An artist impression of Devine s $170 million Festival Towers development in the Brisbane CBD.

Transcription

1 A N N U A L R E P O R T L I M I T E D

2 An artist impression of Devine s $170 million Festival Towers development in the Brisbane CBD.

3 Contents Page No. Company Directory CHAIRMAN S REPORT 4 MANAGING DIRECTOR S REPORT 6 DIRECTORS REPORT 8 STATEMENT OF FINANCIAL PERFORMANCE 15 STATEMENT OF FINANCIAL POSITION 16 STATEMENT OF CASH FLOWS 17 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS 18 DIRECTORS DECLARATION 58 INDEPENDENT AUDIT REPORT 59 SHAREHOLDINGS 61 CORPORATE GOVERNANCE STATEMENT 63 ANNUAL GENERAL MEETING The Annual General Meeting of Devine Limited will be held on 10 November 2004, commencing at 11:00 am at the Stamford Plaza Hotel, 39 Edward Street, Brisbane. DEVINE LIMITED A.B.N Directors K P Prior AM (Chairman) D H T Devine (Managing Director) P J Ferris AM R W Parris K M Woodley (Marketing Director) D J Ridley Company Secretary V N Grayson Registered Office 3 Westmoreland Boulevard Springwood, Queensland 4127 Telephone: (07) Solicitors McCullough Robertson Bankers Australia and New Zealand Banking Group Limited FINANCIAL CALENDAR Financial Year End 30 June 2004 Ordinary Shares Begin Trading ex-dividend 18 October 2004 Books close for entitlement to Final Dividend on Ordinary Shares 22 October 2004 Final Dividend paid on Ordinary Shares 5 November 2004 Auditors Ernst & Young Level 5, Waterfront Place 1 Eagle Street Brisbane, Queensland 4000 Share Registrar Computershare Registry Services Pty Ltd Level 27, Central Plaza One 345 Queen Street Brisbane, Queensland 4000 Annual General Meeting 10 November 2004 L I M I T E D 1

4 Devine Homes Queensland display home The Grand at the Springfield Lakes display village on Brisbane s Westside L I M I T E D 2 Devine Limited Company Overview Devine Limited is a major force in Australia s residential property market offering affordable housing products in Queensland, Victoria and South Australia. The company is also active in the high-rise residential market in the CBD s of both Brisbane and Melbourne. The company was formed in 1993, when the founding director, David Devine, listed the company on the Australian Stock Exchange. At that time Devine s operations were based solely around southeast Queensland. Its only product was detached housing constructed in the main on land that the company had developed. Today, the company can demonstrate geographic and product diversifi cation operating in three states. It is now actively involved in medium density developments and has an in-house mortgage loan origination, securitisation and servicing business. Devine Limited s core competencies include concept design, product design, marketing and project management. In home building, the Company is the registered builder and sub-contracts all construction work. In relation to its large property development activities, Devine currently contracts all building construction work to one of the major registered builders. In 1996 Devine established a Property Development Division in Queensland and developed the successful 514- unit Cathedral Place project. Following the success of this inaugural project, this Division has completed a total of 1,162 residential units with an end value of $327 million. In May 1997, Devine acquired the contract housing business of Pioneer Homes, giving the company a presence in New South Wales, Victoria and South Australia at that time. The company currently has two residential projects under construction in the Brisbane CBD totalling 615 units with an end value of $253M. In September 2003, the company commenced construction of its largest project, a $334M residential unit and mixed-use development in the Dockland s precinct in the Melbourne CBD. This project encompasses 447 residential apartments, 105 serviced apartments and a seven level offi ce building. Devine has been ranked as high as the third largest builder of detached homes in the annual HIA survey of Australia s leading Home Builders. The company s in-house mortgage origination and securitisation business, First Permanent, continues to play an important role in the provision of housing loans to Devine s customers.

5 Financial Summary (Five Year Review) $ Revenues from ordinary activities 227, , , , ,581 Profi t/(loss) from ordinary activities before Interest & Tax 5,247 8,991 46,694 26,703 38,434 Profi t/(loss) from ordinary activities before Tax 2,206 1,189 39,111 19,430 22,486 Profi t/(loss) from ordinary activities after Tax 1, ,748 13,069 15,650 Net profi t (loss) attributable to outside equity interests 92 (37) (875) (142) - Net profi t (loss) attributable to members of Devine Ltd 1, ,623 13,211 15,650 Dividends declared, paid or provided for 1,121 1,038 8,094 7,970 *** 8,645 *** Retained earnings 10,339 10,514 29,888 39,995 47,365 Total assets 114, , , , ,367 Net assets/shareholders equity 50,309 42,265 ** 56,274 ** 66,614 ** 82,167 Net tangible assets 46,993 38,195 ** 52,958 ** 63,298 ** 78,851 Number of ordinary shares on issue ( 000) 72, , , , ,208 Number of preference shares on issue ( 000) 1, Net tangible assets per ordinary share (cents) ** 51.2 ** 61.2 ** 67.9 Earnings per ordinary share (cents) * 14.0 Dividends per ordinary share (cents) Interim Final Total Closing share price (cents) Return on shareholders equity (%) Dividend yield % (before grossed up effect of franking credits) Price/earnings ratio (times) * Based on weighted average number of ordinary shares outstanding during the year, adjusted for any bonus element. This refl ects the change in treatment as a result of the amendment to AASB1027. The comparatives have not been amended to refl ect this change in standard. ** Refl ects the reclassifi cation in the year ended 30 June 2001 of the share capital relating to the company s Converting Preference Shares as Debt rather than Equity as required by Accounting Standard AASB1033. *** In accordance with AASB 1044, the fi nal dividend declared in respect of the years ended June 2003 and June 2004 have not been provided for in the accounts as at June 2003 and June

6 CHAIRMAN S REPORT Other key ratios were a net tangible asset backing per share of 67.9 cents at year-end, up from 61.2 cents a year earlier and a return on shareholders equity at yearend of 19.1% (last year 19.8%). Key Activities and Initiatives As mentioned above, an important event during the year was the conversion of the company s converting preference shares (CPS) into ordinary shares. This always had the potential to be very dilutive for existing holders of the company s ordinary shares. Directors were conscious of the need to ensure that the interests of both the holders of the CPS and ordinary shares were taken into account when arriving at the average share price to be used in the conversion formula calculation and I am confi dent that, with the approach taken, this was achieved. The result for the company was the issue of 12.7 million new ordinary shares representing a 12.2% increase on the issued capital of the company prior to the conversion. Kerry Prior AM - Chairman On behalf of your Board, I am pleased to report to you on the results and activities of Devine Limited for the year ending 30 June It was another successful year for the company with earnings above the guidance provided to the market this time last year and a number of exciting initiatives undertaken during the year. Results The $15.650M profi t after tax recorded for the year represented an 18.5% increase on the 2002/03 year and was above the 15% increase profi t guidance given during the year. Basic earnings per share were 14.0 cents for the year (2003, 12.8 cents) and have resulted in Directors increasing the full year dividend to 8 cents per share fully franked (last year 7 cents fully franked). This is despite the increase in the number of ordinary shares on issue consequent upon the conversion of the company s converting preference shares into ordinary shares in October A fi nal dividend of 4.0 cents per share fully franked has been declared and is payable on 5 November This dividend payment will result in 56.2% (last year 55%) of the company s after tax earnings being distributed to shareholders for the 2003/04 year and refl ects the Board s desire to, over time, reduce the level of debt funding required when large property development projects are commenced. It also recognises that there are an increased number of shares on issue that will need to be serviced in the future. There were a number of other signifi cant events for the company during the year and the managing director will cover these in more detail in his report. In summary however, activities and initiatives undertaken included the commencement of construction of the company s largest development, Victoria Point Docklands in Melbourne, settlement occurring on the Festival Hall site in the Brisbane CBD and the subsequent commencement in January 2004 of the Festival Towers project on that site and the very encouraging level of sales achieved on the proposed new development known as Charlotte Towers in the Brisbane CBD. In relation to the Housing Division, the company made signifi cant progress with its strategy of moving towards controlling and developing a greater proportion of its own land stocks rather than relying on other developers for the supply of developed lots. Obviously, this was quite diffi cult in the prevailing market conditions. This strategy saw the number of potential future developed lots either owned or under option double to over 2,000 lots. Two other achievements during the year were the securing under a conditional contract of a 148 hectare parcel of land at Currumbin on the Gold Coast and being selected as one of three fi nalists invited to submit a proposal to the Queensland state government for the development of a tennis centre and residential precinct development at Tennyson in Brisbane. The managing director will provide more details on these initiatives in his report. I am pleased to report that the company s exit from the New South Wales market which was announced in June last year, has been achieved with profi ts being recorded on both the housing work completed during the year and the remaining inventory which has been largely sold during the year. The company will continue to meet its obligations to its customers in relation to future maintenance and warranty work in that state. The withdrawal from this market has proved to be the right decision given the problems of delay in development of land and affordability which beset that market. However, given the size and 4

7 importance of the NSW market, we will look for opportunities in the medium density sector when we believe that the market conditions are appropriate. Governance The company has always acted in accordance with clearly defi ned corporate governance policies. Given the increased interest in this area these policies have now been formalised and are in accordance with best practice in the corporate world. Outlook With the signifi cant increases in land prices experienced in all markets over the last 12 months and cost pressures occurring in the supply of labour and materials, the deterioration in housing affordability is a major issue for consumers and builders alike. The federal government s recent focus on this issue underlines the importance of addressing this in order to maintain the health of the Australian economy and the high levels of home ownership that have been a feature of the Australian way of life in past decades. The affordability issue, which is highly relevant to a signifi cant part of the company s client base, is being addressed by the company, as best we can, by exploring innovative housing design and land development initiatives. The Housing Division is experiencing signifi cant delays in accessing developed land to enable housing starts to occur. This has been caused by the buoyant housing market generally over the last two years and the adverse impact that this has had on land availability. This factor together with the downward pressure being applied to housing margins as a result of very signifi cant cost increases and a shortage of skilled trades will see the housing result, and consequently the Devine Group s consolidated result, lower in the December 2004 half than that reported in the corresponding period for the 2003/04 year. The profi t expected to fl ow from the company s large CBD projects during this period will counter this impact to some degree and our projections suggest that this imbalance should correct itself in the second half. Conclusion The company, its shareholders and your Board are well served by a talented, supportive and loyal team of managers and employees and I extend to them the appreciation of all of us for their efforts. I also take this opportunity to acknowledge the excellent contribution made by my fellow Directors and thank them for their commitment and support over the past year K. P. Prior AM Chairman 5

8 MANAGING DIRECTOR S REPORT Review of Operations Year Ended 30 June 2004 Land availability and pricing remains a major constraint, particularly in southeast Queensland, and is having a major adverse impact on housing affordability. This is necessitating a move to smaller lot sizes and the design of more cost effi cient housing products. The company is currently undertaking extensive work in this regard. A recent independent study carried out in relation to the inner city residential unit market in Brisbane confi rms that forward supply is limited and that current and expected demand should easily absorb the planned new projects. This view is supported by the company s recent experience in relation to the marketing of the proposed Charlotte Towers project as detailed later in this report. Housing Division David H.T. Devine - Managing Director The past fi nancial year saw the company s earnings increase by 18.5% to $15.650M. This was achieved on revenue of $ M, up 10.8% on the 2002/03 year. Also, during the year, the company undertook a number of initiatives that I am confi dent will underpin the company s profi tability over the next few years. These initiatives included the commencement of our fourth high-rise CBD development in Brisbane, doubling the number of future potential residential lots under the company s control. This includes the securing under a conditional contract an exciting 148 hectare potential golf course and residential development site on the Gold Coast. In addition, the company was selected by the Queensland Government as one of three fi nalists chosen to submit a proposal for a new tennis centre and residential development at the government s decommissioned Tennyson Powerhouse site on the Brisbane River. I will comment in more detail on these matters later in this report. Market Conditions As predicted, the housing market remained strong over the 2003/04 year with total dwelling commencements expected to be around 171,600 for the year. This compares to 169,945 for the previous year and confi rms the positive impact that overseas migration and the changing demographics in Australia are having on the market. Respected market forecasters, BIS Shrapnel, are forecasting total dwelling commencements to remain at the same level of around 170,000 for the 2004/05 year with declines in NSW and Victoria and a projected rise in Queensland. The Housing Division experienced a severe shortage of developed land in the second half of the year, particularly in Queensland, and this restricted marketing opportunities and constrained house commencements. Also, the strong housing market conditions in south east Queensland combined with labour shortages to put pressure on housing margins in this market. These factors resulted in a 10% decline in revenues and a corresponding 17% fall in profi t before tax to $18.081M in the 2003/04 year when compared to the previous period. During the year, the company made signifi cant investments in acquiring and securing new land for development in both Queensland and Victoria. This is part of a broader strategy which will see the company being less reliant on other land developers for developed land stocks in the future and will also result in enhanced returns fl owing to the Housing Division. The company s orderly exit from the NSW market saw it complete all work that was in the system at the start of the year and meet its obligations to past and current customers in relation to maintenance and warranty work. The sale of land and other inventory held in NSW during the course of the year resulted in good profi ts being generated. At the time of this report, only sundry lots remain unsold and we are confi dent that these will be sold at a profi t over coming months. Based on the results achieved and the current state of the fi rst homebuyer market in this state, the decision to withdraw from this market has proved to be the right one for the company. Property Development Division This Division reported a pre-tax profi t of $6.581M for the year. This compares to the loss recorded in the 2002/03 year which resulted from the exit from The Georgian project in November The current year s result was struck on turnover of $140.4M (last year $76.8M). 6

9 The formal launch of the Charlotte Towers project occurred in February 2004 and together with sales made prior to the offi cial launch, 356 of the 416 units have been sold with 322 or 77% of the 416 units being unconditional contract status with 10% deposit paid. The signifi cant increase in high-rise construction activity in the Brisbane CBD has resulted in cost pressures for both labour and materials fl owing on to increases in prices being quoted by large building contractors. With the positive sales results achieved to date, the company s attention is now focused on securing a build price that will deliver acceptable margins on the project. Construction on the 214 unit $91M Casino Towers project in the Brisbane CBD, which commenced in December 2002, continues to be behind schedule. Completion is now forecast to be in April Despite these delays, margins on the project are protected by the contractual arrangements entered into with the building contractor. Only one unit remains unsold. The 401 unit, $170M Festival Towers project is proceeding well, with construction having commenced in January Completion is forecast to occur in January With marketing efforts focusing on the Charlotte Towers project, 33 units remain to be sold and 366 or 91% of units are at unconditional contract status with 10% deposit paid. The company s largest development, the Victoria Point Docklands project in Melbourne is on schedule to be completed by March 2006 with the stand alone seven storey Commercial Building and Serviced Apartments stages completing in the December 05 quarter. At the time of this report, 426 (95%) of the 447 residential units are sold and unconditional with a 10% deposit paid. Similarly, 104 of the project s 105 serviced apartments are sold and unconditional with a 10% deposit held. All of the retail and commercial space is sold and unconditional. Other highlights of the year were: the completion and settlement of all of the 221 units in the River City project in the Brisbane CBD. The predicted strong demand for CBD rental accommodation was confi rmed with all available units in the project having been let within six weeks of being placed on the market. the conditional purchase of a prime residential and golf course development site at Currumbin on the Gold Coast. This $27M acquisition is subject to Devine securing a satisfactory development approval for the site from the Gold Coast City Council. With the detailed planning that has been put into the development to date, the low density proposed and the attention given to environmental concerns, the company is anticipating a positive outcome in relation to this potential major future development. Devine being short listed as one of three developers invited by the Queensland Government to tender for the building of a Tennis Centre on riverfront land owned by the government at Tennyson in Brisbane. A sizable portion of this land will be available for residential development. Finance Division The First Permanent Home Loans Division continues to play an important role in providing an alternative source of fi nancing for Devine s home buying customers. The loss of $1.85M reported for the year was in line with the loss for the 2002/03 year and refl ects some costs incurred in the development and initial marketing of a new loan product, the Establishment Loan. This loan product is being marketed externally to Devine s customers. Market research carried out on the loan product was very positive. If successful, this new initiative should contribute meaningful income in future years. As previously forecast, the securitisation of a new pool of mortgage-backed loans valued at $85M occurred in March Future Outlook Despite there being recent evidence of a softening in market conditions, the outlook for housing remains positive and, provided the forecast increases in interest rates are modest over the next economic cycle, the Housing Division should underpin the company s results in the medium term. The company is fortunate in having a number of quality, large residential projects with a high level of presales under construction. The profi ts to be generated by these projects will make a material contribution to the company s results over the next two years and are largely locked in. The signifi cant escalation in construction costs experienced in Brisbane over the last year presents some challenges in preserving acceptable margins and securing fi nance in relation to the company s future projects. Delays in accessing developed land in the housing business will continue in the December 04 half and will result in lower profi t for that period compared with the corresponding period to December 03. As land comes on stream later this calendar year and with the expected commencement of the Charlotte Towers project in January 05, profi ts are forecast to improve in the June 05 half. David H T Devine Managing Director 7

10 DIRECTORS REPORT Your directors submit their report for the year ended 30 June DIRECTORS The names and details of the directors of the company in offi ce during the fi nancial year and at the date of this report are as follows. Directors were in offi ce for this entire period unless otherwise stated. K P Prior, AM, LL.B. (Chairman) Kerry Prior was executive chairman and senior partner of McCullough Robertson, Lawyers. He continues to practice as a partner in the commercial division of McCullough Robertson and has extensive experience in commercial and taxation law. Mr Prior is principal legal adviser to a large number of public and substantial private companies. He is a director of a number of companies and Chairman of the Sir Albert Sakzewski Foundation and Deputy Chairman of the Royal Children s Hospital Foundation. D H T Devine, (Managing Director) David Devine began his working career with a chemical company in Victoria, before joining Hortico Australia Limited in 1968 where he spent 12 years progressing through the company to manage the company s Queensland and later, its Western Australian operations. As a result of Hortico s management structure he gained wide experience in production, manufacturing, advertising, distribution, marketing and administration. In 1980 he left Hortico and acquired his own business in aluminium boat manufacturing. He entered into property development in 1983, setting up the predecessor entity to Devine Limited. P J Ferris, AM, B.A. (Hons Economics) FCA, FAIM, FAICD Peter Ferris is a former senior partner and National Director of Corporate Finance of Ernst & Young. He is on the board of a number of organisations including Sisters of Charity Foundation Limited (Chairman) and a trustee of St Vincent s Hospital Sydney, St Vincent s Clinic Foundation and Catholic Health Care Services (NSW & ACT). He is a former director of Austereo Limited, Hanimex Corporation Limited, the Defence Housing Authority, South Eastern Sydney Area Health Service, Australian Technology Group Limited and the Australian Advisory Board of Marsh Australia Pty Ltd. 8

11 DIRECTORS REPORT (continued) R W Parris, FAICD Rick Parris is a Quantity Surveyor who was formerly Queensland Regional Director for Civil & Civic and the Lend Lease Property Group. He is a director of funds syndicator Investment Management Australia Ltd and director of several private property companies. He is an Honorary Ambassador for the City of Brisbane. K M Woodley, (Marketing Director) Ken Woodley worked in an accounting practice prior to moving into management of a building construction company for nine years, the last four years as managing director. Arriving in Australia in 1982, he worked for Peter Kurts Group prior to setting up Stewarts Real Estate in partnership with another real estate agent. During this time at Stewarts he marketed several Devine Group developments and in 1985 joined Devine Group to head the marketing division. D J Ridley Doug Ridley is a former Senior Executive of AVJennings having been with that company for 34 years, 6 years of which as Chief Executive Offi cer. Mr Ridley has extensive experience in the Housing Industry and since leaving AVJennings, his company has provided consulting services to a number of companies allied to the industry. He is currently a Director of Bradcorp Pty Ltd and First Permanent Financial Services Pty Ltd. COMPANY SECRETARY & CHIEF FINANCIAL OFFICER V N Grayson; B. Business (Accounting), CPA, ACIS, ACIM Viv Grayson joined the company in March Prior to this he spent most of his career at AVJennings Homes having worked with that company from 1973 to During this time he held various accounting and management positions including three and a half years as vice president accounting and fi nance of the company s USA operations. On his return in early 1987, he took up the role of Chief Financial Offi cer in Melbourne. On leaving AVJennings in December 1995, Mr Grayson spent three years as Finance Manager of a large Melbourne based Timber & Hardware company, Bowen & Pomeroy Pty Ltd. 9

12 DIRECTORS REPORT (continued) Interests in the shares and options of the company and related bodies corporate As at the date of this report the interests of the directors in the shares and options of the company and related bodies corporate were: Devine Limited Ordinary Shares Devine Limited Options Over Ordinary Shares K P Prior 252,762 - D H T Devine 27,385,615 1,325,000 P J Ferris 200,577 - R W Parris 123,571 - K M Woodley 9,572, ,000 D J Ridley 170,000 - Interests in contracts or proposed contracts with the company No directors have an interest in contracts or proposed contracts with the company except as otherwise disclosed in this report or in the fi nancial report. PRINCIPAL ACTIVITIES The principal activities during the year of entities within the consolidated entity were: * residential property development * residential construction * real estate marketing * medium density residential development * loan origination and securitisation 10

13 DIRECTORS REPORT (continued) EMPLOYEES The consolidated entity employed 239 employees as at 30 June 2004 (2003: 234 employees). OPERATING RESULTS AND DIVIDENDS Operating results for the year ended 30 June $ 000 $ 000 Profi t/(loss) from ordinary activities after tax 15,650 13,069 Net profi t/(loss) attributable to outside equity interests - (142) Net profi t/(loss) attributable to members of Devine Ltd 15,650 13,211 Dividends Paid or Declared for payment are as follows: Interim dividend paid 4,140 3,105 Dividends proposed but not recognised as a liability 4,648 4,140 Converting preference shares dividend paid 1 November Converting preference shares dividend paid 1 May Converting preference shares dividend accrued 30 June The Converting Preference Shares converted to Ordinary shares on 31 October Therefore, the payment of 42.5 cents per share on these preference shares paid prior to conversion has been disclosed as interest expense in accordance with the requirements of AASB Net Tangible Assets Basic net tangible assets per share 67.9 cents 61.2 cents Diluted net tangible assets per share 66.1 cents 56.9 cents Earnings per share Basic earnings per share 14.0 cents 12.8 cents Diluted earnings per share 13.3 cents 11.1 cents REVIEW OF OPERATIONS The review of operations of the consolidated entity is covered in the Managing Director s Report on page 6. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS There have been no signifi cant changes in the state of affairs of the company. SIGNIFICANT EVENTS AFTER BALANCE DATE A fully franked fi nal dividend in respect of the 2004 fi nancial year of 4 cents (2003: 4 cents) per share was declared by directors on 25 August In accordance with the adoption of AASB 1044 Provisions, Contingent Liabilities and Contingent Assets no provision has been recognised in the Statement of Financial Position as at 30 June There have been no other signifi cant events occur post 30 June

14 DIRECTORS REPORT (continued) LIKELY DEVELOPMENTS AND EXPECTED RESULTS The likely developments and expected results are covered in the Managing Director s Report on page 6. In the opinion of the Directors, further information including expected future results, would prejudice the interests of the consolidated entity. SHARE OPTIONS 250,000 options (2003: 250,000) were granted over unissued shares in Devine Limited during or since the end of the year to executive offi cers of the company. During the year 250,000 (2003: 250,000) options which had been issued in a prior period lapsed. DIRECTORS BENEFITS The Remuneration Committee of the Board of Directors is responsible for determining and reviewing compensation arrangements for the Directors, the Managing Director and the executive team. The Remuneration Committee assesses the appropriateness of the nature and amount of emoluments of such offi cers on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder benefi t from the retention of a high quality Board and Executive team. Such offi cers are given the opportunity to receive their base emolument in a variety of forms including cash and fringe benefi ts such as motor vehicles and expense payment plans. It is intended that the manner of payment chosen will be optimal for the recipient without creating undue cost for the company. To assist in achieving these objectives, the Remuneration Committee links the nature and amount of executive directors and offi cers emoluments to the company s fi nancial and operational performance. Emoluments* of the Directors of Devine Limited Annual Emoluments Long Term Emoluments Base Fee/ Motor Bonus Other Termination Options Superannuation Total Salary Vehicle & Similar ** Payments $ $ $ $ $ $ $ $ K P Prior, AM 91, , ,007 D H T Devine 370, , , ,000 P J Ferris, AM 45, , ,131 65,031 R W Parris 45, , , ,881 K M Woodley 259,495 47,150 87, , ,500 D J Ridley 45, , ,931 76,031 Emoluments* of the five most highly paid executive officers of the company and the consolidated entity Annual Emoluments Long Term Emoluments Base Motor Bonus Other Termination Options Superannuation Total Salary Vehicle & Similar ** Payments $ $ $ $ $ $ $ $ C Fusco 231,563 34,760 35, , ,164 I Grant 252, ,500 22, ,000 V Grayson 213,802 24,198 87, , ,500 J Shapcott 179,068 10,413 56, ,500 10, ,500 R Grant 175,000 20,500 8, , , The terms director and offi cer have been treated as mutually exclusive for the purposes of this disclosure. * The elements of emoluments have been determined on the basis of the cost to the company and the consolidated entity. ** The value ascribed to executive options is in accordance with AASB 1046 which requires that the total value attaching to those options be shown as an emolument paid to directors and offi cers pro-ratad over the vesting period of those options. The vesting period of these options is two years. The amounts disclosed above are the remaining amounts not allocated and disclosed as emoluments in previous years.

15 DIRECTORS REPORT (continued) OPTIONS GRANTED TO DIRECTORS AND ANY OF THE FIVE MOST HIGHLY PAID OFFICERS Options granted as part of remuneration are valued using an option pricing model which takes into account 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. 250,000 options were issued to one of the fi ve most highly paid offi cers during the year. Executives are those directly accountable and responsible for the operational management and strategic direction of the company and the consolidated entity. The category Other includes fees paid to directors in relation to committee work and services as a consultant and the value of any non-cash benefi ts provided. INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS Insurance and indemnity arrangements existing in the previous year concerning offi cers of the Group were renewed or continued. The constitution of Devine Limited provides an indemnity (to the maximum permitted by law) in favour of each director, secretary and executive offi cer. The indemnity is against any liability incurred by that person in their capacity as a director, secretary or executive offi cer to another person (other than Devine or a related body corporate) unless the liability arises out of conduct involving a lack of good faith. The indemnity includes costs and expenses incurred by an offi cer in successfully defending that person s position. The Group has paid a premium regarding a contract insuring each Devine director and each full-time executive, director and secretary of the Group against certain liability incurred in those capacities, to the extent permitted by law. Disclosure of premiums and coverage is prohibited by the contract of insurance. DIRECTORS MEETINGS The number of meetings of directors (including meetings of committees of the directors) held during the year and the number of meetings attended by each director were as follows: Directors Meetings of Committees Meetings Audit Remuneration Number of Meetings Held: Number of Meetings attended: K P Prior AM 10-1 D H T Devine P J Ferris AM R W Parris K M Woodley D J Ridley As at the date of this report, the company had an audit committee and a remuneration committee of the Board of Directors. The members of the Audit Committee are Mr P J Ferris AM (Chairman), Mr R W Parris and Mr D J Ridley. The members of the Remuneration Committee are Mr K P Prior AM (Chairman) and Mr P J Ferris AM. ROUNDING The amounts contained in this report and in the fi nancial statements have been rounded off under the option available to the company under ASIC Class Order 98/100. The company is an entity to which the Class Order applies. CORPORATE GOVERNANCE In recognising the need for the highest standards of corporate behaviour and accountability, the directors of Devine Limited support and have adhered to the principles of corporate governance. The company s corporate governance statement is contained in the additional ASX information section of this annual report. TAX CONSOLIDATION Effective 1 July 2003, for the purposes of income taxation, Devine Limited and its 100 % owned subsidiaries have formed a tax consolidated group. Members of the group have entered into a tax sharing arrangement in order to allocate income tax expense to the wholly-owned subsidiaries on a pro-rata basis. In addition, the agreement provides for the allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations. At the balance date, the possibility of default is remote. The head entity of the tax consolidated group is Devine Limited. 13

16 DIRECTORS REPORT (continued) RISK MANAGEMENT A pro-active approach is taken to risk management. The board is responsible for ensuring that risks and opportunities are identifi ed on a timely basis and that the Group s objectives and activities are aligned with the risks and opportunities identifi ed by the Board. In 2002, the company commenced a major review aimed at risk identifi cation and best practice procedures. This program is being progressively implemented in each of the business operations. In October 2003, the Group appointed an Internal Auditor to monitor and assess risk on an ongoing basis. ENVIRONMENTAL REGULATION AND PERFORMANCE The Economic Entity s activities are primarily involved in the sale and construction of houses, medium density and high-rise developments and the development and sale of residential land. As such, it is subject to the relevant Local, State and Federal government environmental regulations relating to these activities. The company strives at all times to meet the requirements of these regulations and is conscious of its obligations to protect the environment. To the best of the Directors knowledge, all activities have been undertaken in compliance with these requirements. Signed in accordance with a resolution of the directors of Devine Limited. K P Prior Chairman D H T Devine Managing Director Brisbane, 29 September

17 STATEMENT OF FINANCIAL PERFORMANCE Notes CONSOLIDATED DEVINE LIMITED $ 000 $ 000 $ 000 $ 000 Revenues from ordinary activities 2 376, , ,577 89,598 Expenses from ordinary activities, excluding borrowing costs expense 3(a) 338, ,280 92,772 78,695 Borrowing costs expense 3(c) 15,948 7,273 1,798 1,519 Profi t (loss) from ordinary activities before income tax expense 22,486 19,430 6,007 9,384 Income tax expense relating to ordinary activities 4 (6,836) (6,361) 7,012 (1,725) Profi t (loss) from ordinary activities after related income tax expense 15,650 13,069 13,019 7,659 Net profi t (loss) attributable to outside equity interests 23 - (142) - - Net profit (loss) attributable to members of Devine Limited 21(b) 15,650 13,211 13,019 7,659 Total changes in equity other than those resulting from transactions with owners as owners attributable to members of Devine Ltd 15,650 13,211 13,019 7,659 Basic earnings per share (cents per share) Diluted earnings per share (cents per share) Franked dividends per share (cents per share)

18 STATEMENT OF FINANCIAL POSITION AT 30 JUNE 2004 Notes CONSOLIDATED DEVINE LIMITED $ 000 $ 000 $ 000 $ 000 CURRENT ASSETS Cash assets Receivables 6 38,505 32,071 41,647 37,241 Inventories 7 90,763 93,612 72,461 91,914 Other assets 8 3,402 4, TOTAL CURRENT ASSETS 132, , , ,330 NON-CURRENT ASSETS Receivables 9 2,657 5, ,166 Investments ,269 5,269 Inventories ,818 65,531 69,466 38,694 Property, plant & equipment 12 9,855 11,772 4,047 4,518 Deferred tax assets 4-1,811 11,418 3,242 Intangible assets 13 3,316 3,316 3,316 3,316 Other assets 14 3,051 4, TOTAL NON-CURRENT ASSETS 187,697 92,111 93,889 56,205 TOTAL ASSETS 320, , , ,535 CURRENT LIABILITIES Payables 15 50,471 36,636 71,780 74,928 Interest bearing liabilities 16 66,173 69,431 50,634 43,900 Provisions 17 3,143 4,131 1,293 1,278 TOTAL CURRENT LIABILITIES 119, , , ,106 NON-CURRENT LIABILITIES Interest bearing liabilities ,899 36,186 31,739 26,764 Deferred tax liabilities 4 14,266 9,237 5,318 4,148 Provisions TOTAL NON-CURRENT LIABILITIES 118,413 45,623 37,057 30,912 TOTAL LIABILITIES 238, , , ,018 NET ASSETS 82,167 66,614 47,439 34,517 SHAREHOLDERS EQUITY Contributed equity 20 34,802 26,619 34,802 26,619 Reserves ,316 3,316 Retained profi ts 21 47,365 39,995 9,321 4,582 Shareholders equity attributable to members of Devine Limited 82,167 66,614 47,439 34,517 Total outside equity interest in controlled entities TOTAL SHAREHOLDERS EQUITY 82,167 66,614 47,439 34,517 16

19 STATEMENT OF CASH FLOWS Notes CONSOLIDATED DEVINE LIMITED $ 000 $ 000 $ 000 $ 000 CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers 402, ,868 97,643 64,917 Payments to suppliers and employees (443,785) (421,505) (108,037) (88,937) Goods and services tax paid (3,984) (818) - - Interest received Borrowing costs paid (25,463) (8,545) (2,039) (2,127) Income tax (paid)/received 498 (9,350) 692 (502) NET CASH FLOWS FROM/(USED IN) OPERATING ACTIVITIES 22(b) (70,153) (71,811) (11,294) (26,302) CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of property, plant and equipment (1,122) (3,561) (223) (1,764) Proceeds from sale of property, plant and equipment 19 2, ,724 Proceeds from issue of shares Acquisition of controlled entity 22(f) - (297) - (297) NET CASH FLOWS USED IN INVESTING ACTIVITIES (1,073) (1,083) (210) 663 CASH FLOWS FROM FINANCING ACTIVITIES Loans (to)/from related parties - - (260) 3,659 Borrowings - other 124,245 71,349 31,121 30,071 Repayment of borrowings - other (48,721) (6,484) (12,606) (2,569) Finance lease principal repayments (14) (21) (14) (21) Dividends paid 5 (8,280) (7,245) (8,280) (7,245) NET CASH FLOWS FROM/(USED IN) FINANCING ACTIVITIES 67,230 57,599 9,961 23,895 NET INCREASE/(DECREASE) IN CASH HELD (3,996) (15,295) (1,543) (1,744) Add opening cash brought forward ,671 (7,854) (6,110) CLOSING CASH CARRIED FORWARD 22(a) (3,620) 376 (9,397) (7,854) Note - The amount refl ected above as Payments to suppliers and employees includes signifi cant cash payments to external contractors engaged to build the company s major CBD property developments. The corresponding receipts from the funding of these property developments is shown as borrowings - other under Cash Flows From Financing Activities. 17

20 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Accounting The fi nancial statements have been prepared in accordance with the historical cost convention, except for brand names and investments in controlled entities, which are held at valuation. The directors have adopted AASB 1010 Recoverable amounts of non-current assets and accordingly do not revalue these assets. The fi nancial report is a general purpose fi nancial report which has been prepared in accordance with the requirements of the Corporations Act 2001 and which includes applicable Accounting Standards. Other mandatory professional reporting requirements (Urgent Issues Group Consensus Views) have also been complied with. Changes in accounting policies The accounting policies adopted are consistent with those of the previous year. Principles of consolidation The consolidated fi nancial statements are those of the consolidated entity, comprising Devine Limited (the parent entity) and all entities that Devine Limited controlled from time to time during the year and at balance date. Information from the fi nancial statements of subsidiaries is included from the date the parent company obtains control until such time as control ceases. Where there is loss of control of a subsidiary, the consolidated fi nancial statements include the results for the part of the reporting period during which the parent company has control. Subsidiary acquisitions are accounted for using the purchase method of accounting. 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 that may exist. All intercompany balances and transactions, including unrealised profi ts arising from intra-group transactions, have been eliminated in full. Unrealised losses are eliminated unless costs cannot be recovered. Income Recognition Property Revenue: Revenue from sale of developed land is recognised on unconditional contract. Construction contracts: Profi t on construction contracts is brought to account on the percentage of completion basis where it can be reliably estimated. In respect of individual housing contracts, the entity has determined percentage complete based on actual costs incurred as a percentage of total forecast costs. Where losses are foreseeable, such losses are provided for in full. Measurement of the percentage complete is based on information provided by independent consultants on large multi unit construction projects. Finance Revenue: Revenue is recognised to the extent that the economic benefi ts will fl ow to the entity and the revenue can be reliably measured. The following specifi c recognition criteria must also be met before revenue is recognised: * Trust management and servicing - Fee income for the management of securutised loans through trust vehicles is recognised on an accruals basis. * Loan origination and approvals - The group acts as an originator of mortgage loans, fee income from which is recognised on an accruals basis. * Securitisation and warehousing - The group is entitled to residual income from the securitisation programme. The timing and amount of this income is recognised on an accruals basis. 18

21 NOTES (continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Cash and cash equivalents For the purposes of the statement of cash fl ows, cash includes cash on hand and in banks and money market investments readily converting to cash within 2 working days, net of outstanding bank overdrafts. Retention funds held on deposit, which are subject to charges by agreement with fi nancial institutions and which are available to meet costs associated with a loss on resale resulting from the buyer defaulting on their mortgage and repossessions, are classifi ed within other assets. Retention funds have been classifi ed within current assets to the extent the consolidated entity has provided as a current liability for future costs of repossessions. The balance of retention funds have been classifi ed within non-current assets. Inventories Development work in progress: Development land, including acquisition costs of the land, together with associated development costs, is valued at the lower of cost and net realisable value. Interest and other holding costs incurred directly in relation to land are only capitalised for land which is to be held for a period in excess of three years before development commences. No further interest is capitalised once development commences. Construction work in progress: Construction work in progress is stated at cost plus profi t recognised to date less progress billings. Cost includes all costs directly related to specifi c contracts. Expenditure carried forward Signifi cant items of expenditure, including marketing expenditure in respect of large multi-unit development projects, are carried forward provided it is probable that future consolidated benefi ts attributable to the expenditure will be realised. Expenditure carried forward is expensed over the lesser of the period in which the related benefi ts are expected to be realised and three years. Investments Long-term investments (including investment properties not principally occupied by consolidated entity companies) are stated at cost or valuation. There is no policy for regular valuations of investments. Leases Finance leases, which effectively transfer to the consolidated entity substantially all of the risks and benefi ts incidental to ownership of the leased item, are capitalised at the present value of the minimum lease payments, disclosed as leased property, plant and equipment, and amortised over the period the consolidated entity is expected to benefi t from the use of the leased assets. Operating lease payments, where the lessor effectively retains substantially all of the risks and benefi ts of ownership of the leased items, are included in the determination of the operating profi t in equal instalments over the lease term. The lease incentive liability in relation to the non-cancellable operating lease is being amortised on a straight-line basis over the lease term (5 years). Recoverable amount Non-current assets are not revalued to an amount above their recoverable amount and where carrying values exceed this recoverable amount assets are written down. In determining recoverable amount the expected net cash fl ows have not been discounted to their present value. 19

22 NOTES (continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Trade and other payables Liabilities for trade creditors and other amounts are carried at cost which is the fair value of the consideration to be paid in the future for goods and services received, whether or not billed to the consolidated entity. Payables to related parties are carried at the principal amount. Interest, when recognised by the lender, is recognised as an expense on an accruals basis. Deferred cash settlements are recognised at the present value of the outstanding consideration payable on the acquisition of an asset discounted at prevailing commercial borrowing rates. Property, plant and equipment Cost: Property, plant and equipment are carried at the lower of cost and recoverable amount. Depreciation: Depreciation is provided on a straight line basis on all property, plant and equipment, other than freehold land, at rates calculated to allocate the cost, less estimated residual value at the end of the useful life of the assets, against revenue over those estimated useful lives. Major depreciation periods for the years ended 30 June 2004 and 30 June 2003 are: Buildings Plant and equipment 40 years 2 to 10 years Display homes: Where display homes are classifi ed as non-current assets they are depreciated on a straight line basis, to their assessed residual value, over the shorter of 5 years or the expected useful life so as to allocate their cost against revenue over that period. Provisions Provisions are recognised when the economic entity has a legal, equitable or constructive obligation to make a future sacrifi ce of economic benefi ts to other entities as a result of past transactions or other past events, it is probable that a future sacrifi ce of economic benefi ts will be required and a reliable estimate can be made of the amount of the obligation. A provision for dividends in relation to the company s ordinary shares is not recognised as a liability unless the dividends are declared, determined or publicly recommended on or before the reporting date. Employee benefits 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 ows 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 interest rates attaching to government guaranteed securities which have terms to maturity approximating the terms of the related liability are used. 20

23 NOTES (continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Employee benefits (continued) Employee benefi t expenses and revenue arising in respect of the following categories: * wages and salaries, non-monetary benefi ts, annual leave, long service leave and other leave benefi ts; and * other types of employee benefi ts; are recognised against profi ts on a net basis in their respective categories. The value of the employee share incentive scheme described in Note 25 has not been recognised as an employee benefi t expense in the Statement of Financial Performance. The contribution made to superannuation funds are recognised against profi ts when due. Income tax Tax-effect accounting is applied using the liability method whereby income tax is regarded as an expense and is calculated on the accounting profi t after allowing for permanent differences. To the extent timing differences occur between the time items are recognised in the fi nancial statements and when items are taken into account in determining taxable income, the net related taxation benefi t or liability, calculated at current rates, is disclosed as a future income tax benefi t or a provision for deferred income tax. The net future income tax benefi t relating to tax losses and timing differences is not carried forward as an asset unless the benefi t is virtually certain of being realised. Brand Names Brand names owned by the consolidated entity are carried at cost, less recoverable amount write-downs. No amortisation has been recognised in respect of brand names, as the directors do not believe that they have a limited useful life. Expenditure incurred in developing, maintaining or enhancing brand names is written off against profi t from ordinary activities in the year in which it is incurred. The Directors are of the view that the residual value of the brand name to the company is greater than the carrying value and that therefore no depreciable value exists. In addition, the Directors believe that the useful life of the Devine brand has been signifi cantly extended since the date of the last valuation and its value considerably enhanced. This view has been confi rmed by an independent valuation carried out in August 2003, which was performed on an open market basis. Loans and borrowings All loans are measured at the principal amount. Interest is recognised as an expense as it accrues. Finance lease liabilities are determined in accordance with the requirements of AASB 1008 Leases. Converting Preference Shares that exhibit characteristics of liabilities are recognised as liabilities in the Statement of Financial Position. The corresponding dividends are recognised as an interest expense in the Statement of Financial Performance. Goods and services tax Revenues, expenses and assets are recognised net of the amount of GST except: * where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and * receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the Statement of Financial Position. Cash fl ows are included in the Statement of Cash Flows 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. 21

24 NOTES (continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Earnings per Share Basic earnings per share is calculated as net profi t attributable to members, adjusted to exclude costs of servicing equity (other than dividends) and preference share dividends, divided by the weighted average number of ordinary shares outstanding during the fi nancial year, adjusted for any bonus element. Diluted earnings per share is calculated as net profi t attributable to members, adjusted for: * costs of servicing equity (other than dividends) and preference share dividends; * the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses; and * the non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary shares; divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element. Contributed Equity Issued and paid-up capital is recognised at the fair value of the consideration received by the company. Any transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction of the share proceeds received. Comparatives Where necessary, comparatives have been reclassifi ed and repositioned for consistency with current year disclosures. t 22

25 NOTES (continued) Notes CONSOLIDATED DEVINE LIMITED $ 000 $ 000 $ 000 $ REVENUE FROM ORDINARY ACTIVITIES Revenue from operating activities Revenue from sale of properties 369, ,800 94,406 73,376 Revenue from loan origination & securitisation 6,593 4, Total revenues from operating activities 375, ,578 94,406 73,376 Revenues from non-operating activities Interest received - other persons/bodies corporate Rent received - other persons/bodies corporate Management fees - wholly owned entities - - 5,617 12,554 Proceeds on sale of other non-current assets 19 2, ,724 Sundry Income - wholly owned entities Total revenues from outside the operating activities 607 3,405 6,171 16,222 Total revenues from ordinary activities 376, , ,577 89, EXPENSES & LOSSES (a) Expenses Cost of properties sold 273, ,669 81,347 66,265 Write down of land stocks & other inventory 1,532 9, Marketing expenses 32,801 28, Land holding expenses 736 1, Occupancy expenses 2,771 2, Employee expenses 18,787 18,520 5,701 5,415 Administration expenses 7,642 7,376 2,290 2,200 Write off of goodwill in relation to subsidiaries Cost of sale of non-current assets 61 2, ,332 Other expenses from ordinary activities ,746 1,315 Total expenses from ordinary activities 338, ,280 92,772 78,695 (b) Significant Items Profi t from ordinary activities before income tax expense includes the following expenses whose disclosure is relevant in explaining the fi nancial performance of the entity: Write-off costs relating to the Georgian joint venture - 7, Write down of land stocks & other inventory 1,532 1, (c) Borrowing costs expense Interest & other borrowing expenses - other persons/bodies corporate 15,703 6,544 1, Finance charges - lease liability Converting preference shares ,948 7,273 1,798 1,519 Converting Preference Share dividends of $242,636 (2003: $725,345) have been included as an interest expense in the Statement of Financial Performance up until the conversion date of 31 October This disclosure is due to the classifi cation of Converting Preference Shares as debt prior to conversion in accordance with AASB 1033 Financial Instruments. 23

26 NOTES (continued) Notes CONSOLIDATED DEVINE LIMITED $ 000 $ 000 $ 000 $ EXPENSES & LOSSES (continued) (d) Depreciation and amortisation Amortisation of non-current assets Plant and equipment under lease 12(d) Depreciation of non-current assets Buildings 12(d) Plant and equipment 12(d) 1, Display home centres 12(d) ,421 1, Net (profi t)/loss on sale of subsidiary Net (profi t)/loss on disposal of property, plant & equipment 42 (385) 2 (366) Total (profi t)/loss on sale of non-current assets 42 (385) 2 (366) (e) Other expenses Bad & doubtful debts Operating lease rental 663 1, INCOME TAX The prima facie income tax attributable to operating profi t (loss) differs from the income tax provided in the fi nancial statements as follows: Operating profi t (loss) before income tax 22,486 19,430 6,007 9,384 Prima facie 30% (2003: 30% ) 6,746 5,829 1,802 2,816 Tax effect of permanent differences: CPS dividend Pre 1 July 2004 tax losses recognised (239) Tax losses transferred out (1,289) Non-deductible establishment and legal costs of subsidiary Capital gain on sale of building Accounting profi t on sale of fi xed assets - (110) - (110) Other Items (net) Adjustment on entry to the tax consolidation regime * - - (8,981) - Under / (Over) provision of previous year (3) (17) Income tax expense attributable to operating profi t 6,836 6,361 (7,012) 1,725 Deferred tax assets and liabilities Current tax payable/(refund) (485) (979) (231) (918) Future income tax benefi t - non-current - 1,811 11,418 3,242 Provision for deferred tax - non-current 14,266 9,237 5,318 4,148 (a) There are no recognised or unrecognised future income tax benefi ts related to carrying forward tax losses. (b) The future income tax benefi t will only be obtained if: i. Future assessable income is derived of a nature and of an amount suffi cient to enable the benefi t to be realised; ii. The conditions for deductibility imposed by tax legislation continue to be complied with; and iii. No changes in tax legislation adversely affect the consolidated entity in realising the benefi t. * An adjustment to Income Tax Expense of $8,981,011 arises in Devine Limited due to the company s decision to enter into the tax consolidation regime effective 1 July That adjustment has no impact on the consolidated Devine Group, as equal and opposite adjustments are required in other Devine Group companies.

27 NOTES (continued) Notes CONSOLIDATED DEVINE LIMITED $ 000 $ 000 $ 000 $ INCOME TAX (continued) Tax Consolidation Effective 1 July 2003, for the purposes of income taxation, Devine Limited and its 100 % owned subsidiaries have formed a tax consolidated group. Members of the group have entered into a tax sharing arrangement in order to allocate income tax expense to the wholly-owned subsidiaries on a pro-rata basis. In addition, the agreement provides for the allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations. At the balance date, the possibility of default is remote. The head entity of the tax consolidated group is Devine Limited. 5. DIVIDENDS PAID OR PROVIDED FOR DURING THE YEAR Ordinary Shares: Dividends paid - interim (fully franked) (4c per share) (2003: 3c) 4,140 3,105 4,140 3,105 Dividends proposed but not recognised as a liability - fi nal (fully franked) (4c per share) (2003: 4c) 4,648 4,140 4,648 4,140 Converting preference shares dividends of $242,636 (2003: $725,345) have been included as an interest expense in the Statement of Financial Performance. The rate at which these dividends have been franked is 30% (2003: 30%). Dividends paid during the year as set out above differ to the cash payments shown in the statement of cash fl ows as follows: * Previous year fi nal dividend (4c per share) (2003: 4c) 4,140 4,140 4,140 4,140 * Interim dividend paid (4c per share) (2003: 3c) 4,140 3,105 4,140 3,105 * Converting preference share dividends paid Dividends paid in cash 8,645 7,970 8,645 7,970 The tax rate at which dividends have or will be franked is 30% (2003: 30%) The amount of franking credits available for the subsequent fi nancial year are: * franking account balance as at the end of the fi nancial year 11,992 16,235 11,992 1,265 * franking credits that will reverse upon receipt of income tax refund due at the end of the fi nancial year (481) (979) (481) (918) 11,511 15,256 11,

28 NOTES (continued) Notes CONSOLIDATED DEVINE LIMITED $ 000 $ 000 $ 000 $ RECEIVABLES - CURRENT Trade debtors 27,700 25,156 2,036 4,866 Provision for doubtful debts (264) (323) (50) (80) 27,436 24,833 1,986 4,786 Amounts other than trade debtors from related parties: - wholly owned group ,716 28,865 Income tax refund due Other debtors 1,695 2, Deposits 8,889 4,193 4,384 2,672 Movement in provision for doubtful debts 38,505 32,071 41,647 37,241 - balance at beginning of year (323) (137) (80) (80) - bad and doubtful debts provided for during the year - (186) bad and doubtful debts (recovered)/written off balance at year end (264) (323) (50) (80) 7. INVENTORIES - CURRENT Land held for sale at cost Cost of acquisition 31,998 28,915 16,310 11,382 Development costs capitalised 2,845 2,207 2,845 2,207 34,843 31,122 19,155 13,589 Work in progress - cost 54,987 61,657 53,306 78,325 Display homes - cost Total inventories at lower of cost and net realisable value 90,763 93,612 72,461 91,914 Included in work in progress at cost are capitalised borrowing costs of $2,073,083 (2003: $374,756) 8. OTHER ASSETS - CURRENT Prepayments 2,480 2, Retention funds 922 1, RECEIVABLES - NON-CURRENT 3,402 4, Amounts owing from controlled entities Other debtors 2,657 5, ,657 5, ,166 26

29 NOTES (continued) Notes CONSOLIDATED DEVINE LIMITED $ 000 $ 000 $ 000 $ INVESTMENTS - NON-CURRENT Investments in controlled entities - at directors valuation (a) - - 5,438 5,438 Provision for diminution in value - - (169) (169) Investment in controlled entities comprises: - - 5,269 5,269 NAME Notes BENEFICIAL PERCENTAGE HELD BY CONSOLIDATED ENTITY % % $ 000 $ 000 Devine Constructions Pty Ltd * First Permanent Financial Services Pty Ltd First Permanent Securities Pty Ltd Talcliff Pty Ltd * ,268 4,268 DMB Pty Ltd * Devine Civil Contracting Pty Ltd * Pioneer Homes Australia Pty Ltd * Cathedral Place Developments Pty Ltd * River Place Developments Pty Ltd * (formerly Devine Cathedral Place Pty Ltd and River City Apartments Pty Ltd ) Devine Corporation Pty Ltd 10(b) The Devine Properties Trust 10(b) Amalgamated Mortgage Management Holdings Pty Ltd Cut Price Mortgages Pty Ltd * River City Apartments Pty Ltd * Festival Towers Developments Pty Ltd * (formerly The Devine Georgian JV Company Pty Ltd ) The Devine Georgian Land Company Pty Ltd * Stadium West Developments Pty Ltd * Victoria Point Docklands Ltd All of the above entities are incorporated in Australia. 5,438 5,438 * Pursuant to Class Order 98/1418, relief has been granted to the controlled entities from the Corporations Act 2001 requirements for preparation, audit and lodgement of their fi nancial reports, with the exception of Amalgamated Mortgage Management Holdings Pty Ltd and Victoria Point Docklands Limited. As a condition of the Class Order, Devine Limited and the controlled entities subject to the Class Order as indicated above, (the Closed Group ) entered into a Deed of Cross Guarantee on 26 May The effect of the deed is that Devine Limited has guaranteed to pay any defi ciency in the event of winding up of the controlled entities. The controlled entities have also given a similar guarantee in the event that Devine Limited is wound up. 27

30 NOTES (continued) Notes CONSOLIDATED $ 000 $ INVESTMENTS - NON-CURRENT (continued) Investments in controlled entities The consolidated Statement of Financial Performance and Statement of Financial Position of the entities which are members of the Closed Group are as follows: Consolidated Statement of Financial Performance Revenues from ordinary activities 299, ,987 Expenses from ordinary activities excluding borrowing costs (262,135) (303,330) Borrowing costs expense (15,948) (7,273) Profi t from ordinary activities before income tax expense 20,977 21,384 Income tax relating to ordinary activities (6,370) (6,559) Profi t/(loss) from ordinary activities after related tax expense 14,607 14,825 Retained profi ts at the beginning of the fi nancial year 45,227 33,506 Adjustment on acquisition of remaining 10% of First Permanent Group (2,408) - Dividends provided for or paid (8,280) (3,104) Retained profits at the end of the financial year 49,146 45,227 Consolidated Statement of Financial Position Current assets Cash - 80 Receivables 35,405 30,050 Inventories 90,763 82,727 Other assets 3,402 3,384 Total current assets 129, ,241 Non-current assets Receivables 2,939 5,085 Inventories 147,087 65,531 Property, plant and equipment 9,855 11,417 Deferred tax assets - 2,544 Intangible assets 3,316 3,316 Other assets 3,051 4,296 Total non-current assets 166,248 92,189 Total assets 295, ,430 Current liabilities Payables 50,471 35,761 Interest bearing liabilities 40,298 50,168 Provisions 3,131 3,850 Total current liabilities 93,900 89,779 Non-current liabilities Interest bearing liabilities 103,899 36,186 Deferred tax liabilities 13,823 10,919 Provisions Total non-current liabilities 117,970 47,305 Total liabilities 211, ,084 Net assets 83,948 71,346 Shareholders equity Contributed equity 34,802 26,119 Retained profi ts 49,146 45,227 Total equity 83,948 71,346 28

31 NOTES (continued) 10. INVESTMENTS - NON-CURRENT (continued) (a) (b) The carrying value of investments in controlled entities were re-valued by the Directors at 30 June 1998 to take account of the net realisable value for each controlled entity. Devine Corporation Pty Ltd is the trustee of The Devine Properties Trust. The consolidated entity has no ownership interest in Devine Corporation Pty Ltd or The Devine Properties Trust, however both entities are considered to be controlled entities of Devine Limited because: * The articles of association of Devine Corporation Pty Ltd provide that only persons approved by Devine Limited may be nominated for appointment to the board of Devine Corporation Pty Ltd. * Representatives of the board of Devine Limited constitute the whole of the board of the trustee, Devine Corporation Pty Ltd. * The trust deed empowers Devine Limited to remove the trustee from offi ce and replace it with another trustee of Devine Limited s choice. * In October 2003 Devine Limited renewed the irrevocable offer to acquire all the shares in Devine Corporation Pty Ltd for a nominal consideration. The previous offer, having been in place for the preceding 10 years, was due to expire at this time. This renewed offer is open for acceptance for a further ten years. That is until October * Devine Limited is an eligible benefi ciary of The Devine Properties Trust entitling it to receive income and capital distributions. 11. INVENTORIES - NON-CURRENT Notes CONSOLIDATED DEVINE LIMITED $ 000 $ 000 $ 000 $ 000 Land on hand Cost of acquisition 28,273 26,197 19,436 26,197 Development costs capitalised 1,944 1,940 1,310 1,940 Work in progress 138,601 37,394 48,720 10,557 Included in work in progress at cost are capitalised borrowing costs of $7,711,456 (2003: $1,345,975) 168,818 65,531 69,466 38,694 29

32 NOTES (continued) Notes CONSOLIDATED DEVINE LIMITED $ 000 $ 000 $ 000 $ PROPERTY, PLANT & EQUIPMENT Land - at cost 12(a)(c) Buildings - at cost 12(a)(c) 2,893 2,834 2,893 2,834 Less: accumulated depreciation (850) (755) (850) (755) 2,043 2,079 2,043 2,079 Display homes - at cost 12(b) 5,882 8, Less: accumulated depreciation (1,674) (2,569) - - 4,208 5, Plant and equipment - at cost 6,861 6,830 3,606 3,441 Less: accumulated depreciation (3,881) (3,284) (2,226) (1,637) 2,980 3,546 1,380 1,804 Plant and equipment - leased 12(a) Less: accumulated amortisation (5) (6) (5) (6) Total property, plant and equipment - cost 16,265 18,386 7,128 6,916 Less: accumulated depreciation and amortisation (6,410) (6,614) (3,081) (2,398) Total written down amount 9,855 11,772 4,047 4,518 (a) The balances of freehold land and buildings are assets over which fi rst mortgages have been granted as security over bank loans (see note 16). The terms of the fi rst mortgages preclude the assets being sold or used as security for further mortgages without the permission of the fi rst mortgage holder. The mortgage also requires buildings that form part of the security to be fully insured at all times. Assets under lease are pledged as security for the associated lease liability. (b) (c) (d) Display homes have been recorded at cost or valuation. If the properties were sold at balance date at the valuation amount, no capital gains tax would be payable. The consolidated entity has a set policy for regular valuation of display homes at least once every three years to support carrying values. The fair value of freehold land and buildings has been supported by independent valuation performed by DTZ Australia Valuers on 14 November 2002, arriving at a valuation of $2,450,000 on a vacant possession basis using the capitalisation of income methodology. The valuation was prepared for the purposes of fi rst mortgage security. Asset Reconciliations Reconciliations of the carrying amounts of property, plant and equipment at the beginning and end of the current and previous fi nancial year. Land Carrying amount at beginning 605 1, ,274 Disposals - (669) - (669) Buildings Carrying amount at beginning 2,079 3,920 2,079 3,920 Additions Disposals - (1,664) - (1,664) Depreciation expense (96) (177) (96) (177) 2,043 2,079 2,043 2,079 30

33 NOTES (continued) Notes CONSOLIDATED DEVINE LIMITED $ 000 $ 000 $ 000 $ PROPERTY, PLANT & EQUIPMENT (continued) (d) Asset Reconciliations (continued) Reconciliations of the carrying amounts of property, plant and equipment at the beginning and end of the current and previous fi nancial year. Display homes Carrying amount at beginning 5,512 4, Additions Disposals (5) Depreciation expense (39) (185) - - Transfer (to)/from work in progress (1,565) 1, ,208 5, Plant and equipment - cost Carrying amount at beginning 3,546 1,281 1, Additions 757 3, ,774 Disposals (57) (43) (15) (28) Additions through entities Depreciation expense (1,286) (972) (596) (587) 2,980 3,546 1,380 1,804 Plant and equipment - Leased Carrying amount at beginning Additions Disposals - (59) - - Amortisation expense (11) (17) (11) (17) INTANGIBLE ASSETS Brand name - at cost 5,300 5,300 5,300 5,300 Recoverable amount write-down (1,984) (1,984) (1,984) (1,984) 3,316 3,316 3,316 3,316 The valuation of the company s Brand Names was reviewed and updated by KPMG Corporate Finance (Qld) Pty Ltd on 6 August The value in use of the Devine brand name was assessed as being no less than $9.9 million using the relief from royalty methodology. This approach represents the value of an asset deployed in a going concern business and assumes continuation of existing patterns of use. This updated valuation compares with a value in the range of $3.7 million to $4.0 million when the exercise was last carried out in September Directors have elected to retain the existing carrying value in the accounts. 14. OTHER ASSETS - NON-CURRENT Retention funds 3,051 4, PAYABLES - CURRENT Trade creditors 47,445 33,611 6,165 7,227 Sundry creditors 3,026 3,025 2, Amount owing to controlled entities ,468 66,792 50,471 36,636 71,780 74,928 31

34 NOTES (continued) Notes CONSOLIDATED DEVINE LIMITED $ 000 $ 000 $ 000 $ INTEREST-BEARING LIABILITIES - CURRENT Secured: Bank overdraft 3,620-9,397 7,854 Bank loans 62,263 60,863 40,947 27,478 Converting Preference Shares - 8,182-8,182 Lease liability Bank loans and bank overdraft are secured by mortgages over the consolidated entity s land and buildings and development land. The lease liability is secured by a charge over the leased assets. Converting Preference Shares Converting Preference Shares were converted to Ordinary shares on 31 October ,173 69,431 50,634 43,900 32

35 NOTES (continued) Notes CONSOLIDATED DEVINE LIMITED $ 000 $ 000 $ 000 $ PROVISIONS - CURRENT Dividends - converting preference shares 17(a)(i) Employee benefi ts 1,531 1, Provision for repossessions 17(a)(ii) 922 1, Provision for rental guarantee 17(a)(iii) Other 17(a)(iv) (a) Movements in provisions 3,143 4,131 1,293 1,278 (i) Dividends - Converting preference shares Carrying amount at the beginning of the fi nancial year Additional provision Amounts utilised during the year (121) (725) (121) (725) Carrying amount at the end of the fi nancial year (ii) Repossessions Carrying amount at the beginning of the fi nancial year 1,539 2, Additional provision Amounts utilised or written back to profi ts during the year (1,419) (1,858) - - Carrying amount at the end of the fi nancial year 922 1, (iii) Rental Guarantee Carrying amount at the beginning of the fi nancial year Additional provision Amounts utilised or written back to profi ts during the year (236) (345) (40) (10) Carrying amount at the end of the fi nancial year (iv) Other Carrying amount at the beginning of the fi nancial year 533 1, Additional provision Amounts utilised during the year (774) (891) (140) (708) Carrying amount at the end of the fi nancial year

36 NOTES (continued) Notes CONSOLIDATED DEVINE LIMITED $ 000 $ 000 $ 000 $ INTEREST-BEARING LIABILITIES - NON-CURRENT Secured Bank loans 103,869 36,186 31,739 26,764 Redeemable Preference Shares Bank loans are secured by mortgages over the consolidated entity s land and buildings, development land and motor vehicles. Redeemable Preference Shares During the year, Victoria Point Docklands Ltd issued 1 redeemable preference share to one of its shareholders, RIA (Docklands) Pty Ltd for the purposes of corporate restructuring. 19. PROVISIONS - NON-CURRENT 103,899 36,186 31,739 26,764 Employee benefi ts CONTRIBUTED EQUITY (a) Ordinary Shares: Issued and paid up capital 116,208,250 ordinary shares, fully paid (2003: 103,507,838) 34,802 26,619 34,802 26,619 (b) Movements in shares on issue Number of $ 000 Number of $ 000 Shares Shares Balance at beginning of period 103,507,838 26, ,507,838 26,619 Issued during the year Conversion of Converting Preference Shares 12,700,412 8, Balance at end of period 116,208,250 34, ,507,838 26,619 Ordinary Shares (a) Dividend Reinvestment Plan : The Dividend Reinvestment Plan was suspended on 10 February (b) Employee Share Scheme : An employee share scheme has been in operation during the year. The scheme was approved by members at the Annual General Meeting held on 18 November 1998 and operates at the discretion of the board. No shares were issued under the scheme during the year. (c) Terms and conditions of contributed equity : Ordinary shares have the right to receive dividends as declared, and in the event of winding up of the company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held. Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the company. 34

37 NOTES (continued) 20. CONTRIBUTED EQUITY (continued) Ordinary Shares (continued) (d) Share Options : 21. RESERVES Under the Executive Share Option Plan approved by members on 18 November 1998, 1,325,000 options over ordinary shares were issued to executives of the company in June The options were granted on 16 June 1999, for no consideration at an exercise price of 61.5 cents and expire on 16 June Subsequently, 350,000 of these options lapsed. In March 2002, 2,450,000 additional options were issued to executives of the company. The options were granted on 6 March 2002 for no consideration at an exercise price of 51.7 cents and expire on 6 March Subsequently 500,000 of these options lapsed. In July 2002, a further 250,000 options were issued to an executive of the company. The options were granted on 17 July 2002 at an exercise price of 60.0 cents and expire on 17 July In July 2003, a further 250,000 options were issued to an executive of the company. The options were granted on 1 July 2003 at an exercise price of 40.4 cents and expire on 1 July The exercise price was based on the weighted average price of shares sold on the Australian Stock Exchange during the 5 trading days up to and including the date of grant of the options. The earliest date the options can be exercised is 24 months from the date of grant provided that certain performance hurdles as determined by the board, are met. There are no additional amounts required to be paid on the exercise of the options. Notes CONSOLIDATED DEVINE LIMITED $ 000 $ 000 $ 000 $ 000 Asset revaluation reserve - - 3,316 3,316 Retained Profi ts 47,365 39,995 9,321 4,582 (a) Asset revaluation reserve (i) Nature and purpose 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 (ii) Movement in reserve Balance at beginning and end of year - - 3,316 3,316 35

38 NOTES (continued) Notes CONSOLIDATED DEVINE LIMITED $ 000 $ 000 $ 000 $ RESERVES (continued) (b) Retained Profits Balance at beginning of year 39,995 29,888 4, Adjustment arising from adoption of accounting standard AASB1044 Provisions, Contingent Liabilities & Contingent Assets - 4,140-4,140 Net profi t/(loss) attributable to members of Devine Limited 15,650 13,211 13,019 7,660 Total available for appropriation 55,645 47,239 17,601 11,826 Dividends for the period (8,280) (7,244) (8,280) (7,244) Balance at end of year 47,365 39,995 9,321 4,582 The Converting Preference Shares converted to Ordinary shares on 31 October Therefore, the payment of 42.5 cents per share on these preference shares paid at conversion has been disclosed as interest expense in accordance with the requirements of AASB STATEMENT OF CASH FLOWS (a) Reconciliation of cash : Cash balance comprises: - cash at bank bank overdraft (3,620) - (9,397) (7,854) Closing cash balance (3,620) 376 (9,397) (7,855) (b) Reconciliation of the operating profit after tax to the net cash flows from operations: Non-cash items - operating profi t after tax 15,650 13,069 13,019 7,660 - depreciation and amortisation of property, plant and equipment 1,431 1, write-off of goodwill depreciation of display centres CPS dividend accrued (121) - (121) - - interest capitalised (9,845) (1,721) (611) (967) - fi nance lease interest bad debts written off (59) provision for customer subsidies (16) (182) provision for doubtful debts (30) - - provision for employee benefi ts (80) 135 (4) provision for rental guarantee (115) (209) 81 (10) - provision for repossessions (617) (1,245) provision for warranties (17) (708) (17) (708) - loss/(profi t) on sale of non-current assets 43 (385) 2 (366) - management fees - - (5,617) (12,554) 36

39 NOTES (continued) Notes CONSOLIDATED DEVINE LIMITED $ 000 $ 000 $ 000 $ STATEMENT OF CASH FLOWS (reconciliation continued) Changes in assets and liabilities - trade and sundry debtors (1,134) 7,697 3,144 4,011 - prepayments (488) 465 (32) inventories (94,378) (79,766) (9,491) (15,571) - future income tax benefi t 1,811 (1,811) (8,177) (1,644) - creditors and accruals 14,382 (5,888) (4,445) (11,971) - deferred income tax liability 5,029 8,360 1,170 3,352 - retention funds (2,721) 690 (1,500) - - provision for tax 494 (9,539) 687 (487) - other non-current assets 596 (2,986) (57) 1,465 Net cash flow from (used in) operating activities (70,153) (71,811) (11,294) (26,302) (c) Bank overdraft facility : The consolidated entity has a bank overdraft facility available to the extent of $4,798,233 (2003: $5,000,000). As at balance date $1,179,233 of the facility was not utilised (2003: $5,000,000). (d) Financing facilities : Financing facilities of $584,105,260 (2003: $153,875,000) were available to the consolidated entity at the end of the fi nancial year. As at that date, $213,306,918 (2003: $85,541,000) of these facilities were in use. (e) Non-cash financing and investing activities : During the fi nancial year the consolidated entity acquired plant and equipment with an aggregate fair value of $Nil (2003: $Nil) by means of fi nance leases. Plant and equipment acquired by means of a fi nance lease by the parent entity was $Nil (2003: $Nil). (f) Acquisition of Controlled Entity : Consideration - cash paid Net assets of Victoria Point Docklands Ltd at 13 August goodwill arising on acquisition Net cash effect Cash paid for purchase of controlled entity as refl ected in the consolidated fi nancial report OUTSIDE EQUITY INTEREST Reconciliation of outside equity interest in controlled entities: Opening balance - (233) - - Add share of operating profi t/(loss) - (142) - - Adjustment on acquisition of minority interest Closing balance

40 NOTES (continued) Notes CONSOLIDATED DEVINE LIMITED $ 000 $ 000 $ 000 $ EXPENDITURE COMMITMENTS Lease expenditure commitments (a) Finance leases - not later than one year later than one year but not later than fi ve years later than fi ve years Less: future fi nance charges (1) (2) (1) (2) Lease liability Current liability Non-current liability (b) (c) Operating leases (non-cancellable) - not later than one year 24(d) 1,877 1, later than one year and not later than fi ve years 24(d) 3,262 3, later than fi ve years 24(d) Aggregate lease expenditure contracted for at balance date but not provided for 5,139 4,579 1, Total lease Liability: Current: - Finance leases Lease incentive liability 24(e) (d) (e) Operating leases have an average lease term of 4 years and an average implicit interest rate of 7.93%. Assets that are the subject of operating leases include motor vehicles and offi ce premises. These commitments refl ect the cash incentive received by the consolidated entity for entering into a non-cancellable operating lease for premises occupied by a controlled entity, entered into in September The lease term is fi ve years and the incentive liability is reduced on a straight line basis over the period of the lease. 25. EMPLOYEE BENEFITS Employee Benefits The aggregate employee benefi ts liability is comprised of: Provisions (current) 1,531 1, Provisions (non-current) Employee share scheme 1,779 1, An employee share scheme has been established where directors, executives and certain members of staff of the consolidated entity are issued with options over the ordinary shares of Devine Limited. The options, issued for Nil consideration, are issued in accordance with guidelines established by the directors of Devine Limited. The options are issued for a term of 10 years and are exercisable beginning on the second anniversary of the date of grant. The options cannot be transferred and will not be quoted on the ASX. There are currently 2 directors and 4 executives eligible for this scheme. 38

41 NOTES (continued) 25. EMPLOYEE BENEFITS (continued) Information with respect to the number of options granted under the employee share scheme is as follows: Notes Number Weighted Number Weighted of Options average of Options average exercise price exercise price Balance at beginning of year 3,425, ,425, granted 250, , forfeited (250,000) (250,000) Balance at end of year 3,425, ,425, Exercisable at end of year 2,925, Nil - (a) Options held at the beginning of the reporting period: The following table summarises information about options held by employees as at 1 July 2003: Number Weighted of Grant Vesting Expiry average Options Date Date Date exercise price 975, Jun Jun Jun ,200,000 6-Mar Mar Mar , Jul Jul Jul (b) Options held at the end of the reporting period: The following table summarises information about options held by employees as at 30 June 2004: Number Weighted of Grant Vesting Expiry average Options Date Date Date exercise price 975, Jun Jun Jun ,950,000 6-Mar Mar Mar , Jul Jul Jul ,000 1-Jul Jul Jul There were no options exercised during the year (2003: Nil) 39

42 NOTES (continued) 26. DIRECTORS AND EXECUTIVES DISCLOSURES (a) Details of Specified Directors and Specified Executives (i) Specifi ed directors K. P. Prior AM Chairman (non-executive) D.H.T. Devine Managing Director P. J. Ferris AM Director (non-executive) R. W. Parris Director (non-executive) K. M. Woodley Marketing Director D. J. Ridley Director (non-executive) (ii) Specifi ed executives C. Fusco General Manager Housing - Southern Region I. Grant General Manager - First Permanent V. Grayson Company Secretary and Chief Financial Offi cer P. Nash General Manager Housing - QLD B. Gillan Manager Property Development QLD J. Shapcott Advertising Manager NOTES (continued) YEAR ENDED 30 JUNE 2004 Notes CON 2004 $ 26. DIRECTORS AND EXECUTIVES DISCLO- SURES (continued) (b) Remuneration of Specified Directors and Specified Executives (i) Remuneration Policy 40

43 NOTES (continued) 26. DIRECTORS AND EXECUTIVES DISCLOSURES (continued) (b) Remuneration of Specified Directors and Specified Executives (continued) (ii) Remuneration of Specifi ed Directors Primary Post Employment Equity Other Total Options Bonuses Retirement Benefits Superannuation Other Fees Non-monetary Benefits* Base Salary & Fees Specified Directors K. P. Prior AM , , , , , ,750 D.H.T. Devine , , , , , ,630-7, ,000 P.J Ferris AM ,900 15,000-4, , ,000 12,200-3, ,800 R. W. Parris , ,850-4, , ,000 76,978-3, ,578 K. M. Woodley ,495-47,150 23, , , ,495-47,150 23,355-5, ,000 D. J. Ridley ,900 24,200-5, , ,000 26,000-5, ,400 Total Remuneration: Specified Directors , ,050 47,150 75, ,500 1,386, , ,178 47,150 72,335-12,000-1,071,528 41

44 42 NOTES (continued) 26. DIRECTORS AND EXECUTIVES DISCLOSURES (continued) (b) Remuneration of Specified Directors and Specified Executives (continued) (ii) Remuneration of Specifi ed Executives Primary Post Employment Equity Other Total Options Bonuses Retirement Benefits Superannuation Other Fees Non-monetary Benefits* Base Salary & Fees Specified Executives C. Fusco ,563-34,760 20, , , ,787-29,000 14,920-2, , ,707 I. Grant , ,551-12, , , , , ,594 V. Grayson ,802-24,198 12, , , ,802-24,198 12,000-5,000 75, ,000 P. Nash ** ,846-4,154 6, , B Gillan *** ,397-4,065 13, , , , , ,626 J. Shapcott ,068-10,413 10,519-32,500 56, , ,068-10,413 10,519-32,500 30, ,500 Total Remuneration: Specified Executives ,086,125-77,590 85,491-45, ,000 1,501, **** 799,521-64,289 59,117-40, ,500 1,219,427 * Includes Motor Vehicle related costs. ** Mr Nash joined the company in March 2004 *** Mr Gillan joined the company in April **** Group Totals in respect of the fi nancial year ended 2003 do not necessarily equal the sums of amounts disclosed for 2003 for individuals specifi ed in 2004, as different individuals were specifi ed in 2003.

45 NOTES (continued) 26. DIRECTORS AND EXECUTIVES DISCLOSURES (continued) (c) Remuneration options: Granted and vested during the year During the fi nancial year options were granted as equity compensation benefi ts to one specifi ed executive as disclosed below. The options were issued free of charge. Each option entitles the holder to subscribe for one fully paid ordinary share in the entity at an exercise price of $ The options may only be exercised two years after the date of grant and expire ten years after this date. The options granted vest after a two year period based on the achievement of certain key performance criteria. The key performance criteria to be met are in respect of shareholder returns. Shareholder returns are defi ned as growth in share price plus dividends reinvested. For the options to be exercisable, they must exceed either (a) the growth in ASX accumulation small cap ordinaries index or (b) GDP plus 6%. Terms and Conditions for Each Grant Vested Granted Value per Exercise First Last Number Number Grant Date Option at Price per Exercise Exercise Grant Date Share Date Date ($) ($) Specified executives I. Grant 250,000 1-Jul Jul Jul-2013 Total 250,000 (d) Shares issued on exercise of remuneration options No options were exercised during the year ended 30 June 2004 (2003: Nil) (e) Option holdings of specified directors and specified executives Balance at Granted as Options Net Balance at beginning Remuner- Exercised Change end Vested at 30 June 2004 of period ation Other of period Not 01-July June-2004 Total exercisable Exercisable Specified directors D.H.T. Devine 1,325, ,325,000 1,325,000-1,325,000 K. M. Woodley 850, , , ,000 Specified executives C. Fusco 250, , , ,000 I. Grant - 250, , V. Grayson 500, , , ,000 J. Shapcott 250, , ,175, , ,425,000 2,925,000-2,925,000 43

46 44 NOTES (continued) 26. DIRECTORS AND EXECUTIVES DISCLOSURES (continued) (f) Shareholdings of Specified Directors and Specified Executives Shares held in Balance Granted as On Exercise Net Change Balance Devine Limited 01-July-2003 Remuneration of Options Other 30-June-2004 (number) Ord Pref Ord Pref Ord Pref Ord Pref Ord Pref Specified directors K. P. Prior AM 222,996 2, ,766 (2,000) 252,762 - D.H.T. Devine 27,385, ,385,615 - P. J. Ferris AM 126,638 4, ,939 (4,968) 200,577 - R. W. Parris 154, (31,000) - 123,751 - K. M. Woodley 9,572, ,572,351 - D. J. Ridley 120, , ,000 - Specified executives C. Fusco 19,682 19,682 - V. Grayson 410,000 5, ,415 (5,000) 484,415 - J. Shapcott 505, ,587 - Total 38,517,620 11, ,120 (11,968) 38,714,740 - All equity transactions with specifi ed directors and specifi ed executives other than those arising from the exercise of remuneration options have been entered into under terms and conditions no more favourable than those the entity would have adopted if dealing at arm s length.

47 NOTES (continued) 26. DIRECTORS AND EXECUTIVES DISCLOSURES (continued) (g) Loans to/from Specified Directors and Specified Executives During the year, Devine Industries Pty Ltd of which Mr David H T Devine is a director and shareholder provided a loan to Devine Limited of $4,144,806 (2003: $Nil) to assist with the purchase by Devine Limited of land at Waterford in Brisbane. The loan was drawn down on 2 September 2003 and repaid on 5 December 2003 with an interest rate of 8% p.a. and was secured by a fi rst mortgage over the property. The loan was arranged on commercial terms to Devine Limited and was approved, in the absence of Mr Devine, by the board of Devine Limited. No other loans were secured or made during the year ended 30 June 2004 (2003: $Nil) (h) Other transactions and balances with Specified Directors and Specified Executives Purchases During the year, parties related to Mr K M Woodley, purchased the management rights and manager s unit associated with the Casino Towers Project. The purchase price which totalled $2,065,750 (inclusive of GST) was in accordance with an independent valuation and, as at 30 June 2004, the contract was unconditional. The transaction was entered into on commercial terms to Devine Limited and was approved, in the absence of Mr Woodley, by the board of Devine Limited. Services K P Prior is a partner of McCullough Robertson. Fees totalling $245,407 (2003: $112,048) were paid or payable to Mc- Cullough Robertson during the year in respect of legal services provided to the consolidated entity. These fees were determined under normal commercial terms and conditions. K M Woodley is a partner in a business known as Clayfi eld Galleries. Clayfi eld Galleries provided picture framing services to the group for the year ended 30 June 2003 amounting to $484. No services were provided in the current year. R W Parris is a partner of Parris & Associates. Fees totalling $98,450 (2003: $76,978) were paid or payable to Parris & Associates during the year in respect of project management services provided to a controlled entity. These fees were determined under normal commercial terms and conditions. Parris Interiors is an associate of R W Parris. Fees totalling $77,503 (2003: $148,123) were paid or payable to Parris Interiors during the year in respect of interior design services provided to a controlled entity. These fees were determined under normal commercial terms and conditions. 27. AUDITOR S REMUNERATION Amounts received or due and receivable by the auditors for: CONSOLIDATED DEVINE LIMITED $ $ $ $ Audit or review of the fi nancial report 184, , , ,000 Other services Tax advisory and compliance services 98,489 63,690 98,489 63,690 Capital restructuring & Corporate Finance advice 62,328 36,500 62,328 36,500 Other assurance services 25,300 68,975 25,300 46, , , , ,190 45

48 NOTES (continued) 28. EVENTS SUBSEQUENT TO BALANCE DATE A fully franked fi nal dividend in respect of the 2004 fi nancial year of 4 cents (2003: 4 cents) per share was declared by directors on 25 August In accordance with the adoption of AASB 1044 Provisions, Contingent Liabilities and Contingent Assets no provision has been recognised in the statement of Financial Position as at 30 June There have been no other signifi cant events occur post 30 June RELATED PARTY DISCLOSURES (a) Ultimate Parent Devine Limited is the ultimate parent company. (b) Wholly-owned group transactions * Rental income was received from controlled entities under normal commercial terms and conditions. * Management fees were received from controlled entities under normal commercial terms and conditions. * Interest free loans made by Devine Limited to controlled entities repayable on demand. * Interest free loans made to Devine Limited by controlled entities repayable on demand. 46

49 NOTES (continued) 30. SEGMENT INFORMATION ELIMINATIONS CONSOLIDATED FINANCE CORPORATE/ OTHER HOUSING & LAND PROPERTY DEVELOPMENT $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Business Segments: Sales to customers outside the consolidated entity 228, , ,420 76,830 6,593 4, , ,578 Other Revenues from customers outside the consolidated entity , ,405 Intersegment revenues (239) (367) - - Total segment revenue 229, , ,452 76,830 6,854 5, ,212 (239) (367) Unallocated Revenue - - Total consolidated revenue 376, ,983 Results Segment Result 18,081 21,710 6,581 (947) (1,850) (1,796) (326) ,486 19,805 Unallocated expenses Consolidated entity profi t from ordinary activities before income tax expense 22,486 19,430 Income tax expense (6,836) (6,361) Net Profi t 15,650 13,069 As management is able to identify funds used by each segment, the interest associated with the use of those funds is allocated to the respective segment. The total amount of borrowing costs allocated to segments is as follows: Housing $915,718 (2003: $565,672); Property Development $14,381,837 (2003: $5,657,110); Finance $Nil (2003: $343); and Corporate/Other $650,383 (2003: $1,049,875). 47

50 48 NOTES (continued) 30. SEGMENT INFORMATION (continued) ELIMINATIONS CONSOLIDATED FINANCE CORPORATE/ OTHER HOUSING & LAND PROPERTY DEVELOPMENT $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Assets Segment assets 105,723 86, , ,291 2,894 3,524 19,804 18,718 (28,973) (14,607) 314, ,010 Unallocated assets 5,489 7,425 Total assets 320, ,435 Liabilities Segment liabilities 41,822 26, ,911 89, ,792 39,700 (20,652) (8,036) 232, ,396 Unallocated liabilities 5,489 7,425 Total liabilities 238, ,821 Other segment information: Acquisition of non-current assets 823 1, , ,122 3,858 Depreciation ,421 1,334 Amortisation Non cash expense other than depreciation or amortisation - goodwill write-off Geographical Segments: The economic entity operates in Queensland, Victoria and South Australia.

51 NOTES (continued) 31. CONTINGENT LIABILITIES The parent entity and controlled entities have entered into local authority performance guarantees of $21,510,735 at 30 June 2004 (2003: $6,282,404) relating to individual estates. Of the $15,228,331 increase over the balance at 30 June 2003, $15,100,000 relates to performance guarantees associated with the Victoria Point Docklands project. The guarantees are secured by charges over the assets of the respective entities. No liabilities are expected to arise. The parent entity (Devine Limited) has guaranteed, under the terms of Class Order 98/1418, to pay any defi ciency in the event of winding up of the controlled entities listed in note 10. The controlled entities have also given a similar guarantee in the event that Devine Limited is wound up. The company has deposited $3,972,574 (2003: $5,835,205) into bank accounts subject to charges by agreement with the fi nancial institutions which provide funding for mortgages under the Builder Pays Deposit promotion. A further $2,656,788 (2003: $4,234,899) is invested in Trust structures associated with the company s loan origination and securitisation business, First Permanent Financial Services Pty Ltd. In addition a performance guarantee totalling $1,500,000 (2003: $1,500,000) has been issued to one of the lending institutions. These funds are only available to meet costs associated with a loss on resale occuring as a result of buyer default on mortgages and repossessions. The consolidated entity s liability is limited to between 2% and 7%, of the original loan amount of the defaulting purchaser in each individual case and the amounts held in the bank accounts and performance guarantee in total. That is, the consolidated entity could not be liable for more than $8,129,362 as at 30 June 2004 (2003: $11,570,105). As at the 30 June 2004 a provision of $921,591(2003: $1,538,717) has been raised on the basis of expected future costs as disclosed in Note 17. The company has secured a new interim funding facility for the provision of mortgage loans to its Housing customers by its subsidiary First Permanent Financial Services Pty Ltd. A contingent liability exists to the extent of $4,000,000 (2003: $2,500,000) in relation to Devine Limited undertaking to meet the future working capital requirements of First Permanent Financial Services Pty Ltd. 32. LAND ACQUISITION COMMITMENTS As at 30 June 2004 the group had entered into land marketing agreements to acquire developers land amounting to $57,433,000 (2003: $28,845,000). At exercise date the consolidated entity is required to acquire land at a predetermined acquisition price. 33. EARNINGS PER SHARE Notes CONSOLIDATED The following refl ects the income and share data used in the calculations of basic and diluted earnings per share: Net Profi t 15,650 13,069 Adjustments: Net loss attributable to outside equity interest Earnings used in calculating basic earnings per share 15,650 13,211 Dividends paid on convertible preference shares Earnings used in calculating diluted earnings per share 15,894 13,936 49

52 NOTES (continued) 33. EARNINGS PER SHARE (continued) Number of Number of Shares Shares Weighted average number of ordinary shares used in calculating basic earnings per share 111,940, ,507,838 Adjusted weighted average number of ordinary shares used in calculating dilutive earnings per share * 119,394, ,687,097 * Consequent upon the conversion of the company s converting preference shares on 31 October 2003, 12,700,412 new ordinary shares were issued, increasing the total number of ordinary shares on issue to 116,208,250. Conversions, calls, subscriptions or issues since 30 June 2004 There have been no other conversions to, calls of, or subscriptions for ordinary shares or issues of potential ordinary shares since the reporting date and before the completion of this fi nancial report. 34. FINANCIAL INSTRUMENTS (a) Terms, conditions and accounting policies (i) Financial assets Recognised Balance Financial Sheet Accounting Policies Terms and Conditions Instruments Notes Trade and other debtors 6,9 Trade and other debtors are carried at nominal amounts due, less any provision for doubtful debts. A provision for doubtful debts is recognised when collection of the full nominal amount is no longer recognised Proceeds due from sales made on completed homes are payable on the settlement date of each sale. The terms of each sale will vary due to individual circumstances. Progress claims issued with regard to homes under construction are due and receivable after 5 working days. Retention Funds 8, 14 Retention funds are carried at the principal amount. Interest is recognised as it is earned. These funds are only available to meet costs associated with a loss on resale occurring as a result of buyer default on mortgages and repossession. The consolidated entity s liability is limited to between 2% and 7% of the original loan amount of the defaulting purchaser in each individual case and the amounts held in the bank accounts in total. 50

53 NOTES (continued) 34. FINANCIAL INSTRUMENTS (continued) (a) Terms, conditions and accounting policies (continued) (ii) Financial liabilities Recognised Balance Financial Sheet Accounting Policies Terms and Conditions Instruments Notes Bank overdrafts 16 The bank overdraft is carried at the principal amount. Interest is charged as an expense as it accrues. Bank loans 16, 18 Bank loans are carried at the principal amount. Interest is charged as an expense as it accrues. Interest is charged by the bank at a variable rate of 7.95% (2003: 6.23%). Details of the security over the bank overdraft are set out in note 16. The bank loans are repayable from the proceeds of sales as a percentage of cash receipts. Details of the security over bank loans are set out in note 16 and 18. Interest has been charged at an average rate of 6.24% (2003: 6.74%). Trade and other creditors 15 Liabilities are recognised for amounts to be paid in the future for goods and services received, whether or not billed to the consolidated entity Trade liabilities are settled on the due date for payment agreed with individual suppliers. Dividends Payable :Ordinary Shares 5 Dividends payable are recognised when declared by the consolidated entity No dividends are payable (2003:$Nil) per ordinary share for the fi nancial year ended 30 June The extent to which the dividends are franked, details of the franking account balance at balance date and franking credits available for the subsequent fi nancial year are disclosed in note 5. Converting Preference Shares 16 Converting Preference Shares are recognised as debt where the holder is not exposed to the changes in fair value of the instrument. Financial lease liability 16 The lease liability is accounted for in accordance with AASB 1008 The Converting Preference Shares converted to Ordinary Shares on 31 October As at balance date, the consolidated entity had fi nance leases with an average lease term of 1 year. The average discount rate implicit in the leases is 7.93% (2003: 7.52%). The security over fi nance leases is disclosed in note

54 NOTES (continued) 34. FINANCIAL INSTRUMENTS (continued) (a) Terms, conditions and accounting policies (continued) (iii) Equity Recognised Balance Financial Sheet Accounting Policies Terms and Conditions Instruments Notes Ordinary shares 20 Ordinary share capital is recognised at the fair value of the consideration received by the company. Details of shares issued and the terms and conditions of options outstanding over ordinary shares at balance date are set out in note 20. (iv) Unrecognised Financial Instruments Put/Call Option Agreement 32 The consolidated entity enters into put/call option agreements with developers to acquire land. At balance date the consolidated entity had put/call agreements with developers to acquire land amounting to $57,433,000 (2003: $28,845,000). These options all have an exercise date within one year of balance date. 52

55 NOTES (continued) 34. FINANCIAL INSTRUMENTS (continued) (b) Interest rate risk The consolidated entity s exposure to interest rate risks and the effective interest rates of fi nancial assets and fi nancial liabilities, both recognised and unrecognised at the balance date are as follows: Fixed interest rate maturing in: Total carrying Weighted Financial interest rate Floating 1 year or less Over 1 to 5 More than Non Interest amounts per the average effective interest rate years 5 years Bearing Balance sheet interest rate $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 % (i) Financial assets Trade and other debtors ,062 34,062 N/A Short term deposits 7, , % Retention Funds 3, , % Total financial assets 11, ,062 45,135 N/A (ii) Financial liabilities Bank overdrafts 3, , % Bank loans 72,526 14,636 78, , % Trade and other creditors ,471 50,471 N/A Finance lease liability % Total financial liabilities 76,145 14,655 78,971-50, ,242 N/A 53

56 54 NOTES (continued) 34. FINANCIAL INSTRUMENTS (continued) (b) Interest rate risk (continued) The consolidated entity s exposure to interest rate risks and the effective interest rates of fi nancial assets and fi nancial liabilities, both recognised and unrecognised at the balance date are as follows: Fixed interest rate maturing in: Total carrying Weighted Financial interest rate Floating 1 year or less Over 1 to 5 More than Non Interest amounts per the average effective interest rate years 5 years Bearing Balance sheet interest rate $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 % (i) Financial assets Cash % Trade and other debtors ,956 34,956 N/A Short term deposits ,500 2,500 N/A Retention Funds 5, , % Total financial assets 6, ,456 43,667 N/A (ii) Financial liabilities Bank overdrafts % Bank loans 72,257 11,728 13, , % Trade and other creditors ,515 36,515 N/A Dividends payable N/A Converting Preference Shares - 8, , % Finance lease liability % Total financial liabilities 72,257 19,940 13,064-36, ,897 N/A

57 NOTES (continued) 34. FINANCIAL INSTRUMENTS (continued) c) Net fair values The aggregate net fair values of fi nancial assets and recognised fi nancial liabilities, at balance date, are equivalent to their carrying values. The net fair value of unrecognised fi nancial liabilities excluding the associated asset to be recognised on recognition of the liability, at balance date, is $57,433,000 (2002: $28,845,000) which is the maximum amount the group is liable to pay on land marketing agreements in place at balance date. The following methods and assumptions are used to determine the net fair values of fi nancial assets and liabilities. Recognised financial instruments : Cash and cash equivalents The carrying amount approximates fair value because of their short term to maturity. Trade and other debtors The carrying amount approximates fair value. Dividends payable The carrying amount approximates fair value. Trade and other creditors Trade and other creditors represent the principal amounts outstanding at balance date plus, where applicable, any accrued interest. The carrying amount approximates net fair value because credit terms are not greater than 60 days. Borrowings Bank loans are recognised in the fi nancial statements on the basis of the nominal amounts outstanding at balance date plus accrued interest which is charged at current market rate. At 30 June 2004 the consolidated entity had on issue Nil (2003: 853,347) 8.50% fully franked Converting Preference Shares (2003: 8.50%). These shares converted to ordinary shares on 31 October Finance lease liability The carrying amount of fi nance lease liability approximates net fair value because interest is charged at market rates. d) Credit risk exposures The consolidated entity s maximum exposures* to credit risk at balance date in relation to each class of recognised fi nancial assets is the carrying amount of those assets as indicated in the balance sheet. Concentrations of credit risk (a) (b) The company minimises concentrations of credit risk in relation to trade receivables by undertaking transactions with a large number of customers. However, the majority of customers are concentrated in Australia. Credit risk in trade debtors is minimised as trade debtors have approved fi nance prior to sales taking place. * The maximum credit risk exposure does not take into account the value of any collateral or other security held, in the event other entities/parties fail to perform their obligations under the fi nancial instruments in question. 55

58 56 NOTES (continued) 35. IMPACT OF ADOPTING INTERNATIONAL FINANCIAL REPORTING STANDARDS For reporting periods beginning on or after 1 January 2005, Australian Companies must comply with Australian Equivalents to International Financial Reporting Standards (IFRS) as issued by the Australian Accounting Standards Board. Having a 30 June balance date, Devine Limited s (the company s) fi rst fully IFRS compliant fi nancial report will be for the year ended 30 June The company has commenced transitioning its accounting policies and fi nancial reporting from current Australian Standards to IFRS. The company has allocated internal resources and engaged expert consultants to assist in this process. The company s implementation project consists of three phases as described below: Assessment and Planning Phase The assessment and planning phase was commenced in March 2004 and is largely complete. Its objective was to produce a high level overview of the impacts on existing accounting and reporting policies and procedures of conversion to IFRS reporting. This phase included: * high level identifi cation of the key areas where differences in accounting policies and disclosures are expected to arise from the adoption of IFRS. * a fi nancial impact grading of each area as either high, medium or low. * identifi cation of new or additional information required to enable a quantitative assessment to be carried out of the likely impact of adoption. * familiarisation of key accounting and other staff with IFRS and identifi cation of appropriate ongoing training requirements. * preparation of a plan to evaluate in detail the likely impact of IFRS and move to the implementation phase. Evaluation Phase Following the above phase, individual project teams have been established to focus on the key impact areas identifi ed. In addition, an IFRS steering committee has been formed to oversee and co-ordinate the work of these sub-groups. This phase has commenced and key outputs will be: * collection of additional information required as identifi ed in the assessment and planning phase. * quantifying the potential fi nancial impacts as at the transition date and for subsequent reporting periods. * formulating revised accounting policies and procedures for compliance with IFRS requirements. * designing accounting, IT and business processes to support IFRS reporting obligations. * developing revised IFRS disclosures. * undertaking appropriate training programs for key staff. Implementation Phase The implementation phase will bring together the information gathered from the evaluation phase and replace existing accounting policies, systems and procedures with those developed above. It will enable Devine to be fully compliant with the requirements of the transition to IFRS. It is expected that this phase will be substantially complete by 30 June Likely Impact Following the initial assessment phase as described above, the potential key implications of the conversion to IFRS on the consolidated entity and their initially assessed fi nancial impact rating are expected to be as follows: Securitised Mortgage Loans (High) - mortgage loans originated on behalf of Devine s customers by the company s subsidiary, First Permanent Home Loans, and subsequently securitised into the market place may have to be recognised as both an asset and corresponding liability in the consolidated entity s balance sheet. Reliable estimation of the future fi nancial effect of this change in accounting policy has not yet been measured.

59 NOTES (continued) 35. IMPACT OF ADOPTING INTERNATIONAL FINANCIAL REPORTING STANDARDS (continued) Likely Impact (continued) Revenue Recognition (High) - Revenue recognition in relation to the company s large CBD property developments may change under IFRS as UIG 53 which deals with revenue recognition in relation to large property developments and which became operative in March 2003 may be in confl ict with the relevant international accounting standard. Until further guidance is provided by the Australian Accounting Standards Board, the company cannot reliably estimate the future fi nancial effect of any potential change in accounting policy. Capitalised Costs (Medium) - Capitalised costs associated with the company s CBD property developments which are currently not expensed until recognition of revenue occurs, may, under IFRS, be required to be expensed in the period in which they are incurred. Reliable estimates of the future fi nancial effect of this change in accounting policy has not yet been measured. Deferred Income Tax (Medium) - Income tax will be calculated on the balance sheet approach, which could result in additional deferred tax assets and liabilities and, as tax effects follow the underlying transactions, some tax effects will be recognised in equity. Reliable estimates of the future fi nancial effect of this change in accounting policy have not yet been measured. Investment in Controlled Entities (Medium) - Investments in controlled entities are carried at directors valuations. A review of the carrying values as governed by IAS 28 and IAS 39 will need to be undertaken. Equity Based Remuneration (Medium) - Equity based remuneration in the form of shares and options will be recognised as expenses in the statement of fi nancial performance in the periods during which they are made. The standard applies to all share-based payments issued after 7 November 2002 which have not vested as at 1 January Reliable estimates of the future fi nancial effects of this change in accounting policy is impractical as they are dependant on the company s share price and its volatility. Intangible Assets (Low) - Goodwill and intangible assets with indefi nite useful lives will be tested for impairment annually and will not be amortised. This could potentially affect the carrying value of the company s Brand Name. Reliable estimates of the future fi nancial effects of this change in accounting policy cannot be quantifi ed because the conditions under which impairment will be assessed are not yet known. Restating Comparatives (Low) - The fi rst restatement of comparatives will occur in the fi nancial year ended 30 June The comparative period will be the year ended 30 June 2005 and the opening statement of fi nancial position at 1 July 2004 will be restated to ensure IFRS compliance. The fi nancial impact of adopting IFRS will be disclosed in the 30 June 2005 fi nancial report. 57

60 DIRECTORS DECLARATION In accordance with a resolution of the directors of Devine Limited, we state that: (1) In the opinion of the directors: (a) the fi nancial statements and notes of the company and of the consolidated entity are in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the company s and consolidated entity s fi nancial position as at 30 June 2004 and of their performance for the year ended on that date; and (ii) complying with Accounting Standards and Corporations Regulations 2001; 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. (2) In the opinion of the directors, as at the date of this declaration, there are reasonable grounds to believe that the members of the Closed Group identifi ed in note 10 will be able to meet any obligations or liabilities to which they are or may become subject to, by virtue of the Deed of Cross Guarantee. On behalf of the Board K P Prior Chairman D H T Devine Managing Director Brisbane, 29 September

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