jatenergy ar 2011 - wordpress.com based upon a plant called jatropha, produce a crude oil that,...
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JATENERGY LIMITED(Formerly JATOIL LIMITED)
ANNUAL REPORTABN 31 122 826 242
FOR YEAR ENDED 30 JUNE 2011
jatOILENERGY
CONTENTS
Chairman’s Letter ...................................................................3
Chief Executive Offi cer’s Report ..............................................4
Directors’ Report ....................................................................6
Auditor’s Independence Declaration .....................................21
Corporate Governance ..........................................................22
Financial Report ...................................................................27
Directors’ Declaration ...........................................................64
Independent Auditor’s Report to the Members of Jatenergy Limited ..............................................65
Shareholder Information .......................................................68
ANNUAL REPORT FOR YEAR ENDED 30 JUNE 20113 JATENERGY LIMITED
CHAIRMAN’S LETTER
Dear Shareholder
The 2011 fi nancial year was one of substantial change for Jatenergy with a number of signifi cant milestones being achieved. These achievements have shaped Jatenergy into a diversifi ed conventional and renewable energy company with high value assets in Australia and Indonesia.
The transition into conventional energy – via the acquisition of Blackrock Resources Pty Limited in April this year - was a diffi cult but necessary decision for the Company. While our oil seeds business in Indonesia continues to grow – it remains under-valued by the Australian market. However, the market here does understand coal – and the successful development of our coal assets in Indonesia and Australia should substantially re-rate the company. We are pursuing this development as our top priority as we have an excellent asset base to work from.
Our outlook for energy demand and pricing remains robust – our projects all benefi t from a market where crude oil is USD 65 / bbl or more, and quality thermal coal USD 100 / tonne or more. We expect the fi rmness in energy pricing to continue to be driven by Asian demand – especially from China and India.
Over the next 3 to 5 years, we also expect to see our oil seeds business move from pre-commercial to commercial, in response to European-lead global demand for alternative fuels. Our oil seeds, from a sustainable agricultural business
model based upon a plant called jatropha, produce a crude oil that, today, is being made into biojet fuel for aircraft. Our operations in central Java are contributing to commercial fl ights on renewable biojet fuel. The airline industry is targeting 10 % of their fuel from such sources by 2017 – some 200 million barrels a year. We will continue to develop our oil seeds business given this huge potential upside, and are actively pursuing direct project investment to grow the business more quickly.
I would like to again thank our CEO Phil Hodgson and his team for their tireless efforts during what has been a challenging and at times diffi cult transition year for the Company. I would also like to take this opportunity to thank my fellow Directors for their invaluable input during the year.
The Board remains focussed on enhancing shareholder value over the short and longer terms and will continue to pursue the drive of Jatenergy developing into a high value player in energy now…and for the future.
Ross KestelChairman
ANNUAL REPORT FOR YEAR ENDED 30 JUNE 2011 JATENERGY LIMITED 4
CHIEF EXECUTIVE OFFICER’S REPORT
Welcome to our fourth annual report since listing on the
Australian Stock Exchange (ASX) in January 2008.
The 2011 fi nancial year has been a substantial success for the
Company with signifi cant new assets added to an expanded
energy portfolio and signifi cant progress in our operations.
The Company achieved its fi rst product sales from its oil seed
business and as at Q3, 2011, remains on track to do the same
from its coal business by end 2011. Additionally, the Company
has substantial potential upside with its central Kalimantan
coal asset – Katingan, its Queensland coal tenements, and the
recent acceleration in biojet fuel use in commercial fl ights in
Europe and the Americas.
The specifi c and signifi cant milestones achieved to date from
mid-2010 are:
• July 2010:
o Sale of our fi rst crude jatropha oil to the aviation
industry
o Announced a 4-year off take agreement to supply
jatropha oil to the aviation industry
• September 2010
o Announced our energy portfolio adjustment strategy –
added Indonesian coal and concentrated our oil seed
business into one project in Indonesia
• December 2010
o Introduced a Chinese cornerstone investor and director
– Mr Li Xipeng
• February 2011
o Announced 200 T production milestone for our oil
seeds business
o Announced binding offer for 4 coal tenements in Galilee
Basin in Queensland
o Set-up of trading entity in Singapore and appointment
of experienced trading Director
• April 2011
o Successful recapitalisation and re-listing on ASX
o Completed the acquisition of Blackrock Resources and
Indonesian coal assets
o Changed the Company name to “Jatenergy” to refl ect
our new strategy
o Appointed an experienced coal executive to the Board
of Jatenergy
• May 2011
o Employed an experienced Chief Operating Offi cer in
Indonesian coal
o Expanded the deal for Queensland coal assets to
include Bowen Basin tenements
• June 2011
o Full agreement executed for Queensland coal assets in
Galilee and Bowen Basins
• August 2011
o Addition of new fast-to-production coal project in
Kalimantan – Jongkang
o Announcement of Queensland offi ce – shared services
with Australian Pacifi c Coal
• September 2011
o Announced sale of 200 T of crude jatropha oil to power
pioneering biojet fl ights
Subsequent to the re-listing on the ASX, Jatenergy also issued
a prospectus in relation to a loyalty option issue, opened a
shared offi ce in Queensland, and has begun the set-up of a
Jakarta offi ce ready for operations.
ANNUAL REPORT FOR YEAR ENDED 30 JUNE 20115 JATENERGY LIMITED
CHIEF EXECUTIVE OFFICER’S REPORT
The stock remains in our view signifi cantly undervalued in the market given our progress and potential, and this is partly a refl ection of the current market conditions. In extensive consultation with the broking community, we have sharpened our plans to demand a re-rating in the very near term via a very simple 3-step strategy:
1. Achieve fi rst coal production in the second half of 2011 from an East Kalimantan coal project.
2. Develop coal assets over the next two years by:a) Using some of the proceeds to develop a portfolio of
several short-to-production mines in Indonesia;b) JORC drilling our Central Kalimantan Project –
“Katingan”;c) Developing our portfolio of Australian coal tenements.
3. Complete our capital-raising in SE Asia to continue to develop our biofuel project in Indonesia.
This strategy, successfully executed, will highlight our operational credentials and strengthen the Company’s balance sheet through early cash, as well as start to highlight signifi cant and realisable blue-sky potential for our Australian and Indonesian coal and oil seeds businesses.
The Board and Management of Jatenergy remain focussed and united behind this strategy, and I thank them for their continued support. I would also like to thank you, our shareholders, for your patience and loyalty in a turbulent market and diffi cult times. The Company is poised for signifi cant breakthrough performance.
Phil HodgsonChief Executive Offi cer
ANNUAL REPORT FOR YEAR ENDED 30 JUNE 2011 JATENERGY LIMITED 6
DIRECTORS’ REPORT
Your Directors present their report on the consolidated entity (referred to hereafter as the Group) consisting of Jatenergy Limited (“Jatenergy” or the “Company”) and the entities it controlled during the year ended 30 June 2011. The Company changed its name from Jatoil Limited to Jatenergy Limited as approved by shareholders at a General Meeting held on 10 February 2011.
Directors
The following persons were Directors of Jatenergy Limited during the whole of the fi nancial year and up to the date of this report.
Ross Kestel, Non-Executive Chairman from 4 August 2010, (Non-Executive Director appointed 19 September 2007)Phil Hodgson, Chief Executive Offi cer, Executive Director (appointed 1 October 2008)Thomas Hancock, Non-Executive Director (appointed 20 August 2007)Alan Broome, Non-Executive Director (appointed 15 April 2011)Xipeng Li, Non-Executive Director (appointed 15 April 2011)Wilton Yao, Alternate Non-Executive Director for Mr Xipeng Li (appointed 15 April 2011)Michael Taverner, Non-Executive Chairman (resigned 4 August 2010)Edgare Kerkwijk, Non-Executive Director (resigned 16 November 2010)
Directors have been in offi ce since the start of the year to the date of this report unless otherwise stated.
Principal activities
The principal activities of Jatenergy Limited are to develop conventional and renewable energy projects, with an initial focus on exploration and production of coal from Indonesia and Australia, and on producing crude oil from its Indonesian oil seeds plantation.
Dividends paid or recommended
No dividends were paid or declared since the start of the period. No recommendation for payment of dividends has been made. (2010: $nil).
Review of operations
The major operational activities during the year were as follows:
Indonesia
Jatenergy Limited “Jatenergy” announced during the fi rst half of 2011 the appointments of the following key personnel to build its expertise in coal including:
- The addition of Alan Broome to the Board of Jatenergy Limited. Alan Broome has more than 20 years’ experience in the secondary metals industry as a metallurgist and 20 years’ experience in the mining industry. He holds ASX-listed chairmanships (Nimrodel Resources and Endocoal) and directorships, (Micromine, Inbye Mining Services, WorkPac Group, Buccaneer Energy, Solid Energy (NZ) and CRL Energy (NZ).
- The recruitment of Chris Flanagan as Chief Operating Offi cer – Coal in Indonesia operations. Chris has a Bachelor of Science in Mine Engineering (honours) from The Royal School of Mines in London, and more than 30 years’ experience in South Africa, Ghana, the UK and Australia, where he was Mining Director for Gloucester Coal. He has spent the last 6 years in Indonesia, building expertise in mining operations, project identifi cation, coal supply and coal industry regulatory processes
- The addition of Nick Croom to the Boards of Jatenergy’s Singapore entities - Nick has 20 years’ experience working in commodity trading and investment banking in Sydney, London and Singapore for ANZ, BNP Paribas, Glencore, RBS Sempra and JP Morgan. While in Singapore, his core responsibilities included origination of investment banking transactions and product development surrounding physical commodities with imbedded risk management.
As at July 2011, Jatenergy has also established an offi ce in Jakarta in support of its local operations.
Acquisition of Blackrock Resources Pty Ltd
Jatenergy completed the acquisition of Blackrock Resources Pty Ltd upon re-listing on the ASX on 15 April 2011. At that date Blackrock Resources Pty Ltd held the rights to 2 coal projects in Kalimantan Indonesia, being the “Atan Bara” project and the “Katingan” project. A binding memorandum of understanding has subsequently been executed for a new coal
project “Jongkang”.
ANNUAL REPORT FOR YEAR ENDED 30 JUNE 20117 JATENERGY LIMITED
DIRECTORS’ REPORT
Incorporation of PT Barata Energy
PT Barata Energy is a local Indonesian entity set up by Jatenergy Limited to hold projects to mining projects in Indonesia. PT Barata Energy received its investment licence from the foreign investment regulatory authorities (the BKPM), and its Deed of Establishment on July 29th, 2011. Final incorporation, an administrative process involving the set up of a local bank account, capital injection and fi nal clearance from the Ministry of Law and Human Rights, is anticipated by the end of Q3, 2011. Under Indonesian law, PT Barata Energy is able to enter into contracts and is effectively now in operation.
Atan Bara Project
The Atan Bara project is a contractual arrangement between PT Barata Energy and PT Atan Bara Sejahtera (ABS). Under this arrangement, PT Barata Energy has exclusive rights to conduct coal mining, and an exclusive right to purchase or market any coal mined from the Atan Bara project. The more detailed commercial terms are to be established in the two contracts; a Mining Services Agreement and a Coal Offtake Agreement.
These contracts are on foot but were not executed as at 30 June 2011. Jatenergy anticipates the execution of these contracts in the next quarter, in conjunction with the granting of the Production Licence currently under application. First coal production is targeted before the end of 2011.
Katingan Project
Jatenergy Limited holds a conditional share purchase agreement to acquire 80% of the shares of PT Coal Soil Brik. The timing of completion of this agreement is primarily determined by the process of converting PT Coal Soil Brik into a foreign investment vehicle and obtaining the necessary government and regulatory approvals. As at 30 June 2011, a letter of support from the Katingan Bupati has been issued and sent to the Provincial Governor for approval. The report from the local Forestry Department confi rms that there have been no illegal activities carried out within the concession and no impediment to the granting of the licence. Completion of the transaction is targeted before the end of 2011.
Jongkang Project
A binding heads of agreement has been signed between PT Barata Energy and CV Wijaya Mulia for a 30/70 joint operation and 100% off-take of coal from a new project “Jongkang”
near Tenggarong, East Kalimantan. Licencing, in conjunction with a full JV agreement, is targeted for completion by end Q3, 2011 and work will commence immediately thereafter. The coal is excellent quality thermal coal with high gross calorifi c value (6,400-6,674 kcal/kg adb*), sulphur below 1% and low ash and moisture. CV Wijaya Mulia has already operated two contiguous mining concessions and infrastructure is already in place.*Indonesia Department of Mines records
Queensland coal assets.
Jatenergy announced on 20 June 2011 that it had completed the full agreements to acquire 2 coal exploration permits and 8 coal exploration permit applications (6 non-competing, 2 competing) in the Bowen and Galilee basins in Queensland. The tenements are in the process of being purchased from Spinifex Rural Management Pty Ltd and Demycoal Pty Ltd, for a total consideration of $340,000 in cash and 12.5 million Jatenergy shares, due in parcels as and when each tenement moves under Jatenergy Limited upon Ministerial approval.
The deal will complete over several stages subject to fi nal regulatory and shareholder approvals. Jatenergy expects to complete the purchase of the two existing full permits in the next quarter in conjunction with fi nal Ministerial approvals. The remaining tenements will transfer over the following few months as the current applications are converted to full permits and Ministerial approvals are granted to transfer to Jatenergy.
Indonesia Biofuel Project
As at 30 June 2011 Jatenergy Limited, through its 70% investment in PT Jatoil Waterland had approximately 2000 hectares of jatropha plantations under cultivation.
The total production of crude jatropha oil for the year ending 30 June 2011 was over 200 tonnes, with the majority of production targeted for use in power generation or in the production of renewable aviation fuel. The 2000 hectares is of suffi cient scale such that PT Jatoil Waterland is targeted to be economically self-supporting once 600 tonnes of oil is sold, and this is expected to be in the 2011/2 fi nancial year.
Jatenergy is actively seeking third party investment in the project either directly into PT Jatoil Waterland or via investment through its Singapore subsidiary which holds the shares in PT Jatoil Waterland. Critical agreements have been signed with the Indonesian Forestry Department that secure both the current 2000 Ha, and an additional land bank of 9,000 hectares to be exploited as and when funding is available.
ANNUAL REPORT FOR YEAR ENDED 30 JUNE 2011 JATENERGY LIMITED 8
DIRECTORS’ REPORT
Impairment of Green Energy Vietnam
The Company announced on 24 September 2010 that it would
suspend further funding into its Vietnam operations, Green
Energy Vietnam (GEV). The farmer contract model was proving
too costly and slow to establish compared to the Indonesian
plantation model. While Jatenergy will retain its 45.96% stake
in GEV, if GEV is unable to raise further capital in the short
to medium term, Jatenergy’s investment may be severely
impaired or ultimately prove to be unrecoverable. While
Jatenergy will endeavour to recover its investment in GEV, given
the parameters of the asset impairment assessment process,
a decision was taken to write down the investment in GEV to
zero. This has resulted in an impairment charge of $321,113
(2010: $2,472,030) in the accounts of the Company.
Corporate – Loyalty Option Issue
Pursuant to the Replacement Prospectus dated 14 March
2011, the Board of Jatenergy issued a prospectus on 12
August 2011 in respect of an Entitlement Issue Offer (Offer).
The Offer is to raise approximately $393,000 in consideration
for the issue of up to 39 million options. The Offer is for 1
option for every 2 shares held as at 23 August, with a strike
price of $0.25 and an expiry of 31 March 2014.
The consolidated loss of the Group for the year after providing
for income tax amounted to $3,166,075 (2010: $4,803,303).
The 2011 loss is attributable to the following:
Employment benefi ts of $439,165 (2010: $514,702)
Consultancy expenses of $1,232,181 (2010: $606,632) *
Professional costs of $403,763 (2010: $225,736)
Impairment of investment in associate of $321,113 (2010:
$2,472,030)
*Consulting fee increase is mainly related to the additional
costs of acquisition activities during the current fi nancial year.
These include Blackrock Resources Pty Ltd and Queensland
coal tenement acquisitions.
Financial position
The consolidated statement of fi nancial position at 30
June 2011 refl ects cash at bank of $3,801,689 (2010:
$4,203,143). The net assets of the group have increased from
$4,235,653 at 30 June 2010 to $9,888,052 at 30 June 2011.
Signifi cant changes in state of affairs
Signifi cant changes in the state of affairs of the Group during
the fi nancial year were as follows:
The company announced in September 2010 that it was
following a diversifi cation strategy into coal production as part
of a broadening of its energy portfolio. During the fi nancial
year, the company completed the acquisition of Blackrock
Resources Pty Ltd in April 2011 which held the rights to 2
coal projects in Kalimantan, Indonesia, being the “Atan Bara”
project and the “Katingan” project.
Matters subsequent to the end of the fi nancial year
On June 20 2011 Jatenergy Limited announced the acquisition
from Spinifex Rural Management Pty Ltd and Demycoal Pty Ltd
of coal exploration permits (two) and permit applications (eight;
two of which were competing applications) in Queensland. On
28 July 2011 Demycoal Pty Ltd was advised by Queensland
Department of Employment, Economic Development and
Innovation that one of the two competing applications
(EPCA2152) was unsuccessful. Jatenergy Limited was advised
of this on 23 August, 2011. The proposed consideration for
EPCA2152 was $20,000 and was subject to the application
being successful, and hence the consideration will not be paid.
The exclusion of EPCA2152 does not have a material impact
on the value the transaction. Determination with respect to the
one remaining competing application in the deal (EPCA 2153)
is pending.
The Company announced on 22 August 2011 that it had
reached conditional agreement for a new coal mining joint
venture in East Kalimantan. The Jongkang project, located 5
km along an existing haul road from the Mahakam River and
about 25km from a major hub of Indonesia’s coal industry
at Samarinda, is being developed by an existing coal mine
operator, CV Wijaya Mulia. Jatenergy has signed a heads of
agreement with that Indonesian company. The transaction
involves Jatenergy covering the working capital costs of the
operation, expected to be a maximum of US$2 million, while
gaining the rights to 30% of the mining margin and the ability
to market 100% of the coal produced. The transaction is
subject to fi nal legal and technical due diligence, which is
expected to take about four weeks, and development activities
are expected to progress quickly, given CV Wijaya Mulia is
already mobilised on an adjacent site.
ANNUAL REPORT FOR YEAR ENDED 30 JUNE 20119 JATENERGY LIMITED
DIRECTORS’ REPORT
No matters other than the above have arisen since 30 June
2011 that have signifi cantly affected, or may signifi cantly
affect:
(i) the Company’s operations in future fi nancial years; or(ii) the results of those operations in future fi nancial years; or(iii) the Company’s state of affairs in future fi nancial years.
Likely developments and expected results of operations
Additional comments on expected results of certain operations of the group are included in this annual report under the review of operations and activities on pages 6-9.
Further information on likely developments in the operations of the group and the expected results of operations have not been included in this annual fi nancial report because the Directors believe it would be likely to result in unreasonable prejudice to the Group.
Environmental regulations
The consolidated entity’s operations are not regulated by any signifi cant environmental regulation under a law of the Commonwealth or of a state or territory in Australia.
Loss per share 2011 2010 Cents CentsBasic loss per share (7.83) (16.81)Diluted loss per share (7.62) (16.81)
Information on directors
Ross Kestel (B.Bus, CA, AICD)NON-EXECUTIVE CHAIRMAN - INDEPENDENT (FROM 4 AUGUST 2010)NON-EXECUTIVE DIRECTOR (APPOINTED 19 SEPTEMBER 2007) CHAIR OF THE AUDIT COMMITTEE AND REMUNERATION COMMITTEE
Ross is a Chartered Accountant and was a director of a mid tier accounting practice for over 25 years until June 2010.
He has acted as a director and company secretary of a number of public companies involved in mineral exploration, mining, mine services, property development, manufacturing and technology industries.
Ross is currently a Non-Executive Director of the following ASX
listed companies:
• Resource Star Limited – August 2006 to current
• Xstate Resources Limited – September 2006 to current
• Regis Resources Limited – July 2009 to current
• Equator Resources Limited – June 2011 to current
During the past three years he has also served as a Non-
Executive Director of the following ASX listed companies:
• VDM Group Limited – August 2005 to March 2011
• Jabiru Metals Limited – August 2003 to May 2011
• Dioro Exploration NL – April 2008 to February 2010
• Blackcrest Resources Limited – June 2006 to October
2010
Ross is a member of the Australian Institute of Company
Directors.
Phil Hodgson (BE, PhD)CHIEF EXECUTIVE OFFICER, EXECUTIVE DIRECTOR
(APPOINTED 1 OCTOBER 2008)
MEMBER OF REMUNERATION COMMITTEE
Phil Hodgson joined Jatenergy as a Non-Executive Director in
October 2008, and moved to the Chief Executive Offi cer role
in February 2009. He has developed signifi cant international
board experience with numerous company directorships in
Vietnam, Singapore and Indonesia, as well as Australia.
Phil is founding Director of an independent consultancy
specialising in strategy and change management, supply
chain and commercial development of energy technologies.
He has consulted to large corporations (including BlueScope,
FoodWorks, Chevron/Kellogg Joint Venture – Gorgon, Energy
Developments Limited, Queensland Rail) as well as start-
up alternative and renewable energy technology companies
(Geodynamics, Exergen).
Phil completed a Bachelor of Chemical Engineering from
the University of Sydney in 1989, and a PhD in Chemical
Engineering from the University of NSW in 1993. Phil then
joined Shell, and for over 14 years developed signifi cant
depth and breadth of experience in numerous roles across
all key sectors of the energy industry including oil refi ning
and supply, marketing and sales, pricing strategy and risk
management, and corporate strategy and portfolio project
management. Senior executive roles during this time include
General Manager and Alternate Director of Fuelink Pty Ltd,
ANNUAL REPORT FOR YEAR ENDED 30 JUNE 2011 JATENERGY LIMITED 10
DIRECTORS’ REPORT
a $700m revenue, 300-employee distribution and sales
subsidiary; and Manager - Strategy and Portfolio for Shell
Australia, where Phil led numerous business strategy, portfolio
and change management projects including the completion of
4 international portfolio deals worth over $150m. Phil resigned
from Shell in 2007 to pursue his consultancy and business
interests.
Thomas Hancock (BSc, MIEAust, CPEng)NON-EXECUTIVE DIRECTOR - INDEPENDENT (APPOINTED
20 AUGUST 2007)
MEMBER OF AUDIT COMMITTEE AND REMUNERATION
COMMITTEE
Tom Hancock is a chemical engineer with more than 20
years experience in the environmental and waste-to-energy
fi elds in Australia and Asia. He was previously Executive
Chairman of the Asian subsidiary of a large multinational waste
management company headquartered in France, involved in
the recycling and disposal of hazardous waste.
Tom has considerable experience in the operation of
chemical plants. He was previously general manager of
waste management for Brambles Asia, where he initiated a
successful project for the conversion of waste to energy, and
was Managing Director of Cleanaway Taiwan, Brambles’ fi rst
joint venture in Asia.
Tom has previously held the position of national technical
manager for Cleanaway Australia, the largest waste
management company in Australia at the time, providing
technical services and support to Cleanaway state divisions
across Australia and preparing the winning bid for construction
and operation of a liquid waste treatment plant. He has been
a manager for Retec Limited, a subsidiary of ICI Australia,
where he was responsible for the division producing exotic
and hazardous chemicals, and for marketing and distribution
throughout Oceania and Southeast Asia into the explosives,
steel, rubber and chemical industries. He has also held
management positions with Australian Fertilizers Limited (a
subsidiary of ICI Australia), where he was responsible for a
large fertiliser factory with 250 employees, and for liaison with
the company’s agronomists, agricultural agencies and farmers.
Edgare Kerkwijk (MBE, BE Psychology)NON-EXECUTIVE DIRECTOR - INDEPENDENT (APPOINTED 1 MARCH 2010, RESIGNED 16 NOVEMBER 2010)MEMBER OF AUDIT COMMITTEE
Michael Taverner (MagricSci, PHD, FAIAST, MAICD)NON-EXECUTIVE CHAIRMAN - INDEPENDENT (APPOINTED
1 JUNE 2007 - RESIGNED 4 AUGUST 2010)
MEMBER OF AUDIT COMMITTEE
Mike Taverner was the Company’s former Chairman, having
been Chairman of the Company since its listing on the ASX.
On 4 August 2010 Mike retired from his position as Chairman
of the Board.
Alan Broome, (AM IEng FAusIMM FAICD MIMMM (London) MInstD (NZ))NON-EXECUTIVE DIRECTOR – INDEPENDENT (APPOINTED
15 APRIL 2011)
Alan Broome is highly regarded as a business leader and
strategic thinker in the mining industry. He has over 20 years’
experience in the secondary metals industry as a metallurgist
and 20 years’ experience in the mining industry.
Mr Broome holds numerous Chairmanships (Endocoal
Limited) and Directorships, (Micromine Pty Limited, Inbye
Mining Services Limited, WorkPac Group Limited, ASX-listed
Buccaneer Energy Limited, Solid Energy Limited (NZ) and CRL
Energy Limited (NZ)).
Xipeng LiNON-EXECUTIVE DIRECTOR - INDEPENDENT (APPOINTED
15 APRIL 2011)
Li Xipeng is an experienced executive and has served as a
Director and Chief Executive Offi cer of Pinglin Expressway
Limited. He has also served as Chairman of Pinglin Expressway
Limited since May 2003. Prior to that, Mr Li served as
Chairman of HSV, China since May 2001 and as Chairman of
Henan Shengrun Real Estate Co Ltd, China, since May 2000.
Mr Li graduated from Zhongnan University of Economics
and Law and he earned his EMBA at Cheung Kong Graduate
School of Business.
Wilton YaoALTERNATE NON-EXECUTIVE DIRECTOR FOR MR XIPENG LI
– INDEPENDENT (APPOINTED 15 APRIL 2011)
MEMBER OF AUDIT COMMITTEE
Wilton Yao has been involved in business broking industry for
more than 10 years and specialises in franchise recruitment
and development. He has worked with a number of franchise
ANNUAL REPORT FOR YEAR ENDED 30 JUNE 201111 JATENERGY LIMITED
DIRECTORS’ REPORT
fi rms to develop franchise businesses for both local and
international markets. Mr Yao has also been involved in
managing several retail and franchise businesses for many
years and has great experience and knowledge in management
and marketing. Mr Yao has strong connections with overseas
investors, especially from mainland China and he has worked
closely with Australian Government organisations and local
companies to promote successful investment projects for
Chinese investors. He also provides consulting services to a
number of ASX listed companies, focusing on project exploring
and seeking investment funds from overseas investors.
Information on company secretary
Emmanuel Correia (B.Bus ACA)COMPANY SECRETARY (PART-TIME) (APPOINTED 25
OCTOBER 2007)
Emmanuel Correia has over 20 years experience in public
company accounting and the provision of public company
compliance services in Australia across a diverse range
of industries. Emmanuel also has extensive experience in
corporate fi nance and equity capital markets. Emmanuel
provides corporate advice to a diverse client base in relation to
capital raisings, corporate strategy and structuring, prospectus
preparation, due diligence enquires and various ASX and ASIC
regulations and requirements.
Director and audit committee meetings
The number of meetings of the Company’s Board of Directors
and of each Board committee held during the year ended 30
June 2011 and the numbers of meetings attended by each
Director were:
Full meetings Meetings of audit of directors risk management committee A B A BMichael Taverner 1 1 - -
Ross Kestel 12 12 2 2
Thomas Hancock 12 12 2 2
Phil Hodgson (CEO)** 12 12 - -
Edgare Kerkwijk 3 3 1 1
Alan Broome 1 2 - -
Xipeng Li - 2 - -
Wilton Yao 2 2 - -
A Number of meetings attended
B Number of meetings held during the time the Director held
offi ce or was a member of the committee during the year
** Not a member of the relevant committee
Audit and risk management committee
Members of the audit and risk management committee are
Ross Kestel and Thomas Hancock. (Michael Taverner was a
member until his resignation on 4 August 2010 and Edgare
Kerkwijk was a member until his resignation on 16 November
2010.)
Risk management
The Company takes a proactive approach to risk management.
Management, through the Chief Executive Offi cer, is
responsible for designing, implementing and reporting on the
adequacy of the Company’s risk management and internal
control system. The risk management program is approved
by the Board and monitored by the Audit and Risk Committee.
Management reports to the Board via the Audit and Risk
Committee on the Company’s key risks and the extent to which
it believes these risks are being managed. This is performed
on a six monthly basis or more frequently as required by the
Board or relevant subcommittee.
The Board is responsible for satisfying itself annually, or more
frequently as required, that management has developed and
implemented a sound system of risk management and internal
control. Detailed work on this task is delegated to the Board
Audit and Risk Committee and reviewed by the full Board. The
Audit and Risk Committee also oversees the adequacy and
comprehensiveness of risk reporting from management.
The Company has developed a series of risks which the
Company believes to be inherent in the business and industry
in which the Group operates. These include:
• operating risk;
• environmental risk;
• branding and reputation risk;
• legal, compliance and regulatory risk;
• competitor and market risk;
• intellectual property risk;
• occupational health and safety risk; and
• fi nancing and adequacy of capital risk.
ANNUAL REPORT FOR YEAR ENDED 30 JUNE 2011 JATENERGY LIMITED 12
DIRECTORS’ REPORT
These risk areas are provided here to assist investors to understand better the nature of the risks faced by our Group and the industry in which we operate. This is not necessarily an exhaustive list.
The Board received regular reports on progress in addressing and management of the key risks associated with the Group’s business. The Audit and Risk Committee has the right to appoint external professional advisers to carryout regular investigations into control mechanisms, and report their fi ndings, including recommendations for improvement to controls, processes and procedures to the Audit and Risk Committee.
A copy of the Company’s risk management policy is contained in Annexure 4 of the Company’s Corporate Governance Statement, a copy of which is available on the Company’s website.
Remuneration report
This report outlines the remuneration arrangements in place for Directors and key management personnel of the Group for FY2011. The remuneration report is set out under the following main headings:
A. Principles used to determine the nature and amount of remuneration
B. Details of remunerationC. Service agreementsD. Share-based compensation
These disclosures have been audited, as required by section 308(3c) of the Corporations Act 2001.
Role of the remuneration committee
The remuneration committee is a committee of the Board. It is primarily responsible for making recommendations to the Board on:
• non-executive director fees• executive remuneration (directors and other executives),
and• the over-arching executive remuneration framework and
incentive plan policies.
Their objective is to ensure that remuneration policies and structures are fair and competitive and aligned with the long-term interests of the Company. In doing this, the remuneration committee seeks advice from independent remuneration consultants.
The Corporate Governance Statement provides further information on the role of this committee.
A. Principles used to determine the nature and amount of remuneration
The performance of the Group depends on the quality of its Directors and executives.
To prosper, the Group must attract, motivate and retain highly skilled Directors and executives. To this end, the Group embodies the following principles in its remuneration framework:
• provide competitive rewards to attract high calibre executives;
• link executive rewards to shareholder value;• ensure that a signifi cant portion of executive remuneration
is ‘at risk’, and therefore dependent on meeting pre-determined performance benchmarks; and
• establish appropriate performance hurdles in relation to variable executive remuneration.
The Board of Directors assesses the appropriateness of the nature and amount of remuneration of Directors and senior managers on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder benefi t from the retention of a high quality Board and executive team.
Remuneration structure
In accordance with the corporate governance principles and recommendation, the structure of Non-Executive Director and senior manager remuneration is separate and distinct.
Non-executive director remuneration
Objective
The Board seeks to set aggregate remuneration at a level that provides the Group with the ability to attract and retain Directors of the highest calibre, while incurring costs that are acceptable to shareholders.
Structure
Each Non-Executive Director receives a fi xed fee for being a Director of the Group.
ANNUAL REPORT FOR YEAR ENDED 30 JUNE 201113 JATENERGY LIMITED
DIRECTORS’ REPORT
The constitution and the ASX Listing Rules specify that the
maximum aggregate remuneration of Non-Executive Directors
shall be determined from time to time by a general meeting
of shareholders. At the general meeting of shareholders held
on 27 November 2009, this maximum amount was set at
$350,000 per annum. In 2011, the Group paid Non-Executive
Directors a total of $234,837 (2010: $197,168) including
superannuation.
The amount of aggregate remuneration sought to be
approved by shareholders and the fi xed fees paid to Directors
are reviewed annually. The Board considers fees paid to
Non-Executive Directors of comparable companies when
undertaking the annual review process.
Non-Executive Directors were also granted options on ordinary
shares of Jatenergy Limited on the successful ASX listing of
the Company (formerly Jatoil Limited) in January 2007. The
details of these options are set out in Sections B and D below
and note 17 to the fi nancial statements - Key Management
Personnel Disclosure.
Executive remuneration
Objective
The Group aims to reward executives with a level and mix
of remuneration commensurate with their position and
responsibilities within the Group and so as to:
• reward executives for group and individual performance
against targets set by reference to appropriate benchmarks;
• align the interests of executives with those of shareholders;
• link reward with the strategic goals and performance of the
Group; and
• ensure total remuneration is competitive by market
standards.
Structure
A policy of the Board is to establish employment or consulting
contracts with the chairman, chief executive offi cer and other
senior executives. At the time of this report this included the
chief executive offi cer and general manager.
Remuneration consists of fi xed remuneration under an
employment or consultancy agreement and long term equity-
based incentives that are subject to satisfaction of performance
conditions. The equity-based incentives are intended to
retain key executives and reward performance against agreed
performance objectives.
Fixed remuneration
The level of fi xed remuneration is set so as to provide a base
level of remuneration that is both appropriate to the position
and competitive in the market.
Fixed remuneration is reviewed annually by the Board and
the process consists of a review of group-wide and individual
performance, relevant comparative remuneration in the
market, and internal and (where appropriate) external advice
on policies and practices.
Senior managers are given the opportunity to receive their fi xed
(primary) remuneration in a variety of forms including cash
and expense payment plans, such that the manner of payment
chosen is optimal for the recipient without creating additional
cost for the Group.
Remuneration Policy and Performance
The Company is in the early stages of its business plan
following relisting on the Australian Securities Exchange (ASX)
on 12 April 2011. Accordingly the Company is currently
reviewing the remuneration policies applicable to the CEO,
general manager and other senior personnel of the Company in
relation to KPI’s and extent of remuneration which is ‘at risk’.
The review will assist the Company to better structure
remuneration policies in accordance with current trends and
practices in corporate remuneration.
Relationship between remuneration policy and company
performance
2011 2010
$ $
Revenue 97,392 175,645
Net loss (3,166,075) (4,803,303)
Share price 0.077 0.020
The Company is currently reviewing its remuneration policies
as indicated above.
ANNUAL REPORT FOR YEAR ENDED 30 JUNE 2011 JATENERGY LIMITED 14
DIRECTORS’ REPORT
B. Details of remuneration (audited)
Details of the remuneration of the Directors and other key management personnel (as defi ned in AASB 124 Related Party Disclosures) of Jatenergy Limited are set out in the following tables. Key management personnel include the chief executive offi cer and general manager.
Post-Employment Short Term Benefi ts Benefi ts Share-Based Payments Non- Long term Perform-Name Cash salary Cash monetary Super- Retirement benefi ts/Long Termination ance and fees bonus benefi ts annuation benefi ts service leave benefi ts Options Total related 2011 $ $ $ $ $ $ $ $ $ %Non-executive directors Michael Taverner 1 6,667 - - - - - - - 6,667 -
Ross Kestel 75,670 - - 6,000 - - - - 81,670 -
Thomas Hancock 54,000 - - 4,860 - - - - 58,860 -
Edgare Kerkwijk 2 22,500 - - - - - - - 22,500 -
Alan Broome 3 13,500 - - - - - - - 13,500 -
Xipeng Li 3 - - - - - - - - - -
Wilton Yao 3, 4 13,500 - - - - - - - 13,500 -
Total non-executive directors 185,837 - - 10,860 - - - - 196,697 -Executive directors Phil Hodgson
(Executive director/CEO) 296,795 20,000 - - - - - 14,269 331,064 4.3
Key Management Paul Hogan 199,740 10,000 - 10,243 - - - - 219,983 -
Total executive directors & key management 496,535 30,000 - 10,243 - - - 14,269 551,047 2.6Total 682,372 30,000 - 21,103 - - - 14,269 747,744 1.91. Michael Taverner resigned effective 4 August 20102. Edgare Kerwijk resigned effective 16 November 20103. Appointed effective 15 April 20114. Alternative for Xipeng Li
2010 $ $ $ $ $ $ $ $ $ %Non-executive directors Michael Taverner 74,668 - - - - - - - 74,668 -
Ross Kestel 50,000 - - - - - - - 50,000 -
Thomas Hancock 50,000 - - 4,500 - - - - 54,500 -
Edgare Kerkwijk1 18,000 - - - - - - - 18,000 -
Total non-executive directors 192,668 - - 4,500 - - - - 197,168 -
Executive directorsPhil Hodgson (Executive
director/CEO) 264,000 - - - - - - 16,770 280,770 6.0
Key ManagementPaul Hogan 191,077 - - 17,197 - - - 3,778 212,052 1.8
Total executive directors & key management 455,077 - - 17,197 - - - 20,548 492,822 4.2Total 647,745 - - 21,697 - - - 20,548 689,990 3.01. Edgare Kerkwijk commenced as a Director effective 1 March 2010.
ANNUAL REPORT FOR YEAR ENDED 30 JUNE 201115 JATENERGY LIMITED
DIRECTORS’ REPORT
C. Service agreements
The chief executive offi cer, Phil Hodgson is a consultant of the Group under an agreement signed on 23 September 2009. Under the
terms of the present contract:
• Phil Hodgson may resign from his position and thus terminate this contract by giving six months written notice. On resignation any
unvested options will be forfeited.
• The Group may terminate the employment agreement by providing six months written notice or providing payment in lieu of the
notice period (based on the fi xed component of Phil Hodgson’s remuneration).
• The Group may terminate the contract at any time without notice if serious misconduct has occurred. Where termination with
cause occurs, the chief executive offi cer is only entitled to that portion of remuneration which is fi xed, and only up to the date of
termination. On termination with cause, any unvested options will immediately be forfeited.
• Phil Hodgson’s employment agreement sets out certain performance incentives that are payable subject to achievement of specifi c
milestones. Key milestones that trigger performance incentives are as approved by the Board of Jatenergy Limited.
The general manager, Paul Hogan, is a consultant of the Group under an agreement signed on 29 January 2011. Under the terms of
the present contract:
• Paul Hogan may resign from his position and thus terminate this contract by giving four months written notice.
• The Group may terminate the employment agreement by providing four months written notice or providing payment in lieu of the
notice period (based on the fi xed component of Paul Hogan’s remuneration).
• The Group may terminate the contract at any time without notice if serious misconduct has occurred. Where termination with
cause occurs the general manager is only entitled to that portion of remuneration which is fi xed, and only up to the date of
termination. On termination with cause any unvested options will immediately be forfeited.
D. Share-based compensation (audited)
Options issued as part of remuneration for the year ended 30 June 2011
The issuance of options to Directors, executives and key management personnel was approved by shareholders at a general meeting
on 26 October 2007, 23 June 2009 and 17 November 2009.
These options were granted for no consideration. The terms and conditions of the grant of options affecting remuneration in the
previous, this or future reporting periods are as follows:
ANNUAL REPORT FOR YEAR ENDED 30 JUNE 2011 JATENERGY LIMITED 16
DIRECTORS’ REPORT
Options and rights granted Grant details For the fi nancial year ended 30 June 2011 Overall Date No. Value Exercised Exercised Lapsed Lapsed Vested Vested Unvested Lapsed $ No. $ No. $ No. % % %Group Key Management Personnel M Taverner - - - - - - - - - - -R Kestel - - - - - - - - - - -T Hancock - - - - - - - - - - -E Kerkwijk - - - - - - - - - - -A Broome - - - - - - - - - - -X Li - - - - - - - - - - -W Yao - - - - - - - - - - -P Hodgson 19/11/09 5,000,000 56,000 - - - - 375,000* 30 70 -P Hogan 19/2/08 1,000,000 12,942 - - 1,000,000 12,942 - - - - - - - - 375,000 * Consolidation of company securities on a 4:1 basisNote 1: The value of options granted as remuneration and as shown in the above table has been determined in accordance with
applicable accounting standards.Note 2: All options exercised resulted in the issue of ordinary shares in Jatoil Limited on a 1:1 basis. All persons exercising options
paid the relevant exercise price in its entirety.Note 3: The value of options that have been exercised during the year as shown in the above table was determined as at the time of
their exercise.Note 4: The value of options that have lapsed during the year due to vesting conditions not being satisfi ed has been determined at
the time of their lapsing as if vesting conditions had been satisfi ed.
Description of options/rights issued and remuneration
Details of the options granted as remuneration to those key management personnel and executives listed in the previous table are as follows:
Grant date Issuer Entitlement on Dates Exercise Value per option Amount paid/payable exercise exercisable price $ at grant date $ by recipient19/11/09 Jatoil Ltd 375,000 28/09/10 0.80 15,000 300,00019/11/09 Jatoil Ltd 250,000 31/12/13 0.40 13,000 100,00019/11/09 Jatoil Ltd 250,000 31/12/13 0.80 10,000 200,00019/11/09 Jatoil Ltd 250,000 31/12/13 0.40 13,000 100,00019/11/09 Jatoil Ltd 125,000 31/12/13 0.80 5,000 100,000
Option values at grant date were determined using the Black-Scholes method.
Options granted carry no dividend or voting rights. When exercisable, each option is convertible into one ordinary share of the Company. The options’ performance conditions are as set out in Note 26(a).
Loans to directors and executives
There were no loans to Directors or executives during or since the end of the year.
ANNUAL REPORT FOR YEAR ENDED 30 JUNE 201117 JATENERGY LIMITED
DIRECTORS’ REPORT
Share holdings of key management personnel
Balance at the start Received during the Other changes Balance at the end of the year year on the exercise during the year of the year of options Directors of Jatenergy Limited ordinary shares No No No No2011 Ross Kestel - - - -Thomas Hancock 1,330,000 - 10,303 342,803*Phil Hodgson 300,000 - 22,803 97,803*Alan Broome - - - -Xipeng Li** - - 13,411,222 13,411,222Wilton Yao - - - -* Consolidation of company securities on a 4:1 basis**Shares held indirectly2010 Mike Taverner 863,080 - 150,000 1,013,080Ross Kestel - - - -Thomas Hancock 1,330,000 - - 1,330,000Edgare Kerkwijk - - 220,000 220,000Phil Hodgson 150,000 - 150,000 300,000Mike Taverner owns 863,080 shares indirectly.Thomas Hancock owns 1,330,000 shares indirectly.Paul Hogan owns 150,000 shares indirectly.
Options
At the date of this report, the unissued ordinary shares of Jatenergy Limited under option are as follows:
Grant Date Date of Expiry Exercise Price Number under Option30 November 2007 30 November 2010 $0.20 2,500,00023 June 2009 1 July 2012 $0.069 500,00019 November 2009 31 December 2013 $0.10 to $0.201 5,000,00012 April 2011 1 March 2014 $0.25 5,500,000 13,500,0001 Refer Note 26 for details.
Option holders do not have any rights to participate in any issues of shares or other interests in the Company or any other entity.
There have been no unissued shares or interests under option of any controlled entity within the Group during or since reporting date.For details of options issued to Directors and executives as remuneration, refer to the Remuneration Report.
During the year ended 30 June 2011, no ordinary shares of Jatenergy Limited were issued on the exercise of options granted. No further shares have been issued since year end. No amounts are unpaid on any of the shares.
No person entitled to exercise the option had or has any right by virtue of the option to participate in any share issue of any other body corporate.
ANNUAL REPORT FOR YEAR ENDED 30 JUNE 2011 JATENERGY LIMITED 18
DIRECTORS’ REPORT
Insurance of offi cers and auditors
During the fi nancial year, the Group paid a premium of $36,345 (2010: $48,000) to insure the Directors and offi cers of the Group.
The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought against the offi cers in their capacity of offi cers of the Group and any other payments arising from liabilities incurred by the offi cers in connection with such proceedings. This does not include such liabilities that arise from conduct involving a wilful breach of duty by the offi cers or the improper use by the offi cers of their position or of information to gain advantage for them or someone else or to cause detriment to the Company. It is not possible to apportion the premium between amounts relating to the insurance against legal costs and those relating to other liabilities. No insurance or indemnifi cation has been given to the auditors.
Indemnifi cation of offi cers and auditors
The Group has entered into Deeds of Indemnity, Insurance and Access with each of the Directors and the Company secretary. Each deed provides offi cers with the following:
• a right to access certain Board papers of the Group during the period of their tenure and for a period of seven years after that tenure ends;
• subject to the Corporations Act an indemnity in respect of liability to persons other than the Group and its related bodies corporate that they may incur while acting in their capacity as an offi cer of the Group or a related body corporate, except where that liability involves a lack of good faith and for defending certain legal proceedings; and
• the requirement that the Group maintain appropriate Directors and offi cers insurance for the offi cer.
No liability has arisen under these indemnities as at the date of this report.
Proceedings on behalf of the Company
No person has applied to the Court under section 237 of the Corporations act 2001 for leave to bring proceedings on behalf of the Group, or to intervene in any proceedings to which the Group is a party, for the purpose of taking responsibility on behalf of the Group for all or part of those proceedings.
No proceedings have been brought or intervened in on behalf of the Group with leave of the Court under section 237 of the Corporations Act 2001.
Non-audit services
The Group may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s expertise and experience with the Group and/or the Company are important.
Details of the amounts paid or payable to the auditor (currently Grant Thornton) for audit and non-audit services provided during the year are set out below.
The Board has considered the position and in accordance with the advice received from the audit committee is satisfi ed that the provision of the non-audit service is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001.
The Directors are satisfi ed that the provision of non-audit services by the auditor, as set out below, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons:
ANNUAL REPORT FOR YEAR ENDED 30 JUNE 201119 JATENERGY LIMITED
DIRECTORS’ REPORT
• All non-audit services have been reviewed by the audit committee to ensure they do not impact the impartiality and objectivity of the auditor.
• None of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of ethics for Professional Accountants.
During the year the following fees were paid or payable for services provided by the auditor of the group, its related practices and non-related audit fi rms:
Consolidated Consolidated 2011 2010 $ $ (a) Assurance services Audit services - Grant Thornton Australian fi rm Audit of fi nancial reports and other audit work under the Corporations Act 2001 63,708 50,000Total remuneration for audit services 63,708 50,000 (b) Taxation services Grant Thornton Australian fi rm Tax compliance services, including review of company income tax returns 12,735 12,225Total remuneration for taxation services 12,735 12,225 (c) Advisory services Grant Thornton Australian fi rm Initial public offering, other public raisings 46,519 -Total remuneration for advisory services 46,519 -Total remuneration for non-audit services 59,254 12,225
ANNUAL REPORT FOR YEAR ENDED 30 JUNE 2011 JATENERGY LIMITED 20
DIRECTORS’ REPORT
Auditor’s independence declaration
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 23.
Auditor
Grant Thornton continues in offi ce in accordance with section 327 of the Corporations Act 2001.
This report is made in accordance with a resolution of the Board of Directors:
Chairman Ross Kestel
Dated this 22 day of September 2011.
ANNUAL REPORT FOR YEAR ENDED 30 JUNE 201121 JATENERGY LIMITED
INDEPENDENT AUDITOR’S REPORT
Grant Thornton Audit Pty LtdACN 130 913 594
Level 17, 383 Kent StreetSydney NSW 2000Locked Bag Q800QVB Post Offi ceSydney NSW 1230
T +61 2 8297 2400F +61 2 9299 4445E [email protected] www.grantthornton.com
AUDITOR’S INDEPENDENCE DECLARATIONTO THE DIRECTORS OF JATENERGY LIMITED
In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit of Jatenergy Limited for the year ended 30 June 2011, I declare that, to the best of my knowledge and belief, there have been:
a. no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
b. no contraventions of any applicable code of professional conduct in relation to the audit.
GRANT THORNTON AUDIT PTY LTDChartered Accountants
Andrew RigeleDirector - Audit & Assurance
Sydney, 22 September 2011
Grant Thornton Australia Limited is a member fi rm within Grant Thornton International Ltd. Grant Thornton International Ltd and the member fi rms are not a worldwide
partnership. Grant Thornton Australia Limited, together with its subsidiaries and related entities, delivers its services independently in Australia.
Liability limited by a scheme approved under Professional Standards Legislation
ANNUAL REPORT FOR YEAR ENDED 30 JUNE 2011 JATENERGY LIMITED 22
CORPORATE GOVERNANCE
The principal features of the Company’s Corporate Governance
policies and practices are summarized below.
The Company has adopted a comprehensive system of control
and accountability as the basis for the administration of
corporate governance.
The Board is responsible to Shareholders for the overall
management of the Company’s business and affairs. The
Directors’ overriding objective is to increase Shareholder value
within an appropriate framework which protects the rights and
interests of Shareholders and ensures the Company is properly
managed.
The Board is committed to administering the policies and
procedures with openness and integrity, pursuing the true spirit
of corporate governance commensurate with the Company’s
needs. To the extent they are applicable, the Company has
adopted the Corporate Governance Principles (2nd edition)
(“Principles”) as published by ASX Corporate Governance
Council (ASXCGC).
The Company’s corporate governance principles and policies
are structured with reference to the ASXCGC’s Corporate
Governance Principles (2nd edition), which are as follows:
Recommendation 1 Lay solid foundations for management
and oversight;
Recommendation 2 Structure the Board to add value;
Recommendation 3 Promote ethical and responsible
decision making;
Recommendation 4 Safeguard integrity in fi nancial reporting;
Recommendation 5 Make timely and balanced disclosures;
Recommendation 6 Respect the rights of shareholders;
Recommendation 7 Recognise and manage risk;
Recommendation 8 Remunerate fairly and responsibly;
In accordance with recommendations of the ASX, information
published on the Company’s web site includes charters
of Board and its subcommittees, codes of conduct and
other policies and procedures relating to the Board and
its responsibilities. A copy of the Company’s Corporate
Governance Statement can be found on the Company’s website
www.jatenergy.com under the Corporate Governance Section.
The Board will consider on an ongoing basis its Corporate
Governance procedures and whether they are suffi cient as
the Company’s activities develop in size, nature and scope.
Jatenergy Limited’s corporate governance practices were in
place for the year ending 30th June 2011 and other than
outlined below the corporate governance practices of Jatenergy
Limited were compliant with the Council’s recommendations
during the year.
Board Responsibilities
The Company has established the Role and Responsibilities
of the Chairman, the Board (i.e. Board Charter) and the
Company’s CEO. A description of these functions and matters
delegated to the CEO can be found in Annexure 1 of the
Company’s Corporate Governance Statement on the Company’s
website.
Board Structure
The composition of the Board is determined in accordance
with the following principles and guidelines:
• the Board should comprise directors with an appropriate
range of qualifi cations and expertise; and
• the Board shall meet at least every second month and
follow meeting guidelines set down to ensure all directors
are made aware of, and have available all necessary
information, to participate in an informed discussion of all
agenda items.
The directors in offi ce at the date of this statement and their
respective terms in offi ce are as follows:
Name Position Term in Offi ce
Ross Kestel Independent Non 47 Months
Executive Chairmen
Tom Hancock Independent Non 47 Months
Executive Director
Alan Broome Independent Non 5 Months
Executive Director
Mr Li Independent Non 5 Months
Executive Director
Wilton Yao Alternate Non 5 Months
(alternate for Executive Director
Mr Li) for Mr Li
Dr Phil Hodgson Executive Director, 32 Months
Chief Executive Offi cer
ANNUAL REPORT FOR YEAR ENDED 30 JUNE 201123 JATENERGY LIMITED
CORPORATE GOVERNANCE
Dr Phil Hodgson is an executive of the Company and is therefore not considered to be independent. Mr Li has an indirect shareholding through Sheng Run Holdings Group (Australia) Pty Ltd which is the Company’s largest shareholder with an ownership interest of 11.61% and 5.45% and at 30 June 2011 the two holdings added to 17.50%. He is therefore also not considered to be independent.
Each of the other abovementioned directors are considered independent by virtue of the fact that each individual is not a member of management, is not a substantial shareholder of the Company and is free of any business or other relationship that could materially interfere with or could reasonably be perceived to materially interfere with – the independent exercise of their judgment.
When assessing the independence of directors, the ASX recommendations refer to materiality thresholds throughout the independence criteria, specifi cally in reference to evaluating what may constitute a material relationship.
The Board has adopted the following quantitative thresholds to be used as a guide when considering amounts in context of determining the materiality of certain relationships:
(i) an amount which is equal to or greater than 10% of the appropriate base amount may be presumed to be material unless there is evidence or convincing argument to the contrary;
(ii) an amount which is equal to or less than 5% of the appropriate base amount may be presumed not to be material, unless there is evidence, or convincing
argument to the contrary.
In accordance with the ASXCGC principles, the majority of the
Company’s directors, including the Chairman are independent.
As part of discharging its obligations as directors of the
Company, the Directors will, from time to time need to
seek independent professional advice at the expense of
the Company. Accordingly, the Board has agreed that
where issues or matters arise in relation to the running of
the Company, that in the opinion of the directors require
independent professional advice to assist in the decision
making surrounding the resolution of these issues, the Board
may engage such professional advice providing it is on
standard commercial terms for advice of its nature.
Please refer to page 10 of the 2011 Annual Financial Report
for the relevant skills and experience of each of the directors.
Board Sub Committees
The Board has established an audit and risk management
committee and a nomination and remuneration committee.
The name of members of each committee and their attendance
at meetings is contained on page 10 of the Annual Report.
A copy of each respective Committee’s Charter is contained
in Annexure 5 and 6 of the Company Corporate Governance
statement, a copy of which is available on the Company’s
website.
ASXCGC recommendations 4.2 and 8.2 outline that these sub
committees be chaired by an independent chair.
The Company does not comply with these recommendations
as Mr Ross Kestel, the Chairman of the Company is also
the chairman of both of these sub committees. The Board
ANNUAL REPORT FOR YEAR ENDED 30 JUNE 2011 JATENERGY LIMITED 24
CORPORATE GOVERNANCE
considers that Mr Kestel as the most experienced public company director on the Board is well equipped to perform the role of chairman of these committees.
One of the responsibilities of the audit and risk management committee is to ensure that the Company’s external auditors have in place an appropriate policy in relation to partner rotation. The audit and risk management committee assesses each proposed audit partner to ensure they have the appropriate level of experience and expertise to adequately lead the independent audit function.
The Board can confi rm that it has received written assurance from the Chief Executive Offi cer (CEO) and the Chief Financial Offi cer (CFO) that to the best of their knowledge and belief, the declaration provided by them in accordance with section 295A of the Corporations Act is founded on a sound system of risk management and internal control and that the system is operating effectively and in relation to fi nancial reporting risks. The Board notes that due to its nature, internal control assurance from the CEO and CFO can only be reasonable rather than absolute. This is due to such factors as the need for judgement, the use of testing on a sample basis, the inherent limitations in internal control and because much of the evidence available is persuasive rather than conclusive and therefore is not and cannot be designed to detect all weaknesses in control procedures.
Code of Conduct and Diversity
The Company has established a Code of Conduct and an Employee/Executive Share Trading Policy which is contained in Annexure 2 and 3 respectively of the Company’s Corporate Governance Statement, a copy of which is available on the Company’s website.
Jatenergy has established a Diversity Policy that outlines the Company’s commitment to diversity and the active steps the Company will take in implementing the policy, commensurate with a company of its size and the industry with which it operates. A copy of the Diversity Policy is contained in Annexure 7 of the Company’s Corporate Governance Statement, a copy of which is available on the Company’s website.
Timely Disclosure
The Company’s Corporate Governance Statement contains the Company’s policy to ensure compliance with ASX Listing Rules continuous disclosure obligations and the Company’s policy to ensure timely and effective shareholder communication, including the encouragement for shareholders to participate at the Company’s Annual General Meeting. A copy of the Company’s Corporate Governance Statement is available on the Company’s website.
Board and Senior Executive Performance Evaluation
ASXCGC recommendation 2.5 requires the disclosure of the process for performance evaluation of the Board, its committees and individual directors, and key executives. During the year, the Board has conducted a formal internal Board performance evaluation process. In addition the Directors consider, on an ongoing basis, the overall performance of the Board in context of the company meeting and exceeding its stated objectives and the trading price of its shares on the ASX.
The Board is responsible for evaluating the performance of the CEO. During the year, the Board discussed and evaluated the performance of the CEO on an ongoing basis and where applicable appropriate feedback was provided to the CEO. In accordance with the Company’s policy of conducting an annual review of the CEO performance, the performance of the CEO was formally evaluated against predefi ned key performance indicators and generally accepted business principles.
The CEO is responsible for evaluating the performance of the Company’s senior executives. The CEO evaluates the performance of the Company’s senior executives on an annual basis against predefi ned key performance indicators and generally accepted good business principles.
OTHER INFORMATION
The Company’s corporate governance practices and policies are publicly available at the Company’s registered offi ce.
CONTENTS
FINANCIAL REPORT
Financial Report ...................................................................27
Statement of Comprehensive Income ...................................28
Statement of Financial Position .............................................29
Statement of Changes in Equity ............................................30
Statement of Cash Flows ......................................................31
Notes to the Financial Statements ........................................33
Directors’ Declaration ...........................................................64
Independent Auditor’s Report to the Members of Jatenergy Limited ..............................................65
Shareholder Information .......................................................68
ANNUAL REPORT FOR YEAR ENDED 30 JUNE 201127 JATENERGY LIMITED
FINANCIAL REPORT
This fi nancial report covers the consolidated entity consisting of Jatenergy Limited (formerly Jatoil Limited) and its subsidiaries.
Subsidiaries are all those entities (including special purpose entities) over which the Group has the power to govern the fi nancial and operating policies, generally accompany a shareholding of more than one-half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.
The fi nancial report is presented in Australian currency.
Jatenergy Limited is a company limited by shares, incorporated and domiciled in Australia. Its registered offi ce and principal place of business is:
Level 6, Suite 855 Miller StreetPyrmont NSW 2009
The fi nancial report was authorised for issue by the Directors on 22 September 2011. The Company has the power to amend and reissue the fi nancial report.
Through the use of the internet, we have ensured that our corporate reporting is timely and complete. All press releases, fi nancial reports and other information are available on our website: www.jatenergy.com.
ANNUAL REPORT FOR YEAR ENDED 30 JUNE 2011 JATENERGY LIMITED 28
STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 June 2011
Consolidated Entity 2011 2010 Note $ $Revenue 5 97,392 175,645Other income 5 17,697 60,646Consultancy expenses (1,232,181) (606,632)Share-based compensation 26 (14,269) (20,548)Insurance expense (52,860) (35,083)Depreciation and amortisation expense 6 (6,255) (6,513)Professional fees (403,763) (225,736)Directors’ fees (245,697) (245,168)Employee benefi ts expense (439,165) (514,702)Travel expenses (136,611) (174,188)Occupancy expenses (51,601) (47,595)Share of associate’s loss - (371,295)Finance costs 6 (226) (60)Foreign exchange losses (111,199) (118,974)Other expenses (266,224) (201,070)Impairment of assets 6 (321,113) (2,472,030)Loss before income tax (3,166,075) (4,803,303)Income tax expense 7 - -Loss for the year (3,166,075) (4,803,303)Other Comprehensive Income Other comprehensive income for the period, net of tax - -Total comprehensive income for the period (3,166,075) (4,803,303)Loss attributable to: - Members of parent entity (3,132,679) (4,803,303)- Non-controlling interest (33,396) - (3,166,075) (4,803,303)Total comprehensive income attributable to: - Members of parent entity (3,132,679) (4,803,303)- Non-controlling interest (33,396) - (3,166,075) (4,803,303)Loss per share for loss attributable to the ordinary equity holders of the Company: Cents CentsBasic loss per share (7.83) (16.81)Diluted loss per share (7.62) (16.81)
The above statement of comprehensive income should be read in conjunction with the accompanying notes.
ANNUAL REPORT FOR YEAR ENDED 30 JUNE 201129 JATENERGY LIMITED
STATEMENT OF FINANCIAL POSITION
As at 30 June 2011
Consolidated Entity 2011 2010 Note $ $Assets Current assets Cash and cash equivalents 8 3,801,689 4,203,143Trade and other receivables 9 316,868 144,980Total current assets 4,118,557 4,348,123Non-current assets Property, plant and equipment 10 273,738 23,955Investments 11 - 173,945Intangibles 12 5,844,565 -Total non-current assets 6,118,303 197,900Total assets 10,236,860 4,546,023Liabilities Current liabilities Trade and other payables 13 348,177 292,936Short term provisions 14 631 17,434Total current liabilities 348,808 310,370Total liabilities 348,808 310,370Net assets 9,888,052 4,235,653Equity Contributed equity 15 25,655,160 16,881,950Non-controlling interest (2,401) -Reserves 16(a) 342,335 328,066Accumulated losses 16(b) (16,107,042) (12,974,363)Total equity 9,888,052 4,235,653
The above statement of fi nancial position should be read in conjunction with the accompanying notes.
ANNUAL REPORT FOR YEAR ENDED 30 JUNE 2011 JATENERGY LIMITED 30
STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2011
Contributed Non-Controlling Reserves Accumulated Total Equity Interest Losses $ $ $ $ $Balance at 1 July 2009 16,881,950 - 307,518 (8,171,060) 9,018,408Loss for the year - - - (4,803,303) (4,803,303)Other comprehensive income - - - - -Total comprehensive income for the year - - - (4,803,303) (4,803,303)Employee share based scheme - - 20,548 - 20,548Transaction with owners - - 20,548 - 20,548Balance at 30 June 2010 16,881,950 - 328,066 (12,974,363) 4,235,653
Balance at 1 July 2010 16,881,950 - 328,066 (12,974,363) 4,235,653Loss for the year - (33,396) - (3,132,679) (3,166,075)Total comprehensive income - (33,396) - (3,132,679) (3,166,075)Employee share based scheme - - 14,269 - 14,269Issue of capital 9,114,796 30,995 - - 9,145,791Less: transaction costs arising on share issue (341,586) - - - (341,586)Transaction with owners 8,773,210 30,995 14,269 - 8,818,474Balance at 30 June 2011 25,655,160 (2,401) 342,335 (16,107,042) 9,888,052
The above statement of changes in equity should be read in conjunction with the accompanying notes.
ANNUAL REPORT FOR YEAR ENDED 30 JUNE 201131 JATENERGY LIMITED
STATEMENT OF CASH FLOWS
For the year ended 30 June 2011
Consolidated Entity 2011 2010 Note $ $Cash fl ows from operating activities Payments to suppliers and employees (2,760,201) (1,931,488)Interest received 97,392 175,645Interest paid (226) (60)Net cash outfl ow from operating activities 24 (2,663,035) (1,755,903) Cash fl ows from investing activities Payments for property, plant and equipment (82,093) (3,149)Payment for investments in associate (321,113) (1,398,051)Purchase of subsidiary – net of cash acquired 24 1,476 -Payments to Blackrock before acquisition (1,101,695) -Net cash outfl ow from investing activities (1,503,425) (1,401,200) Cash fl ows from fi nancing activities Proceeds from issues of shares and other equity securities net of transactions costs 3,845,209 -Proceeds from issue of shares from non-controlling interest 30,995 -Net cash infl ow from fi nancing activities 3,876,204 - Net decrease in cash and cash equivalents (290,255) (3,157,103)Cash and cash equivalents at the beginning of the fi nancial year 4,203,143 7,479,220Effect of exchange on cash holdings in foreign currencies (111,199) (118,974)Cash and cash equivalents at end of year 8(a) 3,801,689 4,203,143
The above statement of cash fl ows should be read in conjunction with the accompanying notes.
CONTENTS
NOTES TO THE FINANCIAL STATEMENTS
1 Summary of signifi cant accounting policies ....................33
2 Financial risk management ............................................43
3 Critical accounting estimates and judgements ................45
4 Segment information .....................................................45
5 Other revenue and other income ...................................46
6 Expenses ......................................................................46
7 Income tax expense ......................................................47
8 Current assets - cash and cash equivalents ...................47
9 Current assets - trade and other receivables ..................48
10 Non-current assets - property, plant and equipment ......48
11 Non-current assets - investments accounted for using the equity method ................................................49
12 Intangibles ....................................................................50
13 Current liabilities - trade and other payables ..................51
14 Current liabilities - provisions .........................................51
15 Contributed equity .........................................................52
16 Reserves and accumulated losses .................................53
17 Key management personnel disclosures ........................54
18 Remuneration of auditors ..............................................56
19 Contingencies ...............................................................57
20 Commitments ................................................................57
21 Related party transactions .............................................58
22 Controlled Entities .........................................................58
23 Events occurring after the reporting date ........................60
24 Reconciliation of loss after income tax to net cash outfl ow from operating activities .....................................60
25 Loss per share ...............................................................61
26 Share-based payments ..................................................61
27 Jatenergy Limited - Parent Company Information ...........63
ANNUAL REPORT FOR YEAR ENDED 30 JUNE 201133 JATENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
1 Summary of signifi cant accounting policies
The principal accounting policies adopted in the preparation of the fi nancial report are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. The fi nancial statements cover Jatenergy Limited and its controlled entities as a consolidated entity (“group”).
(a) Basis of preparation
This general purpose fi nancial report has been prepared in accordance with Australian Accounting Standards, Australian Accounting Interpretation, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001.
Compliance with IFRSs
Australian Accounting Standards set out accounting policies that the AASB has concluded would result in a fi nancial report containing relevant and reliable information about transactions, events and conditions. Compliance with Australian Accounting Standards ensures that the consolidated fi nancial statements and notes of Jatenergy Limited and its controlled entity comply with International Financial Reporting Standards (IFRS).
Historical cost convention
The fi nancial report has been prepared on an accruals basis and is based on historical costs, modifi ed where applicable by the measurement at fair value of selected non-current assets, fi nancial assets and fi nancial liabilities.
Critical accounting estimates
The preparation of fi nancial statements in conformity with Australian Accounting Standards requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Company’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are signifi cant to the fi nancial statements are disclosed in note 3.
Change of Company name
The Company changed its name from Jatoil Limited to Jatenergy Limited as approved by shareholders at a general meeting held on 10 February 2011.
(b) Principles of consolidation
Subsidiaries
The consolidated fi nancial statements incorporate the assets, liabilities and results of entities controlled by Jatenergy Limited at the end of the reporting period. A controlled entity is any entity over which Jatenergy Limited has the power to govern the fi nancial and operating policies so as to obtain benefi ts from the entity’s activities. Control will generally exist when the parent owns, directly or indirectly through subsidiaries, more than half of the voting power of an entity. In assessing the power to govern, the existence and effect of holdings of actual and potential voting rights are also considered.
Where controlled entities have entered or left the Group during the year, the fi nancial performance of those entities are included only for the period of the year that they were controlled. A list of controlled entities is contained in Note 22 to the fi nancial statements.
In preparing the consolidated fi nancial statements, all inter-group balances and transactions between entities in the consolidated group have been eliminated on consolidation. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with those adopted by the group.
(c) Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identifi ed as the Board of Directors.
(d) Revenue and other income
Interest income is recognised on a time proportion basis using the effective interest method.
(e) Income tax
The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the national income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the fi nancial statements and to unused tax losses.
ANNUAL REPORT FOR YEAR ENDED 30 JUNE 2011 JATENERGY LIMITED 34
NOTES TO THE FINANCIAL STATEMENTS
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted for each jurisdiction. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profi t or taxable profi t or loss.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probably that future taxable amounts will be available to utilise those temporary differences and losses.
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the group is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.
Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity.
(f) Leases
Lease payments for operating leases, where substantially all the risks and benefi ts remain with the lessor, are charged as expenses in the periods in which they are incurred.
Lease incentives under operating leases are recognised as a liability and amortised on a straight-line basis over the life of the lease term.
(g) Business combinations
The purchase method of accounting is used to account for all business combinations, including business combinations involving entities or businesses under common control, regardless of whether equity instruments or other assets are acquired. Cost is measured as the fair value of the assets given, shares issued or liabilities incurred or assumed at the date of exchange plus costs directly attributable to the acquisition. Where equity instruments are issued in an
acquisition, the fair value of the instruments is their published market price as at the date of exchange unless, in rare circumstances, it can be demonstrated that the published price at the date of exchange is an unreliable indicator of fair value and that other evidence and valuation methods provide a more reliable measure of fair value. Transaction costs arising on the issue of equity instruments are recognised directly in equity.
Identifi able assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Group’s share of the identifi able net assets acquired is recorded as goodwill. If the cost of acquisition is less than the Group’s share of the fair value of the identifi able net assets of the subsidiary acquired, the difference is recognised directly in the statement of comprehensive income, but only after a reassessment of the identifi cation and measurement of the net assets acquired.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent fi nancier under comparable terms and conditions.
(h) Impairment of non fi nancial assets
At each the end of each reporting period, the Group assesses whether there is any indication that an asset may be impaired. The assessment will include the consideration of external and internal sources of information including dividends received from subsidiaries, associates or jointly controlled entities deemed to be out of pre-acquisition profi ts. If such an indication exists, an impairment test is carried out on the asset by comparing the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to the statement of comprehensive income.
Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Impairment testing is performed annually for goodwill and intangible assets with indefi nite lives.
ANNUAL REPORT FOR YEAR ENDED 30 JUNE 201135 JATENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
(i) Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits
held at call with fi nancial institutions, other short-term, highly
liquid investments with original maturities of three months or
less that are readily convertible to known amounts of cash and
which are subject to an insignifi cant risk of changes in value,
and bank overdrafts.
(j) Financial instruments
Recognition and initial measurement
Financial assets and fi nancial liabilities are recognised when
the entity becomes a party to the contractual provisions to the
instrument. For fi nancial assets, this is equivalent to the date
that the Company commits itself to either the purchase or sale
of the asset (i.e. trade date accounting is adopted).
Financial instruments are initially measured at fair value plus
transaction costs.
Classifi cation and subsequent measurement
Finance instruments are subsequently measured at either
of fair value, amortised cost using the effective interest rate
method, or cost. Fair value represents the amount for which
an asset could be exchanged or a liability settled, between
knowledgeable, willing parties. Where available, quoted prices
in an active market are used to determine fair value. In other
circumstances, valuation techniques are adopted.
Amortised cost is calculated as:
(i) the amount at which the fi nancial asset or fi nancial
liability is measured at initial recognition;
(ii) less principal repayments;
(iii) plus or minus the cumulative amortisation of the
difference, if any, between the amount initially recognised
and the maturity amount calculated using the effective
interest method; and
(iv) less any reduction for impairment.
The effective interest method is used to allocate interest
income or interest expense over the relevant period and is
equivalent to the rate that exactly discounts estimated future
cash payments or receipts (including fees, transaction costs
and other premiums or discounts) through the expected life (or
when this cannot be reliably predicted, the contractual term)
of the fi nancial instrument to the net carrying amount of the
fi nancial asset or fi nancial liability. Revisions to expected future
net cash fl ows will necessitate an adjustment to the carrying
value with a consequential recognition of an income or expense
in profi t or loss.
The Group does not designate any interests in subsidiaries,
associates or joint venture entities as being subject to the
requirements of accounting standards specifi cally applicable to
fi nancial instruments.
(i) Loans and receivables:
Loans and receivables are non-derivative fi nancial assets
with fi xed or determinable payments that are not quoted
in an active market and are subsequently measured at
amortised cost.
Loans and receivables are included in current assets, as
they are expected to mature within 12 months after the
end of the reporting period.
(ii) Held-to-maturity investments:
Held-to-maturity investments are non-derivative fi nancial assets
that have fi xed maturities and fi xed or determinable payments,
and it is the Group’s intention to hold these investments to
maturity. They are subsequently measured at amortised cost.
Held-to-maturity investments are included in current assets, as
they are expected to mature within 12 months after the end of
the reporting period.
(iii) Financial liabilities:
Non-derivative fi nancial liabilities are subsequently measured
at amortised cost.
Impairment
At the end of each reporting period, the Group assesses
whether there is objective evidence that a fi nancial instrument
has been impaired. Impairment losses are recognised in the
statement of comprehensive income.
ANNUAL REPORT FOR YEAR ENDED 30 JUNE 2011 JATENERGY LIMITED 36
NOTES TO THE FINANCIAL STATEMENTS
De-recognition
Financial assets are de-recognised where the contractual rights to receipt of cash fl ows expires or the asset is transferred to another party whereby the entity no longer has any signifi cant continuing involvement in the risks and benefi ts associated with the asset. Financial liabilities are de-recognised where the related obligations are discharged, cancelled or expired. The difference between the carrying value of the fi nancial liability extinguished or transferred to another party and the fair value of consideration paid, including the transfer of non-cash assets or liabilities assumed, is recognised in profi t or loss.
(k) Property, plant and equipment
Property, plant and equipment are stated at historical cost less depreciation and impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probably that future economic benefi ts associated with the item will fl ow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the statement of comprehensive income during the fi nancial period in which they are incurred.
Depreciation on assets in calculated using the straight-line method to allocate their cost or revalued amounts, net of their residual values, over their estimated useful lives.
The depreciation rates used for each class of depreciable assets are:
• Furniture, fi ttings and offi ce equipment 20-33%
• Leasehold improvements 33%
The asset’s residual values and useful lives are reviewed and adjusted if appropriate, at each reporting date.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (note 1(h)).
Gains and losses on disposal are determined by comparing
proceeds with carrying amount. These are included in the statement of comprehensive income.
(l) Foreign currency translation
(i) Functional and presentation currency
Items included in the fi nancial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated fi nancial statements are presented in Australian dollars, which is Jatenergy Limited’s functional and presentation currency.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of comprehensive income, except when they are attributable to part of the next investment in foreign operation.
Translation differences on fi nancial assets and liabilities carried at fair value are reported as part of the fair value gain or loss. Translation differences on non-monetary fi nancial assets and liabilities such as equities held at fair value through profi t or loss are recognised in statement of comprehensive income as part of the fair value gain or loss. Translation differences on non-monetary fi nancial assets such as equities classifi ed as available-for-sale fi nancial assets are included in the fair value reserve in equity.
(iii) Group companies
The results and fi nancial position of all the Group entities (none of which has the currency of a hyperinfl ationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:
• assets and liabilities for each statement of fi nancial position presented are translated at the closing rate at the date of that statement of fi nancial position;
• income and expenses for each statement of comprehensive income are translated at average exchange rates (unless
ANNUAL REPORT FOR YEAR ENDED 30 JUNE 201137 JATENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
this is not a reasonable approximation of the cumulative
effect of the rates prevailing on the transaction dates, in
which case income and expenses are translated at the
dates of the transactions); and
• all resulting exchange differences are recognised as a
separate component of equity.
On consolidation, exchange differences arising from the
translation of any net investment in foreign entities, and of
borrowings and other fi nancial instruments designated as
hedges of such investments, are taken to shareholders’ equity.
When a foreign operation is sold or any borrowings forming
part of the net investment are repaid, a proportionate share
of such exchange differences are recognised in the statement
of comprehensive income, as part of the gain or loss on sale
where applicable.
Goodwill and fair value adjustments arising on the acquisition
of a foreign entity are treated as assets and liabilities of the
foreign entities and translated at the closing rate.
(m) Intangibles
Intangible assets acquired separately or in a business
combination are initially measured at cost. The cost of an
intangible asset acquired in a business combination is its fair
value as at the date of acquisition. Following initial recognition,
intangible assets are carried at cost less any accumulated
amortisation and any accumulated impairment losses.
Internally generated intangible assets, excluding capitalised
development costs, are not capitalised and expenditure is
recognised in profi t or loss in the year in which the expenditure
is incurred.
The useful lives of intangible assets are assessed to be
either fi nite or indefi nite. Intangible assets with fi nite lives
are amortised over their useful life and tested for impairment
whenever there is an indication that the intangible asset may
be impaired. The amortisation period and the amortisation
method for an intangible asset with a fi nite useful life is
reviewed at least at each fi nancial year end. Changes in the
expected useful life or the expected pattern of consumption of
future economic benefi ts embodied in the asset are accounted
for prospectively by changing the amortisation period or
method, as appropriate, which is a change in accounting
estimate. The amortisation expense on intangible assets with
fi nite lives is recognised in profi t or loss in the expense category
consistent with the function of the intangible asset.
Intangible assets with indefi nite useful lives are tested for impairment annually either individually or at the cash-generating unit level consistent with the methodology outlined for goodwill above. Such intangibles are not amortised. The useful life of an intangible asset with an indefi nite life is reviewed each reporting period to determine whether indefi nite life assessment continues to be supportable. If not, the change in the useful life assessment from indefi nite to fi nite is accounted for as a change in an accounting estimate and is thus accounted for on a prospective basis.
(n) Employee benefi ts
Benefi ts
(i) Wages and salaries, annual leave and sick leave
Liabilities 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 and are measured at the amounts expected to be paid when the liabilities are settled.
(ii) Long service leave
The liability for long service leave is recognised in the provision for employee benefi ts and measured as 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 of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outfl ows.
Share-based payments
Share-based compensation benefi ts are provided to Directors and executives. Information relating to these benefi ts is set out in note 26.
The fair value of options granted is recognised as a benefi t expense with a corresponding increase in equity. The fair value is measured at grant date and recognised over the period during which the Directors and executives become unconditionally entitled to the options.
ANNUAL REPORT FOR YEAR ENDED 30 JUNE 2011 JATENERGY LIMITED 38
NOTES TO THE FINANCIAL STATEMENTS
The fair value at grant date is determined using a Black-Sholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option.
The fair value of the options granted is adjusted to refl ect market vesting conditions, but excludes the impact of any non-market vesting conditions. Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. At each reporting date, the entity revises its estimate of the number of options that are expected to become exercisable. The benefi t expense recognised each period takes into account the most recent estimate.
Upon the exercise of options, the balance of the share-based payments reserve relating to those options is transferred to share capital and the proceeds received, net of any directly attributable transaction costs, and are credited to share capital.
(o) Contributed equity
Ordinary shares are classifi ed as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issue of new shares or options for the acquisition of a business are not included in the cost of the acquisition as part of the purchase consideration.
(p) Earnings per share
(i) Basic earnings per share
Basic earnings per share is calculated by dividing the profi t attributable to equity holders of the Company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the fi nancial year, adjusted for bonus elements in ordinary shares issued during the year.
(ii) Diluted earnings per share
Diluted earnings per share adjusts the fi gures used in the determination of basic earnings per share to take into account
the after income tax effect of interest and other fi nancing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.
(q) Goods and services tax (GST)
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the statement of fi nancial position.
Cash fl ows are presented on a gross basis. The GST components of cash fl ows arising from investing or fi nancing activities which are recoverable from, or payable to the taxation authority, are presented as operating cash fl ow.
(r) Investments in associates
Associate companies are companies in which the Group has signifi cant infl uence through holding, directly or indirectly, 20% or more of the voting power of the Company. Investments in associates are accounted for in the fi nancial statements by applying the equity method of accounting whereby the investment is initially recognised at cost and adjusted thereafter for the post-acquisition change in the Group’s share of net assets of the associate company. In addition the Group’s share of the profi t or loss of the associate company is included in the Group’s profi t or loss.
Details of the Group’s investments in associates are shown at Note 11.
ANNUAL REPORT FOR YEAR ENDED 30 JUNE 201139 JATENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
(s) New accounting standards and Australian accounting interpretations
New Accounting Standards for Application in Future Periods
The AASB has issued new and amended Accounting Standards and Interpretations that have mandatory application dates for future reporting periods and which the Group has decided not to early adopt. A discussion of those future requirements and their impact on the Group is as follows:– AASB 9: Financial Instruments (December 2010)
(applicable for annual reporting periods commencing on or after 1 January 2013).
This Standard is applicable retrospectively and includes revised requirements for the classifi cation and measurement of fi nancial instruments, as well as recognition and derecognition requirements for fi nancial instruments. The Group has not yet determined any potential impact on the fi nancial statements.
The key changes made to accounting requirements include: - simplifying the classifi cations of fi nancial assets into
those carried at amortised cost and those carried at fair value;
- simplifying the requirements for embedded derivatives; - removing the tainting rules associated with held-to-
maturity assets; - removing the requirements to separate and fair value
embedded derivatives for fi nancial assets carried at amortised cost;
- allowing an irrevocable election on initial recognition to present gains and losses on investments in equity instruments that are not held for trading in other comprehensive income. Dividends in respect of these investments that are a return on investment can be recognised in profi t or loss and there is no impairment or recycling on disposal of the instrument;
- requiring fi nancial assets to be reclassifi ed where there is a change in an entity’s business model as they are initially classifi ed based on: (a) the objective of the entity’s business model for managing the fi nancial assets; and (b) the characteristics of the contractual cash fl ows; and
- requiring an entity that chooses to measure a fi nancial liability at fair value to present the portion of the change in its fair value due to changes in the entity’s own credit risk in other comprehensive income, except when that would create an accounting mismatch. If such a
mismatch would be created or enlarged, the entity is required to present all changes in fair value (including the effects of changes in the credit risk of the liability) in profi t or loss.
– AASB 124: Related Party Disclosures (applicable for annual reporting periods commencing on or after 1 January 2011).
This Standard removes the requirement for government-related entities to disclose details of all transactions with the government and other government-related entities and clarifi es the defi nition of a “related party” to remove inconsistencies and simplify the structure of the Standard. No changes are expected to materially affect the Group.
– AASB 1053: Application of Tiers of Australian Accounting Standards and AASB 2010–2: Amendments to Australian Accounting Standards arising from Reduced Disclosure Requirements [AASB 1, 2, 3, 5, 7, 8, 101, 102, 107, 108, 110, 111, 112, 116, 117, 119, 121, 123, 124, 127, 128, 131, 133, 134, 136, 137, 138, 140, 141, 1050 & 1052 and Interpretations 2, 4, 5, 15, 17, 127, 129 & 1052] (applicable for annual reporting periods commencing on or after 1 July 2013).
AASB 1053 establishes a revised differential fi nancial reporting framework consisting of two tiers of fi nancial reporting requirements for those entities preparing general purpose fi nancial statements: - Tier 1: Australian Accounting Standards; and - Tier 2: Australian Accounting Standards – Reduced
Disclosure Requirements. Tier 2 of the framework comprises the recognition,
measurement and presentation requirements of Tier 1, but contains signifi cantly fewer disclosure requirements.
The following entities are required to apply Tier 1 reporting requirements (ie full IFRS): - for-profi t private sector entities that have public
accountability; and - the Australian Government and state, territory and local
governments. Since the Group is a for-profi t private sector entity that has
public accountability, it does not qualify for the reduced disclosure requirements for Tier 2 entities.
AASB 2010–2 makes amendments to Australian Accounting Standards and Interpretations to give effect to the reduced disclosure requirements for Tier 2 entities. It achieves this by specifying the disclosure paragraphs that a Tier 2 entity need not comply with as well as adding specifi c “RDR” disclosures.
– AASB 1054: Australian Additional Disclosures This Standard sets out the Australian-specifi c disclosures
ANNUAL REPORT FOR YEAR ENDED 30 JUNE 2011 JATENERGY LIMITED 40
NOTES TO THE FINANCIAL STATEMENTS
for entities that have adopted Australian Accounting
standards. This Standard contains disclosure requirements
that are additional to IFRSs.
This Standard is not expected to impact the Group.
– AASB 2009–12: Amendments to Australian Accounting
Standards [AASBs 5, 8, 108, 110, 112, 119, 133,
137, 139, 1023 & 1031 and Interpretations 2, 4, 16,
1039 & 1052] (applicable for annual reporting periods
commencing on or after 1 January 2011).
This Standard makes a number of editorial amendments
to a range of Australian Accounting Standards and
Interpretations, including amendments to refl ect changes
made to the text of IFRSs by the IASB. The Standard also
amends AASB 8 to require entities to exercise judgment
in assessing whether a government and entities known to
be under the control of that government are considered
a single customer for the purposes of certain operating
segment disclosures. The amendments are not expected to
impact the Group.
– AASB 2009–14: Amendments to Australian Interpretation
– Prepayments of a Minimum Funding Requirement [AASB
Interpretation 14] (applicable for annual reporting periods
commencing on or after 1 January 2011).
This Standard amends Interpretation 14 to address
unintended consequences that can arise from the previous
accounting requirements when an entity prepays future
contributions into a defi ned benefi t pension plan.
This Standard is not expected to impact the Group.
– AASB 2010–4: Further Amendments to Australian
Accounting Standards arising from the Annual
Improvements Project [AASB 1, AASB 7, AASB 101 &
AASB 134 and Interpretation 13] (applicable for annual
reporting periods commencing on or after 1 January 2011).
This Standard details numerous non-urgent but necessary
changes to Accounting Standards arising from the IASB’s
annual improvements project. Key changes include:
- clarifying the application of AASB 108 prior to an
entity’s fi rst Australian-Accounting-Standards fi nancial
statements;
- adding an explicit statement to AASB 7 that qualitative
disclosures should be made in the context of the
quantitative disclosures to better enable users to
evaluate an entity’s exposure to risks arising from
fi nancial instruments;
- amending AASB 101 to the effect that disaggregation
of changes in each component of equity arising from
transactions recognised in other comprehensive income
is required to be presented, but is permitted to be
presented in the statement of changes in equity or in
the notes;
- adding a number of examples to the list of events or
transactions that require disclosure under AASB 134;
and
- making sundry editorial amendments to various
Standards and Interpretations.
This Standard is not expected to impact the Group.
– AASB 2010–5: Amendments to Australian Accounting
Standards [AASB 1, 3, 4, 5, 101, 107, 112, 118, 119,
121, 132, 133, 134, 137, 139, 140, 1023 & 1038 and
Interpretations 112, 115, 127, 132 & 1042] (applicable for
annual reporting periods beginning on or after 1 January
2011).
This Standard makes numerous editorial amendments
to a range of Australian Accounting Standards and
Interpretations, including amendments to refl ect changes
made to the text of IFRSs by the IASB. However, these
editorial amendments have no major impact on the
requirements of the respective amended pronouncements.
– AASB 2010–6: Amendments to Australian Accounting
Standards – Disclosures on Transfers of Financial Assets
[AASB 1 & AASB 7] (applicable for annual reporting
periods beginning on or after 1 July 2011).
This Standard adds and amends disclosure requirements
about transfers of fi nancial assets, especially those in
respect of the nature of the fi nancial assets involved and
the risks associated with them. Accordingly, this Standard
makes amendments to AASB 1: First-time Adoption of
Australian Accounting Standards, and AASB 7: Financial
Instruments: Disclosures, establishing additional disclosure
requirements in relation to transfers of fi nancial assets.
This Standard is not expected to impact the Group.
– AASB 2010–7: Amendments to Australian Accounting
Standards arising from AASB 9 (December 2010) [AASB 1,
3, 4, 5, 7, 101, 102, 108, 112, 118, 120, 121, 127, 128,
131, 132, 136, 137, 139, 1023 & 1038 and Interpretations
2, 5, 10, 12, 19 & 127] (applies to periods beginning on or
after 1 January 2013).
This Standard makes amendments to a range of
Australian Accounting Standards and Interpretations as
a consequence of the issuance of AASB 9: Financial
Instruments in December 2010. Accordingly, these
amendments will only apply when the entity adopts AASB 9.
As noted above, the Group has not yet determined any
potential impact on the fi nancial statements from adopting
AASB 9.
ANNUAL REPORT FOR YEAR ENDED 30 JUNE 201141 JATENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
– AASB 2010–8: Amendments to Australian Accounting Standards – Deferred Tax: Recovery of Underlying Assets [AASB 112] (applies to periods beginning on or after 1 January 2012).
This Standard makes amendments to AASB 112: Income Taxes.
The amendments brought in by this Standard introduce a more practical approach for measuring deferred tax liabilities and deferred tax assets when investment property is measured using the fair value model under AASB 140: Investment Property.
Under the current AASB 112, the measurement of deferred tax liabilities and deferred tax assets depends on whether an entity expects to recover an asset by using it or by selling it. The amendments introduce a presumption that an investment property is recovered entirely through sale. This presumption is rebutted if the investment property is held within a business model whose objective is to consume substantially all of the economic benefi ts embodied in the investment property over time, rather than through sale.
The amendments brought in by this Standard also incorporate Interpretation 121 into AASB 112.
The amendments are not expected to impact the Group.– AASB 2010–9: Amendments to Australian Accounting
Standards – Severe Hyperinfl ation and Removal of Fixed Dates for First-time Adopters [AASB 1] (applies to periods beginning on or after 1 July 2011).
This Standard makes amendments to AASB 1: First-time Adoption of Australian Accounting Standards.
The amendments brought in by this Standard provide relief for fi rst-time adopters of Australian Accounting Standards from having to reconstruct transactions that occurred before their date of transition to Australian Accounting Standards.
Furthermore, the amendments brought in by this Standard also provide guidance for entities emerging from severe hyperinfl ation either to resume presenting Australian-Accounting-Standards fi nancial statements or to present Australian-Accounting-Standards fi nancial statements for the fi rst time.
This Standard is not expected to impact the Group.– AASB 2010–10: Further Amendments to Australian
Accounting Standards – Removal of Fixed Dates for First-time Adopters [AASB 2009–11 & AASB 2010–7] (applies to periods beginning on or after 1 January 2013).
This Standard makes amendments to AASB 2009–11: Amendments to Australian Accounting Standards arising
from AASB 9, and AASB 2010–7: Amendments to Australian Accounting Standards arising from AASB 9 (December 2010).
The amendments brought in by this Standard ultimately affect AASB 1: First-time Adoption of Australian Accounting Standards and provide relief for fi rst-time adopters from having to reconstruct transactions that occurred before their transition date.
[The amendments to AASB 2009–11 will only affect early adopters of AASB 2009–11 (and AASB 9: Financial Instruments that was issued in December 2009) as it has been superseded by AASB 2010–7.]
This Standard is not expected to impact the Group.– AASB 2011-1: Amendments to Australian Accounting
Standards arising from the Trans-Tasman Convergence project (AASB 1, AASB 5, AASB 101, AASB 107, AASB 108, AASB 121, AASB 128, AASB 132, AASB 134, Interpretation 2, Interpretation 112, Interpretation 113).
This Standard makes amendments to a range of Australian Accounting Standards and Interpretations for the purpose of closer alignment to IFRSs and harmonisation between Australian and New Zealand Standards.
This Standard is not expected to impact the Group.– AASB 2011-2: Amendments to Australian Accounting
Standards arising from the Trans-Tasman Convergence project – Reduced disclosure regime (AASB 101, AASB 1054).
This Standard makes amendments to the following Australian Accounting Standards:
AASB 101 Presentation of Financial Statements; AASB 1054 Australian Additional Disclosures, to establish reduced disclosure requirements for entities
preparing general purpose fi nancial statements under Australian Accounting Standards – Reduced Disclosure Requirements in relation to the Australian additional disclosures arising from the Trans-Tasman Convergence Project.
This Standard is not expected to impact the Group.– AASB 2011-3: Amendments to Australian Accounting
Standards – Orderly Adoption of Changes to the ABS GFS Manual and Related Amendments (AASB 1049).
The Standard makes amendments to AASB 1049 in relation to the Whole of Government and General Government Financial Reporting so as to clarify the defi nition of the ABS GFS Manual, and to facilitate the orderly adoption of changes to the ABS GFS Manual and related disclosures.
This Standard is not expected to impact the Group.
ANNUAL REPORT FOR YEAR ENDED 30 JUNE 2011 JATENERGY LIMITED 42
NOTES TO THE FINANCIAL STATEMENTS
– AASB 2011-4: Amendments to Australian Accounting Standards to Remove Individual Key Management Personnel Disclosure Requirements (AASB 124).
The Standard makes amendments to remove the individual key management personnel disclosure requirements, as these are considered to be more in the nature of corporate governance and are generally covered in the Corporations Act and disclosed within the Directors and/or Remuneration Report.
This Standard is not expected to impact the Group.– AASB 2011-5: Amendments to Australian Accounting
Standards – Extending Relief from Consolidation, the Equity Method and Proportionate Consolidation (AASB 127, AASB 128 & AASB 131).
The AASB considers that the relief from consolidation, the equity method and proportionate consolidation should also be available in certain circumstances to a parent entity, investor or venturer where the ultimate or any intermediate parent entity prepares consolidated fi nancial statements that are not compliant with IFRS.
This Standard is not expected to impact the Group.– AASB 2011-6: Amendments to Australian Accounting
Standards – Extending Relief from Consolidation, the Equity Method and Proportionate Consolidation – Reduced Disclosure Requirements (AASB 127, AASB 128 & AASB 131).
The AASB considers that the relief from consolidation, the equity method and proportionate consolidation should also be available in certain circumstances to a parent entity, investor or venturer where the ultimate or any intermediate parent entity prepares consolidated fi nancial statements that are not compliant with IFRS as a result of applying Australian Accounting Standards – Reduced Disclosure Requirements. Therefore, this Standard extends that relief provided that the parent entity, investor or venturer:a) is an entity complying with Australian Accounting
Standards – Reduced Disclosure Requirements;b) has an ultimate or intermediate parent that prepares
consolidated fi nancial statements in accordance with Australian Accounting Standards or Australian Accounting Standards – Reduced Disclosure Requirements; and
c) meets the relevant criteria in paragraphs 10(a) to 10(c) of AASB 127, paragraphs 13(c)(i) to 13(c)(iii) of AASB 128 or paragraphs 2(c)(i) to 2(c)(iii) of AASB 131.
This Standard is not expected to impact the Group.– AASB 10 Consolidated Financial Statements. It introduces a new, principle-based defi nition of control
which will apply to all investees to determine the scope of consolidation.
Traditional control assessments based on majority ownership of voting rights will very rarely be affected. However, ‘borderline’ consolidation decisions will need to be reviewed and some will need to be changed taking into consideration potential voting rights and substantive rights.
This Standard is not expected to impact the Group.– AASB 11 Joint Arrangements. Entities with existing joint arrangements or that plan to
enter into new joint arrangements will be affected by the new standard. These entities will need to assess their arrangements to determine whether they have invested in a joint operation or a joint venture upon adoption of the new standard or upon entering into the arrangement.
Entities that have been accounting for their interest in a joint venture using proportionate consolidation will no longer be allowed to use this method; instead they will account for the joint venture using the equity method. In addition, there may be some entities that have previously equity-accounted for investments that may need to account for their share of assets and liabilities now that there is less focus on the structure of the arrangement.
This Standard is not expected to impact the Group.– AASB 12 Disclosure of Interests in Other Entities. AASB 12 combines the disclosure requirements for
subsidiaries, joint arrangements, associates and structured entities within a comprehensive disclosure standard.
It aims to provide more transparency on ‘borderline’ consolidation decisions and enhance disclosures about unconsolidated structured entities in which an investor or sponsor has involvement.
This Standard is not expected to impact the Group.– Fair Value Measurement IFRS 13 has been created to:
• establish a single source of guidance for all fair value measurements;
• clarify the defi nition of fair value and related guidance; and
• enhance disclosures about fair value measurements (new disclosures increase transparency about fair value measurements, including the valuation techniques and inputs used to measure fair value).
This Standard is not expected to impact the Group.
ANNUAL REPORT FOR YEAR ENDED 30 JUNE 201143 JATENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
2 Financial risk management
The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework. The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limited and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to refl ect changes in market conditions and the Group’s activities.
The Group’s activities expose it to a limited number of fi nancial risks as described below. The Group’s overall risk management program seeks to minimise potential adverse effects on the fi nancial performance of the Group. To date, the Group has not had the need to utilise derivative fi nancial instruments such as foreign exchange contracts or interest rate swaps to manage any risk exposure identifi ed. The Group holds the following fi nancial instruments.
Consolidated Entity 2011 2010 Note $ $Financial assets Cash and cash equivalents 8 3,801,689 4,203,143Trade and other receivables 9 316,868 144,980Total 4,118,557 4,348,123Financial liabilities Trade and other payable 13 348,177 292,936Total 348,177 292,936
Specifi c fi nancial risk exposures and management
The main risks the Group is exposed to through its fi nancial instruments are interest rate risk, foreign currency risk, credit risk and liquidity risk.
(a) Interest rate risk
The Group’s main interest exposure arises from cash at bank and bank term deposits as at the reporting date, the Group had the following cash profi le.
Consolidated Entity 2011 2010 $ $Cash at bank and in hand 2,760,388 555,088Term deposit 1,041,301 3,648,055Total 3,801,689 4,203,143
The Group’s main interest rate risk arises from cash and cash equivalents. The bank term deposit has an interest rate which is fi xed for the term of the investment and the bank accounts have a fl oating interest rate.
ANNUAL REPORT FOR YEAR ENDED 30 JUNE 2011 JATENERGY LIMITED 44
NOTES TO THE FINANCIAL STATEMENTS
(b) Foreign exchange risk
Foreign exchange risk arises when future commercial transactions and recognised assets and liabilities are denominated in a currency that is not the entity’s functional currency. The risk is measured using cash fl ow forecasting. The Groups exposure to foreign currency risk relates to investments in overseas entities which are denominated in foreign currency with future investments dependent on achievement of milestones agreed.
The Group maintains a foreign currency (United States dollars) bank account in Australia to control currency risk. The balance of this account at 30 June 2011 was USD$199,725 (2010: USD$314,819).
The Group operates internationally but are only exposed to minimal foreign exchange risk arising from various currency exposures.
Foreign exchange risk arises from future commercial transactions denominated in a currency that is not the entity’s functional currency. The risk is measured using sensitivity analysis and cash fl ow forecasting.
The Group maintains suffi cient funds in this account to cover its foreign currency denominated investments for the immediate future.
(c) Credit risk
Credit risk is managed on a group basis. Credit risk arises from cash and cash equivalents, deposits and banks as well credit exposure including outstanding receivables and committed transactions. For banks and fi nancial institutions, only independently rated parties with a minimum rating of ‘A’ are accepted. In respect of the group, credit risk relates to loans with subsidiary and associated companies. In order to achieve stated corporate objectives, the parent entity provides fi nancial support to subsidiary and associated companies, but only to the level which the Board considers necessary to achieve these objectives and meets agreed conditions. Any loans to subsidiary and associated companies considered to be unrecoverable have been provided for.
(d) Liquidity risk
The Group maintains suffi cient liquidity by holding cash in readily accessible accounts. The Group manages liquidity risk by continuously monitoring forecast and actual cash fl ows and matching the maturity profi les of fi nancial assets and liabilities. The Group has no access to borrowing facilities at the reporting date. The Group’s fi nancial assets $4,118,557 and fi nancial liabilities $348,177 have a maturity within 12 months of 30 June 2011.
(e) Fair value
The carrying amount of fi nancial assets and liabilities recorded in the fi nancial statements represents their respective net fair values unless otherwise noted, determined in accordance with the accounting policies disclosed in the Statement of Accounting Policies.
(f) Sensitivity analysis
The following table illustrates a sensitivity to the Group’s exposure to changes in interest rates and exchange rates. The table indicates the impact on how profi t and equity values reported at reporting date would have been affected by changes in the relevant risk variable that management considers to be reasonably possible. This sensitivity assumes that the movement in a particular variable is independent of other variables.
ANNUAL REPORT FOR YEAR ENDED 30 JUNE 201145 JATENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
Consolidated Entity Profi t Equity $ $Year ended 30 June 2011 +/-1% in interest rates +/- 36,150 +/- 36,150+10% in $A/$US 20,701 20,701-10% in $A/$US (16,938) (16,938)Year ended 30 June 2010 +/-1% in interest rates +/- 38,352 +/- 38,352+10% in $A/$US 40,848 40,848-10% in $A/$US (33,421) (33,421)
3 Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a fi nancial impact on the entity and that are believed to be reasonable under the circumstances.
(a) Critical accounting estimates and assumptions
The Company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by defi nition, seldom equal the related actual results. The estimates and assumptions that have a signifi cant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next fi nancial year are discussed below.
(i) Estimated impairment of investment in associateThe Company review’s impairment of its investments in associates in accordance with the accounting policy stated in note 1(h). Refer to note 11(d) for details of assumptions used.
(ii) Value allocation of intangiblesThe Group determines whether goodwill and intangibles with indefi nite useful lives are impaired at least on an annual basis. This requires an estimation of the recoverable amount of the cash-generating units, using a value in use discounted cash fl ow methodology, to which the goodwill and intangibles with indefi nite useful lives are allocated. See Note 12 for further details.
(iii) Share based paymentsThe Company determines values for share options issued. Disclosure of these valuations can be found in Note 26.
4 Segment information
The Company has identifi ed its operating segment based on the internal reports that are reviewed and used by the Board of Directors (chief operating decision makers) in assessing performance and determining the allocation of resources.
The Company is managed primarily on the basis of product category. The Company’s operating segments are therefore determined on the same basis.
Reportable segments disclosed are based on aggregating operating segments where the segments are considered to have similar economic characteristics and are also similar with respect to the following:
• the products sold provided by the segment;• the planting process;• the type or class of customer for the products;• the distribution method; and• external regulatory requirements.
ANNUAL REPORT FOR YEAR ENDED 30 JUNE 2011 JATENERGY LIMITED 46
NOTES TO THE FINANCIAL STATEMENTS
The primary business segments and the primary geographic segments within which the Company operates are biofuel and coal mining in the Asia Pacifi c regions respectively. For primary reporting purposes, the entity operates predominantly in two geographical areas, being Australia and Indonesia. The acquisition of Blackrock Resources Pty Ltd in April 2011 included mining tenements and contracts located in Indonesia. As at 30 June 2011, no material transactions have been incurred in this segment.
The Group’s operations in the biofuels segment had revenue of $6,890 and operating expenses of $123,750 during the fi nancial year ended 30 June 2011. In addition, assets and liabilities of the biofuels segment included assets of $259,623 and liabilities of $345,534 (mainly intercompany funding for operation of the segment). Details of the coalmining segment fi nancials can be found at Note 22(b).
5 Other revenue and other income
Consolidated Entity 2011 2010 $ $Other revenue Interest 97,392 175,645Other income GST refund received - -Sale of jatropha oil 6,890 -Miscellaneous income 10,807 60,646Total 115,089 236,291
6 Expenses
Consolidated Entity 2011 2010 $ $Loss before income tax includes the following specifi c expenses: Depreciation: Plant and equipment 6,255 6,513Total depreciation 6,255 6,513Finance costs: Interest and fi nance charges paid/payable 226 60Total fi nance costs 226 60 Foreign exchange gains and losses: Net foreign exchange losses recognised in loss before income tax for the year (as either other income or expense) 111,199 118,974Total foreign exchange gains and losses 111,199 118,974Impairment: Investment in associate 321,113 2,472,030 Intangible assets - -Total impairment 321,113 2,472,030Rental expense relating to operating leases: Minimum lease payments 19,565 46,194Total rental expense relating to operating leases 19,565 46,194
ANNUAL REPORT FOR YEAR ENDED 30 JUNE 201147 JATENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
7 Income tax expense
Consolidated Entity 2011 2010 $ $(a) Income tax expense Current tax - - Deferred tax - - - -(b) Numerical reconciliation of income tax expense to prima facie tax payable Loss before income tax expense (3,166,075) (4,803,303) Tax (benefi ts) at the Australian tax rate of 30% (949,822) (1,440,991) Tax effect of amounts which are not deductible in calculating taxable income: Other non-allowable items - - Share-based payments 4,281 6,164 Impairment 96,334 741,609 Adjusted income tax (849,207) (693,218) Tax losses not brought to account 849,207 693,218 Income tax expense - -(c) Tax losses Unused tax losses for the current year for which no deferred tax asset has been recognised 849,207 693,218 Unused tax losses carried forward from prior years for which no deferred tax asset has been recognised 1,372,161 678,943Potential tax benefi t @ 30% 2,221,368 1,372,161
(d) Tax consolidation legislationJatenergy Limited does not have any Australian subsidiaries to implement tax consolidation legislation.
8 Current assets - cash and cash equivalents
Consolidated Entity 2011 2010 $ $Cash at bank and in hand 2,760,388 555,088Term deposit 1,041,301 3,648,055 3,801,689 4,203,143
(a) Reconciliation to cash at the end of the year
The above fi gures are reconciled to cash at the end of the fi nancial year as shown in the statement of cash fl ow as follows:
Consolidated Entity 2011 2010 $ $Balances as above 3,801,689 4,203,143Balances per statement of cash fl ow 3,801,689 4,203,143
ANNUAL REPORT FOR YEAR ENDED 30 JUNE 2011 JATENERGY LIMITED 48
NOTES TO THE FINANCIAL STATEMENTS
(b) Cash
The cash in the investment account earns a fl oating interest rate of 2.75% (2010: 3.75%). The term deposit account earns a fi xed interest rate of 5.60% (2010: 4.81%).
(c) Interest rate risk
The Group’s exposure to interest rate risk relates primarily to the cash balances in the investment account detailed above. The Group’s and the parent entity’s exposure to interest rate risk is discussed in note 2.
9 Current assets - trade and other receivables
Consolidated Entity 2011 2010 $ $Other receivables 292,664 97,905Prepayments 24,204 47,075 316,868 144,980
(a) Effective interest rates and credit risk
There is no interest rate risk for the balance of trade and other receivables.
All amounts past due are considered impaired and provided against. All other receivables are within credit terms and not considered impaired.
10 Non-current assets - property, plant and equipment
Furniture, fi ttings and offi ce equipment Total $ $Consolidated Year ended 30 June 2010 Opening net book amount 27,319 27,319Additions 3,149 3,149Disposals - -Depreciation charge (6,513) (6,513)Closing net book amount 23,955 23,955At 30 June 2010 Cost 37,984 37,984Accumulated depreciation (14,029) (14,029)Net book amount 23,955 23,955Year ended 30 June 2011 Opening net book amount 23,955 23,955Additions 82,093 256,038Transfer from investments 173,945 -Disposals - -Depreciation charge (6,255) (6,255)Closing net book amount 273,738 273,738
ANNUAL REPORT FOR YEAR ENDED 30 JUNE 201149 JATENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
Furniture, fi ttings and offi ce equipment Total $ $At 30 June 2011 Cost 294,022 294,022Accumulated depreciation (20,284) (20,284)Net book amount 273,738 273,738
11 Non-current assets - investments
Consolidated Entity 2011 2010 Note $ $Investment in associates (a) - -Investment in PT Jatenergy Waterland (e) - 173,945 - 173,945
(a) Investments in associates
Investments in associates are accounted for in the consolidated fi nancial statement using the equity method of accounting and are carried at cost by the parent entity.
(b) Movements in carrying amounts Consolidated Entity 2011 2010Carrying amount at the beginning of the fi nancial year - 1,619,219New investments during the year 321,113 1,224,106Dividends received/receivable - -Share of associate loss after income tax - (371,295)Impairment of investment (321,113) (2,472,030)Carrying amount at the end of the fi nancial year - -
(c) Summarised fi nancial information of associates
Ownership Groups Share of: Interest % Assets Liabilities Revenues Profi t/(Loss) $ $ $ $2011 Green Energy Joint Stock Company 45.96 - - - - 2010 Green Energy Joint Stock Company 45.96 326,872 80,639 - (371,295) 326,872 80,639 - (371,295)
The above associates are incorporated in Vietnam. Principal activities are producing processing and marketing jatropha based projects.
ANNUAL REPORT FOR YEAR ENDED 30 JUNE 2011 JATENERGY LIMITED 50
NOTES TO THE FINANCIAL STATEMENTS
(d) Impairment of investment in associate
The Company announced on 24 September 2010 that it would suspend further funding into its Vietnam operations, Green Energy Vietnam (GEV). The farmer contract model was proving too costly and slow to establish compared to the Indonesian plantation model. While Jatenergy will retain its 45.96% stake in GEV, if GEV is unable to raise further capital in the short to medium term, Jatenergy’s investment may be severely impaired or ultimately prove to be unrecoverable. While Jatenergy will endeavour to recover its investment in GEV, given the parameters of the asset impairment assessment process, a decision was taken to write down the investment in GEV to zero. This has resulted in an impairment charge of $321,113 (2010: $2,472,030) in the accounts of the Company.
The investment in Green Energy was based on a business plan to produce jatropha and a positive cash fl ow by 2014. An impairment test insert was prepared on the fi nancial projections prepared by Green Energy and has been based on best-estimate assumptions of the company’s management.
These calculations are cash fl ows based on a fi nancial projection which cover a fi ve-year period plus a terminal value. The revenue projection included crop yields and pricing for seedcake, CJO and carbon. Pricing assumptions are based on near equivalent products recently sold in target markets. All future cash fl ows have been discounted to present values at a rate of 20%.
The Directors have assessed that the recoverable amount of the Company’s investment in Green Energy under the impairment basis is nil as at 30 June 2011.
(e) Investment
The Company has made an initial investment of USD$150,000 (AUD$173,945) for a 70% ownership of 1,000 hectares of two to three year jatropha plantation in Central Java, Indonesia. The investment provides the Company with an option to purchase further interests in a land bank of 10,000 hectares. During the period, this balance has been transferred to property, plant and equipment.
12 Intangibles
Acquisitions Goodwill Contracts Tenements Total $ $ $ $Cost Balance at 1 July 2010 - - - -Acquisitions through business combinations - 1,478,235 4,366,330 5,844,565Effect of movements in exchange rates - - - -Balance at 30 June 2011 - 1,478,235 4,366,330 5,844,565Carrying amounts At 1 July 2010 - - - -At 30 June 2011 - 1,478,235 4,366,330 5,844,565
The premium of $5,844,565 paid over the fair value of assets acquired has been allocated to two interests Blackrock held at the time of acquisition; being a mining services contract and interest in mining tenement in Indonesia.
The Fair value of the mining services contract has been calculated based on net future cash fl ows generated from the contract. A total of $4,366,330 has been allocated to this contract.
ANNUAL REPORT FOR YEAR ENDED 30 JUNE 201151 JATENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
The key assumptions used in the valuation include a discount rate of 22%. Revenues are based on forecasted coal production of 690,000 with an effective margin of $8USD per tonne. The contract life is 2.5 years and in accordance with the Group’s accounting amortisation will be occur on a systematic basis over the life of the contract once coal production commences.
The residual excess of the premium $1,478,235 has been allocated to the mining tenement PT Coal Soil Brik
13 Current liabilities - trade and other payables
Consolidated 2011 2010 $ $Trade payables 348,177 292,936 348,177 292,936
14 Current liabilities - provisions
Consolidated 2011 2010 $ $Employee benefi ts - annual leave 631 17,434 631 17,434
Employee benefi ts - annual leave 2011 2010Consolidated Group Opening balance 1 July 17,434 23,197Additional provisions 9,965 8,322Amounts used (26,768) (14,085)Balance as at 30 June 631 17,434
Provisions of Annual Leave
A provision has been recognised for employee benefi ts relating to annual leave. The measurement and recognition criteria relating to employee benefi ts have been included in Note 1 to this report.
ANNUAL REPORT FOR YEAR ENDED 30 JUNE 2011 JATENERGY LIMITED 52
NOTES TO THE FINANCIAL STATEMENTS
15 Contributed equity
Consolidated Entity 2011 2010 Notes Number Number (a) Share capital Ordinary Shares - -Fully paid (c) 76,626,098 114,299,250 76,626,098 114,299,250 (b) Other equity securities Options Restricted 625,000 2,500,000 Unrestricted 5,500,000 - Directors - Unlisted 1,250,000 5,000,000 Executives - Unlisted 125,000 1,500,000Total options 7,500,000 9,000,000
(c) Movements in ordinary share capital
Date Details Number of shares Issue price $1 July 2008 Opening balance 134,299,250 18,132,26023 June 2009 Share cancellation - PT Biodiesel Austindo (20,000,000) 0.032 (640,000) Less transaction costs arising on share issue - - (610,310)30 June 2009 Closing balance 114,299,250 - 16,881,95030 June 2010 Closing balance 114,299,250 - 16,881,95013 December 2010 Share issue 17,144,888 0.04 686,79612 April 2011 Consolidation of company securities on a 4:1 basis 32,861,098 - -12 April 2011 Share issue 8,125,000 0.16 1,300,00012 April 2011 Share issue 11,000,000 0.20 2,200,00012 April 2011 Share issue 24,640,000 0.20 4,928,000 Less: transaction costs arising on share issue - (341,586)30 June 2011 Closing balance 76,626,098 25,655,160
(d) Ordinary shares
The Company does not have a limited amount of authorised capital.
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number of and amounts paid on the shares held and do not have a par value.
On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote.
ANNUAL REPORT FOR YEAR ENDED 30 JUNE 201153 JATENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
(e) Movements in options
Listed Unlisted Restricted $Opening balance 1 July 2008 8,900,000 19,100,000 -23 June 2009 Options issue at $0.069 500,000 - 8,850Closing balance 30 June 2009 9,400,000 19,100,000 -Options expired 31 December 2009 (7,900,000) (16,600,000) -Options issued at between $0.10 and $0.20 5,000,000 - 56,000Closing balance 30 June 2010 6,500,000 2,500,000 -Options issued at $0.25 expiring 1 March 2014 5,500,000 Options lapsed/expired (1,000,000) Closing balance 30 June 2011 5,500,000 5,500000 2,500,000
(f) Options
Information relating to Jatenergy Director and executive options, including details of options issued and outstanding, is set out in note 25.
(g) Capital risk management
The Group’s and parent entity’s objectives when managing capital are to safeguard their ability to continue as a going concern, so that they can continue to provide returns for shareholders and benefi ts for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. There were no changes in the Group’s approach to capital management during the year. Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements.
16 Reserves and accumulated losses
Consolidated 2011 2010 $ $(a) Reserves Share-based payments reserve 342,335 328,066 342,335 328,066 (b) Accumulated losses Movements in accumulated losses were as follows: Balance 1 July (12,974,363) (8,171,060)Net loss for the year (3,132,679) (4,803,303)Balance 30 June (16,107,042) (12,974,363)
(c) Nature and purpose of reserves
(i) Share-based payments reserve
The share-based payments reserve is used to recognise the fair value of options granted but not exercised.
ANNUAL REPORT FOR YEAR ENDED 30 JUNE 2011 JATENERGY LIMITED 54
NOTES TO THE FINANCIAL STATEMENTS
17 Key management personnel disclosures
(a) Directors
The following persons were Directors of Jatenergy Limited during the fi nancial year.
Chairman - executive
Michael Taverner (retired 4 August 2010)Ross Kestel (from 4 August 2010)
Non-executive directors
Ross KestelTom HancockEdgare Kerkwijk (from 1 March 2010, retired 16 November 2010)Alan Broome, Non-Executive Director (appointed 15 April 2011)Xipeng Li, Non-Executive Director (appointed 15 April 2011)Wilton Yao, Alternate Non-Executive Director for Mr Xipeng Li (appointed 15 April 2011)
(b) Other key management personnel
Phil Hodgson Paul Hogan
(c) Key management personnel compensation
The Company has taken advantage of the relief provided by Corporations Regulation 2M.6.04 and has transferred the detailed remuneration disclosures to the Director’s report. The relevant information can be found in sections A-D of the remuneration report on pages 13 to 19.
(d) Equity instrument disclosures relating to key management personnel
(i) Options provided as remuneration and shares issued on exercise of such options
Details of options provided as remuneration, together with terms and conditions of the options, can be found in note 26.
(ii) Options holding
The numbers of options over ordinary shares in the Company held during the fi nancial year by each Director of Jatenergy Limited and other key management personnel of the Group, including their personally related parties, are set out below.
ANNUAL REPORT FOR YEAR ENDED 30 JUNE 201155 JATENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
Balance at the Granted Exercised Other Balance Vested and start of the during the during the changes at the end exercisable year year as year during the of the year at the end compensation year of the yearName No. No. No. No. No. No.2011 Directors of Jatenergy Limited Ross Kestel 500,000 - - - 125,0001 125,0001
Tom Hancock 500,000 - - - 125,0001 125,0001
Alan Broome - - - - - -Xipeng Li - - - - - -Wilton Yao - - - - - -Other key management personnel Phil Hodgson 5,500,000 - - - 1,375,0001 125,0001
Paul Hogan 1,000,000 - - (1,000,000) 2 - -1. Consolidation of company securities on a 4:1 basis completed 8 March 20112. Expired 31 December 20102010 Directors of Jatenergy Limited Michael Taverner 1,850,000 - - (350,000) 1,500,000 1,500,000Ross Kestel 500,000 - - - 500,000 500,000Tom Hancock 500,000 - - - 500,000 500,000Edgare Kerkwijk - - - - - -Other key management personnel Phil Hodgson 500,000 5,000,000 - - 5,500,000 500,000Paul Hogan 1,000,000 - - - 1,000,000 1,000,000
(iii) Share holdings of key management personnel
The numbers of shares in the Company held during the fi nancial year by each Director of Jatenergy Limited, including their personally related parties, are set out below. There were no shares granted during the reporting period as compensation.
Balance at the Received during Other changes Balance at the start of the year the year on the during the year end of the year exercise of options No. No. No. No.2011 Directors of Jatenergy Limited ordinary shares Ross Kestel - - - -Tom Hancock 1,330,000 - 10,303* 342,803*Phil Hodgson 300,000 - 10,303* 97,803*Alan Broome - - - -Xipeng Li - - 13,411,222 13,411,222Wilton Yao - - - -* Consolidation of company securities on a 4:1 basis completed 8 March 2011Xipeng Li owns 13,411,222 shares indirectly
ANNUAL REPORT FOR YEAR ENDED 30 JUNE 2011 JATENERGY LIMITED 56
NOTES TO THE FINANCIAL STATEMENTS
Balance at the Received during Other changes Balance at the start of the year the year on the during the year end of the year exercise of options No. No. No. No.2010 Directors of Jatenergy Limited ordinary shares Michael Taverner 863,080 - 150,000 1,013,080Ross Kestel - - - -Tom Hancock 1,330,000 - - 1,330,000Edgare Kerkwijk - - 220,000 220,000Phil Hodgson 150,000 - 150,000 300,000Michael Taverner owns 1,013,080 shares indirectly.Tom Hancock owns 1,330,000 shares indirectly.Edgare Kerkwijk owns 220,000 shares directly.Phil Hodgson owns 300,000 shares directly.
(e) Other transactions with key management personnel
There were no other transactions with key management personnel during the fi nancial year ended 30 June 2011.
The chief executive offi cer and general manager are employed under a consulting and employment services contract, respectively.
18 Remuneration of auditors
During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related practices and a non-related audit fi rm.
Consolidated Entity 2011 2010 $ $(a) Assurance services Audit services Grant Thornton Australian fi rm Audit of fi nancial reports and other audit work under the Corporations Act 2001 63,708 50,000Total remuneration for audit services 63,708 50,000Other assurance services - -Total remuneration for assurance services 63,708 50,000(b) Taxation services Grant Thornton Australian fi rm Tax compliance services, including review of company income tax returns 12,735 12,225Total remuneration for taxation services 12,735 12,225(c) Advisory services Grant Thornton Australian fi rm Initial public offering, other public raisings 46,519 -Total remuneration for advisory services 46,519 -Total remuneration for non-audit services 59,254 12,225
ANNUAL REPORT FOR YEAR ENDED 30 JUNE 201157 JATENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
Grant Thornton were appointed as the Group’s auditors at the Annual General Meeting on 26 October 2007.
It is the Group’s policy to employ Grant Thornton on assignments additional to their statutory audit duties where Grant Thornton’s expertise and experience with the Group are important, and where the engagement does not compromise their independence. It is the Group’s policy to seek competitive tenders for all major consulting projects.
19 Contingencies
(a) Contingent liabilities
The Group had no signifi cant contingent liabilities at 30 June 2010 or at 30 June 2011.
(b) Contingent assets
The Group had no signifi cant contingent assets at 30 June 2010 or at 30 June 2011.
20 Commitments
(a) Operating lease commitments - group as lessee
Consolidated Entity 2011 2010 $ $Commitments for minimum lease payments in relation to operating leases contracted for the reporting date but not recognised as liabilities, payable: Within one year 18,315 48,212Later than one year but not later than fi ve years - 18,315Later than fi ve years - - 18,315 66,527
Representing: Non-cancellable operating leases - - 18,315 66,527
The Group leases an offi ce under a non-cancellable operating lease expiring in three years. The lease contains an option to extend for an additional two year period.
At 30 June 2011 the Group has a commitment to PT Waterland Asia Bio Ventures that, subject to completion of specifi c milestones, Jatenergy will purchase 70% of capital in PT Jatenergy Waterland.
ANNUAL REPORT FOR YEAR ENDED 30 JUNE 2011 JATENERGY LIMITED 58
NOTES TO THE FINANCIAL STATEMENTS
21 Related party transactions
(a) Parent entities
Jatenergy Limited is the ultimate parent entity within the Group.
(b) Subsidiaries
Interests in the subsidiary are set out in note 22.
(c) Key management personnel
Disclosures relating to key management personnel are set out in the Director’s report.
(d) Amounts receivable or payable to related parties
Amounts receivable from or payable to the controlled entity are shown in notes 9 and 13 to the fi nancial statements. These amounts do not carry interest and there is no fi xed term for their repayment.
(e) Transactions with related parties
The following transactions occurred with related parties:
Consolidated Entity 2011 2010 $ $A company controlled by George Sims, a former director, provided consultancy services during the period 31,892 -A company controlled by Wilton Yao, a director, provided consultancy services during the period 106,173 -
22 Controlled Entities
(a) Controlled Entities Consolidated
Subsidiaries of Jatenergy Limited Country of incorporation Percentage Owned (%)* 2011 2010 % %Jatenergy Holdings Pte Ltd Singapore 100 100Jatenergy Indonesia Pte Ltd Singapore 100 100PT Jatoil Waterland Indonesia 70 70Blackrock Resources Pty Ltd Australia 100 100Blackrock Energy Pte Ltd Singapore 100 100* Percentage of voting power is in proportion to ownership
ANNUAL REPORT FOR YEAR ENDED 30 JUNE 201159 JATENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
(b) Acquisition of Controlled Entities
On 12 April 2011, the parent entity acquired a 100% interest of Blackrock Resources Pty Ltd which held the rights to 2 coal projects in Kalimantan, Indonesia. The acquisition was a result of the Group’s strategy of increasing its presence in the mining industry. The acquisition resulted in Jatenergy Limited obtaining control of Blackrock Resources Pty Ltd.
Fair Value $000Share Consideration 4,928,000 4,928,000
Less Cash and cash equivalents 1,476Deposits paid 195,395Property, plant and equipment -Payables (11,741)Borrowings (1,101,695)Intangibles - Tenements 4,366,330- Contracts 1,478,235Identifi able assets acquired and liabilities assumed 4,928,000Goodwill -
In relation to the Blackrock Business combination, no goodwill arose given that an active business was not acquired.
The premium of $5,844,565 paid over the fair value of assets acquired has been allocated to two interests Blackrock held at the time of acquisition; being a mining services contract and interest in mining tenement in Indonesia.
The Fair value of the mining services contract has been calculated based on net future cash fl ows generated from the contract. A total of $4,366,330 has been allocated to this contract.
The key assumptions used in the valuation include a discount rate of 22%. Revenues are based on forecasted coal production of 690,000 with an effective margin of $8USD per tonne. The contract life is 2.5 years and in accordance with the Group’s accounting amortisation will be occur on a systematic basis over the life of the contract once coal production commences.
The residual excess of the premium $1,478,235 has been allocated to the mining tenement PT Coal Soil Brik.
The consideration paid to acquire Blackrock Resources Pty Ltd includes 24,640,000 shares at $0.20 each issued to the vendors of Blackrock Resources Pty Ltd. The fair value of the shares has been determined based on the market price of the shares at the date of acquisition.
Revenue of Blackrock Resources Pty Ltd included in the consolidated revenue of the Group since the acquisition date on 12 April 2011 amounted to $nil. Profi t of Blackrock Resources Pty Ltd included in the consolidated profi t of the Group since the acquisition date amounted to $nil. Acquisition costs not capitalised amount to $Nil.
The consolidated fi nancial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in note 1(b).
ANNUAL REPORT FOR YEAR ENDED 30 JUNE 2011 JATENERGY LIMITED 60
NOTES TO THE FINANCIAL STATEMENTS
Name of entity Country of incorporation Class of shares Equity holding 2011 2010 % %Jatenergy Holdings Pte Ltd Singapore Ordinary 100 100Jatenergy Indonesia Pte Ltd (*) Singapore Ordinary 100 100Jatenergy Vietnam Pte Ltd (*) Singapore Ordinary 100 100Blackrock Resources Pty Ltd Australia Ordinary 100 -Blackrock Energy Pte Ltd (x) Singapore Ordinary 100 -PT Jatoil Waterland Indonesia Ordinary 70 -* These entities are subsidiaries of Jatenergy Holdings Pte Ltd.x This entity is a subsidiary of Blackrock Resources Pty Ltd
23 Events occurring after the reporting date
No matters other than the above have arisen since 30 June 2011 that has signifi cantly affected, or may signifi cantly affect:
(i) the Company’s operations in future fi nancial years; or(ii) the results of those operations in future fi nancial years; or(iii) the Company’s state of affairs in future fi nancial years.
24 Reconciliation of loss after income tax to net cash outfl ow from operating activities
Consolidated Entity 2011 2010 $ $Loss for the year (3,166,075) (4,803,303)Depreciation and amortisation 6,255 6,513Foreign exchange loss 111,199 118,974Non-cash expense - share-based payments 14,269 20,548Other non-cash items: Impairment 321,113 2,472,030 Gain on loss of control - - Share of associate’s loss - 371,295Change in operating assets and liabilities: Increase/(decrease) in trade and other receivables 23,507 (82,836) Increase/(decrease) in trade and other payables 43,500 146,639 Decrease in provisions (16,803) (5,763)Net cash (outfl ow) from operating activities (2,663,035) (1,755,903)
ANNUAL REPORT FOR YEAR ENDED 30 JUNE 201161 JATENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
25 Loss per share
Consolidated Entity 2011 2010 cents cents(a) Basic and diluted loss per share Basic loss attributable to the ordinary equity holders of the Company (7.83) (16.81)Diluted loss attributable to the ordinary equity holders of the Company (7.62) (16.81) (b) Loss used in calculating basic and diluted loss per share (3,166,075) (4,803,303) (c) Weighted average number of shares used as the denominator Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share. 40,416,616 114,299,250Weighted average number of ordinary shares used as the denominator in calculating diluted earnings per share. 41,501,780 114,299,250
(d) Information concerning the classifi cation of securities
(i) Options
Options granted to executives and Directors are considered to be potential ordinary shares and have been included in the determination of diluted earnings per share to the extent to which they are dilutive. In the year ended 30 June 2010 and 30 June 2011, these options were in fact anti-dilutive, and consequently diluted EPS is the same as basis EPS. The options have not been included in the determination of basic earnings per share. Details relating to the options are set out in note 26.
26 Share-based payments
(a) Director and executive options
The issuance of options to Directors and executives was approved by shareholders at the General Meeting on 26 October 2007.
Options were granted for no consideration and are exercisable at $0.20. Each option entitles the holder to one share in the Company. Options granted carry no dividend or voting rights.
The Director options were granted and vested at the date of the initial public offering. They are exercisable at any time prior to 30 November 2011. The fair value of these options of $289,500 has been recorded as share-based compensation in the year ended 30 June 2008.
Additional Director options were granted to Phil Hodgson as approved at a General Meeting of Shareholder on 23 June 2009. The fair value of these options of $8,850 has been recorded as share-based compensation in the year ended 30 June 2009.
These options were granted for no consideration and are exercisable at $0.069 any time prior to 1 July 2012, the options vested on issue. Each option entitles the holder to one share in the Company. Options granted carry no dividend or voting rights.
ANNUAL REPORT FOR YEAR ENDED 30 JUNE 2011 JATENERGY LIMITED 62
NOTES TO THE FINANCIAL STATEMENTS
The executive options were granted to the general manager, and will only vest if the milestones as described below are attained.
Tranche Milestone No. of options Fair value of options1 First anniversary date of executive’s execution of the agreement 500,000 6,4712 Second anniversary date of executive’s execution of the agreement 500,000 6,471
The number of options granted are also summarised in note 17 key management personnel disclosures. No options granted as share-based payments were forfeited or exercised during the periods covered by the tables in that note.
The weighted average remaining contractual life of Director and executive share options outstanding at the end of the period was three years.
Fair value of options granted
The assessed fair value of grant date of options granted during the year ended 30 June 2010 was between $0.01 and $0.013 cents (2009: $0.018 cents) per option. The fair value at grant date is determined using a binomial option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate of the term of the option.
The model inputs for options granted during the year ended 30 June 2010 include:
The expected price volatility is based on the historic volatility of companies in the biofuels sector.
Total expenses arising from share-based payment transactions recognised during the period were as follows:
Consolidated Entity 2011 2010 $ $Options issued to directors - -Options issued to executives 14,269 20,548 14,269 20,548
A total of 5,000,000 executive options were granted to Phil Hodgson as approved at a general Meeting of shareholders on 17 November 2009. The fair value of these options are as set out below:
Tranche Milestone No. of Options Fair Value of OptionsSeries 1 expiry of 12 months from the date of extension of the Executive Service Contact 1,500,000 $15,000Series 2 realisation of an investment in, or a capital raising by, the Company and or its subsidiaries, in excess of $10,000,000 USD 1,000,000 $13,000Series 3 realisation of an investment in, or a capital raising by, the Company and or its subsidiaries, in excess of $20,000,000 USD 1,000,000 $10,000Series 4 the volume-weighted average price of this Company’s shares as traded on ASX exceeding $0.20 for 20 consecutive Business Days 1,000,000 $13,000Series 5 the volume-weighted average price of the Company’s shares as traded on ASX exceeding $0.30 for 20 consecutive Business Days 500,000 $5,000
ANNUAL REPORT FOR YEAR ENDED 30 JUNE 201163 JATENERGY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
27 Jatenergy Limited - Parent Company Information
Consolidated Entity 2011 2010 $ $Parent Entity Assets Current assets 3,908,526 4,348,123Non-current assets 6,452,846 197,900Total assets 10,361,372 4,546,023Liabilities Current liabilities 337,114 310,370Total liabilities 337,114 310,370Equity Issues capital 25,655,159 16,881,950Retained earnings (15,973,236) (12,974,363)Total equity 9,681,923 3,907,587Reserves Asset revaluation reserve - -Financial assets reserve -Share-based payments reserve 342,335 328,066Total reserves 342,335 328,066Financial performance Loss for the year (2,998,873) (4,803,303)Other comprehensive income - -Total comprehensive income (2,998,873) (4,803,303)Guarantees in relation to the debts of subsidiaries Guarantee provided under the deed of cross guarantee Nil NilContingent liabilities Non-cancellable operating lease - premises 18,315 66,527Contractual commitments Contractual capital commitments for the acquisition of property, plant or equipment. Nil Nil
ANNUAL REPORT FOR YEAR ENDED 30 JUNE 2011 JATENERGY LIMITED 64
DIRECTORS’ DECLARATION
The Directors of the Company declare that:
(a) the fi nancial statements and notes set out on pages 26 to 59 are in accordance with the Corporations Act 2001, and:
(i) comply with Accounting Standards;
(ii) give a true and fair view of the fi nancial position as at 30 June 2011 and of the performance for the year ended on that date of the consolidated entity.
(iii) comply with International Financial Reporting Standards as disclosed in note 1.
(b) the chief executive offi cer and chief fi nancial offi cer have each declared that:
(i) the fi nancial records of the Company for the fi nancial year have been properly maintained in accordance with section 286 of the Corporations Act 2001;
(ii) the fi nancial statements and notes for the fi nancial year comply with the Accounting Standards; and
(iii) the fi nancial statements and notes for the fi nancial year give a true and fair view;
(c) in the Directors opinion there are reasonable grounds to believe that the Company 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.
Ross KestelChairman
Sydney22 September 2011
ANNUAL REPORT FOR YEAR ENDED 30 JUNE 201165 JATENERGY LIMITED
INDEPENDENT AUDITOR’S REPORT
Grant Thornton Audit Pty LtdACN 130 913 594
Level 17, 383 Kent StreetSydney NSW 2000Locked Bag Q800QVB Post Offi ceSydney NSW 1230
T +61 2 8297 2400F +61 2 9299 4445E [email protected] www.grantthornton.com
INDEPENDENT AUDITOR’S REPORTTO THE MEMBERS OF JATENERGY LIMITED
REPORT ON THE FINANCIAL REPORT
We have audited the accompanying fi nancial report of Jatenergy Limited (the “Company”), which comprises the consolidated statement of fi nancial position as at 30 June 2011, the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash fl ows for the year then ended, notes comprising a summary of signifi cant accounting policies and other explanatory information and the directors’ declaration of the consolidated entity comprising the Company and the entities it controlled at the year’s end or from time to time during the fi nancial year.
Directors responsibility for the fi nancial reportThe Directors of the Company are responsible for the preparation of the fi nancial report that gives a true and fair view of the fi nancial report in accordance with Australian Accounting Standards and the Corporations Act 2001. This responsibility includes such internal controls as the Directors determine are necessary to enable the preparation of the fi nancial report to be free from material misstatement, whether due to fraud or error. The Directors also state, in the notes to the fi nancial report, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that compliance with the Australian equivalents to International Financial Reporting Standards ensures that the fi nancial report, comprising the fi nancial statements and notes, complies with International Financial Reporting Standards.
Auditor’s responsibilityOur responsibility is to express an opinion on the fi nancial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards which require us to comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the fi nancial report is free from material misstatement.
Grant Thornton Australia Limited is a member fi rm within Grant Thornton International Ltd. Grant Thornton International Ltd and the member fi rms are not a worldwide
partnership. Grant Thornton Australia Limited, together with its subsidiaries and related entities, delivers its services independently in Australia.
Liability limited by a scheme approved under Professional Standards Legislation
ANNUAL REPORT FOR YEAR ENDED 30 JUNE 2011 JATENERGY LIMITED 66
INDEPENDENT AUDITOR’S REPORT
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the fi nancial report, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the Company’s preparation and fair presentation of the fi nancial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the fi nancial report.
We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
IndependenceIn conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.
Auditor’s opinionIn our opinion:a. the fi nancial report of Jatenergy Limited is in accordance with the Corporations Act 2001, including:
i. 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; and
ii. complying with Australian Accounting Standards and the Corporations Regulations 2001; andb. the fi nancial report also complies with International Financial Reporting Standards as disclosed in the notes to the fi nancial
statements. Report on the remuneration report We have audited the remuneration report included in pages 13 to 19 of the directors’ report for the year ended 30 June 2011. The Directors of the Company are responsible for the preparation and presentation of the remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the remuneration report, based on our audit conducted in accordance with Australian Auditing Standards.
ANNUAL REPORT FOR YEAR ENDED 30 JUNE 201167 JATENERGY LIMITED
INDEPENDENT AUDITOR’S REPORT
Auditor’s opinion on the remuneration reportIn our opinion, the remuneration report of Jatenergy Limited for the year ended 30 June 2011, complies with section 300A of the Corporations Act 2001.
GRANT THORNTON AUDIT PTY LTDChartered Accountants
Andrew RigeleDirector - Audit & Assurance
Sydney, 22 September 2011
ANNUAL REPORT FOR YEAR ENDED 30 JUNE 2011 JATENERGY LIMITED 68
SHAREHOLDER INFORMATION
The shareholder information set out below was applicable as at 7 September 2011.
(a) Distribution of equity securities
Analysis of a number of equity security holders by size of holding:
Holders Units Issued Capital 1 - 1,000 24 13,868 0.02% 1,001 - 5,000 277 847,797 1.07% 5,001 - 10,000 148 1,106,083 1.41% 10,001 - 100,000 373 13,426,264 17.08% 100,001 - And over 115 63,221,556 80.42%Total on Register 937 78,615,568 100.00%
Total Number of Unmarketable Parcels: 272
(b) Equity security holdings
(i) Ordinary Shares
Twenty largest quoted equity security holders.
The names of the 20 largest quoted equity security holders of quoted equity securities are listed below:
Spread & Top 20 Listings Holder Name Current Status % of Units Issued1 SHENG RUN HLDGS GRP AUST 9,125,000 11.61%2 ICELAND NOM LTD 5,967,000 7.59%3 SHENG RUN HLDGS GRP AUST 4,286,222 5.45%4 SIM GEORGE CALDER 4,162,885 5.30%5 HSBC PORTFOLIO NOM PL 2,653,337 3.38%6 HSBC CUSTODY NOM AUST LTD 2,624,067 3.34%7 SHL PL 2,612,568 3.32%8 JAT SHARE SCHEME PL 1,989,470 2.53%9 CRIMMINS ANTHONY STEPHEN 1,655,039 2.11%10 CAMUGLIA JOSEPH + K 1,154,481 1.47%11 BOND STREET CUSTS LTD 1,000,000 1.27%12 CAMUGLIA ANTHONY 902,174 1.15%13 CAMUGLIA JOHN 902,174 1.15%14 CRIMMINS ANTHONY STEPHEN 875,500 1.11%15 MELDEJ PL 773,735 0.98%16 ANDERSON DAVID JOHN 747,032 0.95%17 I E PROPS PL 675,012 0.86%18 RUN IT PL 636,549 0.80%19 NUBEY TRADING PL 614,145 0.78%20 FAR EAST CAP LTD 560,875 0.71% Total Top 20 Shareholders 43,917,265 55.86%
ANNUAL REPORT FOR YEAR ENDED 30 JUNE 201169 JATENERGY LIMITED
SHAREHOLDER INFORMATION
(c) Substantial holders
The substantial shareholders of the Company are as follows:
Holder Name Current Status % of Units IssuedSHENG RUN HLDGS GRP AUST 9,125,000 11.61%ICELAND NOM LTD 5,967,000 7.59%SHENG RUN HLDGS GRP AUST 4,286,222 5.45%SIM GEORGE CALDER 4,162,885 5.30%
(d) Voting rights
The voting rights attaching to each class of equity securities are set out below:
(i) Ordinary Shares
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote.
(ii) Options
No voting rights.
JATENERGY LIMITED(Formerly JATOIL LIMITED)
ABN 31 122 826 242
Floor 6, Suite 8, 55 Miller Street, Pyrmont NSW 2009, AUSTRALIAT +61 2 9571 8300 F +61 2 9571 8200 E [email protected]
www.jatoil.net
jatOILENERGY