export customers or for further value added processing by our food division. New facility To meet increased tonnages we have recently completed a $32 million investment in a new almond processing facility. The facility has a high level of automation which will significantly improve efficiency, flexibility, product quality and food safety management. The facility incorporates all almond processing activities on one site with potential capacity of around 40,000 tonnes per annum. The site offers the flexibility of further expansion to accommodate future processing needs. ALMOND TONNAGE 55,000 50,000 45,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 TOTAL TONNAGE 10 Select Harvests Annual Report 2008 Processing - Food division Quality The new almond facility will help drive our continuous quality improvement program. We have invested in electronic sorting equipment to improve the accuracy of our grading process. In addition a pasteurization process will eliminate microbiological contamination and climate controlled warehousing will ensure product freshness and improved shelf life. We have recently installed a chemical testing laboratory to undertake quality analysis prior to shipment. Value added processing Select Harvests undertakes a range of value added processes to meet the needs of our customers from food manufacturers, distributors, retailers and consumers. Activities include blanching, roasting, flavouring, cutting, blending, and packaging to satisfy a number of retail and industrial formats. The food division operates in a competitive market and made the decision in early 2008 to decommission our Brisbane facility and consolidate operations on one site in Melbourne. The project was completed within expected costs and is forecasted to deliver annual cost savings of around $3.0 million per year. The focus of the team is to continue to extract operational efficiencies while delivering an improved level of customer service. Select Harvests Annual Report 2008 11 Sales and marketing Almond Pool Management ALMOND PRICE AUD/KG NPSSR 23/25 $14.00 $12.00 $10.00 $8.00 $6.00 $4.00 $2.00 $0.00 3 9 - G U A 4 9 - B E F 4 9 - G U A 5 9 - B E F 5 9 - G U A 6 9 - B E F 6 9 - G U A 7 9 - B E F 7 9 - G U A 8 9 - B E F 8 9 - G U A 9 9 - B E F 9 9 - G U A 0 0 - B E F 0 0 - G U A 1 0 - B E F 1 0 - G U A 2 0 - B E F 2 0 - G U A 3 0 - B E F 3 0 - G U A 4 0 - B E F 4 0 - G U A 5 0 - B E F 5 0 - G U A 6 0 - B E F 6 0 - G U A 7 0 - B E F 7 0 - G U A 8 0 - B E F 8 0 - G U A EXCHANGE RATE AUD/USD $1.20 $1.00 $0.80 $0.60 $0.40 $0.20 $0.00 3 9 - G U A 4 9 - B E F 4 9 - G U A 5 9 - B E F 5 9 - G U A 6 9 - B E F 6 9 - G U A 7 9 - B E F 7 9 - G U A 8 9 - B E F 8 9 - G U A 9 9 - B E F 9 9 - G U A 0 0 - B E F 0 0 - G U A 1 0 - B E F 1 0 - G U A 2 0 - B E F 2 0 - G U A 3 0 - B E F 3 0 - G U A 4 0 - B E F 4 0 - G U A 5 0 - B E F 5 0 - G U A 6 0 - B E F 6 0 - G U A 7 0 - B E F 7 0 - G U A 8 0 - B E F 8 0 - G U A ALMOND PRICE NPSSR 23/25 USD/lb $4.50 $4.00 $3.50 $3.00 $2.50 $2.00 $1.50 $1.00 $.50 $0.00 3 9 - G U A 4 9 - B E F 4 9 - G U A 5 9 - B E F 5 9 - G U A 6 9 - B E F 6 9 - G U A 7 9 - B E F 7 9 - G U A 8 9 - B E F 8 9 - G U A 9 9 - B E F 9 9 - G U A 0 0 - B E F 0 0 - G U A 1 0 - B E F 1 0 - G U A 2 0 - B E F 2 0 - G U A 3 0 - B E F 3 0 - G U A 4 0 - B E F 4 0 - G U A 5 0 - B E F 5 0 - G U A 6 0 - B E F 6 0 - G U A 7 0 - B E F 7 0 - G U A 8 0 - B E F 8 0 - G U A Increasing tonnages Select Harvests’ 2008 crop of 15,000 tonnes reinforces our emergence as one of the world’s leading almond growers and marketers. Our crop represents 57% of the estimated Australian 2008 harvest of 26,800 tonnes. Our growing almond pool is driving our export focus, with 60% of our crop designated for international markets. The fundamentals of the global almond market remain strong, with international almond pricing trading at the high end of historic levels. We absorbed the negative impact of the Australian dollar, trading at 25 year highs. There is a current correction in this pricing which is providing some relief and signals the potential for lower levels in the longer term. Expanding our markets Consumption of almonds continues to grow in both domestic and export markets. We continue to develop our customer base and market spread to accommodate future crops. Sales of value added almond products remains a key component of our domestic sales program and we will look to expand this activity to export markets in the future. 12 Select Harvests Annual Report 2008 Sales and marketing USA ANNUAL PRODUCTION 2 8 9 1 3 8 9 1 4 8 9 1 5 8 9 1 6 8 9 1 7 8 9 1 8 8 9 1 9 8 9 1 0 9 9 1 1 9 9 1 2 9 9 1 3 9 9 1 4 9 9 1 5 9 9 1 6 9 9 1 7 9 9 1 8 9 9 1 9 9 9 1 0 0 0 2 1 0 0 2 2 0 0 2 3 0 0 2 4 0 0 2 5 0 0 2 6 0 0 2 7 0 0 2 8 0 0 2 CROP (MILLION lbs) BEARING ACRES KG/ACRE USA PRODUCTION VS SHIPMENTS Driving growth in almond consumption Communicating the health benefits of eating almonds is a core component of our marketing program. We leverage two industry initiatives to achieve this objective. The Nuts for life program is primarily focused on educating health professionals, particularly General Practitioners, in the key role nuts play in a healthy daily diet. The Almond Board of Australia Guilds on this message by promoting our call to action of eating a handful of almonds everyday. Our consumer communications highlight the taste, health and versatility benefits of Australian almonds. 1,600.0 1,400.0 1,200.0 1,000.0 800.0 600.0 400.0 200.0 0.0 2,000.0 1,500.0 1,000.0 ) s b l N O I L L I M ( 500.0 0.0 2 8 9 1 3 8 9 1 4 8 9 1 5 8 9 1 6 8 9 1 7 8 9 1 8 8 9 1 9 8 9 1 0 9 9 1 1 9 9 1 2 9 9 1 3 9 9 1 4 9 9 1 5 9 9 1 6 9 9 1 7 9 9 1 8 9 9 1 9 9 9 1 0 0 0 2 1 0 0 2 2 0 0 2 3 0 0 2 4 0 0 2 5 0 0 2 6 0 0 2 7 0 0 2 8 0 0 2 PRODUCTION BEARING ACRES SHIPMENTS CARRY–IN Outlook The demand side of the global almond market continues to grow, with the increased USA crop in 2007 offset by a commensurate increase in shipments. The USA is forecasting an 8% increase in supply for 2008. However a continuation of current consumption growth will see supply and demand remain in balance. Sales and Marketing: Value added product sales The core focus of our sales and marketing strategy is to further develop our almond sales, both within Australia and nd internationally. Domestically, we will leverage our existing retail position in our n our branded products as well as in our private ivate label supply relationships. Select Harvests remains globally competitive in our cost of production. We compete against an industry in California that is also experiencing water and farm cost issues, to the extent to which new developments have stalled. It is expected that these issues will cause supply growth to slow or plateau in the future. This will offer the potential for upward pricing pressure. One of the initiatives taken over the past 12 months has been to undertake a e a rationalisation of our total range in order rder to focus on key products and brands. The Lucky brand was successfully repackaged, utilising stand-up edgeseal eal packaging that is both retailer and consumer friendly. During 2008, the Lucky Lucky brand will be further enhanced through gh the use of resealable tabs, which will provide greater consumer convenience. ce Select Harvests Annual Report 2008 13 Environment, community and people Our community Select Harvests is strongly committed to the Robinvale community. We continue to support the Robinvale Secondary College Chaplaincy service that offers both staff and students with a comprehensive counselling program. We are also proud to support many different Robinvale community and sporting clubs and programs. Our people We have provided over 50 staff with the opportunity to undertake a traineeship in either irrigation or horticulture. Courses are being delivered by the Sunraysia Institute of TAFE and have been designed to meet our training needs. This year Rural Ambulance Victoria trained over 70 staff in Level III First Aid. This gives us the highest concentration of Level III First Aiders in any business in Victoria. Our environment Caring for our environment is an integral part of orchard management processes. Two key components of this commitment to the environment are water management and wildlife management. In terms of water management, Select Harvests ensures that water is used in the most efficient manner possible. This involves maximizing the amount of water used by the trees and minimizing any wastage and any negative environmental impacts. Our water management processes also extends to supporting efficient river flows. In order to continue to improve our water efficiency, we are continuing to invest in significant research trials. Our Wildlife Management Plan is also very important, as we recognize the imperative of ecological sustainability. In this regard, we are active in developing methods that preserve habitat for native wildlife by incorporating wildlife corridors linking feeding with breeding grounds alongside our orchards, and taking other measures to protect wildlife and the environment. We are committed to minimising harm and optimising benefits to wildlife, within the goal of producing sustainable commercial crops. To this end, we are undertaking a major research project with the Charles Sturt University. This project is also being supported by the Victorian, New South Wales and South Australian governments. The purpose of the research is to understand how we can maximise production and conservation outcomes. This project will involve a case study around the Regent Parrot. The key objectives of the project are to: • Identify sustainable orchard management practices that balance the needs of commercial horticulture and wildlife • Assess and monitor current and future populations of Regent Parrots • Study the Regent Parrot’s behaviour and food sources, evaluating methods to minimise damage to the almond crop • Examine orchard layout to identify if it is possible to change orchard development in the future to reduce crop damage by birds. 14 Select Harvests Annual Report 2008 Statistical summary SELECT HARVESTS CONSOLIDATED RESULTS FOR YEARS ENDED 30 JUNE 2008 2007 2006 2005 2004 2003 Total sales 224,655 229,498 217,866 173,864 127,381 80,994 Earnings before interest and tax 27,119 40,549 38,369 33,069 23,836 Operating profit before tax Net profit after tax Earnings per share (Basic) Return on shareholders’ equity Dividend per ordinary share Special dividend per ordinary share Dividend franking Dividend payout ratio Financial ratios Net tangible assets per share Net interest cover Debt/equity ratio Current asset ratio Balance sheet data as at 30 June Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Net assets Shareholders’ equity Share capital Reserves Retained profits Total shareholders’ equity Other data as at 30 June Fully paid shares Number of shareholders Select Harvests’ share price - close Market capitalization $ ‘000 (except where indicated) 17,421 16,110 25,384 40,014 37,903 31,802 22,587 18,130 28,098 26,492 22,104 15,225 10,962 (cents) (%) (cents) (cents) (%) (%) (%) (times) (%) (times) 46.7 19.3 45.0 - 100 96.4 1.41 15.6 54.0 0.87 71.0 29.4 57.0 - 100 80.0 1.57 75.8 1.7 1.32 67.1 26.1 53.0 10.0 100 80.0 1.83 82.3 1.3 1.82 56.9 25.1 42.0 - 100 75.4 1.52 26.2 1.0 1.52 40.0 19.2 26.0 - 100 65.7 1.35 19.1 10.2 1.70 31.3 18.3 18.5 - 100 62.8 1.08 13.3 15.4 1.61 77,014 70,983 72,455 58,832 32,486 25,077 118,934 89,170 79,421 78,676 74,469 60,672 195,948 160,153 151,876 137,508 106,955 85,749 88,162 53,680 39,905 38,757 19,077 15,581 13,715 10,969 10,490 10,656 8,610 10,162 101,877 64,649 50,395 49,413 27,687 25,743 94,071 95,504 101,481 88,095 79,268 60,006 44,375 41,953 52,665 46,925 43,940 36,206 11,235 11,273 12,691 13,766 38,461 42,278 36,125 27,404 14,191 21,137 9,458 14,342 94,071 95,504 101,481 88,095 79,268 60,006 (000) 39,009 38,739 39,708 39,069 38,525 35,455 3,319 2,953 3,369 2,999 2,413 2,054 ($) 6.00 11.60 13.02 9.70 6.67 4.80 234,054 449,372 516,998 378,970 256,965 170,184 Select Harvests Annual Report 2008 15 Financial report contents Directors’ report Auditors independence declairation Corporate governance statement Income statements Balance sheets Statements of changes in equity Cash fl ow statements Notes to the fi nancial statements 1. Summary of significant accounting policies 2. Financial risk management 3. Critical accounting estimates and judgements 4. Revenue 5. Expenses 6. 7. Discontinued operations 8. Dividends paid or provided for on ordinary shares 9. Cash and cash equivalents Income tax 10. Receivables (current) 11. Inventories (current) 12. Derivative financial instruments (current) 13. Receivables (non current) 14. Other financial assets (non current) 15. Property, plant and equipment 16. Deferred tax assets 17. Biological assets – almond trees 18. Intangibles 19. Trade and other payables (current) 20. Interest bearing liabilities (current) 21. Provisions (current) 22. Trade and other payables (non current) 23. Interest bearing liabilities (non current) 24. Deferred tax liabilities (non current) 25. Provisions (non current) 26. Contributed equity 27. Reserved and retained profits 28. Reconciliaton of the net profit after income tax to the net cash flows from operating activities 29. Expenditure commitments 30. Events occuring after balance date 31. Earnings per share 32. Remuneration of directors and key management personnel 33. Remuneration of auditors 34. Related party disclosures 35. Segment information 36. Interest rate risk 37. Controlled entities 38. Employee benefits 39. Contingent liabilities Directors’ declaration Independent auditor’s report ASX additional information Corporate information 17 29 30 36 37 38 39 40 40 49 52 53 53 54 55 56 56 57 58 58 59 60 60 62 62 63 64 64 65 65 65 67 67 67 68 70 71 72 72 73 77 77 79 81 82 82 84 85 86 88 90 16 Select Harvests Annual Report 2008 Directors’ report The directors present their report together with the financial report of Select Harvests Limited and controlled entities (referred to hereafter as the “consolidated entity”) for the year ended 30 June 2008. Directors The qualifications, experience and special responsibilities of each person who has been a director of Select Harvests Limited at any time during or since the end of the financial year is provided below, together with details of the company secretary as at the year end. Directors were in office for this entire period unless otherwise stated. Names, qualifi cations, experience and special responsibilities J C Leonard, B.Mktng & Bus. Admin, MBA (Chairman) Joined the Board on 21 July 2004. Has held senior management positions with the Mars group of companies in Australia including General Manager of Mars Confectionery, Managing Director of Uncle Ben’s, and Managing Director of Mars Australia and New Zealand. In addition, he has served as President, Asia Pacific of all Mars businesses, and a Director of the Managing Board of Mars Incorporated global business. Is a Director of Patties Foods Limited. Member of the Audit and Risk Committee, and Nomination Committee. Since the end of the financial year, was elected Chairman of the Board, effective 15 August 2008, and became a member of the Remuneration Committee. Interest in Shares and Options: 581,779 fully paid shares M A Fremder (Non-Executive Director) Joined the board in March 1996 and from that time was Chairman of The Board until retiring from this position on 15 August, 2008. Formerly a director of IAMA Limited, and founder of Nufarm, one of Australia’s largest chemical manufacturers for the rural industry. Mr Fremder also was a Non-Executive Director of Tassal Limited between 3 October 2003 and 18 March 2005. Member of the Remuneration Committee and Chairman of the Nomination Committee. Interest in Shares and Options: 5,777,234 fully paid shares. J Bird (Managing Director) Became the CEO of Select Harvests Limited in January 1998. Has had many years’ experience in the food industry and international trade. Formerly Managing Director of Jorgenson Waring Foods. Appointed Managing Director and joined the Board in September 2001. Member of the Nomination Committee. Interest in Shares and Options: 619,522 fully paid shares, 46,134 options expiring 31 October 2008 exercisable at $11.05 each. G F Dan O’Brien, BSc, B VMS, MBA (Non-Executive Director) Joined the Board on 29 March 2004. Dan is the principal of Dromoland Capital, a private equity group, non- executive director of Thomas & Coffey Limited, and is also the Chairman of Hexima Limited. Mr O’Brien has significant commercial experience having held CEO positions for BIL Australia Limited, Mattel Asia Pacific, and The King Island Company. He holds an MBA, having graduated with distinction from Harvard Business School and is a qualified veterinary surgeon. Member of the Audit and Risk Committee, Chairman of the Remuneration Committee, and member of the Nomination Committee. Mr O’Brien was a director of SPC Ardmona Limited between 9 January 2002 and 4 March 2005, and a director of Coates Hire Limited between 15 September 2003 and 9 January 2008. Interest in Shares and Options: 54,769 fully paid shares. R M Herron, FCA & FAICD (Non-Executive Director) Joined the Board on 27 January 2005. A Chartered Accountant, Mr Herron retired as a Senior Partner of PricewaterhouseCoopers in December 2002. He was a member of the Coopers & Lybrand (now PricewaterhouseCoopers) Board of Partners where he was National Deputy Chairman and was the Select Harvests Annual Report 2008 17 Directors’ report Melbourne office Managing Partner for six years. He also served on several international committees within Coopers & Lybrand. He is a Non-Executive Director of GUD Holdings Ltd, Heemskirk Consolidated Ltd, Royal Automobile Club Of Victoria (RACV) Ltd and a major industry superannuation fund. Chairman of the Audit and Risk Committee, and member of the Nomination Committee. Interest in Shares and Options: 8,772 fully paid shares. C G (Sandy) Clark, B.Comm, Dip.Ag.Econ, FAICD (Non Executive Director) Joined the board in January 1998. Is currently Chairman, Aviva Australia Holdings Limited; Chairman, The Myer Family Office Limited; Director, Southern Cross Broadcasting Australia Ltd; Director, The Myer Foundation; Trustee, The William Buckland Foundation; Chairman of Council, Melbourne Grammar School; and a director of a number of private companies. Appointed Chairman of Brown Brothers Holdings from 14 June 2007. Former Deputy Chairman of Legal Practice Board of Victoria and former Director of CGNU Australia Holdings Limited. Member of the Audit and Risk Committee and the Nomination Committee, and Chairman of the Remuneration Committee. Interest in Shares and Options: 23,892 fully paid shares. Resigned as a Director on 31 January, 2008. P Chambers, BSc Hons, ACA (Chief Financial Officer and Company Secretary) Joined Select Harvests as Chief Financial Officer and Company Secretary in September 2007. He is a Chartered Accountant and has over 20 years’ experience in senior financial management roles in Australian and European organisations, including corporate positions with the Fosters Group. Most recently, was CFO of Henkel Australia and New Zealand. Interest in shares and options: 0 fully paid shares. Corporate information Nature of operations and principal activities The principal activities during the year of entities within the consolidated entity were: • Processing, packaging, marketing and distribution of edible nuts, dried fruits, seeds, and a range of natural health foods, and • The growing, processing and sale of almonds to the food industry from company owned almond orchards, the provision of management services to external owners of almond orchards, including orchard development, tree supply, farm management, land rental and irrigation infrastructure, and the marketing and selling of almonds on behalf of external investors. There were no other significant changes in the nature of the activities of the consolidated entity in the financial year. There were no other significant changes in the nature of the activities of the consolidated entity in the previous financial year. Employees The consolidated entity employed 337 full time employees as at 30 June 2008 (2007: 340 employees). Review and results of operations Profit attributable to the members of Select Harvests Limited for the year ended 30 June 2008 was $18.1 million compared to $28.1 million in 2007. 2008 includes before tax costs of $3.0 million for temporary water purchases and $1.8 million for restructuring costs. For additional information refer to the announcement lodged with the ASX and the report before Appendix 4E. 18 Select Harvests Annual Report 2008 Directors’ report Signifi cant changes in the state of affairs No significant changes in the state of affairs of the consolidated entity occurred during the financial year. Signifi cant events after the balance date On 20 August 2008, the Directors declared a fully franked final dividend of 23 cents per ordinary share to be paid on 1 October 2008 to shareholders registered at 5.00 pm on 10 September 2008. On 15 August, 2008, Mr Max Fremder retired as Chairman of The Board of Directors, succeeded by Mr Curt Leonard, formerly the Deputy Chairman. No other matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the consolidated entity, the results of those operations, or the state of affairs of the consolidated entity in future financial years. Likely developments and expected results For comments on the outlook period refer to the announcement lodged with the ASX and the report before Appendix 4E. Environmental regulation and performance The consolidated entity’s operations are subject to environmental regulations under laws of the Commonwealth or of a State or Territory. Details of the consolidated entity’s performance in relation to such environmental regulations follows: The consolidated entity holds licences issued by the Environmental Protection Authority which specify limits for discharges to the environment which are the result of the consolidated entity’s operations. These licences regulate the management of discharge to the air and stormwater run off associated with the operations. There have been no significant known breaches of the consolidated entity’s licence conditions. The company takes its environmental responsibilities seriously, has a good record in environmental management to date, and adheres to environmental plans that preserve the habitat of native species. Almond developments have had a positive environmental impact. The change in land use and the increase in food source have seen a rejuvenation of remnant native vegetation and an increase in the wildlife population, in particular bird species. The company has committed funding to the monitoring of Regent parrot populations around our orchards and the effectiveness of protecting native vegetation corridors in preserving wildlife. Remuneration report A. Principles used to determine the nature and amount of remuneration Remuneration levels are set to attract and retain appropriately qualified and experienced directors and senior executives. The Remuneration Committee may obtain independent advice on the appropriateness of remuneration packages, given trends in the marketplace. Remuneration packages include a mix of fixed remuneration, performance based remuneration and equity based remuneration. Non-executive directors receive fees and do not receive options or bonus payments. Further details regarding components of directors’ and executive remuneration are provided in Note 32 to the financial statements. (i) Short-term incentives Executive directors and senior executives may receive short term incentives based on achievement of specific business plans and performance indicators, which include financial and operational targets relevant to performance at the consolidated entity level, divisional level, or functional level, as applicable, for the financial year. The Remuneration Committee is responsible for assessing whether the KPIs are met based on detailed reports on performance prepared by management. Select Harvests Annual Report 2008 19 Directors’ report (ii) Long-term incentives In addition, the company offers executive directors and senior executives the opportunity to participate in the long-term incentive scheme involving the issue of options to the employee under the executive share option scheme. The executive share option scheme provides for the offer of a parcel of options to participating employees on an annual basis, with a three-year expiry period, exercisable at the market price set at the time the offer was made. The options are granted annually in three tranches upon achievement of a 10% increase in EPS. The Remuneration Committee is responsible for assessing whether the targets are met based on reports prepared by management. B. Details of remuneration Details of the remuneration of the directors and the key management personnel as defined in AASB 124 Related Party Disclosures of Select Harvests Limited and the consolidated entity are set out in the following tables. The key management personnel of the consolidated entity includes the directors as listed above and the following executive officers, which also includes the 5 highest paid executives of the consolidated entity: NAME K Bush POSITION EMPLOYER Group Manager Sales & Marketing (resigned 20 May 2008) Select Harvests Food Products Pty Ltd M Bartholomew Group Manager Sales & Marketing (commenced 20 May 2008) Select Harvests Food Products Pty Ltd K Martin Group Operations Manager Select Harvests Limited T Millen Group Horticultural & Farm Operations Manager Kyndalyn Park Pty Ltd R Palmaricciotti Chief Financial Officer & Company Secretary (resigned 9 September 2007 ) Select Harvests Limited L Van Driel Group Trading Manager Select Harvests Food Products Pty Ltd P Chambers Chief Financial Officer & Company Secretary (commenced 9 September 2007 ) Select Harvests Limited The nature and amount of each major element of the remuneration of each director of the Company and each of the key management personnel of the company and the consolidated entity for the financial year is detailed below. REMUNERATION OF DIRECTORS OF SELECT HARVESTS LIMITED 2008 ANNUAL REMUNERATION LONG TERM REMUNERATION BASE FEE $ SHORT TERM INCENTIVES $ NON CASH BENEFITS $ SUPER CONTRIBUTIONS $ LONG SERVICE LEAVE ACCRUED $ OPTIONS GRANTED NUMBER VALUE $ TOTAL $ 109,000 29,167 50,000 50,000 50,000 - - - - - - - - - - - 2,625 4,500 4,500 4,500 - - - - - - - - - - - - - - - 109,000 31,792 54,500 54,500 54,500 532,457 98,000 36,737 56,538 23,334 56,867 72,799 819,865 Non Executive M A Fremder C G Clark* G F Dan O’Brien J C Leonard R M Herron Executive J Bird 20 Select Harvests Annual Report 2008 Directors’ report 2007 ANNUAL REMUNERATION LONG TERM REMUNERATION BASE FEE $ SHORT TERM INCENTIVES $ NON CASH BENEFITS $ SUPER CONTRIBUTIONS $ LONG SERVICE LEAVE ACCRUED $ OPTIONS GRANTED NUMBER VALUE $ TOTAL $ Non Executive M A Fremder C G Clark* G F Dan O’Brien J C Leonard R M Herron Executive J Bird 103,000 50,000 50,000 50,000 50,000 - - - - - - - - - - 6,000 4,500 4,500 4,500 4,500 - - - - - - - - - - - - - - - 109,000 54,500 54,500 54,500 54,500 474,319 267,462 36,737 42,792 18,000 86,067 101,999 941,309 * Resigned from the role of Director 31 January 2008. REMUNERATION OF THE KEY MANAGEMENT PERSONNEL OF THE COMPANY AND THE CONSOLIDATED ENTITY 2008 ANNUAL REMUNERATION LONG TERM REMUNERATION BASE FEE $ SHORT TERM INCENTIVES $ NON CASH BENEFITS $ SUPER CONTRIBUTIONS $ K Bush (Resigned 20.5.08) M Bartholomew (Commenced 20.5.08) K Martin L Van Driel T Millen 243,431 20,000 26,833 - 233,945 12,250 - - - 181,696 30,000 5,172 142,468 20,000 45,694 R Palmaricciotti (Resigned 9.9.07) P Chambers (Commenced 9.9.07) 57,949 198,777 - - 6,053 33,670 2,415 22,158 18,745 14,541 4,337 - 17,890 LONG SERVICE LEAVE ACCRUED $ OPTIONS GRANTED NUMBER VALUE $ - - - - - - - - - TOTAL $ 297,101 29,248 268,353 5,322 4,491 8,767 5,533 12,045 252,980 8,037 235,231 - - - - - - 68,339 216,667 Select Harvests Annual Report 2008 21 Directors’ report 2007 ANNUAL REMUNERATION LONG TERM REMUNERATION SHORT TERM INCENTIVES $ NON CASH BENEFITS $ SUPER CONTRIBUTIONS $ BASE FEE $ 173,538 104,893 - - - - 148,095 50,000 20,689 130,117 20,000 44,712 107,986 - 2,806 134,908 55,337 18,830 8,563 LONG SERVICE LEAVE ACCRUED $ - - 5,000 5,000 - - OPTIONS GRANTED NUMBER VALUE $ - - - - TOTAL $ 200,538 114,333 12,667 7,333 - 15,945 252,883 9,837 221,562 - 120,511 26,200 30,810 248,448 27,000 9,440 13,154 11,896 9,719 K Bush (Commenced 25.9.06) K Martin (Commenced 16.1.07) L Van Driel T Millen R Palmaricciotti (Commenced 14.12.06) M Mattia (Resigned 21.12.06) Notes The terms ‘director’ and ‘officer’ have been treated as mutually exclusive for the purposes of this disclosure. The elements of remuneration have been determined on the basis of the cost to the company and the consolidated entity. Options granted as part of remuneration have been valued using the Black-Scholes option pricing model, which takes account of factors such as the option exercise price, the current level and volatility of the underlying share price and the time to maturity of the option. Key management personnel are those directly accountable and responsible for the operational management and strategic direction of the Company and the consolidated entity. C. Service arrangements Service arrangements between the consolidated entity and executive directors and key management personnel are on a continuing basis and include, in certain cases, relevant notice periods. There are no specific termination benefits applicable to the service arrangements. J Bird, Managing Director • Term of Agreement – on-going agreement • Base salary, inclusive of superannuation for the year ended 30 June 2008 of $610,500. M Bartholomew, Group Manager Sales and Marketing • Term of Agreement – on-going agreement, with 3 month notice period • Base salary, inclusive of superannuation for the year ended 30 June 2008 of $250,000. K Martin, Group Operations Manager • Term of Agreement – on-going agreement, with 3 month notice • Base salary, inclusive of superannuation for the year ended 30 June 2008 of $255,000. T Millen, Group Horticultural and Farm Operations Manager • Term of Agreement – on-going agreement • Base salary, inclusive of superannuation for the year ended 30 June 2008 of $200,000. 22 Select Harvests Annual Report 2008 Directors’ report P Chambers, Chief Financial Officer & Company Secretary • Term of Agreement – on-going agreement, with 3 month notice period • Base salary, inclusive of superannuation for the year ended 30 June 2008 of $260,000. L Van Driel, Group Trading Manager • Term of Agreement – on-going agreement • Base salary, inclusive of superannuation for the year ended 30 June 2008 of $200,000. D. Share-based compensation (i) Executive share option scheme The current executive share option scheme provides for the offer of a parcel of options to participating employees on an annual basis, with a three year expiry period, exercisable at the market price at the time the offer was made. Individual parcels of options offered to participating employees are based on a percentage of fixed remuneration. The options are granted annually in three tranches on achievement of a 10% increase in EPS. Options granted as remuneration are subject to continuing service with the consolidated entity. Options granted as remuneration are valued at grant date in accordance with AASB 2 Share-based Payments. No options previously granted as remuneration have lapsed during the year. The assessed fair value at offer date is determined using a Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at offer 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 model inputs for options offered during the year ended 30 June 2008 included: a) options are granted for no consideration, have a three year life, and one third of the options offered vest in each year and are exercisable from the date of vesting to the expiry date b) exercise price: $9.74 (2007 – $13.13) c) offer date: 21 September 2007 (2007 – 22 September 2006) d) expiry date: 28 October 2010 (2007 – 31 October 2009) e) Volume weighted average share price at offer date: $9.43 (2007 – $13.09) f) expected price volatility of the company’s shares: 28% (2007 – 49.4%) g) expected dividend yield: 5.8% (2007 – 4.05%) h) risk free interest rate: 6.19% (2007 – 5.89%) THE FOLLOWING TABLE IS A SUMMARY OF THE EXECUTIVE SHARE OPTION SCHEMES CURRENTLY IN PLACE 2005 Offer 2006 Offer 2007 Offer Total I G N T A P C T R A P I I S E E Y O L P M E 4 4 7 I N O T A U L A V I N O T P O $1.72 $3.57 $1.48 I E C R P E S I C R E X E I S N O T P O F O . O N D E R E F F O I S N O T P O F O O N . I G N T A P I I C T R A P O T D E R E F F O S E E Y O L P M E E T A D Y R I P X E 6 0 T S U G U A D E T N A R G 7 0 T S U G U A D E T N A R G $11.05 153,300 101,200 31/10/08 33,732 33,734 $13.13 68,095 57,798 31/10/09 $9.74 238,429 238,429 28/10/10 - - - - R A E Y G N R U D I D E T I E F R O F - - E C N A L A B 33,734 57,798 27,872 210,557 459,824 397,427 33,732 33,734 27,872 302,089 Select Harvests Annual Report 2008 23 Directors’ report (ii) Options granted During or since the end of the financial year, the Company granted options over unissued ordinary shares to the executive director and the following key management personnel of the Company as part of their remuneration. NUMBER OF OPTIONS GRANTED 2008 NUMBER OF OPTIONS GRANTED 2007 Director J Bird Key management personnel M Mattia (departed 21 December 2006) W Turner (departed 13 July 2006) L Van Driel T Millen R Tanti (departed 21 July 2006) (iii) Shares issued on exercise of options 56,867 - - 8,767 5,533 - 86,067 26,200 18,600 12,667 7,333 13,867 Details of ordinary shares in the company provided as a result of the exercise of remuneration options to each director of the consolidated entity and other key management personnel are set out below. NUMBER OF SHARES ISSUED ON EXERCISE OF OPTIONS 2008 NUMBER OF SHARES ISSUED ON EXERCISE OF OPTIONS 2007 Director J Bird Key management personnel M Mattia (departed 21 December 2006) W Turner (departed 13 July 2006) L Van Driel T Millen R Tanti (departed 21 July 2006) 101,400 - - 12,300 6,000 - 87,600 26,200 18,600 3,900 5,400 21,267 The amounts paid per ordinary share by each director and other key management personnel on the exercise of options at the date of exercise were as follows. NUMBER OF SHARES AMOUNT PAID ON EACH SHARE 119,700 $7.78 There were no amounts unpaid on the shares issued. E. Additional information (i) Principles used to determine the nature and amount of remuneration: relationship between remuneration and company performance The overall level of executive reward takes into account the performance of the consolidated entity over a number of years, with greater emphasis given to the current year. Over the past 5 years, the consolidated entity’s profit from ordinary activities after income tax has grown at an average rate of 15% per annum and shareholder return has grown at an average rate of 12%. The EPS has grown at an average rate of 12% over the last 5 years. 24 Select Harvests Annual Report 2008 Directors’ report (ii) Details of remuneration: cash bonuses and options For each cash bonus and grant of options included above, the percentage of the available bonus or grant that was paid, or that vested, in the financial year, and the percentage that was forfeited because the person did not meet the service and performance criteria is set out below. No part of the bonuses is payable in future years. No options will vest if the conditions are not satisfied hence the minimum value of the option yet to vest is nil. The maximum value of the options yet to vest has been calculated based on the option price. CASH BONUS OPTIONS FINANCIAL YEARS IN WHICH OPTIONS MAY VEST MINIMUM TOTAL VALUE OF GRANT YET TO VEST ($) MAXIMUM TOTAL VALUE OF GRANT YET TO VEST ($) VESTED % FORFEITED % PAID % FORFEITED % J Bird 100 L Van Driel 100 T Millen 100 K Martin 100 P Chambers - K Bush 100 - - - - - - YEAR GRANTED 2005 2006 2007 66 - - 2005 66 2006 2007 - - 2005 66 2006 2007 2007 2007 2007 - - - - - - - - - - - - - - - - 100% 2008 2009 2008 2009 2008 2009 2010 2008 2009 2008 2009 2008 2009 2010 2008 2009 2008 2009 2008 2009 2010 2008 2009 2010 2008 2009 2010 - - - - - - - - - - - - - - - - - - - - - - - - 39,674 131,251 152,625 8,027 27,000 30,000 6,077 27,838 30,000 38,251 39,000 - Select Harvests Annual Report 2008 25 Directors’ report (iii) Share based compensation: options NAME REMUNERATION CONSISTING OF OPTIONS A Directors VALUE GRANTED VALUE EXERCISED VALUE LAPSED TOTAL VALUE B C J Bird 25% $72,799 $99,372 Key Management Personnel T Millen L Van Driel 15% 15% $8,037 $12,045 $5,880 $12,054 D - - - $79,350 $12,154 $16,054 A - The percentage of the value of remuneration consisting of options, based on the value at grant date set out in column B B – The value at grant date calculated in accordance with AASB2 Share-based payments of options granted during the year as part of remuneration. C – The value at exercise date of options that were granted as part of remuneration and were exercised during the year. D – The value at lapsed date of options that were granted as part of remuneration and that lapsed during the year. (iv) Loans to directors and executives Information on loans to directors and executives (if any), are set out in Note 34. (v) Share options granted to directors and the most highly remunerated officers Options over unissued ordinary shares of Select Harvests Limited granted and not exercised during or since the end of the financial year to the five most highly remunerated officers of the company as part of their remuneration were as follows: NAME J Bird T Millen L Van Driel OPTIONS GRANTED & NOT EXERCISED 46,134 7,066 9,334 The options were granted under the consolidated entity’s executive share option scheme on 24 August 2005. Details of options granted to the directors and the five most highly remunerated officers of the consolidated entity can be found above. No options have been granted since the end of the financial year. (vi) Unissued ordinary shares under option At the date of this report unissued ordinary shares of the company under option are: OFFER 2005 NUMBER OF SHARES EXERCISE PRICE EXPIRY DATE 67,468 $11.05 31 October 2008 All options expire on the earlier of their expiry date or termination of the employee’s employment. Current option holders do not have any right, by virtue of the option, to participate in any share issue of the company or any related body corporate. 26 Select Harvests Annual Report 2008 Directors’ report Dividends – Select Harvests Limited DIVIDENDS Final dividends proposed and not recognised as a liability (payable on 1 October, 2008): CENTS 2008 $ • on ordinary shares 23.0 8,972,053 Fully Franked Dividends paid in the year (paid on 3 April, 2007): Interim for the year • on ordinary shares Final for 2007 shown as recommended in the 2007 report (payable on 1 October, 2007): • on ordinary shares 22.0 8,555,751 17,527,804 35.0 13,558,666 Indemnifi cation and insurance of directors and offi cers During the year the Company has paid a premium of $20,647 in respect to an insurance contract to indemnify directors and officers against liabilities that may arise from their position as directors and officers of the Company and its controlled entities. Officers indemnified include the Company Secretary, all directors, and executive officers participating in the management of the Company and its controlled entities. Directors’ meetings The number of meetings of directors (including meetings of committees of directors) held during the financial year and the number of meetings attended by each director were as follows: DIRECTORS’ MEETINGS AUDIT AND RISK REMUNERATION NOMINATION NUMBER ELIGIBLE TO ATTEND NUMBER ATTENDED NUMBER ELIGIBLE TO ATTEND NUMBER ATTENDED NUMBER ELIGIBLE TO ATTEND NUMBER ATTENDED NUMBER ELIGIBLE TO ATTEND NUMBER ATTENDED MEETINGS OF COMMITTEES M A Fremder J Bird C G Clark G F Dan O’Brien J C Leonard R M Herron 12 12 7 12 12 12 12 12 6 9 11 12 - - 2 4 4 4 - - 1 4 4 4 1 - 1 1 - - 1 - 1 1 - - 1 1 - 1 1 1 1 1 - 1 1 1 Select Harvests Annual Report 2008 27 Directors’ report Committee membership During or since the end of the financial year, the company had an Audit and Risk Committee, a Remuneration Committee, and a Nomination Committee comprising members of the Board of Directors. Members acting on the committees of the Board during or since the end of the financial year were: Remuneration Audit and Risk R M Herron (Chairman) GF Dan O’Brien (Chairman) GF Dan O’ Brien MA Fremder J C Leonard C G Clark * CG Clark* JC Leonard *CG Clark resigned as a Director on 31 January 2008 Nomination MA Fremder (Chairman) J Bird GF Dan O’Brien RM Herron JC Leonard Directors’ interests in contracts Directors’ interest in contracts are disclosed in Note 34 to the financial statements 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 14. Non-audit services Non-Audit services are approved by resolution of the Audit and Risk Committee and approval is provided in writing to the board of directors. Non-audit services provided by the auditors of the consolidated entity during the year are detailed in Note 33. The directors are satisfied that the provision of the non-audit services during the year by the auditor is compatible with the general standard of independence for auditors imposed by Corporations Act 2001 as non-audit services are reviewed by the Audit & Risk Committee to ensure they do not impact the impartiality and objectivity of the auditor. Rounding The amounts contained in this report and in the financial report have been rounded to the nearest $1,000 (where rounding is applicable) under the option available to the company under ASIC Class Order 98/100. The Company is an entity to which the Class Order applies. Proceedings on behalf of the company There are no material legal proceedings in place on behalf of the company as at the date of this report. Corporate governance In recognising the need for the highest standards of corporate behaviour and accountability, the directors of Select Harvests Limited support and have adhered to the ASX principles of corporate governance. The Company’s corporate governance statement is contained in detail in the corporate governance section of this annual report. This report is made in accordance with a resolution of the directors. J C Leonard Chairman Melbourne, 20 August 2008 28 Select Harvests Annual Report 2008 Select Harvests Annual Report 2008 29 Corporate governance statement This statement outlines the key corporate governance practices of the consolidated entity which considers the ASX Principles of Good Corporate Governance and Best Practice Recommendations issued by the ASX Corporate Governance Council. During the reporting period, the company has been compliant with the ASX Guidelines. These principles are: Principle 1– Lay solid foundations for management and oversight Principle 2 – Structure the Board to add value Principle 3 – Promote ethical and responsible decision making Principle 4 – Safeguard integrity in financial reporting Principle 5 – Make timely and balanced disclosure Principle 6 – Respect the right of shareholders Principle 7 – Recognise and manage risk Principle 8 – Encourage enhanced performance Principle 9 – Remunerate fairly and responsibly Principle 10 – Recognise the legitimate interests of shareholders The statements set out below are referred to the above Principles as applicable. Board of Directors and its Committees The role of the Board and Board Processes set out below are with reference to Principle 1, lay solid foundations for management and oversight. Role of the Board The Board of Directors of Select Harvests Limited is responsible for the overall corporate governance of the consolidated entity. The Board guides and monitors the business and affairs of Select Harvests Limited on behalf of the shareholders by whom they are elected and to whom they are accountable. Details of the Board’s charter are located on the company’s website. The Board seeks to identify the expectations of the shareholders, as well as other regulatory and ethical expectations and obligations. In addition, the Board is responsible for ensuring that management’s objectives and activities are aligned with the expectations and risks identified by the Board and ensuring arrangements are in place to adequately manage those risks. To ensure that the Board is well equipped to carry out its responsibilities it has established guidelines for the nomination and selection of Directors and for the operation of the Board. The Board has delegated responsibility for the operation and administration of the company to the Managing Director and the executive management team. The Board ensures that this team is appropriately qualified and experienced to carry out its responsibilities and has in place procedures to assess the performance of the Managing Director and the executive management team. Board processes To assist in the execution of its responsibilities, the Board has established a Remuneration Committee, and an Audit and Risk Committee. The Board also performs, as part of its function, the role of Nomination Committee. These Committees have written charters, which are reviewed on a regular basis and are located on the company’s website. The Board has also established a framework for the management of the consolidated entity. 30 Select Harvests Annual Report 2008 Corporate governance statement The full Board holds twelve scheduled meetings each year, plus any additional meetings at such other times as may be necessary to address any specific matters that may arise. The agenda for meetings is prepared and includes the Managing Director’s report, financial reports, business segment reports, strategic matters, governance and compliance. Submissions are circulated in advance. Executives are involved in Board discussions where appropriate, and Directors have other opportunities, including visits to operations, for contact with a wider group of employees. Set out below, Director Education, Independent Advice and Access to Company Information, Composition of The Board and the Nomination Committee, make reference to Principle 2 – Structure the Board to add value. Director Education The consolidated entity has a process to educate new Directors about the nature of the business, current issues, the corporate strategy, and the expectations of the consolidated entity concerning performance of Directors. Directors also have the opportunity to visit the facilities of the consolidated entity and to meet with management to gain a better understanding of business operations. Directors are able to access continuing education opportunities to update and enhance their skills and knowledge. Independent professional advice and access to company information Each Director has the right of access to all relevant company information and to the Company’s executives and, subject to prior consultation with the Chairman, may seek independent professional advice at the consolidated entity’s expense. Composition of the Board The names of the Directors of the company in office at the date of this report are set out in the Directors’ report. The composition of the Board is determined in accordance with the following ASX principles: • The Board should comprise at least four Directors; • The Board should maintain a majority of independent non-executive Directors; • The Chairperson must be a non-executive Director; and • The Board should comprise Directors with an appropriate range of qualifications, skills and experience. The Board assesses the independence of each Director in light of interests known to the Board, as well as those disclosed by each Director. In accordance with the ASX Corporate Governance Council’s recommendations, the Board wishes to outline the following: • A non – executive Director of the Company, Mr M A Fremder, is a substantial shareholder, having a 14.8% shareholding at 30 June 2008. • A non – executive Director of the Company, Mr M A Fremder, owns (directly or indirectly) almond orchards totalling 2,053 acres in respect to which the consolidated entity provides orchard management services under contract at market rates. • The Chairman of the Company, Mr J C Leonard, owns (directly or indirectly) almond orchards totalling 1,753 acres in respect to which the consolidated entity provides orchard management services under contract at market rates • A non-executive Director of the Company, Mr Dan O’Brien, acquired from Select Harvests, via an associated entity, $89,344 worth of Almond Hull suitable for livestock feed. This was purchased at market prices. Select Harvests Annual Report 2008 31 Corporate governance statement Nomination Committee The Board of Directors, as one of its important functions, performs the role of Nomination Committee. The Board’s role as Nomination Committee is to ensure that the composition of the Board of Directors is appropriate for the purpose of fulfilling its responsibilities to shareholders. The duties and responsibilities of the Board in its role as Nomination Committee are as follows: • To access and develop the necessary and desirable competencies of Board members; • To develop and review Board succession plans; • To evaluate the performance of the Board; • To recommend to the Board, the appointment and removal of Directors; and • Where a vacancy exists, to determine the selection criteria based on the skills deemed necessary and to identify potential candidates with advice from external consultants. The Chairman of the Board evaluates the performance of each Board member annually in the last quarter of each financial year. The Chairman of the Audit Committee reviews the performance of the Chairman of the Board in the same period. The performance of each Board member is reviewed against the Board charter and any specific objectives agreed and set by the Board for the consolidated entity. The Nomination Committee meets annually unless otherwise required. The Committee met once during the financial year and the Committee members’ attendance record is disclosed in the table of Directors’ meetings. The members of the Nomination Committee are disclosed in the Directors’ Report. Further details of the Nomination Committee’s charter are available on the Company’s website. The statements set out below in relation to Remuneration, the Remuneration Committee and Remuneration Policies are with reference to Principle 8, Encourage enhanced performance, and Principle 9, Remunerate fairly and responsibly. Remuneration Remuneration Committee The Remuneration Committee reviews and makes recommendations to the Board on remuneration packages and policies applicable to the Managing Director, senior executives and the Directors themselves. It evaluates the performance of the Managing Director and is also responsible for share option schemes, incentive performance packages, superannuation entitlements and fringe benefits policies. Remuneration levels are reviewed annually and the Remuneration Committee may obtain independent advice on the appropriateness of remuneration packages, given trends in the marketplace. The members of the Remuneration Committee are disclosed in the Directors’ Report. The Managing Director is invited to Remuneration Committee meetings as required to discuss senior executives’ performance and remuneration packages. The Remuneration Committee meets once a year or as required. The Committee met once during the financial year and the Committee members’ attendance record is disclosed in the table of Directors’ meetings. Further details of the Remuneration Committee’s charter are available on the company’s website. Remuneration Policies Remuneration levels are set to attract and retain appropriately qualified and experienced Directors and senior executives. The Remuneration Committee may obtain independent advice on the appropriateness of remuneration packages, given trends in the marketplace. Remuneration packages include a mix of fixed remuneration, performance based remuneration, and equity based remuneration. 32 Select Harvests Annual Report 2008 Corporate governance statement Executive Directors and senior executives may receive short term incentives based on achievement of specific business plans and performance indicators, which include financial and operational targets relevant to performance at the consolidated entity level, divisional level, or functional level, as applicable, for the financial year. In addition, the consolidated entity offers executive Directors and senior executives participation in the long-term incentive scheme involving the issue of options to the employee under the executive share option scheme. The executive share option scheme provides for the offer of a parcel of options to participating employees on an annual basis, with a three-year expiry period, exercisable at the market price set at the time the offer was made. The options are granted annually in three tranches on achievement of the performance hurdles. Non-executive Directors do not receive any performance related remuneration. Set out below are statements in relation to the Audit and Risk Committee and Risk Management, with reference to Principle 7, Recognise and Manage Risk, and Principle 4, Safeguard integrity in Financial Reporting. Audit and Risk Committee The Audit and Risk Committee has a documented charter, approved by the Board. All members of the Committee are non executive Directors with a majority being independent, and the Chairman of the Audit and Risk Committee is not the Chairman of the Board of Directors. The members of the Audit and Risk Committee during the financial year are disclosed in the Directors’ Report. The external auditors, the Managing Director and Chief Financial Officer are invited to Audit and Risk Committee meetings at the discretion of the Committee, and the external auditor also meets with the Audit Committee during the year without management being present. The Committee met four times during the year and the Committee members’ attendance record is disclosed in the table of Directors’ meetings. The Managing Director and the Chief Financial Officer have provided a statement in writing to the Board that the consolidated entity’s financial reports for the year ended 30 June 2008 present a true and fair view, in all material respects, of the consolidated entity’s financial condition and operational results and are in accordance with the relevant accounting standards. This statement is required annually. Further details of the Audit and Risk Committee’s charter are available on the Company’s website. The duties and responsibilities of the Audit and Risk Committee include: • Recommending to the Board the appointment of the external auditors; • Recommending to the Board the fee payable to the external auditors; • Reviewing the audit plan and performance of the external auditors; • Determining that no management restrictions are being placed upon the external auditors; • Evaluating the adequacy and effectiveness of the reporting and accounting controls of the company through active communication with operating management and the external auditors; • Reviewing all financial reports to shareholders and/or the public prior to their release; • Evaluating systems of internal control; • Monitoring the standard of corporate conduct in areas such as arms-length dealings and likely conflicts of interest; • Requiring reports from management and the external auditors on any significant regulatory, accounting or reporting development to assess potential financial reporting interest; Select Harvests Annual Report 2008 33 Corporate governance statement • Reviewing and approving all significant company accounting policy changes; • Reviewing the company’s taxation position; • Reviewing the annual financial statements with the Chief Financial Officer and the external auditors, and recommending acceptance to the Board; • Evaluating the adequacy and effectiveness of the company’s risk management policies and procedures including insurance; and • Directing any special projects or investigations deemed necessary by the Board or by the Committee. The Audit and Risk Committee is committed to ensuring that it carries out its functions in an effective manner. Accordingly, it reviews its charter at least once in each financial year. Risk management The Board oversees the establishment, implementation, and review of a system of risk management within the consolidated entity. The consolidated entity’s areas of focus in respect of risk management practices include, but are not limited to, environment, occupational health and safety, property, financial reporting and internal control. The Board is responsible for the overall risk management and internal control framework, but recognises that no cost-effective risk management and internal control system will preclude all errors and irregularities. The Board has the following procedures in place to monitor performance and to identify areas of concern: • Strategic Planning – The Board reviews and approves the strategic plan that encompasses the consolidated entity’s strategy, designed to meet the stakeholders’ needs and manage business risk. The strategic plan is dynamic and the Board is actively involved in developing and approving initiatives and strategies designed to ensure the continued growth and success of the consolidated entity; • Financial reporting – Monthly actual results are reported against budgets approved by the Directors and revised forecasts prepared during the year; • Functional Reporting – Key areas subject to regular or periodical reporting to the Board include, but are not limited to, operational, treasury (including foreign exchange), environmental, occupational health & safety, insurance, and legal matters; • Continuous disclosure – A process is in place to identify matters that may have a material effect on the price of the Company’s securities and to notify them to the ASX; and • Investment appraisal – Guidelines for capital expenditure include annual budgets, appraisal and review procedures, due diligence requirements where businesses are being acquired or divested. The Managing Director and Chief Financial Officer have provided a statement in writing to the Board that the declaration made in respect of the consolidated entity’s financial reports is founded on a system of risk management and internal compliance and control which reflects the policies adopted to date by the Board, and that the consolidated entity’s risk management and internal control and compliance system is operating effectively in all material respects based on the criteria for effective internal control established by the Board. The statements set out below on Ethical standards, Conflict of Interest and Dealings in Company Shares are with reference to Principle 3, Promote ethical and responsible decision making, and Principle 10, Recognise the legitimate interests of stakeholders. 34 Select Harvests Annual Report 2008 Corporate governance statement Ethical Standards All Directors, managers and employees are expected to act with the utmost integrity and objectivity, striving at all times to enhance the reputation and performance of the consolidated entity. The consolidated entity’s code of conduct includes the following: Conflict of interest Directors must keep the Board advised, on an ongoing basis, of any interest that could potentially conflict with those of the Company. Should a situation arise where the Board believes that a material conflict exists, the Director concerned shall not receive the relevant Board papers and will not be present at the meeting when the item is considered. Details of Director related entity transactions with the Company and consolidated entity are set out in the Notes to the financial statements. Dealings in company shares Directors and senior management are prohibited from dealing in Company shares except within a four week trading window that commences 48 hours after the release of the consolidated entity’s results at year end and half year on the basis that they are not in possession of any price sensitive information. Directors must advise the ASX of any transactions conducted by them in shares in the Company. The statement below in relation to Communication with Shareholders, is with reference to Principle 5 – Make timely and balanced disclosures, and Principle 6 – Respect the rights of shareholders. Communication with shareholders The Board of Directors aims to ensure that shareholders are informed of all major developments affecting the consolidated entity’s state of affairs. Information is communicated to shareholders as follows: • The annual report is distributed to all shareholders (unless a shareholder has specifically requested not to receive the document), including relevant information about the operations of the consolidated entity during the year, changes in the state of affairs and details of future developments; • The half yearly report contains summarised financial information and a review of the operations of the consolidated entity during the period. The half year audited financial report is lodged with the Australian Securities and Investments Commission and the ASX, and sent to any shareholder who requests it; • The consolidated entity has nominated the Company Secretary to ensure compliance with the consolidated entity’s continuous disclosure requirements, and overseeing and co-ordinating disclosure of information to the ASX; • Information is posted on the consolidated entity’s website immediately after ASX confirms an announcement has been made to ensure that the information is made available to the widest audience. The consolidated entity’s website is www.selectharvests.com.au; • The Board encourages full participation of shareholders at the Annual General Meeting to ensure a high level of accountability and identification with the consolidated entity’s strategy and goals. It is the policy of the consolidated entity and the policy of the auditor for the lead engagement partner to be present at the Annual General Meeting to answer any questions about the conduct of the audit and the preparation and content of the auditor’s report; and • Occasional letters from the Chairman and Managing Director may be utilised to provide shareholders with key matters of interest. Select Harvests Annual Report 2008 35 Income statements FOR THE YEAR ENDED 30 JUNE 2008 NOTES CONSOLIDATED PARENT ENTITY Revenue Sales of goods and services Other revenue Total revenue Other income (expenses) Almond stock fair value adjustment Almond tree fair value adjustment Total other income (expenses) Expenses Cost of sales Temporary water costs Total cost of sales Distribution expenses Marketing expenses Occupancy expenses Administrative expenses Finance costs Restructure costs Other expenses PROFIT BEFORE INCOME TAX Income Tax Expense PROFIT FROM CONTINUING OPERATIONS PROFIT FOR THE YEAR PROFIT ATTRIBUTABLE TO MEMBERS OF SELECT HARVESTS LIMITED Earnings per share for profit from continuing operations attributable to the ordinary equity holders of the company: Basic earnings per share (cents per share) Diluted earnings per share (cents per share) Earnings per share for profit attributable to the ordinary equity holders of the company: Basic earnings per share (cents per share) Diluted earnings per share (cents per share) 2008 $’000 2007 $’000 2008 $’000 2007 $’000 4 4 224,655 229,498 155 265 224,810 229,763 - 27,344 27,344 - 27,801 27,801 92 500 592 1,071 92 1,163 5 (174,866) (173,549) (3,007) - (177,873) (173,549) (6,593) (1,414) (2,060) (3,439) (1,891) (1,845) (6,049) (706) (2,048) (3,300) (800) - (4,903) (4,460) 25,384 (7,254) 18,130 18,130 40,014 (11,916) 28,098 28,098 5 6 - - - - - - - - - (2,453) (1,806) - (1,067) 22,018 (404) 21,614 21,614 - - - - - - - - - (2,742) (2,043) - (968) 22,048 34 22,082 22,082 27(c) 18,130 28,098 21,614 22,082 31 31 31 31 46.7 46.7 46.7 46.7 71.0 70.8 71.0 70.8 The above income statements should be read in conjunction with the accompanying Notes. 36 Select Harvests Annual Report 2008 Balance sheets AS AT 30 JUNE 2008 NOTES CONSOLIDATED PARENT ENTITY CURRENT ASSETS Cash and cash equivalents Trade and other receivables Inventories Derivative financial instruments Current tax receivables TOTAL CURRENT ASSETS NON CURRENT ASSETS Receivables Other financial assets Property, plant and equipment Deferred tax assets Biological assets – Almond Trees Intangible assets TOTAL NON CURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES Trade and other payables Interest bearing liabilities Derivative financial instruments Current tax liabilities Provisions TOTAL CURRENT LIABILITIES NON CURRENT LIABILITIES Trade and other payables Interest bearing liabilities Deferred tax liabilities Provisions TOTAL NON CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Contributed equity Reserves Retained profits TOTAL EQUITY 2008 $’000 2007 $’000 4,054 43,101 29,229 69 561 6,924 33,459 30,169 431 - 2008 $’000 3,946 1,127 - 69 561 2007 $’000 6,529 705 - 431 - 77,014 70,983 5,703 7,665 - - 73,135 624 6,039 39,136 118,934 195,948 34,847 50,787 82 - 2,446 88,162 - - 13,020 695 13,715 101,877 94,071 44,375 11,235 38,461 94,071 - - 47,754 692 5,998 34,726 89,170 160,153 46,406 1,399 627 2,766 2,482 126,352 9,607 287 577 - - 136,823 142,526 1,405 50,609 82 - 319 53,680 52,415 51,063 9,607 276 555 - - 61,501 69,166 437 1,302 627 2,766 306 5,438 - 237 10,178 554 10,969 64,649 95,504 41,953 11,273 42,278 95,504 41,261 16,904 - - 126 41,387 93,802 48,724 44,375 3,590 759 48,724 58 - 93 17,055 22,493 46,673 41,953 3,628 1,092 46,673 9 10 11 12 13 14 15 16 17 18 19 20 12 21 22 23 24 25 26 27 27 The above balance sheets should be read in conjunction with the accompanying Notes. Select Harvests Annual Report 2008 37 Statements of changes in equity FOR THE YEAR ENDED 30 JUNE 2008 NOTES CONSOLIDATED PARENT ENTITY 2008 $’000 2007 $’000 2008 $’000 2007 $’000 Total equity at the beginning of financial year 95,504 101,481 46,673 57,920 Changes in fair value of cash flow hedges net of tax 27(a) Net income (expense) recognised directly in equity 128 128 (1,395) (1,395) 128 128 (649) (649) Profit for the year 27(c) 18,130 28,098 21,614 22,082 Total recognised income and expense for the year 18,258 26,703 21,742 21,433 Transactions with equity holders in their capacity as equity holders: - Contributions of equity, net of transaction costs - Employee share options - Dividends provided for or paid - Dividends refunded - Share buy back Total equity at the end of financial year 26(b) 26(b),27 8 (a) 27 ( c) 26 (b) 3,695 931 3,531 1,265 3,695 931 3,531 1,265 (22,156) (21,945) (22,156) (21,945) 209 - 209 - (2,370) (15,531) (2,370) (15,531) (19,691) (32,680) (19,691) (32,680) 94,071 95,504 48,724 46,673 The above statements of changes in equity should be read in conjunction with the accompanying Notes. 38 Select Harvests Annual Report 2008 Cash fl ow statements FOR THE YEAR ENDED 30 JUNE 2008 NOTES CONSOLIDATED PARENT ENTITY CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers (inclusive of goods and services tax) Payments to suppliers and employees (inclusive of goods and services tax) Interest received Interest paid Income tax paid Net Cash Inflow/(Outflow) From Operating Activities 28 CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of property, plant and equipment Payments for property, plant and equipment Payments for other non-current assets Net Cash Inflow/(Outflow) From Investing Activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issues of ordinary shares Share Buy Back Repayments of borrowings 2008 $’000 2007 $’000 2008 $’000 2007 $’000 252,731 251,512 - - (241,360) (210,519) (22,625) 11,371 155 (1,806) (7,725) 1,995 37 (29,953) (4,409) (34,325) 40,993 (22,625) 265 (800) 155 (1,806) 28,196 28,196 218 (682) (10,667) (7,725) (10,667) 29,791 (32,001) 17,065 135 (10,787) (2,460) (13,112) - (140) - (140) - (121) - (121) 931 1,100 931 1,100 (2,370) (15,531) (2,370) (15,531) (114) (117) (16) 5 Dividend payment on ordinary shares, net of DRP (18,253) (18,213) (18,253) (18,213) Net Cash Inflow/(outflow) from financing activities (19,806) (32,761) (19,708) (32,639) Net increase/(decrease) in cash and cash equivalents (52,136) (16,082) (51,849) (15,695) Cash and cash equivalents at the beginning of the financial year Cash and cash equivalents at the end of the financial year 5,639 21,721 5,244 20,939 28(a) (46,497) 5,639 (46,605) 5,244 The above cash flow statements should be read in conjunction with the accompanying Notes. Select Harvests Annual Report 2008 39 Notes to the fi nancial statements 1. Summary of signifi cant accounting policies The principal accounting policies adopted in the preparation of the financial report are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. The financial report includes separate financial statements for Select Harvests Limited as an individual entity and the consolidated entity consisting of Select Harvests Limited and its subsidiaries. (a) Basis of preparation This general purpose financial report has been prepared in accordance with Australian equivalents to International Financial Reporting Standards (AIFRS), other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Interpretations and the Corporations Act 2001. Compliance with IFRS Australian Accounting Standards include AIFRS. Compliance with AIFRS ensures that the consolidated financial statements and Notes of Select Harvests Limited comply with International Financial Reporting Standards (IFRS). Historical cost convention These financial statements have been prepared under historical cost convention, as modified by the revaluation of available-for-sale financial assets, financial assets and liabilities (including derivative instruments) at fair value through profit and loss, and certain classes of property, plant and equipment. Critical accounting estimates The preparation of financial statements in conformity with AIFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the consolidated entity’s accounting policies. The areas involving a higher level 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 The consolidated financial statements are those of the consolidated entity, comprising Select Harvests Limited (the parent entity) and all entities which Select Harvests Limited controlled at any point during the year and at balance date. Subsidiaries are all those entities (including special purpose entities) over which the consolidated entity has power to govern the financial and operating policies, generally accompanying 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 consolidated entity controls another entity. Subsidiaries are fully consolidated from the date at which control is transferred to the consolidated entity. They are deconsolidated from the date that control ceases. The purchase method of accounting is used to account for the acquisition of subsidiaries by the consolidated entity. The financial statements of subsidiaries are prepared for the same reporting period as the parent entity, using consistent accounting policies. Adjustments are made to bring into line any dissimilar accounting policies which may exist. All intercompany balances and transactions, including unrealised profits arising from intra-group transactions, have been eliminated in full. Investments in subsidiaries are accounted for at cost in the individual financial statements of Select Harvests Limited. 40 Select Harvests Annual Report 2008 Notes to the fi nancial statements (c) Foreign currency translation (i) Functional and presentation currency Items included in the financial statements of each entity comprising the consolidated entity 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 the functional and presentation currency of Select Harvests Limited. (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. (d) Cash and cash equivalents Cash on hand and in banks and short term deposits are stated at nominal value. For the purposes of the cash flow statement, cash includes cash on hand and in banks, and money market investments readily convertible to cash within two working days, net of outstanding bank overdrafts. Bank overdrafts are carried at the principal amount. Interest is charged as an expense as it accrues. (e) Inventories Inventories are valued at the lower of cost and net realisable value except for almond stocks which are measured at fair value less estimated point of sale costs in accordance with AASB 141: “Agriculture” refer to (f) below. Costs incurred in bringing each product to its present location and condition are accounted for as follows: • Raw materials and consumables purchase cost on a first in first out basis; • Finished goods and work in progress cost of direct material and labour and a proportion of manufacturing overheads based on normal operating capacity; and • Almond stocks are valued in accordance with AASB 141 “Agriculture” whereby the cost of the non living (harvested) produce is deemed to be its net market value immediately after it becomes non living. This valuation takes into account current almond selling prices and current processing and selling costs. (f) Biological Assets Almond trees Almond trees are classified as a biological asset and valued in accordance with AASB 141 “Agriculture.” Developing almond trees are valued at their growing cost until the year they bear their first commercial crop. The value of crop bearing almond trees is measured at fair value using a discounted cash flow methodology. The discounted cash flow incorporates the following factors: • Almond trees have an estimated 30 year economic life, with crop yields consistent with long term yield rates; • Selling prices are based on long term average trend prices; • Growing, processing and selling costs are based on long term average levels; • Cash flows are discounted at a rate that takes into account the cost of capital plus a suitable risk factor; and Select Harvests Annual Report 2008 41 Notes to the fi nancial statements • Asset values (eg: land, buildings, water licenses, etc) to be deducted from the cumulative cash flow, to determine the tree value, are based on current valuation and then adjusted annually to account for capital expenditure, depreciation and utilised acreage. Nursery trees are grown by the consolidated entity for sale to external almond orchard owners and for use in almond orchards owned by the consolidated entity. Nursery trees are carried at fair value. Growing almond crop The growing almond crop is valued in accordance with AASB 141 “Agriculture”. This valuation takes into account current almond selling prices and current growing, processing and selling costs. The calculated crop value is then discounted to take into account that it is only partly developed, and then further discounted by a suitable factor to take into account the agricultural risk until crop maturity. New orchards growing costs All costs associated with the establishment, planting and growing of almond trees for a new orchard are accumulated for the first three years of that orchard. Once immature trees commence bearing a commercial crop a proportion of the annual growing costs are expensed on the basis of yield achieved as a proportion of anticipated yield of a mature tree. At the end of the eighth year full maturation is deemed to occur, after which the tree is considered to be mature in terms of revenue generation and the annual growing costs are then expensed in full. Almond trees are valued as described above once they commence bearing a commercial crop. (g) Derivatives Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value. 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 consolidated entity designates derivatives as either; (1) hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedge); or (2) hedges of highly probable forecast transactions (cash flow hedges). The consolidated entity documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The consolidated entity 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. (i) Fair value hedge Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the income statement, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. (ii) Cash flow hedge The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in equity in the hedging reserve. The gain or loss relating to the ineffective portion is recognised immediately in the income statement. 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 or is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and 42 Select Harvests Annual Report 2008 Notes to the fi nancial statements is recognised when the forecast transaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement. (h) Property, plant and equipment Cost and valuation All classes of property, plant and equipment are measured at cost less accumulated depreciation. The carrying amount of property, plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount from those assets. The recoverable amount is assessed on the basis of the expected net cash flows which will be received from the assets’ employment and subsequent disposal. The expected net cash flows have been discounted to present values in determining recoverable amounts. Where assets have been revalued, the potential effect of the capital gains tax on disposal has not been taken into account in the determination of the revalued carrying amount. Where it is expected that a liability for capital gains tax will arise, this expected amount is disclosed by way of Note. Depreciation The depreciable amount of all fixed assets including buildings and capitalised leased assets, but excluding freehold land water rights, and almond trees, are depreciated on a straight line basis over their estimated useful lives to the entity commencing from the time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements. The useful lives for each class of assets are: Buildings: Leasehold improvements: Plant and equipment: 25 to 40 years 5 to 40 years 5 to 20 years Leased plant and equipment: 5 to 10 years Plantation land, irrigation systems: 10 to 40 years Capital works in progress Capital works in progress are valued at cost and relate to costs incurred for owned orchards and other assets under development. (i) Leases Leases are classified at their inception as either operating or finance leases based on the economic substance of the agreement so as to reflect the risks and benefits incidental to ownership. Operating leases The minimum lease payments of operating leases, where the lessor effectively retains substantially all of the risks and benefits of ownership of the leased item, are recognised as an expense on a straight line basis over the term of the lease. Finance leases Leases which effectively transfer substantially all the risks and benefits incidental to ownership of the leased item to the consolidated entity are capitalised at the present value of the minimum lease payments and disclosed as plant and equipment under lease. A lease liability of equal value is also recognised. Select Harvests Annual Report 2008 43 Notes to the fi nancial statements Capitalised leased assets are depreciated over the shorter of the estimated useful life of the assets and the lease term. Minimum lease payments are allocated between interest expense and reduction of the lease liability with the interest expense calculated using the interest rate implicit in the lease and charged directly to the income statement. The cost of improvements to or on leasehold property is capitalised, disclosed as leasehold improvements, and amortised over the unexpired period of the lease or the estimated useful lives of the improvements, whichever is the shorter. ( j) Intangibles Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the consolidated entity’s share of the net identifiable assets of the acquired subsidiary/business at the date of acquisition. Goodwill is not amortised. Instead, goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less any accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill is allocated to cash-generating units for the purpose of impairment testing. Brand names Brand names are measured at cost. Directors are of the view that brand names have an indefinite life. Brand names are therefore not depreciated. Instead, brand names are tested for impairment annually or more frequently if events or changes in circumstances indicate that they might be impaired, and are carried at cost less any accumulated impairment losses. Permanent water rights Permanent water rights are recorded at historical cost. Such rights have an indefinite life, and are not depreciated. As an integral component of the land and irrigation infrastructure required to grow almonds, the carrying value is tested annually for impairment. If events or changes in circumstances indicate impairment, the carrying value is adjusted to take account of any impairment losses. (k) 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, and amounts collected on behalf of third parties. Revenue is recognised to the extent that it is probable that the economic benefits will flow to the entity, the revenue can be reliably measured, and the risks and rewards have passed to the buyer. The following specific recognition criteria must also be met before revenue is recognised: Sale of goods Control of the goods has passed to the buyer. Rendering of services Revenue from the rendering of services is recognised upon the delivery of the service to the customer. Certain clients may be invoiced in advance of provision of services. Interest Interest revenue is recognised when it becomes receivable on a proportional basis taking into account the interest rates applicable to the financial assets. Dividends Dividends are recognised as revenue when the right to receive payment is established. 44 Select Harvests Annual Report 2008 Notes to the fi nancial statements Almond pool revenue Under the contractual arrangements with external growers the Company simultaneously acquires and sells the almonds and does not make a margin on those sales. These transactions are disclosed in Note 4 and are not recognised as revenue. As at 30 June 2008 the Company held almond inventory on behalf of external growers which was not recorded as inventory of the Company. All revenue is stated net of the amount of Goods and Services Tax (GST). (l) Other income Almond stocks Increments or decrements in the net market value of almond stocks are recognised as income or expenses in the income statement in the financial year in which they occur. The net increment or decrement in the total market value of the almond stocks is determined as the difference between the net market value and quantities at the beginning of the year and at year end, less any further costs required to get the almonds stocks to a saleable state. (m) 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 between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses. Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted for each jurisdiction. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future. Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity. Tax consolidation The parent entity of Select Harvests Limited and its subsidiaries have implemented the tax consolidation legislation and formed a tax-consolidated group from 1 July 2003. The parent entity and its wholly owned Australian subsidiaries 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. 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 of tax funding agreements are outlined in Note 6. 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. Select Harvests Annual Report 2008 45 Notes to the fi nancial statements Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of GST except: • Where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and • Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet. Cash flows are included in the cash flow statement on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to the taxation authority are classified as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority. (n) Impairment of assets Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units). (o) Employee benefits Provision is made for employee benefits accumulated as a result of employees rendering services up to the reporting date. These benefits include wages and salaries, annual leave and long service leave. Liabilities arising in respect of wages and salaries, annual leave and any other employee benefits expected to be settled within twelve months of the reporting date are measured at their nominal amounts based on remuneration rates which are expected to be paid when the liability is settled. All other employee benefit liabilities are measured at the present value of the estimated future cash outflow to be made in respect of services provided by employees up to the reporting date. In determining the present value of future cash outflows, the market yield as at the reporting date on national government bonds, which have terms to maturity approximating the terms of the related liability, are used. Employee benefit expenses and revenues arising in respect of the following categories are charged against profit on a net basis in their respective categories: • wages and salaries, non monetary benefits, annual leave, long service leave, sick leave and other leave benefits. • Other types of employee benefits. Contributions are made by the consolidated entity to an employee superannuation fund and are charged as expenses when incurred. Share based payments Share based compensation benefits are provided to employees via the Select Harvests Limited Executive Share Option Scheme. Information relating to this scheme is set out in Note 32. 46 Select Harvests Annual Report 2008 Notes to the fi nancial statements The fair value of options granted under the Select Harvests Limited Executive Share Option Scheme 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 employees become unconditionally entitled to the options. The fair value at grant date is independently determined using a Black Scholes option pricing model that takes into account the exercise price, the term of the option, the vesting and performance criteria, the impact of dilution, 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 market vesting conditions, but excludes the impact of any non market vesting conditions (for example, profitability and sales growth targets). Non market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. At each balance sheet 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 original estimates, if any, is recognised in the income statement with a corresponding adjustment to equity. (p) Financial instruments Financial assets Collectibility of trade receivables is reviewed on an ongoing basis. Trade receivables are carried at full amounts due less any provision for doubtful debts. A provision for doubtful debts is recognised when collection of the full amount is no longer probable. Debts which are known to be collectible are written off immediately. Amounts receivable from other debtors are carried at full amounts due. Other debtors are normally settled on 30 days from month end unless there is a specific contract which specifies an alternative date. Amounts receivable from related parties are carried at full amounts due. Details of the terms and conditions are set out in Note 34. Financial liabilities The bank overdraft is carried at the principal amount. Interest is charged as an expense as it accrues. Liabilities are recognised for amounts to be paid in the future for goods and services received, whether or not billed to the consolidated entity. Finance lease liability is accounted for in accordance with AASB 117 “Leases”. (q) Fair value estimation The fair value of certain financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes. The fair value of financial instruments traded in active markets (such as foreign exchange hedge contracts) is based on quoted market prices at the balance sheet date. The quoted market price used for financial assets held by the consolidated entity is the current bid price; the appropriate quoted market price for financial liabilities is the current ask price. The nominal value less estimated credit adjustments of trade receivables and payables are assumed to approximate their fair values. 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 consolidated entity for similar instruments. (r) Borrowing costs Borrowing costs incurred for the construction of any qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its intended use. All other borrowing costs, inclusive of all facility fees, bank charges, and interest, are expensed as incurred. Select Harvests Annual Report 2008 47 Notes to the fi nancial statements (s) Earnings per share (i) Basic Earnings per share Basic earnings per share are calculated by dividing the profit attributable to equity holders of the company by the weighted average number of ordinary shares outstanding during the financial 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 financing costs associated with dilutive potential ordinary shares. (t) Segment reporting A business segment is identified for a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different to those of other business segments. (u) New accounting standards and UIG interpretations Certain new accounting standards and UIG interpretations have been published that are not mandatory for 30 June 2008 reporting periods. The Group’s and the parent entity’s assessment of the impact of these new standards and interpretations is set out below: a) AASB 101 (Revised) Presentation of Financial Statements is applicable to annual reporting periods beginning on or after 1 January 2009. The group has not adopted the standards early. Application of the standard will not affect any of the amounts recognised in the financial statements. b) AASB 2008-1 Amendments to Australian Accounting Standard – Share-based Payments: Vesting Conditions and Cancellations (AASB 2) is applicable to annual reporting periods beginning on or after 1 January 2009. The group has not adopted the standards early. Application of the standard will not affect any of the amounts recognised in the financial statements. c) AASB 8 Operating Segments and AASB 2007-3 Amendments to Australian Accounting Standards arising from AASB 8 AASB 8 and AASB 2007-3 are effective for annual reporting periods commencing on or after 1 January 2009. AASB 8 will not result in a significant change in the approach to segment reporting for Select Harvests. It requires adoption of a ‘management approach’ to reporting on financial performance. The information being reported will be based on what the key decision maker’s use internally for evaluating segment performance and deciding how to allocate resources to operating segments. d) Revised AASB 123 Borrowing Costs and AASB 2007-6 Amendments to Australian Accounting Standards arising from AASB 123 [AASB 1, AASB101, AASB 107, AASB 111, AASB 116 & AASB 138 and Interpretations 1 & 12]. The revised AASB 123 is applicable to annual reporting periods commencing on or after 1 January 2009. It has removed the option to expense all borrowing costs and – when adopted – will require the capitalisation of all borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset. e) Revised AASB 101 Presentation of Financial Statements and AASB 2007-8 Amendments to Australian Accounting Standards arising from AASB 101. A revised AASB 101 was issued in September 2007 and is applicable for annual reporting periods beginning on or after 1 January 2009. It requires the presentation of a statement of comprehensive income and makes changes to the statement of changes in equity, but will not affect any of the amounts recognised in the financial statements. If an entity has made a prior period adjustment or has reclassified items in the financial statements, it will need to disclose a third balance sheet (statement of financial position), this one being as at the beginning of the comparative period. The introduction of the above standards will not have a material impact on Select Harvests and the impact is limited to disclosure requirements only in future years. 48 Select Harvests Annual Report 2008 Notes to the fi nancial statements (v) Provisions Provisions are recognised when the consolidated entity has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and the amount has been reliably estimated. (w) Trade and other payables These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year which are unpaid. These amounts are unsecured and are usually paid within 30 days of recognition. (x) Contributed equity Ordinary shares are classified as equity. The value of new shares or options issued is shown in equity. (y) Comparatives Where necessary, comparatives have been reclassified and repositioned for consistency with current year disclosures. (z) Rounding amounts The company is of a kind referred to in Class Order 98/100, issued by the Australian Securities & Investments Commission, relation to the “rounding off” of amounts in the financial report. Amounts in the financial report have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, to the nearest dollar. 2. Financial risk management The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk and commodity price risk), credit risk and liquidity risk. 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 risk, foreign exchange and other price risks, and ageing analysis for credit risk. Risk management is carried out by management pursuant to policies approved by the Board of Directors. (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 consolidated entity’s functional currency. The Group sells both almonds harvested from owned orchards through the almond pool and processed products internationally in United States dollars, and purchases raw materials and other inputs to the manufacturing and almond growing process from overseas suppliers predominantly in United States dollars. Overseas purchases are paid on delivery, so no foreign currency payable exists at balance date. Management and the Board review the foreign exchange position of the Group and, where appropriate, take out forward exchange contracts, transacted with the Groups’s banker, to manage foreign exchange risk. Select Harvests Annual Report 2008 49 Notes to the fi nancial statements The exposure to foreign currency risk at the reporting date was as follows: GROUP Trade receivables Cash at bank Foreign exchange contracts - buy foreign currency (cash flow hedges) - sell foreign currency (cash flow hedges) PARENT Cash at bank Foreign exchange contracts - buy foreign currency (cash flow hedges) - sell foreign currency (cash flow hedges) 30 JUNE 2008 USD $000’S 30 JUNE 2007 USD $000’S 7,245 283 2,793 1,657 30 JUNE 2008 USD $000’S 283 2,793 1,657 7,565 (865) 4,979 19,982 30 JUNE 2007 USD $000’S (865) 4,979 19,982 Group sensitivity analysis Based on financial instruments held at the 30 June 2008, had the Australian dollar strengthened/weakened by 5 % against the US dollar, with all other variable’s held constant, the Group’s post tax profit for the year would have been $262,000 lower/$290,000 higher (2007: $265,000 lower/$293,000 higher), mainly as a result of the US dollar denominated financial instruments as detailed in the above table. Equity would have been $306,000 lower/$329,000 higher (2007:$301,000 lower/$391,000 higher), arising mainly from foreign forward exchange contracts designated as cash flow hedges. Parent sensitivity analysis Based on financial instruments held at the 30 June 2008, had the Australian dollar strengthened/weakened by 5 % against the US dollar, with all other variable’s held constant, the parent entity post tax profit for the year would have been $10,000 lower/$11,000 higher (2007: $34,000 higher/ $38,000 lower), mainly as a result of the US dollar denominated financial instruments as detailed in the above table. Equity would have been $54,000 lower/$50,000 higher (2007:$632,000 lower/$691,000 higher), arising mainly from foreign forward exchange contracts designated as cash flow hedges. (ii) Price risk The Group is exposed to commodity price risk. The Group sells almonds harvested from owned orchards domestically and overseas throughout the year based on an almond price which will fluctuate from time to time due to changes in international market conditions. The Group has an active and ongoing almond marketing and selling program in place which is continually monitored and adapted for changes in almond prices. The Group also purchases raw materials and other inputs to the manufacturing and almond growing process domestically and overseas. The price of such inputs will also fluctuate from time to time based on market forces. Where practical, the consolidated entity, through its procurement programs, contracts from time to time to acquire such quantity of inputs as is projected to be required at fixed prices. (iii) Cash flow and fair value interest rate risk The Group’s interest rate risk arises from borrowings issued at variable rates, which exposes the Group to cash flow interest rate risk. The Group’s borrowings at variable interest rate are denominated in Australian dollars. 50 Select Harvests Annual Report 2008 Notes to the fi nancial statements At the reporting date the Group and the parent had the following variable rate borrowings: 30 JUNE 2008 WEIGHTED AVERAGE INTEREST RATE % 7.30% 11.75% BALANCE $000 50,500 51 30 JUNE 2007 WEIGHTED AVERAGE INTEREST RATE % - 10.4% BALANCE $000 - 1,285 Commercial bills Overdraft An analysis of maturities is provided in (c) below The Group analyses interest rate exposure on an ongoing basis in conjunction with debt facility, cash flow and capital management. Group and Parent sensitivity At 30 June 2008, if interest rates had changed by +/- 25 basis points from the year end rates with all other variables held constant, post tax profit for the year would have been $88,000 lower/higher (2007: $nil lower/ higher). All Group borrowings are held by the parent entity. (b) Credit risk Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions, as well as exposure to wholesale, retail and farm investor 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. Derivative counterparties and cash transactions are limited to high credit quality financial institutions. The credit quality of financial assets that are neither past due or impaired can be assessed by reference to external credit ratings (if available) or to historical information about default rates. (c) Liquidity risk The Group manages liquidity risk by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. Financing arrangements The Group and parent entity had access to the following undrawn borrowing facilities at the reporting date: Floating rate (expiring within 1 year) - Commercial bill facility - Bank overdraft facility AUD - Bank overdraft facility USD 2008 $’000 $A 9,500 $A 949 $US 3,000 2007 $’000 $A 28,000 $A 1,000 $US 2,415 The bank overdraft facility may be drawn at any time and may be terminated by the bank without notice. The commercial bill acceptance facility may be drawn at any time and is subject to annual review. Select Harvests Annual Report 2008 51 Notes to the fi nancial statements Maturities of financial liabilities The table below analyses the Group’s and parent entity’s financial liabilities, net and gross settled derivative instruments into relevant maturity groupings based on the remaining period at the reporting date on the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. GROUP AND PARENT AT 30 JUNE 2008 LESS THAN 6 MONTHS 6 MONTHS TO 12 MONTHS TOTAL CONTRACTUAL CASH FLOWS CARRYING AMOUNT (ASSETS)/ LIABILITIES $’000 $’000 $’000 $’000 Non derivatives Variable Rate Bills payable Derivatives Bank Overdraft USD buy USD sell USD net 50,500 50 2,397 1,546 851 - - 396 111 285 50,500 50,500 50 2,793 1,657 1,136 50 82 (69) 13 GROUP AND PARENT AT 30 JUNE 2007 LESS THAN 6 MONTHS 6 MONTHS TO 12 MONTHS TOTAL CONTRACTUAL CASH FLOWS CARRYING AMOUNT (ASSETS)/ LIABILITIES $’000 $’000 $’000 $’000 Non derivatives Variable Rate Bills payable Derivatives Bank Overdraft USD buy USD sell USD net - 1,285 4,960 15,302 (10,342) - - 19 4,680 (4,661) - 1,285 4,979 19,982 (15,003) - 1,285 627 (431) 196 3. Critical accounting estimates and judgements Estimates and judgements are continually evaluated and are based on historical experience and other factors. Critical accounting estimates and assumptions The consolidated entity makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. Almond trees Almond trees are classified as a biological asset and valued in accordance with AASB 141 “Agriculture”. The consolidated entity’s accounting policies in relation to almond trees are detailed in Note 1(f). In applying this policy, the consolidated entity has made various assumptions. These are detailed in Note 17 of the financial statements. As at 30 June 2008, the value of almond trees carried in the financial statements of the consolidated entity is $6.0 million (2007:$5.8 million) Estimated impairment of intangible assets The Group tests annually whether intangible assets, has suffered any impairment, in accordance with the accounting policy stated in note 1(j). The recoverable amounts of cash generating units have been determined based on value- in- use calculations. These calculations require the use of assumptions. Refer to note 18 for details of these assumptions and the potential impact of changes to these assumptions. 52 Select Harvests Annual Report 2008 Notes to the fi nancial statements 4. Revenue Revenue from continuing operations Sales of goods and services * Other revenue Management fees Dividends and distributions - Controlled entities Interest Wholly owned entities - Other persons/corporations Total interest Total other revenue Total revenue Revenue/Cost of goods sold from Almond Pool Revenue from almond pool sales Cost of goods sold from almond pool sales CONSOLIDATED PARENT ENTITY 2008 $’000 2007 $’000 2008 $’000 2007 $’000 224,655 229,498 - - 3,915 4,554 20,500 22,000 - - - 155 155 155 - - - 265 265 265 224,810 229,763 43,210 45,767 (43,210) (45,767) - - 2,774 155 2,929 27,344 27,344 - - - * Revenue from almond pool sales includes sales of almonds for externally owned almond orchards, which are sold by the consolidated entity on a pooled basis, the proceeds from which are distributed to the pool participants. This revenue is not included in the revenue as stated above within revenue from continuing operations. 5. Expenses Profit before tax includes the following specific expenses: Cost of goods & services sold Temporary water costs Depreciation of non current assets Freehold land and buildings Buildings Plantation Land and irrigation systems Leased plant and equipment Plant and equipment Total depreciation of non current assets 174,866 173,549 3,007 - 55 468 116 3,163 3,802 - - 82 411 115 3,194 3,802 - - - - - 16 117 133 1,029 218 1,247 27,801 27,801 - - - - - - - - 17 276 293 Select Harvests Annual Report 2008 53 Notes to the fi nancial statements 5. Expenses cont. Finance costs wholly owned entities other persons capitalised Total finance costs Impairment losses: trade receivables Movement in provision for employee entitlements Movement in provision for stock diminution Foreign exchange losses Operating lease rental minimum lease payments Net loss on disposal of property, plant and equipment (a) Capitalised borrowing costs CONSOLIDATED PARENT ENTITY 2008 $’000 2007 $’000 2008 $’000 2007 $’000 - 3,373 (1,482) 1,891 38 675 55 72 9,514 837 - 852 (52) 800 13 721 9 - 7,695 6 1,857 3,288 (1,482) 3,663 - (36) - - - - 1,361 734 (52) 2,043 - 130 - - - 6 The capitalised rate used to determine the amount of borrowing costs to be capitalised is the weighted average interest rate applicable to the entity’s outstanding borrowings during the year, 7.3 % (2007 – 7.0 %) 6. Income tax (a) Income tax expense Current Tax Deferred tax Under (over) provided in prior years Income tax expense is attributable to: Profit from continuing operations Aggregate income tax expense Deferred income tax (revenue) expense included in income tax expense comprises: Decrease (increase) in deferred tax assets (Decrease) increase in deferred tax liabilities 16 24 4,912 2,715 (373) 7,254 7,254 7,254 (127) 2,842 2,715 11,540 493 (117) 11,916 11,916 11,916 (288) 781 493 501 (37) (60) 404 404 404 (37) - (37) 357 (274) (117) (34) (34) (34) (274) - (274) 54 Select Harvests Annual Report 2008 Notes to the fi nancial statements (b) Numerical reconciliation of income tax expense to prima facie tax payable Profit from continuing operations before income tax expense CONSOLIDATED PARENT ENTITY 2008 $’000 2007 $’000 2008 $’000 2007 $’000 25,384 25,384 40,014 40,014 22,018 22,018 22,048 22,048 Tax at the Australian tax rate of 30% (2007 – 30%) 7,615 12,004 6,605 6,614 Tax effect of amounts that are not deductible (taxable) in calculating taxable income Rebateable dividends Other non allowable items Other non assessable items Under/(over) provision of previous year Income tax expense - 12 - (373) 7,254 - 65 (36) (117) 11,916 (6,150) (6,600) 9 - (60) 404 69 - (117) (34) (c) Tax consolidation legislation Select Harvests Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation as of 1 July 2003. The accounting policy in relation to this legislation is set out in Note 1(m). On adoption of the tax consolidation legislation, the entities in the tax consolidated group entered into a tax sharing agreement which limits the joint and several liability of the wholly-owned entities in the case of a default by the head entity, Select Harvests Limited. The entities have also entered into a tax funding agreement under which the wholly-owned entities fully compensate Select Harvests Limited for any current tax payable assumed and are compensated by Select Harvests Limited for any current tax receivable and deferred tax assets relating to unused tax losses or unused tax credits that are transferred to Select Harvests 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. 7. Discontinued operations There are no discontinued operations impacting the reported results in the current financial year or the prior financial year. Select Harvests Annual Report 2008 55 Notes to the fi nancial statements 8. Dividends paid or provided for on ordinary shares (a) Dividends paid during the year (i) Interim - paid 3 April 2008 (2007: 2 April 2007) Fully franked dividend (22c per share) (2007: 22c per share) (ii) Final - paid 1 October 2007 (2007: 2 October 2006) Fully franked dividend (35c per share) (2007: 33c per share) (b) Dividends proposed and not recognised as a liability Fully franked dividend payable on 1 October 2008 (23c per share, $8,972,053) (c) Franking credit balance Franking credits available for the subsequent financial year arising from: Franking account balance as at the beginning of the financial year Current year tax payment instalments and adjustments Interim Dividends paid Franking account balance at end of financial year Current year income tax payable/(receivable) Dividend declared Franking account balance after payment of current year tax and dividends CONSOLIDATED PARENT ENTITY 2008 $’000 2007 $’000 2008 $’000 2007 $’000 8,556 8,556 8,802 8,802 8,556 8,556 8,802 8,802 13,600 22,156 13,143 21,945 13,600 22,156 13,143 21,945 29,629 18,025 (8,556) 39,098 (1,309) (8,972) 26,639 22,585 (8,802) 40,422 2,766 (13,559) 28,817 29,629 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 $3,845,165 (2007 - $5,810,856) 9. Cash and cash equivalents Cash at bank and in hand Deposits at call 4,054 - 4,054 924 6,000 6,924 3,946 - 3,946 (a) Reconciliation to cash at the end of the year The above figures are reconciled to cash at the end of the financial year as shown in the statement of cash flow as follows: Balances as above Bank overdrafts and Commercial bills (Note 20) Balances per statement of cash flows 4,054 (50,551) (46,497) 6,924 (1,285) 5,639 3,946 (50,551) (46,605) 529 6,000 6,529 6,529 (1,285) 5,244 56 Select Harvests Annual Report 2008 Notes to the fi nancial statements (b) Cash at bank and on hand Details of the interest rates applicable to cash at bank and on hand are detailed in Note 36. (c) Deposits at call The deposits are bearing a floating interest rate at 30 June 2008. Details of the interest rates applicable to deposits at call are detailed in Note 36. 10. Receivables (current) Trade receivables Provision for impairment of trade receivables Prepayments (a) Impaired trade receivables CONSOLIDATED PARENT ENTITY 2008 $’000 2007 $’000 2008 $’000 2007 $’000 40,664 (15) 40,649 2,452 43,101 32,674 (18) 32,656 803 33,459 - - - 1,127 1,127 - - - 705 705 As at 30 June 2008 current trade receivables of the Group with a value of $15,000 (2007: $18,000) were impaired. The amount of the provision was $15,000 (2207:$18,000). There were no impaired receivables for the parent in 2008 or 2007. The aging of these receivables is as follows: Over 6 months Movements in the provision for impairment of receivables are as follows: At 1 July Provision for impairment recognised during the year Receivables written off during the year CONSOLIDATED 2008 $’000 15 15 18 38 (41) 15 2007 $’000 18 18 10 13 (5) 18 (b) Trade receivables past due but not impaired As at 30 June 2008, trade receivables of $4,804,382 (2007: $6,060,729) were past due but not impaired. These relate to a number of customers for whom there is no recent history of default. The ageing analysis of these receivables is as follows: Up to 3 months 3 to 6 months > 6 months CONSOLIDATED 2008 $’000 3,277 660 867 4,804 2007 $’000 4,870 222 969 6,061 Select Harvests Annual Report 2008 57 Notes to the fi nancial statements (c) Effective interest rates and credit risk All receivables are non-interest bearing. The Company minimises concentrations of credit risk in relation to trade receivables by undertaking transactions with a large number of customers from across the range of business segments in which the consolidated entity operates. Refer to Note 2 for more information on the risk management policy of the consolidated entity. Information concerning the effective interest rate and credit risk of both current and non-current receivables is set out in Note 36. (d) Fair value and credit risk Due to the short - term nature of these receivables, their carrying amount is assumed to approximate their fair value. NOTES CONSOLIDATED PARENT ENTITY 2008 $’000 2007 $’000 2008 $’000 2007 $’000 11. Inventories (current) Raw materials Raw materials at cost Finished goods Finished goods at cost Provision for diminution in value 11(a) Other inventory Other inventory at cost Almond stocks Almond stocks at cost (refer to Note 1 (f)) Total inventories (a) Movements in provision for diminution in value 9,887 9,887 5,814 (64) 5,750 4,759 4,759 8,833 8,833 29,229 8,026 8,026 5,803 (9) 5,794 7,309 7,309 9,040 9,040 30,169 Write-downs of inventory to net realisable value recognised as an expense during the year ended 30 June 2008 amounted to $133,000 (2007 / $nil). The expense has been included in other expenses. 12. Derivative fi nancial instruments (current) Current assets Forward exchange contracts – cash flow hedges Total current derivative financial instrument assets Current liabilities Forward exchange contracts – cash flow hedges Total current derivative financial instrument liabilities 58 Select Harvests Annual Report 2008 69 69 82 82 431 431 627 627 - - - - - - - - - - 69 69 82 82 - - - - - - - - - - 431 431 627 627 Notes to the fi nancial statements (i) Forward exchange contracts – cash flow hedges The consolidated entity enters into forward exchange contracts to buy and sell specified amounts of foreign currency in the future at stipulated exchange rates. The objective in entering the forward exchange contracts is to protect the consolidated entity against unfavourable exchange rate movements for highly probable contracted and forecasted sales and purchases undertaken in foreign currencies. The net amount of the foreign currency the consolidated entity will be required to pay or purchase when settling the brought forward exchange contracts should the counterparty not pay the currency it is committed to deliver to the Company at balance date was $1,136,000 (2007: $15,003,000). The accounting policy in regard to forward exchange contracts is detailed in Note 1(c). At balance date, the details of outstanding forward exchange contracts are: BUY UNITED STATES DOLLARS SETTLEMENT Less than 6 months 6 months to 1 year SELL UNITED STATES DOLLARS SETTLEMENT Less than 6 months 6 months to 1 year (ii) Credit risk exposures SELL AUSTRALIAN DOLLARS AVERAGE EXCHANGE RATE 2008 $’000 2,397 396 2,793 2007 $’000 4,960 19 4,979 2008 $ 0.92 0.92 BUY AUSTRALIAN DOLLARS AVERAGE EXCHANGE RATE 2008 $’000 1,546 111 1,657 2007 $’000 15,302 4,680 19,982 2008 $ 0.92 0.86 2007 $ 0.77 0.77 2007 $ 0.81 0.84 The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date to recognised financial assets is the carrying amount of those assets, net of any provisions for doubtful debts of those assets, as disclosed in the balance sheet and Notes to the financial statements. Credit risk for derivative financial instruments arises from the potential failure by counterparties to the contract to meet their obligations at maturity. The credit risk exposure to forward exchange contracts is the net fair value of these contracts. The consolidated entity does not have any material credit risk exposure to any single debtor or group of debtors under financial instruments entered into by the consolidated entity. (iii) Interest rate risk exposures Refer to Note 36 for the consolidated entity’s exposure to interest rate risk on derivative financial instruments. 13. Receivables (non current) Related party receivables Wholly owned group • controlled entities NOTES CONSOLIDATED PARENT ENTITY 2008 $’000 2007 $’000 2008 $’000 2007 $’000 34 (f) - - - - 126,352 126,352 51,063 51,063 Select Harvests Annual Report 2008 59 Notes to the fi nancial statements NOTES CONSOLIDATED PARENT ENTITY 2008 $’000 2007 $’000 2008 $’000 2007 $’000 - - - - 9,607 9,607 9,607 9,607 2,809 (466) 2,343 21,589 - (2,363) 19,226 21,569 608 (410) 198 2,809 (411) 2,398 25,328 (5,826) (1,908) 17,594 19,992 609 (295) 314 15(a) 15(b) 15(a) 15(a) 36,466 37,645 (22,210) (20,170) 15(a) 14,256 17,475 15(a) 37,112 37,112 51,368 98,584 - 9,973 9,973 27,762 76,364 (5,826) (25,449) (22,784) 73,135 47,754 - - - - - - - - 103 (45) 58 1,104 (875) 229 - - - 1,207 - (920) 287 - - - - - - - - 103 (29) 74 931 (772) 159 43 43 276 1,077 - (801) 276 14. Other fi nancial assets (non current) Investments at cost comprise: Shares Controlled entities – unlisted 15. Property, plant and equipment Buildings At cost Accumulated depreciation Plantation land and irrigation systems At cost Transfer to intangible assets Accumulated depreciation Total land and buildings Plant and equipment under lease At cost Accumulated amortisation Plant & equipment At cost Accumulated depreciation Capital works in progress At cost Total plant and equipment Total property, plant and equipment Cost Transfer to intangible assets Accumulated depreciation and amortisation Total written down amount 60 Select Harvests Annual Report 2008 Notes to the fi nancial statements NOTES CONSOLIDATED PARENT ENTITY 2008 $’000 2007 $’000 2008 $’000 2007 $’000 (a) Reconciliations Reconciliations of the carrying amounts of property, plant and equipment at the beginning and end of the current financial year. Buildings Carrying amount at beginning Additions Depreciation expense Disposals Plantation Land and irrigation systems Carrying amount at beginning Additions Transfer to intangible assets Transfers between classes Depreciation expense Plant and equipment under lease Carrying amount at beginning Transfers between classes Depreciation expense Plant and Equipment Carrying amount at beginning Additions Disposals Transfers between classes Depreciation expense Capital works in progress Carrying amount at beginning Additions Transfers between classes Total written down value 15 (b) 2,398 - (55) - 2,511 - (82) (31) 2,343 2,398 17,594 - - 2,100 (468) 19,226 314 - (116) 198 17,475 1,252 (674) (633) (3,164) 14,256 9,973 28,848 (1,709) 37,112 73,135 23,437 468 (5,826) (74) (411) 17,594 701 (272) (115) 314 16,265 3,787 (108) 725 (3,194) 17,475 1,468 8,884 (379) 9,973 47,754 - - - - - - - - 74 - (16) 58 159 115 - 71 (116) 229 43 (43) - - 287 - - - - - - - - - 91 - (17) 74 373 62 - - (276) 159 - 43 - 43 276 (b) The historical cost of permanent water rights has been reclassified as an intangible asset, with the prior year comparative restated accordingly Select Harvests Annual Report 2008 61 Notes to the fi nancial statements NOTES CONSOLIDATED PARENT ENTITY 2008 $’000 2007 $’000 2008 $’000 2007 $’000 16. Deferred tax assets The balance comprises temporary differences attributable to: Amounts recognised in profit and loss Assets at cost Employee benefits Accruals Provisions Doubtful debts Amounts recognised directly in equity Cash flow hedges Movements: Opening balance 1 July Credited / (charged) to income statement Credited / (charged) to equity Closing balance at 30 June Deferred tax assets to be recovered after more than 12 months Deferred tax assets to be recovered within 12 months - 163 46 411 - 620 4 624 692 (127) 59 624 71 553 624 (180) 438 41 329 5 633 59 692 345 288 59 692 (61) 753 692 - 140 46 387 - 573 4 577 555 (37) 59 577 40 537 577 - 126 41 329 - 496 59 555 223 274 59 555 119 436 555 17. Biological assets – almond trees The consolidated entity, as part of its operations, grows, harvests, and sells almonds. Harvesting of almonds occurs from February through to April each year. The almond orchards are located in the Robinvale area of North West Victoria. As at 30 June 2008 the consolidated entity owned and managed a total of 1,863 acres of almond orchards (2007: 1,863 acres) and leased and managed a total of 1,505 acres of almond orchards (2007: 1,505 acres). During the year ended 30 June 2008, 2,400 metric tonnes of almonds were harvested from these orchards (2007: 2,400 metric tonnes). These almonds had a fair value less estimated point of sale costs of $12.8 million (2007: $15.5 million). Carrying amount at 1 July Additions Almond Tree fair value adjustment Carrying amount at 30 June 62 Select Harvests Annual Report 2008 CONSOLIDATED 2008 $’000 5,998 41 - 2007 $’000 5,799 107 92 6,039 5,998 Notes to the fi nancial statements Developing almond trees are valued at their growing cost until the year they bear their first commercial crop. The value of crop bearing almond trees is calculated using a discounted cash flow methodology. The discounted cash flow incorporates the following factors: • Almond trees have an estimated 30 year economic life, with crop yields consistent with long term yield rates; • Selling prices are based on long term average trend prices; • Growing, processing and selling costs are based on long term average levels; • Cash flows are discounted at a rate that takes into account the cost of capital plus a suitable risk factor; and • An appropriate rental charge is included to represent the use of the developed land on which the trees are planted. (a) Financial risk management strategies The consolidated entity is exposed to financial risks arising from changes in the price of almonds. The consolidated entity reviews its outlook for almond prices regularly in considering the need for active financial risk management. (b) Non-current assets pledged as security Refer to Note 23 for information on biological assets whose title is restricted and the carrying amounts of any biological assets pledged as security by the parent entity or its subsidiaries. 18. Intangibles Year ended 30 June 2007 Opening net book amount Additions Transfer from property, plant and equipment Closing net book amount Year ended 30 June 2008 Opening net book amount Additions Closing net book amount CONSOLIDATED GOODWILL $’000 BRAND NAMES* $’000 PERMANENT WATER RIGHTS $’000 TOTAL $’000 25,995 2,900 - - 5 - 25,995 2,905 25,995 - 25,995 2,905 - 2,905 - - 5,826 5,826 5,826 4,410 10,236 28,895 5 5,826 34,726 34,726 4,410 39,136 * Brand name assets relate to the “Lucky” brand, which has been assessed as having an indefinite useful life. This assessment was based on the Lucky brand having been sold in the market place for over 50 years, is a market leader in the cooking nuts category and remains a heritage brand. (a) Impairment tests for goodwill Goodwill is allocated to the consolidated entity’s cash-generating units (CGU) identified according to business segment. The total value of goodwill relates to the Food Products CGU. The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use cash flow projections based on financial projections by management covering a five-year period assuming a 10% growth rate based on projected crop increases and other growth rates based on past performance and its expectations for the future. These do not exceed the long-term growth rate for the business in which the Food Products Division operates in. A weighted average cost of capital of 10.8% has been used to discount the cash flow projections. Select Harvests Annual Report 2008 63 Notes to the fi nancial statements (b) Impact of possible changes to key assumptions The recoverable amount of the goodwill in the Food Products Division exceeds the carrying amount of goodwill at 30 June 2008. If a post-tax discount rate of 11.8% was used instead of 10.8% the recoverable amount of the goodwill in the Food Products Division would still exceed the carrying amount of goodwill at 30 June 2008. (c ) Permanent water rights The value of permanent water rights relates to the almond division Cash Generating Unit (CGU). As an integral part of Land and irrigation infrastructures required to grow almond orchards, the recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use cash flow projections based on projections by management covering a five-year period assuming a growth of 10% based on projected crop increases and other growth rates based on past performance and its expectations for the future. A weighted average cost of capital of 10.8% has been used to discount cash flows indicating a recoverable amount exceeding the carrying value of permanent water rights at 30 June 2008. 19. Trade and other payables (current) Trade creditors Other creditors and accruals 20. Interest bearing liabilities (current) Secured Bank overdraft Bills payable Lease liability Total secured current borrowings (a) Security NOTES CONSOLIDATED PARENT ENTITY 2008 $’000 2007 $’000 8,112 26,735 34,847 7,899 38,507 46,406 2008 $’000 96 1,309 1,405 2007 $’000 140 297 437 23 (a) 23 (a) 29 50 1,285 50 1,285 50,500 237 50,787 - 114 50,500 59 - 17 1,399 50,609 1,302 Details of the security relating to each of the secured liabilities and further information on the bank overdrafts and bank loans are set out in Note 23. (b) Interest rate risk exposures Details of the consolidated entity’s exposure to interest rate changes on borrowings are set out in Note 36. (c) Fair value disclosures Details of the fair value of borrowings for the consolidated entity are set out in Note 23. 64 Select Harvests Annual Report 2008 Notes to the fi nancial statements 21. Provisions (current) Employee benefits 22. Trade and other payables (non current) Aggregate amounts payable to related parties - wholly owned companies 23. Interest bearing liabilities (non current) Secured Lease liability Total secured non-current borrowings (a) Total secured liabilities 29 The total secured liabilities (current and non current) are as follows: Bank overdraft Bills payable Lease liability Total secured liabilities (b) Assets pledged as security: 29 NOTES CONSOLIDATED PARENT ENTITY 2008 $’000 2,446 2,446 2007 $’000 2,482 2,482 2008 $’000 319 319 2007 $’000 306 306 - - - - 50 50,500 237 50,787 - - 41,261 41,261 16,904 16,904 237 237 1,285 - 351 - - 58 58 50 1,285 50,500 59 - 75 1,636 50,609 1,360 The bank overdraft and commercial bills of the parent entity and subsidiaries are secured by the following: (i) A registered mortgage debenture is held as security over all the assets and undertakings of Select Harvests Limited and the entities of the wholly owned group. (ii) A deed of cross guarantee exists between the entities of the wholly owned group. Lease liabilities are effectively secured as the rights to the leased assets recognised in the financial statements revert to the lessor in the event of a default. Select Harvests Annual Report 2008 65 Notes to the fi nancial statements The carrying amounts of assets pledged as security for current and non-current borrowings are: NOTES CONSOLIDATED PARENT ENTITY 2008 $’000 2007 $’000 2008 $’000 2007 $’000 Current Floating charge Cash and cash equivalents Receivables Inventories Derivative financial instruments 4,054 43,101 29,229 69 6,924 33,459 30,169 431 3,946 1,127 - 69 6,529 705 - 431 Total current assets pledged as security 76,453 70,983 5,142 7,665 126,352 9,607 287 - 136,246 141,388 51,063 9,607 276 - 60,946 68,611 Non-current Floating charge Receivables Other financial assets Property, plant and equipment Biological assets – almond trees Total non-current assets pledged as security - - 73,135 6,039 79,174 - - 47,754 5,998 53,752 Total assets pledged as security 155,627 124,735 (c) Financing arrangements The consolidated entity and the Company have bank overdraft facilities available to the extent of 1,000,000 Australian dollars and 3,000,000 United States dollars (2007: AUD1,000,000 & USD3,000,000). As at 30 June 2008 the consolidated entity and Company have used AUD 51,018 and USD Nil (2007: AUD Nil & USD 703,128) of the facility. The consolidated entity and the Company have a commercial bill facility available to the extent of $60,000,000 (2007: $28,000,000). As at 30 June 2008 the consolidated entity and Company have used $ 50,500,000 (2007: $Nil). This facility is treated as a current liability because it is due for renewal on 3 October 2008. The current interest rates are 7.80% on the commercial bill facility, 11.75% on the Australian dollar bank overdraft facility, and 3.41 % on the United States dollar bank overdraft facility. (d) Interest rate risk exposures Details of the consolidated entity’s exposure to interest rate risk are set out in Note 36. (e) Fair value The fair value of borrowings at balance date is equal to the carrying amounts set out in part (a) above. 66 Select Harvests Annual Report 2008 Notes to the fi nancial statements NOTES CONSOLIDATED PARENT ENTITY 2008 $’000 2007 $’000 2008 $’000 2007 $’000 24. Deferred tax liabilities (non current) The balance comprises temporary differences attributable to: Amounts recognised in profit and loss Inventory Assets at cost Employee benefits Accruals Intangibles Operating leases Amounts recognised directly in equity Cash flow hedges Movements: Opening balance 1 July Credited / (charged) to income statement Credited / (charged) to equity Closing balance at 30 June Deferred tax liabilities to be settled after more than 12 months Deferred tax liabilities to be settled within 12 months 25. Provisions (non current) Employee entitlements (a) Aggregate employee entitlements liability (b) Number of full time employees at year end 26. Contributed equity (a) Issued and paid up capital Ordinary shares fully paid 2,169 9,777 (893) 1,468 870 (371) 13,020 1,816 8,538 (648) (64) 870 (334) 10,178 - - 13,020 10,178 10,178 2,842 - 9,718 781 (321) 13,020 10,178 10,249 2,771 13,020 695 3,141 337 9,142 1,036 10,178 554 3,036 340 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 126 445 18 93 399 16 44,375 44,375 41,953 41,953 44,375 44,375 41,953 41,953 Select Harvests Annual Report 2008 67 Notes to the fi nancial statements (b) Movements in shares on issue Beginning of the financial year Issued during the year • Dividend reinvestment scheme • Employee share scheme • Share buy back End of Financial year (c) Share options Employee share scheme 2008 2007 NUMBER OF SHARES $’000 NUMBER OF SHARES $’000 38,739,047 41,953 39,707,757 52,665 451,074 119,700 3,695 1,097 299,128 164,867 (300,893) (2,370) (1,432,705) 39,008,928 44,375 38,739,047 3,531 1,288 (15,531) 41,953 The company continued to offer employee participation in short term and long term incentive schemes as part of the remuneration packages for the employees of the companies. Both the short term and long term schemes involve payments up to an agreed proportion of the total fixed remuneration of the employee, with relevant proportions based on market relativity of employees with equivalent responsibilities. The employee is able to receive payments under the short term incentive scheme based on the achievement of agreed business plans by the individual. This performance is measured and reported by a balanced scorecard approach. The long term scheme involves the issue of options to the employee, under the executive share option scheme. During or since the end of the financial year, 71,167 options (2007: 171,101 options) have been granted under this scheme (refer Note 38 and Directors’ Report for further details). The market value of ordinary Select Harvests Limited shares closed at $ 6.00 on 30 June 2008 ($11.60 on 30 June 2007). (d) 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. 27. Reserves and retained profi ts Capital reserve Cash flow hedge reserve Asset revaluation reserve Options reserve NOTES CONSOLIDATED PARENT ENTITY 2008 $’000 2007 $’000 2008 $’000 2007 $’000 27(a) 27(a) 27(a) 27(a) 3,270 (9) 7,645 329 11,235 3,270 (137) 7,645 495 11,273 3,270 (9) - 329 3,270 (137) - 495 3,590 3,628 Retained profits 27(c) 38,461 42,278 759 1,092 68 Select Harvests Annual Report 2008 Notes to the fi nancial statements NOTES CONSOLIDATED PARENT ENTITY 2008 $’000 2007 $’000 2008 $’000 2007 $’000 3,270 3,270 (137) 128 (9) 7,645 7,645 495 - (166) 329 3,270 3,270 1,258 (1,395) (137) 7,645 7,645 518 174 (197) 495 3,270 3,270 (137) 128 (9) - - 495 - (166) 329 3,270 3,270 512 (649) (137) - - 518 174 (197) 495 (a) Movements Capital reserve Balance at beginning of year Balance at end of year Cash flow hedge reserve Balance at beginning of year Currency translation differences arising during the year Balance at end of year Asset revaluation reserve Balance at beginning of year Balance at end of year Options reserve Balance at beginning of year Option expense Transfer to share capital (options exercised) Balance at end of year (b) Nature and purpose of reserves (i) Capital reserve The capital reserve is used to isolate realised capital profits from disposal of non-current assets. (ii) Asset revaluation reserve The asset revaluation reserve is used to record increments and decrements in the value of non current assets. The reserve can only be used to pay dividends in limited circumstances. (iii} Options reserve The options reserve is used to recognise the fair value of options issued but not exercised. (iv) Cash flow hedge reserve The cash flow hedge reserve is used to record gains or losses on foreign exchange contracts in a cash flow hedge that are recognised directly in equity. c) Retained profits Balance at the beginning of year Profit attributable to members of Select Harvests Limited Total available for appropriation Dividends paid Dividends refunded Balance at end of year 42,278 18,130 60,408 (22,156) 209 38,461 36,125 28,098 64,223 1,092 21,614 22,706 955 22,082 23,037 (21,945) (22,156) (21,945) - 42,278 209 759 - 1,092 Select Harvests Annual Report 2008 69 Notes to the fi nancial statements NOTES CONSOLIDATED PARENT ENTITY 2008 $’000 2007 $’000 2008 $’000 2007 $’000 28. Reconciliaton of the net profi t after income tax to the net cash fl ows from operating activities Net profit Non Cash Items Depreciation and amortisation Almond stock fair value adjustment Almond trees fair value adjustment Net loss on disposal of property, plant and equipment Dividends received from controlled entities Interest received Management fees received Changes in assets and liabilities (Increase) in trade receivables (Increase) / decrease in inventory 18,130 28,098 21,614 22,082 3,802 3,802 133 291 92 500 837 - - - 1,071 92 6 - - - - - - - - - (20,500) (22,000) (2,929) (1,247) (3,915) (4,554) (7,561) (9,064) 348 (5,487) - - - - (Increase) / decrease in receivables and other assets (1,865) (1,712) (26,335) 22,195 (Decrease) / increase in trade and other payables (11,977) 11,993 968 29 (Decrease) / increase in income tax payable (3,327) 472 (1,028) 472 Increase in deferred income tax liability 2,842 460 - - (Increase) / decrease in deferred tax assets Increase in employee entitlements 69 105 (347) 407 (22) (332) 13 129 Net cash flow from operating activities 1,995 29,791 (32,001) 17,065 Reconciliation of cash Cash balance comprises: Cash at bank Bank overdraft Closing cash balance 4,054 (50,551) (46,497) 6,924 (1,285) 5,639 3,946 (50,551) (46,605) 6,529 (1,285) 5,244 70 Select Harvests Annual Report 2008 Notes to the fi nancial statements NOTES CONSOLIDATED PARENT ENTITY 2008 $’000 2007 $’000 2008 $’000 2007 $’000 29. Expenditure commitments Lease commitments – Group company as lessee Commitments in relation to leases contracted for at the reporting date but not recognised as liabilities, payable: Within one year Later than one year but not later than five years Later than five years (i) Operating leases (non cancellable): Minimum lease payments • Not later than one year • Later than one year and not later than five years • Later than five years • Aggregate lease expenditure contracted for at reporting date Aggregate expenditure commitments comprise: 11,550 42,496 52,623 9,891 38,322 56,554 106,669 104,767 9,101 32,120 9,705 50,926 8,076 29,544 10,935 48,555 Aggregate lease expenditure contracted for at reporting date 50,926 48,555 Operating lease payments are for rental of premises, farming and factory equipment. (ii) Finance leases: • Not later than one year • Later than one year and not later than five years • Total minimum lease payments • Future finance charges • Lease liability - Current liability - Non current liability 20 23 Finance leases are for various items of plant & equipment (iii) Almond orchard leases: Minimum lease payments • Not later than one year • • Later than one year and not later than five years Later than five years Aggregate expenditure commitments comprise: 257 - 257 (20) 237 237 - 237 133 260 393 (42) 351 114 237 351 2,213 10,376 42,919 1,701 8,541 45,619 Aggregate lease expenditure contracted for at reporting date 55,508 55,861 - - - - - - - - - 60 - 60 (1) 59 59 - 59 - - - - - - - - - - - - 24 60 84 (9) 75 17 58 75 - - - Select Harvests Annual Report 2008 71 Notes to the fi nancial statements NOTES CONSOLIDATED PARENT ENTITY 2008 $’000 2007 $’000 2008 $’000 2007 $’000 The almond orchard leases comprises the lease of a 512 acre almond orchard and a 1,002 acre lease from Sandhurst Trustees Limited in which the consolidated entity has the right to harvest the almonds from the trees owned by the lessor for the term of the agreement. The company also has first right of refusal to purchase the properties in the event that the lessor wished to sell. Other leases within Select have renewal and first right of refusal clauses. 30. Events occuring after balance date On 20 August 2008, the Directors declared a fully franked final dividend of 23 cents per ordinary share to be paid on 1 October 2008 to shareholders registered at 5.00 pm on 10 September 2008. Effective 15 August Mr Max Fremder retired as Chairman of The Board of Directors, succeeded by Mr Curt Leonard. There has been no other matter or circumstance, which has arisen since 30 June 2008 that has significantly affected or may significantly affect: a) the operations, in financial years subsequent to 30 June 2008, of the consolidated entity, or b) the results of those operations, or c) the state of affairs, in financial years subsequent to 30 June 2008, of the consolidated entity. 31. Earnings per share The following reflects the income and share data used in the calculations of basic and diluted earnings per share: Profit from continuing operations Profit attributable to equity holders of the company used in calculating basic earnings per share Diluted earnings per share: Profit from continuing operations Profit attributable to equity holders of the company used in calculating diluted earnings per share Weighted average number of ordinary shares used in calculating basic earnings per share Effect of dilutive securities: Diluted earnings per share: Share options CONSOLIDATED 2008 $’000 2007 $’000 18,130 28,098 18,130 28,098 18,130 28,098 18,130 28,098 NUMBER OF SHARES 2008 2007 38,851,551 39,556,731 - 121,994 Adjusted weighted average number of ordinary shares used in calculating diluted earnings per share 38,851,551 39,678,725 72 Select Harvests Annual Report 2008 Notes to the fi nancial statements 32. Remuneration of directors and key management personnel Principles used to determine the nature and amount of remuneration Remuneration levels are set to attract and retain appropriately qualified and experienced directors and key management personnel. The Remuneration Committee may obtain independent advice on the appropriateness of remuneration packages, given trends in the marketplace. Remuneration packages include a mix of fixed remuneration, performance based remuneration, and equity based remuneration. Executive directors and key management personnel may receive short term incentives based on achievement of specific business plans and performance indicators, which include financial and operational targets relevant to performance at the consolidated entity level, divisional level, or functional level, as applicable, for the financial year. In addition, the consolidated entity offers executive directors and key management personnel participation in the long-term incentive scheme involving the issue of options to the employee under the executive share option scheme. The executive share option scheme provides for the offer of a parcel of options to participating employees on an annual basis, with a three- year expiry period, exercisable at the market price set at the time the offer was made. The options are granted annually in three tranches on achievement of the performance hurdles. Non-executive directors each receive a base fee of $50,000 per annum. The Chairman receives up to twice the base fee. Non-executive directors do not receive any performance related remuneration nor are they issued options on securities. a) Directors The following persons were directors of Select Harvests Limited during the financial year: (i) Chairman – non-executive M A Fremder (ii) Executive director J Bird, Managing Director (iii) Non-executive directors G F Dan O’Brien J C Leonard R M Herron C G Clark (resigned 31 January 2008) (b) Other key management personnel The following persons also had authority and responsibility for planning, directing, and controlling the continuing activities of the consolidated entity, directly or indirectly, during the financial year: NAME POSITION EMPLOYER M Bartholemew Group Manager Sales & Marketing Select Harvests Food Products Pty Ltd K Martin T Millen Group Operations Manager Select Harvests Limited Group Horticultural & Farm Operations Manager Kyndalyn Park Pty Ltd L Van Driel Group Trading Manager Select Harvests Food Products Pty Ltd P Chambers Chief Financial Officer & Company Secretary Select Harvests Limited Select Harvests Annual Report 2008 73 Notes to the fi nancial statements All of the above persons were also key management persons during the year ended 30 June 2008, except for M Bartholomew who commenced employment with the consolidated entity on 20 May 2008; P Chambers who commenced employment with the consolidated entity on 9 September 2007. K Bush was a key management person in the year ended 30 June 2008 and ceased employment with the consolidated entity on 20 May 2008; R Palmaricciotti was a key management person in the year ended 30 June 2008 and ceased employment with the consolidated entity on 9 September 2007. NOTES CONSOLIDATED PARENT ENTITY 2008 $’000 2007 $’000 2008 $’000 2007 $’000 (c) Key management personnel compensation Short term employment benefits 2,061,756 1,826,293 1,277,091 1,255,792 Long service leave Share based payments 33,147 92,881 28,000 158,591 23,334 72,799 18,000 132,809 2,187,784 2,012,884 1,373,224 1,406,601 The company has taken advantage of the relief provided by Corporations Regulations 2M.6.04 and has transferred the detailed remuneration disclosures to the Directors’ report. The relevant information can be found in Sections A to C of the remuneration report on pages 5 to 8. (d) Equity instrument disclosures relating to key management personnel Number of options held by directors and key management personnel The movement during the financial year in the number of options over ordinary shares in the company held, directly or indirectly, by each director and key management personnel is as follows: 2008 Directors J Bird Key Management Personnel K Bush (Group Manager Sales & Marketing) M Bartholomew (Group Manager Sales & Marketing) K Martin (Group Operations Manager) T Millen (Group Horticultural & Farm Operations Manager) L Van Driel (Group Trading Manager) R Palmaricciotti (Chief Financial Office and Company Secretary) P Chambers (Chief Financial officer & Company secretary) HELD AT 1 JULY 2007 GRANTED AS REMUNERATION EXERCISED HELD AT 30 JUNE 2008 VESTED AND EXERCISABLE AT 30 JUNE 2008 90,667 56,867 (101,400) 46,134 46,134 - - - - - - - - - 7,533 12,867 5,533 8,767 (6,000) (12,300) - - - - - - - - - 7,066 9,334 - - - - - 7,066 9,334 - - 74 Select Harvests Annual Report 2008 Notes to the fi nancial statements 2007 Directors J Bird Key Management Personnel K Bush (Group Manager Sales & Marketing) K Martin (Group Operations Manager) T Millen (Group Horticultural & Farm Operations Manager) HELD AT 1 JULY 2006 GRANTED AS REMUNERATION EXERCISED HELD AT 30 JUNE 2007 VESTED AND EXERCISABLE AT 30 JUNE 2007 92,200 86,067 87,600 90,667 90,667 - - - - - - - - - - 5,600 7,333 5,400 7,533 7,533 L Van Driel (Group Trading Manager 4,100 12,667 3,900 12,867 12,867 R Palmaricciotti (Chief Financial Office and Company Secretary) M Mattia (Chief financial officer & Company secretary) R. Tanti (Sales Manager – Food Products) W Turner (General Manager – Almond Division) - - - - 26,200 26,200 7,400 - 13,867 18,600 21,267 18,600 - - - - - - - - No options held by directors or key management personnel are vested but not exercisable. Number of shares held by directors and key management personnel The movement during the financial year in the number of ordinary shares of the company held, directly or indirectly, by each director and key management personnel, including their personally related entities, is as follows: 2008 Directors - Non Executive M A Fremder J C Leonard C G Clark R M Herron G F Dan O’Brien Directors – Executive J Bird HELD AT 1 JULY 2007 RECEIVED AS REMUNERATION RECEIVED ON EXERCISE OF OPTIONS OTHER – DRP, SALES & PURCHASES TOTAL 5,777,234 484,797 23,892 5,000 51,090 518,122 - - - - - - - - - - - - 5,777,234 96,982 - 3,772 3,679 581,779 23,892 8,772 54,769 101,400 - 619,522 Select Harvests Annual Report 2008 75 Notes to the fi nancial statements 2008 HELD AT 1 JULY 2007 RECEIVED AS REMUNERATION RECEIVED ON EXERCISE OF OPTIONS OTHER – DRP, SALES & PURCHASES Key Management Personnel K Bush (Group Manager Sales & Marketing) K Martin (Group Operations Manager) T Millen (Group Horticultural & Farm Operations Manager) P Chambers (Chief Financial Officer and Company Secretary) L Van Driel (Group Trading Manager) M Bartholemew (Group Sales & Marketing Manager) 2007 Directors - Non Executive M A Fremder J C Leonard C G Clark R M Herron G F Dan O’Brien Directors – Executive J Bird Key Management Personnel K Bush (Group Manager Sales & Marketing) K Martin (Group Operations Manager) T Millen (Group Horticultural & Farm Operations Manager) L Van Driel (Group Trading Manager) TOTAL - - 45,444 - - - TOTAL 5,777,234 484,797 23,892 5,000 51,090 - - 39,444 - - - - - - - - - - - 6,000 - - - - - 12,300 (12,300) - - HELD AT 1 JULY 2006 RECEIVED AS REMUNERATION RECEIVED ON EXERCISE OF OPTIONS OTHER – DRP, SALES & PURCHASES 5,662,365 455,932 23,892 5,000 50,000 426,522 - - 34,044 38,700 - - - - - - - - - - - - - - - 114,869 28,865 - - 1,090 87,600 4,000 518,122 - - 5,400 3,900 - - - - - 39,444 42,600 - (e) Other transactions with directors and key management personnel Transactions with directors and key management personnel that require disclosure in accordance with AASB 124 for the year ended 30 June 2008 are detailed in Note 34. 76 Select Harvests Annual Report 2008 Notes to the fi nancial statements NOTES CONSOLIDATED PARENT ENTITY 2008 $’000 2007 $’000 2008 $’000 2007 $’000 33. 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: Amounts received or due and receivable by PricewaterhouseCoopers for: • An audit or review of the financial report of the entity and any other entity in the consolidated entity • Other financial services (a) 177,800 154,632 177,800 154,632 137,307 315,107 30,140 184,772 137,307 315,107 30,140 184,772 (a) Amounts paid or payable to an auditor for non-audit services provided during the year by the auditor to any entity that is part of the consolidated entity for: PricewaterhouseCoopers: Taxation compliance and advice IT consulting Other 34. Related party disclosures (a) Parent entity 33,910 18,170 33,910 18,170 80,897 - 80,897 22,500 137,307 11,970 30,140 22,500 137,307 - 11,970 30,140 The parent entity within the consolidated entity is Select Harvests Limited. (b) Subsidiaries Interests in subsidiaries are set out in Note 37. (c) Key management personnel Disclosures relating to key management personnel are set out in Note 32. (d) Wholly owned group transactions Dividend revenue Subsidiaries Interest income Subsidiaries Tax consolidation legislation Current tax payable assumed from wholly-owned tax consolidated entities Other transactions Management fees - - - - - - - - 20,500 22,000 2,774 1,029 - - 3,915 4,554 Management fees are received by Select Harvests Limited from controlled entities under normal terms and conditions. Select Harvests Annual Report 2008 77 Notes to the fi nancial statements (e) Director related entity transactions Services Select Harvests Limited has an Almond Orchard Management Agreement and a Land Lease agreement with Maxdy Nominees Pty Ltd, a company in which Mr M A Fremder is a director. Under the terms of the agreements, Select Harvests Limited has developed and continues to manage 300 acres of almond orchard on a fee basis for Maxdy Nominees Pty Ltd. In addition, Select Harvests Limited will process and sell the entire production of the orchard for a 25 year period. The consolidated entity received an amount of $1,514,000 (2007: $1,444,439) during the financial year in relation to the above contract. The agreements are under normal terms and conditions no more favourable than those which it is reasonable to expect the entity would have adopted if dealing with the director or director related entity at arms length in the same circumstances. Select Harvests Limited also has an Almond Orchard Management Agreement with Almas Almonds Pty Ltd, a company which manages the Almas Almonds Partnership in which both Mr M A Fremder and Mr J C Leonard have an indirect interest. Under the terms of the agreement, Select Harvests Limited is developing and shall manage 1,753 acres of almond orchard on a fee basis for Almas Almonds Pty Ltd. In addition, Select Harvests Limited will process and sell the entire production of the orchard for the entire 30 year life of the orchard. The consolidated entity received an amount of $3,242,000 (2007: $4,119,581) during the financial year in relation to the above contract. The agreements are under normal terms and conditions no more favourable than those which it is reasonable to expect the entity would have adopted if dealing with the director or director related entity at arms length in the same circumstances. A non-executive Director of the Company, Mr Dan O’Brien, acquired from Select Harvests, via an associated entity. $89,344 worth of Almond Hull suitable for livestock feed. This was purchased at market prices. NOTES CONSOLIDATED PARENT ENTITY 2008 $’000 2007 $’000 2008 $’000 2007 $’000 (f) Outstanding balances The following balances are outstanding at the reporting date in relation to transactions with related parties: Non current receivables Subsidiaries Non current payables Subsidiaries Loans to/from subsidiaries Beginning of the year Loans advanced Loan repayments received Interest charged End of year - - - - - - - - - - - - - - 126,352 51,063 41,261 16,904 34,159 28,292 329,830 276,538 (281,672) (271,700) 2,774 85,091 1,029 34,159 Loans are made by Select Harvests Limited to controlled entities under normal terms and conditions. Loans are made to Select Harvests Limited by controlled entities under normal terms and conditions. 78 Select Harvests Annual Report 2008 Notes to the fi nancial statements 35. Segment information Segment products and locations The consolidated entity has the following business segments: • The food products division processes, markets, and distributes edible nuts, dried fruits, seeds, and a range of natural health foods. • The almond operation comprises the growing, processing and sale of almonds to the food industry from company owned almond orchards; the sale of a range of management services to external owners of almond orchards, including orchard development, tree supply, farm management, land rental and, irrigation infrastructure; and the sale of almonds on behalf of external investors. The consolidated entity operates predominantly within the geographical area of Australia. Select Harvests Annual Report 2008 79 Notes to the fi nancial statements 35. Segment information continued FOOD PRODUCTS ALMOND OPERATIONS TOTAL OPERATIONS ELIMINATIONS AND CORPORATE CONSOLIDATED ENTITY 2008 $’000 2007 $’000 2008 $’000 2007 $’000 2008 $’000 2007 $’000 2008 $’000 2007 $’000 2008 $’000 2007 $’000 Operating Revenue Sales of goods & services to customers outside the consolidated entiry Intersegment revenue Sale of Almonds to customers outside the consolidated entity on behalf of managed orchard owners (Note (a)) Less Cost of Almonds sold by the consolidated entity on behalf of managed orchard owners (Note (a)) Other revenue Unallocated revenue 124,251 138,298 100,404 91,200 224,655 229,498 - - 224,655 229,498 - - - - - 83 21,150 25,661 21,150 25,744 (21,150) (25,744) - - - 26,096 27,659 26,096 27,659 - - 26,096 27,659 - (43,210) (45,767) (43,210) (45,767) 17,113 18,108 (26,097) (27,659) 47 - 592 1,164 - - 592 - 1,211 - - - - - 592 - 1,211 - Total revenue 124,251 138,428 105,032 99,917 229,283 238,345 (4,037) (7,636) 225,246 230,709 Operating profit before interest, tax, and internal charges tax, and internal charges 925 7,422 29,514 36,827 30,439 44,249 (3,320) (3,700) 27,119 40,549 Segment assets (excluding inter- company debts) 70,051 70,638 125,391 85,771 195,442 156,409 506 3,744 195,948 160,153 Segment liabilities (excluding inter-company debts) 9,922 9,022 65,071 48,555 74,993 57,577 26,884 7,072 101,877 64,649 Acquisition of non-current segment assets Depreciation and amortisation of 1,221 1,025 28,739 12,009 29,960 13,034 140 105 30,100 13,139 segment assets 1,597 1,434 2,072 2,093 3,669 3,527 133 275 3,802 3,802 Note (a) - The consolidated entity provides a range of management and other services to externally owned or third party orchards. In addition to these services, the consolidated entity sells the crop of almonds harvested from the orchards of the external owners. These almonds are sold by the consolidated entity on a pooled basis, the proceeds from which are distributed to the pool participants. The consolidated entity earns a marketing fee for providing this service. Segment revenues, expenses and results include transfers between segments. Such transfers are priced on an “arms-length” basis and are eliminated on consolidation. 80 Select Harvests Annual Report 2008 Notes to the fi nancial statements % % 7 0 0 2 8 0 0 2 7 0 0 2 0 0 0 $ ’ 8 0 0 2 0 0 0 $ ’ 7 0 0 2 0 0 0 $ ’ 8 0 0 2 0 0 0 $ ’ 7 0 0 2 0 0 0 $ ’ 8 0 0 2 0 0 0 $ ’ 7 0 0 2 0 0 0 $ ’ 8 0 0 2 0 0 0 $ ’ 7 0 0 2 0 0 0 $ ’ 8 0 0 2 0 0 0 $ ’ 7 0 0 2 0 0 0 $ ’ 8 0 0 2 0 0 0 $ ’ E T A R T S E R E T N I T E E H S E C N A L A B I E V T C E F F E E G A R E V A E H T R E P S A T N U O M A I G N R A E B D E T H G I E W I G N Y R R A C L A T O T T S E R E T N I N O N S R A E Y 5 N A H T E R O M S R A E Y 5 O T 1 R E V O S S E L R O R A E Y 1 : N I I G N R U T A M E T A R T S E R E T N I D E X I F T S E R E T N I I G N T A O L F E T A R S T N E M U R T S N I I L A C N A N I F - . 2 6 . 5 6 . 4 0 1 - - - - - 4 3 . 7 . 1 1 3 7 . - - 4 2 9 6 , 4 5 0 4 , - - 9 5 4 3 3 , 1 0 1 , 3 4 9 5 4 3 3 , 1 0 1 , 3 4 3 8 3 0 4 , 5 5 1 , 7 4 9 5 4 3 3 , 1 0 1 , 3 4 - 1 2 0 , 1 2 6 2 - 1 5 0 0 5 0 5 , - - - - - - 9 9 8 7 , 2 2 1 , 8 9 9 8 7 , 2 2 1 , 8 7 0 5 8 3 , 5 3 7 6 2 , 7 0 5 8 3 , 5 3 7 6 2 , 0 7 . 0 7 . - 1 5 3 - 7 3 2 - - - - 0 4 0 8 4 , 5 4 6 5 8 , 6 0 4 6 4 , 7 5 8 4 3 , - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 7 3 2 - 7 3 2 - - - - - - - - - - - 0 0 0 6 , - 0 0 0 6 , - - - - - 4 1 1 - 4 1 1 - - - - - - - - 7 3 2 0 0 5 0 5 , - 4 2 9 4 2 9 1 2 0 , 1 2 6 2 - - - - 4 5 0 4 , - 4 5 0 4 , - 1 5 - - - - s e l b a v i e c e r r e h t o d n a e d a r T s t e s s a l a i c n a n i F ) i ( h s a C s e i t i l i b a i l l a i c n a n i F ) i i ( s t e s s a l a i c n a n i f l a t o T D S U – t f a r d r e v o k n a B D U A – t f a r d r e v o k n a B s l l i B l a i c r e m m o C s r o t i d e r c e d a r T s r o t i d e r c r e h t O y t i l i b a i l e s a e l e c n a n i F 3 0 0 5 1 , ) 6 3 1 , 1 ( s t c a r t n o c e g n a h c x e n g i e r o F 7 3 7 0 5 , 6 8 2 6 1 , ) 5 8 0 , 1 ( s e i t i l i b a i l l a i c n a n i f l a t o T Select Harvests Annual Report 2008 81 d n a s t e s s a l a i c n a n i f f o s e t a r t s e r e t n i e v i t c e f f e e h t d n a s k s i r e t a r t s e r e t n i o t e r u s o p x e s ’ y t i t n e d e t a d i l o s n o c e h T k s i r e t a r t s e r e t n I . 6 3 k s i r e t a r t s e r e t n I ) a ( : s w o l l o f s a e r a , e t a d e c n a a b e h t l t a d e s i n g o c e r n u d n a d e s i n g o c e r h t o b , s e i t i l i b a i l l a i c n a n i f Notes to the fi nancial statements 37. Controlled entities Parent Entity: Select Harvests Limited Subsidiaries of Select Harvests Limited: Kyndalyn Park Pty Ltd Select Harvests Food Products Pty Ltd* Subsidiaries of Select Harvests Food Products Pty Ltd*: Meriram Pty Ltd Kibley Pty Ltd 38. Employee benefi ts Executive share option scheme COUNTRY OF INCORPORATION PERCENTAGE OWNED (%) 2008 2007 Australia Australia Australia Australia Australia 100 100 100 100 100 100 100 100 100 100 The consolidated entity has in place an executive share option scheme. The scheme provides for the board to offer to eligible employees a parcel of options, which will be granted for no consideration in three equal tranches over a period of approximately three years from the date of each result announcement to the ASX in each financial year. Each option is convertible into one ordinary share. The exercise price of the options, determined in accordance with the rules of the scheme, is based on the weighted average price of the company’s shares over the first 50 sales of shares in the ordinary course of trading on the stock market of the ASX immediately following the result announcement. All options expire on the earlier of their expiry date or termination of the employee’s employment. The granting of options is conditional upon the consolidated entity achieving growth of at least 10% in EPS in each financial year over the preceding financial year. Accordingly, the scheme does not represent remuneration for past services. There are no voting or dividend rights attached to the options. The assessed fair value at offer date is determined using a Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at offer 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. 82 Select Harvests Annual Report 2008 Notes to the fi nancial statements - - 6 9 6 0 6 3 , 6 9 6 0 6 3 , 6 9 6 0 6 3 , 4 0 9 . 4 0 9 . 4 0 9 . - - - - - - 0 0 9 9 3 , 2 2 4 0 1 3 , 0 0 9 9 3 , 2 2 4 0 1 3 , 0 0 9 9 3 , 2 2 4 0 1 3 , - - - - - - - - 4 3 7 3 3 , 4 3 7 3 3 , 0 0 9 9 3 , - - - 0 0 9 9 3 , 0 0 9 9 3 , - - 0 0 0 2 0 0 0 2 E U L A V R A F I E $ T A G E R G G A E U L A V R A F I E $ R A H S R E P D E U S S I R E B M U N S E R A H S F O S D E E C O R P D $ E V I E C E R D E T S E V E U S S I N O I T A S N O T P O F O R E B M U N R A E Y F O D N E S N O T P O I D E S I C R E X E D E S P A L S N O T P O I S N O T P O I D E T N A R G F O R E B M U N T A S N O T P O I E C R P I E S I C R E X E I G N N N G E B I - - R A E Y F O 0 0 9 9 3 , 0 0 9 , 1 4 0 0 9 , 1 4 - 4 3 7 3 3 , - - 4 3 7 3 3 , 8 7 7 $ . 8 7 7 $ . 8 7 7 $ . 5 0 . 1 1 $ 5 0 . 1 1 $ 7 0 0 2 / 0 1 / 0 2 5 0 0 2 / 8 0 / 4 2 5 0 0 2 / 8 0 / 4 2 7 0 0 2 / 0 1 / 0 2 6 0 0 2 / 8 0 / 8 2 6 0 0 2 / 8 0 / 8 2 7 0 0 2 / 0 1 / 0 2 7 0 0 2 / 8 0 / 7 2 7 0 0 2 / 8 0 / 7 2 8 0 0 2 / 0 1 / 1 3 6 0 0 2 / 8 0 / 8 2 6 0 0 2 / 8 0 / 8 2 8 0 0 2 / 0 1 / 1 3 7 0 0 2 / 8 0 / 7 2 7 0 0 2 / 8 0 / 7 2 E T A D Y R I P X E E S I C R E X E E T A D T N A R G R E T F A R O N O E T A D 8 0 0 2 0 2 4 2 4 2 , 0 0 7 2 6 3 , 0 9 6 , 1 9 6 0 8 5 6 8 , 5 2 3 5 3 3 , , 6 7 3 8 2 2 2 8 7 . 0 7 . 1 1 5 1 . 3 1 0 7 . 1 1 5 1 . 3 1 5 1 . 3 1 0 0 0 , 1 3 0 0 0 , 1 3 0 0 6 3 7 1 , 0 0 6 3 7 1 , 0 0 6 2 5 , 0 6 5 4 9 2 , - - - - - - 0 0 0 , 1 3 0 0 0 , 1 3 0 0 6 2 5 , 0 0 4 7 , 2 7 5 7 5 , 0 0 9 9 3 , 0 0 9 9 3 , 0 0 4 7 , 0 0 5 5 2 , 0 9 3 8 9 1 , 0 0 9 , 1 4 0 0 9 , 1 4 0 0 5 5 2 , 7 6 3 7 1 , 5 0 9 , 1 9 1 - 4 3 7 3 3 , 7 6 3 7 1 , - - - - - - D E T S E V E U S S I N O - - R A E Y F O 0 0 0 , 1 3 0 0 0 , 1 3 0 0 4 7 6 , 1 0 1 , 1 5 - - 0 0 6 2 5 , - - 0 0 3 7 4 , 0 6 5 $ . 0 6 5 $ . 0 6 5 $ . 8 7 7 $ . 8 7 7 $ . 5 0 . 1 1 $ E U L A V R A F I E $ T A G E R G G A E U L A V R A F I E $ R A H S R E P D E U S S I R E B M U N S E R A H S F O S D E E C O R P D $ E V I E C E R I T A S N O T P O F O R E B M U N R A E Y F O D N E S N O T P O I D E S I C R E X E D E S P A L S N O T P O I S N O T P O I D E T N A R G F O R E B M U N T A S N O T P O I E C R P I E S I C R E X E I G N N N G E B I E T A D Y R I P X E E S I C R E X E E T A D T N A R G R E T F A R O N O E T A D 7 0 0 2 6 0 0 2 / 1 1 / 1 0 4 0 0 2 / 8 0 / 7 2 4 0 0 2 / 8 0 / 7 2 6 0 0 2 / 1 1 / 1 0 5 0 0 2 / 8 0 / 4 2 5 0 0 2 / 8 0 / 4 2 6 0 0 2 / 1 1 / 1 0 6 0 0 2 / 8 0 / 8 2 6 0 0 2 / 8 0 / 8 2 7 0 0 2 / 0 1 / 0 2 5 0 0 2 / 8 0 / 4 2 5 0 0 2 / 8 0 / 4 2 7 0 0 2 / 0 1 / 0 2 6 0 0 2 / 8 0 / 8 2 6 0 0 2 / 8 0 / 8 2 8 0 0 2 / 0 1 / 1 3 6 0 0 2 / 8 0 / 8 2 6 0 0 2 / 8 0 / 8 2 f o e c i r p t e k r a m e h t s i d o i r e p g n i t r o p e r e h t g n i r u d s n o i t p o e h t g n i s i c r e x e f o t l u s e r a s a d e u s s i s e r a h s f o e u a v l r i a f e h T . e t a d e s i c r e x e e h t n o g n d a r t i f o e s o l c e h t t a s a X S A e h t n o s e r a h s s ’ y n a p m o c e h t Select Harvests Annual Report 2008 83 e h t g n i r u d s t n e m e v o m d n a e t a d g n i t r o p e r e h t i f o g n d n e d n a g n n n g e b e h t i i i s e r a h s y r a n d r o d e u s s i n u r e v o s n o i t p o f o y r a m m u S t a s e r a h s i y r a n d r o d e u s s i n u r e v o s n o i t p o f o s l i a t e D : w o l e b t u o t e s e r a r a e y ) . t n o c ( s t fi e n e b e e y o p m E . l 8 3 Notes to the fi nancial statements 38. Employee benefi ts (continued) The amounts recognised in the financial statements of the consolidated entity in relation to executive share options exercised during the financial year were: Issued and Paid up Capital 2008 $’000 1,097 2007 $’000 1,380 (b) Expenses arising from share-based payment transactions Total expenses arising from share-based payment transactions recognised during the period as part of employee benefit expense were as follows: Options issued under employee option plan CONSOLIDATED PARENT ENTITY 2008 $’000 - - 2007 $’000 174 174 2008 $’000 - - 2007 $’000 187 187 39. Contingent liabilities Cross guarantees given by the entities comprising the consolidated entity are detailed in Note 23. 84 Select Harvests Annual Report 2008 Directors’ declaration In the directors’ opinion: (a) the financial statements and Notes set out on pages 36 to 84 are in accordance with the Corporations Act 2001, including: (i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and (ii) giving a true and fair view of the company’s and consolidated entity’s financial position as at 30 June 2008 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 The directors have been given the declarations by the Managing Director and Chief Financial Officer required under section 295A of the Corporations Act 2001. This declaration is made in accordance with a resolution of the directors. J C Leonard Chairman Melbourne, 20 August 2008 Select Harvests Annual Report 2008 85 Directors’ Declaration 86 Select Harvests Annual Report 2008 Select Harvests Annual Report 2008 87 ASX additional information Additional information required by the Australian Stock Exchange Limited and not shown elsewhere in this report is as follows. The information is current as at 31 July 2008. (a) Distribution of equity securities The number of shareholders, by size of holding, in each class of share are: NUMBER OF ORDINARY SHARES NUMBER OF SHAREHOLDERS 1 to 1,000 1,001 to 5,000 5,001 to 10,000 10,001 to 100,000 100,001 and over 1,387 1,333 311 253 35 The number of shareholders holding less than a marketable parcel of shares are: NUMBER OF ORDINARY SHARES 4,888 NUMBER OF SHAREHOLDERS 141 (b) Twenty largest shareholders The names of the twenty largest holders of quoted shares are: 1 2 3 Maxdy Nominees Pty Ltd Almonds Australia Pty Ltd HSBC Custody Nominees (Australia) Limited 4 MF Custodians Limited 5 6 7 8 9 Invia Custodian Pty Ltd (Black A/C) Le Grand Pty Ltd John Bird UBS Nominees Pty Ltd Longo Pty Ltd 10 Mr Petrus Cornelius Nicolaas Middencorp 11 Mid Manhattan Pty Ltd 12 UBS Wealth Management Australia Nominees Pty Ltd 13 National Nominees Limited 14 Mirrabooka Investments Limited 15 AMP Life Limited 88 Select Harvests Annual Report 2008 LISTED ORDINARY SHARES NUMBER OF SHARES PERCENTAGE OF ORDINARY 5,777,234 4,500,000 4,429,362 2,294,944 658,838 648,700 619,522 493,136 460,871 460,767 452,878 381,902 368,857 366,777 343,564 14.8 11.5 11.4 5.9 1.7 1.7 1.6 1.3 1.2 1.2 1.2 1.0 1.0 0.9 0.9 ASX additional information 16 17 Invia Custodian Pty Ltd (Wilson INVMT Fund Ltd A/C) ANZ Nominees Ltd 18 Mutual Trust Pty Ltd (Charles Baillieu A/C) 19 Thurston Investments Pty Ltd 20 Dr John Carey (c) Substantial shareholders The names of substantial shareholders are: Maxdy Nominees Pty Ltd Almonds Australia Pty Ltd HSBC Custody Nominees (Australia) Limited LISTED ORDINARY SHARES NUMBER OF SHARES PERCENTAGE OF ORDINARY 343,241 310,373 300,000 280,697 217,215 0.9 0.8 0.8 0.7 0.6 NUMBER OF SHARES 5,777,234 4,500,000 4,429,362 (d) Voting rights All ordinary shares (whether fully paid or not) carry one vote per share without restriction. (e) The Company is listed on the Australian Stock Exchange. The home exchange is Melbourne. Select Harvests Annual Report 2008 89 Corporate information ABN 87 000 721 380 Directors J C Leonard (Chairman) J Bird (Managing Director) G F Dan O’Brien (Non-Executive Director) M Fremder (Non-Executive Director) R M Herron (Non-Executive Director) Company Secretary P Chambers Registered Office – Select Harvests Limited 360 Settlement Road THOMASTOWN VIC 3074 Postal address PO Box 5 THOMASTOWN VIC 3074 Telephone (03) 9474 3544 Facsimile (03) 9474 3588 Email info@selectharvests.com.au Solicitors Gadens Lawyers Bankers Australia and New Zealand Banking Group Limited Auditor PricewaterhouseCoopers Share Register Computershare Investor Services Pty Limited Yarra Falls 452 Johnston Street Abbotsford VIC 3067 Telephone (03) 9415 5040 Facsimile (03) 9473 2562 Internet Address www.selectharvests.com.au 90 Select Harvests Annual Report 2008 Select Harvests Limited ABN 87 000 721 380 Directors J C Leonard (Chairman) J Bird (Managing Director) G F Dan O’Brien (Non-Executive Director) M Fremder (Non-Executive Director) R M Herron (Non-Executive Director) Company Secretary P Chambers Registered Office – Select Harvests Limited 360 Settlement Road THOMASTOWN VIC 3074 Postal address PO Box 5 THOMASTOWN VIC 3074 Telephone (03) 9474 3544 Facsimile (03) 9474 3588 Email info@selectharvests.com.au Solicitors Gadens Lawyers Bankers Australia and New Zealand Banking Group Limited Auditor PricewaterhouseCoopers Share Register Computershare Investor Services Pty Limited Yarra Falls 452 Johnston Street Abbotsford VIC 3067 Telephone (03) 9415 5040 Facsimile (03) 9473 2562 www.selectharvests.com.au Select Harvests Limited ABN 87 000 721 380 PO Box 5 THOMASTOWN VIC 3074 360 Settlement Road THOMASTOWN VIC 3074 Telephone (03) 9474 3544 Facsimile (03) 9474 3588 Email info@selectharvests.com.au www.selectharvests.com.au 

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