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30 August 2012 The Manager Company Announcements Office Australian Securities Exchange Exchange Plaza 2 The Esplanade PERTH WA 6000 By: e-lodgement (ASX code SBI)

ANNUAL REPORT JUNE 2012 Please find attached Sterling Biofuels International Limited’s Annual Report for the year ending 30 June 2012. . Yours sincerely

Alicia Mitton Company Secretary Sterling Biofuels International Limited

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Annual Report

2012

Sterling Biofuels International Limited

Annual Report 2012

Sterling Biofuels International Limited ACN 119 880 492

Malaysia O�ceUnit 607 Block C Pusat Phileo Damansara 19 Jalan 16/1146350 Petaling Jaya Selangor Malaysia

Tel (60-3) 7954 5020 Fax (60-3) 7957 6282

Registered O�ce in Australia57 Havelock Street West Perth WA 6005AustraliaTel : (61- 8) 9324 8555Fax (61-8) 9324 8560

Postal Address PO Box 541 West Perth WA 6872

ASX Code: SBI

www. sterlingbiofuels.com

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Annual report 2012

2 Letter From Executive Chairman3 Financial Report5 Directors’ Report14 Statement of Comprehensive Income15 Statement of Financial Position16 Statement of Changes in Equity17 Cash Flow Statement18 Notes to the Financial Statements60 Directors’ Declaration61 Auditor’s Independence Declaration62 Independent Audit Report64 Corporate Governance Statement71 Additional Stock Exchange Information

Contents

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Corporate Information and Directory

3

DirectorsDato’ CRS Paragash Executive ChairmanAndrew Phang Group Executive Director

Jackie Leong Executive DirectorPaul MasonDirector-Non-ExecutiveGraham KeysDirector-Non-Executive

Company SecretaryAlicia Mitton

Email: [email protected]

Registered Office in Australia57 Havelock Street

West Perth WA 6005Australia

Telephone : (61-8) 9324 8555Facsimile : (61-8) 9324 8560

Websitewww.sterlingbiofuels.com

Postal AddressPO Box 541

West Perth WA 6872

Malaysian officeUnit 607 Block C

Pusat Phileo Damansara 19 Jalan 16/11

46350 Petaling JayaSelangor Malaysia

Telephone : (60-3) 7954 5020Facsimile : (60-3) 7957 6282

Home ExchangeAustralian Stock Exchange

Exchange Plaza2 The EsplanadePerth WA 6000

ASX CodeSBI

Share RegistryComputershare Investor Services Pty Ltd

Level 2, 45 St George’s TerracePerth WA 6000

AuditorsErnst & Young

11 Mounts Bay RoadPerth WA 6000

BankersWestpac Banking Corporation

1257-1261 Hay StreetWest Perth WA 6005

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Annual report 2012


Letter From Executive Chairman

Dear fellow shareholders,

I am pleased to present the annual report of Sterling Biofuels International Limited for the financial year 1 July 2011 to 30June 2012.

We set out in 2006 to be a palm oil based biodiesel producer, but as an industry, this industry has collapsed with little hopeof a revival. In summary the collapse was brought about by amongst others changes to tax structures (where tax incentiveswere withdrawn), governments not walking the talk on green energy initiatives, the hype over biodiesel with the resultantpush-up of palm oil prices which was the major component of our production costs.

Fortunately for us, our diversification into oil palm plantations has given us an opportunity to survive and chart a new pathfor the company. In order to fund the plantation, we had to implement a “Growers Scheme”, where we had in exchange forsome 70% of our future earnings, immediate funding for the plantation. This is part of the consolidation process whichcontinues into the next year. We will be building on this as we have established a niche in this sector of oil palm plantations.

In my last report, I said that there were considerable technical hurdles that needed to be overcome before the value of ourbusiness can be reflected fully in our books and for shareholders to begin to see the fruits of our labour. Application of theInternational Accounting Standards to our Growers Scheme does not take into account the uniqueness of our scheme.

Nevertheless, we look forward to the successful implementation of our oil palm plantation through our Growers Schemeand the commencement of our expansion plans.

I wish to take this opportunity to thank the management and staff for their contributions to the company and to you asshareholders, for your patience and look forward to seeing you at our annual general meeting later this year.

Dato’ CRS ParagashExecutive Chairman30 August 2012

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5 Directors’ Report14 Statement Of Comprehensive Income15 Statement Of Financial Position16 Statement Of Changes In Equity17 Cash Flow Statement18 Notes To The Financial Statements60 Directors’ Declaration61 Auditor’s Independence Declaration62 Independent Audit Report

Financial Report

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Directors’ Report

The directors of Sterling Biofuels International Limited (“SBIL”) submit the annual report of the Company for the year ended30 June 2012.

DIRECTORS

The names of the directors in office since the date of the last report are:

Dato’ CRS Paragash Andrew Phang Jackie Leong (appointed on 17 November 2011)Paul Mason Graham Keys

Details of directors in office at the date of this report are as follows:

Name and Qualifications

Dato’ CRS ParagashFCA Executive Chairman

Andrew PhangFFin LLM LLB Group Executive Director

Jackie LeongExecutive Director

Particulars

Dato’ Paragash joined the board on 25 May 2006. He is a Fellow of the Institute ofChartered Accountants (England & Wales) and a member of the Malaysian Institute ofChartered Accountants. In the past, he has worked with Sime Darby Bhd, aninternational conglomerate. He has been a successful private equity investor involvedin infrastructure and property for over 15 years.

During the past three years, Dato’ Paragash has not served as a director of any otherpublicly listed company.

Interest in SBIL shares/options: 32,600,000 shares in SBIL held indirectly through Duplex Fame Sdn Bhd.

Mr Phang joined the board on 25 May 2006. Mr Phang is a Fellow of the FinancialServices Institute of Australasia. A lawyer by training, he has held senior managementposts in the public and private sectors in Malaysia.

During the past three years, Mr Phang has not served as a director of any other publiclylisted company.

Interest in SBIL shares/options: 32,600,000 shares in SBIL held indirectly through Duplex Fame Sdn Bhd.

Ms Leong joined the board on 17 November 2011. Ms Leong is an accountant bytraining and obtained audit experience with a leading international accounting firmbefore continuing her career in corporate finance and investment banking. She hasextensive experience in advising corporate transactions such as IPOs, capital raising indebt and equity markets as well as mergers and acquisitions. She currently handlescorporate finance related matters for the Group.

During the past three years, Ms Leong has not served as a director of any other publiclylisted company.

Interest in SBIL shares/options: 149,843 shares in SBIL held by spouse.

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Annual report 2012


Directors’ Report (cont’d)

PRINCIPAL ACTIVITIES

The Group is principally involved in oil palm plantation development and the sale and marketing of grower plots (beinginterests under the Golden Palm Growers Scheme) and manufacture of biodiesel from palm oil.

6


Paul Mason Non Executive Director

Graham Keys Non Executive Director

COMPANY SECRETARY


Alicia MittonBA(Intnl Stud), BBus (Intnl Bus),MBus (Acc)

Particulars

Mr Mason joined the board on 1 April 2009. Mr Mason is a chartered accountant byprofession and is a member of the Institute of Chartered Accountants in Australia aswell as the Institute of Chartered Accountants in England and Wales. He has over 17years experience advising public and private companies and has worked in variousindustries in Australia and overseas predominantly in the energy and mining sectors.

During the past three years, Mr Mason has not served as a director of any otherpublicly listed company.

Interest in SBIL shares/options: Nil. Mr. Mason is chairman of the audit and risk committee.

Mr Keys holds a Bachelor of Economics and is a graduate member of the Institute ofCompany Directors. A chartered accountant, Mr Keys was a partner of theinternational firm Ernst & Young for 15 years before leaving to become managingdirector of a publicly listed mining company. In his 40 years of business life, Mr Keyshas developed a wide range of professional, managerial, accounting, financial,corporate and commercial skills in a variety of industries. He is currently ExecutiveChairman of Norvest Corporate and Non Executive Chairman of ASX listed AdvancedEngine Components Ltd and Brand New Vintage Limited.

During the last three years, Mr Keys has not served as a director of any other publiclylisted company.

Interest in SBIL shares/options:14,000 shares, of which 7,000 shares held indirectly through Norvest Corporate PtyLtd.

Particulars

Ms Mitton has experience in project management and corporate advisory roles withpublic, private, state and federal government organizations on projects in Australiaand various Asia Pacific countries. Her experience includes organizational strategicreviews, feasibility studies, financial consulting, business valuation, projectmanagement, business performance and improvement projects. Ms Mitton holds aBachelor of Business (International Business), a Bachelor of Arts (International Studies)and a Masters of Business (Accountancy) from the University of South Australia. MsMitton is the Company Secretary for one other listed company.For

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7


OPERATIONAL AND FINANCIAL REVIEW

Operating Results for the Year

The consolidated loss after income tax for the year ended 30 June 2012 was $8.781 million (2011: Loss after tax of $7.921million).

Summarised operating results for the year under review are as follows.

30 June 2012 30 June 2011 Movement$’000 $’000

Revenue 522 122 up 328%Loss after tax (8,781) (7,921) up 11%Loss attributable to members (8,781) (7,921) up 11%Dividends proposed or paid Nil Nil n/a

Shareholder Returns

There were no returns to shareholders during the year as the Group has yet to commence continuous biodiesel productionand its plantation development is still at the planting out stage. The loss per share is 13.51 cents (2011: 12.19 cents)

Dividends

No dividend was paid or is proposed for the year under review.

Review of Operations

The Group’s Growers Scheme which was launched in August 2010, has been well received and as at 30 June 2012, 16,973“Grower Plots” have been taken up under the Scheme raising $40.9 million for the development of the plantation. The cashraised from the Growers Scheme provides adequate funding for the plantation development whilst allowing the Group toretain at least 30% of the economic value of the plantation. As at 30 June 2012, 2,054 hectares of the 4,565 hectare plantationis already under development. Of this area, 1,805 hectares have been planted out with oil palms some of which have bornetheir first fruit.

The plantation development has been professionally valued at $26.3 million as at 30 June 2012.

While the Group’s Growers Scheme and plantation development has seen tremendous progress, the Group was unable tocommence production at its biodiesel plant as it was not economically feasible to do so. The biodiesel industry remainschallenging both at the international and local front.

Environmental Regulations and Performance

The Group has received relevant approvals from environmental protection authorities in Malaysia with respect to itsbiodiesel plant and the plantation development. These approvals require the Group to comply with applicableenvironmental regulations. The directors are not aware of any breaches of such environmental regulations during the periodof this report.

Review of Financial Position

During the year under review, the Company’s share capital remained unchanged at $32.143 million.

Net cash flows used in operating activities increased to $8.774 million from $6.632 million primarily as a result of increasedstaff costs, expenditure on advertising and marketing of the Growers Scheme as well as plantation operations (namelylease payments for the concession and professional fees incurred for the Growers Scheme).

Net cash flows used in investing activities decreased to $2.847 million from $3.323 million. The decreased activity is due tothe absence of major acquisitions in the current year as compared with the prior year.

Net cash flows from financing activities increased to $14.973 million from $9.692 million reflecting increased proceeds fromthe Growers Scheme.

The Group’s cash balance as at 30 June 2012 was $3.759 million (2011: $0.462 million).

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SIGNIFICANT EVENTS DURING THE YEAR

There were no significant events that occurred during the year under review.

SIGNIFICANT EVENTS AFTER BALANCE SHEET DATE

Except as disclosed in this report or the consolidated financial statements, as at the date of this report, no other matter orcircumstance has arisen that has significantly affected, or may significantly affect, the operations of the Group, the resultsof those operations or the state of affairs of the Group in subsequent years.

LIKELY DEVELOPMENTS AND EXPECTED RESULTS

The biodiesel industry remains challenging both at the international and local front and as such, it is unlikely that the Groupwill commence production at its biodiesel plant in the near future.

The continued success of the Growers Scheme has enabled the Group to further develop its 4,565 hectare oil palmplantation in Malaysia. An important milestone to note is that the initial batch of palms planted out is starting to yield fruit.In this regard, the palms are on-track to achieve commercial yields in 2016.

UNQUOTED OPTIONS

As at the reporting date and the date of this report, there were no unquoted options on issue exercisable into ordinaryshares.

No shares have been issued during or since the end of the financial year as a result of exercise of an option.

DIRECTORS’ INTERESTS IN SHARES AND OPTIONS

The following table sets out each director’s relevant interest in shares of the Company as at the date of this report.

Directors Number of fully paid ordinary shares

Dato’ CRS Paragash * 32,600,000 A Phang * 32,600,000 J Leong ** 149,843P Mason -G Keys 14,000

* held indirectly via Duplex Fame Sdn Bhd

** held by spouse

The current Board of Directors of the Company do not have any options granted to them.

INDEMNIFICATION OF OFFICERS AND AUDITORS

During the financial year, the Company paid a premium in respect of a contract insuring the directors of the Company (asnamed above), the Company Secretary and all executive officers of the Company and of any subsidiary against a liabilityincurred as such as a director, secretary or executive officer to the extent permitted by the Corporations Act 2001. The natureof the liability and the amount of premium paid has not been disclosed due to confidentiality purposes.

The Company has not otherwise, during or since the financial year, except to the amount permitted by law, indemnified oragreed to indemnify an officer or auditor of the Company or any related body corporate against a liability incurred as suchan officer or auditor.

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REMUNERATION REPORT (Audited)

This Remuneration Report outlines the directors and executives remuneration arrangements of the Company and the Groupin accordance with the requirements of the Corporations Act 2001 and its Regulations. For the purposes of this report, KeyManagement Personnel (KMP) are defined as those persons having authority and responsibility for planning, directing andcontrolling the major activities of the Group, directly or indirectly, including any director (whether executive or otherwise)of the parent company.

Details of key management personnel

Position HeldDato’ CRS Paragash Executive Chairman A Phang Group Executive Director J Leong Executive Director Appointed on 17 November 2011P Mason Director (Non-Executive) G Keys Director (Non-Executive)

ExecutivesT Rajan Chief Executive - Growers SchemeMP Nathan Plantation Adviser Joined on 1 May 2012MK Thorley Chief Operating Officer - Biodiesel Resigned on 31 January 2012CC Lim Chief Executive - Plantations Resigned on 31 March 2012

There were no changes to KMP after the reporting date and before the date the financial report was authorised for issue.

During the 2011 AGM the resolution to approve the remuneration report was not passed by a majority of shareholderseligible to vote. The Board has subsequently reviewed salaries and found them to be suitable for the level of responsibilityrequired for each position. The Board, through its remuneration committee, will continue to review key managementpersonnel salaries as part of its commitment to corporate governance best practice.

Remuneration PhilosophyThe Board is responsible for reviewing the compensation arrangements for the directors and the executive team. The Boardassesses the appropriateness of the nature and amount of emoluments of such officers on a periodic basis. The overallobjective is the retention of a high quality Board and executive team, to maximise value of shareholders’ investment.

Relationship between the remuneration policy and company performance

In the prior year, the Board approved a special bonus of $736,000 each to the Executive Chairman and Group ExecutiveDirector calculated on 1% of the gross development value of the Growers Scheme. A similar bonus amounting to $648,000was approved for the Executive Director, J Leong. The special bonuses were awarded for the successful development andimplementation of a corporate plan that culminated in the launch of the Growers Scheme. The performance conditionswere set as it was deemed to be in line with the philosophy of the Company which is to implement a funding strategy forits on-going projects. Payment of the special bonus to the Executive Chairman and Group Executive Director is subject tofulfilment of the following key parameters - sale of at least 6,000 Grower Plots; repayment of existing liabilities (includingthe standby facility from the founder shareholder); and sufficient cash flows for on-going operations. During the year,payment of the bonus of the entire amount has been made to J Leong, whilst the special bonus to the Executive Chairmanand Group Executive Director have not vested and remain unpaid until such time, as the perfomance conditions are met.

T Rajan (Chief Executive - Growers Scheme) has a contractual bonus compensation based on a percentage of funds raisedfrom the Growers Scheme in each financial year, subject to the achievement of a minimum cumulative target of 6,000Grower Plots. The performance conditions were set as it was deemed to be in line with the philosophy of the Companywhich is to implement a funding strategy for its on-going projects.

Except as disclosed above, no component of director and senior management salary is dependent on company performanceand the Company did not have a formal cash incentive or bonus scheme for the years ended 30 June 2011 and 30 June2012.

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REMUNERATION REPORT (Audited) (cont’d)

Relationship between the remuneration policy and company performance (cont’d)

The table below sets out summary information about the Group’s earnings and movements in shareholders wealth for theperiod from 30 June 2008 to 30 June 2012.

30 June 30 June 30 June 30 June 30 June2012 2011 2010 2009 2008

$’000 $’000 $’000 $’000 $’000

Revenue 522 122 111 4,208 1,136Loss before Tax (8,781) (7,921) (2,696) (5,024) (12,448)Loss after Tax (8,781) (7,921) (2,696) (5,024) (12,449)Share price at beginning of year 0.04 0.02 0.10 0.08 0.26Share price at end of year 0.11 0.04 0.03 0.10 0.08Dividends - - - - -Basic and diluted loss per share (cents per share) (13.51) (12.19) (4.15) (7.73) (19.15)

Non-Executive Directors’ Fees

The Constitution and the ASX Listing Rules specify that the aggregate compensation of non-executive directors shall bedetermined from time to time by a general meeting. An amount not exceeding the amount determined is then dividedbetween the directors as agreed. The latest determination was at the General Meeting held on 31 July 2006 whenshareholders approved the aggregate remuneration of $250,000 per year.

The amount of aggregate compensation sought to be approved by shareholders and the manner in which it is apportionedamongst directors is reviewed annually. The Board considers advice from external consultants, as well as the fees paid tonon-executive directors of comparable companies, when undertaking the annual review process.

Executive SalaryThe remuneration of executives is reviewed annually with the review taking into consideration the contribution of theindividual commensurate with the performance of the Group and comparable employment market conditions. Except asdisclosed above, no component of the executive salary is at risk and the Company does not have a formal cash incentive orbonus scheme.

Hedging of equity awards

Executives are prohibited from entering into transactions or arrangements, which limit the economic risk of participatingin unvested entitlements.

Contracts for service

The Executive Chairman, Dato’ CRS Paragash, is employed under contract. The employment contract, which commencedon 1 July 2006, has been renewed for a further 3 years and terminates on 30 June 2015. The total remuneration received bythe Executive Chairman during the year is disclosed in the relevant tables in this report. Either the Executive Chairman orthe Company can terminate the contract by giving 3 months notice.

The Group Executive Director, A Phang, is employed under contract. The employment contract, which commenced on 1July 2006, has been renewed for a further 3 years and terminates on 30 June 2015. The total remuneration received by theGroup Executive Director during the year is disclosed in the relevant tables in this report. Either the Group Executive Directoror the Company can terminate the contract by giving 3 months notice.

The Executive Director, J Leong, is employed under contract. The employment contract, which commenced on 1 July 2012,terminates on 30 June 2015. The total remuneration received by the Executive Director during the year is disclosed in therelevant tables in this report. Either the Executive Director or the Company can terminate the contract by giving 3 monthsnotice.

Remuneration of Key Management Personnel (“KMP”)The directors and the following executives received the following amounts as compensation for their services as directorsand executives of the Company and/or the Group during the year: (see next page)

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12

Sterling Biofuels International Limited ACN 119 880 492Annual report 2012

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DIRECTORS’ MEETINGS

The following table sets out the number of directors’ meetings and committee meetings held during the financial year andthe number of meetings attended by each director (while they were a director or committee member).

Board of Directors Audit and Risk CommitteeDirectors Held Attended Held Attended

Dato’ CRS Paragash 4 4 NA NAA Phang 4 4 NA NAJ Leong (appointed on 17 November 2011) 4 2 NA NAP Mason 4 4 2 2G Keys 4 4 2 2

Unless otherwise indicated, all directors were eligible to attend all board meetings held.

Committee Membership

As at the date of this report, the Company had an Audit and Risk Committee of the board of directors. Members of thiscommittee during the year were:

P Mason (Committee Chairman) G Keys

The full Board meets as the Nomination Committee and the Remuneration Committee on an as required basis. The Boardhad for the year one meeting as the Remuneration Committee during the financial year.

ROUNDING OF AMOUNTS

The Company is an entity to which Australian Securities and Investments Commission Class Order 98/100 applies. Pursuantto this Class Order, amounts reported in this report and the financial statements have been rounded to the nearest thousanddollars, except where not permitted to be rounded under the Corporations Act 2001.

NON-AUDIT SERVICES

An amount of $6,000 is payable to an internationally affiliated practice of the auditor for non-audit services provided duringthe year. The directors are satisfied that the provision of non-audit services is compatible with the general standard ofindependence for auditors imposed by the Corporations Act 2011. The nature and scope of each type of non-audit serviceprovided means that auditor independence was not compromised.

AUDITORS INDEPENDENCE DECLARATION

The Auditor’s Independence Declaration is included on page 61 of the financial report. Signed in accordance with aresolution of the directors.

Dato’ CRS Paragash Andrew PhangExecutive Chairman Group Executive Director

Perth, 30 August 2012


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The Statement of Comprehensive Income should be read in conjunction with the accompanying notes.

Statement of Comprehensive IncomeFor the Year Ended 30 June 2012

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CONSOLIDATED30 June 30 June

2012 2011NOTE $’000 $’000

Revenue 6(a) 522 122

Other income 2 11Net gain arising from changes in fair value of biological assets 2,911 418

Raw materials & consumable used 6(b) (190) (264)Growers Scheme costs (2,726) (2,393)Employee benefits expense 6(c) (3,780) (2,550)Depreciation expense 6(d) (378) (412)Finance costs 6(e) (2,916) (719)Lease expense 6(f ) (915) (912)Travel expense (94) (49)Other expenses 6(g) (1,217) (1,173)

LOSS BEFORE INCOME TAX (8,781) (7,921)Income tax expense 7 - -

LOSS ATTRIBUTABLE TO MEMBERS OF THE ENTITY (8,781) (7,921)

OTHER COMPREHENSIVE INCOME/(LOSS)Foreign currency translation 134 (922)

OTHER COMPREHENSIVE INCOME/(LOSS) FOR THE YEAR, NET OF TAX 134 (922)

TOTAL COMPREHENSIVE LOSS FOR THE YEAR (8,647) (8,843)

LOSS FOR THE YEAR IS ATTRIBUTABLE TONon-controlling interest 5 -Owners of the parent (8,786) (7,921)

(8,781) (7,921)

TOTAL COMPREHENSIVE LOSS FOR THE YEAR IS ATTRIBUTABLE TO:Non-controlling interest - -Owners of the parent (8,647) (8,843)

(8,647) (8,843)

LOSS PER SHARE FOR LOSS ATTRIBUTABLE TO THE ORDINARY EQUITY HOLDERS OF THE PARENTBasic and diluted loss per share(cents per share) 16 (13.51) (12.19)


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The Statement of Financial Position should be read in conjunction with the accompanying notes.

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2012 2011NOTE $’000 $’000

ASSETSCURRENT ASSETSCash and cash equivalents 17(a) 3,759 462Restricted deposits 18 2,454 692Other current assets 8(a) 807 434

TOTAL CURRENT ASSETS 7,020 1,588

NON-CURRENT ASSETSRestricted deposits 18 13,824 6,747Property, plant and equipment 9 11,465 9,494Biological assets 10 4,664 1,389

TOTAL NON-CURRENT ASSETS 29,953 17,630

TOTAL ASSETS 36,973 19,218

LIABILITIESCURRENT LIABILITIESTrade and other payables 11 3,798 2,003Interest bearing loans and borrowings 12 2,660 2,468

TOTAL CURRENT LIABILITIES 6,458 4,471

NON-CURRENT LIABILITIESInterest bearing loans and borrowings 12 153 7Growers Scheme liability 13 40,895 16,494

TOTAL NON-CURRENT LIABILITIES 41,048 16,501

TOTAL LIABILITIES 47,506 20,972

NET LIABILITIES (10,533) (1,754)

SHAREHOLDERS’ DEFICITEquity attributable to equity holders of the parentIssued capital 14(a) 32,143 32,143Accumulated losses (41,275) (32,489)Reserves 15 (1,401) (1,403)

Parent interests (10,533) (1,749)Non-controlling interests 27 - (5)

TOTAL SHAREHOLDERS’ DEFICIT (10,533) (1,754)

Statement of Financial PositionAs at 30 June 2012

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The Statement of Changes in Equity should be read in conjunction with the accompanying notes.

Statement of Changes in EquityFor the Year Ended 30 June 2012

Employee ForeignEquity Currency Non-

CONSOLIDATED Ordinary Accumulated Benefits Translation Equity Owners of controllingShares Losses Reserve Reserve Reserve the Parent Interest Total$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

At 30 June 2010 32,143 (24,568) 234 (30) (685) 7,094 (5) 7,089

Loss for the year - (7,921) - - - (7,921) - (7,921)Other comprehensive loss - - - (922) - (922) - (922)

Total comprehensive loss for the year - (7,921) - (922) - (8,843) - (8,843)

At 30 June 2011 32,143 (32,489) 234 (952) (685) (1,749) (5) (1,754)

Loss for the year - (8,786) - - - (8,786) 5 (8,781)Other comprehensive

income - - - 134 - 134 - 134

Total comprehensive (loss)/income for the year - (8,786) - 134 - (8,652) 5 (8,647)

Transaction with ownersin their capacity as owners

Acquisition of non-controlling interests - - - - (132) (132) - (132)

At 30 June 2012 32,143 (41,275) 234 (818) (817) (10,533) - (10,533)

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The Cash Flow Statement should be read in conjunction with the accompanying notes.

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2012 2011NOTE $’000 $’000

CASH FLOWS FROM OPERATING ACTIVITIESReceipts from trade customers 6 -Receipts from others - 11Payments to suppliers and employees (9,229) (6,648)Refund of tax - 5Interest paid (3) -Interest received 452 -

NET CASH FLOWS USED IN OPERATING ACTIVITIES 17(b) (8,774) (6,632)

CASH FLOWS FROM INVESTING ACTIVITIESProceeds from sale of property, plant and equipment 1 5Purchase of property, plant and equipment (2,303) (2,327)(Increase)/decrease of biological assets (413) (404)Acquisition of non-controlling interests 20(b) (132) (597)

NET CASH FLOWS USED IN INVESTING ACTIVITIES (2,847) (3,323)

CASH FLOWS FROM FINANCING ACTIVITIESProceeds from borrowings - 698Funds received under Growers Scheme 24,649 16,494Placement of deposits pledged (8,958) (7,439)Net yield paid (754) -Repayments from/(Advances to) employees 36 (61)

NET CASH FLOWS FROM FINANCING ACTIVITIES 14,973 9,692

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 3,352 (263)NET FOREIGN EXCHANGE DIFFERENCES (55) 594

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 462 131

CASH AND CASH EQUIVALENTS AT END OF YEAR 17(a) 3,759 462

Cash Flow StatementFor the Year Ended 30 June 2012

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Notes to the Financial Statements

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1. CORPORATE INFORMATION

The financial report of Sterling Biofuels International Limited for the year ended 30 June 2012 was authorised for issue inaccordance with a resolution of the directors on the date of approval of the Directors’ Report.

Sterling Biofuels International Limited is a company limited by shares, incorporated and domiciled in Australia, whose sharesare publicly traded on the Australian Stock Exchange.

The nature of the operations and principal activities of the Group are described in the Directors’ Report.

Going Concern

During the year ended 30 June 2012, the consolidated entity incurred a net loss of $8.781 million (2011: $7.921 million) and anet cash outflow from operations of $8.774 million (2011: $6.632 million).

Although the Group recorded a net loss position, it is in a cash positive position primarily due to the funds received from theGrowers Scheme of $24.649 million (2011: $16.494 million), which were used to place restricted deposits of $8.958 million(2011: $7.439 million) and paid net yield of $0.754 million (2011: nil) as well as to finance the Group’s operations.

The financial report has been prepared on the basis that the consolidated entity will continue to meet its commitments andcan therefore continue normal business activities.

In arriving at the position, the directors have considered the following:

• Continued available funds from the Growers Scheme

The Growers Scheme was successfully launched on 20 August 2010. The Scheme involves the offer of 30,800 growerplots to the Malaysian public. During the term of the Scheme, investors participate in the net yield of the plantationto the extent of their participating interest. The Scheme also provides for guaranteed yield payments and terminationpayments. As at 8 August 2012, $46.557 million has been raised and the Scheme is ultimately expected to raise grossfunds of RM252.8 million equivalent $78 million. The Group expects to raise proceeds of approximately $19.4 millionin the next 12 months. A portion of proceeds raised from the Growers Scheme is set aside as restricted deposits toguarantee net yield payable to growers under the Growers Scheme. The Group further believes that the net proceedsfrom the Growers Scheme will be sufficient to fund plantation development commitments.

The Group will continue to retain at least 30% of the economic value of the plantation development.

• Continued availability of short term funding from the founder shareholder

As at 30 June 2012, the Group has drawn down $2.306 million of the $3.093 million standby credit line made availableby the founder shareholder. With the launch of the Growers’ Scheme, the Group will be less reliant on funding from thefounder shareholder and expects to begin reducing the outstanding amount under this credit line over time. The foundershareholder has confirmed that it will not require repayment of the loan in the next 12 months unless the Group hassufficient funds.

The directors believe that at the date of signing the financial report, there are reasonable grounds to believe that having regardto matters set out above, the consolidated entity will have sufficient funds to meet its obligations as and when they fall due.

Having regard to the above, there is uncertainty whether the consolidated entity will continue as a going concern and thereforewhether it will realise its assets and extinguish its liabilities in the normal course of business and at amounts stated in thefinancial report.

The financial report does not include any adjustment relating to the recoverability and classification of recorded asset amountsor to the amounts and classification of liabilities that might be necessary should the consolidated entity not be able to continueas a going concern.


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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of preparation

The financial report is a general-purpose financial report, which has been prepared in accordance with the requirements ofthe Corporations Act 2001 and Australian Accounting Standards appliacable to for-profits entities. The financial report hasalso been prepared on a historical cost basis, except for biological assets and Growers Scheme liability which have beenmeasured at fair value.

The financial report is presented in Australian dollars and all values are rounded to the nearest thousand dollars (“$’000”),unless otherwise stated, under the option available to the Company under ASIC Class Order 98/0100. The Company is an entityto which the class order applies.

(b) Compliance with IFRS

The financial report complies with Australian Accounting Standards and International Financial Reporting Standards (“IFRS”),as issued by the International Accounting Standard Board.

(c) New accounting standards and interpretations

Adoption of accounting standards

All new and amended standards and interpretations, which became applicable on 1 July 2011, have been adopted by theGroup, including:

AASB 124 (Revised) The revised AASB 124 Related Party Disclosures (December 2009) simplifies the definition of arelated party, clarifying its intended meaning and eliminating inconsistencies from the definition.

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]

AASB 2010-4 Amendments to Australian Accounting Standards arising from the Annual Improvements Project[AASB 1, AASB 7, AASB 101, AASB 134 and Interpretation 13]

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 andInterpretations 112, 115, 127, 132 & 1042]

AASB 1054 Australian Additional DisclosuresThis standard is as a consequence of phase 1 of the joint Trans-Tasman Convergence project ofthe AASB and FRSB.

AASB 2010-6 Amendments to Australian Accounting Standards - Disclosures on Transfers of Financial Assets[AASB 1 & AASB 7]

Adoption of these new and amended standards and interpretations had no impact on the financial position or performanceof the Group.

Notes to the Financial Statements (cont’d)

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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(c) New accounting standards and interpretations

Australian Accounting Standards that have recently been issued or amended but are not yet effective have not beenadopted for the annual reporting year ended 30 June 2012. These are outlined below:

Application Impact on Applicationdate of Group date for

Reference Title Summary standard financial report Group

AASB 2011-9

AASB 10

AASB 12

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Amendments toAustralianAccountingStandards –Presentation ofOtherComprehensiveIncome [AASB 1, 5, 7,101, 112, 120,121, 132, 133,134, 1039 &1049]

ConsolidatedFinancialStatements

Disclosure ofInterests inOther Entities

1 July 2012

1 January2013

1 January2013

This isconsistent withthe Group’sexisting accountingpolicies.Therefore noimpact.

The Group hasnot yetdetermined theextent of theimpact of theamendments, ifany.


1 July 2012

1 July 2013

1 July 2013

This Standard requires entities to group itemspresented in other comprehensive income onthe basis of whether they might be reclassifiedsubsequently to profit or loss and those thatwill not.

AASB 10 establishes a new control model thatapplies to all entities. It replaces parts of AASB127 Consolidated and Separate FinancialStatements dealing with the accounting forconsolidated financial statements and UIG-112Consolidation - Special Purpose Entities.

The new control model broadens thesituations when an entity is considered to becontrolled by another entity and includes newguidance for applying the model to specificsituations, including when acting as a managermay give control, the impact of potentialvoting rights and when holding less than amajority voting rights may give control.

Consequential amendments were also madeto other standards via AASB 2011-7.

AASB 12 includes all disclosures relating to anentity’s interests in subsidiaries, jointarrangements, associates and structuresentities. New disclosures have been introducedabout the judgments made by managementto determine whether control exists, and torequire summarised information about jointarrangements, associates and structuredentities and subsidiaries with non-controllinginterests.

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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

(c) New accounting standards and interpretations (cont’d)

Australian Accounting Standards that have recently been issued or amended but are not yet effective have not beenadopted for the annual reporting year ended 30 June 2012. These are outlined below: (cont’d)



AASB 13

AASB 2012-5

Fair ValueMeasurement

AnnualImprovements2009–2011 Cycle

1 January2013

1 January2013



1 July 2013

1 July 2013

AASB 13 establishes a single source ofguidance for determining the fair value ofassets and liabilities. AASB 13 does not changewhen an entity is required to use fair value, butrather, provides guidance on how to determinefair value when fair value is required orpermitted. Application of this definition mayresult in different fair values being determinedfor the relevant assets.

AASB 13 also expands the disclosurerequirements for all assets or liabilities carriedat fair value. This includes information aboutthe assumptions made and the qualitativeimpact of those assumptions on the fair valuedetermined.

Consequential amendments were also made toother standards via AASB 2011-8.

This standard sets out amendments toInternational Financial ReportingStandards (IFRSs) and the related bases forconclusions and guidance made during theInternational Accounting Standards Board’sAnnual Improvements process. Theseamendments have not yet been adopted bythe AASB.

The following items are addressed by thisstandard:

IFRS 1 First-time Adoption of InternationalFinancial Reporting Standards• Repeated application of IFRS 1 • Borrowing costs

IAS 1 Presentation of Financial Statements• Clarification of the requirements for

comparative information

IAS 16 Property, Plant and Equipment • Classification of servicing equipment

IAS 32 Financial Instruments: Presentation• Tax effect of distribution to holders of equity

instruments

IAS 34 Interim Financial Reporting • Interim financial reporting and segment

information for total assets and liabilities

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AASB 2011-4

AASB 2012-2

AASB 2012-3

Amendments toAustralianAccountingStandards toRemoveIndividual KeyManagementPersonnelDisclosureRequirements[AASB 124]

Amendments toAustralianAccountingStandards –Disclosures –OffsettingFinancial Assetsand FinancialLiabilities

Amendments toAustralianAccountingStandards -OffsettingFinancial Assetsand FinancialLiabilities

1 July2013

1 January2013

1 January2014




1 July 2013

1 July 2013

1 July 2015

This Amendment deletes from AASB 124individual key management personneldisclosure requirements for disclosing entitiesthat are not companies.

AASB 2012-2 principally amends AASB 7Financial Instruments: Disclosures to requiredisclosure of information that will enable usersof an entity’s financial statements to evaluatethe effect or potential effect of nettingarrangements, including rights of set-offassociated with the entity’s recognisedfinancial assets and recognised financialliabilities, on the entity’s financial position.

AASB 2012-3 adds application guidance toAASB 132 Financial Instruments: Presentationto address inconsistencies identified inapplying some of the offsetting criteria of AASB132, including clarifying the meaning of“currently has a legally enforceable right of set-off” and that some gross settlement systemsmay be considered equivalent to netsettlement.


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AASB 9 FinancialInstruments

1 January2015


1 July 2015

AASB 9 includes requirements for the classificationand measurement of financial assets. It was furtheramended by AASB 2010-7 to reflect amendments tothe accounting for financial liabilities.

These requirements improve and simplify theapproach for classification and measurement offinancial assets compared with the requirements ofAASB 139. The main changes are described below.

(a) Financial assets that are debt instruments will beclassified based on (1) the objective of the entity’sbusiness model for managing the financial assets;(2) the characteristics of the contractual cash flows.

(b)Allows an irrevocable election on initialrecognition to present gains and losses oninvestments in equity instruments that are notheld for trading in other comprehensive income.Dividends in respect of these investments that area return on investment can be recognised in profitor loss and there is no impairment or recycling ondisposal of the instrument.

(c) Financial assets can be designated and measuredat fair value through profit or loss at initialrecognition if doing so eliminates or significantlyreduces a measurement or recognitioninconsistency that would arise from measuringassets or liabilities, or recognising the gains andlosses on them, on different bases.

(d) Where the fair value option is used for financialliabilities the change in fair value is to beaccounted for as follows:

• The change attributable to changes in creditrisk are presented in other comprehensiveincome (OCI)

• The remaining change is presented in profit orloss

If this approach creates or enlarges an accountingmismatch in the profit or loss, the effect of thechanges in credit risk are also presented in profit orloss.

Consequential amendments were also made to otherstandards as a result of AASB 9, introduced by AASB2009-11 and superseded by AASB 2010-7 and 2010-10.

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AASB1053

AASB119

Applicationof Tiers ofAustralianAccountingStandards

EmployeeBenefits

1 July 2013

1 January2013



1 July 2013

1 July 2013

This Standard establishes a differential financialreporting framework consisting of two Tiers ofreporting requirements for preparing generalpurpose financial statements:

(a) Tier 1: Australian Accounting Standards(b)Tier 2: Australian Accounting Standards – Reduced

Disclosure Requirements

Tier 2 comprises the recognition, measurement andpresentation requirements of Tier 1 and substantiallyreduced disclosures corresponding to thoserequirements.

The following entities apply Tier 1 requirements inpreparing general purpose financial statements:

(a) For-profit entities in the private sector that havepublic accountability (as defined in this Standard)

(b)The Australian Government and State, Territoryand Local Governments

The following entities apply either Tier 2 or Tier 1requirements in preparing general purpose financialstatements:

(a) For-profit private sector entities that do not havepublic accountability

(b)All not-for-profit private sector entities(c) Public sector entities other than the Australian

Government and State, Territory and LocalGovernments.

Consequential amendments to other standards toimplement the regime were introduced by AASB2010-2, 2011-2, 2011-6, 2011-11 and 2012-1.

The main change introduced by this standard is torevise the accounting for defined benefit plans. Theamendment removes the options for accounting forthe liability, and requires that the liabilities arisingfrom such plans is recognized in full with actuarialgains and losses being recognized in othercomprehensive income. It also revised the method ofcalculating the return on plan assets.

The revised standard changes the definition of short-term employee benefits. The distinction betweenshort-term and other long-term employee benefits isnow based on whether the benefits are expected tobe settled wholly within 12 months after thereporting date.

Consequential amendments were also made to otherstandards via AASB 2011-10.


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(d) Principles of consolidation

The financial statements comprise the financial statements of Sterling Biofuels International Limited (“SBIL”) and itssubsidiaries as at 30 June 2012.

Controlled entity

The financial statements of the controlled entity are prepared as at the same reporting period as the parent company, usingconsistent accounting policies. The financial statements of the controlled entity are included in the consolidated financialstatements from the date control commences until the date control ceases.

Transactions eliminated on consolidation

Unrealised gains and losses and inter-company balances resulting from transactions with or between controlled entitiesare eliminated in full on consolidation.

Non-controlling interests

Non-controlling interests are allocated their share of net profit after tax in the statement of comprehensive income and arepresented within equity in the consolidated statement of financial position separately from the equity of the owners of theparent.

(e) Segment reporting

A business segment is a distinguishable component of the entity that is engaged in providing products or services that aresubject to risks and returns that are different to those of other operating business segments. A geographical segment is adistinguishable component of the entity that is engaged in providing products or services within a particular economicenvironment and is subject to risks and returns that are different than those of segments operating in other economicenvironments.

(f) Foreign currency translation

Both the functional and presentation currency of SBIL is Australian dollar (A$). The functional currency of SPC Biodiesel(the parent for consolidation purposes) is Malaysian Ringgit (RM).

Transactions

Foreign currency transactions are translated to the relevant functional currency at the rate of exchange ruling at the dateof transaction. At balance sheet date, all foreign currency monetary items are translated using the exchange rate ruling onthat date. Non-monetary items which are measured in terms of historical cost in a foreign currency are translated usingthe exchange rate at the date of transaction. Non-monetary items which are measured at fair value in a foreign currencyare translated using the exchange rates at the date when the fair value was determined. Resulting exchange differencesare brought to account as exchange gains or losses in the statement of comprehensive income in the financial year in whichthe exchange rates change.

Presentation of consolidated accounts

On consolidation, the assets and liabilities recognised on a functional currency other than Australian dollar are translatedinto Australian dollar at the exchange rates prevailing at the reporting date. Income and expense items are translated intoAustralian dollar at the average exchange rates for the period unless exchange rates fluctuate significantly. Exchangedifferences arising, if any, are recognised in the foreign currency translation reserve.


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(g) Cash and cash equivalents

Cash and cash equivalents in the statement of financial position comprise cash at bank, on hand and short-term depositswith an original maturity of three months or less that are readily convertible to known amounts of cash and which aresubject to an insignificant risk of changes in value.

For the purposes of the Cash Flow Statement, cash and cash equivalents consist of cash and cash equivalents as definedabove.

(h) Restricted deposits

Restricted deposits comprise deposits with licensed banks representing 40% of the growers fees received from growers.These restricted deposits are to be used for the creation of a Reserve Fund Trust Account for purposes of paying guaranteednet yields (30%) as well as the setting up of a Reserve Margin Account (10%).

(i) Trade and other receivables

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effectiveinterest method, less an allowance for any uncollectible amounts.

Collectibility of trade receivables is reviewed on an ongoing basis. Debts that are known to be uncollectible are written offwhen identified. An allowance for doubtful debts is raised when there is objective evidence that the Group will not be ableto collect the debt.

Financial difficulties of the debtor, default payments or debts more than 90 days overdue are considered objective evidenceof impairment.

(j) Inventories

Inventories are valued at the lower of cost and net realisable value.

Costs incurred in bringing each product to its present location and conditions are accounted for as follows:

• Raw materialspurchase cost is assigned on the weighted average cost basis.

• Finished goods and work-in-progresscost of direct materials and labour and a proportion of variable and fixed manufacturing overheads based on normaloperating capacity but excluding borrowing costs.

• Net realisable valueis the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimatedcosts necessary to make the sale.

(k) Property, plant and equipment

Property, plant and equipment is stated at cost less accumulated depreciation and impairment. Cost includes expenditurethat is directly attributable to the acquisition of the item.

Depreciation is calculated on a straight-line basis over the estimated useful life of the assets. The estimated useful lives,residual values and depreciation method are reviewed at the end of each annual reporting period.

The following estimated useful lives are used in the calculation of depreciation:

a. Buildings – over 20 yearsb. Plant and equipment – between 5 to 20 yearsc. Other non-plant equipment – 5 yearsd. Land – 50 years

An item of property, plant and equipment is derecognised upon disposal or when no further future economic benefits areexpected from its use or disposal. Any gain or loss on derecognition of the asset (calculated as the difference between thenet disposal proceeds and the carrying amount of the asset) is included in statement of comprehensive income in the yearthe asset is derecognised.


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(l) Plantation development costs

Costs incurred on land clearing are capitalised as plantation development costs and is amortised over the economic usefullive of the asset.

Costs on the concession land lease with a term of 60 years are charged to the statement of comprehensive income in theyear in which the costs are incurred.

(m) Biological assets

Biological assets, which include mature and immature oil palm plantations, are stated at fair value less costs to sell, exceptwhen the fair value cannot be measured reliably. In this instance, the biological assets are measured at cost less anyaccumulated depreciation and any accumulated impairment losses until such time as its fair value can be reliably measured.

Fresh fruit bunches (which are subsequently milled to become palm oil) is the harvested product of a biological asset andis measured at its fair value less estimated point of sale costs at the point of harvest.

Net movement in fair value less estimated point of sale costs of biological assets are included in the statement ofcomprehensive income in the year they arise.

(n) Impairment of non-financial assets

At each reporting date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whetherthere is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverableamount of the assets is estimated in order to determine the extent of the impairment loss (if any). An assets recoverableamount is the higher of an asset’s or cash generating unit’s (CGU) fair value less costs to sell and its value in use and isdetermined for an individual asset, unless the asset does not generate cash inflows that are largely independent of thosefrom other assets or group of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, theasset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated futurecash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments ofthe time value of money and the risks specific to that asset. In determining fair value less cost to sell, recent markettransactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation modelis used. These calculations are corroborated by valuation multiples, quoted share prices for publically traded subsidiariesor other available fair value indicators.

Impairment losses of continuing operations, including impairment on inventories, are recognised in the income statementin expense categories consistent with the function of the impaired asset.

An assessment is made at each reporting date whether there is any indication that previously recognised impairment lossesmay no longer exist or may have decreased. If such indication exists, the Group estimates the asset’s or CGUs recoverableamount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used todetermine the asset’s recoverable amount since the last impairment loss was recognised. The reversal is limited so that thecarrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would havebeen determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversalis recognised in the income statement unless the asset is carried at a revalued amount, in which case, the reversal is treatedas a revaluation increase. F

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(o) Financial instruments - Initial recognition and subsequent measurement

(i) Financial assets

Financial assets within the scope of AASB 139 are classified as financial assets at fair value through profit or loss, loans andreceivables, held-to-maturity investments, available-for-sale financial assets, or as derivatives designated as hedginginstruments in an effective hedge, as appropriate. The Group determines the classification of its financial assets at initialrecognition.

All financial assets are recognised initially at fair value plus transaction costs.

Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation orconvention in the market place (regular wat trades) are recognised on the trade date, i.e., the date that the Group commitsto purchase or sell the asset.

The Group’s financial assets include cash and short-term deposits, restricted deposits, trade and other receivables and loansand other receivables.

The subsequent measurement of financial assets depends on their classification as described below:

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed of determinable payments that are not quoted in anactive market. After initial measurement, such financial assets are subsequently measured at amortised cost using the EIRmethod, less impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition andfees or costs that are an integral part of the EIR. The EIR amortisation is included in finance income in the income statement.The losses arising from impairment are recognised in the income statement in finance costs for loans and in cost of sales orother operating expenses for receivables.

Held-to-maturity investments

Non-derivative financial assets with fixed or determinable payments and fixed maturities are classified as held-to-maturitywhen the Group has the positive intention and ability to hold them to maturity. After initial measurement, held-to-maturityinvestments are measured at amortised cost using the EIR, less impairment. Amortised cost is calculated by taking intoaccount any discount or premium on acquistion and fees or costs that are an integral part of EIR. The EIR amortisation isincluded in finance income in the income statement. The losses arising from impairment are recognised in the incomestatement in finance costs.


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(o) Financial instruments - Initial recognition and subsequent measurement (cont’d)

(i) Financial assets (cont’d)

Derecognition

A financial assets (or, where applicable, a part of a financial asset or part of group of similar financial assets) is derecognisedwhen:

• The rights to receive cash flows from the assets have expired.

• The Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay thereceived cash flows in full without material delay to a third party under a “pass-through” arrangement; and either (a)the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferrednor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-througharrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership.

When it has neither transferred nor retained substantially all of the risks and rewards of the assets, nor transferred controlof the asset, the asset is recognised to the extent of the Group’s continuing involvement in the asset. In that case, the Groupalso recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflectsthe rights and obligations that the Group has retained.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the originalcarrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.

Impairment of financial assets

The Group assesses, at each reporting date, whether there is any objective evidence that a financial asset or a group offinancial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there isobjective evidence of impairment as a result of one or more events that has occurred after the initial recognition of theasset (an incurred “loss event”) and that loss event has an impact on the estimated future cash flows of the financial assetor the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that thedebtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principalpayments, the probability that they will enter bankruptcy or other financial reorganisation and when observable dataindicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economicconditions that correlate with defaults.

Financial assets carried at amortised cost

For financial assets carried at amortised cost, the Group first assesses whether objective evidence of impairment existsindividually for financial assets that are individually significant, or collectively for financial assets that are not individuallysignificant. If the Group determines that no objective evidence of impairment exists for an individually assessed financialasset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristicsand collectively assesses them for impairment. Assets that are individually assessed for impairment and for which animpairment loss is, or continue to be, recognised are not included in a collective assessment of impairment.

If there is objective evidence that an impairment loss has been incurred, th amount of the loss is measured as the differencebetween the asset’s carrying amount and the present value of estimated future cash flows (excluding future expected creditlosses that have not yet been incurred). The present value of the estimated future cash flows if discounted at the financialasset’s original effective interest rate. If a loan has a variable interest rate, the discount rate for measuring any impairmentloss is the current EIR.


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(o) Financial instruments - Initial recognition and subsequent measurement (cont’d)

(i) Financial assets (cont’d)

Financial assets carried at amortised cost (cont’d)

The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss isrecognised in the income statement. Interest income continues to be accrued on the reduced carrying amount and isaccrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss.The interest income is recorded as part of finance income in the income statement. Loans together with the associatedallowance are written off when there is no realistic prospects of future recovery and all collateral has been realised or hasbeen transferred to the Group. If, in a subsequent year, the amount of the estimated impairment loss increases or decreasesbecause of an event occurring after the impairment was recognised, the previously recognised impairment loss is increasedor reduced by adjusting the allowance account. If a future write-off is later recovered, the recovery is credited to financecosts in the income statement.

(ii) Financial liabilities

Financial liabilities are classified according to the substance of the contractual arrangements entered into and the definitionsof a financial liability.

Financial liabilities, within the scope of AASB 139, are recognised in the statement of financial position when, and onlywhen, the Group become a party to the contractual provisions of the financial instrument. Financial liabilities are classifiedas either financial liabilities at fair value through profit or loss or other financial liabilities.

Growers Scheme liability

Growers fees received from the growers under the Golden Palm Growers Scheme are financial instruments with multipleembedded derivative and are designated as financial liabilities at fair value through profit or loss upon initial recognitionand are measured initially at fair value and subsequently at fair value, with any resultant gains or losses recognised in profitor loss. Transaction costs are immediately recognised in profit or loss on intial recognition.

(p) Leased assets

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards ofownership to the lessee. All other leases are classified as operating leases.

Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where anothersystematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

(q) Trade and other payables

Trade and other payables are recognised at amortised cost and they represent amounts to be paid in the future for goodsand services received, whether or not billed to the Company. Payables to related parties are carried at the principal amount.Interest, when charged by the lender, is recognised as an expense on an accrual basis.

(r) Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive), as a result of a past event, andthe future sacrifice of economic benefits is probable to settle the obligation, and the amount of the provision can be reliablymeasured.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation atreporting date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measuredusing the cash flows estimated to settle the present obligation, its carrying amount is the present value of those flows.When some or all the economic benefits required to settle a provision are expected to be recovered from a third party, thereceivable is recognised as an asset if it is virtually certain that recovery will be received and the amount of the receivablecan be measured reliably.


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(s) Employee benefits

Provision is made for benefit accruing to employees in respect of wages and salaries, annual leave and long service leavewhen it is probable that settlement will be required and they are capable of being measured reliably. Provisions made inrespect of employee benefits expected to be settled within 12 months, are measured at their nominal values using theremuneration rate expected to apply at the time of settlement.

Provisions made in respect of employee benefits which are not expected to be settled within 12 months are measured asthe present value of the estimated future cash outflows to be made by the Group in respect of services provided byemployees up to reporting date.

Defined Contribution Plan

Contributions to defined contributions plans are expensed when incurred.

(t) Revenue

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenuecan be reliably measured. Revenue is measured at the fair value of the consideration received or receivable, taking intoaccount contractually defined terms of payments and excludes taxes or duty. The following specific recognition criteriamust be met before revenue is recognised:

Sale of Goods

Revenue is recognised when all significant risks and rewards of ownership of the goods have been transferred to the buyerand can be measured reliably. Risks and rewards of ownership are considered transferred to the buyer at the time of deliveryof the goods to the customer.

Interest revenue

Revenue is recognised as the interest accrues (using the effective interest method, which is the rate that exactly discountsestimated future cash receipts through the expected life of the financial instrument) to the net carrying amount of thefinancial asset.

(u) Taxation

Current Tax

Current tax is calculated by reference to the amount of income taxes payable or recoverable in respect of the taxable profitor tax loss for the year. It is calculated using tax rates and tax laws that have been enacted or substantively enacted byreporting date. Current tax for current or prior years is recognised as liability (or asset) to the extent that it is unpaid (orrefundable).

Deferred Tax

Deferred tax is accounted for using the comprehensive balance sheet liability method in respect of temporary differencesarising from differences between the carrying amount of assets and liabilities in the financial statements and thecorresponding tax base of those items. In principle, deferred tax liabilities are recognised for all taxable temporarydifferences.

Deferred tax assets are recognised to the extent that it is probable that sufficient taxable amounts will be available againstwhich deductible temporary differences or unused tax losses and tax offsets can be utilised. However, deferred tax assetsand liabilities are not recognised if the temporary differences giving rise to them arise from the initial recognition of assetsand liabilities (other than as a result of a business combination) which affects neither taxable income or accounting profit.Furthermore, a deferred tax liability is not recognised in relation to taxable temporary differences arising from goodwill.

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(u) Taxation (cont’d)

Deferred Tax (cont’d)

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, branches,associates and joint ventures except where the consolidated entity is able to control the reversal of the temporary differenceand it is probable that the temporary differences will not reverse in the foreseeable future. Deferred tax assets arising fromdeductible temporary differences associated with these investments and interests are only recognised to the extent that itis probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences andthey are expected to reverse in the foreseeable future.

Deferred tax assets and liabilities are measured at the tax rates and are expected to apply to the period(s) when the assetsand liabilities giving rise to them are realised or settled, based on tax rates (and tax laws) that have been enacted orsubstantively enacted by reporting date. The measurement of deferred tax liabilities and assets reflects the tax consequencesthat would follow from the manner in which the consolidated entity expects to recover or settle the carrying amount of itsassets and liabilities. Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxationauthority and the consolidated entity intends to settle its current tax assets and liabilities on a net basis.

Current and deferred tax for the year

Current and deferred tax is recognised as an expense or income in the statement of comprehensive income, except whenit relates to items credited or debited directly to equity, in which case the deferred tax is also recognised directly in equity,or where it arises from the initial accounting for a business combination, in which case it is taken into account in thedetermination of goodwill or excess.

(v) Other taxes

Revenues, expenses and assets are recognised net of the amount of GST except:

• where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, inwhich case the GST is recognised as part of the cost of acquisition of the assets or as part of the expense item asapplicable;

• receivables and payables are stated with the amount of GST included; and• the net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables

or payables in the statement of financial position.

Cash flows are included in the Cash Flow Statement on a gross basis. The GST components of cash flows arising frominvesting or financing activities which are recoverable from, or payable to, the taxation authority are classed as operatingcash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, thetaxation authority.

(w) Research and development costs

Expenditure on research activities is recognised as an expense in the year in which it is incurred. Where no internally–generated intangible asset can be recognised, development expenditure is recognised as an expense in the year as incurred.An intangible asset arising from development (or from the development phase of an internal project) is recognised if, andonly if, all of the following are demonstrated:

• the technical feasibility of completing the intangible asset so that it will be available for use or sale ;• the intention to complete the intangible asset and use or sell it;• the ability to use or sell the intangible asset;• how the intangible asset will generate probable future economic benefits;• the availability of adequate technical, financial and other resources to complete the development and to use or

sell the intangible asset; and• the ability to measure reliably the expenditure attributable to the intangible asset during its development.

Notes to the Financial Statements (cont�

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