s ugar l ed building al sustainable business …...94.4%of sugar exports delivered in full and on...

Queensland Sugar Limited ABN 76 090 152 211

Level 14 348 Edward Street Brisbane Queensland 4000

GPO Box 891 Brisbane Queensland 4001 Australia

Telephone +61 7 3004 4400 Facsimile +61 7 3004 4499

[email protected] www.qsl.com.au

The QSL Annual Report 2010/11 is printed on Impress Satin. Impress Satin has been manufactured and all fibre sourced, according to the FSC Chain of Custody Standard SGS-COC-2262, promoting well-managed forests.

Design and production Lloyd Grey Design.

Queensland sugar limiTedAnnuAl RepoRt 2010/11

Building susTainaBle Business ParTnershiPs

Queensland sugar limiTed ANNuAL rEPOrt 2010/11

QuEENSLAND SuGAr LIMItED ABN 76 090 152 211

QSL Seasonal Pool gross return

of $443.99 (per IPS tonne)

ConTenTs

2010/11 in review ii

About QSL 2

Five year plan 3

Marketing services 6

Chairman’s report 8

Chief Executive Officer’s report 10

Supply chain 14

Service to industry 16

Our people and communities 20

Executive Team 22

Organisational structure 23

Board of Directors 24

Corporate governance 26

Statutory financial report 29

2010/11 in reviewKEy hIGhLIGhtS

Continued strengthening of international

customer relationships

Secured $500 million of

low-cost funding for a further two years

61

94.4%of sugar exports

delivered in full and on time

Smooth offi ce relocation to

new premises at Edward Street,

Brisbane

Completion of brand renewal,

including launch of new

website

South Korea (31%)

Indonesia(26%)

Malaysia(14%)

Japan(13%)

New Zealand(7%)

USA(4%)

Taiwan(3%)

China(2%)

Continued development of

other-origin sugar program to meet growing Asian

demand

Zero lost-time injuries for the fourth

consecutive year

Delivered key engineering

process improvements

across QSL

One of the most challenging years

in the history of the Queensland

sugar industry

Pool sales by market

QUEENSLAND SUGAR LIMITED ANNUAL REPORT 2010/112

ABOUT QSLBUSINESS OVERVIEW

We are proud to be a global leader in raw sugar marketing and logistics.

QSL is a service-focused organisation that promotes the development of the Queensland sugar industry by giving it an edge on the world stage through superior marketing, logistics and supply chain functions.

Our 80-year heritage is built on the traditions of excellence and innovation embedded throughout the Australian sugar industry.

We believe strongly in the benefi ts of the Queensland industry approach of working together – we see fi rsthand the advantages this brings to the sector and to our customers.

QSL works hard to foster strong, long-term relationships with our customers in the Asia-Pacifi c region, supplying around 40 per cent of the East Asian region’s total raw sugar imports each year.

We have a customer-focused approach that is all about understanding and delivering on individual customer quality preferences through our superior sugar shipping and logistics systems.

We manage a highly effective, low-cost, competitive supply chain that delivers signifi cant advantages to our customers throughout the Asia-Pacifi c region and we provide a range of leading pooling, pricing, foreign exchange, risk management and fi nancial services to local industry.

QSL has 35 members which represent the sugar industry – 10 sugar mill owners, 23 grower representative members and two grower association representatives.

WE WORK HARD TO FOSTER STRONG, LONG-TERM RELATIONSHIPS WITH OUR CUSTOMERS.

3

FIVE YEAR PLANA STRONG FUTURE

VISION

QSL: Asia-Pacifi c’s

leading raw sugar marketing company

VALUES

Customer focusReliability

ResponsivenessTeam focusInnovation

MISSION

QSL CREATES VALUE FOR:MARKETING CUSTOMERS

by providing a reliable and consistent source of quality raw sugar at an appropriate price.

SUPPLIER CUSTOMERSby providing a cost-effective gateway to the premium raw sugar markets in the Asia-Pacifi c region and consistent access to competitive funding, hedging, logistics and

support services.

SHAREHOLDERS/MEMBERSby preserving the Australian sugar pipeline to the Asia/Pacifi c whilst diversifying our earnings base to incorporate prudently selected activities that are logically connected to our core raw sugar

business and provide an appropriate risk adjusted return on investment. STRATEGIES

FLEXIBILITY | MAINTAIN | BUILDIMPROVE | ASSIST | LEAD | GROW

Operate in a manner that accommodates emerging changes to industry structures

Maintain market leadership in Asia by continuing to contract the majority of raw sugar shipped from Australian ports

and increasing supply from other origins Build organisational capability with a focus on key areas

of marketing, origination, customer service, engineering and safety

Continuously improve in operational effectiveness through development of key strengths in fi nance, terminals, shipping and IT

Facilitate and assist industry approaches to increasing production of Australian sugar

Be recognised as the leading provider of innovative and relevant pricing, fi nance and logistical services

to millers, growers and refi ners Grow and improve our access to funding by maintaining

a premium credit rating and always having the right level and mix of funding available

to support all activities.

Strong relationships are at the heart of our partnerships with international customers. We are experts in Australian raw sugar quality, delivering fl exible, innovative products and services that add genuine value for our customers. Strong connections to the global marketplace make us the raw sugar supplier of choice to Asia.

Flexibility, capability, quality: The hallmarks of our approach to customer service.


The global marketplace in 2010/11 was characterised by ongoing volatility. Like many commodity sectors, the raw sugar futures market experienced record highs (touching US35.31c/lb in February 2011) and dramatic drops (down to US14.60c/lb in July 2010) during 2010/11.

Many sugar-producing nations faced challenging production conditions in 2010/11. Extreme weather conditions, poor yields, infrastructure diffi culties and heavy demand for raw sugar ensured ongoing tightness in the global market.

Major producer Brazil was a particular infl uence on price, with fl at production growth and major infrastructure challenges during the harvest seasons having a signifi cant impact. Thailand and India both experienced larger than anticipated crops in 2010/11, but the overall outlook for these nations’ future production levels remains uncertain. Northern hemisphere producers also experienced mixed seasons, with drought impacting both Europe and North America crops.

While supply remained tight, demand continues to grow, particularly in Asia where demand for raw sugar is increasing steadily in line with population growth and the adoption of an increasingly Westernised diet.

Widespread macro-economic uncertainty also contributed to volatile market conditions during 2010/11, both in terms of raw sugar prices and the foreign exchange rate, which continued to fl uctuate.

Despite the challenges of the extreme weather conditions and lower export volumes in Australia, QSL managed to leverage our advantages in shipping, logistics and value-adding service offerings to meet our customers’ needs effectively in this volatile context.

We remain well connected in the global marketplace and our focus continues to be on ensuring our customers have access to superior quality raw sugar, delivered on time, at a competitive price, while also providing access to a comprehensive suite of product and service options that add value to their operations.

MARKETING SERVICESOUR GLOBAL VIEW

Our customers have access to superior-quality raw sugar, delivered on time, at a competitive price.

WE VALUE ADD FOR THE BENEFIT OF THE AUSTRALIAN SUGAR INDUSTRY.

7

A SOLUTIONS FOCUS TO MEETING CROP DOWNGRADE

Demand for Australian raw sugar is always very high, particularly from our customers in Asia, who value both the high quality of Australian raw sugar and the proximity of our terminals for effective shipping, which allows for the timely delivery of sugar.

During 2010/11, QSL faced more demand for sugar than was available from Australian supplies, due to the impact of fl oods and cyclones on production levels. In order to meet the strong demand and previous commitments made, QSL made the decision to supplement Australian raw sugar supplies with sugar from other origins.

The key priority for QSL was ensuring that, where possible, the strong company standards around quality and shipping were not compromised.

The service was highly successful and QSL will continue to supplement Australian raw sugar supplies with sugar from other origins.

“All suppliers of other-origin sugar are carefully vetted by the QSL Board and our team of sugar quality experts travel to other-origin ports and attend the majority of loadings, supervising shipments to ensure quality and quantity parameters are met,” said Brent Casey, General Manager, Business Development.

“QSL only supplies sugar from other origins if it is viable commercially and we have a signifi cant risk management system in place – covering credit, delivery and quality risks as well.

“What we found during 2010/11 was that this service delivers benefi ts for customers in terms of surety of supply, and it also plays a key role in ensuring our customer relationships remain strong into the future – which is important for the Australian sugar industry as a whole,” Mr Casey said.

We maintained our focus on the Asia-Pacifi c region, delivering 2.5 million tonnes of raw sugar to customers in Korea, Indonesia, Japan, Malaysia, New Zealand, Taiwan and China. We also provided the maximum tonnage available under the quota system to the US.

Our key highlights in 2010/11 included:

Securing two new refi nery customers in Indonesia Renewing sales to the increasingly important market

of China for the fi rst time since mid-2007 Exceeding internal benchmarks for FOB premiums Refi ning our distribution strategy in Japan Gaining valuable competitor insights from

augmenting supply with other-origin sugar

Customers continue to seek out QSL to supply them with sugar because we offer a competitive, comprehensive service, and we deliver consistently high-quality raw sugar sourced from our Australian suppliers, tailored to suit the specifi c refi nery environment of each customer.

As a result, we continue to add value to Australian raw sugar, ensuring we are able to attract a premium price for our industry’s product on the international market, for the benefi t of all in the local industry.

QSL MARKETING COSTS

2007/08 (AUD

MILLIONS)

2008/09 (AUD

MILLIONS)

2009/10 (AUD

MILLIONS)

2010/11 (AUD

MILLIONS)

QSL marketing charge $7.8 $8.2 $8.0 $6.9

Payments to mill owners $887.8 $1,010.5 $1,518.4 $1,080.8

Marketing charge % 0.9% 0.8% 0.5% 0.6%


CHAIRMAN’S REPORTALAN WINNEY

Strong support has allowed us to work closely with our customers to plan their sugar demands over coming years.

WEATHER IMPACTED 2010 AND 2011 SEASONS

The extraordinary weather conditions of the last 12 months have had a severe impact on the Queensland sugar industry, and in particular QSL and its grower and miller members. Floods and cyclones prevented harvesting in a number of regions and caused major damage to the cane crop in other regions.

This fl owed into a reduction in sugar availability from the 2010 crop and the damage will also have an impact on the 2011 crop year. The impact felt by our members has meant less cane harvested, lower throughput through mills and ports, and reduced sugar supply for our international customers. 2010 will go down as one of the most diffi cult seasons that the industry has experienced.

The rain throughout most of the second half of calendar 2010 was caused by a very strong La Niña pattern throughout the Pacifi c region. Unfortunately the likely impact of this weather infl uence was not fully recognised until late November 2010, so late that a signifi cant portion of 2010 sugar had already been sold. QSL had to immediately change its hedging, marketing and shipping program in light of this dramatic reduction in sugar availability.

Unfortunately for all in the industry non-delivery of sugar led to the lifting of hedges and caused QSL to charge non-delivery fees to the mills, who then passed these costs onto cane growers. All at QSL felt great sympathy for the cane growers whose crops were damaged by the weather and for the fi nancial impact that the wash-up of this weather event had on returns throughout the production and milling sectors of the industry.

I can assure the industry QSL has reviewed all of its systems, procedures and actions and based on the information available to us throughout that period, QSL did everything that it could have possibly done to manage this situation to minimise cost and impact.

Internal and independent reviews have reassured the QSL Board that management acted within established policy guidelines and in fact reduced the overall costs and impact on the industry. I thank them for their efforts during this very diffi cult season. Greater emphasis on crop forecasting and a more conservative approach to forward selling have been introduced to ensure that a repeat of this situation cannot occur again in future.

9

INDUSTRY CONSOLIDATION AND GLOBALISATION

The Australian agribusiness industry has continued to prove a very attractive investment location over the last year, with signifi cant new investment and much media attention on this now popular asset class.

Within the sugar subset of this ongoing agribusiness consolidation we have seen the ownership of many of our miller members actively traded. After welcoming Wilmar as the largest miller in Australia and as a QSL member last year, we have seen another year of active merger and acquisition activity.

China-based food conglomerate COFCO was successful in acquiring Tully Sugar Limited, after a hard fought battle with Bunge and Mackay Sugar Limited. Maryborough Sugar Factory (now MSF Sugar Limited) purchased the northern mills of Bundaberg Sugar and Mitr Pohl of Thailand emerged as the largest shareholder in MSF Sugar Limited. As this Annual Report goes to print, Wilmar and COFCO are actively competing for the ownership of Proserpine Sugar Co-operative. We welcome these new investors in the Australian sugar sector and we look forward to QSL providing strong support in the marketing, logistics and fi nance portions of their businesses.

Post these ownership changes all these groups, with the exception of MSF Sugar Limited, have elected to continue tomarket their sugar through QSL. Current commitments are for more than 90 per cent of Australia’s raw sugar to be marketed through QSL until at least June 2014, and more than 80 per cent of Australia’s raw sugar exports to be marketed through QSL until at least June 2015.

This strong support has allowed us to work closely with many of our long-established international customers to plan their sugar demands over the next few years. Changing ownership and trade fl ows will inevitably cause QSL’s export program to be reviewed and refi ned over the next few years with the likelihood of stronger demand from China and Indonesia and increased multi-origin sourcing.

THE FUTURE

The plateauing of investment in the Brazilian sugar industry has seen world demand continue to outstrip supply and as a result very attractive prices have been achieved for Australian sugar over the last year. The outlook for ongoing strong prices continues into the 2011 season and beyond, providing a great opportunity for a rebirth of new acreage in the Queensland sugar belt.

My three-year term as a QSL Director fi nishes in December 2011, so this will be my last annual report as Chairman of your organisation, QSL. I consider that at the time of my departure from the industry it is in very strong shape. QSL is a renewed commercial and world-class commodity company, ready to compete globally with Australian and other-origin sugars, underpinned by very strong prospects for growth in Australian sugar production and an outlook for very good prices. I thank all of the interesting and welcoming members of the sugar community that I have had the opportunity to work with over the last three years.

THE OUTLOOK FOR ONGOING STRONG PRICES CONTINUES INTO THE 2011 SEASON AND BEYOND.


The 2010/11 fi nancial year was one of the most challenging seasons the Queensland sugar industry has faced for many years, if not ever. The extreme external events that had such an impact on the 2010 crop presented numerous challenges for our business.

Assessing our business performance in a year like this has been diffi cult. We have many achievements to be proud of, but like everyone else in the sugar industry, and indeed Queensland generally, we were badly affected by the seasonal conditions.

In challenging times, teamwork comes to the fore and I am extremely proud of the QSL team for the way they pulled together to manage the challenges presented this year. It is testament to the skill and experience of our people that despite some of the tests faced during 2010/11 they still delivered some good results:

Total revenue of $1.7 billion Rolling over Raw Sugar Supply Agreements (RSSAs)

with eight milling partners until June 2015 Achieving a 94.4 per cent ‘delivered in full and on time’

result, despite severe damage at Lucinda terminal due to Cyclone Yasi and lower total export volumes

Maintaining strong liquidity in the business and securing strong, ongoing support from all banks – resulting in a quality, low-cost refi nancing package delivered ahead of schedule

Managing marketing overhead costs to a lower result than the previous year

Improving our safety record for the fourth consecutive year Launching a new website and completing the rollout of our

revitalised brand Achieving key improvements in engineering processes to

ensure ongoing optimisation of our supply chain Effectively managing the impacts of a high Australian dollar

through our fi xed pricing services, with suppliers able to lock in sales for future seasons at around 85 cents to the US dollar on average.

This year we supplemented sales from Australia with increased sales of other-origin sugar as a means of ensuring we could deliver on our customer expectations for demand. In 2011/12 it is likely we will export similar, lower volumes from Australia as we did in 2010/11, but demand continues to grow from our customers.

CHIEF EXECUTIVE OFFICER’S REPORTNEIL TAYLOR

Australia’s pool-based marketing system enables us to capture maximum value for our high-quality raw sugar.

THE FUTURE HOLDS STRONG OPPORTUNITIES.

11

It is important we remain in a strong bargaining position with our customers, and providing some sugar from other countries is something many of them are asking for, as a way of making sure their primary supplier of sugar is QSL. We will only do this if we make money from these sales. We have worked hard to ensure that the pools benefi t directly from these activities whilst keeping our tax-exempt status. This new and sustainable benefi t from QSL is demonstrated in our fi nancial statements this year. We expect to see more of the same focus on this in the coming year.

LOOKING FORWARD TO A POSITIVE FUTURE

There is no doubt that there are a number of lessons to be learned from the 2010/11 year. I believe the independent industry review established following the 2010 season has helped growers, millers and QSL focus on a number of logical changes to the pooling system that will be for everyone’s benefi t. Our focus is on delivering the industry recommendations effectively.

Looking ahead, there are plenty of opportunities for the industry given the ongoing positive price signals and continued strong demand for our product. We are able to achieve much greater bargaining power on the world stage, particularly in Asia, by operating together. Our collective marketing approach delivers better opportunities for capturing maximum value for our high-quality raw sugar.

Our customers appreciate the ability to lock in deals on both a spot and longer-term basis and, given the consistent quality and service offered by QSL, they pay higher premiums to us versus our competitors. These premiums come back to our members.

QSL’s focus for the coming year will be on working closely with our stakeholders to implement recommendations from the Pooling and Pricing review to further strengthen our marketing system, and to continue to leverage the strengths of the Australian sugar marketing system for the benefi t of all in the industry.

We are likely to see ongoing consolidation in the milling sector. In the long term this will, in my view, see more investment in the Australian sugar industry and ultimately more sugar produced for us to export.

We expect to see increasing demand for Australian sugar across the Asian region and QSL is committed to working with the rest of the industry to develop longer-term strategies to increase Australian production and productivity to make the most of this demand. We are also focused on building strategic international relationships to deepen our knowledge of key markets and drivers across the supply chain, particularly in Indonesia and China.

In 2011/12 we will retain a strong day-to-day focus on the core deliverables for our operational activities, including:

Improving our safety record Delivering on our key engineering projects Continuing to optimise our supply chain Building the other-origin sugar business and linking

this into our pooling business Looking at all options to improve returns for members Getting the highest returns possible for sugar from Australia Improving our customer service offering and keeping close

to our international customers.

As a fi nal note to the year, I would like to extend my thanks to the QSL staff. They have performed very well in an extremely challenging year, and have retained a strong focus on the positive opportunities ahead. Their commitment to achieving improvements in our business will serve them and our business well in future years.

2010/11 (AUD MILLIONS)

2009/10(AUD MILLIONS)

NET SURPLUS 2.3 6.3

ASSETS – Current 339.8 248.1– Non-current 149.8 98.5

TOTAL ASSETS 489.6 346.6

LIABILITIES – Current 351.3 239.8– Non-current 95.9 66.5

TOTAL LIABILITIES 447.2 306.3

QSL FINANCIAL PERFORMANCE

2010/11 2009/10

Seasonal Pool Return(Per Tonne Gross IPS) $443.99 $510.89

Pool Volume(Per Tonne IPS) 2,213,154 2,917,641

Pool Sales Value(AUD) $1.4bn $1.7bn

QSL POOL VALUES

QSL SEASONAL POOL RETURNS

06/07 07/08 08/09 09/10 10/11

600

500

400

300

200

100

0

$/gross tonne IPS

RAW SUGAR ICE 11

JUL 09 OCT 09 JAN 10 APR 10 JUL 10 OCT 10 JAN 11 APR 11 JUL 11

40

US c/lb

35

30

25

20

15

10

AUD-USD EXCHANGE RATE

JUL 09 OCT 09 JAN 10 APR 10 JUL 10 OCT 10 JAN 11 APR 11 JUL 11

1.1

1.0

0.9

0.8

0.7

AUD/USD

Our unique end-to-end supply chain service puts us at the forefront of the global market. We charter and control ships all the way from our terminals to the customer’s factory, always aiming to deliver in full and on time. Our technical staff work on site with customers to ensure the sugar delivered meets specifi cations, thus cementing long-term relationships with consistent supply and tailored solutions.

We are proud to be world leaders in raw sugar shipping, logistics and quality.


QSL achieved a 94.4 per cent ‘delivered in full on time’ result for the 2010/11 fi nancial year. This is a sound result in a diffi cult year that saw harsh and dramatic weather conditions – including an extraordinarily wet season and Cyclones Yasi and Ului – negatively impact the storage, shipping and delivery of raw sugar and precipitate a large number of unforeseeable logistical delays.

QSL received, stored and delivered 2.9 million tonnes of raw sugar at our Bulk Sugar Terminals (BSTs) in Cairns, Mourilyan, Lucinda, Townsville, Mackay and Bundaberg. QSL also unloaded almost 2,000 tonnes of sugar per hour and supplied customers on a year-round basis, exporting and marketing 3.8 million tonnes of raw sugar in total (including Australian raw sugar as well as sugar from other origins).

Though Cyclone Yasi forced the closure of the Lucinda Bulk Sugar Terminal (BST) late in the season, QSL was able to put in place alternative transport arrangements for raw sugar from this region and is continuing to look forward to and support the recovery of all affected regional communities.

Over the past 12 months, QSL has continued to develop a best practice shipping and logistics stream. Part of this involved completing a signifi cant program of capital works at all BST locations, such as upgrading the wharf at Cairns and replacing temporary offi ce structures at Townsville with permanent buildings.

All capital projects – excluding one which was re-scoped – were completed on time and on budget in 2010/11, which is a signifi cant achievement.

During 2010/11 the overarching asset management program at our BSTs was signifi cantly modernised. QSL now has a strong preventative focus in asset management. This enables us to deliver improved results across the three key indicators of effi ciency, safety and customer satisfaction.

QSL’s expertise in sugar logistics is based on a robust quality control system and continues through our uniquely effi cient and low-cost end-to-end customer service model. We take advantage of the fl exibility that our BST storage capacity offers as well as the geographic diversity of the industry’s production base to capture the full physical values for QSL’s raw sugar suppliers, as well as minimising counterparty credit risks and any foreseeable production threats. Our technical expertise and ability to add value in this area lies in large part with our committed and knowledgeable staff who accompany sugar from port to refi nery, ensuring the highest levels of quality control.

SUPPLY CHAINWORLD-LEADING SHIPPING AND LOGISTICS

Our expertise is based on a robust quality control system and incorporates a uniquely effi cient and low-cost end-to-end customer service model.

QSL RECEIVED, STORED AND DELIVERED 2.9 MILLION TONNES OF RAW SUGAR AT OUR BULK SUGAR TERMINALS.

15

Because we lease our BSTs under a medium-term arrangement with Sugar Terminals Limited, we are able to control all segments of our supply chain and offer our international customers raw sugar that meets their specifi c needs. Our end-to-end model allows us to ensure our customers receive the expected quality and quantity of sugar.

We make the majority of our sales on a coordinated cost and freight (CFR) basis, while also organising independent shipping. QSL charters its own ships and controls the loading and discharge processes at ports to gain priority access to port berths and avoid shipping queues and delays – a key point of differentiation from our competitors. These chartering services give QSL independence from disruptions and the high levels of control, consistency and service our international client base need and expect.

Though adverse weather events substantially lowered Australian sugar production during the 2010/11 season, QSL was still able to meet our customers’ premium raw sugar needs and supplement our supply by sourcing some other-origin sugar. This aspect of our business ensures we meet long-term customers’ expectations and maintain strong customer relationships. QSL attends the majority of other-origin load ports and supervises loading to ensure quality and quantity parameters are met.

For international customers, the QSL pool-based marketing system and shipping and logistics stream offer uniquely fl exible capabilities to supply sugar to custom specifi cations. The ability to control and monitor sugar quality ‘end-to-end’ is a strategic asset to the Australian sugar industry as well as our customers.

KEEPING QUEENSLAND SUGAR MOVING

During 2010/11, natural disasters took a major toll on Queensland communities. As a major contributor to the state economy, it was imperative that the sugar industry got back on its feet as quickly as possible to support regional recovery.

As the biggest raw sugar exporter in the state, QSL worked hard in the aftermath of the fl oods and cyclones to develop effective solutions for keeping raw sugar moving.

At the Lucinda bulk sugar terminal, the jetty and structural system suffered major damage during Cyclone Yasi.

QSL’s priority was, and continues to be, to ensure that the sugar moves effi ciently to the alternative export port of Townsville, so it is available for sale, and as such generate returns for the local community as quickly as possible to support recovery from Cyclone Yasi.

QSL representatives worked closely with local and state government stakeholders to ensure broad agreement with an alternative transport plan.

This plan centred on using trucks to move sugar from Lucinda to Townsville throughout the 2011 season. QSL partnered with a reputable and highly experienced trucking supplier to develop a comprehensive transport management plan that factored in key safety, noise and frequency issues.

QSL also worked with the local community to explain the steps the company was taking to minimise the impact of increased truck trips through local towns over the season.

Recovery from natural disasters is always a lengthy process, but QSL was pleased with the progress made in recovery at our key export terminals, and with the lack of disruptions to our shipping program as a result of the effective alternative solutions put in place.

QSL CONTINUES TO DEVELOP EXCELLENCE IN SHIPPING AND LOGISTICS, AND DESPITE THE SEASON’S DIFFICULTIES, ACHIEVED A 94.4% ‘DELIVERED IN FULL ON TIME’ RESULT’.


This year, QSL has continued to offer a range of fi nancial, risk and pricing services to Australian cane growers and millers.

Our pricing and marketing systems faced challenges around the extreme weather conditions and dramatic drop in volumes during the 2010/11 season, but the overall structure and focus of the system remain sound.

We continue to offer a range of pooling and pricing options to suit different needs, and we also seek to maximise the benefi ts of the bargaining power that working collectively offers the Australian industry.

This year we have successfully continued our advances payment program – an important tool for helping growers to access cash in-season. During 2010 we offered an initial advance rate of $265 per IPS tonne, and this strong initial rate continues for the 2011 season.

Whilst a good credit rating from Standard and Poor’s is benefi cial to securing fi nance for programs such as this, as it helps to demonstrate the strength of the model we operate, our funding arrangements and pricing from our banking partners negotiated this year were not driven by this. Our credit rating was downgraded this season from AA- (long term) and A1+ (short term) to A (long term) and A1 (short term) respectively, which is still a very high rating, and indeed one of Australia’s highest, and we remain well supported by the major banks.

Our strong banking support reduces industry costs as it means we are able to access relatively inexpensive funding – our current borrowing rates average around 5.25 per cent – which enables us to maximise returns to growers as we keep our funding costs low.

SERVICE TO INDUSTRYDELIVERING LOW-COST FINANCING TO INDUSTRY

Our strong banking support reduces costs and enables us to maximise returns to industry.

This year QSL continued to offer the ability to fi x prices for up to fi ve seasons, which is unique. Some pricing secured for future seasons has allowed sales for those seasons to be locked in at around 85 cents on average to the US dollar, which is a signifi cant benefi t given the current and predicted future strength of our currency against the US dollar.

We were very pleased this year to roll over RSSAs with eight milling partners until June 2015.

We are looking forward to working with our industry partners in the year ahead and we are committed to working closely with all stakeholders on matters relating to pooling, pricing and risk management, and to effectively implementing the recommendations from the independent Pooling and Pricing Review for the benefi t of the industry as a whole.QSL CONTINUES TO OFFER

A RANGE OF POOLING AND PRICING OPTIONS TO SUIT DIFFERENT NEEDS.

17

MOVING FORWARD FROM 2010

Following the extreme challenges of the 2010 season, QSL acted promptly to establish an independent review of pooling and pricing arrangements including forecasting and stakeholder communications.

The objective of the review was to seek input from QSL stakeholders in order to further strengthen the robust foundations of the Australian sugar marketing system and ensure all members of the industry are well placed to make the most of its strong future potential.

The review was conducted by Pacifi c Strategy Partners (PSP) over four months from May to August and involved interviews with more than 120 industry participants, including growers, mills, industry groups and QSL.

The review confi rmed that all participants want to continue to benefi t from the advantages that come from having a shared pooling, pricing, marketing and logistics functions. A number of opportunities to ensure the system continues to meet the needs of all participants into the future were identifi ed and agreed.

Over the 2011/12 fi nancial year, QSL will implement recommendations of the review, including:

Sponsoring an independent industry-wide crop forecasting system

Creating clearer product communication materials, focusing on tri-partite communication models and delivering improved risk management education

Introducing new and additional Pool products that provide different risk management options to industry

Working with industry to redraft the RSSA terms allowing greater transparency and the opportunity to harmonise contract terms

The report noted that the Queensland sugar industry has a very sound pooling and pricing system but there is scope for further improvement and QSL is committed to working with industry in delivering these improvements.

We are looking forward to sharing the results and benefi ts of these activities throughout the course of 2011/12 and beyond.

WE WERE VERY PLEASED THIS YEAR TO ROLL OVER RAW SUGAR SUPPLY AGREEMENTS WITH EIGHT MILLING PARTNERS UNTIL JUNE 2015.

QSL is founded on the strength and expertise developed during an 80-year history. Our future is fi rmly focused on a strong, collective approach to sugar marketing and logistics, to create maximum value for the high-quality raw sugar produced by Australian cane growers and milling companies.

We work to grow the value of the Australian sugar industry for grower and miller members.


OUR PEOPLE

QSL’s business relies heavily on its intellectual property, information systems and the expertise and experience of its employees in a range of areas including international marketing, commodity trading, risk and fi nancial management, logistics and quality assurance.

Our success depends on fostering a culture where people with a diverse range of skills, often regionally based, work in ways that refl ect QSL’s core business cause and drive strong performance. Diversity of skill, thought, experience and style are all important elements of our people strategy and are key drivers in our success.

In 2011/12, we will bring our sales, marketing and business development functions together to streamline the key drivers of our future business growth – sales, shipping and customer service. Brent Casey will lead this new team as General Manager Sales and Business Development.

We will also incorporate our risk management and pricing functions into our Finance team. We believe improved points of contact between our fi nancial team and stakeholders can help us deliver better returns to Australia’s sugar cane growers and millers.

QSL continually strives to improve our business by leveraging intellectual property across the organisation. One way in which we do this is through our Business Improvement Team, which includes employees from all areas of the organisation, who identify and drive specifi c projects designed to improve our business performance.

In 2011/12, we will continue to focus on organisational improvement, and learning and fostering development opportunities for our people to ensure we are able to deliver on our principal objective of promoting the development of the Australian sugar industry.

OUR PEOPLE AND COMMUNITIESLIVING OUR VALUES

Our values of customer focus, reliability, responsiveness, team focus and innovation are demonstrated every day by staff.

OUR COMMUNITIES

In managing the sugar pools, QSL makes an important contribution to the Australian sugar industry and the regional communities this industry supports.

With responsibility for more than 90 per cent of Australian raw sugar exports, QSL generates the majority of the revenue achieved by the sugar industry. In 2010/11, QSL pool revenues of $1.4 billion were achieved on behalf of our mill suppliers, directly supporting Australia’s sugar growers and fl owing on to thousands of regional industry employees.

We are also a signifi cant employer in Queensland in our own right, with 160 employees across our seven offi ce and terminal locations. The pride of our staff in the role that QSL plays in local communities is evident at all of our sites where our values of customer focus, reliability, responsiveness, team focus and innovation are demonstrated every day by our staff in the way they go about their work.

The 2010/11 year was an extremely diffi cult one for the many Queensland communities affected by cyclones and fl oods. During these challenging times, QSL offered counselling assistance for employees and their immediate families, donated to fl ood relief funds and continues to support ongoing disaster recovery efforts in regional Queensland.

QSL IS IMPLEMENTING CHANGES TO THE STRUCTURE OF OUR ORGANISATION TO STRENGTHEN OUR CUSTOMER FOCUS.

21

Our relationship with local communities is enduring and involves a robust sponsorship and giving program. Every year we contribute to a variety of causes in the communities in which we operate. We are proud to support a variety of educational, community and safety initiatives in Queensland.

HEALTH, SAFETY AND THE ENVIRONMENT

Providing a safe and healthy workplace is of critical importance to QSL. During 2010/11, zero lost-time injuries (LTIs) were reported. QSL has maintained a zero LTI record for four years. Upholding this record continues to be a strong focus for our business and in 2010/11 we introduced a new safety reporting and recording system to help identify hazards and near misses and improve corrective action.

Demonstrating our ongoing commitment to the health and safety of employees, QSL’s Safety Leadership Team has continued to work with employees across our site locations to raise awareness and integrate best practices of health and safety across our whole business. The Safety Leadership Team involves employees from all levels of the business and aims to instil the QSL safety culture and ensure all employees are aligned toward the same safety goals.

A major initiative this year was the successful replacement of all bicycles and motorbikes used as site transport at our bulk sugar terminals with four-wheeled utility vehicles. This initiative was the result of historical incident data and a risk assessment which showed the potential for injury on pushbikes and motorbikes was unacceptable.

QSL is also committed to a high level of environmental performance. With sound environmental management a company priority, it is pleasing to report that there were no breaches of the company’s environmental licences again this year.

PROVIDING A SAFE AND HEALTHY WORKPLACE IS OF CRITICAL IMPORTANCE TO QSL.


EXECUTIVE TEAMQUEENSLAND SUGAR LIMITED

Highly experienced, our executive team brings specialist skills that help us deliver our vision and goals.

NEIL TAYLOR MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER

Neil joined QSL as Managing Director and Chief Executive Offi cer in August 2009. Previously, Neil was Chief Executive of Australian fertiliser company Hi Fert from 2005 to 2009 and was Marketing Manager for CSR Ethanol from 2003 to 2005. Prior to joining CSR, Neil had a 12-year international career with BP working in Europe, the Asia-Pacifi c and the Middle East.

JOHN BIRD CHIEF OPERATING OFFICER

John has been with QSL since March 1990 and was appointed Chief Operating Offi cer in August 2009. John has extensive experience in the Australian sugar industry. Prior to joining QSL, John worked with Queensland Industry Development Corporation, Angliss Group and the Commonwealth Bank. At QSL, John is responsible for the international sales and marketing program, price and currency risk management functions, and miller relations. He is a member of the World Sugar Committee of the Intercontinental Exchange in New York.

GREG BEASHEL GENERAL MANAGER OPERATIONS

Greg joined QSL in June 2000. Greg has extensive experience in supply chain management in the sugar industry. He is responsible for the management and operations of the six terminals located at the ports of Cairns, Mourilyan, Townsville, Lucinda, Mackay and Bundaberg, as well as logistics, engineering, health, safety and environment, storage and handling, quality assurance and customer payments.

MATT WEDMAIER CHIEF FINANCIAL OFFICER

Matt joined QSL in April 2010. Prior to joining QSL, Matt held roles at KPMG, Suncorp-Metway, Bank of Queensland and the Sunland Group. He is a Chartered Accountant, holds an MBA and is a Fellow of Financial Services Institute of Australasia with over 15 years of practical management and fi nance experience. Matt has had extensive exposure to statutory reporting, currency translation and hedge accounting, international taxation and risk management.

23

BRENT CASEY GENERAL MANAGER BUSINESS DEVELOPMENT

Brent joined QSL in December 2009. Prior to joining QSL, Brent built up a specialist property business in New Zealand. He has also previously worked for BP internationally in the areas of business development and commodity trading. Brent is responsible for developing opportunities for QSL to diversify its earnings base outside of the Sugar Pool, including other-origin trading and supply chain services.

SAMANTHA KYLE-LITTLE GENERAL MANAGER CORPORATE SERVICES AND COMPANY SECRETARY

Samantha joined QSL in October 2009. Prior to joining QSL, Samantha managed corporate services and strategic planning functions for a number of Queensland public sector organisations in the food and agriculture sector. At QSL, she is responsible for managing corporate services including legal and compliance, company secretariat, corporate governance, human resources, information and communication technology, communications and media relations, administration and procurement.

(TOP) NEIL TAYLOR (FROM LEFT) GREG BEASHEL, BRENT CASEY, SAMANTHA KYLE-LITTLE, MATT WEDMAIER, JOHN BIRD – ABSENT.

QSL MembersTHIRTY-FIVE REPRESENTATIVES OF AUSTRALIAN SUGAR MILLS AND CANE GROWERS

QSL Board of DirectorsALAN WINNEY, GUY COWAN, NICOLE BIRRELL, MARK SAGE AND NEIL TAYLOR (MD)

NEIL TAYLOR

MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER

JOHN BIRD

CHIEF OPERATING OFFICER

MATT WEDMAIER

CHIEF FINANCIAL OFFICER

GREG BEASHEL

GENERAL MANAGER OPERATIONS

BRENT CASEY

GENERAL MANAGER BUSINESS DEVELOPMENT

SAMANTHA KYLE-LITTLE

GENERAL MANAGER CORPORATE SERVICES AND COMPANY SECRETARY

Executive Team


ALAN WINNEY M.B.A., AMP (WHARTON), MAICD CHAIRMAN OF THE BOARD AND MEMBER OF THE REMUNERATION & NOMINATION COMMITTEE

Alan has more than 35 years’ experience in the agribusiness sector. Alan’s other current roles include Director of the Australian Sugar Industry Alliance, Chairman and major shareholder of the Emerald Group – a leading Australian grain company, Chairman of Seashift Properties and Director of Melbourne Rebels Rugby Union Ltd.

Alan has previously held chief executive, senior management and trading roles with Elders IXL, Louis Dreyfus Corporation, and the Al Ghurair Group, as well as six years as Head of Trading at the Australian Wheat Board. Previous non-executive roles have included Deputy Chairman of Pulse Australia, Deputy Chairman of Victorian grain group SQP Pty Ltd, Director of NETCO Co-operative, and Director of United Farmers Co-operative Company. In 2010 Alan was named Australian Agribusiness Leader of the Year.

BOARD OF DIRECTORSQUEENSLAND SUGAR LIMITED

Our independent Board of Directors sets the strategic direction for QSL and is responsible for QSL’s overall performance.

NEIL TAYLOR AMP (WHARTON), B.A. (HONS) MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER

Neil joined QSL as its Managing Director and Chief Executive Offi cer in August 2009. Previously, Neil was Chief Executive of Hi Fert from October 2005 until July 2009. From 2003 until joining Hi Fert, Neil was the Marketing Manager for CSR Ethanol, during which time CSR entered the fuel ethanol market.

Earlier, Neil had a 12-year international career with BP Plc with roles based in the United Kingdom, Belgium, Japan, Australia and the United Arab Emirates (UAE), where he headed up BP’s Middle East and South Asian Lubricants business.

NICOLE BIRRELL M.SC., FAICD DIRECTOR AND MEMBER OF THE AUDIT & RISK COMMITTEE

Nicole has over 25 years’ experience in wholesale and investment banking in Australia and the UK, with expertise in the strategic management of operational risk in fi nancial markets operations, including systems risk and insurance management, and fi nancial markets compliance.

Nicole is currently a member of the boards of the Grains Research and Development Corporation, SMS Management & Technology Ltd and Superpartners Pty Ltd and a member of Wheat Exports Australia. Nicole was formerly a Director of AusBulk Ltd in South Australia.

In each of these organisations, Nicole is also the Chair or a member of the Board committee responsible for carrying out audit, compliance and risk oversight.

25

GUY COWAN BSC (HONS), FCCA (UK), MAICD DIRECTOR AND CHAIRMAN OF THE AUDIT & RISK COMMITTEE

Guy has had nine years’ experience as a Chartered Accountant with Price Waterhouse (now PricewaterhouseCoopers) and KPMG, in addition to 23 years’ international experience in commercial and fi nance roles in the oil and gas industry.

Prior to February 2005 he was Chief Financial Offi cer of Shell Oil in the USA, and from February 2005 until February 2009, Guy was CFO of Fonterra Co-operative Group Limited, the New Zealand-based world leading exporter of dairy products that accounts for more than one third of the international dairy trade.

In addition to his role on the QSL Board, Guy holds directorships with UGL (formerly United Group Limited), Ludowici Ltd, Gold Oil PLC (UK) and Raisama Ltd.

MARK SAGE GAICD DIRECTOR AND CHAIR OF THE REMUNERATION & NOMINATION COMMITTEE

Mark has over 25 years’ management experience in a public company environment. Mark has particular expertise in international business development, with extensive experience in retail and commodity markets in the Asian, Middle East and Pacifi c regions and brings to the QSL Board broad expertise in export marketing, logistics and commodity markets trading.

Mark’s recent senior roles include: Managing Director International, Goodman Fielder Group; Human Resources Director, Goodman Fielder Limited; and Export Manager Building Materials, CSR Limited.

Mark has a strong background in change management and has experience in leading change in large organisations including acquisitions and divestments in Australia, New Zealand and the Asia-Pacifi c region, business integration and major internal change programs driving productivity and capability improvement.

Mark holds Australian Institute of Company Directors qualifi cations, and in addition to his role on the QSL Board, holds non-executive directorships with Paradise Foods Ltd and the Emerald Agribusiness Group Pty Ltd.

COMPANY SECRETARY

SAMANTHA KYLE-LITTLE M.SC., M.P.A., B.A. GENERAL MANAGER CORPORATE SERVICES AND COMPANY SECRETARY

Samantha was appointed to the position of Company Secretary in October 2009. In addition to the Company Secretary role, Samantha is responsible for managing QSL’s corporate services functions.

(TOP) ALAN WINNEY (FROM LEFT) NEIL TAYLOR, GUY COWAN, NICOLE BIRRELL, MARK SAGE, SAMANTHA KYLE-LITTLE


CORPORATE GOVERNANCEQUEENSLAND SUGAR LIMITED

QSL exists to grow the value of the Australian sugar industry for members.

The Board is responsible to QSL’s members for the strategic direction of QSL, for the monitoring of risk matters and governance, and for the overall performance of QSL. More specifi cally, the responsibilities of the Board include the following:

guiding the culture of the organisation strategy, planning and policy development oversight of QSL’s management monitoring, compliance and risk management delegation of authority health, safety and wellbeing of employees stakeholder liaison and communication.

Monitoring review and oversight of the risk management, in particular fi nancial risk is a key function of the Board. Policies and procedures are in place to manage QSL’s strategic and operational risks. The Board ensures the overall risk management framework remains appropriate for QSL’s business at all times, and regularly reviews individual policies.

Specifi c policies are also in place to govern the management of sugar price and foreign exchange risk. Speculative transactions are not permitted and hedging is only permitted within policy parameters for managing risks.

As part of QSL’s commitment to managing exposure to signifi cant business risk, the company also has policies and associated procedures covering areas such as:

customer and trade credit liquidity risk management credit risk – fi nancial institutions credit risk – suppliers fi nancial delegations and authorities environmental management and compliance corporate risk management fi nancial risk management confl icts of interest management freight trade practices law compliance workplace health and safety equal opportunity and anti-discrimination privacy.

QUEENSLAND SUGAR LIMITED

QSL is a public company limited by guarantee, incorporated under the Corporations Act 2001. The principal object of the company, without limiting its powers under law, is to promote the development of the sugar industry.

The company has 35 members representing the Australian sugar industry. These members consist of:

ten mill owner members twenty-fi ve grower representative members, comprising:

– twenty-three elected holders, who are growers elected to represent the 23 sugar-growing regions in Queensland

– two representatives, one appointed by each of the organisations representing cane growers, Australian Cane Farmers Association Limited and Queensland Cane Growers Organisation Limited.

These members are able to exercise voting rights at meetings as outlined in QSL’s Constitution.

THE QSL BOARD OF DIRECTORS

Role of the BoardQSL’s Board of Directors is responsible for establishing an effective corporate governance framework and providing strategic guidance for the company, while ensuring effective oversight of management with the objective of promoting the development of the sugar industry.

The Board has adopted a Board Charter to cover matters such as its role, induction of directors, Board proceedings, the working relationship between it and management, and directors’ declarations of interests.

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Composition of the BoardQSL’s Constitution provides for a Board consisting of up to a maximum of four Non-Executive Directors and a Managing Director. The current Non-Executive Directors were all originally appointed to the Board in January 2009. Alan Winney (Chairman) and Guy Cowan were appointed to three-year terms, whilst Nicole Birrell and Mark Sage were initially appointed to one-year terms and were reappointed by the Board Selection Committee for further three-year terms commencing January 2010.

The Constitution provides that it is the role of QSL’s Board Selection Committee to appoint Non-Executive Directors, assisted by a reputable executive search fi rm. The Board Selection Committee has been constituted under the processes of the Constitution and has four members – two members elected for a three-year term by mill owner members and two members elected for a three-year term by grower representative members.

Under the Constitution, in selecting Non-Executive Directors, the Board Selection Committee has to have regard to the mix of skills required for the Board to properly meet the company’s objects and carry out its Charter, including experience in the fi elds of: corporate governance and company board processes; export marketing and sales; fi nancial and derivatives markets; legal; fi nance and accounting; and export logistics.

Remuneration of DirectorsThe QSL Constitution requires the aggregate fees per annum paid to Non-Executive Directors to be set by the company in general meeting. The initial aggregate fees were agreed with the sugar industry representative bodies, based on remuneration previously determined by the Queensland Government for the Queensland Sugar Corporation, and were subsequently confi rmed at the company’s 2001 annual general meeting.

BOARD COMMITTEES

To assist it to carry out its functions, the Board has established two Board committees: the Audit & Risk Committee; and the Remuneration & Nomination Committee.

Audit & Risk Committee The Audit & Risk Committee assists the Board to discharge its responsibilities via oversight of the risk management, control and compliance framework established by the Board and QSL management; and review of QSL’s risk management, fi nance and audit reporting. The Committee has authority from the Board to review and investigate any matter within the scope of its charter and make recommendations to the Board in relation to any action.

The current members of the Audit & Risk Committee are Guy Cowan (Committee Chair) and Nicole Birrell, Alan Winney as Chairman is an ex-offi cio member of this committee. The Managing Director, the Chief Financial Offi cer, Company Secretary and representatives of the external and internal auditors attend meetings of this Committee by invitation.

Specifi c responsibilities include advising the Board on:

QSL’s risk management framework and risk management plan the continuing appropriateness and effectiveness

of QSL’s risk management policies QSL’s insurance strategy QSL’s compliance principles, policies, strategies,

processes and controls appointment and remuneration of QSL’s internal

and external auditors QSL’s internal audit plan and internal audit reports,

and management response to fi ndings QSL’s external audit plan and external audit reports,

and management response to fi ndings fi nancial management reporting for the company.

Remuneration & Nomination CommitteeThe Remuneration & Nomination Committee assists the Board to discharge its responsibilities relating to the composition and performance of the Board and the remuneration of Directors,senior management and employees. The Committee has authority from the Board to review and investigate any matter within the scope of its charter and make recommendations to the Board in relation to the outcomes.

The current members of the Remuneration & Nomination Committee are Mark Sage (Committee Chair) and Alan Winney, with the Managing Director and Company Secretary invited to attend meetings as appropriate.

Matters dealt with by this Committee include: the composition, performance

and remuneration of the QSL Board the induction and professional development of Directors recruitment and performance evaluation

of the Managing Director and Chief Executive Offi cer management succession planning development of leadership development

and performance systems review of QSL’s human resources policies establishment of an appropriate remuneration framework and

development of policies linked to performance objectives.

BUSINESS CONDUCT

The Board has adopted a Code of Ethics requiring Directors, management, employees, agents and brokers to act with integrity and objectivity, and maintain high standards and ethical behavior in the execution of their duties.

Under the Code, all those associated with QSL must act in accordance with the fundamental principles of integrity, objectivity, confi dentiality, ethical behaviour, professional standards and consultation.

INDEPENDENT ADVICE

QSL recognises that there may be occasions when the Board as a whole, or Directors as a group or as individuals, believe it to be in their interests and in the interests of the company to seek independent professional advice on matters such as accounting, taxation or law, at the company’s expense.

Requests for the provision of such advice are directed to the Chairman or in the case of the Chairman seeking advice, to the Chair of the Audit & Risk Committee.

THE PRINCIPAL OBJECT OF THE COMPANY IS TO PROMOTE THE DEVELOPMENT OF THE AUSTRALIAN SUGAR INDUSTRY.

QSL is proud to make a contribution to the Australian sugar industry and the communities it supports. We live our values in our local actions. We aim to provide quality services to regional partners while keeping our people safe and healthy at all times and minimising our impact on the environment.

Sugar underpins regional Queensland communities. Our people live our values in these communities.

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STATUTORY FINANCIAL REPORT

CONTENTS

Directors’ report 30

Auditor’s independence declaration 33

Consolidated statement of comprehensive income 34

Consolidated statement of fi nancial position 35

Consolidated statement of changes in equity 36

Consolidated statement of cash fl ows 37

Notes to the fi nancial statements 38

Directors’ declaration 59

Auditor’s independent report 60

QUEENSLAND SUGAR LIMITED FINANCIAL REPORT 2010/1130

DIRECTORS’ REPORTFOR THE YEAR ENDED 30 JUNE 2011 QUEENSLAND SUGAR LIMITED AND ITS CONTROLLED ENTITIES

The directors of Queensland Sugar Limited (‘QSL’ or ‘Parent Entity’) present their report on QSL and its Controlled Entities (‘Consolidated Entity’) for the year ended 30 June 2011 and the auditor’s report thereon.

DIRECTORS

The following persons were directors of QSL during the whole of the fi nancial year and up to the date of this report:

ALAN WINNEY M.B.A., AMP (WHARTON), MAICD

CHAIRMAN OF THE BOARD AND MEMBER OF THE REMUNERATION & NOMINATION COMMITTEE

Alan has more than 35 years’ experience in the agribusiness sector. Alan’s other current roles include Director of the Australian Sugar Industry Alliance, Chairman and major shareholder of the Emerald Group – a leading Australian grain company, Chairman of Seashift Properties and Director of Melbourne Rebels Rugby Union Ltd.

Alan has previously held chief executive, senior management and trading roles with Elders IXL, Louis Dreyfus Corporation, and the Al Ghurair Group, as well as six years as Head of Trading at the Australian Wheat Board. Previous non-executive roles have included Deputy Chairman of Pulse Australia, Deputy Chairman of Victorian grain group SQP Pty Ltd, Director of NETCO Co-operative, and Director of United Farmers Co-operative Company. In 2010 Alan was named Australian Agribusiness Leader of the Year.

NEIL TAYLOR AMP (WHARTON), B.A. (HONS)

MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER

Neil joined QSL as its Managing Director and Chief Executive Offi cer in August 2009. Previously, Neil was Chief Executive of Hi Fert from October 2005 until July 2009. From 2003 until joining Hi Fert, Neil was the Marketing Manager for CSR Ethanol, during which time CSR entered the fuel ethanol market.

Earlier, Neil had a 12-year international career with BP Plc with roles based in the United Kingdom, Belgium, Japan, Australia and the United Arab Emirates (UAE), where he headed up BP’s Middle East and South Asian Lubricants business.

NICOLE BIRRELL M.SC., FAICD

DIRECTOR AND MEMBER OF THE AUDIT & RISK COMMITTEE

Nicole has over 25 years’ experience in wholesale and investment banking in Australia and the UK, with expertise in the strategic management of operational risk in fi nancial markets operations, including systems risk and insurance management, and fi nancial markets compliance.

Nicole is currently a member of the boards of the Grains Research and Development Corporation, SMS Management & Technology Ltd and Superpartners Pty Ltd and a member of Wheat Exports Australia. Nicole was formerly a Director of AusBulk Ltd in South Australia.

In each of these organisations, Nicole is also the Chair or a member of the Board committee responsible for carrying out audit, compliance and risk oversight.

GUY COWAN BSC (HONS), FCCA (UK), MAICD

DIRECTOR AND CHAIRMAN OF THE AUDIT & RISK COMMITTEE

Guy has had nine years’ experience as a Chartered Accountant with Price Waterhouse (now PricewaterhouseCoopers) and KPMG, in addition to 23 years’ international experience in commercial and fi nance roles in the oil and gas industry.

Prior to February 2005 he was Chief Financial Offi cer of Shell Oil in the USA, and from February 2005 until February 2009, Guy was CFO of Fonterra Co-operative Group Limited, the New Zealand-based world leading exporter of dairy products that accounts for more than one third of the international dairy trade.

In addition to his role on the QSL Board, Guy holds directorships with UGL (formerly United Group Limited), Ludowici Limited, Gold Oil PLC (UK) and Raisama Ltd.

MARK SAGE GAICD

DIRECTOR AND CHAIR OF THE REMUNERATION & NOMINATION COMMITTEE

Mark has over 25 years’ management experience in a public company environment. Mark has particular expertise in international business development, with extensive experience in retail and commodity markets in the Asian, Middle East and Pacifi c regions and brings to the QSL Board broad expertise in export marketing, logistics and commodity markets trading.

Mark’s recent senior roles include: Managing Director International, Goodman Fielder Group; Human Resources Director, Goodman Fielder Limited; and Export Manager Building Materials, CSR Limited.

Mark has a strong background in change management and has experience in leading change in large organisations including acquisitions and divestments in Australia, New Zealand and the Asia-Pacifi c region, business integration and major internal change programs driving productivity and capability improvement.

Mark holds Australian Institute of Company Directors qualifi cations, and in addition to his role on the QSL Board, holds non-executive directorships with Paradise Foods Ltd and the Emerald Agribusiness Group Pty Ltd.

COMPANY SECRETARY

SAMANTHA KYLE-LITTLE M.SC., M.P.A., B.A.

GENERAL MANAGER CORPORATE SERVICES AND COMPANY SECRETARY

Samantha was appointed to the position of Company Secretary in October 2009. In addition to the Company Secretary role, Samantha is responsible for managing QSL’s corporate services functions.

31

DIRECTORS’ MEETINGS

The number of meetings of QSL’s directors (including meetings of Committees of directors) and the number of meetings attended by each director during the fi nancial year were:

BOARD OF DIRECTORS AUDIT & RISK COMMITTEE REMUNERATION & NOMINATION COMMITTEE

HELD ATTENDED HELD ATTENDED HELD ATTENDED

Alan Winney 12 12 – – 4 4

Neil Taylor 1 12 12 4 4 1 1

Guy Cowan 12 12 4 4 – –

Nicole Birrell 12 11 4 4 – –

Mark Sage 12 12 – – 4 4

1 Neil Taylor attends Committee meetings by invitation but is not a formal Committee member.These refl ect the number of meetings Neil attended when invited.

PRINCIPAL ACTIVITIES

The principal activities are the marketing of raw sugar, the management of fi nancial risk in connection with such marketing and ancillary services in transport and logistics.

SIGNIFICANT CHANGES

There were no signifi cant changes in the state of affairs or in the nature of QSL’s or its Controlled Entities’ principal activities during the year.

REVIEW OF OPERATIONS AND RESULTS

A review of the Consolidated Entity’s operations and results for the year ended 30 June 2011 is set out below:

Marketing Activities

The 2011 fi nancial year saw QSL provide marketing services to eight Queensland milling companies (2010: eight) under the Raw Sugar Supply Agreements (‘RSSAs’) and the subsequent sale of 2.2 million tonnes of Australian raw sugar (2010: 2.9 million tonnes). The 2011 fi nancial year was adversely affected by a severe La Niña weather event with heavy in-season rain resulting in a large amount of sugar cane remaining unharvested. This resulted in Australian sugar exports decreasing by 24% from the previous year.

The acquisition by MSF Sugar Limited (‘MSF’) of Bundaberg Sugar Ltd’s northern mills during the fi nancial year meant that MSF became a participant under the RSSA from the effective date of this sale. MSF provided a notice of termination under the RSSA in June 2011, which will result in QSL ceasing to market this sugar following the 2014 fi nancial year.

All other milling companies rolled over their RSSAs during the fi nancial year and QSL will market sugar on their behalf until at least the end of the 2015 fi nancial year.

The sugar industry continues to consolidate with Sucrogen Limited being acquired by Wilmar International Limited and Tully Sugar Limited being acquired by Top Glory Australia Pty Ltd, the Australian subsidiary of China National Cereals, Oils and Foodstuffs Corporation (‘COFCO’). Proserpine Co-Operative Sugar Milling Association is currently subject to bids from other milling companies. In this context of consolidation, QSL will continue to act in the best interests of the Queensland sugar industry, in line with its constitution.

Revenues

Sales revenue from Australian raw sugar for the 2011 fi nancial year was $1,368.9 million, a reduction of $290.1 million (17%) from the previous year. This was predominantly due to the drop in export tonnage due to adverse weather conditions, as mentioned above. The reduced tonnage available for export reduced the quantity of sugar priced by QSL in the seasonal pool and was refl ected in the seasonal pool return of $443.99 per tonne gross IPS (International Pol Scale) before shared pool allocation (2010: $510.89 per tonne gross IPS).

The impact of the reduced sugar deliveries from Queensland and prevailing market conditions resulted in QSL increasing its level of other-origin sugar sales and purchases this year to 548,000 tonnes (2010: 15,000 tonnes). QSL was able to purchase sugar from Brazil, Thailand and Guatemala in order to meet existing contractual commitments that would have previously been fi lled by sugar supplied from Queensland. This resulted in QSL receiving sales revenues of $354.5 million in relation to this non-Australian sugar.

In order for QSL to meet customer demand and maintain its marketing presence in Asian markets in light of lower expected Queensland production in the short-term, QSL will continue to buy and sell other-origin sugar in fi scal 2012. Consistent with prior years, QSL continues to be focused on marketing sugar to Asian markets.

During the fi nancial year QSL sold its 19.9% stake in Tully Sugar Limited (‘Tully’) to Mackay Sugar Limited, which resulted in a capital gain of $5.6 million.

Expenses

Payments to mill owners for the year ended 30 June 2011 were $1,080.8 million, a decrease of $437.6 million (29%) from prior year payments of $1,518.4 million. This decrease in payments to mill owners refl ects the decrease of 700,000 tonnes (24%) of Australian raw sugar available for export.

Operating lease rental costs of $43.1 million were consistent with the prior year (2010: $43.2 million), despite the drop in Australian raw sugar exports, due to the fi xed nature of the bulk sugar terminal lease with Sugar Terminals Ltd.

The timing of payments to mill owners and the receipt of funds in relation to customer sales as well as an offi cial interest rate increase of 25 basis points in the fi nancial year resulted in borrowing costs remaining consistent at $19.5 million when compared to the previous fi nancial year (2010: $19.2 million).


DIRECTORS’ REPORT CONTINUED

FOR THE YEAR ENDED 30 JUNE 2011 QUEENSLAND SUGAR LIMITED AND ITS CONTROLLED ENTITIES

REVIEW OF OPERATIONS AND RESULTS CONTINUED

Expenses CONTINUED

As noted previously, the 2011 fi nancial year was adversely affected by a severe La Niña weather event that resulted in a large amount of sugar cane remaining unharvested. These severe in-season weather conditions resulted in QSL incurring net costs in relation to the unwinding of futures and foreign currency positions as well as the physical costs of substituting non-Australian sugar in order to meet existing Australian sugar sales commitments. These delivery shortfall costs totalled $105.5 million.

In order to partly mitigate the impact of the severe weather event on the industry, QSL offered all RSSA participants the option of deferring their respective portion of the delivery shortfall costs over the coming three seasons in the form of a Set-Off Loan. As at 30 June 2011, QSL had Set-Off Loan receivables of $37.0 million outstanding.

Net Operating Result

The net operating result from non-pooling activities for the current fi nancial year before any corporate charges totalled $11.8 million, an increase of $4.7 million from the previous fi nancial year result of $7.1 million. However, the net surplus for the year was $2.3 million (2010: $6.3 million), a decrease of $4.0 million. The lower fi nancial year surplus refl ects a higher internal fi nancing charge levied by the Pools of $8.6 million (2010: $0.8 million) and a $0.9 million research and development related grant to the Australian Sugar Industry Alliance. QSL will continue to use the proceeds of future non-pooling activities to promote and develop the Queensland sugar industry, as required by its constitution.

Banking and Finance

During the fi nancial year QSL refi nanced its AUD $700 million syndicated standby credit facility expiring on 31 October 2011 with a AUD $500 million syndicated standby credit facility expiring on 30 June 2013. The lower amount funded refl ects the lower crop expectations of the next two seasons as a result of the fl oods and cyclones experienced throughout Queensland in the fi nancial year. The lower standby facility and the existing commercial paper program will still enable QSL to fund the advances program and manage pricing on behalf of RSSA participants, while reducing the cost associated with higher committed lines.

The impact of the severe weather, the level of industry consolidation, QSL’s then holding in Tully and the industry Set-Off Loan initiative resulted in Standard & Poor’s changing QSL’s rating from A1+ (short term) and AA- (long term) to A1 (short term) and A (long term), which remains a high corporate credit rating. While QSL seeks to maintain as high a credit rating as possible, the drop in rating did not materially impact QSL’s cost of funding in the fi nancial year and QSL was able to renew its committed lines at 30 June 2011 at more favourable rates.

EVENTS AFTER REPORTING DATE

Other than the items reported in Note 21 of the fi nancial report, no matter or circumstance has arisen since the end of the reporting period that has signifi cantly affected or may signifi cantly affect:

the Consolidated Entity’s operations in future fi nancial years; the result of those operations in future fi nancial years; or the Consolidated Entity’s state of affairs in future fi nancial years.

LIKELY DEVELOPMENTS

The Consolidated Entity will continue to provide marketing of raw sugar, the management of fi nancial risk in connection with such marketing and ancillary services in transport and logistics.

ENVIRONMENTAL REGULATION

The Consolidated Entity’s operations are subject to signifi cant environmental regulation under Commonwealth and Queensland law, particularly with regard to air, noise, water, waste management and site contamination at its bulk sugar terminal operations.

The Consolidated Entity has established procedures to monitor and manage compliance with existing environmental regulations and new regulations as they come into force.

Directors are not aware of any signifi cant breaches of environmental regulation during the reporting period.

INDEMNITIES AND INSURANCE

The Constitutions of QSL, QSL Investments (No1) Pty Ltd, QSL Investments (No2) Pty Ltd and Transu Limited provide that each company, to the extent permitted by law, must indemnify each person who is, or has been, a Director or Secretary of the company against any liability (resulting directly or indirectly from facts or circumstances relating to the person serving in that capacity in relation to the company):

– to any person (other than the company) which does not arise out of conduct involving the lack of good faith or conduct known to the person to be wrongful;

– for costs and expenses incurred by the person in defending proceedings, whether civil or criminal, in which judgement is given in favour of the person or in which the person is acquitted, or in connection with any application in relation to such proceedings in which the court grants relief to the person under the Corporations Act 2001.

The Constitutions of each of the four companies also provide that the Board of Directors may authorise the company to, and the company may, enter into any insurance policy for the benefi t of any person who is, or has been, a Director, Secretary, auditor, employee of other offi cer of the company. The obligation of the company to indemnify persons as set out in the preceding paragraph is reduced to the extent that a person is entitled to an indemnity in respect of that liability under a contract of insurance. The company has paid, or has agreed to pay, premiums in respect of contracts insuring against liability, persons who are or have been offi cers of the company, namely, any past, present or future Director or Offi cer of the company. The contracts prohibit disclosure of the extent of the cover and amounts of the premium.

AUDITOR INDEPENDENCE

The auditor’s independence declaration is set out on page 33 and forms part of the Directors’ Report for the year ended 30 June 2011.

ROUNDING OF AMOUNTS

Unless otherwise shown in the fi nancial report, amounts have been rounded to the nearest $1,000 (where rounding is applicable and where noted ($’000)) under the option available to the company under ASIC CO 98/0100. QSL is a company to which the Class Order applies.

The Directors’ Report is signed for and on behalf of the Directors in accordance with a resolution of the Board of Directors of QSL.

Alan WinneyCHAIRMAN

22 SEPTEMBER 2011

33

AUDITOR’S INDEPENDENCE DECLARATIONFOR THE YEAR ENDED 30 JUNE 2011 QUEENSLAND SUGAR LIMITED AND ITS CONTROLLED ENTITIES


CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEFOR THE YEAR ENDED 30 JUNE 2011 QUEENSLAND SUGAR LIMITED AND ITS CONTROLLED ENTITIES

NOTE 2011 2010$’000 $’000

REVENUES FROM CONTINUING ACTIVITIESSales of Australian raw sugar 1,368,920 1,659,008Sales of non-Australian raw sugar 3 354,462 27,201Net foreign currency exchange gain/(loss) (43,404) 18,864Interest income 566 1,635Dividend income 3 1,463 3,388Gain on disposal of equity investments 3 5,569 –Other revenues 1,502 2,442

1,689,078 1,712,538EXPENSES FROM CONTINUING ACTIVITIESPayments to mill owners for Australian raw sugar 1,080,756 1,518,404

Purchases of non-Australian raw sugar 3 334,067 24,891

Freight and brokerage 4 74,073 75,506

Operating lease rental 4 43,136 43,192

Salaries and employee benefi ts 17,209 16,492

Borrowing costs 4 19,457 19,248

Depreciation 4 1,334 1,265

2010 Season Delivery Shortfall Costs 5 105,544 –

Research funding to the sugar industry 3 925 –

Other expenses 6 10,306 7,220

1,686,807 1,706,218

NET SURPLUS ATTRIBUTABLE TO MEMBERS OF QUEENSLAND SUGAR LIMITED AND ITS CONTROLLED ENTITIES 2,271 6,320

OTHER COMPREHENSIVE INCOME FOR THE YEAR

Net fair value gain/(loss) on available-for-sale fi nancial assets 35 (13)

Net loss on foreign currency translation (221) (45)

TOTAL COMPREHENSIVE INCOME FOR THE YEAR 2,085 6,262

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

35

CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAS AT 30 JUNE 2011 QUEENSLAND SUGAR LIMITED AND ITS CONTROLLED ENTITIES

NOTE 2011 2010$’000 $’000

ASSETS

CURRENT ASSETSCash and cash equivalents 16(b) 503 3,129

Trade and other receivables 7 126,909 58,850

Inventories 8 69,754 125,253

Other assets 9 142,662 60,846

TOTAL CURRENT ASSETS 339,828 248,078

NON-CURRENT ASSETSAvailable-for-sale fi nancial assets 11 19,623 25,163

Property, plant and equipment 12 11,962 10,968

Other receivables 10 24,684 –

Other assets 9 93,503 62,414

TOTAL NON-CURRENT ASSETS 149,772 98,545

TOTAL ASSETS 489,600 346,623

LIABILITIES

CURRENT LIABILITIESTrade and other payables 13 209,077 221,887

Interest bearing liabilities 14 140,304 15,300

Provisions 15 1,913 2,607

TOTAL CURRENT LIABILITIES 351,294 239,794

NON-CURRENT LIABILITIESTrade and other payables 13 93,602 63,662

Provisions 15 2,255 2,803

TOTAL NON-CURRENT LIABILITIES 95,857 66,465

TOTAL LIABILITIES 447,151 306,259

NET ASSETS 42,449 40,364

EQUITYReserves 24,139 24,325

Retained surpluses 18,310 16,039

TOTAL EQUITY 42,449 40,364

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


CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED 30 JUNE 2011 QUEENSLAND SUGAR LIMITED AND ITS CONTROLLED ENTITIES

RETAINED EARNINGS

RESERVES TOTAL EQUITY

Capital Investments

Foreign Currency

Translation$’000 $’000 $’000 $’000 $’000

BALANCE AT 1 JULY 2009 9,719 23,242 1,652 (511) 34,102

Net surplus for the year 6,320 – – – 6,320

Other comprehensive income – – (13) (45) (58)

Total comprehensive income for the year 6,320 – (13) (45) 6,262

BALANCE AT 30 JUNE 2010 16,039 23,242 1,639 (556) 40,364

BALANCE AT 1 JULY 2010 16,039 23,242 1,639 (556) 40,364

Net surplus for the year 2,271 – – – 2,271

Other comprehensive income – – 35 (221) (186)

Total comprehensive income for the year 2,271 – 35 (221) 2,085

BALANCE AT 30 JUNE 2011 18,310 23,242 1,674 (777) 42,449

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

37

CONSOLIDATED STATEMENT OF CASH FLOWSFOR THE YEAR ENDED 30 JUNE 2011 QUEENSLAND SUGAR LIMITED AND ITS CONTROLLED ENTITIES

NOTE 2011 2010$’000 $’000

CASH FLOWS FROM OPERATING ACTIVITIES

Receipts from customers (inclusive of GST) 1,656,657 1,745,020

Payments to mill owners for Australian raw sugar (inclusive of GST) (1,272,953) (1,612,759)

Payments to third party sugar suppliers for non-Australian raw sugar (inclusive of GST) (334,043) (24,891)

Payments to suppliers and employees (inclusive of GST) (214,554) (138,175)

Payments for 2010 season delivery shortfall (105,544) –

GST recovered 133,598 150,712

Interest and other costs of fi nance paid (19,457) (19,249)

Interest received 566 1,684

Other receipts 82,267 24,255

NET CASH FLOWS FROM/(USED IN) OPERATING ACTIVITIES 16(a) (73,463) 126,597

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of available-for-sale fi nancial assets (15,170) (10,551)

Purchase of property, plant and equipment (3,153) (2,459)

Proceeds from sale of property, plant and equipment 185 1,614

Dividends received 1,463 3,388

NET CASH FLOWS FROM/(USED IN) INVESTING ACTIVITIES (16,675) (8,008)

CASH FLOWS FROM FINANCING ACTIVITIES

Set-off loans advanced to mill owners (37,008) –

NET CASH FLOWS USED IN FINANCING ACTIVITIES (37,008) –

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS (127,146) 118,589

Cash and cash equivalents at beginning of the year (12,171) (131,088)

Effects of exchange rate changes on the cash and cash equivalents (484) 328

CASH AND CASH EQUIVALENTS AT END OF YEAR 16(b) (139,801) (12,171)

The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.


NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2011 QUEENSLAND SUGAR LIMITED AND ITS CONTROLLED ENTITIES

1 CORPORATE INFORMATION

The fi nancial report of QSL and its Controlled Entities for the year ended 30 June 2011 was authorised for issue in accordance with a resolution of the Directors on 22 September 2011.

QSL is a company limited by guarantee incorporated in Australia. The Consolidated Entity’s principal activity is the sale of raw sugar for export. The operations of the Parent Entity include the management of the six Bulk Sugar Terminals located in Queensland as well as the marketing of raw sugar for export to an existing and mature customer base.

QSL’s Controlled Entities comprise Transu Limited, QSL Investment (No1) Pty Ltd and QSL Investment (No2) Pty Ltd.

The registered offi ce of QSL is located at Level 14, 348 Edward Street, Brisbane, Queensland.

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(A) BASIS OF ACCOUNTINGThe fi nancial report is a general purpose fi nancial report, which has been prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board. The fi nancial report has also been prepared under the historical cost convention, except for inventory, derivative fi nancial instruments and available-for-sale investments, which have been measured at fair value. The carrying values of recognised assets and liabilities that are hedged items in fair value hedges, and are otherwise carried at cost, are adjusted to record changes in the fair values attributable to the risks that are being hedged.

The fi nancial report includes consolidated fi nancial statements of QSL and its Controlled Entities with supplementary information about the Parent Entity included in Note 25 of the fi nancial statements.

The fi nancial report is presented in Australian dollars and all values are rounded to the nearest thousand dollars ($000) unless otherwise stated.

(B) PRINCIPLES OF CONSOLIDATIONThe consolidated fi nancial statements comprise the fi nancial statements of QSL and its Controlled Entities. Under the Corporations Amendment (Corporate Reporting Reform) Act 2010 supplementary information about the Parent Entity is included in Note 25 to the fi nancial statements.

The fi nancial statements of the Controlled Entities are prepared for the same reporting period as the Parent Entity, using consistent accounting policies. In preparing the consolidated fi nancial statements, all intercompany balances and transactions, income and expenses and surplus and losses resulting from intra-group transactions have been eliminated in full.

(C) STATEMENT OF COMPLIANCE The fi nancial report complies with Australian Accounting Standards as issued by the Australian Accounting Standards Board and International Financial Reporting Standards (‘IFRS’) as issued by the International Accounting Standards Board.

The Consolidated Entity prepares one set of consolidated fi nancial statements and provides supplementary information about the Parent Entity, QSL in Note 25 of the fi nancial statements.

The Consolidated Entity has adopted the following new and amended Australian Accounting Standards and Interpretations as of 1 July 2010:

AASB 2009-5 Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project

The adoption of this standard is deemed to not have a material impact on the fi nancial statements or the performance on the Consolidated Entity.

Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet effective and have not been adopted by the Consolidated Entity for the annual reporting period ended 30 June 2011 are outlined below:

AASB 9 Financial Instruments AASB 2009-11 Amendments to Australian Accounting

Standards arising from AASB9 AASB 124 Related Party Disclosures AASB 2009-12 Amendments to Australian Accounting

Standards AASB 1053 Applications of Tiers of Australian Accounting

Standards AASB 1054 Australian Additional Disclosures AASB 2012-2 Amendments to Australian Accounting Standards

arising from reduced disclosure requirements AASB 2010-4 Further Amendments to Australian Accounting

Standards arising from Annual Improvements AASB 2010-5 Amendments to Australian Accounting Standards AASB 2010-6 Amendments to Australian Accounting Standards

– Disclosures on Transfers of Financial Assets AASB 2010-7 Amendments to Australian Accounting Standards

arising from AASB 9 AASB 2011-1 Amendments to Australian Accounting Standards

arising from the Trans-Tasman Convergence project AASB 2011-2 Amendments to Australian Accounting Standards

arising from the Trans-Tasman Convergence project – reduced disclosure regime

The Consolidated Entity is currently considering the impact of these new and amended standards and interpretations.

(D) SALES OF RAW SUGAR/REVENUE RECOGNITIONSales to customers are made on commercial terms with settlement generally on a cash against documents basis or letter of credit predominantly in United States (‘US’) dollars. Sales are recognised when the bill of lading is signed by the ship’s master and it is probable that the economic benefi ts will fl ow to the Consolidated Entity and can be reliably measured. Sales revenue also includes transactions relating to foreign exchange, sugar futures and options operations and is net of rebates, discounts and allowances.

(E) FUTURES AND OPTIONS MARKET HEDGINGTransactions in sugar futures and options are carried out as part of the range of pricing mechanisms for physical sales of sugar. The results of such transactions are linked with the appropriate sugar sales contracts and are thus included in sales income. At reporting date, those relating to future years are accounted for as derivatives (Refer Note 2(g)).

39

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED

(F) FOREIGN CURRENCY TRANSLATIONThe US dollar is the principal currency in which sugar is traded. The fi nancial statements are presented in Australian dollars, which is the Consolidated Entity’s functional and presentation currency.

Transactions denominated in foreign currencies are initially recorded in the functional currency at the exchange rates prevailing at the date of the transaction. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of foreign currency denominated monetary assets and liabilities using rates applicable at reporting date are recognised in the Consolidated Statement of Comprehensive Income.

Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the reporting date.

(G) DERIVATIVESDerivative instruments are used by the Parent Entity to manage commodity and foreign currency exposures connected with the sale of each season’s Australian raw sugar production and purchases of non-Australian third party sugar. The Parent Entity does not trade in derivatives. In accordance with the Parent Entity’s Financial Risk Management Policy, derivatives are entered into to manage defi ned sugar price and currency exposures. These exposures relate to known or anticipated sales of raw sugar. Derivatives are stated at fair value with any gains or losses arising from changes in fair value taken directly to the Consolidated Statement of Comprehensive Income.

Forward foreign currency and sugar swap contracts terms do not exceed fi ve years. Sugar futures and option contracts are entered into with terms not greater than one year. Details of open contracts at reporting date are provided in Note 26.

Amounts receivable or payable at reporting date relating to future pools’ production under sugar futures and options and foreign currency transactions are recognised as amounts owing to or amounts owing from future pools, and are included in the Statement of Financial Position on a net basis with gains or losses arising from changes in the value of amounts owing to or amounts owing from future pools taken directly to the Consolidated Statement of Comprehensive Income (Refer to Notes 9 and 13).

(H) CASH AND CASH EQUIVALENTSFor the purposes of the Consolidated Statement of Cash Flows, cash includes cash on hand and at bank, money market, securities and funding swaps connected with the pooling and sale of raw sugar, net of interest bearing liabilities.

Cash and cash equivalents are stated at the lower of cost and net realisable value. Interest is recognised as an expense as it accrues.

(I) TRADE AND OTHER RECEIVABLES

(i) Trade Receivables

Trade receivables, which are generally settled against documents when each vessel is loaded, are recognised and carried at original invoice amount less an allowance for any uncollectible amounts.

(ii) Amounts Owing from Mill Owners

Following the adverse weather events experienced in the 2011 fi nancial year, the Consolidated Entity has made available three year set-off loans to all Mill Owners. As at 30 June 2011, these amounts are classifi ed as current and non-current receivables accordingly (Refer to Notes 7 and 10).

An allowance for doubtful debts is made when there is objective evidence that the Consolidated Entity will not be able to collect the debts. Bad debts are written off as incurred.

(J) INVENTORIESMaterials and general store items used for maintenance at bulk sugar terminals are expensed in the year in which they are incurred.

Raw sugar stock on hand at reporting date has been valued at the lower of cost and net realisable value. The cost of stock on hand in respect of each season’s production has been determined as the respective weighted average of payment scheme prices payable to mill owners as calculated in accordance with supply contracts with mill owners.

In respect of the following season’s stock on hand where the fi nal pool price has not been established, the cost has been determined on the basis of the weighted average of forecast pool prices at reporting date. Where sales of the following season’s production are made prior to reporting date, those stocks are valued on the basis of the net proceeds expected to be received from those shipments.

Raw sugar on hand comprises stock on hand at bulk sugar terminals at reporting date. Sugar stocks are recognised when sugar is received and property to the sugar passes to the Consolidated Entity. In relation to the determination of pool prices each season, any raw sugar on hand at reporting date was valued in the realisation and distribution account as follows:

(i) sugar unshipped and priced – valued at net realisable value and converted to Australian dollars at the exchange rate ruling at reporting date; and

(ii) sugar unshipped and unpriced – valued at reporting date on the basis of the Intercontinental Exchange (‘ICE’) No 11 or No 16 futures settlement price for the quoted positions or market day average prices, in respect to specifi c contracts of sale and converted to Australian dollars at the exchange rate ruling at reporting date.

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

(K) CURRENT ASSETSCurrent assets comprise cash at bank and on hand, term deposits, debtors, other receivables relating to the Set-Off loans, prepayments, raw sugar stock on hand, amounts owing from future pools, unrealised gains on foreign currency transactions and unrealised gains on sugar futures and options contracts.

(L) PROPERTY, PLANT AND EQUIPMENTPlant and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses. Such costs include the costs of replacing parts that are eligible for capitalisation when the cost of replacing the part is incurred.


NOTES TO THE FINANCIAL STATEMENTS CONTINUED



(L) PROPERTY, PLANT AND EQUIPMENT CONTINUED

(i) Depreciation

Depreciation is provided on a straight-line basis on all property, plant and equipment, other than freehold and leasehold land, over the estimated useful life of the assets as follows:

ASSET CLASS 2011 2010

Freehold buildings 50 years 50 years

Leasehold improvements lease term lease term

Plant and equipment 4 to 25 years 4 to 25 years

The assets’ residual values, useful lives and amortisation methods are reviewed, and adjusted if appropriate, at each reporting date.

(ii) Impairment

The carrying values of plant and equipment are reviewed for impairment at each reporting date, with the recoverable amount being estimated when events or changes in circumstances indicate that the carrying value may be impaired.

The recoverable amount of plant and equipment is the higher of fair value less costs to sell and value in use. In assessing value in use for the Parent Entity, as an income tax exempt entity, fair value is depreciated replacement cost.

Impairment exists when the carrying value of an asset or cash-generating unit exceeds its estimated recoverable amount. The asset or cash-generating unit is then written down to its recoverable amount.

(iii) Derecognition and disposal

An item of property, plant and equipment is derecognised upon disposal or when no further future economic benefi ts are expected from its use or disposal.

Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the Consolidated Statement of Comprehensive Income in the year the asset was derecognised.

Freehold buildings are valued at the cost to the Consolidated Entity at the time of purchase.

(M) IMPAIRMENT OF ASSETSThe Consolidated Entity assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Consolidated Entity makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of its fair value less costs to sell and its value in use determined for an individual asset, unless the asset does not generate cash infl ows that are largely independent of those from the other assets and the asset’s value in use cannot be estimated to be close to its fair value. In such cases the asset is tested for impairment as part of the cash-generating unit to which it belongs. When the carrying amount of the asset or cash-generating unit exceeds its recoverable amount, the asset or cash-generating unit is considered impaired and is written down to its recoverable amount.

In assessing value in use, the estimated cash fl ows are discounted to their present value using a pre-tax discount rate that refl ects

current market assessments of the time value of money and the risks specifi c to the asset. Impairment losses relating to continuing operations are recognised in those expense categories consistent with the function of the impaired asset unless the asset is carried at the revalued amount (in which case the impairment loss is treated as a revaluation decrease).

An assessment is also made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in the prior years. Such reversal is recognised in the Consolidated Statement of Comprehensive Income unless the asset is carried at a revalued amount, in which case the reversal is treated as a revaluation increase. After such a reversal the depreciation charge is adjusted in future years to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.

(N) OTHER NON-CURRENT ASSETSExpenditure carried forward

Signifi cant items of carry forward expenditure having a benefi t or relationship to more than one year are written off over the years to which such expenditure relates.

(O) LEASED ASSETSOperating leases

Operating leases are those where the lessor effectively retains substantially all the risks and benefi ts incidental to ownership of the leased property. Lease payments of this type are not capitalised and rental payments are expensed each year as incurred. Disclosure of these lease commitments is made in Note 17.

(P) CURRENT LIABILITIESCurrent liabilities comprise all amounts owing at reporting date and payable within 12 months, including amounts due to Queensland mill owners.

(Q) TRADE AND OTHER PAYABLESTrade payables and other payables are carried at amortised cost and represent liabilities for goods and services provided to the Consolidated Entity prior to the end of the fi nancial year that are unpaid and arise when the Consolidated Entity becomes obliged to make future payments in respect of the purchase of those goods and services.

(R) INTEREST BEARING LOANS AND BORROWINGSAll loans and borrowings are initially recognised at fair value of the consideration received less directly attributable transaction costs.

After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method.

41


(S) PROVISIONSProvisions are recognised when the Consolidated Entity has a present obligation as a result of a past event, it is probable that an outfl ow of resources embodying economic benefi ts will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that refl ects the risks specifi c to the liability.

When discounting is used, the increase in provision due to the passage of time is recognised in fi nance costs.

(T) EMPLOYEE LEAVE BENEFITS(i) Wages, salaries, annual leave and sick leave

Liability for wages and salaries, including non-monetary benefi ts, annual leave and accumulating sick leave expected to be settled within 12 months of the reporting date are recognised in other payables in respect of employees’ services up to the reporting date. They are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for non-accumulating sick leave are recognised when the leave is taken and are measured at the rates paid or payable.

(ii) Long service leave

The liability for long service leave is recognised in the provision for employee benefi ts and measured at the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience in employee departures, and years of service. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity that match as closely as possible the estimated future cash outfl ows.

(U) POST-EMPLOYMENT BENEFITS Defi ned Benefi t Plan

The Consolidated Entity contributes to one defi ned benefi t plan on behalf of certain eligible employees.

In respect of QSL’s defi ned benefi ts superannuation plan, any contributions made to the superannuation plan by the Consolidated Entity are recognised against surpluses when due.

Employees of QSL who have a defi ned benefi t plan are members of QSuper (Refer Note 19).

For employees who are members of QSuper, the Treasurer of Queensland, based on advice received from the State Actuary, determines employer contributions for superannuation expenses.

No liability is recognised for accruing the above superannuation benefi ts in these fi nancial statements, the liability being held on a whole-of-Government basis and reported in the whole of government fi nancial report prepared pursuant to AAS 31 – Financial Reporting by Governments.

(V) NATURE AND PURPOSE OF RESERVES(i) Capital reserve

The capital reserve represents the value of equity transferred from Queensland Sugar Corporation in 2000, which was deducted from pool proceeds to fund purchases of property, plant and equipment.

(ii) Investments reserve

Changes in the fair value of equity investments, classifi ed as available-for-sale fi nancial assets, are taken to the available-for-sale reserve. Amounts are recognised in the Consolidated Statement of Comprehensive Income when the associated assets are sold or impaired.

(iii) Foreign currency translation

Transactions in foreign currencies are initially recorded in the functional currency by applying the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at reporting date.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated at the exchange rate as at the date of the initial transaction. Non-monetary items measured at fair value in foreign currency are translated using the exchange rates at the date when the fair value was determined.

Exchange variations resulting from the translation are recognised in the Consolidated Statement of Comprehensive Income.

(W) INCOME TAXParent Entity

In accordance with sections 50-1 and 50-40 of the Income Tax Assessment Act 1997, QSL is exempt from income tax.

Controlled Entities

The Controlled Entities account for current tax assets and liabilities by measuring the amount expected to be recovered from or payable to the taxation authorities based on the current year’s taxable income. The tax rates and tax laws used to compute the amounts are those that are enacted or substantively enacted by the reporting date.

Deferred tax is provided on all temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for fi nancial reporting purposes.

Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised for all deductible temporary differences, carry-forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profi t will be available against which the deductible temporary differences and the carry-forward of unused tax credits and unused tax losses can be utilised.

The carrying amount of deferred tax assets is reviewed at reporting date and reduced to the extent that it is no longer probable that suffi cient taxable profi t will be available to allow all or part of the deferred tax asset to be utilised.

Unrecognised deferred tax assets are reassessed at reporting date and are recognised to the extent that it has become probable that future taxable profi t will allow the deferred tax asset to be recovered.





(W) INCOME TAX CONTINUED Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority.

Current and deferred tax is recognised as an expense in the Consolidated Statement of Comprehensive Income except when it 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 an initial accounting for a business acquisition, in which case it is taken into account in the determination of goodwill.

(X) DEFERRED INCOME AND EXPENSESIncome and expenses have been carried forward only in circumstances relating to future sales proceeds, the receipt of which is reasonably assured.

(Y) GOODS AND SERVICES TAXRevenues, expenses and assets are recognised net of the amount of Goods and Services Tax (‘GST’), except:

(i) Where the amount of GST incurred is not recoverable from the Australian Taxation Offi ce (‘ATO’), it is recognised as part of the cost of the acquisition of an asset or as a part of the item of expense; or

(ii) For receivables or payables, which are recognised inclusive of GST, the net amount of GST recoverable from or payable to, the ATO is shown under current receivables or payables.

(Z) BORROWING COSTSBorrowing costs are recognised as an expense when incurred.

(AA) MAKE GOOD PROVISIONProvision has been made for the present value of anticipated costs of future restoration of leased offi ce premises. The provision includes future cost estimates associated with offi ce dismantling. The calculation of this provision requires assumptions such as the applicable environmental legislation and engineering cost estimates. These uncertainties may result in future actual expenditure differing from the amounts currently provided. The provision recognised is reviewed annually and updated based on the facts and circumstances available at the time. Changes to the estimated future costs are recognised in the Consolidated Statement of Financial Position by adjusting both the asset or expense (if applicable) and provision. The related carrying amounts are disclosed in Note 15.

(AB) ACCOMMODATION INCENTIVEProvision has been made for the present value of fi t-out incentive costs of the leased offi ce premises as specifi ed in the Incentive Deed between Harburg Investments Pty Ltd and QSL which concludes on 30 April 2018. The provision represents the present value of the total incentive benefi t of $1,048,800 over the remaining six years of the lease in accordance with Interpretation 115. The related carrying amounts are disclosed in Note 15.

43

2011 2010$’000 $’000

Non-Australian raw sugar activities

Sales of non-Australian raw sugar 354,462 27,201

Purchases of non-Australian raw sugar (334,067) (24,891)

Freight and brokerage (11,208) (1,711)

Salaries and employee costs (376) (164)

Other expenses (3,176) (777)

5,635 (342)

Equity investment activities

Dividend income 1,463 3,388

Gain on disposal of equity investments a 5,569 –

7,032 3,388

Other activities

Gain on sale of non-current assets – 913

Other income 3,435 5,408

Salaries and employee costs (1,211) (1,265)

Other expenses (3,101) (972)

(877) 4,084

NON-POOLING ACTIVITIES (PRE-CORPORATE CHARGE) 11,790 7,130

Research funding to the sugar industry b (925) –

Internal fi nancing cost on Non-Australian Raw Sugar Activities c (6,313) (31)

Internal fi nancing cost on Equity Investment Activities c (1,723) (713)

Internal fi nancing cost on Other Activities c (558) (66)

(9,519) (810)

NET SURPLUS 2,271 6,320

a Relates to the gain on the disposal of shares in Tully Sugar Limited (‘TSL’). QSL’s 19.9% interest in TSL was disposed of in June 2011 to Mackay Sugar Limited at $43 per share.

b Relates to amount contributed to the Australian Sugar Industry Alliance for research and development related expenditure.

c Relates to internal corporate fi nancing costs for the relevant activity from the Pool. This internal corporate charge reduces borrowing costs for the Pool.

3 INCOME AND EXPENSES FROM NON-POOLING ACTIVITIES

Pooling activities are those that directly relate to the sale of Australian raw sugar under the RSSA and the payment of these proceeds net of fi nancing, terminal operations and marketing costs to mill owners. The following revenues and expenses relate to those activities not directly concerned with pooling activities.




4 EXPENSES FROM CONTINUING ACTIVITIES

2011 2010$’000 $’000

Freight and brokerage Sea freight 72,770 75,051Road freight 717 409Selling brokerage 586 46

TOTAL FREIGHT AND BROKERAGE 74,073 75,506

Operating lease rental Minimum lease payments

Sugar Terminals Limited 42,626 42,582Other property 510 610

TOTAL OPERATING LEASE RENTAL 43,136 43,192

Borrowing costs expenseInterest expense

Short term debt 13,037 14,003Other 6,420 5,245

TOTAL BORROWING COSTS EXPENSE 19,457 19,248

Depreciation expensePlant and equipment 1,158 1,126Buildings on freehold land 56 62Leasehold improvements 120 77

TOTAL DEPRECIATION EXPENSE 1,334 1,265

5 2010 SEASON SHORTFALL DELIVERY COSTS

SEASON SHORTFALL DELIVERY COSTS 105,544 –

The 2010 Season was adversely affected by severe in-season weather conditions that resulted in a large quantity of sugar cane being unharvested. The sugar delivery shortfall resulted in QSL incurring net costs in relation to unwinding futures and foreign currency positions as well as substituting non-Australian sugar in order to meet existing sugar sales commitments.

6 OTHER EXPENSES FROM CONTINUING ACTIVITIES

This amount includes all other operating expenditure not separately identifi ed in the Consolidated Statement of Comprehensive Income, less the recovery of $15.1 million in Storage and Handling costs for Australian raw sugar not purchased from milling companies for sale by QSL (2010: $11.8 million).

7 TRADE AND OTHER RECEIVABLES

2011 2010$’000 $’000

CURRENTTrade debtors a 57,792 25,811

Other debtorsFutures margins and deposits 3,617 5,733GST receivable 5,768 10,215Loan (set-off) agreements with Suppliers b 12,324 –Receivable from sale of Tully Sugar Limited Shares c 26,440 –Other 20,968 17,091

69,117 33,039

TOTAL TRADE AND OTHER RECEIVABLES (CURRENT) 126,909 58,850

a Contractual terms and conditions, any collateral held and the timing of the payments are set out in Note 26.b Relates to amounts loaned to mill owners relating to the 2010 season for delivery shortfall costs which are set off

against payments for future sugar deliveries (refer to Note 17(c)).c During the year QSL sold its holding of Tully Sugar Limited with cash proceeds received post year end.

45

8 INVENTORIES

2011 2010$’000 $’000

Bulk Australian raw sugar at cost 69,754 125,253

TOTAL INVENTORIES 69,754 125,253

9 OTHER ASSETS

CURRENT

Unrealised gains on foreign currency contracts 136,361 59,641

Deferred expenditure and prepayments relating to a future year:Prepaid expenditure 4,052 306Amounts owing from future pools a 2,249 899

6,301 1,205

TOTAL OTHER ASSETS (CURRENT) 142,662 60,846

NON-CURRENT

Unrealised gains on foreign currency contracts 75,811 62,414Deferred expenditure and prepayments relating to a future year

Amounts owing from future pools a 17,692 –

TOTAL OTHER ASSETS (NON-CURRENT) 93,503 62,414

a Represents unrealised losses on sugar hedges, foreign exchange hedges and option contracts which will be allocated against future years’ sales.

10 OTHER RECEIVABLES

NON-CURRENT

Loan (set-off) agreements with Suppliers a 24,684 –

a Relates to amounts loaned to mill owners relating to the 2010 season for delivery shortfall costs which are set off against payments for future sugar deliveries (refer to Note 17(c)).

11 AVAILABLE-FOR-SALE FINANCIAL ASSETS

NON-CURRENT

Shares at fair value a 19,623 25,163

a QSL holds 12.3% (2010: 9.6%) of the G (Grower) class of share capital of Sugar Terminals Limited (‘STL’), a company that owns bulk raw sugar storage facilities in Queensland. Under a sublease with STL, QSL operates and maintains these facilities until 31 December 2013. The STL G class shares are traded on the National Stock Exchange of Australia. Given the illiquid or thinly traded market in STL G Shares, QSL’s investment in STL has been valued using an independent valuation methodology rather than the market value pursuant to AASB 139 Financial Instruments: Recognition and Measurement. This is consistent with the approach adopted in the prior year.

QSL also holds shares in the Intercontinental Exchange, Inc which is listed on the New York Stock Exchange.

During the year QSL sold its holding of 19.9% of the issued shares in Tully Sugar Limited (‘TSL’). At 30 June 2010, QSL owned 10.4% of TSL.

Available-for-sale investments consist of investments in ordinary shares, and therefore have no fi xed maturity date or coupon rate.




12 PROPERTY, PLANT AND EQUIPMENT

2011 2010$’000 $’000

Freehold land:At cost 960 960

Leasehold land:At cost 195 195

Leasehold improvements:At cost 1,506 2,269Accumulated depreciation (502) (833)

1,004 1,436

Buildings on freehold land:At cost 683 846Accumulated depreciation (280) (385)

403 461

Plant and equipment:At cost 15,683 18,075Accumulated depreciation (6,283) (10,159)

9,400 7,916

TOTAL PROPERTY, PLANT AND EQUIPMENT 11,962 10,968

Reconciliations

Reconciliations of the carrying amounts of freehold land, leasehold land, leasehold improvements, buildings on freehold land and plant and equipment at the beginning of and end of the fi nancial year.

Freehold land:Carrying amount at the beginning of the year 960 1,194Disposals – (234)

Carrying amount at the end of the year 960 960

Leasehold land:Carrying amount at the beginning and the end of the year 195 195

Leasehold improvements:Carrying amount at the beginning of the year 1,436 817Additions 56 696Impairment (368) –Depreciation expense (120) (77)

Carrying amount at the end of the year 1,004 1,436

Buildings on freehold land:Carrying amount at the beginning of the year 461 692Disposals (2) (169)Depreciation expense (56) (62)

Carrying amount at the end of the year 403 461

Plant and equipment:Carrying amount at the beginning of the year 7,916 7,602Additions 3,191 1,706Disposals (338) (266)Impairment (211) –

Depreciation expense (1,158) (1,126)

Carrying amount at the end of the year 9,400 7,916

TOTAL PROPERTY, PLANT AND EQUIPMENT 11,962 10,968

47

13 TRADE AND OTHER PAYABLES

2011 2010$’000 $’000

CURRENT

CreditorsQueensland sugar mills 73,317 126,855Trade creditors 1,061 898

74,378 127,753

Other creditorsUnrealised losses on sugar futures and options contracts 125,195 14,504Other 9,504 4,787

134,699 19,291

Deferred income relating to a future yearAmounts owing to future pools a – 74,843

TOTAL TRADE AND OTHER PAYABLES (CURRENT) 209,077 221,887

NON-CURRENT

Other creditorsUnrealised losses on sugar futures and option contracts 93,499 7,878Other 103 531Deferred income relating to a future year:

Amounts owing to future pools a – 55,253

TOTAL TRADE AND OTHER PAYABLES (NON-CURRENT) 93,602 63,662

a Represents unrealised gains on sugar hedges, foreign exchange hedges and option contracts which will be allocated against future years’ sales.

14 INTEREST BEARING LIABILITIES

CURRENT

UnsecuredSecurities – commercial paper a 103,593 –Money market b 36,711 15,300

TOTAL INTEREST BEARING LIABILITIES (CURRENT) 140,304 15,300

a Represents funding for advances to mill owners, sugar futures settlements and margins.

b These short term loans are repayable within 30 days.

15 PROVISIONS

MAKE GOOD PROVISION a

ACCOMMODATION INCENTIVE

STAFF INCENTIVE PROVISION

PROVISION FOR RESTRUCTURING

ANNUAL LEAVE

LONG SERVICE

LEAVESICK

LEAVE TOTAL

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

BALANCE AT 1 JULY 2009 484 – 389 193 1,305 1,409 38 3,818Arising during the year 175 913 1,223 701 1,077 982 47 5,118Utilised (284) (22) (654) (894) (1,159) (697) (33) (3,743)Discount rate adjustment – – – – – 217 – 217

BALANCE AT 30 JUNE 2010 375 891 958 – 1,223 1,911 52 5,410

REPRESENTED AS:Current 200 131 958 – 1,223 43 52 2,607Non-Current 175 760 – – – 1,868 – 2,803

TOTAL 375 891 958 – 1,223 1,911 52 5,410




15 PROVISIONS CONTINUED

MAKE GOOD PROVISION a

ACCOMMODATION INCENTIVE

STAFF INCENTIVE PROVISION

PROVISION FOR RESTRUCTURING

ANNUAL LEAVE

LONG SERVICE

LEAVESICK

LEAVE TOTAL$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

BALANCE AT 1 JULY 2010 375 891 958 – 1,223 1,911 52 5,410Arising during the year – – (146) – 1,297 159 24 1,334

Utilised (200) (131) (688) – (1,189) (470) (41) (2,719)

Discount rate adjustment – 33 – – – 110 – 143

BALANCE AT 30 JUNE 2011 175 793 124 – 1,331 1,710 35 4,168

REPRESENTED AS:Current – 131 124 – 1,331 292 35 1,913

Non-Current 175 662 – – – 1,418 – 2,255

TOTAL 175 793 124 – 1,331 1,710 35 4,168

a During the year the Parent Entity concluded a lease agreement with Daisho Co Ltd and in accordance with the lease agreement the Parent Entity was required to restore its leased premises to the original condition. An amount of $200,000 has been paid to the landlord to make good the premises which was included in the provision. In the prior year the Parent Entity also commenced an 8 year lease agreement with Harburg Investments Pty Ltd and in accordance with the lease agreement the Parent Entity must restore its leased premises to the original condition. The provision has been calculated using a rate per square metre giving a provision of $175,000.

16 CASH AND CASH EQUIVALENTS

2011 2010$’000 $’000

(A) RECONCILIATION OF THE OPERATING SURPLUS TO THE NET CASH FLOWS FROM OPERATIONS

Surplus attributable to the members of QSL and its Controlled Entities for the year 2,271 6,320

Adjustments for:Depreciation of non-current assets 1,334 1,265(Gain)/loss recognised on re-measurement to fair value (35) 13Net gain on disposal of fi nancial assets – (913)Foreign currency loss on equity investments 221 45Net foreign currency (gain)/loss on translation 484 (328)Dividend income classifi ed as an investing cash fl ow (1,463) (3,388)Net gain on the sale of Tully Sugar Limited shares (5,569) –Impairment and write-off of non-current assets 579 –

Changes in assets and liabilities:(Increase)/decrease in trade and other receivables (29,767) 39,188Decrease in inventory 55,499 55,354(Increase)/decrease in other current assets (81,816) 59,525(Increase)/decrease in non-current assets (31,089) 17,581Decrease in trade and other payables (12,810) (31,294)(Decrease)/increase in non-current payables 29,940 (18,363)(Decrease)/increase in provisions (1,242) 1,592

NET CASH PROVIDED BY/(USED IN) OPERATING ACTIVITIES (73,463) 126,597

(B) RECONCILIATION OF CASH AND CASH EQUIVALENTS

Cash and cash equivalents balance comprises:

Cash on hand 503 3,129

Money market liabilities (36,711) (15,300)

Securities – commercial paper liabilities (103,593) –

TOTAL CASH AND CASH EQUIVALENTS (139,801) (12,171)

49

16 CASH AND CASH EQUIVALENTS CONTINUED

(C) FINANCING FACILITIES AVAILABLE

At reporting date, the following fi nancing facilities had been negotiated and were available:

Commercial paper program

In conjunction with a number of Australian fi nancial institutions, the Parent Entity has a $1 billion (2010: $1 billion) Australian dollar revolving commercial paper borrowing program entered into for the purposes of funding advance payments to mill owners and associated responsibilities. The commercial paper program is backed by the syndicated standby credit facilities referred to below.

Syndicated standby credit facilities

The Parent Entity has a committed $500 million (2010: $700 million) Australian dollar syndicated, standby facility which expires on 30 June 2013. This facility is for general funding of activities including sugar price risk management operations. This facility remains undrawn at 30 June 2011 and can be used to fund the net current asset defi ciency existing at balance date, created by the funding of loans to mill owners under the Loan (set-off) Facility.

Letter of credit issuance facility

The Parent Entity has in place a committed letter of credit issuance facility which matures on 31 October 2011. The facility is for issuing standby letters of credit in lieu of performance bonds in connection with contract tender terms. At 30 June 2011, nil funds (2010: USD $1.3m) had been drawn against the facility of USD $10.0m (2010: USD $10.0m).

In addition, the Parent Entity had available at 30 June 2011 uncommitted facilities with various fi nancial institutions of $175.0 million (2010: $233.5 million).

17 COMMITMENTS

2011 2010$’000 $’000

(A) CAPITAL EXPENDITURE COMMITMENTS

Estimated capital expenditure contracted for at reporting date, but not provided for, payable

Not later than one year 301 250

(B) LEASE EXPENDITURE COMMITMENTS

Operating leases (non-cancellable):

Minimum lease payments

Not later than one year 43,132 42,570

Later than one year but not later than fi ve years 65,223 107,137Later than fi ve years 1,139 1,728

AGGREGATE LEASE EXPENDITURE CONTRACTED FOR AT REPORTING DATE 109,494 151,435

Amounts not provided for:

– Rental commitments – STL a 105,629 147,000

– Other property 3,865 4,435

AGGREGATE LEASE EXPENDITURE CONTRACTED FOR AT REPORTING DATE 109,494 151,435

a The Parent Entity has entered into a 5 year agreement with STL effective from 1 January 2009. The terms of the agreement are largely the same as prior agreements. The key features are:

– Fixed charge of $42 million per annum (subject to quantum of capital expenditure)

– Capital expenditure above or set below a set threshold adding to or reducing the fi xed charge

(C) LOAN (SET-OFF) FACILITY

To mitigate the impact of the severe weather on the 2010 Season, QSL entered into set-off loans with mill owners (refer Note 7 and 10). These loans have a term of three years and were offered to all RSSA participants. Any drawdowns under these loans were required to be completed by 22 July 2011.

Approved loan facility 73,653 –

Utilised facility a 37,035 –

UNUSED FACILITY 36,618 –

a An additional $2.3 million was drawn down by mill owners after 30 June 2011.




18 NON-HEDGED FOREIGN CURRENCY BALANCES

The Australian dollar equivalents of non-hedged foreign currency balances included in the accounts are as follows:

2011 2010$’000 $’000

US Dollars

Current assets 66,940 29,275

Current liabilities (31,780) (642)

19 EMPLOYEE BENEFITS AND SUPERANNUATION COMMITMENTS

Employee benefi ts

Accrued wages, salaries and on-costs 540 774

Provisions for employee benefi ts (current) 1,782 2,276

Provisions for employee benefi ts (non-current) 1,418 1,868

TOTAL EMPLOYEE BENEFITS AND SUPERANNUATION COMMITMENTS 3,740 4,918

AMOUNT CONTRIBUTED BY QSL TO THE QSUPER DEFINED BENEFIT PLAN 328 472

20 CONTINGENT LIABILITIES

There are no known contingent liabilities at 30 June 2011 of a material nature.

21 SUBSEQUENT EVENTS

There are no known events of a material nature that have occurred after 30 June 2011.

22 DIRECTOR AND EXECUTIVES DISCLOSURES

2011 2010$ $

COMPENSATION OF KEY MANAGEMENT PERSONNEL AND DIRECTORS

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Consolidated Entity, directly or indirectly, including any Director. The Directors, the Chief Executive Offi cers and the General Managers of the Consolidated Entity have been classifi ed as Key Management Personnel.

Short term 2,383,431 2,408,491

Termination benefi ts a 389,986 183,623

2,773,417 2,592,114

a Termination benefi ts only includes the bona fi de portion of any termination payment.

51

23 AUDITORS’ REMUNERATION

2011 2010$ $

Amounts received or due and receivable for auditing services by Ernst & Young for the Consolidated Entity:

– audit or review of the fi nancial report 109,727 121,546– internal audit services 23,690 132,374– 2010 season delivery shortfall review 26,800 –– other non-audit services 53,165 99,674

213,382 353,594

Amounts received or due and receivable for auditing services by PricewaterhouseCoopers for the Consolidated Entity:

– internal audit services 132,500 –– taxation services 11,850 –– other non-audit services 29,331 –

173,681 –

TOTAL AUDITORS’ REMUNERATION 387,063 353,594

24 RELATED PARTY DISCLOSURES

Under raw sugar supply contracts with a number of milling companies in Queensland which fi rst came into effect on 1 January 2006 and new supply agreements entered into in 2008, QSL purchases those milling companies’ sugar production destined for the export market. Under the terms of supply contracts with milling companies, sugar on receival becomes the absolute property of QSL, free of all encumbrances or adverse claims. In return mill owners receive a right of payment for the sugar purchased, to be calculated in accordance with the pricing options and other provisions within the contracts. The amount in respect to each season’s production is determined by QSL, following the sale and pricing of that season’s production on commercial terms, and progressive payments are made in accordance with the terms of the contracts. The fi nal payment to each milling company is made in July each year in respect to sugar production in the previous calendar year.

Milling companies in turn make payments to cane growers for cane delivered to the mill, based on cane payment formulae incorporated into the local collective agreement for each area and advance payments received from QSL. Where applicable, the pool price forms part of the cane payment formulae.

All other related party transactions are on normal commercial terms and conditions.

25 PARENT ENTITY INFORMATION AND CONTROLLED ENTITIES

(A) CONTROLLED ENTITIES

CONTROLLED ENTITYCOUNTRY OF

INCORPORATIONPERCENTAGE OWNERSHIP

DATE OF INCORPORATION

Transu Limited Australia 100% 24/11/10QSL Investments (No1) Pty Ltd Australia 100% 16/10/09QSL Investments (No2) Pty Ltd Australia 100% 16/10/09

(B) PARENT ENTITY DISCLOSURES

2011 2010$’000 $’000

Information relating to QSL:

Current assets 339,828 248,519TOTAL ASSETS 474,047 340,005Current liabilities 351,294 233,174TOTAL LIABILITIES 431,513 299,639

Reserves 24,139 24,325Retained surpluses 18,395 16,041

TOTAL EQUITY 42,534 40,366

NET SURPLUS 2,298 6,323

TOTAL COMPREHENSIVE INCOME 2,112 6,264




25 PARENT ENTITY INFORMATION AND CONTROLLED ENTITIES CONTINUED

(B) PARENT ENTITY DISCLOSURES CONTINUED

Commitments

All expenditure commitments in Note 17 relate to the Parent Entity.

Contingent Liabilities

There are no contingent liabilities that relate to the Parent Entity as disclosed in Note 20.

Guarantees

The Parent Entity guarantees all the debts of the Controlled Entities.

26 FINANCIAL RISK MANAGEMENT AND INSTRUMENTS

The Consolidated Entity’s principal fi nancial instruments comprise of cash and short term deposits, short term loans and derivatives. The Consolidated Entity’s activities expose it to a variety of fi nancial risks: market risk (including currency risk and commodity price risk), credit risk and liquidity risk. The Consolidated Entity uses a variety of derivative fi nancial instruments to manage specifi cally identifi ed foreign currency and commodity price risks. The Consolidated Entity does not use derivative or fi nancial instruments for speculative or trading purposes.

The use of fi nancial derivatives is governed by risk management policies approved by the Board of Directors. The policies provide specifi c principles in relation to foreign exchange risk, commodity price risk, credit risk, the use of fi nancial and non-fi nancial derivatives and the management of liquidity. Compliance with these policies and procedures is reviewed by the Directors monthly and as part of the internal audit function on a regular basis.

(I) FOREIGN EXCHANGE RISKThe Consolidated Entity is primarily exposed to the risk of adverse movements in the AUD/USD exchange rate. The Consolidated Entity uses a variety of foreign exchange risk management instruments including foreign exchange contracts and currency options to manage exchange rate risk of the Australian dollar value of US dollar receipts from the sale of raw sugar arising from committed and anticipated sales. Foreign currency options entitle the Consolidated Entity to buy or sell US dollars at an agreed rate of exchange, while forward exchange contracts commit the Consolidated Entity to sell US dollars at an agreed rate of exchange.

Risk management transactions have been accounted for on a basis consistent with the accounting for the underlying transaction. Gains and losses on specifi c risk transactions of committed future sales are deferred until the date of sale and included in the measurement of the transaction.

The following table summarises by contract maturity the Australian dollar value of forward exchange contracts and foreign currency options. Foreign currency amounts are translated at rates current at reporting date. Contracts to sell US dollars are entered into to offset the proceeds from the sale of the raw sugar.

Foreign exchange contracts a WEIGHTED AVERAGE

EXCHANGE RATES

CONTRACT MATURITIES

< 1 year 1–2 years 2–3 years 3–4 years 4–5 years Total$’000 $’000 $’000 $’000 $’000 $’000

2011Sell US dollars 0.8532 651,755 254,959 98,009 30,074 10,646 1,045,4432010Sell US dollars 0.7845 1,015,138 408,954 130,503 6,076 1,318 1,561,989

a $214.1 million of net foreign exchange contract gains (2010: $122.1 million) have been deferred as the gains represent amounts owed to future years’ pools. The expected timing of recognition based on the fair values at 30 June 2011 are: one year or less $138.2 million gain (2010: $59.6 million gain), one to two years $53.6 million gain (2010: $48.9 million gain), two to three years $15.5 million gain (2010: $12.5 million gain), three to four years $5.0 million gain (2010: $0.8 million gain) and four to fi ve years $1.7 million gain (2010: $0.2 million gain).

53

26 FINANCIAL RISK MANAGEMENT AND INSTRUMENTS CONTINUED

(I) FOREIGN EXCHANGE RISK CONTINUED

Currency options WEIGHTED AVERAGE

EXCHANGE RATES

CONTRACT MATURITIES


2011Purchased AUD Call against USD 1.0391 96,233 – – – – 96,233

Sold AUD Call against USD 1.0000 (30,000) – – – – (30,000)

Sold AUD Put against USD 0.9468 105,615 – – – – 105,615

Purchased AUD Put against USD 0.8900 (33,708) – – – – (33,708)

TOTAL 138,140 – – – – 138,140

2010Purchased AUD Call against USD 0.8517 85,239 – – – – 85,239

Sold AUD Call against USD 0.8950 (22,346) – – – – (22,346)

Sold AUD Put against USD 0.7861 92,354 – – – – 92,354

Purchased AUD Put against USD 0.8030 (24,907) – – – – (24,907)

TOTAL 130,340 – – – – 130,340

The following table details the Consolidated Entity’s sensitivity for fi nancial instruments held at reporting date to movements in the exchange rate of the Australian dollar to the US dollar, with all other variables held constant. The 10% sensitivity is based on reasonable possible changes, over a fi nancial year, using the observed range of actual historic rates for the preceding fi ve year period.

Price change sensitivityEXCHANGE RATE10% DECREASE

EXCHANGE RATE10% INCREASE

2011 2010 2011 2010$’000 $’000 $’000 $’000

Amounts owed to future pools (94,613) (163,906) 81,604 136,081

As at 30 June 2011, had the Australian dollar weakened/strengthened by 10% against the US dollar with all other variables held constant, surplus for the year would have been unchanged as a result of amounts owed to or from future years’ pools absorbing any impact of foreign exchange fl uctuation.

(II) COMMODITY PRICE RISKThe following table summarises the notional contract amounts, maturity dates and average contract rates for sugar futures, sugar option and sugar swap contracts outstanding at reporting date. The notional contract amounts are denominated in Australian dollars derived from the settlement price of the respective futures contract and converted to Australian dollars at the hedge settlement rate at reporting date.

The sugar futures and sugar options contracts are entered into to manage adverse movements in the ICE No 11 and No 16 sugar price arising from known and anticipated sales that have not been price fi xed or price protected. The exposure to price risk arises from sugar sales contracts where the pricing mechanism is against the ICE No 11 and No 16 sugar price.





(II) COMMODITY PRICE RISK CONTINUED

Sugar futures contracts a WEIGHTED AVERAGE

PRICE b CONTRACT MATURITIES


2011ICE 11 Contract 25.17 (58,254) – – – – (58,254)

TOTAL (58,254) – – – – (58,254)

2010ICE 11 Contract 18.26 55,342 – – – – 55,342

ICE 16 Contract 26.75 10,865 – – – – 10,865

TOTAL 66,207 – – – – 66,207

a $227.9 million of net price risk instrument losses (2010: $22.4 million loss) have been deferred as the losses represent amounts owed from future years’ pools. The expected timing of recognition based on the fair values at 30 June 2011 are: one year or less $134.4 million loss (2010: $14.5 million loss), one to two years $78.9 million loss (2010: $7.0 million loss), two to three years $11.3 million loss (2010: $0.8 million loss), three to four years $2.8 million loss (2010: $nil) and four to fi ve years $nil (2010: $nil).

b US cents per pound.

Sugar options WEIGHTED AVERAGE

PRICE c CONTRACT MATURITIES


2011Purchased Puts d 23.88 25,008 – – – – 25,008

Sold Puts d 24.14 10,618 – – – – 10,618

TOTAL 35,626 – – – – 35,626

2010Purchased Puts d – – – – – – –

Sold Calls d – – – – – – –

TOTAL – – – – – –

c US cents per pound.

d Exchange Traded Options.

Sugar swaps WEIGHTED AVERAGE

PRICE CONTRACT MATURITIES


2011Australian dollars e 429.75 6,085 9,132 – – – 15,217US dollars f 17.41 411,658 280,978 94,860 27,848 9,503 824,847

2010Australian dollars e 416.00 5,261 5,097 4,080 – – 14,438US dollars f 15.46 360,864 251,010 100,297 4,639 983 717,793

e Australian dollars per tonne.

f US cents per pound.

55


(II) COMMODITY PRICE RISK CONTINUEDThe following table details the Consolidated Entity’s sensitivity of fi nancial instruments held at reporting date to movements in the sugar price with all other variables held constant. The movements in amounts owed to/from future years in 2011 are more sensitive because of the increase in use of commodity price hedges.

Price change sensitivitySUGAR PRICE

30% DECREASESUGAR PRICE

30% INCREASE

2011 2010 2011 2010

$’000 $’000 $’000 $’000

Amounts owed to future pools 218,529 242,084 (218,529) (242,084)

The Consolidated Entity’s sensitivity to sugar price risk at reporting date is not representative of the sensitivity throughout the year as the year end exposure does not refl ect the exposure during the year due to in-season sugar pricing undertaken.

As at 30 June 2011, had the sugar price weakened/strengthened by 30% with all other variables held constant, surplus for the year would have been unchanged as a result of amounts owed to or from future years’ pools absorbing any impact on sugar price fl uctuation.

(III) INTEREST RATE RISKThe Consolidated Entity does not enter into fi nancial instruments to manage cash fl ow risks associated with interest rate movements on borrowings. Short term loans totalling $140.3 million (2010: $15.3 million) are repayable within 3 months (2010: 1 month) at an interest rate of 4.4% (2010: 4.6%). Cash totalling $0.5 million (2010: $3.1 million) comprises bank and short term investments maturing overnight at an interest rate of 5.1% (2010: 2.5%) and nil (2010: 0.3%) for investments in the United States and Australia respectively. All remaining fi nancial assets and liabilities are non-interest bearing.

(IV) LIQUIDITY RISKLiquidity risk management requires maintaining suffi cient cash, committed and uncommitted facilities and reserve borrowing facilities by continuously monitoring forecast and actual cash fl ows and matching the maturity profi les of fi nancial assets and liabilities. Details of credit facilities and the maturity profi le are detailed in Note 16.

The table below analyses the Consolidated Entity’s fi nancial liabilities are derivative fi nancial instruments into relevant maturity groupings based on the remaining period at the reporting date to maturity date. The amounts are not discounted.

CONTRACT MATURITIES


2011Current payables 1,061 – – – – 1,061Borrowings (including interest) 140,304 – – – – 140,304Commodity fi nancial instruments a 125,195 78,876 11,279 2,811 533 218,694Foreign currency fi nancial instruments (136,361) (53,641) (15,456) (5,037) (1,677) (212,172)

TOTAL 130,199 25,235 (4,177) (2,226) (1,144) 147,887

2010Current payables 898 – – – – 898Borrowings (including interest) 15,300 – – – – 15,300Commodity fi nancial instruments a 14,504 7,028 751 40 59 22,382Foreign currency fi nancial instruments (59,641) (48,904) (12,520) (781) (209) (122,055)

TOTAL (28,939) (41,876) (11,769) (741) (150) (83,475)

a Settlement of commodity and foreign currency fi nancial instruments will be offset by revenue from the sale of commodities.

(V) CREDIT RISK(a) Financial instruments

The exposure to credit risk arises from the potential failure of counterparties to meet their obligations under the respective contracts at maturity. Credit risk is managed as part of the fi nancial risk management program. Credit ratings of fi nancial institutions are utilised and limits and risk weightings are applied by the Consolidated Entity to monitor and control credit risk relating to fi nancial instruments. No collateral or security is required by the Consolidated Entity in dealing with these fi nancial institutions.

At reporting date, the Consolidated Entity had no signifi cant concentrations of credit risk to a single counterparty or group of counterparties. The Consolidated Entity’s exposures to credit risk is indicated by the carrying amounts of those fi nancial assets on the Consolidated Statement of Financial Position.





(V) CREDIT RISK CONTINUED

(b) Trade receivables

Sales of raw sugar are recognised when the Bill of Lading is signed by the ship’s master. Exposure to credit risk in the event of non-performance by customers is minimised by a policy of making sales on a C&F or CIF basis, with settlement generally on cash against documents basis or by letter of credit. Sales are predominantly in US dollars (Refer Note 2(d)).

Credit risks are managed by periodically assessing and monitoring the credit worthiness of customers. Collateral in the form of cash deposits is required in situations where credit risk is not at an acceptable level.

At reporting date, the Consolidated Entity had no signifi cant concentration of credit risk with any single counterparty or group of counterparties.

The geographic concentrations of credit risk is disclosed in the following table:

2011 2010$’000 $’000

Asia 37,598 10,257New Zealand 20,184 15,553North America 10 –

TOTAL 57,792 25,810

(c) Credit risk supplier customers

Under RSSAs, milling companies are able to price raw sugar committed to future years’ pools by the Consolidated Entity entering into derivative contracts. The supply contracts limit the quantity of raw sugar that each milling company can price from a given season’s forecast production. Currently forward pricing is able to be undertaken for 2011, 2012, 2013, 2014 and 2015 seasons. Credit limits have been set for each milling company under the Credit Risk Policy and Procedures – Suppliers Customers and the mark-to-market position of forward pricing is produced weekly and monitored by the Directors on a monthly basis.

CARRYING AMOUNT NET FAIR VALUE

2011 2010 2011 2010$’000 $’000 $’000 $’000

FINANCIAL ASSETS

FOREIGN EXCHANGE RISK EXPOSUREForward exchange rate contracts

Sell USD 211,220 120,450 171,983 70,915Currency options

Purchased AUD Call against USD 2,895 1,604 11,002 3,059Purchased AUD Put against USD – – 5 239

TOTAL FOREIGN EXCHANGE RISK EXPOSURE 214,115 122,054 182,990 74,213

COMMODITY PRICE RISK EXPOSURESugar futures contracts 1,506 6,511 1,506 6,511Sugar options Purchased Puts a 2,640 – 1,002 –Sugar swap Australian dollars – 293 – 293

TOTAL COMMODITY RISK EXPOSURE 4,146 6,804 2,508 6,804

OTHER FINANCIAL INSTRUMENTSAvailable-for-sale: shares at fair value 19,623 25,163 19,623 25,163

TOTAL 237,884 154,021 205,121 106,180

FINANCIAL LIABILITIES

FOREIGN EXCHANGE RISK EXPOSURECurrency options Sold AUD Call against USD (1,943) – (5,268) (55) Sold AUD Put against USD – – (548) (3,129)

TOTAL FOREIGN EXCHANGE RISK EXPOSURE (1,943) – (5,816) (3,184)

57


(c) Credit risk supplier customers CONTINUED

CARRYING AMOUNT NET FAIR VALUE

2011 2010 2011 2010$’000 $’000 $’000 $’000

COMMODITY PRICE RISK EXPOSURESugar future contracts – – – –Sugar options Sold Puts a (1,662) – (449) –Sugar swap Australian dollars (2,313) – (2,313) – US dollars (215,097) (19,328) (215,097) (19,328)

TOTAL COMMODITY RISK EXPOSURE (219,072) (19,328) (217,859) (19,328)

TOTAL (221,015) (19,328) (223,675) (22,512)

a Exchange Traded Options.

The following tables provide an analysis of fi nancial instruments that are measured subsequent to initial recognition at fair value, grouped into Level 1 to 3 based on the degree to which fair value is observable:

– Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for fi nancial assets or liabilities;

– Level 2 fair value measurements are those derived from 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); and

– Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

2011$’000

FINANCIAL ASSETS

FOREIGN EXCHANGE INSTRUMENTS LEVEL 1 LEVEL 2 LEVEL 3 TOTALForward exchange rate contracts Sell USD – 171,983 – 171,983

Currency options Purchased AUD Call against USD – 11,002 – 11,002 Purchased AUD Put against USD – 5 – 5

COMMODITY INSTRUMENTSSugar future contracts 1,506 – – 1,506Sugar options Purchased Puts a – 1,002 – 1,002

OTHER FINANCIAL INSTRUMENTSAvailable-for-sale: shares at fair value – – 19,623 19,623

TOTAL 1,506 183,992 19,623 205,121


2010$’000

FINANCIAL ASSETS

FOREIGN EXCHANGE INSTRUMENTS LEVEL 1 LEVEL 2 LEVEL 3 TOTALForward exchange rate contracts Sell USD – 70,915 – 70,915Currency options Purchased AUD Call against USD – 3,059 – 3,059 Purchased AUD Put against USD – 239 – 239





(V) CREDIT RISK CONTINUED

(c) Credit risk supplier customers CONTINUED2010

$’000

COMMODITY INSTRUMENTS LEVEL 1 LEVEL 2 LEVEL 3 TOTALSugar future contracts 6,511 – – 6,511Sugar swap Australian dollars – 293 – 293

OTHER FINANCIAL INSTRUMENTSAvailable-for-sale: shares at fair value – – 25,163 25,163

TOTAL 6,511 74,506 25,163 106,180


There have been no movements of fi nancial assets or fi nancial liabilities between levels during the year.

RECONCILIATION OF LEVEL 3 FAIR VALUE MEASUREMENTS NET FAIR VALUE

2011 2010$’000 $’000

OPENING BALANCE 25,163 14,648Acquisitions during the year 15,385 10,551Consideration on sale of interest in TSL shares a (26,440) –Gain on sale of TSL shares 5,569 –Revaluation loss in retained surpluses – (9)Fair value gain/(loss) 35 (13)Foreign currency translation (89) (14)

CLOSING BALANCE 19,623 25,163

a The investment in shares of Tully Sugar Limited was disposed of in June 2011.

2011$’000


FOREIGN EXCHANGE INSTRUMENTS LEVEL 1 LEVEL 2 LEVEL 3 TOTALCurrency options Sold AUD Call against USD – (5,268) – (5,268) Sold AUD Put against USD – (548) – (548)

COMMODITY INSTRUMENTSSugar options Sold Puts a – (449) – (449)Sugar swap Australian dollars – (2,313) – (2,313) US dollars – (215,097) – (215,097)

TOTAL – (223,675) – (223,675)

2010$’000


FOREIGN EXCHANGE INSTRUMENTS LEVEL 1 LEVEL 2 LEVEL 3 TOTALCurrency options Sold AUD Call against USD – (55) – (55) Sold AUD Put against USD – (3,129) – (3,129)

COMMODITY INSTRUMENTSSugar swap US dollars – (19,328) – (19,328)

TOTAL – (22,512) – (22,512)


59

DIRECTORS’DECLARATIONFOR THE YEAR ENDED 30 JUNE 2011 QUEENSLAND SUGAR LIMITED AND ITS CONTROLLED ENTITIES

In the directors’ opinion:

(a) The fi nancial statements and notes set out on pages 34 to 58 for the year ended 30 June 2011 are in accordance with the Corporations Act 2001, including:

(i) complying with Accounting Standards (including the Australian Accounting Interpretations) and Corporations Regulations 2001

(ii) giving a true and fair view of the Consolidated Entity’s fi nancial position as at 30 June 2011 and of its performance for the year ended on that date

(b) The fi nancial statements and notes also comply with International Financial Reporting Standards as disclosed in Note 2(c)

(c) There are reasonable grounds to believe that the Consolidated Entity will be able to pay its debts as and when they become due and payable.

This declaration is made in accordance with a resolution of the directors.

Alan WinneyCHAIRMAN

22 SEPTEMBER 2011


AUDITOR’S INDEPENDENT REPORTFOR THE YEAR ENDED 30 JUNE 2011 QUEENSLAND SUGAR LIMITED AND ITS CONTROLLED ENTITIES

QuEENSLAND SuGAr LIMItED ABN 76 090 152 211

QSL Seasonal Pool gross return

of $443.99 (per IPS tonne)

ConTenTs

2010/11 in review ii

About QSL 2

Five year plan 3

Marketing services 6

Chairman’s report 8

Chief Executive Officer’s report 10

Supply chain 14

Service to industry 16

Our people and communities 20

Executive Team 22

Organisational structure 23

Board of Directors 24

Corporate governance 26

Statutory financial report 29

2010/11 in reviewKEy hIGhLIGhtS

Continued strengthening of international

customer relationships

Secured $500 million of

low-cost funding for a further two years

61

Queensland Sugar Limited ABN 76 090 152 211

Level 14 348 Edward Street Brisbane Queensland 4000

GPO Box 891 Brisbane Queensland 4001 Australia

Telephone +61 7 3004 4400 Facsimile +61 7 3004 4499

[email protected] www.qsl.com.au

The QSL Annual Report 2010/11 is printed on Impress Satin. Impress Satin has been manufactured and all fibre sourced, according to the FSC Chain of Custody Standard SGS-COC-2262, promoting well-managed forests.

Design and production Lloyd Grey Design.

Queensland sugar limiTedAnnuAl RepoRt 2010/11

Building susTainaBle Business ParTnershiPs

Queensland sugar limiTed ANNuAL rEPOrt 2010/11

s ugar l ed building al sustainable business …...94.4%of sugar exports delivered in full and on...

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