Select Harvests Limited Annual Report 2009

Plain-text annual report

Contents OUR MISSION, STRATEGY, ACTIVITIES AND OUTLOOK . . . . . . . . . . . 1 BUSINESS MODEL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 KEY FINANCIAL RESULTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 FROM THE CHAIRMAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 OUR BOARD OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 FROM THE CEO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 OUR EXECUTIVE TEAM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 MARKETING OUR PRODUCTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 OUR ENVIRONMENT AND COMMUNITY . . . . . . . . . . . . . . . . . . . . . . 13 STATISTICAL SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14 FINANCIAL REPORT CONTENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 DIRECTORS’ REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16 AUDITORS’ INDEPENDENCE DECLARATION . . . . . . . . . . . . . . . . . . . 26 CORPORATE GOVERNANCE STATEMENT . . . . . . . . . . . . . . . . . . . . . . 27 DIRECTORS’ DECLARATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .77 INDEPENDENT AUDITOR’S REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . 78 ASX ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 Our mission, strategy, activities and outlook Our mission Our outlook 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 through ongoing diversiﬁ cation and expansion of our income streams, leveraging our core strengths – almond growing and knowledge of edible nuts and their markets and 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. Global demand for almonds continues to grow strongly and based on current plantings will outstrip supply within ﬁ ve years. This is supportive of upward pressure on prices. With existing infrastructure and production capacity in place in Northern Victoria, and with land and water to support new orchard developments in Western Australia, Select Harvests is well positioned to beneﬁ t from these opportunities. Shareholder Information Annual General Meeting The annual general meeting will be held on 29th October 2009, at the Soﬁ tel Melbourne, 25 Collins Street, commencing at 10.30am. A separate notice of meeting has been posted to all shareholders. 2010 Calendar 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 ﬁ nal dividend Oct Annual general meeting Select H Select Harvests Annual Report 2009 1 1 Business model “We are now positioned as a major global player in the almond industry with state of the art production facilities and a sales and marketing reach into growing export markets. Our product quality and cost competitiveness is supportive of proﬁ table growth opportunities for our domestic and export business.” JOHN BIRD, CEO SELECT HARVESTS OPERATING EARNINGS BEFORE INTEREST AND TAX (EBIT) 2008: $30.4M 2009: $34.7M ORCHARD DEVELOPMENT - NURSERY - ORCHARD ESTABLISHMENT EBIT 2008: $2.7M 2009: NIL INVESTOR ORCHARDS EBIT 2008: $18.7M 2009: $18.4M ACRES: 35,296 ORCHARD MANAGEMENT - ALMOND GROWING - HARVESTING EBIT 2008: $5.3M 2009: $9.2M 2008 CROP: 15,000 TONNES 2009 CROP: 22,300 TONNES PROCESSING - ALMOND PROCESSING - VALUE-ADDED PROCESSING EBIT 2008: $2.1M 2009: $3.3M SALES AND MARKETING - ALMOND POOL SALES - VALUE-ADDED PRODUCT SALES COMPANY OWNED ORCHARDS EBIT 2008: $2.8M 2009: $2.7M ACRES: 3,368 EBIT 2008: $-1.2M 2009: $1.1M 2008 REVENUE: $124M 2009 REVENUE: $132M 2 Select Harvests Annual Report 2009 Key ﬁ nancial results A $’000’s Sales revenue EBIT - Management services - Almond orchards Almond division Food division Operating EBIT Corporate costs 248,581 27,570 2,706 30,276 4,459 34,735 (3,240) EBIT - before Timbercorp bad debt provision 31,495 Timbercorp bad debt provision (4,668) EBIT - after Timbercorp bad debt provision 26,827 Net proﬁ t after tax Net proﬁ t after tax excluding Timbercorp bad debt provision 16,712 19,980 Year ended 30 June 2009 Year ended 30 June 2008 % increase (decrease) 224,655 26,661 2,853 29,514 925 30,439 (3,320) 27,119 - 27,119 18,130 18,130 10.7% 3.4% (5.2)% 2.6% 382% 14.1% (2.4)% 16.1% - (1.1)% (7.8)% 10.2% ORDINARY DIVIDEND PER SHARE EARNINGS PER SHARE CENTS CENTS +8% +26% +62% -21% +41% -73% 60 50 40 30 20 10 0 70 60 50 40 30 20 10 0 +6% +18% +42% +28% -34% -9% 2004 2005 2006 2007 2008 2009 2004 2005 2006 2007 2008 2009 Select Harvests Annual Report 2009 3 From the Chairman The year gone The last year presented a number of challenges and at the same time saw the company deliver a solid result and make a number of positive advancements in the development of our business. The appointment of an Administrator to the Timbercorp Group in April created signiﬁ cant disruption and threatened both the viability of the orchards and the continuation of our management rights. We have steadfastly worked towards a favourable outcome for the company since that time. Whilst a signiﬁ cant event, it should not eclipse the progress the company made during the year. Total revenues increased by over 10% and, excluding the impact of the Timbercorp bad debt provision (after tax impact of $3.3 million), earnings before Interest and Taxes increased by 16%, Net Proﬁ t after Taxes increased by 10% and operating cash ﬂ ows improved. We have also completed a detailed capital management strategy and successfully extended our banking facilities to 30 June 2010. A record crop was produced while managing severe water restrictions, our new almond processing facility is operating above expectations facilitating an early completion of 2009 crop processing, and a successful sales program with impressive export market development was completed. The food division continues on its path to improved returns with Net Sales growing by 6% and Earnings before Interest and Taxes up signiﬁ cantly from improved margins. We have purchased land and been granted water licenses to support our Western Australia expansion. 4 Select Harvests Annual Report 2009 “The underlying organic growth of our business and signiﬁ cant effort by our management and employees has been great in this challenging environment.” • CURT LEONARD, CHAIRMAN Secondly, through the development of our Western Australian project. We have invested $8 million in land and been granted water entitlements which is sufﬁ cient to develop around 4,500 acres of a 10,000 acre project. This will be progressed as investment funds become available. Orchard management The cornerstone of our business model was the development and management of substantial almond acreage which placed us as the number two operator globally. The demise of Timbercorp put at risk a substantial portion of this portfolio. Timbercorp was terminally impacted by the global ﬁ nancial crisis and regulatory issues in their market sector. However, the fundamentals of the international almond market remain strong and Australia’s international competitiveness remains in tact. There is strong investor interest in the Timbercorp almond orchards and we expect they will be sold and continue to operate in the future. In our view Select Harvests is best placed to operate these orchards successfully and we expect to play a role in their future management. Our strategy since the appointment of administrators has been threefold: • Minimise the ﬁ nancial impact on Select Harvests • Facilitate the retention of tree health and productive capacity of the orchards • Engage with prospective investors to participate in future ownership and/or management of the orchards The orchards are in good health and the 2010 crop set indicates potential for a good 2010 crop. We anticipate an outcome as to the future ownership of the Timbercorp orchards will be determined by the end of September. Future growth We continue to have several areas of growth available to Select Harvests. • Firstly, with continued management of the Timbercorp orchards, crop production will grow from 22,300mt this year to 50,000mt in the next ﬁ ve years. This will generate proportional increases in harvesting, processing and selling fees. We also anticipate expansion within the Food division as a larger volume of almonds become available. • Thirdly, future orchard expansion and/or acquisition in the Murray/Darling basin as water supply stabilises. These options are currently being progressed. Outlook The company has renewed borrowing facilities through to 30 June 2010, which includes a reduction in the facility of $10million in December, this is consistent with our current cash requirements. We have developed a detailed capital management plan to guide us through the current turbulence and also to provide the framework for future growth. There is still some uncertainty as to the ﬁ nal outcome of the Timbercorp orchards and our participation in their ownership and management. We therefore took the difﬁ cult decision to further conserve cash and not pay a ﬁ nal dividend. The company expects to resume dividend payments once cash ﬂ ows are normalised and certainty has come to ownership and management of these orchards. While it is not possible to make speciﬁ c forecasts with this uncertainty, we remain conﬁ dent of a growing and proﬁ table future. Our business model is sound and Select Harvests has the necessary capabilities and capacities in place to service our planned growth. The demand for almonds globally remains strong, Australia’s world competitiveness remains in tact and we continue to market increased tonnages to premium export markets. Select Harvests is a world class grower, processor and marketer, handling 65% of Australia’s almonds. In my view Select Harvests is in the right product, in the right place, at the right time. I would like to take this opportunity to thank our directors and staff for their efforts during this challenging and uncertain time. Our board of directors CURT LEONARD Chairman JOHN BIRD CEO MICHAEL CARROLL Non-Executive Director 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 Paciﬁ c of all Mars businesses, and a Director of the Managing Board of Mars Incorporated global business. Is a Director of Patties Foods Limited. Is Chairman of the Board, a member of the Audit and Risk committee and Remuneration Committee. 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 31 March, 2009. He works with a range of agribusiness companies in a board and advisory capacity, and has directorships with Meat and Livestock Australia and the Rural Finance Corporation. He has 18 years’ experience in banking and ﬁ nance, having lead and established the Agribusiness division within the National Australia Bank. He has worked for a number of companies in the agricultural sector including Monsanto Agricultural Products and a venture capital biotechnology company. He is Chairman of the Remuneration Committee, and a member of the Audit and Risk Committee and Nomination Committee. ROSS HERRON 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 ofﬁ ce 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 Remuneration and Nomination Committees. MAX 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, Audit and Risk Committee and Chairman of the Nomination Committee. Select Harvests Annual Report 2009 5 From the CEO JOHN BIRD, CEO Milestones In a challenging period for the company we have successfully reached a number of operational and strategic milestones: • Produced a record almond crop up 40% on the previous year • Successfully managed another year of reduced water supply delivering crop yields within the normal range • Operated the new almond processing plant at anticipated throughputs facilitating completion of 2009 crop processing by September • Successfully marketed the 2009 almond crop further developing and expanding export markets • Grew domestic consumption of almonds and increased market share • Bedded down the consolidation of the food division on one site in Melbourne • Achieved a turnaround in food division earnings • Acquired land and water licenses to support 4,500 acres of new almond developments in Western Australia Capabilities and Competitive Position Select Harvests has grown almonds for over 30 years and has recently driven the growth of the Australian industry, developing 36,500 acres of new almond orchards. In parallel with this expansion Select Harvests has developed capability and capacity to successfully manage all facets of a large scale almond operation from the orchard through to the consumer. Select Harvests currently manages 38,500 acres of almond orchards which is the second largest area globally. Almond farming is highly mechanised and requires signiﬁ cant investment in farming and harvesting equipment and processing capacity. Due to the rapid growth and the high proportion of non–bearing acres currently planted in Australia, harvesting and processing capacities are inadequate for future requirements. As trees mature signiﬁ cant investment will be required to bridge the gap. Select Harvests has sufﬁ cient harvesting and processing capacity for the total area currently under our management and the future tonnages that will come from these orchards. This infrastructure represents approximately 60% of Australia’s future capacity requirements, representing an investment value of around $90 million. Over the last 15 years, Select Harvests has developed a strong international reputation and well established export markets. Our food division provides added value SELECT HARVESTS ALMOND PRODUCTION FORECAST S E N N O T 60,000 50,000 40,000 30,000 20,000 10,000 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 SELECT HARVESTS INVESTORS 6 Select Harvests Annual Report 2009 capabilities and distribution to retailers, food manufacturers and other food distributors. As a result Select Harvests provides a strong and sustainable outlet for almonds into the domestic market which will be further developed as our crop increases. We believe the above capabilities best position Select Harvests to provide ongoing management services to the orchards we currently manage and to maintain our leadership position in the further development of the Australian almond industry. 2009 Almond Crop The 2009 crop was a record 22,300 tonnes, contributing around 65% of Australia’s almond production. The harvest program proceeded with minimal interruption and good kernel size and quality assisted the selling program. As a result of orchard maturity and strong yields from young trees, the crop exceeded the previous year by 40%. The trees currently under our management will produce annual crops of around 50,000 tonnes by 2014. Orchard Operation Water restrictions were again in place during the 2009 crop growing season, necessitating the purchase of temporary water and reductions in water applications to around 80% of normal. Irrigation techniques developed in recent years again delivered normal yields on less water. While producing acceptable results in the circumstances, lower water applications may be limiting yields. This provides potential upside when water availability and cost improve. We continue to collaborate with researchers, industry and government to deliver improved irrigation and nutrition efﬁ ciencies and higher yields. The cost of producing the 2009 crop was impacted by spiralling world fertiliser costs, perfectly timed with our major application period. Prices have since eased signiﬁ cantly, which will deliver cost savings for the 2010 crop. Despite interruptions caused by the demise of Timbercorp, the orchards remain in good health and to date the development of the 2010 crop has progressed well. Water Almond Processing Almond Sales We have recently commenced a third year of water restrictions which as previously outlined has created a cost issue rather than a supply issue. The operation of the water market facilitates the transfer of available water to crops which deliver higher gross margin per megalitre of water (such as almonds) and also provides an attractive return to the seller. Therefore the consequence of water restrictions has been an increase in the cost of almond production. CROP MURRAY YEAR ALLOCATION COST OF AVERAGE COST PER ACRE 2007 95% TEMPORARY WATER $80/ML NIL 2008 43% $900/ML $1,680 2009 38% $305/ML $690 The Murray system commenced the 2009/10 season with dry catchments and low storage. Reasonable rains, particularly in August have improved inﬂ ows and storages are currently approximately 5% above last year. Recent inﬂ ows have been the best since 2007 and follow up rains if they occur will result in further inﬂ ow responses. We expect allocations will be at least in line with last year with potential upside. The current allocation is 13% (6% last year). The new almond processing facility came online late in the 2008 season. This state of the art plant represents investment of $35million and has an annual capacity of around 40,000 tonnes. Together with our existing processing facility which specialises in inshell products for the Indian and Chinese markets (capacity of around 15,000 mt), we have sufﬁ cient capacity to efﬁ ciently process future tonnages from orchards currently under our management. The new facility consolidates the full production process from nut receival to ﬁ nished product despatch. The ﬁ nal commissioning of the facility was completed prior to the commencement of the 2009 crop harvest. The plant has operated efﬁ ciently at the rated capacity through the season and has produced high quality almond kernels in line with our expectations. The increased processing capacity has facilitated completion of 2009 crop processing prior to the end of September and has enabled us to maximise export opportunities prior to the commencement of USA 2009 almond crop shipments. Our sales team was challenged with a 40% increase in volume from the 2009 crop and competition from a record USA crop, which in turn was contending with the global ﬁ nancial crisis and slowing demand particularly from Europe. Despite these challenges we are currently completing a successful selling program having contracted over 90% of the 2009 crop and shipped 77% by the end of September assisting cash ﬂ ow and the timing of returns to investors. Our export program focuses on growth markets and particularly markets where almonds are consumed in the natural form and Australian quality can be leveraged. The 2009 crop sales program has signiﬁ cantly increased penetration in the key growth markets of India, Middle East and China and increased export volumes by 53%. The program has further enhanced Australia’s reputation in the high end of the market. Almond consumption in Australia continues to grow and during the year we increased domestic sales volume by 20%. Consistent with our added value strategy we continue to develop almond distribution through our food division and year on year we have increased volumes by 22% through this channel. In conjunction with The Australian Almond Board we ran successful new season and almond blossom promotional events with support from major retailers. These promotions have delivered signiﬁ cant sales growth and we plan to develop these themes as annual promotional events. Select Harvests Annual Report 2009 7 USA Almonds Supply Following ﬂ at supply from 2002 to 2006 USA produced two large crops on the back of increased acreage and improved yields with a record 2008 crop at 1.61 billion lbs up 16% on the previous year. The 2009 crop is currently being harvested and is forecasted to be down on the 2008 by 18% at 1.35 billion lbs. Demand With a record crop to sell, the USA 2008 crop sales program commenced strongly but stalled in the last quarter as demand from Europe (the major export market) evaporated. Sales recovered dramatically from February 2009 with consecutive record shipments driven by emerging markets particularly India, China and the Middle East. The 2009 crop season commenced in August with another record up 20% on the previous year and double shipments of the 2006 crop. USA ﬁ nished the year with record shipments of 1.380 million up 10% on the previous year and a continuation of the growth story from the start of the decade with the only interruption being supply restrictions between 2002 to 2005. The forecasted 2009 crop of 1.350 billion lbs puts current annual supply and demand in balance. Australian Almonds Supply Position The Australian almond industry has long been known for international competitiveness due to high yields and product quality. Driven by this competitive position, the industry experienced a period of rapid expansion between 2001 and 2007. Now well positioned as a global player, Australia has more than 67,500 acres of almonds, 65% of which are currently managed by Select Harvests. The 2009 Australian almond crop is estimated at 36,000 metric tonnes, up 38% on 2008. In excess of 60% of Australia’s 2009 almond production has come from Select Harvests managed orchards. Future production increases from newly planted USA ANNUAL PRODUCTION ) S B L N O I L L I M ( 1,800 1,600 1,400 1,200 1,000 800 600 400 200 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 9 0 0 2 CROP (MILLION LBS) BEARING ACRES KG/ACRE MONTHLY USA ALMOND SHIPMENTS (DOMESTIC AND EXPORT) ) S B L N O I L L I M ( 180 160 140 120 100 80 60 40 20 0 AUG SEP OCT NOV DEC JAN FEB MAR APR MAY JUN JUL 2006/07 2007/08 2008/09 2009/10 USA ALMOND CROP ANNUAL SHIPMENTS ) S B L N O I L L I M ( 1,400.0 1,200.0 1,000.0 800.0 600.0 400.0 200.0 0.0 483 525 520 534 556 536 499 609 468 533 612 573 482 398 304 1389 1261 982 1024 984 1066 914 713 740 821 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 AUSTRALIAN ALMOND PLANTINGS S E R C A 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 SELECT HARVESTS ALMOND INDUSTRY 8 Select Harvests Annual Report 2009 orchards, will see Australia eclipse Spain as the number two producing country within the next six years. At full maturity Australia’s almond production is expected to reach 80,000 metric tonnes, with Select Harvests managed orchards to generate more than 50,000 tonnes, 60% of this total. S E N N O T Market Position Australia has been exporting almonds to the major international markets for many years and market acceptance of our product has always been strong. The challenge has been to maintain global relevance with low volumes historically available. In more recent years increased tonnages and the prospect of continuing growth has allowed us to signiﬁ cantly increase distribution in key markets and further develop the Australian origin as a internationally recognised quality supplier of almonds. Australia now has a signiﬁ cant presence in major almond markets around the globe and is achieving strong sales growth in the key markets of India, China and the Middle East, all consumers of natural almonds which is well aligned to Australia’s quality advantages. Interestingly, 2009 almond exports to the Middle East are likely to surpass Europe, historically one of Australia’s largest export markets, emphasising the growing importance of this developing region. Global Almonds Future Supply and Demand There are limited areas suitable for commercial almond production. Supply increases in the last 20 years have been driven by expansion in USA and more recently Australia. New developments have stalled in both locations and water and land availability will constrain future orchard development particularly in the short term. Almond consumption has grown by 9% per annum globally over the last 10 years. Consumption growth of 5% per annum over the next four years will absorb production increases as young trees mature applying pressure to supply and pricing. The growth rates of emerging markets suggest 5% is conservative. AUSTRALIAN ALMOND PRODUCTION FORECAST 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 SELECT HARVESTS ALMOND INDUSTRY AUSTRALIAN ALMOND EXPORTS 2008/9 Netherlands 3% Saudi Arabia 3% China 3% Other 10% India 39% France 4% United Kingdom 4% Germany 6% Spain 7% New Zealand 8% United Arab Emirates 13% WORLD ALMOND SUPPLY VS DEMAND ) S B L N O I L L I M ( 3,000 2,500 2,000 1,500 1,000 500 0 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 9 0 0 2 0 1 0 2 1 1 0 2 2 1 0 2 3 1 0 2 4 1 0 2 5 1 0 2 WORLD PRODUCTION ANNUAL SUPPLY DEMAND CARRY-OUT Select Harvests Annual Report 2009 9 4 9 - R A M 4 9 - P E S 5 9 - R A M 5 9 - P E S 6 9 - R A M 6 9 - P E S 7 9 - R A M 7 9 - P E S 8 9 - R A M 8 9 - P E S 9 9 - R A M 9 9 - P E S 0 0 - R A M 0 0 - P E S 1 0 - R A M 1 0 - P E S 2 0 - R A M 2 0 - P E S 3 0 - R A M 3 0 - P E S 4 0 - R A M 4 0 - P E S 5 0 - R A M 5 0 - P E S 6 0 - R A M 6 0 - P E S 7 0 - R A M 7 0 - P E S 8 0 - R A M 8 0 - P E S 9 0 - R A M 9 0 - P E S Pricing ALMOND PRICE AUD/KG NONPAREIL $14.00 $12.00 $10.00 $8.00 $6.00 $4.00 $2.00 $0.00 While almonds were not immune to the impact of the global ﬁ nancial crisis the fundamentals of the international almond market remain strong with potential for upward price movement. The large USA 2008 crop and reduced demand from Europe (the major buyer of manufacturing grades) has resulted in an oversupply of these grades while premium varieties and grades effectively sold out. As a result premium grades (particularly nonpareil variety) have traded at reasonable prices while manufacturing grades have traded at record discounts. The European market has commenced a slow recovery and with a lower crop and continued strong demand from emerging markets we are seeing a reduction in price differentials for the lower grades which we expect to continue as the crop year develops. Food Division The food division delivered an improved result for the year as a result of gains across sales, margin and costs on the back of the rationalisation and consolidation program. Decommissioning of the Brisbane facility and the consolidation of our food division at the Melbourne processing facility took place at the commencement of the year. This was followed by a period of implementation and integration which is now complete. The consolidation has reduced overheads and improved operating efﬁ ciencies which are delivering lower costs and enhanced customer service. Sales grew for the year by 6% and we achieved a number of distribution and market share improvements which resulted in our major brand “Lucky” reaching its highest market share position since 2006. The focus on almond sales continues with volumes increasing by 22% due to increased sales across a number of market sectors. Major promotional programs around key dates on the almond calendar (new season and almond blossom) have delivered strong sales results and these themes will be further developed in the future. This division operates in a very competitive environment making margin management crucial to success. We saw some improvement during the year and management continues to focus in this area. Going forward we will receive some assistance from lower commodity pricing and a stronger Australian dollar. 10 Select Harvests Annual Report 2009 Western Australia Expansion Cost and availability of land and water in Australia’s traditional growing areas along the Murray River prompted the identiﬁ cation of alternative locations to grow almonds. Following an extensive review we identiﬁ ed the Dandaragan plateau in the Northern wheat belt of Western Australia as suitable for almond production with a reliable and cost effective water resource. The company has spent four years in investigation and project development which has culminated in obtaining water licenses to extract 22,000 megalitres of water annually for almond production. Select Harvests has purchased properties suitable for almond growing which together with the water licenses will support approximately 4,500 acres of almond development. The company has received approval from the Western Australia government to commence development once funding is available. We believe that the current land and water availability in Western Australia could support 10,000 acres of almond development providing scale and diversiﬁ cation to our business. Our executive team TIM MILLEN Horticultural Manager PETER ROSS Operations Manager Almond Division KIM MARTIN 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 Ofﬁ cer 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. MATTHEW GRAHAM Sales & Marketing Manager Food Division PAUL CHAMBERS Chief Financial Ofﬁ cer & Company Secretary Joined Select Harvests in August 2007 as Grocery Channel Manager, and moved into the Group Manager Sales & Marketing role in March 2009. Previously to this he has developed his multi channel FMCG experience through senior management roles at both Mars Food, and Nestle Confectionery. His experience includes Channel and Customer Management roles across our major Grocery customers. Joined Select Harvests in 2007. Paul is a Chartered Accountant and has over 20 years’ experience in senior ﬁ nancial 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. CEO: JOHN BIRD HORTICULTURAL MANAGER: TIM MILLEN OPERATIONS MANAGER ALMOND DIVISION: PETER ROSS OPERATIONS MANAGER FOOD DIVISION: KIM MARTIN TRADING MANAGER: LAURENCE VAN DRIEL SALES & MARKETING MANAGER FOOD DIVISION: MATTHEW GRAHAM CFO & COMPANY SECRETARY: PAUL CHAMBERS Select Harvests Annual Report 2009 11 Marketing our products Almonds Lucky Brand The Lucky brand has clearly demonstrating that it is a favourite with Australian consumers. Lucky has consolidated its market leadership position having achieving its highest market share position for over 3 years at 40%+. This strong performance was generated by a targeted print media campaign during Christmas and the launch of a number of new products. Expansion of our larger ‘snacking’ packs range and the introduction of Lucky “add nuts” has answered consumer needs in both the healthy snacking and value-add cooking section. Promotional activity at events such as the Good Food & Wine shows in Melbourne, Sydney and Brisbane have assisted in raising brand awareness and driving distribution through our key retail partners. Driving almond consumption is the core focus of Select Harvests’ marketing program.In partnership with the Almond Board of Australia (ABA), we have raised awareness of Australian almonds and signiﬁ cantly increased consumption growth. Together with our orchard investors, Select Harvests are major contributors and supporters of the ABA’s almond marketing program. This year we have successfully participated in an expanded industry program focused on developing a calendar of annual events and themes in order to showcase Australian almonds to Australian consumers. April saw the launch of an annual “New Season” almond promotion incorporating an eye catching “almond dress” highlighting Australia’s new season almonds, encouraging consumers to enjoy the unique taste of almonds fresh from the tree. This was followed by a promotion in August during the spectacular almond blossom season, celebrating the natural beauty of almond orchards in bloom. This campaign showcased the natural goodness of Australian almonds and included hosting a regional blossom festival at Select Harvests orchards. This annual campaign will be completed with a third event, ‘New Year New Heart’ in January, primarily focusing on the ‘healthy heart’ message. As consumers make New Year resolutions, January is a great time to promote snacking on healthy Australian almonds. Select Harvests participation in these industry-wide promotional programs, together with our direct marketing activities has driven signiﬁ cant almond sales growth. Working together with the Almond Board of Australia, Select Harvests now intends to further develop and establish these events and themes into an annual promotions calendar. A recently released industry communication “All About Australian Almonds”, showing Australian almonds been inserted into this year’s Annual Report. 12 Select Harvests Annual Report 2009 Our environment and community Our environment Our community Select Harvests remains committed to two key environmental issues: water management and wildlife management. Select Harvests plays an important role in supporting a number of community activities within the Robinvale regions. We have been proud supporters of the emerging Mallee Almond Blossom Festival. This event helps to showcase the beauty of the Australian almond blossom season and also the natural goodness of Australian almonds. Other community organisations that we support include the Robinvale Secondary College Chaplaincy, the Euston Pre-School and the Wemen progress Association. Our water management processes revolves around a continuous improvement plan of reducing water inputs while maintaining crop yield. To achieve this objective, water wastage is minimised and the water used by the trees, maximised. Select Harvests continues to invest in important research trials to take the next step in water efﬁ ciency. This emphasis on water management has made the almond industry one of the most efﬁ cient water converters in Australia. In terms of wildlife management, Select Harvests is committed to ecological sustainability. We actively maintain the health of the wildlife corridors within our orchards that provides the habitat for native wildlife. These corridors link feeding and breeding grounds together. A major joint environmental research project with the Charles Sturt University is progressing. This project, which is also supported by the Victorian, New South Wales and South Australian governments, seeks to understand how to maximise both production and conservation outcomes. A case study around the Regent parrot is central to this project. Select Harvests Annual Report 2009 13 Statistical summary SELECT HARVESTS CONSOLIDATED RESULTS FOR YEARS ENDED 30 JUNE 2009 2008 2007 2006 2005 2004 248,581 224,655 229,498 217,866 173,864 26,827 23,047 16,712 27,119 40,549 38,369 33,069 25,384 40,014 37,903 18,130 28,098 26,492 31,802 22,104 42.6 16.6 12.0 - 100 28.2 1.56 7.1 51.9 0.79 46.7 19.3 45.0 - 100 71.0 29.4 57.0 - 100 67.1 26.1 53.0 10.0 100 96.4 80.0 80.0 1.41 15.6 49.7 0.87 1.57 75.8 1.7 1.32 1.83 82.3 1.3 1.82 56.9 25.1 42.0 - 100 75.4 1.52 26.2 1.0 1.52 127,381 23,836 22,587 15,225 40.0 19.2 26.0 - 100 65.7 1.35 19.1 10.2 1.70 (cents) (%) (cents) (cents) (%) (%) (%) (times) (%) (times) 81,075 77,014 133,884 118,934 70,983 89,170 72,455 79,421 58,832 32,486 78,676 74,469 214,959 195,948 160,153 151,876 137,508 106,955 102,348 88,162 53,680 39,905 11,735 13,715 10,969 10,490 114,083 101,877 64,649 50,395 38,757 10,656 49,413 19,077 8,610 27,687 100,876 94,071 95,504 101,481 88,095 79,268 46,433 12,949 41,494 100,876 44,375 11,235 38,461 94,071 41,953 11,273 42,278 52,665 46,925 43,940 12,691 36,125 13,766 27,404 14,191 21,137 95,504 101,481 88,095 79,268 (000) 39,519 39,009 38,739 39,708 39,069 38,525 3,296 3,319 2,953 3,369 2,999 2,413 ($) 2.16 6.00 11.60 13.02 9.70 6.67 85,361 234,054 449,372 516,998 378,970 256,965 Total sales Earnings before interest and tax Operating proﬁ t before tax Net proﬁ t 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 Net 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 proﬁ ts 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) 14 Select Harvests Annual Report 2009 Financial report contents DIRECTORS’ REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 CORPORATE GOVERNANCE STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 INCOME STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 BALANCE SHEETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 STATEMENT OF CHANGES IN EQUITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 CASH FLOW STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 NOTES TO THE FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 1. Summary of signiﬁ cant accounting policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 2. Financial risk management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 3. Critical accounting estimates and judgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 4. Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 5. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 6. Income Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 7. Discontinued Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 8. Dividends Paid or Proposed for on Ordinary Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 9. Cash and Cash Equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 10. Receivables (Current) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 11. Inventories (Current). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 12. Derivative Financial Instruments (Current) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 13. Receivables (Non Current) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 14. Other Financial Assets (Non current) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 15. Property, Plant and Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 16. Deferred Tax Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 17. Biological Assets – Almond Trees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 18. Intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 19. Trade And Other Payables (Current) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 20. Interest Bearing Liabilities (Current) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 21. Provisions (Current). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 22. Trade And Other Payables (Non current) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 23. Secured Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 24. Deferred Tax Liabilities (Non Current) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 25. Provisions (Non Current) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 26. Contributed Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 27. Reserves And Retained Proﬁ ts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 28. Reconciliaton Of The Net Proﬁ t After Income Tax To The Net Cash Flows From Operating Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .63 29. Expenditure Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 30. Events Occuring After Balance Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .65 31. Earnings Per Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .65 32. Remuneration of Directors and Key Management Personnel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 33. Remuneration Of Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 34. Related Party Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 35. Segment Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 36. Interest Rate Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 37. Controlled Entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 38. Employee Beneﬁ ts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 39. Contingent Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76 DIRECTORS’ DECLARATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 INDEPENDENT AUDITOR’S REVIEW REPORT TO THE MEMBERS OF SELECT HARVESTS LIMITED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 ASX ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 SelSelSelSelee eeecectectectect H H HHaHaHaHaHaHaHaaaH rrvrvrververvestsstsstsstsstsss A A A AnAnAnAnAnAnAnAnnuanuan l Rl Rl Rl Repoepoeportrt rtrt 2002002002000 999 Select Harvests Annual Report 2009 1515155 15 Directors’ Report The directors present their report together with the ﬁ nancial report of Select Harvests Limited and controlled entities (referred to hereafter as the “consolidated entity”) for the year ended 30 June 2009. Directors The qualiﬁ cations, 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 ﬁ nancial year is provided below, together with details of the company secretary as at the year end. Directors were in ofﬁ ce 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 Bens, and Managing Director of Mars Australia and New Zealand. In addition, he has served as President, Asia Paciﬁ c of all Mars businesses, and a Director of the Managing Board of Mars Incorporated global business. Is a Director of Patties Foods Limited. He is Chairman of the Board, a member of the Audit and Risk Committee, Remuneration Committee and Nomination Committee. Interest in Shares and Options: 615,628 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, Audit and Risk 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. G F Dan O’Brien, B Sc, 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 signiﬁ cant commercial experience having held CEO positions for BIL Australia Limited, Mattel Asia Paciﬁ c, and The King Island Company. He holds an MBA, having graduated with distinction from Harvard Business School and is a qualiﬁ ed veterinary surgeon. Member of the Audit and Risk Committee, 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: 59,349 fully paid shares. Resigned as a Director on 23 June 2009 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 ofﬁ ce 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 a member of the Remuneration Committee and Nomination Committee. Interest in Shares and Options: 18,772 fully paid shares. M Carroll, BSC, MBA (Non- Executive Director) Joined the board on 31 March, 2009. He works with a range of agribusiness companies in a board and advisory capacity, and has directorships with Meat and Livestock Australia and the Rural Finance Corporation. He has 18 years’ experience in banking and ﬁ nance, having lead and established the Agribusiness division within the National Australia Bank. He has worked for a number of companies in the agricultural sector including Monsanto Agricultural Products and a venture capital biotechnology company. He is Chairman of the Remuneration Committee, and a member of the Audit and Risk Committee and Nominations Committee. Interest in Shares and Options: 0 fully paid shares. 16 Select Harvests Annual Report 2009 Directors’ Report P Chambers, BSc Hons, ACA (Chief Financial Ofﬁ cer and Company Secretary) Joined Select Harvests as Chief Financial Ofﬁ cer and Company Secretary in September 2007. He is a Chartered Accountant and has over 20 years’ experience in senior ﬁ nancial 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 signiﬁ cant changes in the nature of the activities of the consolidated entity in the ﬁ nancial year. Employees The consolidated entity employed 366 full time employees as at 30 June 2009 (2008: 340 employees). Review and results of operations Proﬁ t attributable to the members of Select Harvests Limited for the year ended 30 June 2009 was $16.7 million compared to $18.1 million in 2008. 2009 includes before tax provisions of $4.7 million for the impact of lost revenues pertaining to the administration of Almond Management Pty Ltd, a subsidiary of Timbercorp Limited. For additional information refer to the announcement lodged with the ASX and the report before the Appendix 4E. Signiﬁ cant changes in the state of affairs No signiﬁ cant changes in the state of affairs of the consolidated entity occurred during the ﬁ nancial year. Signiﬁ cant events after the balance date On 28 August 2009, the Directors resolved that no ﬁ nal dividend will be paid in relation to the ﬁ nancial year ended 30 June 2009. This decision was made to preserve cash in the context of current uncertainties pertaining to the liquidation of Timbercorp. On 8 July 2009 the approval was granted for the extension of bank debt facilities until the next review date on 30 June 2010. An undertaking of this facility is that a repayment of $10 million is made by 15 December 2009. The Board is conﬁ dent that through a range of capital management initiatives, the undertaking to reduce debt and meet banking covenants can be achieved. Since the 30 June 2009, the company has been involved in extensive discussions with the liquidator of Timbercorp relating to the future management of the Timbercorp almond orchards. The Board is conﬁ dent that agreement will soon be reached to secure future management rights over these orchards through a restructured ownership model. No other matters or circumstances have arisen since the end of the ﬁ nancial year which signiﬁ cantly affected or may signiﬁ cantly affect the operations of the consolidated entity, the results of those operations, or the state of affairs of the consolidated entity in future ﬁ nancial 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 follow: 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 signiﬁ cant known breaches of the consolidated entity’s licence conditions. Select Harvests Annual Report 2009 17 Directors’ Report 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 qualiﬁ ed 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 ﬁ xed remuneration, performance based remuneration and equity based remuneration. Non-executive directors receive fees and do not receive options or bonus payments. (i) Short-term incentives Executive directors and senior executives may receive short term incentives based on achievement of speciﬁ c business plans and performance indicators, which include ﬁ nancial and operational targets relevant to performance at the consolidated entity level, divisional level, or functional level, as applicable, for the ﬁ nancial year. The Remuneration Committee is responsible for assessing whether the KPIs are met based on detailed reports on performance prepared by management. (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, with 3 consecutive vesting periods, 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 deﬁ ned 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 ofﬁ cers, which also includes the 5 highest paid executives of the consolidated entity: Name P Ross K Martin T Millen Position Employer Operations Manager Almond Division Kyndalyn Park Pty Ltd Operations Manager Food Products Division 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 Ofﬁ cer & Company Secretary Select Harvests Limited M Graham Sales & Marketing Manager Select Harvests Food Products Pty Ltd 18 Select Harvests Annual Report 2009 Directors’ Report 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 ﬁ nancial year is detailed below. It should be noted that “share based payments” referred to in the remuneration details set out in this report comprise a proportion of share options which may be granted in the future under the terms of the long term incentive plan, and are not reﬂ ective of actual options granted or exercised in the ﬁ nancial year. Remuneration of directors of Select Harvests Limited 2009 ANNUAL REMUNERATION LONG TERM REMUNERATION SHORT TERM INCENTIVES $ NON CASH BENEFITS $ SUPER CONTRI- BUTIONS $ LONG SERVICE LEAVE ACCRUED $ NUMBER VALUE $ TOTAL $ SHARE BASED PAYMENTS - - - - - - - - - - - 4,950 10,725 1,530 5,850 - - - - - - - - - - - - - - - 82,658 59,950 129,892 18,531 70,850 BASE FEE $ 82,658 55,000 119,167 17,001 65,000 560,806 80,000 30,133 57,673 17,047 21,821 22,258 767,917 Non Executive M A Fremder G F Dan O’Brien* J C Leonard M Carroll** R M Herron Executive J Bird * Resigned from the role of Director 23 June 2009 ** Appointed as a Director on 31 March, 2009 2008 ANNUAL REMUNERATION LONG TERM REMUNERATION BASE FEE $ SHORT TERM INCENTIVES $ NON CASH BENEFITS $ SUPER CONTRI- BUTIONS $ LONG SERVICE LEAVE ACCRUED $ NUMBER VALUE $ TOTAL $ SHARE BASED PAYMENTS 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 *Resigned from the role of Director 31 January 2008. Select Harvests Annual Report 2009 19 Directors’ Report Remuneration of the key management personnel of the Company and the Consolidated Entity 2009 ANNUAL REMUNERATION LONG TERM REMUNERATION BASE FEE $ 182,659 177,353 214,450 203,784 174,451 237,804 250,000 SHORT TERM INCENTIVES $ NON CASH BENEFITS $ SUPER CONTRI- BUTIONS $ - - - 30,000 40,000 20,000 - - 19,797 - 10,406 39,848 10,793 - 15,829 15,962 19,300 20,832 15,701 23,202 - SHARE BASED PAYMENTS NUMBER - - 5,208 4,698 4,902 5,515 5,106 VALUE $ - - 5,313 4,792 5,000 5,625 5,208 LONG SERVICE LEAVE ACCRUED $ - 5,135 5,350 7,426 10,108 5,987 - M Bartholomew* M Graham K Martin L Van Driel T Millen P Chambers P Ross * Resigned 9 April 2009 2008 ANNUAL REMUNERATION LONG TERM REMUNERATION SHARE BASED PAYMENTS SHORT TERM INCENTIVES $ NON CASH BENEFITS $ SUPER CONTRI- BUTIONS $ LONG SERVICE LEAVE ACCRUED $ NUMBER - 12,250 30,000 20,000 - 20,000 - - 5,172 45,694 - - - 6,053 2,415 22,158 18,745 14,541 17,890 33,670 4,337 584 5,350 5,322 4,491 4,499 6,856 - - - 8,767 5,533 - - - BASE FEE $ 26,833 233,945 181,696 142,648 198,777 243,431 57,949 VALUE $ - - 12,045 8,037 - - - M Bartholomew* K Martin L Van Driel T Millen P Chambers** K Bush*** R Palmaricciotti**** TOTAL $ 198,488 218,247 244,413 277,240 285,108 303,411 255,208 TOTAL $ 29,832 273,703 252,980 235,231 221,166 303,957 68,339 * commenced 20 May, 2008 ** commenced 9 September, 2007 *** Resigned 20 May, 2008 **** Resigned 9 September, 2007 Notes 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 speciﬁ c termination beneﬁ ts 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 2009 of $641,000. 20 Select Harvests Annual Report 2009 Directors’ Report M Graham, Sales and Marketing Manager - Term of Agreement – on-going agreement, with 3 month notice period - Base salary, inclusive of superannuation for the year ended 30 June 2009 of $225,000 K Martin, Operations Manager, Food Products Division - Term of Agreement – on-going agreement, with 3 month notice - Base salary, inclusive of superannuation for the year ended 30 June 2009 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 2009 of $230,000. P Chambers, Chief Financial Ofﬁ cer & Company Secretary - Term of Agreement – on-going agreement, with 3 month notice period - Base salary, inclusive of superannuation for the year ended 30 June 2009 of $270,000. L Van Driel, Group Trading Manager - Term of Agreement – on-going agreement - Base salary, inclusive of superannuation for the year ended 30 June 2009 of $230,000. P Ross, Operations Manager, Almond Division - Term of Agreement – on going agreement - Base salary, inclusive of superannuation for the year ended 30 June 2009 of $250,000. 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 ﬁ xed 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. Options previously granted as remuneration, (62,534 shares) valued at $107,558 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 2009 included: a) options are granted for no consideration, have a three year life, and one third of the options offered vest in each year, subject to meeting EPS hurdles b) exercise price: $5.15 (2008 - $9.74) c) offer date: 20 September 2008 (2008 – 21 September 2007) d) expiry date: 28 October 2011 (2008 – 28 October 2010) e) Volume weighted average share price at offer date: $5.44 (2008 – $9.43) f) expected price volatility of the company’s shares: 34% (2008 – 28%) g) expected dividend yield: 7.5% (2008 – 5.8%) h) risk free interest rate: 5.76% (2008 – 6.19%) Select Harvests Annual Report 2009 21 Directors’ Report E M P L O Y E E S I I P A R T C P A T N G I O P T O N I G R A N T D A T E V A L U A T O N A T I E X E R C I S E P R C E I N O O F . G R A N T E D I O P T O N S G R A N T E D I O P T O N S E M P L O Y E E S T O E X I S T N G I D A T E E X P I R Y Y E A R D U R N G I E X E R C I S E D Y E A R D U R N G I F O R F E I T E D B A L A N C E 2006 Offer 2007 Offer 2008 Offer Total 4 7 7 $3.57 $13.13 68,095 57,798 31/10/09 $1.48 $9.74 238,429 210,557 28/10/10 $1.02 $5.15 362,379 362,379 28/10/11 668,903 630,734 - - - - - - - - 57,798 210,557 362,379 630,734 (ii) Options Granted During or since the end of the ﬁ nancial 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. Director J Bird Key management personnel L Van Driel K Martin P Chambers P Ross T Millen NUMBER OF OPTIONS GRANTED IN FY 2009 NUMBER OF OPTIONS GRANTED IN FY 2008 157,114 33,824 37,500 39,706 36,765 35,294 103,125 20,270 25,845 26,351 - 20,270 (iii) Shares Issued on Exercise of Options 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. Director J Bird Key management personnel L Van Driel T Millen NUMBER OF SHARES ISSUED ON EXERCISE OF OPTIONS FY 2009 NUMBER OF SHARES ISSUED ON EXERCISE OF OPTIONS FY 2008 0 0 0 101,400 12,300 6,000 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. In ﬁ nancial year ended 30 June 2008 NUMBER OF SHARES AMOUNT PAID ON EACH SHARE 119,700 $7.78 No options were exercised in the ﬁ nancial year ended 30 June 2009.There were no amounts unpaid on the shares issued. 22 Select Harvests Annual Report 2009 Directors’ Report E. Additional information (i) Principles used to determine the nature and amount of remuneration: relationship between remuneration and company performance The overall level of executive reward takes into account the performance of the consolidated entity over a number of years, with greater emphasis given to the current year. Over the past 5 years, the consolidated entity’s proﬁ t from ordinary activities after income tax has grown at an average rate of 5% per annum and the EPS has grown at an average rate of 5% over the last 5 years. (ii) Details of remuneration: cash bonuses and options For each cash bonus and grant of options included above, the percentage of the available bonus or grant that was paid, or that vested, in the ﬁ nancial year, and the percentage that was forfeited because the person did not meet the service and performance criteria is set out below. No part of the bonuses is payable in future years. No options will vest if the conditions are not satisﬁ ed hence the minimum value of the option yet to vest is nil. The maximum value of the options yet to vest has been calculated based on the option price. NAME CASH BONUS OPTIONS PAID % FORFEITED % YEAR GRANTED VESTED % FORFEITED % FINANCIAL YEARS IN WHICH OPTIONS MAY VEST MINIMUM TOTAL VALUE OF GRANT YET TO VEST ($) MAXIMUM TOTAL VALUE OF GRANT YET TO VEST ($) J Bird 100 L Van Driel 100 T Millen 100 K Martin 100 P Chambers 100 - - - - - P Ross N/A N/A (iii) Share based compensation: options 2006 2007 2008 2006 2007 2008 2006 2007 2008 2007 2008 2007 2008 2008 - - - - - - - - - - - - - - - - - - - - - - - - - - - - 2009 2010 2011 2009 2010 2011 2009 2010 2011 2010 2011 2010 2011 2011 - - - - - - - - - - - - - - 131,251 152,625 160,256 27,000 30,000 34,500 27,838 30,000 36,000 38,251 38,250 39,000 40,500 37,500 NAME Directors J Bird Key Management Personnel T Millen L Van Driel K Martin P Chambers P Ross REMUNERATION CONSISTING OF OPTIONS VALUE GRANTED VALUE EXERCISED VALUE LAPSED A B C D 2.9% 160,256 1.8% 1.8% 2.2% 1.9% 2.0% 36,000 34,500 38,250 40,500 37,500 0 0 0 0 0 0 79,350 12,154 16,054 0 0 0 Select Harvests Annual Report 2009 23 Directors’ Report 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 ofﬁ cers Options over unissued ordinary shares of Select Harvests Limited granted and not exercised during or since the end of the ﬁ nancial year to the ﬁ ve most highly remunerated ofﬁ cers of the company as part of their remuneration were as follows: No options have been granted since the end of the ﬁ nancial year. (vi) Unissued Ordinary shares Under Option At the date of this report there are 630,734 unissued ordinary shares of the company under option. Dividends – Select Harvests Limited DIVIDENDS Interim for the year - on ordinary shares Final for 2008 shown as recommended in the 2008 report (payable on 1 October, 2008) - on ordinary shares CENTS 12.0 2009 $ 4,706,727 4,706,727 23.0 8,972,053 Indemniﬁ cation and insurance of directors and ofﬁ cers During the year the Company has paid a premium of $22,776 in respect to an insurance contract to indemnify directors and ofﬁ cers against liabilities that may arise from their position as directors and ofﬁ cers of the Company and its controlled entities. Ofﬁ cers indemniﬁ ed include the Company Secretary, all directors, and executive ofﬁ cers 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 ﬁ nancial year and the number of meetings attended by each director was as follows: DIRECTORS’ MEETINGS AUDIT AND RISK MEETINGS OF COMMITTEES REMUNERATION NOMINATION M A Fremder J Bird G F Dan O’Brien* J C Leonard R M Herron M Carroll NUMBER ELIGIBLE TO ATTEND NUMBER ATTENDED NUMBER ELIGIBLE TO ATTEND NUMBER ATTENDED NUMBER ELIGIBLE TO ATTEND NUMBER ATTENDED NUMBER ELIGIBLE TO ATTEND NUMBER ATTENDED 12 12 11 12 12 4 11 12 10 12 11 4 4 - 4 4 4 1 4 - 3 4 4 1 1 - 1 1 - - 1 - 1 1 - - 1 1 1 1 1 - 1 1 1 1 1 - * Resigned as a Director on 23 June, 2009. 24 Select Harvests Annual Report 2009 Directors’ Report Committee membership During or since the end of the ﬁ nancial 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 ﬁ nancial year were: Audit and Risk Remuneration Nomination R M Herron (Chairman) M Carroll (Chairman) M A Fremder (Chairman) G F Dan O’Brien* M A Fremder J Bird J C Leonard MA Fremder M Carroll J C Leonard R Herron G F Dan O’Brien * * Resigned as a Director on 23 June, 2009. G F Dan O’Brien* R M Herron J C Leonard M Carroll Director’s interests in contracts Directors’ interest in contracts are disclosed in Note 34 to the ﬁ nancial 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 26. 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 satisﬁ ed 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 ﬁ nancial 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, 28 August 2009 Select Harvests Annual Report 2009 25 PricewaterhouseCoopers ABN 52 780 433 757 Freshwater Place 2 Southbank Boulevard SOUTHBANK VIC 3006 GPO Box 1331L MELBOURNE VIC 3001 DX 77 Telephone 61 3 8603 1000 Facsimile 61 3 8603 1999 Website:www.pwc.com/au Auditor’s Independence Declaration As lead auditor for the audit of Select Harvests Limited for the year ended 30 June 2009, I declare that to the best of my knowledge and belief, there have been: a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and b) no contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of Select Harvests Limited and the entities it controlled during the period. Andrew Mill Partner PricewaterhouseCoopers Melbourne 28 August 2009 Liability limited by a scheme approved under Professional Standards Legislation 26 Select Harvests Annual Report 2009 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 ﬁ nancial reporting Principle 5 – Make timely and balanced disclosure Principle 6 – Respect the right of shareholders Principle 7 – Recognise and manage risk Principle 8 – Remunerate fairly and responsibly The statements set out below refer 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 identiﬁ ed 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 qualiﬁ ed 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. The full Board holds twelve scheduled meetings each year, plus any additional meetings at such other times as may be necessary to address any speciﬁ c matters that may arise. The agenda for meetings is prepared and includes the Managing Director’s report, ﬁ nancial 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. Select Harvests Annual Report 2009 27 Corporate governance statement 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 ofﬁ ce 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 qualiﬁ cations, 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 14.6% shareholding at 30 June 2009. - 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, who resigned as a Director on 23 June 2009, acquired from Select Harvests, via an associated entity, $146,974 worth of Almond Hull suitable for livestock feed. This was purchased at market prices. 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 fulﬁ lling 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 ﬁ nancial 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 speciﬁ c 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 ﬁ nancial 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, 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 beneﬁ ts 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. 28 Select Harvests Annual Report 2009 Corporate governance statement 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 ﬁ nancial 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 qualiﬁ ed 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 ﬁ xed remuneration, performance based remuneration, and equity based remuneration. Executive Directors and senior executives may receive short term incentives based on achievement of speciﬁ c business plans and performance indicators, which include ﬁ nancial and operational targets relevant to performance at the consolidated entity level, divisional level, or functional level, as applicable, for the ﬁ nancial 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 ﬁ nancial year are disclosed in the Directors’ Report. The external auditors, the Managing Director and Chief Financial Ofﬁ cer 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 Ofﬁ cer have provided a statement in writing to the Board that the consolidated entity’s ﬁ nancial reports for the year ended 30 June 2009 present a true and fair view, in all material respects, of the consolidated entity’s ﬁ nancial 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 ﬁ nancial 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 conﬂ icts of interest; - - - - Requiring reports from management and the external auditors on any signiﬁ cant regulatory, accounting or reporting development to assess potential ﬁ nancial reporting interest; Reviewing and approving all signiﬁ cant company accounting policy changes; Reviewing the company’s taxation position; Reviewing the annual ﬁ nancial statements with the Chief Financial Ofﬁ cer 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. Select Harvests Annual Report 2009 29 Corporate governance statement 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 ﬁ nancial 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, ﬁ nancial 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 Ofﬁ cer have provided a statement in writing to the Board that the declaration made in respect of the consolidated entity’s ﬁ nancial reports is founded on a system of risk management and internal compliance and control which reﬂ ects 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, Conﬂ ict of Interest and Dealings in Company Shares are with reference to Principle 3, Promote ethical and responsible decision making. 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: Conﬂ ict of Interest Directors must keep the Board advised, on an ongoing basis, of any interest that could potentially conﬂ ict with those of the Company. Should a situation arise where the Board believes that a material conﬂ ict 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 ﬁ nancial 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 right 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 speciﬁ cally 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; 30 Select Harvests Annual Report 2009 Corporate governance statement - - - - The half yearly report contains summarised ﬁ nancial information and a review of the operations of the consolidated entity during the period. The half year audited ﬁ nancial 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 conﬁ rms 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 identiﬁ cation 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 2009 31 Income statements FOR THE YEAR ENDED 30 JUNE 2009 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 Proﬁ t before provision for impairment and income tax Provision for impairment of Timbercorp receivable PROFIT BEFORE INCOME TAX Income Tax Expense PROFIT ATTRIBUTABLE TO MEMBERS OF SELECT HARVESTS LIMITED 2009 $’ 000 2008 $’ 000 2009 $’ 000 2008 $’ 000 4 4 248,581 224,655 93 155 248,674 224,810 - 20,561 20,561 - 27,344 27,344 (1,951) - (1,951) 92 500 592 5 (197,821) (174,866) (1,608) (199,429) (3,007) (177,873) (8,220) (901) (1,441) (3,718) (3,873) - (1,427) 27,714 (4,667) 23,047 (6,335) (6,593) (1,414) (2,060) (3,439) (1,891) (1,845) (4,903) 25,384 - 25,384 (7,254) 5 10 6 - - - - - - - - - (2,851) (3,873) - (988) 12,849 - 12,849 570 27(c) 16,712 18,130 13,419 - - - - - - - - - (2,453) (1,806) - (1,067) 22,018 - 22,018 (404) 21,614 Earnings per share for proﬁ t attributable to the ordinary equity holders of the company: Basic earnings per share (cents per share) Diluted earnings per share (cents per share) 31 31 42.6 42.6 46.7 46.7 Earnings per share adjusted for after tax impact of provision for impairment of Timbercorp receivable 50.9 46.7 The above income statements should be read in conjunction with the accompanying Notes. 32 Select Harvests Annual Report 2009 Balance sheets AS AT 30 JUNE 2009 NOTES CONSOLIDATED PARENT ENTITY CURRENT ASSETS Cash and cash equivalents Trade and other receivables Inventories Derivative ﬁ nancial instruments Current tax receivables TOTAL CURRENT ASSETS NON CURRENT ASSETS Receivables Other ﬁ nancial 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 ﬁ nancial instruments Current tax liabilities Provisions TOTAL CURRENT LIABILITIES NON CURRENT LIABILITIES Trade and other payables Deferred tax liabilities Provisions TOTAL NON CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Contributed equity Reserves Retained proﬁ ts TOTAL EQUITY 9 10 11 12 13 14 15 16 17 18 19 20 12 21 22 24 25 26 27 27 The above balance sheets should be read in conjunction with the accompanying Notes. 2009 $’ 000 2008 $’ 000 2009 $’ 000 2008 $’ 000 6,945 43,128 28,680 2,322 - 4,054 43,101 29,229 69 561 6,943 1,132 - 2,322 - 3,946 1,127 - 69 561 81,075 77,014 10,397 5,703 - - 88,685 24 6,039 39,136 133,884 214,959 36,764 59,293 149 3,566 2,576 102,348 - 10,871 864 11,735 114,083 100,876 46,433 12,949 41,494 100,876 - - 73,135 624 6,039 39,136 160,979 9,607 394 - - - 126,352 9,607 287 577 - - 118,934 170,980 195,948 181,377 136,823 142,526 34,847 50,787 82 - 2,446 88,162 1,303 59,293 149 3,566 361 1,405 50,609 82 - 319 64,672 52,415 - 63,991 41,261 13,020 695 13,715 101,877 94,071 44,375 11,235 38,461 94,071 341 137 64,469 129,141 52,236 46,433 5,304 499 52,236 - 126 41,387 93,802 48,724 44,375 3,590 759 48,724 Select Harvests Annual Report 2009 33 Statement of changes in equity FOR THE YEAR ENDED 30 JUNE 2009 NOTES CONSOLIDATED PARENT ENTITY 2009 $’ 000 2008 $’ 000 2009 $’ 000 2008 $’ 000 Total equity at the beginning of ﬁ nancial year 94,071 95,504 48,724 46,673 Changes in fair value of cash ﬂ ow hedges net of tax Net income recognised directly in equity 1,529 1,529 128 128 1,529 1,529 128 128 Proﬁ t for the year 16,712 18,130 13,419 21,614 Total recognised income and expense for the year 18,241 18,258 14,948 21,742 Transactions with equity holders in their capacity as equity holders: - Contributions of equity, net of transaction costs - Employee share options - Dividends paid - Dividends refunded - Share buy back Total equity at the end of ﬁ nancial year 2,058 185 3,695 931 2,058 185 3,695 931 (13,679) (22,156) (13,679) (22,156) - - (11,436) 100,876 209 (2,370) (19,691) 94,071 - - (11,436) 52,236 209 (2,370) (19,691) 48,724 The above statements of changes in equity should be read in conjunction with the accompanying Notes. 34 Select Harvests Annual Report 2009 Cash ﬂ ow statements FOR THE YEAR ENDED 30 JUNE 2009 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 Inﬂ ow/(Outﬂ ow) From Operating Activities 28 CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of property, plant and equipment Payment for property, plant and equipment Payment for other non current assets Net Cash Inﬂ ow/(Outﬂ ow) From Investing Activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issues of ordinary shares Share Buy Back Commercial bill draw downs Repayments of borrowings Dividends payment on ordinary shares, net of DRP Net Cash Inﬂ ow/(Outﬂ ow) from ﬁ nancing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the ﬁ nancial year Cash and cash equivalents at the end of the ﬁ nancial year 9(a) 2009 $’ 000 2008 $’ 000 2009 $’ 000 2008 $’ 000 330,408 252,731 13,640 - (300,296) (241,359) - (22,624) 30,112 93 (3,873) (3,759) 22,573 161 (16,718) - (16,557) - - 6,000 (246) (11,622) (5,868) 148 4,004 4,152 11,372 155 (1,806) (7,725) 1,996 37 (29,953) (4,409) (34,325) 931 (2,370) 50,500 (114) (18,253) 30,694 (1,635) 5,639 4,004 13,640 (22,624) 93 (3,873) (3,759) 6,101 - (225) - (225) - - 6,000 - (11,622) (5,622) 254 3,896 4,150 155 (1,806) (7,725) (32,000) - (140) - (140) 931 (2,370) 50,500 (16) (18,253) 30,792 (1,348) 5,244 3,896 The above cash ﬂ ow statements should be read in conjunction with the accompanying Notes. Select Harvests Annual Report 2009 35 Notes to the Financial Statements 1. Summary of signiﬁ cant accounting policies The principal accounting policies adopted in the preparation of the ﬁ nancial report are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. The ﬁ nancial report includes separate ﬁ nancial 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 ﬁ nancial report has been prepared in accordance with Australian Accounting Standards, 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 ﬁ nancial statements and Notes of Select Harvests Limited comply with International Financial Reporting Standards (IFRS). Historical cost convention These ﬁ nancial statements have been prepared under the historical cost convention, as modiﬁ ed by the revaluation of available- for-sale ﬁ nancial assets, ﬁ nancial assets and liabilities (including derivative instruments) at fair value through proﬁ t and loss, and certain classes of property, plant and equipment. Critical Accounting Estimates The preparation of ﬁ nancial 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 signiﬁ cant to the ﬁ nancial statements are disclosed in Note 3. Going Concern Basis The ﬁ nancial report has been prepared on the basis that Select Harvests Limited (“the Group”), comprising the parent company and its subsidiaries, is a going concern. At 30 June 2009, the Group’s borrowings of $59.3 million (June 2008: $50.6 million) have been classiﬁ ed as current on the basis that the facility has been extended through to 30 June 2010 and is due for formal review on this date. The facility is subject to a number of ﬁ nancial undertakings and covenants and the company will seek an extension, with a view to longer term funding, as soon as the factors impacting the ownership structure of Timbercorp and its impact on the Group become more certain. The Board is also actively considering its capital requirements in the context of: - - - a number of various possible outcomes of the Timbercorp orchard sale process; the need to reduce the bank facility limit by $10m by 15 December 2009; the aim of strengthening the company’s balance sheet; - management of dividends; and - providing funds for future growth. The Directors acknowledge that in the context of the current economic environment and the uncertainties surrounding the Timbercorp situation reﬁ nancing of facilities beyond 30 June 2010 is not certain. However, the Directors are conﬁ dent that there are realistic prospects of achieving ongoing funding based on the factors below: - - - The Group’s net asset position attributable to members is $100.9 million (December 2008:$95.6 million); The Group has annuity type income streams, excluding Timbercorp, which extend well into the future. Cash ﬂ ow forecasts indicate that the Group is able to pay its liabilities as and when they fall due; The capital Management initiatives are well advanced and it is expected the Group will reduce debt in accordance with the banking facility requirements by 15 December 2009; - All ﬁ nancial banking covenants as at 30 June 2009 have been achieved and forecasts indicate continued achievement into the future; - Based on discussions to date it is probable that current banking facilities can be reﬁ nanced beyond 30 June 2010. On the basis of this assessment the Directors believe the going concern basis of preparation remains appropriate. (b) Principles of consolidation The consolidated ﬁ nancial 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. 36 Select Harvests Annual Report 2009 Notes to the Financial Statements Subsidiaries are all those entities (including special purpose entities) over which the consolidated entity has power to govern the ﬁ nancial 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 ﬁ nancial 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 proﬁ ts arising from intra-group transactions, have been eliminated in full. Investments in subsidiaries are accounted for at cost in the individual ﬁ nancial statements of Select Harvests Limited. (c) Foreign currency translation (i) Functional and presentation currency - Items included in the ﬁ nancial 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 ﬁ nancial 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 ﬂ ow 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 ﬂ ow 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 ﬁ rst in ﬁ rst 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. - Other inventories comprise consumable stocks of chemicals, fertilisers and packaging materials. (f) Biological Assets Almond Trees Almond trees are classiﬁ ed 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 ﬁ rst commercial crop. The value of crop bearing almond trees is measured at fair value using a discounted cash ﬂ ow methodology. The discounted cash ﬂ ow 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 ﬂ ows are discounted at a rate that takes into account the cost of capital plus a suitable risk factor; and Select Harvests Annual Report 2009 37 Notes to the Financial Statements - An appropriate rental charge is included to represent the use of the developed land on which the trees are planted. 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 ﬁ rst 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 ﬁ rm commitment (fair value hedge); or (2) hedges of highly probable forecast transactions (cash ﬂ ow 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 ﬂ ows 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 ﬂ ow hedge The effective portion of changes in the fair value of derivatives that are designated and qualify as cash ﬂ ow 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 proﬁ t 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 ﬁ nancial asset (for example, inventory) or a non ﬁ nancial 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 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 ﬂ ows which will be received from the assets’ employment and subsequent disposal. The expected net cash ﬂ ows have been discounted to present values in determining recoverable amounts. 38 Select Harvests Annual Report 2009 Notes to the Financial Statements 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 ﬁ xed 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: Leased plant and equipment: 25 to 40 years 5 to 40 years 5 to 20 years 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 classiﬁ ed at their inception as either operating or ﬁ nance leases based on the economic substance of the agreement so as to reﬂ ect the risks and beneﬁ ts incidental to ownership. Operating leases The minimum lease payments of operating leases, where the lessor effectively retains substantially all of the risks and beneﬁ ts 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 beneﬁ ts 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. 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 identiﬁ able 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 indeﬁ nite 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 indeﬁ nite 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 beneﬁ ts will ﬂ ow to the entity, the revenue can be reliably measured, and the risks and rewards have passed to the buyer. The following speciﬁ c recognition criteria must also be met before revenue is recognised: Select Harvests Annual Report 2009 39 Notes to the Financial Statements 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 ﬁ nancial assets. Dividends Dividends are recognised as revenue when the right to receive payment is established. 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 2009 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 ﬁ nancial 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 ﬁ nancial 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 proﬁ t or taxable proﬁ t 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. 40 Select Harvests Annual Report 2009 Notes to the Financial 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 ﬂ ows are included in the cash ﬂ ow statement on a gross basis and the GST component of cash ﬂ ows arising from investing and ﬁ nancing activities, which is recoverable from, or payable to the taxation authority are classiﬁ ed as operating cash ﬂ ows. 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 indeﬁ nite 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 identiﬁ able cash ﬂ ows (cash generating units). (o) Employee beneﬁ ts Provision is made for employee beneﬁ ts accumulated as a result of employees rendering services up to the reporting date. These beneﬁ ts include wages and salaries, annual leave and long service leave. Liabilities arising in respect of wages and salaries, annual leave and any other employee beneﬁ ts 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 beneﬁ t liabilities are measured at the present value of the estimated future cash outﬂ ow to be made in respect of services provided by employees up to the reporting date. In determining the present value of future cash outﬂ ows, 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. 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 beneﬁ ts are provided to employees via the Select Harvests Limited Executive Share Option Scheme. Information relating to this scheme is set out in Notes 32 and 38. The fair value of options granted under the Select Harvests Limited Executive Share Option Scheme is recognised as an employee beneﬁ t 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 reﬂ ect market vesting conditions, but excludes the impact of any non market vesting conditions (for example, proﬁ tability 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 beneﬁ t 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, and where there is objective evidence of impairment, debts which are known to be non 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 speciﬁ c contract which speciﬁ es 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. Select Harvests Annual Report 2009 41 Notes to the Financial Statements 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 ﬁ nancial assets and ﬁ nancial liabilities must be estimated for recognition and measurement or for disclosure purposes. The fair value of ﬁ nancial 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 ﬁ nancial assets held by the consolidated entity is the current bid price; the appropriate quoted market price for ﬁ nancial 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 ﬁ nancial liabilities for disclosure purposes is estimated by discounting the future contractual cash ﬂ ows 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. (s) Earnings per share (i) Basic Earnings per share Basic earnings per share are calculated by dividing the proﬁ t attributable to equity holders of the company by the weighted average number of ordinary shares outstanding during the ﬁ nancial year. (ii) Diluted earnings per share Diluted earnings per share adjusts the ﬁ gures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other ﬁ nancing costs associated with dilutive potential ordinary shares. (t) Segment Reporting A business segment is identiﬁ ed 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 2009 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 123 (Amendment) Borrowing Costs is effective from 1 January 2009. The deﬁ nition of borrowing costs has been amended so that interest expense is calculated using the effective interest method deﬁ ned in AASB 139 Financial Instruments:Recognition and Measurement. The group has adopted the standard early and the accounting policy is set out in note 1 (r) to the capitalization of borrowing costs on qualifying assets from 1 July 2008. b) AASB 136 (Amendment) Impairment of Assets is effective from 1 January 2009. Where fair value less costs to sell is calculated on the basis of discounted cash ﬂ ows, disclosures equivalent to those for a value- in - use calculation should be made. The group will apply the AASB 136 (Amendment) and provide the required disclosure where applicable for impairment tests from 1 July 2009. c) AASB 119 (Amendment) Employee Beneﬁ ts is effective from 1 January 2009. The distinction between short term and long term employee beneﬁ ts will be based on whether beneﬁ ts are due to be settled within or after 12 months of employee service being rendered. AASB 137 Provisions, Contingent Liabilities and Contingent Assets requires contingent liabilities to be disclosed, not recognised. AASB 119 has been amended to be consistent. The amendment also clariﬁ es certain treatments of pension plans, not applicable to Select Harvests. d) AASB 139 (Amendment) Financial Instruments: Recognition and Measurement is effective from 1 January 2009. This amendment clariﬁ es that it is possible for there to be movements into and out of fair value through proﬁ t or loss category where a derivative commences or ceases to qualify as a hedging instrument in a cash ﬂ ow or net investment hedge. The amendment also treatment pertaining of ﬁ nancial assets and liabilities held for trading purposes; the treatment of intersegmental hedges; and carrying values of debt instruments. e) AASB 101 (Amendment) Presentation of Financial Statements is effective from 1 January 2009. The amendment clariﬁ es that some rather than all ﬁ nancial assets and liabilities classiﬁ ed as ﬁ nancial assets and liabilities classiﬁ ed as held for trading in accordance with AASB 139 Financial Instruments: Recognition and Measurement are examples of current assets and liabilities respectively. 42 Select Harvests Annual Report 2009 Notes to the Financial Statements f) AASB 141 (Amendment) Agriculture is effective from 1 January 2009. The amendment requires the use of a market - based discount rate where fair value calculations are based on discounted cash ﬂ ows and the removal of the prohibition on taking into account biological transformation when calculating fair value. g) AASB 3 Business Combinations (Amendment) and AASB 127 (Amendment) Consolidated and Separate Financial Statements change the application of acquisition accounting for business combinations and accounting for non controlling interests. Key changes include the expensing of all transaction costs, measurement of contingent consideration at acquisition date with subsequent changes through the income statements, measurement of minority interests at full fair value or the proportionate share of fair value of the underlying net assets. h) AASB 8 Segment Reporting will result in a requirement to adopt a “management approach” to reporting on ﬁ nancial performance. The introduction of amendments to the above standards will not have a material impact on Select Harvests and the impact is limited to disclosure requirements only in future years. (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 outﬂ ow 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 ﬁ nancial year which are unpaid. These amounts are unsecured and are usually paid within 30 days of recognition. (x) Contributed equity Ordinary shares are classiﬁ ed as equity. The value of new shares or options issued is shown in equity. (y) Comparatives Where necessary, comparatives have been reclassiﬁ ed 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 ﬁ nancial report. Amounts in the ﬁ nancial 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 ﬁ nancial 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. Management and the Board review the foreign exchange position of the Group and, where appropriate, take out forward exchange contracts, transacted with the Group’s banker, to manage foreign exchange risk. The exposure to foreign currency risk at the reporting date was as follows: GROUP Trade receivables net of payables Cash at bank/(overdraft) 30 JUNE 2009 USD $000’S 9,186 (2,253) 30 JUNE 2008 USD $000’S 7,245 283 Foreign exchange contracts - buy foreign currency (cash ﬂ ow hedges) - sell foreign currency (cash ﬂ ow hedges) 3,740 14,464 2,793 1,657 Select Harvests Annual Report 2009 43 Notes to the Financial Statements PARENT Cash at bank/(overdraft) Foreign exchange contracts - buy foreign currency (cash ﬂ ow hedges) - sell foreign currency (cash ﬂ ow hedges) Group sensitivity analysis 30 JUNE 2009 USD $000’S (2,253) 30 JUNE 2008 USD $000’S 283 3,740 14,464 2,793 1,657 Based on ﬁ nancial instruments held at the 30 June 2009, had the Australian dollar strengthened/weakened by 5% against the US dollar, with all other variable’s held constant, the Group’s post tax proﬁ t for the year would have been $287,000 lower/ $317,000 higher (2008: $262,000 lower/$290,000 higher), mainly as a result of the US dollar denominated ﬁ nancial instruments as detailed in the above table. Other components of equity would have been $730,000 lower/$806,000 higher (2008: $306,000 lower/$329,000 higher), arising mainly from foreign forward exchange contracts designated as cash ﬂ ow hedges. Parent sensitivity analysis Based on ﬁ nancial instruments held at the 30 June 2009, had the Australian dollar strengthened/weakened by 5 % against the US dollar, with all other variables held constant, the parent entity post tax proﬁ t for the year would have been $103,000 lower/$ 93,000 higher (2008: $ 11,000 higher/$ 10,000 lower), mainly as a result of the US dollar denominated ﬁ nancial instruments as detailed in the above table. Other components of equity would have been $546,000 lower/$583,000 higher (2008: $ lower 54,000/$50,000 higher), arising mainly from foreign forward exchange contracts designated as cash ﬂ ow hedges. (ii) Price risk The Group is exposed to commodity price risk in relation to its owned orchards. The Group sells almonds harvested from owned orchards domestically and overseas throughout the year based on an almond price which will ﬂ uctuate 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 ﬂ uctuate 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 ﬁ xed prices. (iii) Cash ﬂ ow 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 ﬂ ow interest rate risk. The Group’s borrowings at variable interest rate are denominated in Australian dollars. At the reporting date the Group and the parent had the following variable rate borrowings: 30 JUNE 2009 WEIGHTED AVERAGE INTEREST RATE BALANCE 30 JUNE 2008 WEIGHTED AVERAGE INTEREST RATE BALANCE % $000 % $000 Commercial bills Overdraft 7.87% 3.80% 56,500 2,793 7.30% 11.75% 50,500 51 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 ﬂ ow and capital management. Group and Parent sensitivity At 30 June 2009, if interest rates had changed by +/- 25 basis points from the year end rates with all other variables held constant, post tax proﬁ t for the year would have been $94,000 lower/higher (2008: $88,000 lower/higher). All Group borrowings are held by the parent entity. 44 Select Harvests Annual Report 2009 Notes to the Financial Statements (b) Credit risk Credit risk arises from cash and cash equivalents, derivative ﬁ nancial instruments and deposits with banks and ﬁ nancial institutions, as well as exposure to wholesale, retail and farm investor customers, including outstanding receivables and committed transactions. The Group has no signiﬁ cant 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 ﬁ nancial institutions. The credit quality of ﬁ nancial 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. The Group’s banking partner has a long-term credit rating of AA (Standard & Poors). Refer to note 10 for a summary of aged receivables impaired, and past due but not impaired. (c) Liquidity risk The Group manages liquidity risk by continuously monitoring forecast and actual cash ﬂ ows and matching the maturity proﬁ les of ﬁ nancial 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 2009 $’000 $A8,500 - $US 747 2008 $’000 $A 9,500 $A 949 $US 3,000 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. Maturities of ﬁ nancial liabilities The table below analyses the Group’s and parent entity’s ﬁ nancial 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 ﬂ ows. Select Harvests Annual Report 2009 45 Notes to the Financial Statements Group and Parent at 30 June 2009 Non derivatives Variable Rate Bills payable Derivatives USD buy - outﬂ ow Bank Overdraft USD sell - inﬂ ow USD net Group and Parent at 30 June 2008 Non derivatives Variable Rate Bills payable Derivatives USD buy - outﬂ ow Bank Overdraft USD sell - inﬂ ow USD net LESS THAN 12 MONTHS MORE THAN 12 MONTHS TOTAL CONTRACTUAL CASH FLOWS CARRYING AMOUNT (ASSETS)/LIABILITIES $’000 $’000 $’000 $’000 56,500 2,793 (3,740) 7,884 4,144 50,500 51 (2,793) 1,657 1,136 - - - 6,580 6,580 - - - - - 56,500 2,793 (3,740) 14,464 10,724 50,500 51 (2,793) 1,657 1,136 56,500 2,793 149 2,322 2,173 50,500 51 82 (69) 13 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 deﬁ nition, 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 ﬁ nancial year are discussed below. Almond Trees Almond trees are classiﬁ ed 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 ﬁ nancial statements. As at 30 June 2009, the value of almond trees carried in the ﬁ nancial statements of the consolidated entity is $6.0 million (2008:$6.0 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. 46 Select Harvests Annual Report 2009 Notes to the Financial 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 NOTES CONSOLIDATED PARENT ENTITY 2009 $’000 2008 $’000 2009 $’000 2008 $’000 248,581 224,655 - - - - - 93 93 93 - - - 155 155 155 3,737 3,915 10,500 20,500 6,231 93 6,324 20,561 2,774 155 2,929 27,344 Total revenue 248,674 224,810 20,561 27,344 Revenue / Cost of goods sold from Almond Pool Revenue from almond pool sales Cost of goods sold from almond pool sales 92,150 (92,150) - 43,210 (43,210) - - - - - - - * 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. Select Harvests Annual Report 2009 47 Notes to the Financial Statements NOTES CONSOLIDATED PARENT ENTITY 2009 $’000 2008 $’000 2009 $’000 2008 $’000 5. Expenses Proﬁ t before tax includes the following speciﬁ c 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 Finance costs other persons capitalised Total ﬁ nance costs Impairment losses: trade receivables Foreign exchange (gain) Operating lease rental minimum lease payments 197,821 1,608 174,866 3,007 - 236 356 34 4,170 4,796 4,585 (712) 3,873 4,695 (279) 10,681 - 55 468 116 3,163 3,802 3,373 (1,482) 1,891 38 (126) 9,514 Net loss on disposal of property, plant and equipment 53 837 - - - - - 4 144 148 4,585 (712) 3,873 - - - - - - - - - 16 117 133 3,288 (1,482) 1,806 - - - - (a) Capitalised Borrowing Costs 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, 7.87% (2008 – 7.3%) 48 Select Harvests Annual Report 2009 Notes to the Financial Statements NOTES CONSOLIDATED PARENT ENTITY 2009 $’000 2008 $’000 2009 $’000 2008 $’000 6. Income Tax (a) Income tax expense Current Tax Deferred tax Under (over) provided in prior years Income tax expense is attributable to: Proﬁ t 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 (b) Numerical reconciliation of income tax expense to prima facie tax payable 8,213 (1,439) (439) 6,335 6,335 6,335 55 (1,494) (1,439) 4,912 2,715 (373) 7,254 7,254 7,254 (127) 2,842 2,715 (509) 1,074 (1,135) (570) (570) (570) 78 996 1,074 501 (37) (60) 404 404 404 (37) - (37) 23,047 25,384 12,849 22,018 Proﬁ t from continuing operations before income tax expense Tax at the Australian tax rate of 30% (2008 – 30%) 23,047 6,914 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 (c) Tax consolidation legislation - 10 (150) (439) 6,335 25,384 7,615 - 12 - (373) 7,254 12,849 3,855 (3,150) 10 (150) (1,135) (570) 22,018 6,605 (6,150) 9 - (60) 404 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’ ﬁ nancial 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 ﬁ nancial 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 ﬁ nancial year or the prior ﬁ nancial year. Select Harvests Annual Report 2009 49 Notes to the Financial Statements NOTES CONSOLIDATED PARENT ENTITY 2009 $’000 2008 $’000 2009 $’000 2008 $’000 8. Dividends Paid or Proposed for on Ordinary Shares (a) Dividends paid during the year (i) Interim - paid 16 April 2009 (2008: 3 April 2008) Fully franked dividend (12c per share) (2008: 22c per share) (ii) Final - paid 1 October 2008 (2007: 1 October 2007) Fully franked dividend (23c per share) (2007: 35c per share) (b) Dividends proposed and not recognised as a liability No ﬁ nal dividend has been declared by the Directors. (c) Franking credit balance Franking credits available for the subsequent ﬁ nancial year arising from: Franking account balance as at the beginning of the ﬁ nancial year Current year tax payment instalments and adjustments Interim Dividends paid Franking account balance at end of ﬁ nancial year Current year income tax payable/(receivable) Dividend declared Franking account balance after payment of current year tax and dividends 4,707 4,707 8,972 13,679 8,556 8,556 13,600 22,156 4,707 4,707 8,972 13,679 28,817 10,299 (4,707) 34,409 8,321 - 42,730 8,556 8,556 13,600 22,156 29,629 18,025 (8,556) 39,098 (1,309) (8,972) 28,817 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, is $ nil (2008 - $3,845,165). 9. Cash and Cash Equivalents Cash at bank and in hand 6,945 6,945 4,054 4,054 6,943 6,943 3,946 3,946 (a) Reconciliation to cash at the end of the year The above ﬁ gures are reconciled to cash at the end of the ﬁ nancial year as shown in the statement of cash ﬂ ow as follows: Balances as above Bank overdrafts 20 6,945 (2,793) 4,152 4,054 (50) 4,004 6,943 (2,793) 4,150 3,946 (50) 3,896 (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. 50 Select Harvests Annual Report 2009 Notes to the Financial Statements NOTES CONSOLIDATED PARENT ENTITY 2009 $’000 2008 $’000 2009 $’000 2008 $’000 46,126 (4,688) 41,438 1,690 43,128 40,664 (15) 40,649 2,452 43,101 - - - 1,132 1,132 - - - 1,127 1,127 10. Receivables (Current) Trade receivables Provision for impairment of trade receivables Prepayments (a) Impaired trade receivables As at 30 June 2009 current trade receivables of the Group with a value of $4,688,000 (2008: $15,000) were impaired. The amount of the provision was $4,688,000 (2008:$15,000). There were no impaired receivables for the parent in 2009 or 2008. 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 2008 Provision for impairment recognised during the year Receivables written off during the year At 30 June 2009 CONSOLIDATED 2009 $’000 2008 $’000 17 17 15 4,695 (22) 4,688 15 15 18 38 (41) 15 Provision for impairment recognised during the year includes $4,667,000 relating to revenues earned but not yet collected from Almond Management Pty Ltd, a subsidiary of Timbercorp Limited (b) Trade receivables past due but not impaired As at 30 June 2009, trade receivables of $ 5,566,108 (2008: $4,804,382) 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 2009 $’000 5,165 183 218 5,566 2008 $’000 3,277 660 867 4,804 Select Harvests Annual Report 2009 51 Notes to the Financial 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 2009 $’000 2008 $’000 2009 $’000 2008 $’000 11. Inventories (Current) Raw Materials Raw materials at cost Finished goods Finished goods at cost Other inventory Other inventory at cost Almond stocks Almond stock at cost Almond stock fair value adjustment 8,911 8,911 9,911 9,911 5,564 5,564 1,768 2,526 4,294 28,680 9,887 9,887 5,750 5,750 4,759 4,759 4,353 4,480 8,833 29,229 1(f) - - - - - - - - - - - - - - - - - Write-downs of inventory to net realisable value recognised as an expense during the year ended 30 June 2009 amounted to $17,000 (2008 $133,000). The expense has been included in other expenses. 12. Derivative Financial Instruments (Current) Current Assets Forward exchange contracts – cash ﬂ ow hedges Total current derivative ﬁ nancial instrument assets Current Liabilities Forward exchange contracts – cash ﬂ ow hedges Total current derivative ﬁ nancial instrument liabilities 2,322 2,322 149 149 69 69 82 82 2,322 2,322 149 149 69 69 82 82 (i) Forward exchange contracts – cash ﬂ ow hedges The consolidated entity enters into forward exchange contracts to buy and sell speciﬁ ed 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. 52 Select Harvests Annual Report 2009 Notes to the Financial Statements 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 $10,724,000 (2008: $1,136,000). 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 SELL AUSTRALIAN DOLLARS AVERAGE EXCHANGE RATE Less than 6 months 6 months to 1 year 2009 $’000 3,740 - 3,740 2008 $’000 2,397 396 2,793 2009 $ 0.78 - 2008 $ 0.92 0.92 SELL UNITED STATES DOLLARS SETTLEMENT BUY AUSTRALIAN DOLLARS AVERAGE EXCHANGE RATE Less than 6 months 6 months to 1 year More than 1 year (ii) Credit risk exposures 2009 $’000 7,884 - 6,580 14,464 2008 $’000 1,546 111 - 1,657 2009 $ 0.73 - 0.67 2008 $ 0.92 0.86 - The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date to recognised ﬁ nancial 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 ﬁ nancial statements. Credit risk for derivative ﬁ nancial 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 ﬁ nancial instruments entered into by the consolidated entity. NOTES CONSOLIDATED PARENT ENTITY 2009 $’000 2008 $’000 2009 $’000 2008 $’000 13. Receivables (Non Current) Related party receivables Wholly-owned group controlled entities 34(f) - - - - 160,979 160,979 126,352 126,352 Select Harvests Annual Report 2009 53 Notes to the Financial Statements NOTES CONSOLIDATED PARENT ENTITY 2009 $’000 2008 $’000 2009 $’000 2008 $’000 15(a) 15(a) 15(a) 15(a) 15(a) - - - - 9,607 9,607 9,607 9,607 10,511 (702) 9,809 30,091 (2,729) 27,362 37,171 - - - 66,173 (26,295) 39,878 11,636 11,636 51,514 118,411 (29,726) 88,685 2,809 (466) 2,343 21,589 (2,363) 19,226 21,569 608 (410) 198 36,466 (22,210) 14,256 37,112 37,112 51,368 98,584 (25,449) 73,135 - - - - - - - - - - 1,434 (1,040) 394 - - - 1,434 (1,040) 394 - - - - - - - 103 (45) 58 1,104 (875) 229 - - - 1,207 (920) 287 14. Other Financial 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 Accumulated depreciation Total land and buildings Plant and equipment under lease At cost Accumulated amortisation Plant and equipment At cost Accumulated amortisation Capital works in progress At cost Total plant and equipment Total property, plant and equipment Cost Accumulated depreciation and amortisation Total written down amount 54 Select Harvests Annual Report 2009 Notes to the Financial Statements (a) Reconciliations Reconciliations of the carrying amounts of property, plant and equipment at the beginning and end of the current ﬁ nancial year. NOTES CONSOLIDATED PARENT ENTITY 2009 $’000 2008 $’000 2009 $’000 2008 $’000 Buildings Carrying amount at beginning Transfers between classes Depreciation expense Plantation land and irrigation systems Carrying amount at beginning Additions Transfers between classes Depreciation expense Plant and equipment under lease Carrying amount at beginning Disposals Transfer 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 Reclassiﬁ cation from Trade & Other Receivables Expensed to proﬁ t & loss Transfers between classes Total written down value 2,343 7,702 (236) 9,809 19,226 3 8,489 (356) 27,362 198 (164) - (34) - 14,256 2 (50) 29,840 (4,170) 39,878 37,112 16,713 3,867 (25) (46,031) 11,636 88,685 2,398 - (55) 2,343 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 - - - - - - - - - 58 - (54) (4) - 229 255 - 54 (144) 394 - - - - - - - - - - - - - - - 74 - - (16) 58 159 115 - 71 (116) 229 43 (43) - - - - 394 287 Select Harvests Annual Report 2009 55 Notes to the Financial Statements NOTES CONSOLIDATED PARENT ENTITY 2009 $’000 2008 $’000 2009 $’000 2008 $’000 16. Deferred Tax Assets The balance comprises temporary differences attributable to: Amounts recognised in proﬁ t and loss Employee beneﬁ ts Accruals Provisions Amounts recognised directly in equity Cash ﬂ ow 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 - - 24 24 - 24 624 55 (655) 24 - 24 24 163 46 411 620 4 624 692 (127) 59 624 71 553 624 - - - - - - 577 78 (655) - - - - 140 46 387 573 4 577 555 (37) 59 577 40 537 577 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 2009 the consolidated entity owned and managed a total of 1,863 acres of almond orchards (2008: 1,863 acres) and leased and managed a total of 1,505 acres of almond orchards (2008: 1,505 acres). During the year ended 30 June 2009, 2,600 metric tonnes of almonds were harvested from these orchards (2008: 2,400 metric tonnes). These almonds had a fair value less estimated point of sale costs of $13.0 million (2008: $12.8 million). Carrying amount at 1 July Additions Carrying amount at 30 June CONSOLIDATED 2009 $’000 6,039 - 6,039 2008 $’000 5,998 41 6,039 56 Select Harvests Annual Report 2009 Notes to the Financial Statements Developing almond trees are valued at their growing cost until the year they bear their ﬁ rst commercial crop. The value of crop bearing almond trees is calculated using a discounted cash ﬂ ow methodology. The discounted cash ﬂ ow 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 ﬂ ows are discounted at a rate of 17% which 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 ﬁ nancial 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 ﬁ nancial 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 2008 Opening net book amount Additions Closing net book amount Year ended 30 June 2009 Opening net book amount Closing net book amount GOODWILL $’000 CONSOLIDATED BRAND NAMES* $’000 PERMANENT WATER RIGHTS $’000 TOTAL $’000 25,995 - 25,995 25,995 25,995 2,905 - 2,905 2,905 2,905 5,826 4,410 10,236 10,236 10,236 34,726 4,410 39,136 39,136 39,136 * Brand name assets relate to the “Lucky” brand, which has been assessed as having an indeﬁ nite 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) identiﬁ ed 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 ﬂ ow projections based on ﬁ nancial projections by management covering a ﬁ ve-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 12.8% has been used to discount the cash ﬂ ow projections. (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 2009. If a pre-tax discount rate of 13.8% was used instead of 12.8% the recoverable amount of the goodwill in the Food Products Division would still exceed the carrying amount of goodwill at 30 June 2009. (c) Permanent water rights The value of permanent water rights relates to the almond division Cash Generating Unit (CGU) and is an integral part of land and irrigation infrastructures required to grow almond orchards. The fair value of permanent water rights is supported by the tradeable market value , which at current market prices is in excess of book value. Select Harvests Annual Report 2009 57 Notes to the Financial Statements NOTES CONSOLIDATED PARENT ENTITY 2009 $’000 2008 $’000 2009 $’000 2008 $’000 7,047 29,717 36,764 2,793 56,500 - 59,293 8,112 26,735 34,847 50 50,500 237 50,787 82 1,221 1,303 96 1,309 1,405 2,793 56,500 - 59,293 50 50,500 59 50,609 29 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 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. 21. Provisions (Current) Employee beneﬁ ts 22. Trade And Other Payables (Non current) Aggregate amounts payable to related parties - wholly owned companies 2,576 2,576 2,446 2,446 361 361 319 319 - - - - 63,991 63,991 41,261 41,261 58 Select Harvests Annual Report 2009 Notes to the Financial Statements NOTES CONSOLIDATED PARENT ENTITY 2009 $’000 2008 $’000 2009 $’000 2008 $’000 23. Secured Liabilities Assets pledged as security 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. The carrying amounts of assets pledged as security for current and non current borrowings are: Current Floating charge Cash and cash equivalents Receivables Inventories Derivative ﬁ nancial instruments Total current assets pledged as security Non current Floating charge Receivables Other ﬁ nancial assets Property, plant and equipment Biological assets – almond trees Permanent water rights Total non current assets pledged as security Total assets pledged as security 6,945 43,128 28,680 2,322 81,075 - - 88,685 6,039 10,236 104,960 186,035 4,054 43,101 29,229 69 76,453 - - 73,135 6,039 10,236 89,410 165,863 6,943 1,132 - 2,322 10,397 163,790 9,607 394 - - 3,946 1,127 - 69 5,142 126,352 9,607 287 - - 173,791 184,188 136,246 141,388 Financing arrangements The consolidated entity and the Company have bank overdraft facilities available to the extent of USD 3,000,000 (2008: AUD 1,000,000 & USD 3,000,000). As at 30 June 2009 the consolidated entity and Company have used USD 2,253,000 (2008: AUD 51,018 & USD Nil) of the facility. The consolidated entity and the Company have a commercial bill facility available to the extent of $65,000,000 (2008: $60,000,000). As at 30 June 2009 the consolidated entity and Company have used $56,500,000 (2008: $50,500,000). This facility is treated as a current liability because it is due for renewal on 30 June 2010. The current interest rates are 6.2% on the commercial bill facility, and 3.8% on the United States dollar bank overdraft facility. A number of covenants and ﬁ nancial undertakings are associated with the company banking facilities, all of which have been met during the period and as at 30 June 2009. Select Harvests Annual Report 2009 59 Notes to the Financial Statements NOTES CONSOLIDATED PARENT ENTITY 2009 $’000 2008 $’000 2009 $’000 2008 $’000 24. Deferred Tax Liabilities (Non Current) The balance comprises temporary differences attributable to: Amounts recognised in proﬁ t and loss Inventory Assets at cost Employee beneﬁ ts Accruals Provisions Intangibles Operating leases Amounts recognised directly in equity Cash ﬂ ow 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 1,338 10,709 (1,093) 898 (1,995) 870 (396) 10,331 540 10,871 13,020 (1,494) (655) 10,871 11,222 (351) 10,871 864 3,440 366 2,169 9,777 (893) 1,468 - 870 (371) - - (154) (45) - - - 13,020 (199) - 13,020 10,178 2,842 - 13,020 10,249 2,771 13,020 695 3,141 340 540 341 - 996 (655) 341 382 (41) 341 137 498 14 - - - - - - - - - - - - - - - - 126 445 18 60 Select Harvests Annual Report 2009 Notes to the Financial Statements NOTES CONSOLIDATED PARENT ENTITY 2009 $’000 2008 $’000 2009 $’000 2008 $’000 46,433 46,433 44,375 44,375 46,433 46,433 44,375 44,375 2009 2008 NUMBER OF SHARES 39,008,928 $’000 44,375 NUMBER OF SHARES 38,739,047 509,987 2,058 - - - - 451,074 119,700 (300,893) 39,518,915 46,433 39,008,928 $’000 41,953 3,695 1,097 (2,370) 44,375 26. Contributed Equity (a) Issued and paid up capital Ordinary shares fully paid (b) Movements in shares on issue Beginning of the ﬁ nancial year - Issued during the year - Dividend reinvestment scheme - Employee share scheme Share buy back End of Financial year (c) Share options Employee share scheme 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 ﬁ xed 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 ﬁ nancial year, no options (2008: 71,167 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 $ 2.16 on 30 June 2009 ($6.00 on 30 June 2008). (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. Select Harvests Annual Report 2009 61 Notes to the Financial Statements NOTES CONSOLIDATED PARENT ENTITY 2009 $’000 2008 $’000 2009 $’000 2008 $’000 27(a) 27(a) 27(a) 27(a) 27(c) 27. Reserves And Retained Proﬁ ts Capital reserve Cash ﬂ ow hedge reserve Asset revaluation reserve Options reserve Retained proﬁ ts (a) Movements Capital reserve Balance at beginning of year Balance at end of year Cash ﬂ ow 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 3,270 1,520 7,645 514 12,949 41,494 3,270 3,270 (9) 1,529 1,520 7,645 7,645 329 185 - 514 3,270 (9) 7,645 329 11,235 38,461 3,270 3,270 (137) 128 (9) 7,645 7,645 495 - (166) 329 3,270 1,520 - 514 5,304 499 3,270 3,270 (9) 1,529 1,520 - - 329 185 - 514 3,270 (9) - 329 3,590 759 3,270 3,270 (137) 128 (9) - - 495 - (166) 329 The capital reserve is used to isolate realised capital proﬁ ts 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. This revaluation reserve is no longer in use given assets are now recorded at cost. This is in line with accounting policies within note 1. (iii) Options reserve The options reserve is used to recognise the fair value of options granted but not exercised. (iv) Cash ﬂ ow hedge reserve The cash ﬂ ow hedge reserve is used to record gains or losses on foreign exchange contracts in a cash ﬂ ow hedge that are recognised directly in equity. 62 Select Harvests Annual Report 2009 Notes to the Financial Statements (c) Retained proﬁ ts Balance at the beginning of year Proﬁ t attributable to members of Select Harvests Limited Total available for appropriation Dividends paid Dividends refunded Balance at end of year NOTES CONSOLIDATED PARENT ENTITY 2009 $’000 2008 $’000 2009 $’000 2008 $’000 38,461 16,712 55,173 (13,679) - 41,494 42,278 18,130 60,408 (22,156) 209 38,461 759 13,419 14,178 (13,679) - 499 1,092 21,614 22,706 (22,156) 209 759 28. Reconciliaton Of The Net Proﬁ t After Income Tax To The Net Cash Flows From Operating Activities Net proﬁ t 18,130 16,712 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 (Increase) / decrease in receivables and other assets (Decrease) / increase in trade and other payables (Decrease) / increase in income tax payable Increase/ (decrease) in deferred income tax liability (Increase) / decrease in deferred tax assets Increase in employee entitlements Net cash ﬂ ow from operating activities Non cash ﬁ nancing activities 4,796 1,951 - 53 - - - (4,440) (1,401) (1,491) 3,516 4,127 (2,149) 600 299 22,573 3,802 (92) (500) 837 - - - (7,562) 1,532 (1,863) (11,977) (3,327) 2,842 69 105 1,996 13,419 21,614 148 - - - 133 - - - (10,500) (20,500) (6,231) (3,737) (2,929) (3,915) (6) - (14,718) 22,628 4,127 341 577 53 - - (26,334) 968 (1,028) - (22) 13 6,101 (32,000) During the current year the company issued $2,058,000 of new equity as part of the Dividend Reinvestment Plan (refer to note 26). Select Harvests Annual Report 2009 63 Notes to the Financial Statements NOTES CONSOLIDATED PARENT ENTITY 2009 $’000 2008 $’000 2009 $’000 2008 $’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 ﬁ ve years Later than ﬁ ve years (i) Operating leases (non cancellable): - Minimum lease payments - Not later than one year - Later than one year and not later than ﬁ ve years - Later than ﬁ ve years Aggregate lease expenditure contracted for at reporting date 11,532 27,071 50,357 88,960 9,026 16,338 9,997 35,361 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 ﬁ ve years - Total minimum lease payments - Future ﬁ nance charges - Lease liability - Current liability - Non current liability 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 ﬁ ve years - Later than ﬁ ve years Aggregate expenditure commitments comprise: - - - - - - - - 20 23 2,506 10,733 40,360 2,212 10,376 42,919 11,550 27,110 52,624 91,284 9,101 16,734 9,705 35,540 257 - 257 (20) 237 237 - 237 - - - - - - - - - - - - - - - - - - - - - - - - - - - - 60 - 60 (1) 59 59 - 59 - - - - Aggregate lease expenditure contracted for at reporting date 53,599 55,507 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 ﬁ rst right of refusal to purchase the properties in the event that the lessor wished to sell. Other leases within Select have renewal and ﬁ rst right of refusal clauses. 64 Select Harvests Annual Report 2009 Notes to the Financial Statements 30. Events Occuring After Balance Date On 28 August 2009, the Directors resolved that no ﬁ nal dividend will be paid in relation to the ﬁ nancial year ended 30 June 2009. This decision was made to preserve cash in the context of current uncertainties pertaining to the liquidation of Timbercorp. On 8 July, 2009, the company debt facility was extended for review on 30 June 2010. An undertaking of this is that $10 million of debt is to be repaid by 15 December 2009. Since the 30 June 2009, the company has been involved in extensive discussions with the liquidator of Timbercorp relating to the future management of the Timbercorp almond orchards. The Board is conﬁ dent that agreement will soon be reached to secure future management rights over these orchards through a restructured ownership model. There has been no other matter or circumstance, which has arisen since 30 June 2009 that has signiﬁ cantly affected or may signiﬁ cantly affect: a) the operations, in ﬁ nancial years subsequent to 30 June 2009, of the consolidated entity, or b) the results of those operations, or c) the state of affairs, in ﬁ nancial years subsequent to 30 June 2009, of the consolidated entity. 31. Earnings Per Share The following reﬂ ects the income and share data used in the calculations of basic and diluted earnings per share: Proﬁ t attributable to equity holders of the company used in calculating basic earnings per share Diluted earnings per share: Proﬁ t 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: CONSOLIDATED 2009 $’000 16,712 2008 $’000 18,130 16,712 18,130 NUMBER OF SHARES 2009 2008 39,242,683 38,851,551 Adjusted weighted average number of ordinary shares used in calculating diluted earnings per share 39,242,683 38,851,551 Select Harvests Annual Report 2009 65 Notes to the Financial 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 qualiﬁ ed 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 ﬁ xed remuneration, performance based remuneration, and equity based remuneration. Executive directors and key management personnel may receive short term incentives based on achievement of speciﬁ c business plans and performance indicators, which include ﬁ nancial and operational targets relevant to performance at the consolidated entity level, divisional level, or functional level, as applicable, for the ﬁ nancial 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 $65,000 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 ﬁ nancial year: (i) Chairman – non-executive J C Leonard (ii) Executive director J Bird, Managing Director (iii) Non-executive directors G F Dan O’Brien – resigned on 23 June, 2009 M A Fremder R M Herron M Carroll – appointed on 31 March, 2009 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 ﬁ nancial year: NAME POSITION EMPLOYER M Bartholemew Group Manager Sales & Marketing* Select Harvests Food Products Pty Ltd K Martin T Millen L Van Driel P Chambers P Ross M Graham * Resigned on 9 April, 2009 Operations Manager, Food Products Division Select Harvests Limited Group Horticultural & Farm Operations Manager Kyndalyn Park Pty Ltd Group Trading Manager Select Harvests Food Products Pty Ltd Chief Financial Ofﬁ cer & Company Secretary Operations Manager, Almond Division Select Harvests Limited Kyndalyn Park Pty Ltd Manager Sales & Marketing Select Harvests Food Product Pty Ltd 66 Select Harvests Annual Report 2009 Notes to the Financial Statements NOTES CONSOLIDATED PARENT ENTITY 2009 $ 2008 $ 2009 $ 2008 $ (c) Key management personnel compensation Short term employment beneﬁ ts 2,755,075 2,366,048 1,324,753 1,581,383 Long service leave Share based payments 51,053 48,196 50,436 92,881 23,034 27,833 27,833 72,799 2,854,324 2,509,365 1,375,620 1,682,015 Detailed remuneration disclosures are provided in Sections A to C of the remuneration report on pages X to X. (d) Equity instrument disclosures relating to key management personnel Number of options held by directors and key management personnel The movement during the ﬁ nancial 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: 2009 Directors J Bird Key Management Personnel K Martin (Group Operations Manager) T Millen (Group Horticultural & Farm Operations Manager) L Van Driel (Group Trading Manager) P Chambers ( Chief Financial Ofﬁ cer & Company Secretary) P Ross (Operations Manager Almond Division) 2008 Directors J Bird Key Management Personnel K Martin (Group Operations Manager) T Millen (Group Horticultural & Farm Opera- tions Manager) L Van Driel (Group Trading Manager) P Chambers (Chief Financial Ofﬁ cer & Company Secretary) HELD AT 1 JULY 2008 GRANTED AS COMPENSATION LAPSED HELD AT 30 JUNE 2009 UNVESTED AT 30 JUNE 2009 186,023 157,114 (46,134) 297,003 297,003 25,845 35,135 37,166 26,351 37,500 35,294 33,824 39,706 - 36,765 - (7,066) (9,334) - - 63,345 63,363 61,656 66,057 63,345 63,363 61,656 66,057 36,765 36,765 HELD AT 1 JULY 2007 GRANTED AS COMPENSATION EXERCISED HELD AT 30 JUNE 2008 UNVESTED AT 30 JUNE 2008 105,965 103,125 (23,067) 186,023 186,023 - 18,398 21,563 - 25,845 20,270 20,270 26,351 - 25,845 (3,533) (4,667) - 35,135 37,166 26,351 25,845 35,135 37,166 26,351 No options held by directors or key management personnel are vested but not exercisable. Select Harvests Annual Report 2009 67 Notes to the Financial Statements Number of shares held by directors and key management personnel The movement during the ﬁ nancial 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: 2009 Directors – Non Executive M A Fremder J C Leonard R M Herron G F Dan O’Brien* M Carroll *resigned as a Director on 23 June 2009 Directors – Executive J Bird Key Management Personnel K Martin (Group Operations Manager) T Millen (Group Horticultural & Farm Operations Manager) L Van Driel (Group Trading Manager) P Chambers ( Chief Financial Ofﬁ cer & Company Secretary) P Ross (Operations Manager, Almond Division) 2008 Directors – Non Executive M A Fremder J C Leonard C G Clark* R M Herron G F Dan O’Brien * resigned as a Director on 31 January 2008 Directors – Executive J Bird Key Management Personnel K Martin (Group Operations Manager) T Millen (Group Horticultural & Farm Operations Manager) L Van Driel (Group Trading Manager) P Chambers ( Chief Financial Ofﬁ cer & Company Secretary) HELD AT 1 JULY 2008 RECEIVED ON EXERCISE OF OPTIONS OTHER – DRP, SALES & PURCHASES 5,777,234 581,779 8,772 54,769 - 619,522 - 45,444 - - - - - - - - - - - - - - - 33,849 10,000 4,580 - - - - - - - HELD AT 1 JULY 2007 RECEIVED ON EXERCISE OF OPTIONS OTHER – DRP, SALES & PUR- CHASES 5,777,234 484,797 23,892 5,000 51,090 - - - - - 518,122 101,400 - 39,444 - - - 6,000 12,300 - 96,982 - - 3,772 3,679 - - - (12,300) - TOTAL 5,777,234 615,628 18,772 59,349 - - 619,522 45,444 - -- - TOTAL 5,777,234 581,779 23,892 8,772 54,769 619,522 - 45,444 - - (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 2009 are detailed in Note 34. 68 Select Harvests Annual Report 2009 Notes to the Financial Statements NOTES CONSOLIDATED PARENT ENTITY 2009 $ 2008 $ 2009 $ 2008 $ 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 ﬁ rms: Amounts received or due and receivable by PricewaterhouseCoopers for: - An audit or review of the ﬁ nancial report of the entity and any other entity in the consolidated entity - Other ﬁ nancial services (a) 185,950 177,800 185,950 177,800 75,860 261,810 137,307 315,107 75,860 261,810 137,307 315,107 (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 52,650 7,210 16,000 75,860 33,910 80,897 22,500 137,307 52,650 7,210 16,000 75,860 33,910 80,897 22,500 137,307 34. Related Party Disclosures (a) Parent entity 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. Select Harvests Annual Report 2009 69 Notes to the Financial Statements (d) Wholly owned group transactions NOTES CONSOLIDATED PARENT ENTITY 2009 $’000 2008 $’000 2009 $’000 2008 $’000 Dividend revenue Subsidiaries Interest income Subsidiaries Other transactions Management fees - - - - - - 10,500 20,500 6,231 3,737 2,774 3,915 Management fees are received by Select Harvests Limited from controlled entities under normal terms and conditions. (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 $1,805,723 (2008: $1,514,000) during the ﬁ nancial 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 $3,546,136 (2008: $3,242,000) during the ﬁ nancial 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. At 30 June 2009, the total amount receivable from director related entities in respect to the above transaction is $518,797. During the ﬁ nancial year the company entered into foreign exchange contracts on behalf of Almas Pty Limited and Maxdy Pty Ltd, under conditions which pass costs and beneﬁ ts to the related parties under normal commercial terms. A former non-executive director of the Company, Mr Dan O’Brien, acquired from Select Harvests, via an associated entity. $146,974 (2008: $89,344) worth of almond hull suitable for livestock feed. This was purchased at market prices. 70 Select Harvests Annual Report 2009 Notes to the Financial Statements (f) Outstanding balances The following balances are outstanding at the reporting date in relation to transactions with related parties: NOTES CONSOLIDATED PARENT ENTITY 2009 $’000 2008 $’000 2009 $’000 2008 $’000 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 - - - - - - - - - - - - - - 160,979 126,352 63,991 41,261 85,091 336,770 (331,104) 6,231 96,988 34,159 329,830 (281,672) 2,774 85,091 Loans are made to Select Harvests Limited by controlled entities under normal terms and conditions. 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 2009 71 Notes to the Financial Statements I Y T T N E D E T A D I L O S N O C E T A R O P R O C D N A S N O T A N M I I I L E I S N O T A R E P O L A T O T I S N O T A R E P O D N O M L A S T C U D O R P D O O F 8 0 0 2 9 0 0 2 8 0 0 2 9 0 0 2 8 0 0 2 9 0 0 2 8 0 0 2 9 0 0 2 8 0 0 2 9 0 0 2 , 5 5 6 4 2 2 $ , 1 8 5 8 4 2 $ 0 $ , 5 5 6 4 2 2 $ , 1 8 5 8 4 2 $ , 4 0 4 0 0 1 $ , 2 2 5 6 1 1 $ , 1 5 2 4 2 1 $ , 9 5 0 2 3 1 $ 0 $ 0 $ ) 0 5 1 , 1 2 ( $ ) 2 9 9 3 2 ( $ , 0 5 1 , 1 2 $ 2 9 9 3 2 $ , 0 5 1 , 1 2 $ 2 9 9 3 2 $ , 6 9 0 6 2 $ , 8 3 7 , 1 7 $ 0 $ 0 $ 6 9 0 6 2 $ , 8 3 7 , 1 7 $ 6 9 0 6 2 $ , 8 3 7 , 1 7 $ 0 $ 2 9 5 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 2 9 5 $ 0 $ 0 $ 0 $ 2 9 5 $ 0 $ 0 $ ) 7 9 0 6 2 ( $ , ) 7 3 7 , 1 7 ( $ 3 1 1 , 7 1 $ , 3 1 4 0 2 $ ) , 0 1 2 3 4 ( $ ) 0 5 1 , 2 9 ( $ ) , 0 1 2 3 4 ( $ ) 0 5 1 , 2 9 ( $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ , 6 4 2 5 2 2 $ , 2 8 5 8 4 2 $ ) 7 3 0 4 ( $ , ) 9 7 5 3 ( $ , , 3 8 2 9 2 2 $ 1 6 1 , 2 5 2 $ , 2 3 0 5 0 1 $ 2 0 1 , 0 2 1 $ , 1 5 2 4 2 1 $ , 9 5 0 2 3 1 $ e d i s t u o s r e m o t s u c o t s e c i v r e s & s d o o g f o s e l a S e u n e v e R g n i t a r e p O e h t e d i s t u o s r e m o t s u c o t l s d n o m A f o e l a S d e g a n a m f o f l a h e b n o y t i t n e d e t a d i l o s n o c ) ) a ( e t o N ( s r e n w o d r a h c r o y r i t n e d e t a d i l o s n o c e h t e u n e v e r t n e m g e s r e t n I Select Harvests Annual Report 2009 ) . t n o c ( n o i t a m r o f n I t n e m g e S . 5 3 72 d e t a d i l o s n o c e h t y b d o s l l s d n o m A f o t s o C s s e L s r e n w o d r a h c r o d e g a n a m f o f l a h e b n o y t i t n e e u n e v e r d e t a c o l l a n U e u n e v e r l a t o T e u n e v e r r e h t O ) ) a ( e t o N ( 9 1 1 , 7 2 $ , 7 2 8 6 2 $ ) 0 2 3 3 ( $ , ) 0 4 2 3 ( $ , 9 3 4 0 3 $ , 7 6 0 0 3 $ , , 4 1 5 9 2 $ 8 0 6 5 2 $ , 5 2 9 $ 9 5 4 , 4 $ l a n r e t n i d n a , x a t , t s e r e t n i e r o f e b t ﬁ o r p g n i t a r e p O s e g r a h c , 8 4 9 5 9 1 $ , 9 5 9 4 1 2 $ 6 0 5 $ 2 8 8 5 $ , , 2 4 4 5 9 1 $ , 7 7 0 9 0 2 $ , 1 9 3 5 2 1 $ , 2 7 4 8 3 1 $ , 1 5 0 0 7 $ 5 0 6 0 7 $ , ) s t b e d y n a p m o c - r e t n i i g n d u l c x e ( s t e s s a t n e m g e S 7 7 8 , 1 0 1 $ , 3 8 0 4 1 1 $ 4 8 8 6 2 $ , , 7 7 7 4 6 $ 3 9 9 4 7 $ , 6 0 3 9 4 $ , , 1 7 0 5 6 $ 6 0 9 0 4 $ , 2 2 9 9 $ , 0 0 4 8 $ , y n a p m o c - r e t n i i g n d u l c x e ( s e i t i l i b a i l t n e m g e S ) s t b e d 0 0 1 , 0 3 $ 4 4 6 6 1 $ , 2 0 8 3 $ , 7 9 7 4 $ , 0 4 1 $ 3 3 1 $ 0 6 2 $ 8 4 1 $ 9 6 6 3 $ , 0 6 9 9 2 $ , 4 8 3 6 1 $ , 9 4 6 4 $ , , 9 3 7 8 2 $ 2 7 0 2 $ , 7 1 1 , 6 1 $ 9 4 1 , 3 $ 1 2 2 , 1 $ 7 9 5 , 1 $ 7 6 2 $ 0 0 5 , 1 $ s t e s s a t n e m g e s f o n o i t a s i t r o m a d n a n o i t a i c e r p e D s t e s s a t n e m g e s t n e r r u c - n o n f o n o i t i s i u q c A n a n o d e c i r p e r a s r e f s n a r t h c u S . s t n e m g e s n e e w t e b s r e f s n a r t e d u l c n i s t l u s e r d n a s e s n e p x e , s e u n e v e r t n e m g e S . e c i v r e s i s i h t g n d i v o r p r o f e e f g n i t e k r a m a s n r a e y t i t n e d e t a d i l o s n o c e h T . s t n a p i c i t r a p . n o i t a d i l o s n o c n o d e t a n m i i l e e r a d n a s i s a b ” h t g n e l - s m r a “ l o o p e h t o t d e t u b i r t s i d e r a h c i h w m o r f s d e e c o r p e h t , s i s a b d e l o o p a n o y t i t n e d e t a d i l l o s n o c e h t y b d o s e r a s d n o m a e s e h T l . s r e n w o l a n r e t x e e h t f o s d r a h c r o e h t m o r f d e t s e v r a h s d n o m a f o p o r c l e h t s l l e s y t i t n e d e t a d i l o s n o c e h t , s e c i v r e s e s e h t o t n o i t i d d a n I . s d r a h c r o y t r a p d r i h t r o d e n w o y l l a n r e t x e o t s e c i v r e s r e h t o d n a t n e m e g a n a m f o e g n a r a s e d i v o r p y t i t n e d e t a d i l o s n o c e h T – ) a ( e t o N Notes to the Financial Statements : 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 : 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 l a i c n a n ﬁ d n a s t e s s a l a i c n a n ﬁ 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 ( E T A R T S E R E T N I E V T C E F F E E G A I - R E V A D E T H G I E W T E E H S E C N A L A B E H T I G N Y R R A C L A T O T R E P S A T N U O M A T S E R E T N I G N R A E B 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 E T A R T S E R E T N I I G N T A O L F S T N E M U R T S N I I L A C N A N I F % 8 0 0 2 % 9 0 0 2 8 0 0 2 0 0 0 $ ’ 9 0 0 2 0 0 0 $ ’ 8 0 0 2 0 0 0 $ ’ 9 0 0 2 0 0 0 $ ’ 8 0 0 2 0 0 0 $ ’ 9 0 0 2 0 0 0 $ ’ 8 0 0 2 0 0 0 $ ’ 9 0 0 2 0 0 0 $ ’ 8 0 0 2 0 0 0 $ ’ 9 0 0 2 0 0 0 $ ’ 8 0 0 2 0 0 0 $ ’ 9 0 0 2 0 0 0 $ ’ 4 3 . 7 . 1 1 3 7 . - - 0 7 . 8 3 . - 8 7 . - - - 9 6 4 5 0 4 , 1 0 1 , 3 4 5 4 9 6 , 8 2 1 , 3 4 2 2 3 2 , - 9 6 1 0 1 , 3 4 - 8 2 1 , 3 4 2 2 3 2 , 4 2 2 7 4 , 5 9 3 2 5 , 0 7 1 , 3 4 0 5 4 5 4 , - 0 5 - 3 9 7 2 , 0 0 5 0 5 , 0 0 5 6 5 , - - - 7 3 2 2 8 2 1 1 , 8 5 3 7 6 2 , 7 4 0 7 , 7 1 7 9 2 , - 9 4 1 - 2 8 2 1 1 , 8 5 3 7 6 2 , - - - 7 4 0 7 , 7 1 7 9 2 , - 9 4 1 6 1 7 5 8 , 6 0 2 6 9 , 9 2 9 4 3 , 3 1 9 6 3 , - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 7 3 2 7 3 2 - - - - - - - - - - - 4 5 0 4 , 5 4 9 6 , - - - - 4 5 0 4 , 5 4 9 6 , - 0 5 - 3 9 7 2 , 0 0 5 0 5 , 0 0 5 6 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 c a r t n o c e g n a h c x e n g i e r o F s t e s s a l a i c n a n i F ) i ( h s a C s t e s s a l a i c n a n ﬁ l a t o T s e i t i l i b a i l l a i c n a n i F ) i i ( 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 s t c a r t n o c e g n a h c x e n g i e r o F y t i l i b a i l e s a e l e c n a n i F 0 5 5 0 5 , 3 9 2 9 5 , s e i t i l i b a i l l a i c n a n ﬁ l a t o T Select Harvests Annual Report 2009 73 Notes to the Financial Statements 37. Controlled Entities Parent Entity: Select Harvests Limited Subsidiaries of Select Harvests Limited: Kyndalyn Park Pty Ltd 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 (%) 2009 2008 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 ﬁ nancial 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 ﬁ rst 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 ﬁ nancial year over the preceding ﬁ nancial 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. 74 Select Harvests Annual Report 2009 Notes to the Financial Statements 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 D$ E V I E C E R S D E E C O R P R A E Y F O D N E I T A S N O T P O F O R E B M U N D E T S E V E U S S I N O 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 : w o l e b t u o t e s e r a r a e y 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 - - - - - - - - - - - - - - - - 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 D$ E V I E C E R S D E E C O R P - - - - - - - - - - - - , 8 8 0 2 8 0 , 1 4 0 9 . 0 0 7 9 1 1 , 6 6 2 , 1 3 9 - - - - - - - - - 8 9 7 7 5 , 9 7 3 0 1 2 , , 9 7 3 2 6 3 - - - - - - - 0 0 2 , 1 0 1 - - - , 9 7 3 2 6 3 - R A E Y F O D N E I T A S N O T P O F O R E B M U N D E T S E V E U S S I N O 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 - 0 0 2 , 1 0 1 8 9 7 7 5 , 9 7 3 0 1 2 , 0 0 7 9 1 1 , 0 0 0 4 , - - - - - 2 7 8 7 2 , - - - - R A E Y F O 0 0 7 3 2 1 , 0 0 2 , 1 0 1 8 9 7 7 5 , 9 2 4 8 3 2 , F O R E B M U N T A S N O T P O I I G N N N G E B I i f o g n d n e d n a g n n n g e b e h t i i i t a 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 s l i a t e D 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 n o c ( s t ﬁ e n e B e e y o p m E . l 8 3 R A E Y F O 0 0 2 , 1 0 1 8 9 7 7 5 , 9 7 3 0 1 2 , F O R E B M U N T A S N O T P O I I G N N N G E B I E C R P I E S I C R E X E E T A D Y R I P X E R E T F A R O N O E T A D E S I C R E X E E T A D T N A R G 5 0 . 1 1 $ 3 1 . 3 1 $ . 4 7 9 $ 5 1 . 5 $ 8 0 0 2 / 0 1 / 1 3 6 0 0 2 / 8 0 / 8 2 5 0 0 2 / 8 0 / 8 2 9 0 0 2 / 0 1 / 1 3 6 0 0 2 / 9 0 / 2 2 6 0 0 2 / 9 0 / 2 2 0 1 0 2 / 0 1 / 1 3 7 0 0 2 / 7 0 / 7 2 7 0 0 2 / 8 0 / 7 2 1 1 0 2 / 0 1 / 1 3 9 0 0 2 / 9 0 / 0 2 9 0 0 2 / 9 0 / 0 2 9 0 0 2 E C R P I E S I C R E X E E T A D Y R I P X E R E T F A R O N O E T A D E S I C R E X E E T A D T N A R G 8 7 7 $ . 5 0 . 1 1 $ 3 1 . 3 1 $ . 4 7 9 $ 7 0 0 2 / 0 1 / 0 2 5 0 0 2 / 8 0 / 4 2 5 0 0 2 / 8 0 / 4 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 9 0 0 2 / 0 1 / 1 3 6 0 0 2 / 9 0 / 2 2 6 0 0 2 / 9 0 / 2 2 0 1 0 2 / 0 1 / 1 3 7 0 0 2 / 7 0 / 7 2 7 0 0 2 / 8 0 / 7 2 8 0 0 2 . 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 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 l f o e u a v r i a f e h T Select Harvests Annual Report 2009 75 Notes to the Financial Statements 38. Employee Beneﬁ ts (cont.) The amounts recognised in the ﬁ nancial statements of the consolidated entity in relation to executive share options exercised during the ﬁ nancial year were: Issued and Paid up Capital 2009 $’000 - 2008 $’000 1,097 (b) Expenses arising from share-based payment transactions Total expenses arising from share-based payment transactions recognised during the period as part of employee beneﬁ t expense were as follows: Options granted under employee option plan CONSOLIDATED PARENT ENTITY 2009 $ 48,196 48,196 2008 $ 92,881 92,881 2009 $ 27,883 27,883 2008 $ 72,799 72,799 39. Contingent Liabilities Cross guarantees given by the entities comprising the consolidated entity are detailed in Note 23. 76 Select Harvests Annual Report 2009 Directors Declaration In the directors’ opinion: (a) the ﬁ nancial statements and Notes set out on pages 32 to 76 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 ﬁ nancial position as at 30 June 2009 and of their performance for the ﬁ nancial 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 Ofﬁ cer 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, 28 August 2009 Select Harvests Annual Report 2009 77 PricewaterhouseCoopers ABN 52 780 433 757 Freshwater Place 2 Southbank Boulevard SOUTHBANK VIC 3006 GPO Box 1331L MELBOURNE VIC 3001 DX 77 Telephone 61 3 8603 1000 Facsimile 61 3 8603 1999 Website:www.pwc.com/au Independent auditor’s report to the members of Select Harvests Limited Report on the ﬁ nancial report We have audited the accompanying ﬁ nancial report of Select Harvests Limited (the company), which comprises the balance sheet as at 30 June 2009, and the income statement, statement of changes in equity and cash ﬂ ow statement for the year ended on that date, a summary of signiﬁ cant accounting policies, other explanatory notes and the directors’ declaration for both Select Harvests Limited and the Select Harvests Limited Group (the consolidated entity). The consolidated entity comprises the company and the entities it controlled at the year’s end or from time to time during the ﬁ nancial year. Directors’ responsibility for the ﬁ nancial report The directors of the company are responsible for the preparation and fair presentation of the ﬁ nancial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes establishing and maintaining internal controls relevant to the preparation and fair presentation of the ﬁ nancial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that compliance with the Australian equivalents to International Financial Reporting Standards ensures that the ﬁ nancial report, comprising the ﬁ nancial statements and notes, complies with International Financial Reporting Standards. Auditor’s responsibility Our responsibility is to express an opinion on the ﬁ nancial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the ﬁ nancial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the ﬁ nancial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the ﬁ nancial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the ﬁ nancial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the ﬁ nancial report. Our procedures include reading the other information in the Annual Report to determine whether it contains any material inconsistencies with the ﬁ nancial report. Our audit did not involve an analysis of the prudence of business decisions made by directors or management. 78 Select Harvests Annual Report 2009 Independent auditor’s report to the members of Select Harvests Limited (cont.) We believe that the audit evidence we have obtained is sufﬁ cient and appropriate to provide a basis for our audit opinions. Independence In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. Auditor’s opinion In our opinion: (a) the ﬁ nancial report of Select Harvests Limited is in accordance with the Corporations Act 2001, including: (i) (ii) giving a true and fair view of the company’s and consolidated entity’s ﬁ nancial position as at 30 June 2009 and of their performance for the year ended on that date; and complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and the consolidated ﬁ nancial statements and notes also comply with International Financial Reporting Standards as disclosed in Note 1. Report on the Remuneration Report We have audited the Remuneration Report included in pages 18 to 24 of the directors’ report for the year ended 30 June 2009. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Auditor’s opinion In our opinion, the Remuneration Report of Select Harvests Limited for the year ended 30 June 2009, complies with section 300A of the Corporations Act 2001. PricewaterhouseCoopers Andrew Mill Partner Melbourne 28 August 2009 Liability limited by a scheme approved under Professional Standards Legislation Select Harvests Annual Report 2009 79 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 2009. (a) Distribution of equity securities The number of shareholders, by size of holding, in each class of share is: 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 1,313 1,328 350 270 35 The number of shareholders holding less than a marketable parcel of shares is: NUMBER OF ORDINARY SHARES 18,358 NUMBER OF SHAREHOLDERS 256 (b) Twenty largest shareholders The names of the twenty largest holders of quoted shares are: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Maxdy Nominees Pty Ltd HSBC Custody Nominees (Australia) Limited Almonds Australia Pty Ltd MF Custodians Ltd ANZ Nominees Limited Le Grand Pty Ltd MF Custodians (account 10051001) Mirrabooka Investments Limited Mr John Bird Mid Manhattan Pty Ltd Mr Petrus Cornelius Nicolaas Middencorp Longo Pty Ltd Citicorp Nominees Pty Ltd AMP Life Limited UBS Nominees Pty Ltd RBC Dexia Investor Services Nominees Pty Limited Mr Max Fremder National Nominees Limited Spectrok Pty Ltd 20 JP Morgan Nominees Australia Limited 80 Select Harvests Annual Report 2009 LISTED ORDINARY SHARES NUMBER OF SHARES PERCENTAGE OF ORDINARY 5,406,671 4,964,959 4,500,000 1,141,234 733,113 629,888 585,587 570,684 555,815 499,244 464,128 460,871 410,790 357,108 356,631 324,241 330,563 320,804 306,722 272,405 13.68 12.56 11.39 2.89 1.86 1.56 1.48 1.44 1.41 1.26 1.17 1.17 1.04 0.90 0.90 0.87 0.84 0.81 0.78 0.69 ASX additional information (c) Substantial shareholders The names of substantial shareholders are: NAMES Maxdy Nominees Pty Ltd HSBC Custody Nominees (Australia) Limited Almonds Australia Pty Ltd NUMBER OF SHARES 5,406,671 4,964,959 4,500,000 (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 2009 81 Corporate Information Select Harvests Limited ABN 87 000 721 380 Directors J C Leonard (Chairman) J Bird (Managing Director) M Carroll (Non-Executive Director) M Fremder (Non-Executive Director) R M Herron (Non-Executive Director) Company Secretary P Chambers Registered Ofﬁ ce – 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 82 Select Harvests Annual Report 2009 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 Corporate Information Select Harvests Limited ABN 87 000 721 380 Directors J C Leonard (Chairman) J Bird (Managing Director) M Carroll (Non-Executive Director) M Fremder (Non-Executive Director) R M Herron (Non-Executive Director) Company Secretary P Chambers Registered Ofﬁ ce - 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

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