Lake Powell Almond Property Trust No.2

Transcription

1 Lake Powell Almond Property Trust No.2 Annual report June 2010

2 Lake Powell Almond Property Trust No.2 Seven Fields Management Limited Responsible Entity Report The Directors of the Responsible Entity present their report on the Lake Powell Almond Property Trust No.2 (the Trust) for the year ended 30 June Directors The names of the Directors of the Responsible Entity in office at any time during or since the end of the year are: Greg McMahon Grant Ross (resigned 24 August 2010) Peter Scully (resigned 15 July 2009) Richard Byllaardt (appointed 2 July 2009) Peter Aubort (appointed 24 August 2010) The Directors have been in office since the start of the financial year to the date of this report unless otherwise stated. 2. Principal Activities The Trust was constituted on 8 October The principal activity of the Trust was the development and lease of orchard assets to growers until 31 October Following the restructure, the principle activity of the Trust is the growing and selling of almonds. The principal assets of the Trust are located near the Robinvale region of Victoria. 3. Operating Results The net profit for the year ended 30 June 2010 was $3,321,921 (2009: $15,817). This result includes the income and related costs of growing and selling of almonds following the restructuring. Due to market conditions, the crop income was lower than usual in the quarter ended 30 June 2010 and this has resulted in higher than usual inventory at the year end. 4. Distributions Paid or Recommended No distributions were paid or declared for the year ending 30 June 2010 (2009: $265,039). 5. Significant Changes in State of Affairs After giving detailed consideration to all of the issues facing the Trust and its related Project, Lake Powell Almond Project No.2, which include the fluctuation of almond prices as well as other general agricultural risks, resolutions were passed to transfer all activities of growing and selling of the almonds to the Trust. The winding up of the Project and transfer of operations to the Trust therefore took effect from 1 November Since the Trust now receives farm income and incurs farm related expenses on its own account, the Trust now falls within the category of a public trading trust. Consequently as the Trust is a public trading trust it is liable for income tax. There have been no other significant changes in the state of affairs of the Trust during the reporting period that are not discussed elsewhere in this report. 2

3 Lake Powell Almond Property Trust No.2 Seven Fields Management Limited Responsible Entity Report 6. After Balance Date Events The Trust is seeking to sell its permanent water and the proceeds will be used to reduce the bank debt. The Federal Government has expressed interest in buying the water and has undertaken due diligence, however, at the date of signing this report no contract has been entered into. In the meantime the Trust receives the benefit of the water allocations. No other matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the Trust, the results of those operations, or the state of affairs of the Trust in future financial years. 7. Environmental Issues The Trust complied with all environmental regulations during the course of the financial year. 8. Indemnifying Officers or Auditor During or since the end of the financial year, the Responsible Entity has paid insurance premiums to insure each of the aforementioned Directors as well as officers of the Responsible Entity and members of the external Compliance Committee of the Trust against liabilities for costs and expenses incurred by them in defending any legal proceedings arising out of their conduct while acting in the capacity of the Responsible Entity, other than conduct involving a wilful breach of duty in relation to the Responsible Entity. The Responsible Entity has also indemnified each external member of the Compliance Committee against any liability incurred in carrying out the member s duties (other than a liability to the members of the schemes or the Responsible Entity) unless the liability arises out of conduct involving a lack of good faith on the part of the Committee Member. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium. The Responsible Entity has not otherwise, during or since the end of the financial year indemnified or agreed to indemnify an officer or auditor of the Responsible Entity or of any related body corporate against a liability incurred as such an officer or auditor. 9. Options No options over issued units or interests in the Trust were granted during or since the end of the financial year and there were no options outstanding at the date of this report. The directors and executives of the Responsible Entity hold no options over interests in the Trust. 10. Proceedings on Behalf of the Trust No person has applied for leave of court to bring proceedings on behalf of the Trust or intervene in any proceedings to which the Trust is a party for the purpose of taking responsibility on behalf of the Trust for all or any part of their proceedings. The Trust was not a party to any such proceedings during the year. 3

4 Lake Powell Almond Property Trust No.2 Seven Fields Management Limited Responsible Entity Report 11. Fees, Commissions or other charges by the Responsible Entity or Related Parties of the Responsible Entity. All fees have been detailed in Note 21 Related Party Transactions. 12. Units held by the Responsible Entity or Related Parties of the Responsible Entity At 30 June 2010 the Responsible Entity and its related parties held 13,500 Units in the Trust, as detailed in Note 21 to the Financial Statements. 13. Interests Issued in the Trust No additional ordinary Units have been issued during or subsequent to the reporting period. 14. Buy Back Arrangements As detailed in the Trust Constitution dated 8 October 2004, the Responsible Entity is not under any obligation to buy back, purchase or redeem prescribed units in the Trust from Unitholders. Consequently, no Units were redeemed by the Responsible Entity during the reporting period. 15. Value of Scheme Assets The value of the Trust s assets at the end of the reporting period is $11,967,636 (2009: $7,248,890). The methodology utilised in valuing the assets is detailed in Notes 1 and 11 of the financial statements. The value of the assets held by the Trust has been taken to include the value of the investment property including associated intangible assets. 16. Number of Interests on Issue At 30 June 2010, the number of Units issued in the Trust was 544 (2009: 544). No additional Units have been issued during or subsequent to the reporting period. 17. Auditors Independence Declaration A copy of the auditors independence declaration as required by section 307C of the Corporations Act 2001 is set out in the following report. Signed in accordance with a resolution of the Board of Directors. Richard Byllaardt Director 23 September

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6 STATEMENT OF COMPREHENSIVE INCOME Notes Revenue and other income Farming revenue 3 744,573 - Rental income 3 316,185 1,130,494 Interest 3 4,949 6,092 Total revenue and other income 1,065,707 1,136,586 Expenses Farm operating expenses 4 299,124 - Direct property expenses - (57,400) Debts forgiven to related project 4 125,779 - Net changes in fair value of investment properties 11 2,697,404 (225,931) Net changes in fair value of agricultural assets 12 - (259,900) Administration expenses - Responsible entity's fees: Management fees (195,292) (86,028) Exit fees (9,827) (2,114) - Custodian fees (9,056) (8,480) - Other administration expenses (197,896) (106,473) (412,071) (203,095) Finance costs 4 (454,022) (374,443) Profit before income tax attributable to unitholders for the year 3,321,921 15,817 Income tax expense (951,474) - Profit attributable to the Trust for the year 2,370,447 15,817 Other comprehensive income - - Total comprehensive income/(loss) attributable to the Trust for the year 2,370,447 15,817 The accompanying notes form part of these financial statements. 6

7 STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2010 Notes CURRENT ASSETS Cash and cash equivalents 7 367,079 46,942 Inventory 8 1,916,040 - Trade and other receivables 9 439, ,714 TOTAL CURRENT ASSETS 2,723, ,656 NON-CURRENT ASSETS Property, plant and equipment 10 3,990,274 - Investment properties ,399 Agricultural assets , ,536 Intangible assets 13 4,088,828 4,088,828 Trade and other receivables 9-492,471 Deferred tax assets ,944 - TOTAL NON-CURRENT ASSETS 9,244,582 6,318,234 TOTAL ASSETS 11,967,636 7,248,890 CURRENT LIABILITIES Trade and other payables 15 1,114, ,459 Interest-bearing liabilities 16 4,910,653 4,910,271 TOTAL CURRENT LIABILITIES 6,024,812 5,740,730 NON-CURRENT LIABILITIES Interest-bearing liabilities ,971 - Deferred tax liabilities 17 1,173,635 - Provisions 18 24,013 14,186 TOTAL NON-CURRENT LIABILITIES 2,071,619 14,186 TOTAL LIABILITIES 8,096,432 5,754,916 NET ASSETS 3,871,204 1,493,974 EQUITY Unitholders funds 19 3,871,204 1,493,974 TOTAL EQUITY 3,871,204 1,493,974 The accompanying notes form part of these financial statements. 7

8 STATEMENT OF CHANGES IN EQUITY Total funds attributable to unitholders at the 1,493,974 1,765,805 beginning of the year Total comprehensive income for the year Net profit/(loss) attributable to unitholders 2,370,447 15,817 Total other comprehensive income/(expense) for the year - - 3,864,421 1,781,622 Amounts recognised directly in equity Deferred tax debited directly to equity - Contributed equity 6,783 - Transactions with unitholders Unit issue costs - (22,609) Distributions to unitholders - (265,039) Total funds attributable to unitholders at the end of the year 3,871,204 1,493,974 The accompanying notes form part of these financial statements. 8

9 STATEMENT OF CASH FLOWS Notes CASH FLOWS FROM OPERATING ACTIVITIES Customer receipts 1,630, ,599 Interest received 4,949 6,092 Payments to suppliers (1,735,079) (308,011) Finance costs paid (excluding distributions to unitholders) (454,022) (374,443) Net cash used in operating activities 22(b) (553,834) (131,763) CASH FLOW FROM FINANCING ACTIVITIES Unit issue costs paid - (22,610) Proceeds from issue of preference units 873,971 - Net cash provided by/(used in) financing activities 873,971 (22,610) Net increase/(decrease) in cash and cash equivalents 320,137 (154,373) Cash and cash equivalents at the beginning 46, ,315 of the financial year Cash and cash equivalents at end of year 22(a) 367,079 46,942 The accompanying notes form part of these financial statements. 9

10 NOTE 1: SIGNIFICANT ACCOUNTING POLICIES Reporting Entity These financial statements are for the entity Lake Powell Almond Property Trust No.2 (the Trust) as an individual entity. The Trust is an unlisted unit trust established and domiciled in Australia. The Trust is a registered scheme under the Corporations Act. The Responsible Entity of the Trust is Seven Fields Management Limited, which is a wholly owned subsidiary of Seven Fields Pty Ltd. Basis of Preparation These financial statements are general purpose financial statements that have been prepared in accordance with Australian Accounting Standards (including the Australian Interpretations) and the Corporations Act These financial statements have been prepared on an accruals basis and on the historical cost basis except for investment property which is measured at fair value. Cost is based on the fair values of the consideration given in exchange for assets. The functional and presentation currency of the Trust is Australian dollars. These financial statements was authorised for issue on 23 September 2010 by the Board of Directors. Compliance with IFRSs Australian Accounting Standards include Australian Equivalents to International Financial Reporting Standards ( AIFRS ). Compliance with AIFRS ensures that the financial statements and notes of the Trust comply with International Financial Reporting Standards ( IFRS ). Significant Accounting Policies The accounting policies set out below have been applied consistently to all periods presented in this financial report. (a) Property, plant & equipment Plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Trust and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the statement of comprehensive income during the reporting period in which they are incurred. Depreciation is calculated using the reducing balance method to allocate their cost or revalued amounts, net of their residual values, over their estimated useful lives, as follows: Class of Fixed Asset Depreciation Rate Motor Vehicles 16.67% Plant & Equipment 6-20% The asset s residual values and useful lives are reviewed, and adjusted if appropriate, at each statement of financial position date. 10

11 NOTE 1: SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (a) Property, plant & equipment (Continued) An asset s carrying amount is written down immediately to its recoverable amount if the asset s carrying amount is greater that its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the statement of comprehensive income. Property comprises land and buildings previously classified as investment properties and are carried at fair value as detailed in Note 1(b). (b) Investment properties Investment property is property which is held to earn rental income, or for capital appreciation, or for both. Investment properties are carried at fair value determined either by the Directors or independent valuers. Changes to fair value are recorded in the statement of comprehensive income as income. Investment properties are not depreciated. The fair value of investment properties excludes any accrued operating lease income or lease incentives recognised as a receivable in accordance with AASB 117: Leases as detailed in Note 1(c). (c) Revenue Pre restructure the Trust received lease income and this was recognised as income on a straight-line basis over the lease term. Where the lease had fixed annual increases, the total rent receivable over the lease was recognised as revenue on a straight-line basis over the lease term. This resulted in more income being recognised early in the lease term and less late in the lease term compared to the lease conditions. The difference between the lease income recognised and actual lease payments received was included in receivables. Post restructure, the Trust received income from the sale of Almonds. This is recognised upon invoicing to customers. Interest income is recognised in the statement of comprehensive income on a time basis using the effective interest rate method. Other income is recognised when the right to receive the revenue has been established. All income is stated net of the amount of goods and services tax (GST). (d) Financial instruments Financial assets and financial liabilities are recognised on the Trust s statement of financial position when the Trust becomes a party to the contractual provisions of the instrument. Financial assets are recognised on trade-date the date on which the Trust commits to sell or purchase the asset. Financial assets are derecognised when the right to receive cash flows from the financial asset have expired or have been transferred and the Trust has transferred substantially the risks and rewards of ownership. Financial instruments are designated on initial recognition. Cash and cash equivalents Cash and cash equivalents comprise cash on hand and demand deposits and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. 11

12 NOTE 1: SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (d) Financial instruments (Continued) Trade and other Receivables Trade and other receivables are recognised initially at fair value and subsequently at amortised cost. They are classified as current assets except where the maturity is greater than 12 months after the reporting date, in which case they are classified as non-current. Amounts not recoverable are assessed at each reporting date. Indicators that an amount is not recoverable include where there is objective evidence of significant financial difficulties, debtor bankruptcy, financial reorganisation or default in payment. Any allowances for non-recoverable receivables are recognised in a separate allowance account. Any bad debts which have previously been provided for are eliminated against the allowance account. In all other cases bad debts are written off directly to the statement of comprehensive income. Trade and other Payables These represent liabilities for goods and services provided to the Trust prior to the end of the financial year which are unpaid. Trade and other payables are recognised initially at fair value and subsequently at amortised cost. Financial liabilities and equity Financial liabilities and equity instruments issued by the Trust are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument. The accounting policies adopted for specific financial liabilities and equity instruments are set out below. Issued units Amendments to AASB 132 Financial Instruments: Disclosure and Presentation changed the definition of a financial liability requiring puttable instruments and issued units that meet certain conditions to be classified as equity. Further, associated distributions must also be reclassified from the statement of comprehensive income to equity. In the current year, this has resulted in an increase in equity and net assets of $3,871,204 as disclosed in the statement of financial position, and has resulted in a reclassification of finance costs of $2,370,447 from the statement of comprehensive income to equity. As required, the Trust has applied the amendments to AASB 132 retrospectively requiring the carrying amount of the instrument at the beginning of the financial period (1 July 2008) to be amended. The retrospective application of AASB 132 has resulted in the Trust reclassifying unitholders funds from non-current liability to equity of $1,663,498 as at 1 July In addition, the distributions of $15,817 have been reclassified from finance cost in the statement of comprehensive income to distribution from equity. This resulted in recognition of a profit for the prior year of $15,

13 NOTE 1: SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (d) Financial instruments (Continued) Interest bearing liabilities Interest-bearing loans and overdrafts are initially measured at fair value, net of transaction costs incurred, and are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in the statement of comprehensive income over the period of the interest bearing liability using the effective interest rate method. Interest bearing liabilities are classified as current liabilities unless the Trust has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date. (e) Finance costs Finance costs are recognised using the effective interest rate applicable to the financial liability. (f) Intangible assets Water licences are recognised at cost less impairment losses. Water licences are held for an indefinite period and have an indefinite useful life. Due to their nature they are not subject to amortisation, but are tested for impairment by comparing their recoverable amount with their carrying amount. Water licences are tested for impairment annually or whenever there is an indication that the intangible asset may be impaired. Water licences are leased as an integral part of investment property and are not held for trading purposes. (g) Agricultural assets Agricultural assets comprise Almond trees and are valued at fair value determined either by the Directors or independent valuers. Changes to fair value are recorded in the statement of comprehensive income as income. (h) Goods and services tax (GST) Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Taxation Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of expense. Receivables and payables in the statement of financial position are shown inclusive of GST. (i) Income tax Under current tax legislation the Trust falls within the categories of a public trading trust as the beneficial interests in the Trust are widely held by investors. Consequently as the Trust is a public trading trust the Trust is liable for income tax. Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. 13

14 NOTE 1: SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (i) Income tax (Continued) However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the reporting date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. (j) Net working capital deficiency As detailed in Note 15 the commercial bill facility rolls every 1 3 months and is therefore classified as current. Despite this the financial report has been prepared on a going concern basis as the Directors have determined that the facility will be renegotiated throughout the next 12 months that the Trust will generate sufficient cash flows in the following financial year to satisfy its debts as and when they fall due. The Trust is also seeking to sell its permanent water and the proceeds will be used to reduce the bank debt. Whilst at the date of signing this report no contract has been entered into, the Federal Government has expressed interest in buying the water and has undertaken due diligence. (k) Provisions A provision is recognised when the Trust has a legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Provisions are measured at the present value of the Responsible Entity s best estimate of the expenditure required to settle the present obligation at the reporting date. The discount rate used to determine the present value reflects current market assessments of the time value of money and the risks specific to the liability (refer Note 18). Provisions include exit fees payable to the Responsible Entity upon the sale of the investment property. 14

15 NOTE 1: SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (l) Critical judgements and significant accounting estimates The preparation of financial statements requires the Directors of the Responsible Entity to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. Fair value estimation Investments in investment properties, are carried at values that are based on assumptions and estimates. If any of these assumptions or estimates were not correct this could have a material impact on the carrying amounts in the statement of financial position. Detailed information on the assumptions and estimates made in respect of investment properties is included in Note 11. (m) Accounting standards applicable but not yet adopted The following new accounting standards and interpretations, amendments to standards and interpretations have been issued, but are not mandatory as at 30 June They may impact the Trust in the period of initial application. These standards and interpretations have not been adopted in the financial report for the year ended 30 June 2010: AASB : Further amendments to Australian Accounting Standards arising from the Annual Improvements Process (effective for accounting periods commencing on or after 1 January 2010); AASB : Amendments to Australian Accounting Standards (effective for accounting periods commencing on or after 1 January 2011). These accounting standards are not expected to have a significant impact of the financial statements. 15

16 NOTE 2: FINANCIAL RISK MANAGEMENT The Trust s investing activities expose it to various types of risk that are associated with the financial instruments and markets in which it invests. The most important types of financial risk to which the Trust is exposed to are market risk, credit risk and liquidity risk. The exposure to each of these risks, as well as the Trust s policies and processes for managing these risks are described below. Net assets attributable to unitholders are classified as a financial liability under AASB 132 Financial Instruments: Disclosure and Presentation. As this balance is the net amount owing to unitholders after all other transactions, it has been excluded from the AASB 7 disclosures as it is directly affected by all risks. (a) Market risk Market risk embodies the potential for both loss and gains and would normally include currency risk, interest rate risk and other price risk. The Trust s market risk is managed by the Responsible Entity in accordance with the Trust s purpose. (i) Currency risk Currency risk is the risk of financial loss relating to financial instruments arising from changes in foreign currencies. The Trust has exposure to currency risk as most sales are denominated in US dollars. All purchases are denominated in Australian dollars. The Trust has limited exposure in relation to other price risk. (i) Interest rate risk The Trust s cash and cash equivalents, floating rate borrowings expose it, to a risk of change in their fair value or future cash flows due to changes in interest rates. The specific interest rate exposures are disclosed in the relevant notes to the financial statements. For the Trust, the interest rate exposure is mainly derived from the Commonwealth Bank of Australia (CBA) commercial loan facility. This facility risk exposure is assessed every time the Bill is due to roll. With each roll over the Trust requests quotes from the CBA on the variable interest rate available on a 1, 2 or 3 month term. This is then assessed by the scheme accountant and finance manager against the available cash flow position and the term is then recommended. The Trust s exposure to interest rate risk at reporting date, including its sensitivity to changes in market interest rates that were reasonably possible, is as follows: Instruments with cash flow risk: Cash and cash equivalents (367,079) (46,942) Vaiable borrowings - Current 500, , , ,058 Sensitivity of profit or loss to movements in market interest rates: Market interest rates increased by 200 basis points (2,658) (9,061) Market interest rates decreased by 200 basis points 2,658 9,061 The interest rate range for sensitivity purposes has been determined using the previous 12 month trading range of 1 month BBSW and 1 year swap rate markets as a basis. There are no changes to this methodology from prior periods. 16

17 NOTE 2: FINANCIAL RISK MANAGEMENT (CONTINUED) (b) Credit risk Credit risk is the risk that a party to the financial instrument will cause a financial loss to the Trust by failing to discharge an obligation. The Trust is exposed to credit risk through the financial assets listed below. This also details the maximum exposure to credit risk for each class of financial instrument. The Responsible Entity manages credit risk and the losses which could arise from default by ensuring that parties to contractual arrangements are of an appropriate rating. Cash at bank of $367,079 (2009:$46,942) is held with reputable organisations and receivables of $439,935 (2009:$883,714) pertain to trade and other receivables. All receivables are monitored by the Responsible Entity on a weekly basis. If any amounts owing are overdue these are followed up and if necessary, allowances are made for debts that are doubtful. At reporting date, there are no issues with the credit quality of financial assets that are neither past due or impaired, and all amounts are expected to be received in full. (c) Liquidity risk The Responsible Entity monitors exposure to liquidity risk by ensuring that on a daily basis there is sufficient cash on hand for the Trust to meet the contractual obligations of financial liabilities as they fall due. The Responsible Entity sets budgets to monitor cash flows. The commercial bills are subject to annual review. There have been no changes from previous periods. The maturity of financial liabilities at reporting date are shown below, based on the contractual terms of each liability in place at reporting date. The amounts disclosed are based on undiscounted cash flows. Less than years Over 5 Total Carrying months months years contractual Amount cash flows liabilities 2010 Non-interest bearing 367, ,589 1,114,159 1,114,159 Exit fees ,013 24,013 24,013 Interest bearing liabilities Bank debt 187,558 5,004, ,192,337 4,911,000 Preference units 104, ,877 1,188,601-1,398, ,971 Total 660,005 5,109,656 1,188, ,602 7,728,864 6,923, Non-interest bearing 83, , , ,459 Exit fees ,186 14,186 14,186 Interest bearing liabilities Bank debt 192, ,000 5,263,000-5,647,000 4,911,000 Preference units Total 275, ,000 5,263, ,775 6,491,645 5,755,645 17

18 NOTE 2: FINANCIAL RISK MANAGEMENT (CONTINUED) Fair value estimation The fair values of financial assets and financial liabilities are presented in the following table and can be compared to the carrying values as presented in the statement of financial position. Fair values are those amounts at which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm s length transaction. Fair values derived may be based on information that is estimated or subject to judgment, where changes in assumptions may have a material impact on the amounts estimated. Areas of judgment and the assumptions have been detailed below. Where possible, valuation information used to calculate fair value is extracted from the market, with more reliable information available from markets that are actively traded. In this regard, fair values for listed securities are obtained from quoted market bid prices. Where securities are unlisted and no market quotes are available, fair value is obtained using discounted cash flow analysis and other valuation techniques commonly used by market participants. Net carrying Net fair Net carrying Net fair value value value value Financial assets Cash and cash equivalents 367, ,079 46,942 46,942 Inventories 1,916,040 1,916, Trade & other receivables 439, , , ,714 2,723,054 2,723, , ,656 Financial liabilities Trade and other payables 1,114,159 1,114, , ,459 Bank debt 4,910,653 4,910,653 4,910,271 4,910,271 Preference units 873, , ,898,783 6,898,783 5,740,730 5,740,730 Cash and cash equivalents, trade and other receivables and trade and other payables are short term instruments in nature whose carrying value is equivalent to fair value. 18

19 NOTE 3: REVENUE Revenue includes: (a) Farm revenue from: Almond sales 744,573 - (b) Rental income Land licence fees 316,185 1,130,494 (c) Interest income arises from: Cash and cash equivalents 4,949 6,092 NOTE 4: EXPENSES Profit before distributions to unitholders includes the following expenses: Finance costs (excluding unitholders funds): Interest paid or payable to other persons 454, ,443 Farm operating expenses comprise costs directly associated with the farm together with net movements in inventory. Debts forgiven by the related project comprise amounts owed by the project that were taken over by the Trust following restructure. NOTE 5: CHANGE IN NATURE OF TRADING OPERATIONS As mentioned in Note 5 of the Responsible Entity report, the business operations of Lake Powell Almond Project No.2 ended on 1 November Since then, all activities of growing and selling of the almonds have taken place in the Trust. The financial statements of Lake Powell Project No.2 were therefore prepared to 19 May 2010, being the cessation date and the date all assets and liabilities held within the Project had been realised. On cessation of the Project, amounts owed by the Trust to the Project amounted to $125,779 and these were forgiven as part of the restructure. 19

20 NOTE 6: INCOME TAX EXPENSE (a) Numerical reconciliation of income tax expense to prima face tax payable Current tax (184,554) - Deferred tax (i) 1,143,396 - Deferred tax - initial recognition (7,368) - Income tax expense (ii) 951,474 - (i) Deferred income tax (revenue)/expense included in the income tax expense comprises: Increase in deferred tax assets (30,239) - Decrease in deferred tax liabilities 1,173,635 - Potential tax 30% 1,143,396 - (ii) Profit/(loss) before income tax and distribution to unitholders 3,321,921 (18,611) Prima facie tax on profit/(loss) at 30% 996, ,576 - Initial recognition of deferred tax (7,368) - Other (37,734) - Income tax expense 951,474 - As disclosed in Note 1(i) the Trust falls within the categories of a public trading trust, resulting from the conversion of the Trust into an operating trust on 1 November

21 NOTE 7: CASH AND CASH EQUIVALENTS Cash at bank 367,079 46,942 Cash carries a weighted average effective interest rate of 1.5% (2009: 1.5%). NOTE 8: INVENTORY Almonds on hand 1,916,040 - NOTE 9: TRADE AND OTHER RECEIVABLES CURRENT Trade receivables 353,291 - Amount receivable from related parties - 883,714 Other receivables 78,736 - Prepayments 7, , ,714 NON-CURRENT Lease income receivable (recognised on a straight line basis) - 492,471 Receivables are non-interest bearing. There are no receivables where the fair value would be materially different from the carrying value. NOTE 10: PROPERTY, PLANT & EQUIPMENT Land & Total Buildings Year ended 30 June 2010 Opening net book amount - - Revaluation increments - - Transferred from investment properties 3,990,274 3,990,274 Closing net book value 3,990,274 3,990,274 At 30 June 2010 Fair value 3,990,274 3,990,274 Accumulated depreciation - - Net book amount 3,990,274 3,990,274 21

22 NOTE 11: INVESTMENT PROPERTIES LAKE POWELL ALMOND PROPERTY TRUST NO.2 (a) Investment properties are represented by: Note Investment Property at Directors' valuation - 1,292,870 Less amount classified as receivables (rental income recognised on a straight line basis) 9 - (492,471) - 800,399 (b) Movements during the financial year: Opening balance at 1 July 800,399 1,026,330 Add amounts previously classified as receivables 492,471 - Changes in fair value of investment properties 2,697,404 (225,931) Transferred to property, plant & equipment (3,990,274) - Closing balance at 30 June - 800,399 (c) Amounts recognised in profit/(loss) for investment properties Rental income* - 1,130,494 Direct operating expenses from properties that generated rental income - (57,400) Closing balance at 30 June - 1,073,094 * Prior to 1 November 2009, the investment properties were leased inclusive of all integral components including agricultural assets and water licences to the growers of a related scheme. Rental revenue has been disclosed based on the lease of the investment properties, notwithstanding that agricultural assets and water licences are separately classified. All property expenses related to those that generated rental revenue during the period. (d) Valuation basis Investment properties have been reclassified as land & buildings due to the change in nature of the Trust and as a result of being owner occupied. Despite the reclassification, the basis of the valuation has remained the same and is fair value, being the amounts for which the properties could be exchanged between willing parties in an arm s length transaction. The properties are valued based upon the contract price offered by Select Harvest Limited in March (e) Assets pledged as security Refer to Note 16 for information on investment properties and other assets pledged as security by the Trust. 22

23 NOTE 12: AGRICULTURAL ASSETS Almond trees at fair value 936, ,536 Opening balance at 1 July 936,536 1,196,436 Additions - - Changes in fair value of agricultural assets - (259,900) Closing balance at 30 June 936, ,536 NOTE 13: INTANGIBLE ASSETS Water licences - at cost 4,088,828 4,088,828 There were no movements in water licences during the year. The Trust holds 2,642 megalitres of permanent water licences. Water licences have an indefinite useful life as a result of their legal form, and are thus not amortised. When considering whether the intangible asset s value is impaired, the Directors have assessed the recoverable amount based on fair value less costs to sell by using observable market prices. The Directors have determined the intangible asset s value is not impaired. 23

24 NOTE 14: DEFERRED TAX ASSETS Deductible Temporary Differences: Provisions 2,948 - Loans and borrowings 1,160 - Accruals 4,185 - Tax losses 184,554 - Other expenses 36,097 - Net deferred tax assets 228,944 - Movements Balance at start of period - - Initial recognition of deferred tax asset 7,368 - Charged to the statement of comprehensive income 30,239 - Charged directly to equity 6,783 - Tax losses recognised 184,554 - Balance at 30 June ,944 - NOTE 15: TRADE AND OTHER PAYABLES CURRENT Unsecured liabilities: Amounts payable to related parties 68,750 1,130 Sundry creditors and accruals 298,820 82,740 Distribution payable to unitholders 746, ,589 1,114, ,459 Trade and other payables are non-interest bearing. There are no payables where the fair value would be materially different from the carrying value. 24

25 NOTE 16: INTEREST-BEARING LIABILITIES CURRENT Secured liabilities: Commercial bills 4,911,000 4,911,000 Unamortised transaction costs (347) (729) 4,910,653 4,910,271 NON CURRENT Unsecured liabilities: Preference units 873,971 - The commercial bills have a weighted average effective interest rate of 7.63% at balance date (2009:7.53%) with a maturity date of 1 to 3 months that is expected to be renewed or rolled over at current market interest rates. The Trust has the right to renew or roll over these under a rolling monthly facility agreement. The preference units were allotted on 1 June 2010 and have a fixed interest rate of 12% at balance date. The units may be redeemed by the unitholder 5 years after allotment, or at the option of the Responsible Entity at any time 12 months after the allotment date. Preference unitholders have no right to require the Responsible Entity to redeem the units. (a) Assets pledged as security The commercial bill is secured by a registered first mortgage over the investment property and water licences. The carrying amount of assets pledged as security are: Property, plant & equipment 3,990,274 - Investment property - 1,292,870 Agricultural assets 936, ,536 Water licences 4,088,828 4,088,828 9,015,638 6,318,234 (b) Financing arrangements Loan facilities Total facilities: Commercial bills 4,911,000 4,911,000 Facilities utilised at balance date: Commerical bills 4,911,000 4,911,000 Facilities not utilised at balance date: Commerical bills - - The commercial bill facility is subject to annual review. The covenants over the bank borrowings require an interest cover ratio of greater than 1.75 and a loan value ratio of less than 60%. At 30 June 2010 both of these covenants had been met. 25

26 NOTE 17: DEFERRED TAX LIABILITIES Temporary differences attributable to: Property, plant & equipment 24,323 - Inventory 340,091 - Revaluation 809,221 - Net deferred tax assets 1,173,635 - Movements Balance at start of period - - Initial recognition of deferred tax liability - - Charged/(credited) to the statement of comprehensive income 1,173,635 - Balance at 30 June ,173,635 - NOTE 18: PROVISIONS Exit fees 24,013 14,186 The provision for exit fees relates to amounts payable to the Responsible Entity upon the sale of the investment property. The amount payable is based on a percentage of the property sale price. There is a significant amount of uncertainty as to when the property will be sold and the sale price. The estimated sale date for the property is The provision has been calculated using a discount rate of 10.15%. Movements during the financial year: Opening balance 1 July 14,186 12,072 Charged to the Statement of Comprehensive income - Provision made during the period 9,827 2,114 Closing balance 30 June 24,013 14,186 26

27 NOTE 19: UNITHOLDERS FUNDS LAKE POWELL ALMOND PROPERTY TRUST NO.2 Note Funds attributable to unitholders consists of: Net contributions by unitholders (a) 1,423,581 1,423,581 Cumulative retained funds after distributions to unitholders (b) 2,440,840 70,393 3,864,421 1,493,974 (a) Net contributions by unitholders 1,468,000 ordinary units fully paid (2009: 1,468,800) 1,423,581 1,423,581 There were no movements in issued units during the year. As stipulated in the Trust's constitution, each unit represents a right to an individual unit in the Trust and does not extend to a right to the underlying assets of the Trust. There are no separate classes of units and each unit has the same rights attaching to it as all other units of the Trust. (b) Cumulative retained funds after distributions to unitholders Movements during the financial year: Opening balance 70, ,615 Increase/(decrease) 2,370,447 (249,222) Closing balance 2,440,840 70,393 (c) Capital management The Trust regards net assets attributable to unitholders as its capital. NOTE 20: OPERATING LEASE ARRANGEMENTS Not later than 12 months - 900,632 Between 12 months and 5 years - 4,075,929 Greater than 5 years - 6,351,493-11,328,054 27

28 NOTE 21: RELATED PARTY TRANSACTIONS Responsible Entity The Responsible Entity of the Trust is Seven Fields Management Limited, a wholly owned subsidiary of Seven Fields Pty Ltd. Responsible Entity's fees and other transactions Under the terms of the constitution, the Responsible Entity is entitled to receive fees in accordance with the product disclosure statement. Fees for the year paid/payable by the Trust: Exit fee 9,827 2,114 Management of the Trust 195,292 86,028 Amounts Payable: Aggregate amounts payable to the Responsible Entity at reporting date 68,750 - Amounts Receivable: Aggregate amounts receivable to the Responsible Entity at reporting date - 414,906 Licence fees: Licence fees received from the Responsible Entity during the year - 904,681 Transactions and balances with companies and schemes which are associated with the Responsible Entity or its affiliates Amounts Payable: Aggregate amounts payable to Schemes associated with the Responsible Entity at reporting date - 1,130 Amounts Receivable: Aggregate amounts receivable to Schemes associated with the Responsible Entity at reporting date - 468,808 Transactions between related parties are on normal commercial terms and conditions are no more favourable than those to other parties. Loans to/from related parties are interest free, unsecured and at call. No provision for doubtful debts has been raised during the year and no debts have been written off. 28

29 NOTE 21: RELATED PARTY TRANSACTIONS (CONTINUED) Key management personnel The Trust does not employ personnel in its own right. However, it has an incorporated Responsible Entity, Seven Fields Management Limited, to manage the activities of the Trust and this is considered the key management personnel. The Directors of the Responsible Entity are key management personnel of that entity and their names are Greg McMahon, Grant Ross (resigned 24 August 2010), Peter Scully (resigned 15 July 2009), Richard Byllaardt (appointed 2 July 2009) and Peter Aubort (appointed 24 August 2010). No compensation is paid directly by the Trust to Directors or to any of the key management personnel of the Responsible Entity. Payments made by the Trust to the Responsible Entity do not specifically include any amounts attributable to the compensation of key management personnel. Unit Holdings The numbers of units in the Trust held during the financial year by each Director and other key management personnel of the Responsible Entity, including their personally related parties, are set out below. There were no units granted during the reporting period as compensation Balance at start Changes during Balance at the Interest held of year the year end of the year Units Units Units % Directors 13,500-13,500 1% 2009 Directors 13,500-13,500 1% Distributions received or receivable from the Trust by key management personnel - 2,436 29

30 NOTE 22: CASH FLOW INFORMATION (a) Reconciliation of cash LAKE POWELL ALMOND PROPERTY TRUST NO.2 Cash at bank and in hand 367,079 46,942 (b) Reconciliation of cash flows from operating activities with profit before distribution to unitholders Profit before distributions to unitholders 2,370,447 15,817 Adjustments for: Net changes in fair value of investment properties (2,697,404) 225,931 Net changes in fair value of agricultural assets - 259,900 Amortisation of capital finance costs 9, Amounts recognised directly in equity 6,786 - Changes in assets and liabilities: Decrease/(increase) in receivables 451,687 (635,404) Increase in deferred tax assets (228,944) - Increase in inventory (1,916,040) - Increase in payables 283,700 - Increase in prepayments (7,908) (503) Increase in deferred tax liabilities 1,173,635 - Increase in provision for exit fees 380 2,114 Cash flows from operating activities (553,834) (131,763) NOTE 23: REMUNERATION OF AUDITORS Remuneration of the auditor, BDO Audit (Qld) Pty Ltd for: Audit or review of financial reports 9,500 6,500 Non-audit services: Auditor of the Trust: Audit of compliance plan 1,950 1,950 Related practice of auditor of the Trust: Taxation compliance in respect of distribution statements 1,000 1,000 12,450 9,450 NOTE 24: CONTINGENT LIABILITIES There are no contingent liabilities at the end of the year. 30

31 NOTE 25: EVENTS SUBSEQUENT TO REPORTING DATE There are no events subsequent to reporting date that require disclosure. NOTE 26: RESPONSIBLE ENTITY DETAILS The registered office and the principal place of business of the Responsible Entity is: Seven Fields Management Limited Level 6, 52 Merivale Street South Brisbane Qld

32 DIRECTORS DECLARATION The Directors of Seven Fields Management Limited, the Responsible Entity, declare that: 1. The financial statements, comprising the statement of comprehensive income, statement of financial position, statement of cash flows, statement of changes in equity, and accompanying notes, are in accordance with the Corporations Act 2001 and: (a) comply with Australian Accounting Standards and the Corporations Regulations 2001; and (b) give a true and fair view of the Trust s financial position as at 30 June 2010 and of its performance for the year ended on that date. 2. In the Directors opinion, there are reasonable grounds to believe that the Trust will be able to pay its debts as and when they become due and payable. This declaration is made in accordance with a resolution of the Board of Directors and is signed for and on behalf of the Directors of Seven Fields Management Limited by: Richard Byllaardt Director Brisbane, 23 September

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