australian water technologies pty ltd · australian water technologies pty ltd (abn 81 003 848 860)...

Australian Water Technologies Pty Ltd

Financial Statements for the year ended

30 June 2011

Australian Water Technologies Pty Ltd - 30 June 2011

Contents Statements of comprehensive income Page 3 Statements of financial position Page 4 Statements of changes in equity Page 5 Statements of cash flows Page 7 Notes to the financial statements: Page 8 Company information Page 8 1. Summary of significant accounting policies Page 8 2. Income and expenses Page 19 3. Income tax expense 2 4. Cash and cash equivalents Page 23 5. Investments Page 23 6. Trade and other receivables Page 24 7. Other financial assets Page 25 8. Current tax liabilities Page 25 9. Deferred tax assets and liabilities Page 26 10. Trade and other payables Page 28 11. Dividend payable Page 28 12. Share capital Page 28 13. Other contributed equity Page 29 14. Reserves Page 29 15. Retained earnings Page 29 16. Non-controlling interests Page 30 17. Total equity reconciliation Page 30 18. Notes to the statements of cash flows Page 31 19. Consultants Page 31 20. Commitments Page 31 21. Group entities Page 32 22. Auditors’ remuneration Page 32 23. Related party disclosures Page 33 24. Financial risk management disclosures Page 35 25. Contingencies Page 46 26. Proposed voluntary deregistration of the Company Page 46 Directors’ Declaration Page 47 Independent Auditor’s Report Page 48

Australian Water Technologies Pty Ltd - 30 June 2011 Page 2

Start of audited financial statements

Note 2011 2010 2011 2010$'000 $'000 $'000 $'000

Continuing operations:

Revenue 2(a) 485 368 1,134 368

Other income 2(b) - - - -

Expenses 2(c) (77) (69) (89) (68)

Profit before income tax 408 299 1,045 300

Income tax expense 3(a) (288) (78) (293) (78)

Profit from continuing operations 120 221 752 222

Discontinued operations:

Profit from discontinued operations net of income tax 2(d) 421 120 - -

Profit for the period 541 341 752 222

Other comprehensive income

Foreign operations: 14Exchange differences on translation of foreign operations (52) 42 - - Reclassified to profit or loss on sale of foreign subsidiary (1) - - -

Other comprehensive income for the period net of income tax (53) 42 - -

Total comprehensive income for the period 488 383 752 222

Profit attributable to:

Equity holders of the Company 15 539 339 752 222

Non-controlling interests 16 2 2 - -

Profit for the period 541 341 752 222

Total comprehensive income for the period attributable to:

Equity holders of the Company 17 486 381 752 222

Non-controlling interests 16 2 2 - -

Total comprehensive income for the period 488 383 752 222

These statements should be read in conjunction with the accompanying notes.

Consolidated The Company


and its controlled entities

Statements of comprehensive income

for the year ended 30 June 2011


Note 2011 2010 2011 2010$'000 $'000 $'000 $'000

Current assets

Cash and cash equivalents 4 10,914 10,234 10,914 9,909Trade and other receivables 6 3 66 3 2

Total current assets 10,917 10,300 10,917 9,911

Non-current assets

Investments 5 - - - 18Other financial assets 7 - 18 - 18Deferred tax assets 9 5 6 5 6

Total non-current assets 5 24 5 42

Total assets 10,922 10,324 10,922 9,953

Current liabilities

Trade and other payables 10 16 32 16 27Current tax payable 8 - 24 - - Dividend payable 11 - 7 - -

Total current liabilities 16 63 16 27

Total liabilities 16 63 16 27

Net assets 10,906 10,261 10,906 9,926

Equity

Share capital 12 500 500 500 500Other contributed equity 13 2,182 1,954 2,182 1,954Reserves 14 - 53 - -Retained earnings 15 8,224 7,685 8,224 7,472

Total equity attributable to equity holders of the Company 10,906 10,192 10,906 9,926

Non-controlling interests 16 - 69 - -

Total equity 17 10,906 10,261 10,906 9,926




Statements of financial position

as at 30 June 2011



Other Total attributable Non-Share contributed Translation Retained to equity holders controlling Total

Note capital equity reserve earnings of the Company interests equity$'000 $'000 $'000 $'000 $'000 $'000 $'000

Balances as at 1 July 2010 500 1,954 53 7,685 10,192 69 10,261

Comprehensive income for the period:

Profit for the period 15 - - - 539 539 2 541

Other comprehensive income:

Foreign operations: 14Exchange differences on translation of foreign operations - - (52) - (52) - (52) Reclassified to profit or loss on sale of foreign subsidiary - - (1) - (1) - (1)

Total comprehensive income for the period - - (53) 539 486 2 488

Transactions with owners in their capacity as owners:

Repayment of share capital 16 - - - - - - -

Tax liabilities assumed by the Parent 17 - 228 - - 228 - 228

Dividends recognised as a liability - - - - - (3) (3)

Total transactions with owners in their capacity as owners - 228 - - 228 (3) 225

Changes in ownership interests in subsidiaries:

Disposal of non-controlling interests upon sale and loss of control of subsidiary - - - - - (68) (68)

Total changes in ownership interests in subsidiaries - - - - - (68) (68)

Balances as at 30 June 2011 500 2,182 - 8,224 10,906 - 10,906

Balances as at 1 July 2009 500 1,886 11 7,346 9,743 133 9,876


Profit for the period 15 - - - 339 339 2 341

Other comprehensive income:

Foreign operations: 14Exchange differences on translation of foreign operations - - 42 - 42 - 42 Reclassified to profit or loss on sale of foreign subsidiary - - - - - - -

Total comprehensive income for the period - - 42 339 381 2 383


Repayment of share capital 16 - - - - - (66) (66)

Tax liabilities assumed by the Parent 17 - 68 - - 68 - 68

Dividends recognised as a liability - - - - - - -

Total transactions with owners in their capacity as owners - 68 - - 68 (66) 2

Changes in ownership interests in subsidiaries:

Disposal of non-controlling interests upon sale and loss of control of subsidiary - - - - - - -

Total changes in ownership interests in subsidiaries - - - - - - -

Balances as at 30 June 2010 500 1,954 53 7,685 10,192 69 10,261

Consolidated



Statements of changes in equity



OtherShare contributed Retained Total

Note capital equity earnings equity$'000 $'000 $'000 $'000

Balances as at 1 July 2010 500 1,954 7,472 9,926


Profit for the period 15 - - 752 752

Total comprehensive income for the period - - 752 752


Tax liabilities assumed by the Parent 17 - 228 - 228

Total transactions with owners in their capacity as owners - 228 - 228

Balances as at 30 June 2011 500 2,182 8,224 10,906

Balances as at 1 July 2009 500 1,886 7,250 9,636


Profit for the period 15 - - 222 222

Total comprehensive income for the period - - 222 222


Tax liabilities assumed by the Parent 17 - 68 - 68

Total transactions with owners in their capacity as owners - 68 - 68

Balances as at 30 June 2010 500 1,954 7,472 9,926


The Company



Statements of changes in equity (continued)



Note 2011 2010 2011 2010$'000 $'000 $'000 $'000

Cash flows from operating activities

Cash receipts in the course of operations 589 289 1 2Cash payments in the course of operations (133) (133) (70) (59)Cash generated from operations 456 156 (69) (57)

Interest received 483 370 483 370Dividend received - - 584 -Income tax paid (22) (33) - -Withholding tax paid (25) (8) - -

Net cash from operating activities 18 892 485 998 313

Cash flows from investing activities

Proceeds from sale of subsidiary (net of cash disposed) 2(d) (156) - 7 -Loan repayment received from non-controlling interests - 50 - 50Cash receipt from reduction of investment in subsidiary - - - 43

Net cash from investing activities (156) 50 7 93

Cash flows from financing activities

Repayment of share capital to non-controlling interests 16 - (66) - -

Net cash from financing activities - (66) - -

Net increase (decrease) in cash and cash equivalents 736 469 1,005 406

Cash and cash equivalents at beginning of period 10,234 9,724 9,909 9,503

Effect of exchange rate fluctuations on the balances of cash held inforeign currencies (56) 41 - -

Cash and cash equivalents at end of period 4 10,914 10,234 10,914 9,909





Statements of cash flows



Australian Water Technologies Pty Ltd and its controlled entities

Notes to the financial statements for the year ended 30 June 2011

Company information

Australian Water Technologies Pty Ltd (ABN 81 003 848 860) is a wholly-owned subsidiary of Sydney Water Corporation and will be referred to in these financial statements as ‘the Company’. The Company was incorporated in Australia on 28 July 1989 under the previous name Rartron Pty Ltd, which was changed to the present company name on 20 March 1991. The address of the Company’s registered office in Australia is Level 15, 1 Smith Street, Parramatta, NSW 2150. The consolidated entity comprising the Company and its subsidiary in the current or previous reporting periods will be collectively referred to in these financial statements as ‘the Group’. The Company’s parent entity, Sydney Water Corporation, is a wholly-owned NSW statutory state owned corporation and will be referred to in these financial statements as ‘the Parent’. The Company’s ultimate parent is the NSW Government. Accordingly, the results, financial position and cash flows of the Company and its subsidiary are included in the NSW Total State Sector Accounts. The principal activity of the Company and the Group is marketing the Parent’s expertise in water and water-related services to customers both domestically through the Company’s Australian operations and overseas through its subsidiary. The Company and the Group are for-profit entities. The Company’s consolidated and parent entity financial statements for the year ended 30 June 2011 were authorised for issue in accordance with a resolution of the directors on 5 September 2011. The significant accounting policies that have been adopted in the preparation of the financial statements are detailed below.

1. Summary of significant accounting policies (a) Basis of preparation

The financial statements are general purpose financial statements, which have been prepared in accordance with applicable Australian Accounting Standards (including Australian Interpretations) issued by the Australian Accounting Standards Board (AASB), mandates issued by NSW Treasury and other mandatory and statutory reporting requirements, including Part 3 of the Public Finance and Audit Act 1983 and the associated requirements of the Public Finance and Audit Regulation 2010. In preparing these financial statements, the accounting policies described below are based on the requirements applicable to for-profit entities in these mandatory and statutory requirements. The financial statements cover the financial performance and cash flows of the Company and the Group for the reporting period 1 July 2010 to 30 June 2011 and their financial position as at 30 June 2011.

The financial statements have been prepared on the historical cost basis, except for certain non-current assets that are stated at

cost less any impairment losses, where applicable. The financial statements are presented in Australian dollars and all values are rounded to the nearest thousand dollars ($’000).

The accounting policies set out below have been consistently applied by all entities in the Group to all periods presented in the financial statements. Where relevant, comparative amounts have been restated to conform to the current reporting period’s presentation. This could arise as a result of the requirements of new or revised Australian Accounting Standards or Australian Interpretations, a voluntary change in accounting policy or a reclassification of items presented. If any operations in the Group are discontinued in the current reporting period, the comparative statements of comprehensive income are re-presented for comparison purposes as if those operations had been discontinued from the start of the previous reporting period.

(b) Statement of compliance

The financial statements comply with all applicable Australian Accounting Standards, including Australian Interpretations. The financial statements also comply with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB).


(c) Basis of consolidation

The financial statements of the Group include the financial statements of the Company, being the parent entity of the Group, and the financial statements of its subsidiary, which is an entity that the Company controls. Control exists when the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The financial statements of its subsidiary are prepared for the same reporting period as the Company. Consistent accounting policies have been applied to all entities within the Group. The balances and effects of transactions between entities in the Group have been eliminated in full. Where an entity either begins or ceases to be controlled during the reporting period, the results are included only from the date control commences or up to the date control ceases. The accounting policy for recognition and measurement of the Company’s investment in its subsidiary is shown below in note 1(j). Non-controlling interests of the Group are allocated their share of net profit after tax in the Group’s consolidated statement of comprehensive income and are presented within equity in the Group’s consolidated statement of financial position, separately from the equity that is attributable to the equity holders of the Company.

(d) Foreign currency

Functional currency and presentation currency

The functional currency of the Company’s Australian operations is Australian Dollars. The functional currency of a foreign operation is the currency used in the particular country in which the foreign operation was established. The only foreign operation in the Group’s financial statements is the Company’s subsidiary, AWT International (Thailand) Limited, which was sold on 30 May 2011 (refer note 2(d)) and had a functional currency of Thailand Baht. The presentation currency for preparing the financial statements of the Company and the Group as a whole for the purposes of financial reporting in the NSW public sector is Australian Dollars.

Transactions and balances

Transactions in foreign currencies are translated to Australian Dollars at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to Australian Dollars at the foreign exchange rate ruling on that date. Foreign exchange differences arising on translation are recognised in profit or loss. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to Australian Dollars at foreign exchange rates ruling at the dates the fair value was determined. Net foreign exchange gains are classified as other income (refer note 1(f)) and net foreign exchange losses are classified as expenses.

Translation of controlled foreign operations

The assets and liabilities of a foreign operation are translated into Australian Dollars, which is the Group’s presentation currency, at the foreign exchange rates ruling at the reporting date. Equity items are translated at historical rates. The revenues and expenses of the foreign operation are translated at a weighted average exchange rate for the reporting period, which is considered to approximate the foreign exchange rates ruling at the dates of the transactions. Foreign exchange differences arising on retranslation are recognised in other comprehensive income and taken directly to a translation reserve, which is a separate component of equity. Upon disposal of a foreign operation, the cumulative balance of gains or losses previously taken to the translation reserve for that particular foreign operation is transferred to profit or loss as part of the gain or loss on disposal.


(e) Revenue

Revenue is income that arises in the course of ordinary activities. Revenue is recognised and measured at the fair value of the consideration received or receivable to the extent that it is probable that the economic benefits will flow to the Company or the Group and the revenue can be reliably measured. In respect of the significant categories of revenue earned, the following recognition criteria must also be met before revenue is recognised:

Rendering of services

The Group provides water-related services to customers both domestically and overseas when required. Such services comprise construction and consulting services, project management services and other miscellaneous services. Revenue recognition occurs on an accrual basis when the services are provided, except for construction and consulting contracts whereby revenue is recognised by reference to the stage of completion. (Refer also note 1(m)).

Interest revenue

Interest revenue is recognised as the interest accrues using the effective interest method. The effective interest method calculates the amortised cost of a financial asset and allocates interest revenue over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to its net carrying amount.

Royalty revenue

Prior to its sale, the Company’s partly-owned Thailand subsidiary, AWT International (Thailand) Limited, derived royalty revenue during the reporting period from a ‘Know-how’ agreement with two Thailand water supply companies. Under this agreement, the Thailand subsidiary permitted its name and experience to be used by the particular Thailand water supply companies in supplying water to provincial water authorities. Under the agreement, the royalty revenue was based on 2.25% of the gross revenue arising from the sale of water by the Thailand water supply companies to the provincial water authorities. Royalty revenue was usually recognised on an accrual basis in line with the sale of water under the agreement. During the reporting period and prior to the sale of the Thailand subsidiary, the agreement was terminated and a final settlement for future royalty streams was received by the Group from the Thailand water supply companies on 28 February 2011. Accordingly, royalty revenue recognised in profit or loss for the Group includes both the royalty amount applicable up to the date of termination of the agreement and also the amount of the settlement.

Dividend revenue

Dividend revenue is recognised when the right to receive payment is established. This is considered to be when the dividend is declared by the subsidiary.

(f) Other income

Other income comprises gains arising from either the disposal of recognised assets and liabilities or the re-measurement of some items to fair value at the reporting date that are required to be taken to profit or loss under the relevant applicable Australian Accounting Standards. Examples are gains from the disposal of assets and foreign exchange gains.

Disposal of investments or other financial assets

The net gain or loss on disposal of investments or other financial assets is calculated as the difference between the carrying amount at the time of disposal and the net proceeds on disposal and is recognised in profit or loss in the period of disposal. Net gains on disposal are recognised as other income. Net losses on disposal are reclassified as expenses.

Foreign exchange gains

Refer accounting policy for foreign exchange in note 1(d).

(g) Expenses

Expenses are recognised in profit or loss when incurred. Expenses include items that are incurred in the course of ordinary activities as well as various losses that arise from either the disposal of recognised assets or the re-measurement of some items at the reporting date that are required to be taken to profit or loss under the relevant applicable Australian Accounting Standards. Examples of losses are foreign exchange losses on transactions and asset impairment losses. Expenses are disclosed in these financial statements by nature. (Refer note 2(c)).


(h) Taxation

Income tax

The Company is subject to notional taxation in accordance with the State Owned Corporations Act 1989. An ‘equivalent’ or ‘notional’ income tax is payable to the NSW Government through the Office of State Revenue. Taxation liability is assessed according to the National Tax Equivalent Regime (NTER) that replaced the former State Tax Equivalent Regime of the NSW Treasury from 1 July 2001. The NTER closely mirrors the Commonwealth Income Tax Assessment Acts of 1936 and 1997 (as amended) and is administered by the Australian Taxation Office (ATO). The Group applies the ‘balance sheet method’ of tax-effect accounting to determine income tax expense and current and deferred tax assets and liabilities. Tax-effect accounting is also used to recognise tax liabilities or assets arising in overseas tax jurisdictions through the Group’s overseas operations. Income tax expense on the operating result for the reporting period comprises both current and deferred tax. Income tax is recognised in profit or loss except to the extent that it relates to items recognised directly in equity, in which case the income tax itself is recognised directly in equity as part of other comprehensive income. Current tax is the expected tax payable or receivable on the taxable income for the reporting period, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable or receivable in respect of previous years. Deferred tax represents future assessable or deductible amounts that arise due to temporary differences existing at the reporting date between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes (their tax bases). Deferred tax balances are not recognised for temporary differences that arise from the initial recognition of assets or liabilities in a transaction that is not a business combination and that affect neither accounting profit nor taxable profit, or for those that arise from investments in subsidiaries where the differences will probably not reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Deferred tax assets and liabilities provided are based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities to which they relate. They are measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the tax laws enacted or substantively enacted at the reporting date. Current and deferred tax assets are offset with current and deferred tax liabilities respectively where they relate to income taxes levied by the same taxation authority and the Group intends to settle the current tax assets and liabilities with that taxation authority on a net basis. (Refer note 9).

Tax consolidation Since 1 July 2002, the Company and the Parent have consolidated as a single entity for income tax purposes. The Parent is the head entity in the tax-consolidated group and accordingly is now the only Australian taxpayer in the tax-consolidated group for the purposes of the NTER. As the head entity, the Parent recognises all of the current tax assets and liabilities of the tax-consolidated group (after elimination of intra-group transactions). The tax-consolidated group does not have a tax funding agreement between the Parent and its wholly-owned subsidiaries. In accordance with Australian Interpretation 1052 ‘Tax Consolidation Accounting’, the Company initially recognises its own income tax expense and current and deferred tax balances. Subsequent to initial recognition, the Parent as the head entity in the tax-consolidated group assumes all of the Company’s current Australian tax balances in order to recognise the total current tax payable or receivable of the tax-consolidated group in its own statement of financial position. As there is no tax funding agreement in the tax-consolidated group, the assumption of the Company’s current Australian tax balances by the Parent is recognised as an equity transaction (as other contributed equity) in the Company’s and the Group’s statement of financial position. (Refer notes 13 and 23(c)).

Goods and services tax

Revenue, expenses and assets are recognised net of the amount of Goods and Services Tax (GST), except where the amount of GST incurred by the Company as a purchaser is not recoverable from the ATO. In such cases, the GST incurred is recognised as part of the cost of acquisition of an asset or as part of an item of expense. The Company’s GST obligations (amount receivable) are remitted to (received from) the Parent and are included in the Parent’s monthly consolidated Business Activity Statement remitted to the ATO. Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from or payable to the ATO is included as a current asset or liability respectively in the statements of financial position. Cash flows of GST are included in the statements of cash flows on a gross basis. The GST components of cash flows arising from investing and financing activities that are recoverable from, or payable to, the ATO are classified as cash flows from operating activities. Commitments are disclosed inclusive of GST where applicable.


(i) Cash and cash equivalents

Cash and cash equivalents in the statements of financial position comprise positive cash balances and short-term investments with a maturity period of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. These short-term investments are placed with the Parent to invest on the Company’s and the Group’s behalf, and are at call. For the purposes of the statements of cash flows, cash and cash equivalents consists of the above definition for the statements of financial position, net of any bank overdraft balances. Bank overdraft balances, if any, are shown as borrowings under current liabilities in the statements of financial position.

(j) Investments

Subsidiary

Prior to its sale (refer note 2(d)), the Company’s investment in its subsidiary was recognised in the Company’s statement of financial position at cost, less any impairment losses. An impairment loss was recognised by the Company when its investment in the subsidiary was greater than the subsidiary’s net assets.

(k) Trade and other receivables

Trade and other receivables represent amounts that are receivable by the Company and the Group for providing services to customers prior to the end of the reporting period and that are yet to be collected. Trade and other receivables, which generally have settlement terms within 30 days, are recognised initially and subsequently carried at original invoice amount, which is their fair value, less any impairment losses recognised by way of an allowance for impairment that represents specific amounts considered to be either doubtful or uncollectible. Recognition at original invoice amount is adopted as this is not materially different to amortised cost, given the short-term nature of these receivables. The recoverability of trade receivables is regularly reviewed throughout the reporting period. The allowance for impairment is recognised when collection of the full amount invoiced is considered to be no longer probable after due consideration of factors such as the length of time in excess of the due date, financial difficulties of the debtor, past recoverability experience and prevailing economic conditions. All of these factors are considered to be objective evidence of impairment. Known bad debts are written off against the allowance as and when identified.

(l) Other financial assets

Other financial assets only comprised a long-term loan receivable from the Company’s Thailand subsidiary’s non-controlling interest equity holders. The receivable was carried at cost, adjusted for foreign exchange differences, at the previous reporting date.

(m) Inventories

Inventories, if any, comprises work in progress held as inventory for external construction and consulting contracts. Where the Company or the Group has entered into consulting contracts with external clients, costs incurred, where the related revenues remain unrecognised, are recognised as work in progress held as inventory. Where the Company or the Group has entered into construction contracts with external clients, work in progress held as inventory is recognised at cost plus attributable profit to date based on the value of work completed, less progress billings and provision for foreseeable losses. Where applicable, such losses are provided for as soon as they are identified. Cost includes all costs directly related to specific contracts and an allocation of appropriate overhead expenses. Where the outcome of a contract cannot be reliably estimated, contract costs are expensed as incurred. Where it is probable that the costs will be recovered, revenue is only recognised to the extent of costs incurred. Profit is recognised on an individual construction contract basis using the percentage of completion method when the stage of contract completion can be reliably determined, costs to date can be clearly identified and reliable estimates can be made for total contract revenues to be received and costs to complete. The stage of completion is determined by reference to an assessment of costs incurred to date as a percentage of estimated total costs for each contract. Profit recognition on individual construction contracts does not normally commence until a contract is at least 30% complete and where the value of work undertaken exceeds $1,000.


(n) Impairment of assets

At each reporting date, the carrying amounts of assets (other than inventories and deferred tax assets) are reviewed to determine whether there is an indication of impairment. If any such indication exists, a formal estimate of their recoverable amount is made. Where the carrying amount of an asset is greater than its recoverable amount, the asset is considered impaired. An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised as an expense in profit or loss. Any reversals of impairment losses are also recognised in profit or loss. Impairment losses recognised in respect of an impaired cash-generating unit are allocated to reduce the carrying amount of the assets in the unit on a pro rata basis where those assets do not have a separately determinable recoverable amount. Impairment in respect of an investment in a subsidiary is determined in accordance with the accounting policy in note 1(j). Impairment in respect of receivables is determined in accordance with the accounting policy in note 1(k).

(o) Trade and other payables

Trade and other payables represent liabilities for goods and services provided to the Company and the Group prior to the end of the reporting period and that are unpaid. Trade and other payables are recognised in the statements of financial position at cost, which is considered to approximate amortised cost due to their short-term nature. They are not discounted, as the effect of discounting would not be material for these liabilities. Recognition of trade and other payables occurs when goods or services purchased by the Company and the Group have been received and an obligation to make future payments arises. (Refer note 10).

(p) Dividend payable

A liability for dividend payable is recognised in the reporting period in which the dividend is declared. This is considered to be the period in which the dividend has been proposed and agreed by the directors.

(q) Accounting standards and interpretations issued but not yet operative

At the reporting date, a number of Australian Accounting Standards and Australian Interpretations have been issued by the AASB that are not yet operative and which have not been early adopted by the Company and the Group. The following is a list of these standards and interpretations and a description of their possible impact on the financial statements in the period of their initial application: AASB 2009-11 ‘Amendments to Australian Accounting Standards arising from AASB 9 [AASB 1, 3, 4, 5, 7, 101, 102,

108, 112, 118, 121, 127, 128, 131, 132, 136, 139, 1023 & 1038 and Interpretations 10 & 12]’ (issued December 2009)

This standard makes consequential amendments to various standards and interpretations as a result of the issuance of AASB 9 ‘Financial Instruments’ in December 2009, which focused only on financial assets and has since been replaced by AASB 9 issued in December 2010 (see below). AASB 9 issued in December 2010 sets out new requirements for the classification and measurement of financial instruments, as well as recognition and derecognition requirements. This standard can be early adopted by entities that early adopt AASB 9 issued in December 2009. However, the standard is effectively replaced by AASB 2010-7 issued in December 2010 (see below) if an entity also adopts AASB 9 issued in December 2010. The initial application of this standard will have no impact on the financial results of the Company or the Group. This standard is applicable to annual reporting periods beginning on or after 1 January 2013 when AASB 9 is applied (ie 2013-14).

AASB 124 ‘Related Party Disclosures’ (issued December 2009)

This standard simplifies and clarifies the intended meaning of a related party and eliminates inconsistencies from the definition. The definition now identifies a subsidiary and an associate with the same investor as related parties of each other. Entities significantly influenced by one person and entities significantly influenced by a close family member of the family of that person are no longer related parties of each other. Also, the definition now identifies that whenever a person or entity has both joint control over a second entity and joint control or significant influence over a third party, the second and third entities are related parties of each other. Finally, a partial exemption is provided from the full disclosure requirements for government-related entities where they are controlled by the same government. The initial application of this standard will have no impact on the financial results of the Company or the Group. This standard is applicable to annual reporting periods beginning on or after 1 January 2011 (ie 2011-12).

AASB 2009-12 ‘Amendments to Australian Accounting Standards [AASBs 5, 8, 108, 110, 112, 119, 133, 137, 139, 1023 & 1031 and Interpretations 2, 4, 16, 1039 & 1052]’ (issued December 2009)

This standard makes amendments to a number of Australian Accounting Standards and Interpretations. The main amendment is in relation to AASB 8 ‘Operating Segments’ as a result of the issuance of revised AASB 124 ‘Related Party Disclosures’ in December 2009. AASB 8 is not applicable to the Company or the Group. All the other amendments principally arise from editorial corrections made by the IASB to its Standards and Interpretations (IFRSs) and by the AASB to its pronouncements. These amendments are considered to be minor and will have no impact on the financial results of the Company or the Group. This standard is applicable to annual reporting periods beginning on or after 1 January 2011 (ie 2011-12).


AASB 2009-14 ‘Amendments to Australian Interpretation – Prepayments of a Minimum Funding Requirement [AASB Interpretation 14]’ (issued December 2009)

This standard makes amendments to AASB Interpretation 14 ‘AASB 119 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction”. These amendments arise from the issuance of ‘Prepayments of a Minimum Funding Requirement (Amendment to IFRIC 14)’ by the IASB in November 2009. The amendments relate to grammatical changes to remove an unintended consequence arising from the treatment of prepayments of future contributions to defined benefit plans in some circumstances where there is a minimum funding requirement. The initial application of this standard will have no impact on the financial results of the Company or the Group. This standard is applicable to annual reporting periods beginning on or after 1 January 2011 (ie 2011-12).

AASB 1053 ‘Application of Tiers of Australian Accounting Standards’ (issued June 2010)

This standard establishes a differential financial reporting framework consisting of two Tiers of reporting requirements for preparing general purpose financial statements: (a) Tier 1 – Australian Accounting Standards; and (b) Tier 2 – Australian Accounting Standards – Reduced Disclosure Requirements Tier 2 comprises the recognition, measurement and presentation requirements of Tier 1, and substantially reduced disclosures corresponding to those requirements. Tier 1 requirements must be complied with by for-profit entities in the private sector that have public accountability (as defined in the standard), and Australian, State, Territory and Local Governments. Tier 2 requirements can apply as an optional choice to for-profit private sector entities that do not have public accountability, all not-for-profit private sector entities and public sector entities other than Australian, State, Territory and Local Governments. Whether this becomes an optional choice for the Company or the Group in the future to present reduced disclosure requirements under the standard will depend on NSW public sector-wide policy decisions of the NSW Treasury. The initial application of this standard will have no impact on the financial results of the Company or the Group as it is concerned with disclosure only. This standard is applicable to annual reporting periods beginning on or after 1 July 2013 (ie 2013-14).

AASB 2010-2 ‘Amendments to Australian Accounting Standards arising from Reduced Disclosure Requirements’ (issued June 2010)

This standard makes amendments to many Australian Accounting Standards and Interpretations, to introduce reduced disclosure requirements to these pronouncements for entities that prepare general purpose financial statements under the differential reporting framework and the two Tiers of financial reporting requirements established by Australian Accounting Standard AASB 1053 ‘Application of Tiers of Australian Accounting Standards’ (see above). The initial application of this standard will have no impact on the financial results of the Company or the Group as it is concerned with disclosure only, and its applicability on the Company or the Group is dependent on NSW public sector-wide policy decisions of the NSW Treasury in the future. This standard is applicable to annual reporting periods beginning on or after 1 July 2013 (ie 2013-14).

AASB 2010-4 ‘Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project [AASB 1, AASB 7, AASB 101 & AASB 134 and Interpretation 13]’ (issued June 2010)

This standard makes amendments to various Australian Accounting Standards and Interpretations as a consequence of the IASB’s annual improvements project. The amendments clarify existing requirements in the standards and cover transitional arrangements for first-time adopters of Australian Accounting Standards, disclosures related to the statement of changes in equity and financial instruments, significant event disclosures for interim financial reporting and the fair value of award credits in customer loyalty programs. The initial application of this standard will have no impact on the financial results of the Company or the Group. This standard is applicable to annual reporting periods beginning on or after 1 January 2011 (ie 2011-12).

AASB 2010-5 ‘Amendments to Australian Accounting Standards [AASB 1, 3, 4, 5, 101, 107, 112, 118, 119, 121, 132, 133, 134, 137, 139, 140, 1023 & 1038 and Interpretations 112, 115, 127, 132 & 1042]’ (issued October 2010)

This standard makes numerous editorial amendments to a range of Australian Accounting Standards and Interpretations, including amendments to reflect changes made to the text of IFRSs by the IASB. These amendments have no major impact on the requirements of the amended pronouncements. The initial application of this standard will have no impact on the financial results of the Company or the Group. This standard is applicable to annual reporting periods beginning on or after 1 January 2011 (ie 2011-12).

AASB 2010-6 ‘Amendments to Australian Accounting Standards – Disclosures on Transfers of Financial Assets [AASB 1 & AASB 7]’ (issued November 2010)

This standard adds and amends disclosure requirements about transfers of financial assets, including in respect of the nature of the financial assets involved and the risks associated with them. This includes circumstances where there is some continuing involvement with the transferred financial asset and yet there is no derecognition, or only partial derecognition, of the financial asset by the transferor. The initial application of this standard will have no impact on the financial results of the Company or the Group. This standard is applicable to annual reporting periods beginning on or after 1 July 2011 (ie 2011-12).


AASB 9 ‘Financial Instruments’ (issued December 2010)

This standard includes new requirements for the classification and measurement of financial instruments, as well as recognition and derecognition requirements for financial instruments, resulting from the completion of Phase 1 of the IASB’s project to replace IAS 39 ‘Financial Instruments: Recognition and Measurement’ (and consequently AASB 139 ‘Financial Instruments: Recognition and Measurement’). It replaces AASB 9 issued in December 2009 that focused only on requirements for financial assets. The new requirements improve and simplify the approach for financial instruments compared with the requirements of the existing AASB 139. The main changes from AASB 139 are as follows:

(a) Financial assets are classified on the basis of both the objective of an entity’s business model for managing its financial assets, and the characteristics of the contractual cash flows. This reduces the numerous categories of financial assets in AASB 139, each of which had its own classification criteria.

(b) The standard requires a financial asset to be measured at amortised cost if the asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows, and if the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Otherwise, financial assets are to be measured at fair value.

(c) The standard allows an irrevocable election on initial recognition to present gains or losses on investments in equity instruments that are not held for trading in other comprehensive income. There is no subsequent recycling on disposal of the instrument through profit or loss. Any dividends from these investments are to be recognised in profit or loss.

(d) Hybrid contracts with financial asset hosts are classified and measured in their entirety based on the classification criteria in (a) above.

(e) Investments in unquoted equity instruments must be measured at fair value. Cost may be an appropriate estimate of fair value in limited circumstances.

(f) Investments in contractually linked instruments that create concentrations of credit risk (tranches) are classified and measured by looking through to the underlying assets generating cash flows and assessing them against the classification criteria in (a) above to determine whether the investment is to be measured at fair value or amortised cost.

(g) Financial assets are reclassified only in rare circumstances when there is a relevant change in the entity’s business model.

(h) The portion of a change in fair value relating to an entity’s own credit risk for financial liabilities measured at fair value utilising the fair value option is presented in other comprehensive income, except when that would create an accounting mismatch in which case all changes in fair value are to be recognised in profit or loss.

While these are significant changes to the classification and measurement requirements for financial instruments for many entities, these amendments and the initial application of this standard will have no impact on the financial results of the Company or the Group. This standard is applicable to annual reporting periods beginning on or after 1 January 2013 (ie 2013-14).

AASB 2010-7 ‘Amendments to Australian Accounting Standards arising from AASB 9 (December 2010) [AASB 1, 3, 4, 5, 7, 101, 102, 108, 112, 118, 120, 121, 127, 128, 131, 132, 136, 137, 139, 1023 & 1038 and Interpretations 2, 5, 10, 12, 19 & 127]’ (issued December 2010)

This standard makes amendments to a range of Australian Accounting Standards and Interpretations as a consequence of the issuance of Australian Accounting Standard AASB 9 ‘Financial Instruments’ issued in December 2010 (see above). When operative, the standard supersedes AASB 2009-11 (see earlier). The initial application of this standard will have no impact on the financial results of the Company or the Group. This standard is applicable to annual reporting periods beginning on or after 1 January 2013 (ie 2013-14).

AASB 2010-8 ‘Amendments to Australian Accounting Standards – Deferred Tax: Recovery of Underlying Assets [AASB 112]’ (issued December 2010)

This standard makes amendments that provide a practical approach for measuring deferred tax liabilities and deferred tax assets when investment property is measured using the fair value model in Australian Accounting Standard AASB 140 ‘Investment Property’. The amendments introduce a presumption that investment property is recovered entirely through sale when determining any deferred tax balances related to the investment property. Such a presumption is only rebutted if the business model of the entity is to consume substantially all of the economic benefits embodied in the investment property over time rather than through sale. The initial application of this standard will have no impact on the financial results of the Company or the Group. This standard is applicable to annual reporting periods beginning on or after 1 January 2012 (ie 2012-13).

AASB 2010-9 ‘Amendments to Australian Accounting Standards – Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters [AASB 1]’ (issued December 2010)

This standard makes amendments that provide guidance for entities emerging from severe hyperinflation either to resume presenting Australian-Accounting-Standards financial statements or to present Australian-Accounting-Standards financial statements for the first time. Additionally, the amendments provide relief for first-time adopters of Australian Accounting Standards from having to reconstruct transactions that occurred before their date of transition to Australian Accounting Standards. The initial application of this standard will have no impact on the financial results of the Company or the Group. This standard is applicable to annual reporting periods beginning on or after 1 July 2011 (ie 2011-12).


AASB 2010-10 ‘Further Amendments to Australian Accounting Standards –Removal of Fixed Dates for First-time Adopters [AASB 2009-11 & AASB 2010-7]’ (issued December 2010)

This standard makes amendments that provide relief for first-time adopters of Australian Accounting Standards from having to reconstruct transactions that occurred before their date of transition to Australian Accounting Standards. The amendments to AASB 2009-11 (see earlier) will only affect early adopters of both AASB 2009-11 and AASB 9 as issued in December 2009, as AASB 2009-11 has since been superseded by AASB 2010-7 (see above). The initial application of this standard will have no impact on the financial results of the Company or the Group. This standard is applicable to annual reporting periods beginning on or after 1 January 2013 (ie 2013-14).

AASB 1054 ‘Australian Additional Disclosures’ (issued May 2011)

This standard sets out Australian-specific disclosures for for-profit entities that have adopted Australian Accounting Standards. These disclosures arise from a Trans-Tasman convergence project to harmonise financial reporting standards between Australian and New Zealand jurisdictions. They have been relocated from other Australian Accounting Standards that are equivalent to International Financial Reporting Standards and the wording has been made more consistent for application in both jurisdictions. The initial application of this standard will have no impact on the financial results of the Company or the Group. This standard is applicable to annual reporting periods beginning on or after 1 July 2011 (ie 2011-12).

AASB 2011-1 ‘Amendments to Australian Accounting Standards arising from the Trans-Tasman Convergence Project [AASB 1, AASB 5, AASB 101, AASB 107, AASB 108, AASB 121, AASB 128, AASB 132 & AASB 134 and Interpretations 2, 112 & 113]’ (issued May 2011)

This standard makes amendments to various Australian Accounting Standards as a result of a Trans-Tasman convergence project to harmonise financial reporting standards between Australian and New Zealand jurisdictions. Many of the amendments relocate Australian-specific disclosures to AASB 1054 (see above) but they do not change the overall requirements of the standards being amended. The initial application of this standard will have no impact on the financial results of the Company or the Group. This standard is applicable to annual reporting periods beginning on or after 1 July 2011 (ie 2011-12).

AASB 2011-2 ‘Amendments to Australian Accounting Standards arising from the Trans-Tasman Convergence Project – Reduced Disclosure Requirements [AASB 101 & AASB 1054]’ (issued May 2011)

This standard makes amendments to Australian Accounting Standards AASB 101 ‘Presentation of Financial Statements’ and AASB 1054 ‘Australian Additional Disclosures’ to establish reduced disclosure requirements for those entities that can choose to prepare general purpose financial statements under the Tier 2 reduced disclosure requirements defined in AASB 1053 (see earlier). These amendments have been made in the context of the Australian additional disclosures and amendments made under the Trans-Tasman Convergence Project. The initial application of this standard will have no impact on the financial results of the Company or the Group. This standard is applicable to annual reporting periods beginning on or after 1 July 2013 (ie 2013-14).

AASB 2011-3 ‘Amendments to Australian Accounting Standards – Orderly Adoption of Changes to the ABS GFS Manual and Related Amendments [AASB 1049]’ (issued May 2011)

This standard makes amendments to Australian Accounting Standard AASB 1049 ‘Whole of Government and General Government Sector Financial Reporting’, which only applies to whole of government and General Government sector reporting entities. The amendments clarify the definition of the Australian Bureau of Statistics Government Finance Statistics (ABS GFS) Manual, they facilitate the orderly adoption of changes to the ABS GFS Manual and they provide relief from adopting the latest version of the Manual and related disclosures. The initial application of this standard will have no impact on the financial results of the Company or the Group. This standard is applicable to annual reporting periods beginning on or after 1 July 2012 (ie 2012-13).

AASB 2011-4 ‘Amendments to Australian Accounting Standards to Remove Individual Key Management Disclosure Requirements [AASB 124]’ (issued July 2011)

This standard makes amendments to Australian Accounting Standard AASB 124 ‘Related Party Disclosures’ to remove the individual key management personnel disclosures within the standard that applied to entities defined as ‘disclosing entities’ under the Corporations Act 2001. The Company and the Group do not meet the definition of a disclosing entity and thus the amendments do not apply to these entities. Accordingly, the initial application of this standard will have no impact on the financial results of the Company or the Group. This standard is applicable to annual reporting periods beginning on or after 1 July 2013 (ie 2013-14).


AASB 2011-5 ‘Amendments to Australian Accounting Standards – Extending Relief from Consolidation, the Equity Method and Proportionate Consolidation [AASB 127, AASB 128 & AASB 131]’ (issued July 2011)

This standard makes amendments to Australian Accounting Standards AASB 127 ‘Consolidated and Separate Financial Statements’, AASB 128 ‘Investments in Associates’ and AASB 131 ‘Interests in Joint Ventures’ to extend relief from consolidation, the equity method and proportionate consolidation to not-for-profit entities in particular circumstances. Under these existing standards, relief is provided for entities that satisfy certain criteria, such as having an ultimate or intermediate parent that produces consolidated financial statements available for public use that are compliant with IFRS. The amendments introduce that relief to not-for-profit entities. The Company, however, is a for-profit entity. Accordingly, the initial application of this standard will have no impact on the financial results of the Company or the Group. This standard is applicable to annual reporting periods beginning on or after 1 July 2011 (ie 2011-12).

AASB 2011-6 ‘Amendments to Australian Accounting Standards – Extending Relief from Consolidation, the Equity Method and Proportionate Consolidation – Reduced Disclosure Requirements [AASB 127, AASB 128 & AASB 131]’ (issued July 2011)

This standard makes amendments to Australian Accounting Standards AASB 127 ‘Consolidated and Separate Financial Statements’, AASB 128 ‘Investments in Associates’ and AASB 131 ‘Interests in Joint Ventures’ to extend relief from consolidation, the equity method and proportionate consolidation in particular circumstances to entities that can choose to prepare general purpose financial statements under the Tier 2 reduced disclosure requirements defined in AASB 1053 (see earlier). Under these existing standards, relief is provided for entities that satisfy certain criteria, such as having an ultimate or intermediate parent that produces consolidated financial statements available for public use that are compliant with IFRS. The amendments introduce that relief to Tier 2 entities. Tier 2 requirements can apply as an optional choice to public sector entities other than Australian, State, Territory and Local Governments. However, whether this becomes an optional choice for the Company in the future to present reduced disclosure requirements under AASB 1053 will depend on NSW public sector-wide policy decisions of the NSW Treasury. The initial application of this standard is expected to have no impact on the financial results of the Company or the Group. This standard is applicable to annual reporting periods beginning on or after 1 July 2013 (ie 2013-14).

AASB 10 ‘Consolidated Financial Statements’ (issued August 2011)

This standard redefines and clarifies the notion of control that is the basis for determining which entities should be incorporated on a line by line basis into the consolidated financial statements of a group. A number of additional factors will now need to be considered, such as whether an investor has rights to direct relevant activities of the investee and the impact of potential voting rights, in determining whether control exists. The standard also addresses agency relationships, providing guidance on when a principal/agent relationship exists and clarifies that it is the principal (rather than the agent) that controls an entity over which the principal has delegated decision-making authority to the agent. When operative, this standard together with AASB 127 ‘Separate Financial Statements’ (issued August 2011) (see below) supersedes the requirements related to consolidated financial statements in AASB 127 ‘Consolidated and Separate Financial Statements’ (issued March 2008, as amended) and AASB Interpretation 112 ‘Consolidation – Special Purpose Entities’ (issued December 2004, as amended). The initial application of this standard is expected to have no impact on the financial results of the Company or the Group. This standard is applicable to annual reporting periods beginning on or after 1 January 2013 (ie 2013-14).

AASB 11 ‘Joint Arrangements’ (issued August 2011)

This standard establishes new principles for the financial reporting by entities that have an interest in arrangements that are controlled jointly (ie a joint arrangement). A joint arrangement is either a joint operation or a joint venture. The accounting by an entity must now reflect the rights and obligations arising from the contractual arrangement, rather than by way of its legal form. The standard removes the proportionate consolidation accounting option that previously existed in relation to accounting for joint ventures. A joint operator is required to recognise its assets and liabilities from the arrangement, including its share of assets or liabilities held or incurred jointly. A joint operator is also required to recognise revenue from the sale of its share of the output, its share of the revenue from the sale of the output by the joint operation, and its expenses including its share of any expenses incurred jointly. A joint venturer is required to recognise its interest in a joint venture as an investment and is required to account for it using the equity method of accounting. When operative, this standard supersedes AASB 131 ‘Interests in Joint Ventures’ (issued July 2004, as amended) and AASB Interpretation 113 ‘Jointly Controlled Entities – Non-Monetary Contributions by Venturers’ (issued July 2004, as amended). The initial application of this standard is expected to have no impact on the financial results of the Company or the Group. This standard is applicable to annual reporting periods beginning on or after 1 January 2013 (ie 2013-14).

AASB 12 ‘Disclosure of Interests in Other Entities’ (issued August 2011)

This standard focuses on disclosures in relation to the nature and financial effects of an entity’s interests in other entities, such as subsidiaries, associates, joint arrangements and unconsolidated structured entities. The standard expands the disclosure requirements for both consolidated entities and unconsolidated structured entities. It also requires disclosure of summarised financial information for each individually material joint venture, including disclosure of the nature and effects of an entity’s relationship with other parties or investors in the joint arrangement and the nature of the risks associated with those interests. The initial application of this standard is expected to have no impact on the financial results of the Company or the Group. This standard is applicable to annual reporting periods beginning on or after 1 January 2013 (ie 2013-14).


AASB 127 ‘Separate Financial Statements’ (issued August 2011)

This standard prescribes the accounting and disclosure requirements for investments in subsidiaries, joint ventures and associates when an entity prepares separate financial statements. Separate financial statements are those presented by a parent entity (ie an investor with control of a subsidiary) or an investor with joint control of, or significant influence over, an investee, in which the investments are accounted for at cost or in accordance with AASB 9 ‘Financial Instruments’. When operative, this standard together with AASB 10 (see above) supersedes AASB 127 ‘Consolidated and Separate Financial Statements’ (issued March 2008, as amended). The initial application of this standard is expected to have no impact on the financial results of the Company and it is not relevant for the Group. This standard is applicable to annual reporting periods beginning on or after 1 January 2013 (ie 2013-14).

AASB 128 ‘Investments in Associates and Joint Ventures’ (issued August 2011)

This standard prescribes the accounting for investments in associates and sets out the requirements for the application of the equity method when accounting for investments in associates and joint ventures. When operative, this standard supersedes AASB 128 ‘Investments in Associates’ (issued July 2004, as amended). The initial application of this standard is expected to have no impact on the financial results of the Company and it is not relevant for the Group. This standard is applicable to annual reporting periods beginning on or after 1 January 2013 (ie 2013-14).

AASB 2011-7 ‘Amendments to Australian Accounting Standards arising from the Consolidation and Joint Arrangements Standards [AASB 1, 2, 3, 5, 7, 9, 2009-11, 101, 107, 112, 118, 121, 124, 132, 133, 136, 138, 139, 1023 & 1038 and Interpretations 5, 9, 16 & 17]’ (issued August 2011)

This standard makes amendments to a range of Australian Accounting Standards and Interpretations to replace references to standards that have been superseded as a consequence of the issuance of AASB 10 ‘Consolidated Financial Statements’, AASB 11 ‘Joint Arrangements’, AASB 12 ‘Disclosure of Interests in Other Entities’, AASB 127 ‘Separate Financial Statements’ and AASB 128 ‘Investments in Associates and Joint Ventures’ in August 2011 (see above). The initial application of this standard is expected to have no impact on the financial results of the Company or the Group. This standard is applicable to annual reporting periods beginning on or after 1 July 2013 (ie 2013-14).


___________________________________________________________________________________________________________ Consolidated The Company Note 2011 2010 2011 2010 $’000 $’000 $’000 $’000 ___________________________________________________________________________________________________________ 2. Income and expenses

Profit before income tax expense has been arrived at after including the following income and expense items: (a) Revenue

Revenue items from continuing operations are shown below. Revenue items from discontinued operations are shown in note 2(d). Interest revenue from: Financial assets not at fair value through profit or loss using the effective interest method: Investments with the Parent 477 353 477 353 Bank balances 8 15 8 15 Dividend revenue - - 649 - ____________________________________________________ Total revenue from continuing operations 485 368 1,134 368 Total revenue from discontinued operations 2(d) 590 180 - - ____________________________________________________ Total revenue recognised in profit or loss 1,075 548 1,134 368 ____________________________________________________ (b) Other income Total other income from continuing operations - - - - Total other income from discontinued operations 2(d) 16 - - - ____________________________________________________ Total other income recognised in profit or loss 16 - - - ____________________________________________________

Other income from discontinued operations above represents the overall net gain to the Group upon sale of the subsidiary, AWT International (Thailand) Limited, on 30 May 2011. (Refer note 2(d)).

(c) Expenses

Expenses items from continuing operations are shown below. Expenses items from discontinued operations are shown in note 2(d). Contractor services expenses 42 45 42 45 Administration and other expenses from ordinary activities 17 19 17 18 ____________________________________________________ Total expenses from continuing operations in the course of ordinary activities 59 64 59 63 Net loss on sale of subsidiary 2(d) - - 12 - Foreign exchange loss 3 5 3 5 Impairment expense for receivables 15 - 15 - ____________________________________________________ Total expenses from continuing operations 77 69 89 68 Total expenses from discontinued operations 2(d) 17 21 - - ____________________________________________________ Total expenses recognised in profit or loss 94 90 89 68 ____________________________________________________


___________________________________________________________________________________________________________ Consolidated The Company Note 2011 2010 2011 2010 $'000 $’000 $’000 $'000 ___________________________________________________________________________________________________________

(d) Discontinued operations

On 30 May 2011, the Company sold its Thailand subsidiary, AWT International (Thailand) Limited, to the Thailand shareholder that holds the preferred shares in the subsidiary. This sale was undertaken as part of the Company’s and the Group’s strategy to wind up its overseas operations. The sale of the Thailand subsidiary divests the Company and the Group of its remaining overseas foreign operation. The results of the Thailand subsidiary have been included in the Group’s statement of comprehensive income up to the date of sale. The comparative statement of comprehensive income for the Group has been re-presented to show the discontinued operation separately from continuing operations. Details relating to the discontinued operation are provided below. Results of discontinued operations Revenue: Royalty revenue 2(a) 590 180 - - ____________________________________________________ Total revenue from discontinued operations 590 180 - - ____________________________________________________ Expenses: Contractor services expenses 2(c) (12) (11) - - Administration expenses 2(c) (5) (10) - - ____________________________________________________ Total expenses from discontinued operations (17) (21) - - ____________________________________________________ Results from operating activities 573 159 - - Income tax from operating activities 3(a) (163) (39) - - ____________________________________________________ Results from operations net of income tax 410 120 - - Other income: Gain on sale of discontinued operation 2(b) 16 - - - Income tax on gain on sale of discontinued operation 3(a) (5) - - - ____________________________________________________ Profit from discontinued operations net of income tax 421 120 - - ____________________________________________________ Of the profit from discontinued operations of $0.421 million (2010: $0.120 million), the amount attributable to equity holders of the Company is $0.419 million (2010: $0.118 million). Cash flows from (used) in discontinued operations Net cash from operating activities 479 177 - - Net cash from financing activities (584) (114) - - ____________________________________________________ Net cash flows for the period for discontinued operation (105) 63 - - Effect of exchange rate fluctuations on the balances of cash held in foreign currencies (56) 41 - - ____________________________________________________ Net increase in cash and cash equivalents for discontinued operation (161) 104 - - Elimination of intra group cash flows 584 114 - - ____________________________________________________ Net increase in cash and cash equivalents for the Group during the reporting period up to the date of sale 423 218 - - ____________________________________________________


___________________________________________________________________________________________________________ Consolidated The Company Note 2011 2010 2011 2010 $'000 $’000 $’000 $'000 ___________________________________________________________________________________________________________

Effect of disposal on the financial position of the Group Cash and cash equivalents 163 Trade and other receivables 99 Trade and other payables (43) Current tax payable (150) Dividend payable (9) _____________ Net assets and liabilities 60 Translation reserve (1) _____________ 59 Less non-controlling interests (68) _____________ Net liabilities attributable to the Parent exiting the Group (9) Less consideration received, satisfied in cash (7) _____________ Loss (gain) on sale of subsidiary (16) _____________ Consideration received, satisfied in cash 7 Cash and cash equivalents disposed of (163) _____________ Net cash inflow (outflow) (156) _____________


___________________________________________________________________________________________________________ Consolidated The Company Note 2011 2010 2011 2010 $’000 $’000 $’000 $’000 ___________________________________________________________________________________________________________ 3. Income tax expense

Major components of income tax expense recognised in profit or loss for the reporting period are as follows: (a) Recognised in profit or loss Current tax expense Current year 456 133 293 94 Adjustment for prior year (1) (18) (1) (18) ____________________________________________________ 455 115 292 76 Deferred tax expense Origination and reversal of temporary differences 1 2 1 2 ____________________________________________________ 1 2 1 2 ____________________________________________________ Total income tax expense in profit or loss 456 117 293 78 ____________________________________________________ Total income tax expense in profit or loss is attributable to: Continuing operations 288 78 293 78 Discontinued operations: Results from discontinued operation 2(d) 163 39 - - Gain (loss) on sale of discontinued operation 2(d) 5 - - - ____________________________________________________ 168 39 - - ____________________________________________________ Total income tax expense in profit or loss 456 117 293 78 ____________________________________________________ (b) Reconciliation between income tax expense and profit before income tax Profit before income tax 997 458 1,045 300 ____________________________________________________ Income tax expense calculated using the domestic company tax rate of 30% (2010: 30%) 299 137 314 89 Increase in tax expense due to:

Non-deductible expenses 4 7 4 7 Controlled foreign company income recognised by Parent 171 - 171 - Decrease in tax expense due to: Amount not recognised for tax purposes 178 (9) - - Dividend exempt from income tax (195) - (195) - ____________________________________________________ 457 135 294 96 Under (over)-provided in prior years (1) (18) (1) (18) ____________________________________________________ Income tax expense 456 117 293 78 ____________________________________________________


___________________________________________________________________________________________________________ Consolidated The Company Note 2011 2010 2011 2010 $’000 $’000 $’000 $’000 ___________________________________________________________________________________________________________ 4. Cash and cash equivalents Current Cash 594 392 594 67 Short-term investments maturing three months or less: Deposits at call with the Parent 10,320 9,842 10,320 9,842 ____________________________________________________ Cash and cash equivalents in statements of financial position and statements of cash flows 10,914 10,234 10,914 9,909 ____________________________________________________ Significant terms and conditions Details in respect of the above categories are as follows:

Cash book balance

During the reporting period, the cash book balance can fluctuate from a positive balance to a negative (overdraft) balance. When the cash book balance is negative at the reporting date, it is shown as a bank overdraft under borrowings in the statements of financial position.

Cash balances earn interest at bank rates.

Short-term investments maturing three months or less

Short-term investments maturing three months or less are considered cash equivalents. At the reporting date, these consisted of interest-bearing deposits at call that have been placed with the Parent to invest in marketable securities as part of the overall management of cash and investments for the Sydney Water Group. Their carrying amount approximates fair value due to their short term to maturity.

Interest is earned monthly on deposits at call from the Parent using an agreed average interest rate comprising the Reserve Bank of

Australia (RBA) cash rate plus the three-month bank bill swap rate (BBSW). Refer also note 24(c) for a maturity analysis of all financial assets and financial liabilities.

5. Investments Non-current Investment in subsidiary At cost: Shares in AWT International (Thailand) Limited - - - 18 ____________________________________________________ Total non-current investments - - - 18 ____________________________________________________ Significant terms and conditions The above shareholding represents the Company’s interest in the equity of this subsidiary at the previous reporting date. The

subsidiary was sold on 30 May 2011. (Refer note 2(d)).


___________________________________________________________________________________________________________ Consolidated The Company Note 2011 2010 2011 2010 $’000 $’000 $’000 $’000 ___________________________________________________________________________________________________________ 6. Trade and other receivables Current Non-trade debtors and accrued income: Other parties 3 66 3 2 ____________________________________________________ 3 66 3 2 ____________________________________________________ Total trade and other receivables 3 66 3 2 ____________________________________________________ Significant terms and conditions Trade debtors are required to be settled within 30 days.

Accrued investment income is receivable within a maximum period of six months. All other receivables are expected to be realised within 12 months of the reporting date.

Refer also note 24(c) for a maturity analysis of all financial assets and financial liabilities. Ageing analysis of trade receivables billed to customers

There were no trade debtors at the current or previous reporting dates. All other balances within trade and other receivables are not past due and are expected to be realised at the amounts carried in the statements of financial position when due.

Movement in allowance for impairment The movement during the reporting period for the allowance for impairment is as follows: Carrying amount at beginning of period - - - - Charge for impairment made during the period 2(c) 15 - 15 - ____________________________________________________ 15 - 15 - Amounts written off (15) - (15) - ____________________________________________________ Carrying amount at end of period - - - - ____________________________________________________


___________________________________________________________________________________________________________ Consolidated The Company Note 2011 2010 2011 2010 $’000 $’000 $’000 $’000 ___________________________________________________________________________________________________________

7. Other financial assets Non-current Loan provided to non-controlling interests in subsidiary - 18 - 18 ____________________________________________________

Total non-current other financial assets - 18 - 18 ____________________________________________________ Significant terms and conditions Details in respect of the above financial assets are as follows:

Loan provided to non-controlling interests in subsidiary: The non-current loan receivable in the previous reporting period was between the Company and the non-controlling interest equity

holder of its subsidiary in Thailand, AWT International (Thailand) Limited, prior to its sale on 30 May 2011. That equity holder held the preferred shares in the Thailand subsidiary. The loan was originally provided to the non-controlling interest equity holder in order for it to acquire the shares in the Thailand subsidiary because under Thailand law, a foreign company cannot own more than 49% of the shares in a Thailand company. This loan was forgiven as part of the sale negotiations that took place on 30 May 2011. (Refer also note 2(d)).

8. Current tax liabilities The current tax payable balance of $Nil (2010: $0.024 million) in the Group’s statement of financial position represents the remaining

balance of income taxes payable to overseas jurisdictions at the reporting date in respect of current and prior periods. Income tax payable by the Company in relation to the NTER is assumed by the Parent after initial recognition, as the Parent is the

head entity in the tax-consolidated group. The amount initially recognised, prior to assumption by the Parent, was $0.228 million (2010: $0.068 million).


9. Deferred tax assets and liabilities

(a) Recognised and unrecognised deferred tax assets and liabilities

Deferred tax assets and liabilities recognised in the statements of financial position are attributable to the following:

Assets Liabilities Net

Consolidated

2011

2010

2011

2010

2011

2010

$’000 $’000 $’000 $’000 $’000 $’000 Property, plant and equipment expensed for accounting purposes

(1)

(1)

-

-

(1)

(1)

Anticipated receipts and accrued expenses (4) (5) - - (4) (5) Tax (assets) liabilities (5) (6) - - (5) (6) There were no unrecognised deferred tax assets and liabilities for the Group at the reporting date.

Assets Liabilities Net The Company

2011

2010

2011

2010

2011

2010

$’000 $’000 $’000 $’000 $’000 $’000 Property, plant and equipment expensed for accounting purposes

(1)

(1)

-

-

(1)

(1)

Anticipated receipts and accrued expenses (4) (5) - - (4) (5) Tax (assets) liabilities (5) (6) - - (5) (6) There were no unrecognised deferred tax assets and liabilities for the Company at the reporting date.


(b) Movements in temporary differences


Balance 1 July 2010

Recognised in profit or

loss

Recognised in other

comprehensive income

Balance 30 June 2011

Balance 1 July 2010


loss

Recognised in other



$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 Property, plant and equipment expensed for accounting purposes

(1)

-

-

(1)

(1)

-

-

(1)

Anticipated receipts and accrued expenses (5) 1 - (4) (5) 1 - (4) Net tax (assets) / liabilities (6) 1 - (5) (6) 1 - (5)


Balance 1 July 2009


loss

Recognised in other



Balance 1 July 2009


loss

Recognised in other



$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 Property, plant and equipment expensed for accounting purposes

(2)

1

-

(1)

(2)

1

-

(1)

Anticipated receipts and accrued expenses (6) 1 - (5) (6) 1 - (5) Net tax (assets) / liabilities (8) 2 - (6) (8) 2 - (6)


___________________________________________________________________________________________________________ Consolidated The Company Note 2011 2010 2011 2010 $’000 $’000 $’000 $’000 ___________________________________________________________________________________________________________ 10. Trade and other payables Current Non-trade payables and accrued expenses: Other parties 16 32 16 27 ____________________________________________________ 16 32 16 27 ____________________________________________________ Total trade and other payables 16 32 16 27 ____________________________________________________ Significant terms and conditions

Trade accounts payable and accrued expenses are normally settled within 30 days. Other non-trade payables are payable at various times throughout the reporting period. Trade and other payables are not secured against the assets of the Company or the Group.

Refer also note 24(c) for a maturity analysis of all financial assets and financial liabilities.

11. Dividend payable Current Dividend outstanding on preferred shares held by the non-controlling interest equity holder in overseas subsidiary - 7 - - ____________________________________________________ - 7 - - ____________________________________________________

During the current reporting period, dividends totalling $0.003 million (2010: $Nil) were attributed to the non-controlling interest equity holder prior to the sale of the Company’s subsidiary, AWT International (Thailand) Limited on 30 May 2011, at which time the dividends payable balance of $0.009 million exited the Group. (Refer also notes 3(d) and 16).

Under the NTER, the Company is not required to maintain a dividend franking account.

12. Share capital Issued and fully paid up share capital 500,000 (2010: 500,000) ordinary shares 500 500 500 500 ____________________________________________________

Significant terms and conditions The Company is wholly-owned by the Parent, Sydney Water Corporation. Any changes to the Company’s share capital can only be undertaken in accordance with the Company’s constitution and with the agreement of the Parent. There are no restrictions to dividends payable to the Parent.



13. Other contributed equity Cumulative amount of current tax liabilities incurred by the Company and assumed by the Parent under tax consolidation 2,182 1,954 2,182 1,954 ____________________________________________________

14. Reserves Carrying amount Translation reserve - 53 - - ____________________________________________________ - 53 - - ____________________________________________________

Movements during the reporting period Translation reserve

Balance at beginning of period 53 11 - - Net gain (loss) on translation of foreign entity’s financial statements (52) 42 - - Reclassified to profit or loss on sale of subsidiary 2(d) (1) - - - ____________________________________________________ Balance at end of period - 53 - - ____________________________________________________

The translation reserve recorded the foreign currency differences arising from the translation of the financial statements of the Group’s foreign operation prior to its sale, where its functional currency is different to the presentation currency of the Group.

15. Retained earnings Balance at beginning of period 7,685 7,346 7,472 7,250 Profit attributable to equity holders of the Company 539 339 752 222 ____________________________________________________ Balance at end of period 8,224 7,685 8,224 7,472 ____________________________________________________



16. Non-controlling interests Non-controlling interests in subsidiaries comprises: Non-controlling interests in retained earnings:

Balance at the beginning of the period 46 44 - - Interest in profit after income tax for the period 2 2 - - Dividends recognised as a liability 11 (3) - - - Sale of subsidiary with loss of control 2(d) (45) - - - ____________________________________________________ Balance at the end of the period - 46 - - Non-controlling interests in share capital:

Balance at the beginning of the period 23 89 - - Repayment of share capital - (66) - - Sale of subsidiary with loss of control 2(d) (23) - - - ____________________________________________________ Balance at the end of the period - 23 - - ____________________________________________________ Total non-controlling interests - 69 - - ____________________________________________________

17. Total equity reconciliation Balance at beginning of period 10,261 9,876 9,926 9,636 Total comprehensive income for the period attributable to equity holders of the Company 486 381 752 222 Other contributed equity from assumption of tax balances 228 68 228 68 Total changes in non-controlling interests within the Group 16 (69) (64) - - ____________________________________________________ Balance at end of period 10,906 10,261 10,906 9,926 ____________________________________________________



18. Notes to the statements of cash flows (a) Reconciliation of profit to net cash from operating activities Profit for the period 541 341 752 222 Adjustments for: Net loss (gain) on sale of subsidiary (16) - 12 - Foreign exchange loss realised on reduction of investment in subsidiary - - - 5 Net movement in statement of financial position items applicable to operating activities: Trade and other receivables (96) 58 (48) (5) Trade and other payables 29 2 (11) 13 Income tax assets and liabilities 434 84 293 78 ____________________________________________________ Net cash from operating activities 892 485 998 313 ____________________________________________________ (b) Standby credit arrangements The Company has available to it a $10.400 million drawdown facility provided by the Parent (2010: $10.400 million). In addition, the

Company has a $0.250 million (2010: $0.250 million) Performance Bond/Guarantee facility and a $0.250 million (2010: $0.250 million) bank overdraft facility from the Commonwealth Bank of Australia. The position of these facilities at the reporting date was as follows:

Facility utilised - - - - Facility not utilised 10,900 10,900 10,900 10,900 ____________________________________________________ Total facility 10,900 10,900 10,900 10,900 ____________________________________________________

19. Consultants

During the current reporting period, there were no amounts paid or payable to consultants by the Company or the Group (2010: $Nil).

20. Commitments Both the Company and Group had no commitments as at the end of the current or previous reporting period.


21. Group entities ___________________________________________________________________________________________________________ Ownership interest held Note 2011 2010 % % ___________________________________________________________________________________________________________ Parent entity: Australian Water Technologies Pty Ltd Subsidiaries:

Directly controlled by Australian Water Technologies Pty Ltd: AWT International (Thailand) Limited - 49

AWT International (Thailand) Limited was incorporated in Thailand on 10 May 2002. Although the Company owned 49% of the share capital of this subsidiary, it has been included in the consolidated financial statements up to the date of its sale on 30 May 2011 (refer note 2(d)) as the Company controlled the financial and operating policy decisions affecting the subsidiary.

___________________________________________________________________________________________________________ Consolidated The Company Note 2011 2010 2011 2010 $’000 $’000 $’000 $’000 ___________________________________________________________________________________________________________ 22. Auditors’ remuneration Audit services Remuneration for audit or review of the financial statements of the Company or any entity in the Group: Auditors of the Company: - The Company 12 11 12 11 - Subsidiary * - 3 - 3 Overseas auditors of subsidiary 4 4 4 -- ____________________________________________________ 16 18 16 14 ____________________________________________________ * This audit fee was paid by the Company.


___________________________________________________________________________________________________________ Consolidated The Company Note 2011 2010 2011 2010 $’000 $’000 $’000 $’000 ___________________________________________________________________________________________________________ 23. Related party disclosures

The Company and the Group have related party relationships with key management personnel (refer (a) below), their related entities (refer (b) below), the Parent (refer (c) below), the remaining subsidiary in the Group (refer (d) below) and other related parties (refer (e) below).

(a) Key management personnel compensation

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Company or the Group, directly or indirectly. This comprises all directors of the Company, whether executive or non-executive, and senior executives of the Parent who manage the business operations of the Company and the Group as a whole.

Key management personnel compensation paid by the Company and the Group is as follows: Short-term employee benefits 2 2 - - ____________________________________________________ 2 2 - - ____________________________________________________

The above comprises compensation relating to a non-executive director of the subsidiary company AWT International (Thailand) Limited only prior to its sale on 30 May 2011, (Refer note 2(d)). All other key management personnel received no compensation from the Company or the Group, nor did they receive compensation on behalf of the Company or the Group for services rendered to the Company or the Group from any other related entity.

(b) Other transactions with key management personnel and related entities Any transactions undertaken with entities related to key management personnel are conducted on an arm's length basis in the normal course of business and on commercial terms and conditions. During the current or previous reporting periods, there were no transactions with such entities.

(c) Transactions with the Parent

The Parent provides the Company with all of the resources and services necessary for the Company to fulfil any contractual obligations for external work. Services that are provided include engineering consulting and project management. There are currently no contracts for external work. When providing its resources to the Company under the current trading arrangements, the Parent charges for its services based upon an assessment of direct costs and a factor to cover local and corporate overheads. In addition to the above, the Company places its surplus funds with the Parent for investment purposes. The Parent invests these funds as part of managing the surplus cash of the Sydney Water Group as a whole. Interest earned is then remitted to the Company on a monthly basis. These invested surplus funds are at call and are recognised by the Company and the Group as cash equivalents. (Refer also note 4). The following is a summary of related party transactions and balances with the Parent:



Purchase of services from the Parent 14 12 14 12

____________________________________________________

Interest revenue earned by the Company from the Parent 2(a) 477 353 477 353 ____________________________________________________ Income tax liabilities assumed by the Parent during the period 17 228 68 228 68 ____________________________________________________

Deposits at call with the Parent at the end of the period 4 10,320 9,842 10,320 9,842 ____________________________________________________ (d) Transactions with subsidiary

___________________________ The Company 2011 2010 $’000 $’000

___________________________ Reduction of investment in subsidiary by way of share capital repaid to the Company - 43

___________________________

During the previous reporting period, the Company’s Thailand subsidiary made a repayment to the Company that reduced the amount of ordinary shares the Company owned as its investment in the subsidiary. The total reduction of the investment amounted to $0.056 million. However, after deducting an amount of $0.008 million for withholding tax paid by the subsidiary to the tax authorities in Thailand, and after a foreign exchange loss of $0.005 million was realised upon receipt by the Company, the actual cash received by the Company from this transaction was $0.043 million.

Dividend revenue 649 -

___________________________

During the current reporting period, the Company earned total dividend revenue from its Thailand subsidiary prior to its sale on 30 May 2011. (Refer note 2(d)). The amount earned was $0.649 million. However, after deducting an amount of $0.065 million for withholding tax paid by the subsidiary to the tax authorities in Thailand, the actual cash received by the Company was $0.584 million. Apart from the above transactions, the Company did not transact with its subsidiary during the current or previous reporting periods.

(e) Transactions with other related parties There were no transactions with other related parties in either the current or previous reporting period.


24. Financial risk management disclosures Financial instruments and financial risk factors The Company and Group undertake transactions in a range of financial instruments including:

cash (refer note 4) investments (deposits at call) placed with the Parent (refer note 4) receivables (refer notes 6 and 7) payables (refer note 10)

These financial instruments expose the Company and the Group to a range of financial risks in the normal course of their business operations. These risks include market risk (which comprises foreign currency risk and interest rate risk), credit risk and liquidity risk. Financial risk management policies, objectives and reporting The risks outlined above are managed by staff within the Parent, Sydney Water Corporation, who are responsible for managing the operations of the Company and the Group as part of the Sydney Water Group as a whole. The Parent has in place treasury management policies approved by its Board that the Company and Group utilise as required to manage their risks. These policies provide a framework of strict controls so as to manage the impact of these exposures on the financial results of the Company and the Group within the context of the Sydney Water Group. The policies have also been set to operate in a manner that sits within the overall framework of the Public Authorities (Financial Arrangements) Act 1987 in NSW. The policies cover a number of aspects such as:

approved delegation levels and segregation of duties for dealing, authorising and settling treasury management transactions approved credit limits for dealing with counterparties the types of treasury transactions, including derivatives, that the Parent can enter into on behalf of the Company and Group approved limits for hedging foreign exchange exposures the structure of debt and investment portfolios approved benchmarks for managing performance.

Reporting of treasury and financial risk management performance occurs monthly within the Parent. Where appropriate, additional reporting is also provided to the Parent’s Board on a quarterly basis, with specific treasury management matters being reviewed by the Finance Committee, a sub committee of the Parent’s Board, on a regular basis. Treasury management strategies and performance are also reported on and reviewed on a monthly basis by a Treasury Committee of senior finance managers within the Finance and Regulatory Division of the Parent. In addition, the NSW Treasury conducts regular reviews of the Sydney Water Group’s treasury management activities as to their compliance with the Public Authorities (Financial Arrangements) Act 1987. Use of derivative financial instruments and hedge accounting The Company and the Group do not enter into any derivative financial instruments in their own right. Any such instruments would be entered into by the Parent on the Company’s or Group’s behalf only if there is a material exposure that needs to be hedged under the Parent’s treasury management policies. The derivative financial instruments that the Parent would use to manage exposure to foreign currency risk and interest rate risk include interest rate swaps, forward interest rate contracts, forward foreign exchange contracts, bond options and interest rate futures. Typically, the most common that would be used are forward foreign exchange contracts and interest rate swaps. The Parent uses derivative financial instruments for hedging purposes only and does not enter into or trade them for speculative purposes. Strict internal guidelines and treasury management policies approved by the Parent’s Board exist to control the use of derivative financial instruments. There were no derivative financial instruments in place at the reporting date for the Company or the Group and hedge accounting was not undertaken, as exposures were not considered material. Financial risk exposures (a) Market risk Market risk is the risk that fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises two types of financial risk for the Company and the Group: foreign currency risk and interest rate risk. Foreign currency risk Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The objective in managing foreign currency risk is to minimise the impact that changes in foreign exchange rates will have on the Company’s and Group’s financial outcomes. Exposure to foreign currency risk for the Company and the Group arises from the purchase or supply of goods and services where payment is either required to be made in foreign currency or is pegged to foreign currency rates.


In addition, it also arose for the Group as a result of translation differences between the functional currency of the Company’s Thailand subsidiary prior to its sale on 30 May 2011 and the Group’s presentation currency. In this regard, however, the exposure was not considered to be material and was therefore not hedged. The policies for management of foreign currency risks arising from contractual arrangements for the purchase or supply of goods and services are contained in the Parent’s Treasury Management Policy manual. These policies include hedging of all foreign currency exposures in excess of Australian Dollars (AUD) 1,000,000 and foreign currency exposures above AUD 500,000 that exceed 90 days. The Parent manages foreign exchange risk on behalf of the Company or Group, where necessary, by entering into forward foreign exchange contracts to hedge the relevant purchase and sale commitments. It is the Parent’s policy not to enter forward foreign exchange contracts until a firm commitment is in place and to negotiate the terms of these cash flow hedging derivatives to match the terms of the hedged item in order to maximise hedge effectiveness. With the sale of the Company’s Thailand subsidiary, there was a decrease in the level of foreign currency risk exposure during the current reporting period as all remaining foreign currency exposures were realised. Sensitivity analysis The following table shows the effect on profit and equity after tax at the reporting date of a 10% adverse and favourable movement in exchange rates at that date, with all other variables being held constant and taking into account all underlying exposures and related hedges, if any. An adverse movement in exchange rates implies an increase in the AUD against the foreign currency. A favourable movement represents a fall in the AUD against the foreign currency. A sensitivity of 10% was selected for use at each reporting date as this is considered reasonable based on the current AUD level and the historical volatility of the AUD against other currencies, particularly over the past five years. Based on the value of the AUD at the reporting date as compared with the currencies below, adverse or favourable movements in the foreign exchange rates would result in an increase or decrease in the AUD respectively. The currencies are abbreviated as follows: AUD Australian Dollars BHT Thailand Baht ___________________________________________________________________________________________________________ Post tax profit Equity Higher (lower) Higher (lower) Judgement of reasonably 2011 2010 2011 2010 possible events $’000 $'000 $’000 $'000 ___________________________________________________________________________________________________________ Consolidated

Translation of Thailand subsidiary’s financial statements: AUD/BHT + 10% - 13 - 39 AUD/BHT - 10% - (11) - (32)

Loan to non-controlling interests in Thailand subsidiary: AUD/BHT + 10% - 2 - 2 AUD/BHT - 10% - (2) - (2) The Company

Loan to non-controlling interests in Thailand subsidiary: AUD/BHT + 10% - 2 - 2 AUD/BHT - 10% - (2) - (2)

As the Company earned and received dividend revenue during the current reporting period from its Thailand subsidiary prior to its sale on 30 May 2011, there was no sensitivity for this dividend revenue to change as a result of movements in foreign exchange rates up to the reporting date.


Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The objective in managing interest rate risk is to manage the impact that changes in interest rates will have on the Company’s and Group’s financial outcomes. The Company and the Group are exposed to changes in market interest rates through cash balances held by the Company and deposits at call with the Parent (refer notes 2(a) and 4). These exposures are managed as part of the Parent’s overall treasury management strategies and the strict controls and guidelines therein. As part of this process, the Parent monitors the prevailing economic conditions and any proposed Reserve Bank of Australia (RBA) decisions on changes in interest rates as part of the overall strategy in relation to managing the surplus funds of the Sydney Water Group. The use of derivative financial instruments, such as interest rate swaps, forward interest rate contracts, bond options or interest rate futures, is only undertaken by the Parent if considered necessary and worthwhile on material exposures from a hedge effectiveness perspective. At the reporting date, the exposure in relation to these interest-bearing financial instruments was not considered to be material and thus there were no derivative financial instruments outstanding for managing interest rate risk for both the Company and the Group (2010: Nil outstanding for both the Company and the Group). Interest rate risk for the Company and the Group did not change materially during the current reporting period with the RBA increasing official interest rates in the Australian economy by only 0.25% during this period. This had the effect of increasing the expected interest revenue earned by the Company and the Group from the Parent in the current reporting period. The interest revenue is calculated based on the RBA cash rate plus the three-month bank bill swap rate (BBSW). (Refer note 4). Accordingly, interest rate decisions by the RBA directly impacted the amount of interest revenue payable to the Company and the Group by the Parent. The interest rate exposure for the Company was managed as part of the Parent’s overall cash management policies to ensure surplus funds obtained the best possible interest rate in the market for the Sydney Water Group as a whole. The following table details the carrying amounts of interest-bearing financial instruments, including their weighted average interest rates, at the reporting date and that are not designated in cash flow hedges: ___________________________________________________________________________________________________________ Weighted average interest Carrying amount rate 2011 2010 2011 2010 Note % % $’000 $’000 ___________________________________________________________________________________________________________ Consolidated

Financial assets At amortised cost: Cash 4 4.00 0.65 594 392 Cash equivalents 4 4.89 4.71 10,320 9,842 Loan to non-controlling interests in subsidiary 7 - 10.00 - 18 ___________________________ 10,914 10,252 ___________________________ The Company

Financial assets At amortised cost: Cash 4 4.00 3.75 594 67 Cash equivalents 4 4.89 4.71 10,320 9,842 Loan to non-controlling interests in subsidiary 7 - 10.00 - 18 ___________________________ 10,914 9,927 ___________________________


Sensitivity analysis The following table shows the effect on profit and equity after tax at the reporting date if nominal interest rates had been 100 basis points (that is, one percentage point) higher or lower than current levels, with all other variables being held constant and taking into account all underlying exposures and related hedges if any. A sensitivity of 100 basis points has been used as this is considered reasonable based on the current level of both short-term and long-term Australian interest rates. Based on the value of the Australian short-term interest rates (one month BBSW) at the reporting date of 4.91% (2010: 4.75 %), a 100 basis points increase would increase the rate to 5.91% (2010: 5.75%) and a 100 basis points decrease would reduce the rate to 3.91% (2010: 3.75%). This is broadly representative of recent interest rate increases and decreases within a certain range, which is reasonably possible given historical movements in official interest rates by the RBA. Historically, the RBA official cash rate has fluctuated between 3% and 7.25% over the past five years. ___________________________________________________________________________________________________________ Post tax profit Equity Higher (lower) Higher (lower) Judgement of reasonably 2011 2010 2011 2010 possible events $’000 $'000 $’000 $'000 ___________________________________________________________________________________________________________ Consolidated Interest rates 100 basis points higher 76 69 109 99 Interest rates 100 basis points lower (76) (69) (109) (99) The Company Interest rates 100 basis points higher 76 69 109 99 Interest rates 100 basis points lower (76) (69) (109) (99) (b) Credit risk Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. In this context, it refers to the risk that indebted counterparties will default on their contractual obligations, resulting in financial loss to the Company and the Group. Exposures to credit risk for the Company and the Group exist in respect of all financial assets recognised in the statements of financial position, such as trade and other receivables, cash and cash equivalents. In respect of trade and other receivables, the Company and the Group monitor balances outstanding on an ongoing basis and use the Parent’s policies for the recovery or write-off of amounts outstanding. In respect of cash and cash equivalents, the Company and the Group only deal with creditworthy counterparties and recognised financial intermediaries as a means of mitigating against the risk of financial losses from defaults. The Company and the Group use the Parent’s policies to monitor the credit ratings of counterparties and to limit the amount of funds placed with those counterparties, depending on their credit rating. In addition, only highly liquid marketable securities are used for investment purposes through the Parent. There was no change in the level of credit risk exposure for the Company or the Group during the current reporting period. At the reporting date, there were no significant concentrations of credit risk in which the Company or the Group are significantly exposed to any single counterparty or group of counterparties having similar characteristics or similar geographical locations. At the reporting date, the maximum exposure to credit risk for the Company and the Group is represented by the carrying amount of each financial asset in the statements of financial position. (Refer notes 4, 6 and 7). (c) Liquidity risk Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities. The objective of managing liquidity risk is to maintain a balance of funding and flexibility in ensuring sufficient cash is available each day to meet the Company’s and the Group’s financial obligations and avoid going into overdraft. Liquidity risk is managed by the Company and the Group through the maintenance of cash flow forecasting models as part of the Parent’s cash management activities for the Sydney Water Group, and through the availability of financial accommodation facilities. These facilities include a drawdown facility with the Parent and a bank account overdraft facility with the Company’s corporate banker. (Refer note 18(b)). There was no change in liquidity risk exposure for the Company or the Group during the current reporting period.


Maturity analysis of financial assets and financial liabilities recognised in the statements of financial position The following tables reflect the maturity bands for the settlement of the carrying amounts of financial assets and financial liabilities recognised in the statements of financial position of the Company and the Group at the reporting date. Consolidated ________________________________________________________________________________________________________________________________________________________________ Repricing or maturing in: 2011 Less than 1 to 2 2 to 3 3 to 4 4 to 5 More than Total Note 1 year years years years years 5 years $’000 $’000 $’000 $’000 $’000 $’000 $’000 ________________________________________________________________________________________________________________________________________________________________ Financial assets At amortised cost: Cash 4 594 - - - - - 594 Cash equivalents 4 10,320 - - - - - 10,320 Trade and other receivables 6 3 - - - - - 3 Loan to non-controlling interests in subsidiary 7 - - - - - - - __________________________________________________________________________________________ 10,917 - - - - - 10,917 __________________________________________________________________________________________ Financial liabilities At amortised cost: Trade and other payables 10 16 - - - - - 16 __________________________________________________________________________________________ 16 - - - - - 16 __________________________________________________________________________________________


________________________________________________________________________________________________________________________________________________________________ Repricing or maturing in: 2010 Less than 1 to 2 2 to 3 3 to 4 4 to 5 More than Total Note 1 year years years years years 5 years $’000 $’000 $’000 $’000 $’000 $’000 $’000 ________________________________________________________________________________________________________________________________________________________________ Financial assets At amortised cost: Cash 4 392 - - - - - 392 Cash equivalents 4 9,842 - - - - - 9,842 Trade and other receivables 6 66 - - - - - 66 Loan to non-controlling interests in subsidiary 7 - - - - - 18 18 __________________________________________________________________________________________ 10,300 - - - - 18 10,318 __________________________________________________________________________________________ Financial liabilities At amortised cost: Trade and other payables 10 32 - - - - - 32 __________________________________________________________________________________________ 32 - - - - - 32 __________________________________________________________________________________________


The Company ________________________________________________________________________________________________________________________________________________________________ Repricing or maturing in: 2011 Less than 1 to 2 2 to 3 3 to 4 4 to 5 More than Total Note 1 year years years years years 5 years $’000 $’000 $’000 $’000 $’000 $’000 $’000 ________________________________________________________________________________________________________________________________________________________________ Financial assets At amortised cost: Cash 4 594 - - - - - 594 Cash equivalents 4 10,320 - - - - - 10,320 Trade and other receivables 6 3 - - - - - 3 Loan to non-controlling interests in subsidiary 7 - - - - - - - __________________________________________________________________________________________ 10,917 - - - - - 10,917 __________________________________________________________________________________________ Financial liabilities At amortised cost: Trade and other payables 10 16 - - - - - 16 __________________________________________________________________________________________ 16 - - - - - 16 __________________________________________________________________________________________


________________________________________________________________________________________________________________________________________________________________ Repricing or maturing in: 2010 Less than 1 to 2 2 to 3 3 to 4 4 to 5 More than Total Note 1 year years years years years 5 years $’000 $’000 $’000 $’000 $’000 $’000 $’000 ________________________________________________________________________________________________________________________________________________________________ Financial assets At amortised cost: Cash 4 67 - - - - - 67 Cash equivalents 4 9,842 - - - - - 9,842 Trade and other receivables 6 2 - - - - - 2 Loan to non-controlling interests in subsidiary 7 - - - - - 18 18 __________________________________________________________________________________________ 9,911 - - - - 18 9,929 __________________________________________________________________________________________ Financial liabilities At amortised cost: Trade and other payables 10 27 - - - - - 27 __________________________________________________________________________________________ 27 - - - - - 27 __________________________________________________________________________________________


Contractual maturities of all cash flows from financial liabilities The following tables reflect the maturity bands for all contractual payments for settlement resulting from recognised financial liabilities as at the reporting date for the Company and the Group. For these obligations, the respective undiscounted cash flows for the maturity bands shown are presented. ________________________________________________________________________________________________________________________________________________________________ Repricing or maturing in: Less than 1 to 2 2 to 3 3 to 4 4 to 5 More than Total Note 1 year years years years years 5 years $’000 $’000 $’000 $’000 $’000 $’000 $’000 ________________________________________________________________________________________________________________________________________________________________ Consolidated 2011 Trade and other payables 10 16 - - - - - 16 __________________________________________________________________________________________ 2010 Trade and other payables 10 32 - - - - - 32 __________________________________________________________________________________________ The Company 2011 Trade and other payables 10 16 - - - - - 16 __________________________________________________________________________________________ 2010 Trade and other payables 10 27 - - - - - 27 __________________________________________________________________________________________


Fair values of financial assets and financial liabilities

Fair values of financial assets and financial liabilities are determined on the following bases:

Cash The carrying amount is considered to be a reasonable approximation of the fair value.

Cash equivalents Fair values are determined on the basis of discounted cash flows using valuation rates supplied by independent market sources.

Trade and other receivables The carrying amount is considered to be a reasonable approximation of the fair value.

Loan to non-controlling interests in subsidiary The carrying amount was considered to be a reasonable approximation of the fair value.

Trade and other payables The carrying amount is considered to be a reasonable approximation of the fair value.

The following table details the carrying amounts and fair values at the reporting date for all financial instruments:


___________________________________________________________________________________________________________ Carrying amount Fair value Note 2011 2010 2011 2010 $’000 $’000 $’000 $’000 ___________________________________________________________________________________________________________ Consolidated

Financial assets At amortised cost: Cash 4 594 392 594 392 Cash equivalents 4 10,320 9,842 10,320 9,842 Trade and other receivables 6 3 66 3 66 Loan to non-controlling interests in subsidiary 7 - 18 - 18 ____________________________________________________ 10,917 10,318 10,917 10,318 ____________________________________________________

Financial liabilities At amortised cost: Trade and other payables 10 16 32 16 32 ____________________________________________________ 16 32 16 32 ____________________________________________________ The Company

Financial assets At amortised cost: Cash 4 594 67 594 67 Cash equivalents 4 10,320 9,842 10,320 9,842 Trade and other receivables 6 3 2 3 2 Loan to non-controlling interests in subsidiary 7 - 18 - 18 ____________________________________________________ 10,917 9,929 10,917 9,929 ____________________________________________________

Financial liabilities At amortised cost: Trade and other payables 10 16 27 16 27 ____________________________________________________ 16 27 16 27 ____________________________________________________ Fair value hierarchy

There were no financial instruments at either the current or previous reporting dates that were carried in the statements of financial position at fair value determined by any of the three valuation methods defined below: Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e.,

as prices) or indirectly (i.e., derived from prices) Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).


Management of capital The Company’s objective when managing capital is to safeguard the Company’s and the Group's ability to continue as a going

concern, so that it can continue to provide appropriate returns for the Parent when required. This is achieved by maintaining an optimal capital structure that is reflective of the Company’s size, current operations and level of activity. This capital structure was initially implemented on 1 July 2001 when the Company’s then operations were reintegrated with those of the Parent and were significantly reduced to implement its new role at that time and which has been in place ever since.

The Company’s and the Group’s capital structure is monitored throughout each reporting period to ensure it does not diminish below

the level in the previous reporting period and continues to increase over time to add value to the Sydney Water Group as a whole. The table below shows the level of capital employed at the reporting date for both the Company and the Group. ___________________________________________________________________________________________________________ Consolidated The Company Note 2011 2010 2011 2010 $’000 $'000 $’000 $'000 ___________________________________________________________________________________________________________ Interest-bearing debt - - - - Other interest-bearing liabilities - - - - ____________________________________________________ Total interest-bearing liabilities - - - - Total equity 17 10,906 10,261 10,906 9,926 ____________________________________________________ Total capital employed 10,906 10,261 10,906 9,926 ____________________________________________________

There are no interest-bearing liabilities, and hence the level of capital employed for the Company and the Group is made up entirely of total equity as reported in their statements of financial position. Accordingly, debt to equity and gearing ratios for the Company and the Group, which are measures used by the Parent to manage its own capital and the capital for the Sydney Water Group as a whole in accordance with the NSW Treasury’s Commercial Policy Framework, are Nil at the end of both the current and previous reporting periods.

25. Contingencies

To the best of their knowledge and belief, the directors are not aware of any contingent liabilities or contingent assets existing at the end of the current or previous reporting periods that would result in a material cost, loss or economic benefit to the Company or the Group.

26. Proposed voluntary deregistration of the Company

In the 2004-05 reporting period, the Company’s Board resolved that the Company should move to a position to enable it to be voluntarily deregistered. The Company will not enter into any new contracts. Progress towards this objective has been made in previous years through the discontinuation of various overseas operations. The only remaining overseas operation was the Thailand subsidiary, AWT International (Thailand) Limited, and this was sold during the current reporting period on 30 May 2011. (Refer note 2(d)). With the sale of this subsidiary now complete, the Company is in a position that will enable it to be voluntarily deregistered in accordance with the Board’s objective. The actions to proceed with this objective will continue in the next reporting period. Due to the uncertainty regarding the ultimate timing of the Company’s voluntary deregistration, the directors believe that the going concern basis for preparing these financial statements is still appropriate at this time.

End of audited financial statements


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