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Working for YOUQUEENSLAND SUGAR LIMITED ANNUAL REPORT 2012/13

CONTENTS

About QSL and key achievements 1

Chairman’s report 2

Chief Executive Officer’s report 4

Value offering 6

Value snapshot 8

Market review 14

QSL people and community 16

Environment, health and safety 17

QSL Leadership Team 18

Corporate governance 20

Remuneration report 24

Statutory financial report 26

CAIRNS

MOURILYAN

LUCINDA

TOWNSVILLE

MACKAY

BUNDABERG

QSL MembersTHIRTY REPRESENTATIVES OF AUSTRALIAN SUGAR MILLS AND CANE GROWERS

QSL Board of DirectorsMIKE CARROLL GUY COWAN SARAH SCALES MARK SAGE GREG BEASHEL (CEO and MD)

Leadership Team

GREG BEASHELCHIEF EXECUTIVE OFFICER AND MANAGING DIRECTOR

DAMIAN ZIEBARTHGENERAL MANAGER OPERATIONS

ROBERT HINESCHIEF FINANCIAL OFFICER

BELINDA WATTONGENERAL MANAGER HR AND COMMUNICATIONS

AARON SEARLEFINANCE AND ACCOUNTING MANAGER

MARGARET PASCOECOMPANY SECRETARY AND LEGAL COUNSEL

BRYCE WENHAMFINANCE MANAGER, SUPPLIER RELATIONS

ANDREW HARRISONMANAGER QUALITY AND LOGISTICS

MIKE PANKETERMINAL MANAGER - MACKAY AND BUNDABERG

STEPHEN STONETREASURER

ABOUT QSL

KEY ACHIEVEMENTSFOR 2012/2013: Strong safety focus with formation of Safety Leadership Team.

43% reduction in total recordable injury frequency rate.

Outperformed market benchmark by an average of $20 per tonne IPS in QSL ICE 11 pools.

Net positive allocation to the Shared Pool of $1.03 per tonne IPS.

Introduced two new forward-season pools to enable pricing decisions to be made as far out as 2015.

Outperformed marketing premium benchmark by $5.02 per tonne IPS.

Returned $3.1 million to members through the Shared Pool from corporate activities.

Outlook rating improved by Standard & Poor’s to ‘stable’ from ‘negative’ and existing ‘A long-term’ and ‘A1 short-term’ credit rating affirmed (July 2013).

Re-financed $500m credit facility for extended three-year term with a $300 million step-down approach. This combined with more favourable terms provides for estimated annual benefits of $1.4 million each year.

All Raw Sugar Supply Agreements (RSSA) rolled-over to the end of the 2016 season (30 June 2017). MSF publicly announced it would sign a new agreement with QSL.

Renewed a five-year lease with Sugar Terminals Limited.

First shipment of sugar from the Bundaberg Port in June 2013 after initial dredging undertaken to clear silt in channel caused by January 2013 floods. Government (State and Federal) agreed to fund further dredging to restore the Port (July 2013).

Finalised the repair of the Lucinda jetty after Tropical Cyclone Yasi and re-opened in August 2012.

Creating value for:MARKETING CUSTOMERS by providing a reliable and consistent source of quality raw sugar at a competitive price.

GROWER AND MILLING MEMBERS by providing cost-effective access to:

�� The highest returning raw sugar markets in the Asia-Pacific region

�� Funding, pricing and logistics services.

EMPLOYEES by creating a safe, enjoyable and rewarding working environment where people can achieve their potential.

To serve the interest of growers and millers for the long-term growth and prosperity of the

Queensland sugar industry

QUEENSLAND SUGAR LIMITED ANNUAL REPORT 2012/13 1

CHAIRMAN’S REPORTMIKE CARROLL

In 2012/13 the net pool returns were down on the previous year: $432.15 per tonne IPS (total QSL managed ICE 11 pools average) versus the record return of $519.25 per tonne IPS (total QSL managed ICE 11 pools average) in 2011/12. While disappointing the result was ahead of our Passive Management benchmark of $411.59 dollars per tonne IPS.

The drop in returns reflects the fall in international sugar markets and the ICE 11 contract. The out-performance is largely due to the QSL pricing team forming the view that the market would continue to decline through the season so we priced as much as possible as early as possible. This report includes a commentary from our Treasurer, Stephen Stone, on the factors that influenced the market in 2012/13.

Other important contributions to net returns include:

�� The premium on physical sales, which is a reflection of our reputation for quality and on-time and in-full delivery and long-standing customer relationships

�� Efficient terminal operation without compromising the safety of our employees

�� Overall sound cost management.

There are further details on QSL’s performance on pages 8-13 of this report where we have introduced a more comprehensive analysis of QSL’s performance over the last 12 months and included historic data so that our members can put the year just gone into context and appreciate our underlying performance trends.

So while we are pleased with QSL’s 2012/13 performance in a declining market it was a year with significant distractions.

Our diverse membership base has some distinct interests.

�� Wilmar – our largest milling member wants access to physical Australian

sugar to compliment its trading activity, in what is becoming one of the largest international sugar plays, and proposed a Grower Choice model

�� Growers – our members with the most capital invested in the industry want greater control over how their sugar is marketed so they can ensure industry value (the size of the pie) is not diminished and that their share of the value (share of the pie) is protected

�� Our other milling members have different wants, but common to all of them is access to the economies of scale that pooling Australia’s raw sugar provides in logistics, quality management, funding and managing price risk.

While the RSSA provides some certainty for the next three years, the sense that some members are reluctant parties to this arrangement undermines confidence in QSL’s longer-term future. For QSL it is important that we find a more stable arrangement. The current uncertainty is a significant distraction from the things we should be focusing on, making it challenging to retain and attract good people and leading to short-term thinking around developing our systems and capabilities in general.

Our assessment of the latest version of the Wilmar proposal is that with some modification it could be workable and would preserve most of the value that QSL provides to the industry. A version of the Wilmar proposal would keep Australia’s sugar together so that QSL can continue offering:

�� The ICE 11 price risk management pools

�� The Advances Program

�� Logistics and quality management

all exactly as we do today. The only point of contention is whether multiple sellers of Australian sugar competing with QSL will result in a lower physical sales premium and whether the premium they have offered offsets this adequately and equitably for all other participants in the industry.

We remain very focused on creating value for our members. One of the most important aspects of this is the “net” performance on the raw sugar pools.

2 QUEENSLAND SUGAR LIMITED ANNUAL REPORT 2012/13

However we have some empathy with growers’ concerns, that before the ink is dry on Option B (where millers have access to market their economic interest sugar) there is another proposal and the uncertainty that this creates about where this seemingly ongoing change will end.

The Greenpool Report, like the PSP Report (independent report commissioned by QSL into potential future marketing options) has a number of points we could all debate. However they are largely points to which there is no definitive answer, so this wouldn’t be helpful. When we first saw the report’s key recommendation we thought it was rather radical, however the industry is unique. No other Australian farm product sees the majority of growers having to deal with processors in a monopoly position. So despite being in an era of deregulation where governments seek not to interfere with markets and their competitive dynamic, for 90 percent of growers there is no competition for unmilled cane.

The essence of the report’s recommendations is seeking to put growers in a position where they can control who markets their interest, their share of raw sugar and ultimately the headline figure in their own profit and loss.

We don’t see this concept as being mutually exclusive to Wilmar and Maryborough Sugar Factory (MSF) desires to compete with QSL in offering growers a physical marketing choice. We’d like to think there is a win-win outcome. So we encourage our members to keep talking and exploring how your different interests can be accommodated.

There is a lot at stake here. Let us keep a focus on our common objectives – we do have a lot of common ground:

1. Three of QSL’s activities are not in contention so we should endeavour not to jeopardise the value this creates for the industry

2. We should endeavour to find an outcome that is more stable and that engenders confidence across the supply chain.

It is only with confidence that there will be more investment in the industry, and only with investment will we see increased production, productivity and international competitiveness. These are the things that matter.

We are clearly of the view that the worst outcome for the industry would be the total collapse of our current collaborative arrangements. The Board of QSL strongly encourages the industry to find an arrangement that optimises long-term value in an equitable form for all of our members, and bring these negotiations to a landing. Ultimately QSL’s future is in our members’ hands.

Moving on to other matters, there have been quite a few people changes at QSL that we’d like to acknowledge.

Early in the year Nicole Birrel chose not to seek re-appointment as a Director of QSL and the Board Selection Committee appointed Sarah Scales. I would like to acknowledge the contribution made by Nicole, one of the four original independent Board members, and welcome Sarah. Sarah brings experience and expertise in soft commodity pricing and pool management, international marketing and risk management.

With the departure of our Chief Financial Officer (CFO) Matthew Wedmaier in April this year we welcomed Robert Hines’ appointment. Rob brings a depth of experience having been CFO at a number of leading Queensland companies. We are impressed with how quickly Rob has got his mind around the business and the contribution he is making to the Leadership Team.

Brent Casey, General Manager Marketing and Sales also decided to leave QSL. Both Matt and Brent made very significant contributions to the business and we’d like to sincerely acknowledge and thank them for that.

With concern for the loss of experienced executives we have elevated five employees to the Leadership Team. Their profiles are included in this report. The Board believes this team, which has the very important responsibility of leading the formation and implementation of QSL’s strategy and business plans, has the appropriate mix of industry experience, corporate knowledge and diversity to effectively continue the legacy of commitment and dedication to delivering value for QSL’s members.

Another area of QSL’s activity that the Board believes requires refinement is the funding of various industry initiatives. In the past QSL has funded quite a diverse range of activities, some with varying levels of member support. As funding these activities ultimately impacts pool performance the Board would like to narrow the scope of this activity to “industry good” initiatives that directly impact the international marketing and demand for Australian raw sugar. We encourage the industry to create a mechanism that can raise levies, has the expertise to evaluate proposals and a governance framework to oversee investment in initiatives that are not directly related to the international marketing of raw sugar.

As always we look forward to continuing a high level of engagement with our members and welcome your input.

On behalf of the QSL Board.

3QUEENSLAND SUGAR LIMITED ANNUAL REPORT 2012/13

CHIEF EXECUTIVE OFFICER AND MANAGING DIRECTOR’S REPORTGREG BEASHEL

Delivering results is fundamental to meeting this expectation. I am pleased to report that this year our performance has surpassed expectations and we have met or exceeded our key goals.Key highlights of the year include:

�� A significant improvement in our safety culture and performance, evidenced by a 43% reduction in our total recordable injury frequency rate

�� Pool returns outperforming the market by an average of more than $20 per tonne IPS in QSL ICE 11 pools

�� Rolling over of the RSSAs to 30 June 2017

�� Renewal of our Standard and Poor’s credit rating and an upgrade of our outlook from ‘negative’ to ‘stable’

�� A renewal of our lease with Sugar Terminals Limited to 31 December 2018

�� A new restructured financing facility with annual benefits estimated at $1.4 million

�� An announcement by MSF that they will return to the pooling system and sign a new RSSA with QSL

�� An under-budget performance across the organisation of $2 million.

The purpose of QSL is to serve the interests of growers and millers for the long-term growth and prosperity of the Queensland sugar industry.

We see the most important aspects of this are:

1. Running a safe and efficient operation

2. Maximising pool returns for our members

3. Offering an approach to risk management that our members are comfortable with and providing individual choices that reflect their risk appetite, particularly around sugar and foreign exchange hedging decisions

4. Advancing money to members, ahead of payments from customers, at low cost.

I wanted to run through our performance in each of these key areas of our business.

Improving our safety performance and making our business more efficient has been a major focus over the last year. Improved safety and financial performance are closely linked for organisations as long as the improvements are supported from the top-down and are made in a sensible way. Our focus on safety improvement has changed from reducing lost time injuries to eradicating all injuries. This new focus coupled with hard work and dedication throughout the organisation has paid dividends in terms of results with our total recordable injury frequency rate reducing by 43% over the year. We are targeting a further 50% reduction over the next year.

In my CEO report last year, I discussed my desire that QSL be an organisation that does what we say we are going to do and does not surprise on the downside.


The second major focus has been on maximising pool returns. Our significant outperformance of the average market in all our pools has been pleasing. Pool returns are critical to the long-term viability and success of our clients in both the milling and growing sectors. In 2012/13 the sugar market endured another year where world production exceeded consumption by quite a margin resulting in considerably lower market levels than the previous year. We were in a generally falling market through the year and our decision to hedge ahead of a passive market approach paid-off well with an outperformance across all our pools in excess of an average $20 per tonne IPS (QSL ICE 11 pools) and costs coming in $2 million under-budget. In the lower market environment, it was important to outperform the market to lessen the financial impact for our clients.

The third area of focus was our risk management approach. Managing market volatility and other risks such as production risk, delivery risk and payment risk that are unavoidable in a commodity exporting business like ours is key to our success and ability to deliver results.

There were significant challenges in both financial and operational risk management through the year with the falling sugar price and major flooding event and subsequent port closure in Bundaberg. We introduced two new long-term pricing offerings and for the

first time offered QSL-managed pools that provided members with the choice for QSL to manage their hedging on a time horizon longer than just the current season. Our focus in the year ahead will be to demonstrate a proven track record in these long-term hedging offers which results in greater tonnages being placed in these pools.

The management of the major flooding event in Bundaberg and the support of our members in lobbying government and successfully securing funding for the re-establishment of depths in the channel, swing basin and berth pocket was an operational highlight.

The fourth area of focus was securing competitive funding arrangements for our Advances Program. A restructured finance facility coupled with a renewal of our Standard and Poor’s credit rating and upgrade of our outlook resulted in an agreement to secure our funding for the next three years with annual benefits estimated at $1.4 million to our funding costs.

Without strong, capable and committed staff throughout the organisation, these types of results cannot be achieved. I want to acknowledge the contribution of all of our staff to the results and their dedication throughout the year.

I would also like to acknowledge the continued support of our customers, suppliers and members. You are all so critical to the success of our company and your continued support is greatly appreciated.


QSL works to maximise returns and minimise costs.We do this by moving Queensland’s export raw sugar through an end-to-end supply chain providing a significant advantage in managing risks and seeking to outperform market pricing benchmarks. Substantial value and economies of scale are achieved when Queensland’s raw sugar exports are kept together. QSL provides transparency in returning profits to members.

VALUE OFFERINGS PROVIDED TO MEMBERS:

FINANCINGPRICINGMARKETINGLOGISTICS

FINANCINGQSL makes weekly payments to millers on receival of sugar. This is through QSL’s Advances Program. The QSL Board approves the degree to which payments are made in advance of sales. These payments are made before QSL is paid by customers and in some cases before the raw sugar is sold. Millers then pass funds onto growers, which provides timely cash flow, in and out of season. To facilitate this, QSL borrows money at very low rates. QSL does not add a margin for the Advances Program, essentially charging it at cost. It is able to do this through its three-year $500 million credit facility and commercial paper program.

PRICING Pricing decisions are often a balance of risk and reward. The QSL team manages a range of pricing pools, which allows members to choose how their sugar is priced, in-line with the level of risk they are willing to take. QSL works to achieve a price above the average market price. The team monitors the daily movements in currency and sugar prices and aims to outperform market benchmarks, within the risk parameters for each pool.

MARKETINGQSL currently sells the majority of Queensland’s export raw sugar. Around 25 percent of total Asian raw sugar imports are supplied by QSL. QSL also supplies sugar to other countries including New Zealand and the United States.

A major part of QSL’s role is securing high-returning markets for Queensland’s export sugar. As QSL manages the end-to-end logistics it can match customer specific quality and timing requirements thereby creating additional value for them. Combined with Queensland’s close proximity to the growing Asian market, QSL is able to attract premium returns, which are then passed through to members.

LOGISTICS QSL operates six Bulk Sugar Terminals (BSTs) under a lease with Sugar Terminals Limited. QSL takes delivery of raw sugar, blends it to achieve quality that meets our customers’ needs and arranges its shipping. Currently QSL charters around 70 bulk vessels a year. In 2012/13 more than 98 percent of sugar exports were delivered in-full and on-time. Collectively managing the terminals keeps costs down and maximises shipping flexibility. As the majority of operational work is conducted at our BSTs, safety is a key focus for our people.

VALUE OFFERING

QSL PROVIDES TRANSPARENCY IN RETURNING PROFITS TO MEMBERS

QUEENSLAND SUGAR LIMITED ANNUAL REPORT 2012/136

7

Operate safe and efficient storage and shipping

of raw sugar

GROWERSSell cane to Millers

MILLERSCrush to raw sugar

Sell todomestic market

POOLS

MILLERS

GROWERS

Obtain financing from banks and commercial paper program at low interest rates supported by our credit rating

Sell tointernational market

Knowledge, expertise and experience in pricing and managing Futures Market

QSL Harvest Pool

QSL Discretionary Pool

QSL Actively Managed Pool

QSL Guaranteed Floor Pool

QSL 2-Season Forward Pool

QSL 3-Season Forward Pool

Supplier Pools

US Quota Pool

Monitoring, analysing and

hedging – ICE 11

$/t

$

$

QSLMaximise net returns that are

passed through to millers and growers

• Priced collectively

• Costs and revenues shared (Shared Pool)

Raw sugar supply agreement (RSSA) with QSL

• Access to low-cost financing currently about three percent

• Access to $500m credit facility

• Stable, ongoing income through weekly and monthly advance payments.

International customersAsia/USA/New Zealand

TERMINALS

Cairns LucindaBundaberg

Mourilyan TownsvilleMackay

• Strong relationships with high-returning customers in Asia Pacific region

• Target customers who will pay a premium (eg. value Australian sugar) above ICE 11

• Seek to outperform market benchmarks

• Generate revenue streams through other-origin sugar trading

• Manage counter-party risks (ensuring customer meets terms of contract).

• Knowledge and expertise in sugar market trading

• Competitive forward pricing versus other alternatives, eg bank

• Seek to outperform market benchmarks

• Offer a range of pooling options to price sugar based on market risks and returns

• Manage international market risks including:

• Sugar price falls • Foreign exchange changes.

PRICING MARKETINGMARKETING LOGISTICSFINANCING

$

• Reduce risks in changes to crop estimates (eg disease, weather) by combining tonnage to meet sales commitments

• Ensure reliable delivery of shipments with access to six terminal and storage facilities

• Flexibility in managing quality of sugar (eg colour and filtrability) with options to blend or separate sugar as required

• Match sugar quality to customer preference through access to bulk tonnage

• Reduce logistics costs (eg freight rates) by combining tonnage and shipping in large vessels

• Strong relationship with ship owners providing flexibility in movement and access to vessels

• Cost efficiences through operating six terminals as one.

* Information current as at June 2013 and may change. QUEENSLAND SUGAR LIMITED ANNUAL REPORT 2012/13

VALUE SNAPSHOT

COMPONENTS OF TOTAL QSL-MANAGED ICE 11 POOLS VERSUS THE PASSIVE MANAGEMENT BENCHMARK

OVERALL VALUE CREATED IN THE QSL-MANAGED ICE 11 POOLS

$A/T

ONNE

IPS

Gross ICE 11pools

Net ICE 11pools

Sharedpool

Valueaddedabovebenchmark

PassiveManagementbenchmark

$0

$410

$420

$430

$440

$450

$460

$470

$431.12

Net physicalpremium

Polarisationpremium

Storage andhandling

Marketingservices

Financecosts

Indirectselling

Other costs*

+$18.04

+$14.75 -$21.08

-$2.44

-$3.39

-$1.95

-$3.99

Finance rebate

+$1.09

$1.03 $432.15

$411.59

$20.56

Overall QSL secured strong 2012 pool price returns with a positive allocation of $1.03 per tonne IPS to the ICE 11 Shared Pool. QSL outperformed the market by an average of $20.56 per tonne IPS for QSL-managed ICE 11 pools. The above chart outlines all of the components that make-up the QSL ICE 11 Shared Pool and highlights the value created above the Passive Management benchmark.

* These other costs relate to additional transportation that needed to be undertaken due to silt build-up at Bundaberg Port from the January 2013 floods.


FINANCINGPROVIDING LOW-COST FINANCING THROUGH ADVANCE PAYMENTS TO MEMBERS

WEIGHTED AVERAGE COST OF FUNDSLAST 5 FINANCIAL YEARS

%

08/09 09/10 10/11 11/12 12/13

Weighted average cost of funds 5.28% 4.03% 5.13% 4.77% 3.48%

$0

$1,400

ADVA

NCED

DOL

LARS

($’0

00)

$200

$400

$600

$800

$1,200

$1,000

AUG 12 SEP OCT NOV DEC JAN 13 FEB MAR APR MAY JUN JUL 13*

CUMULATIVE PAYMENTS TO MILL OWNERS12/13 FINANCIAL YEAR

COST

OF F

UNDS

(%)

30 JUN 08 30 JUN 09 30 JUN 10 30 JUN 11 30 JUN 12 30 JUN 130

1

2

3

4

6

5

7

8

QSL AVERAGE COST OF FUNDSLAST 5 FINANCIAL YEARS

This long-term graph reflects QSL’s weighted average cost of borrowings over the last five financial years.

Past performance is provided for reference only and may not be indicative of future performance. Costs and charges may vary from year‑to‑year. QSL cannot guarantee the performance of any pools.

This graph shows the cumulative advance payments made by QSL to suppliers for the 2012 Season. The Advances Program allows suppliers to be paid progressively over the season once deliveries have been received. As raw sugar is received advance payments increase and then taper-off once all the raw sugar is received. * Final payment for the 2012/13 Financial Year

This shows the weighted average cost of funds obtained by QSL for the last five financial years. This low cost of funding is passed onto Suppliers through the Shared Pool to finance the Advances Program.

DEBT PROFILE12/13 FINANCIAL YEAR

-$400

-$300

-$200

-$100

$0

JUL 12 AUG SEP OCT NOV DEC FEB MARJAN APR MAY JUN 13

$’M

AUD

2.7

0

2.9

3.1

3.3

3.5

3.7

3.9

4.1

COST

OF F

UNDS

(%)

JUL 12 AUG SEP OCT NOV DEC FEB MARJAN APR MAY JUN 13

QSL AVERAGE COST OF FUNDS 12/13 FINANCIAL YEAR

This graph reflects QSL’s outstanding debt balance during the financial year. QSL pays advance payments to suppliers on receipt of raw sugar and often before the sugar is shipped. Therefore the debt profile fluctuates throughout the year depending on the receipt and sale of sugar.

This reflects QSL’s weighted average cost of funds incurred over the financial year. QSL’s credit rating allows QSL to borrow at low rates, reducing costs for suppliers.


PRICINGPROVIDING KNOWLEDGE, EXPERTISE AND EXPERIENCE IN PRICING AND MANAGING FUTURES MARKETS

12/13 FINANCIAL YEAR (2012 SEASON)

$360

$0

$380

$400

$420

$440

$460

$480

$500

Performance above benchmark A$ per mt IPS

Benchmark

POOL

PRI

CE*/

IPS

TONN

E (A

$)

$43.19QSL ACTIVELY MANAGED POOL

$411.59 $411.59 $411.59 $411.59 $411.59

$70.27QSL GUARANTEED FLOOR POOL

$26.96QSL DISCRETIONARY POOL

$18.18QSL HARVEST POOL

$20.56 TOTAL QSL-MANAGED ICE 11 POOLS

$A/T

ONNE

IPS

-$50

$50

-$40

-$30

-$20

-$10

0

$10

$20

$30

$40

Finance costs (net of Finance Rebate)

Storage & handling

Indirect selling costs

Polarisation premium

Marketing services

Physical premium

Net $A/tonne IPS(Shared pool result)

08/09 09/10 10/11 11/12 12/13

$6.04

-$0.87

$5.62$7.54

$1.03

THE SHARED POOL ICE 11 COMPONENTLAST 5 FINANCIAL YEARS

This bar chart shows the net pool performance above the Passive Management benchmark for the QSL-managed ICE 11 pools for the 2012 Season. The Passive Management benchmark is the price achieved if no market view was taken by following an evenly-spread sales pattern, adjusted for applicable constraints such as infrastructure, storage and time available to price. This performance above the benchmark highlights the dollar value per QSL-managed ICE 11 pool that QSL provides to suppliers.

*After Shared Pool allocation

This represents the revenue and cost components of the ICE 11 Shared Pool and the overall Net $A/Tonne IPS Shared Pool for the last five years. The Gross $A/Tonne IPS returned is adjusted by the net result of the Shared Pool to give the ICE 11 Pools a net result. The return is based on a number of factors including premiums, overall costs of operating and corporate revenue streams.


VALUE SNAPSHOT CONTINUED


VALUE ADDED TO THE ICE 11 SHARED POOL12/13 FINANCIAL YEAR

$/TONNE IPS

Benchmark Shared Pool amount -$5.08

Value created by QSL through:

Net premiums greater than benchmarks $3.92

Chartering trading activities $1.10

Finance Rebate from corporate activities $1.09

Value above* performance benchmark $1.03

This table represents the value added by QSL in: obtaining net premiums greater than the benchmark (Net Premium), by actively managing chartering activities, and the Finance Rebate provided by corporate activities. If these activities were not undertaken the ICE 11 Shared Pool result would have been negative $5.08 (benchmark) instead of a net positive of $1.03. The Net Premium benchmark is the theoretical Queensland sales premium above the ICE 11 that should be available for exports from Queensland over a set period of time, relative to the most competitive origin at that time. The chartering trading activities value is created by actively taking freight positions within QSL’s risk policies. The Finance Rebate is an internal financing cost on non-Australian raw sugar activities.

* Represents the price achieved if no market view was taken by following an evenly-spread sales pattern, adjusted for applicable constraints such as infrastructure, storage and time available to price (Passive Management benchmark).

8.00

0

16.00

24.00

32.00

12.00

20.00

28.00

36.00

US c/

lb

JUL 08 JAN 09 JUL 09 JAN 10 JUL 10 JAN 11 JUL 11 JAN 12 JUL 12 JAN 13 JUN 13

RAW SUGAR ICE 11LAST 5 FINANCIAL YEARS

AUD/USD CURRENCYLAST 5 FINANCIAL YEARS

0.60

0

0.80

1.00

0.70

0.90

1.10

AUD/

USD

JUL 08 JAN 09 JUL 09 JAN 10 JUL 10 JAN 11 JUL 11 JAN 12 JUL 12 JAN 13 JUN 13

This is a representation of the long-term trend of the Australian dollar against the United States dollar for the last five financial years.


This is a representation of the long-term trend of the raw sugar ICE 11 price for the prompt futures contract for the last five financial years.


MARKETINGMAINTAINING STRONG RELATIONSHIPS WITH HIGH-RETURNING CUSTOMERS IN THE ASIA PACIFIC REGION

NET PREMIUMS EARNED ABOVE BENCHMARK

Financial Year 12/13

Season 2012

Tonnage (Tonnes actual) 2,520,000

Net premiums above* benchmarks US$10.2m

Value added above benchmark $3.92

This table shows the value added to the ICE 11 Shared Pool by obtaining higher premiums than the benchmark. The Net Premium benchmark represents the theoretical sales premium above the ICE 11 that should be available for exports from Queensland over a set period of time, relative to the most competitive origin at that time.

VALUE ADDED FROM CHARTERING ACTIVITIES

Financial Year 12/13

Season 2012

*Tonnage (tonnes actual) 1,225,000

Realised profit & loss from chartering activities

US$2.9m

Value added from chartering activities ($A/tonne IPS)

$1.10

This represents the additional value added to the ICE 11 Shared Pool due to actively managing short open positions within the parameters of the QSL Freight Risk Management Policy.

* Managed tonnage through open positions within defined QSL Freight Risk Management Policy.

TOTAL MARKETING COSTSLAST 5 FINANCIAL YEARS

$’000

08/09 09/10 10/11 11/12 12/13

Marketing costs 8,200 8,000 6,900 7,100 7,000

OTHER ORIGIN SUGARLAST 5 FINANCIAL YEARS

08/09* 09/10 10/11 11/12 12/13

Tonnage - 15,000 280,000 506,000 282,400

Net operating result ($’000) - - $5,635 $10,170 $2,260

This provides a summary of the tonnage and the net operating result achieved each year from Other Origin raw sugar activities. The Other Origin raw sugar activity is dependent on the opportunities available in the market and is transactional in nature. The amount of non-Australian raw sugar purchased and sold during the 12/13 Financial Year decreased due to a reduction in opportunities.

* Did not commence until FY10

0

500

1,000

1,500

2,000

2,500

2.9M 2.9M

2.2M 2.3M

2.8M*

3,000

Supplier priced

QSL priced

TONN

ES A

CTUA

L (’0

00)

08/09 09/10 10/11 11/12 12/13

QSL MARKETSLAST 5 FINANCIAL YEARS

0

500

1,000

1,500

2,000

2,500

3,000

08/09 09/10 10/11 11/12 12/13

United States of America

Other

Wilmar LTC

New Zealand

Malaysia

Taiwan

Republic of Korea

Japan

Indonesia

European Union

TONN

ES A

CTUA

L (’0

00)

TOTAL TONNES MARKETED (SOLD) LAST 5 FINANCIAL YEARS

This represents raw sugar sold by QSL, by region over the last five financial years. The raw sugar has predominantly been sold to Asia.

This table shows the total marketing costs charged by QSL to suppliers over the last five financial years. QSL has managed to reduce marketing costs to approximately $7 million in the last three years due to increased corporate activities.

The bar chart shows the total tonnes sold by QSL over the last five financial years and breaks down how the raw sugar was priced; by supplier or QSL.

*200,000 tonnes is under Wilmar long-term contract (LTC).

VALUE SNAPSHOT CONTINUED


LOGISTICSOPERATING SAFE AND EFFICIENT STORAGE, HANDLING AND SHIPPING OF RAW SUGAR

TONNES HANDLED THROUGH THE BULK SUGAR TERMINALSLAST 5 FINANCIAL YEARS

0

1,000

2,000

3,000

4,000

500

1,500

2,500

3,500

08/09 09/10 10/11 11/12 12/13

TOTA

L TON

NES

ACTU

AL (’

000)

Storage and handling

RSSA

ON-TIME IN-FULL DELIVERIESLAST 5 FINANCIAL YEARS

92%10

20

30

40

50

60

70

80

90

100

94%

96%

98%

93%

95%

97%

99%

08/09 09/10 10/11 11/12 12/13

NUM

BER

OF S

HIPM

ENTS

ON-T

IME

IN-F

ULL D

ELIV

ERY

(%)

No. of ships

On-timein-full deliveries

0%

SAFETY PERFORMANCE — TOTAL RECORDABLE INJURY FREQUENCY RATE

OCT 12* NOV 12 DEC 12 JAN 13 FEB 13 MAR 13 APR 13 MAY 13 JUN 13

10

20

30

40

50

60

70

FREQ

UENC

Y RA

TE

TRIFR12 month rolling average

TRIFR target = 32.00 (Oct to Oct)

64.4 64.2

60.056.2

50.347.3 47.3

37.6 36.6

SAFETY — TOTAL RECORDABLE INJURY FREQUENCY RATE BY CATEGORY

0

1

2

3

4

OCT 12* NOV 12 DEC 12 JAN 13 FEB 13 MAR 13 APR 13 MAY 13 JUN 13

Restricted work injuriesLost time injuriesMedically treated injuries

NO. O

F IN

JURI

ES

This chart shows the number of shipments QSL has chartered and the percentage of those deliveries that were delivered on-time and in-full over the last five financial years. The flexibility provided by collectively managing the terminals ensures we can meet customers’ expectations and deliver on-time and in-full.

This represents the downward trend in the number of total recordable injuries in line with a greater focus on safety after the review conducted. It is calculated by (Lost time injuries + medically treated injuries + restricted work injuries) x 1,000,000/hours.

* Measures commenced in Oct 12 after a safety review

Represents the actual number of injuries sustained each month. It also shows the injuries that required medial treatment and whether the injury resulted in lost time or restricted work.

* Measures commenced in Oct 12 after a safety review

This chart shows the tonnage of raw sugar handled at the six bulk sugar terminals over the last five financial years. It shows the amount that is handled through storage and handling agreements and RSSA.


MARKET REVIEWTREASURER, STEPHEN STONE

RAW SUGAR ICE 11 12/13 FINANCIAL YEAR

15.00

0

16.0017.0018.0019.0020.0021.0022.0023.0024.00

25.00

US c/

lb

JUL 12 SEP 12 NOV 12 JAN 13 MAR 13 JUN 13 MAY 13

The 2012/13 Financial Year was dominated by weak sugar prices and a high Australian dollar.

QSL adapts a conservative approach to price risk, but within the limits set by the Board took a more active price risk management stance in the 2012/13 Financial Year. Combined with expert analysis of the market and interpretation of trends, QSL ended the year returning pool prices at levels significantly higher than industry benchmarks.

SUGARThe sugar market for the 2012/13 Financial Year experienced its third consecutive year of a global sugar surplus. This resulted in ongoing downward pressure on raw sugar prices. Raw sugar futures averaged US19c/lb during the season, with far less price volatility than the previous season.

Brazil, the largest sugar producer in the world, experienced a wet start to their crush which resulted in a brief upward swing in the sugar price. This optimism was brief however and prices tracked consistently lower for the remainder of the season. With a global surplus of sugar in play, the sugar market found itself testing the theoretical ‘ethanol floor’; a price level where it becomes more attractive to divert sucrose to ethanol rather than produce raw sugar. The competing markets for cane have added support to raw sugar prices, yet it remains difficult to determine just how much sucrose ethanol can soak up in any surplus period.

Key themes influencing the market:

�� The increase in ethanol used in vehicles globally has seen the energy market become an important variable in raw sugar prices. Ethanol markets however are heavily influenced by government policy and a multitude of demand and supply variables which make the link to sugar pricing difficult at times.

�� Surplus cycles in sugar can be extended as a result of the many price and volume controlled domestic markets that exist. The controlled domestic markets prevent global sugar price signals from reaching producers protected by trade policies, thereby disrupting the pattern of supply and demand that equilibrates agricultural markets over time.

The sugar surplus and slow downtrend in prices did result in less volatile trading conditions in sugar markets, which presented attractive price risk management opportunities for QSL. Towards the second half of the 2014 season, QSL expects a transition to a more balanced trade for global sugar, moving away from the surplus that has been experienced with an eventual recovery in raw sugar prices.

High: 23.92c/lb Low: 16.21c/lb


AUD/USD CURRENCY12/13 FINANCIAL YEAR

0.90

0

1.00

1.10

AUD/

USD

JUL 12 SEP 12 NOV 12 JAN 13 MAR 13 JUN 13 MAY 13

CURRENCYThe Australian dollar remained high throughout the year with the sharp depreciation not commencing until the end of the financial year. The Australian dollar remained consistently above parity to the US dollar over the 2013 financial year, averaging a level of US$1.03.

Key themes influencing the market:

�� Post GFC, Australia’s AAA credit rating combined with its relatively high domestic interest rates (low interest rates available in most developed economies) attracted foreign investment particularly in Government Bonds. This resulted in the Australian currency overshooting traditional fair value models developed by a number of currency analysts.

�� A slowdown in Chinese demand had a negative impact on mining activity and Australia’s terms of trade which resulted in a lowering of Australian interest rates to support a domestic economy heavily reliant on the mining boom. This had a delayed impact on currency sentiment with the Australian dollar only weakening more recently.

AS CHINA COOLS AND THE US RECOVERS, QSL FORESEES FURTHER PRESSURE ON THE AUSTRALIAN DOLLAR TO THE RELIEF OF AUSTRALIAN EXPORTERS.

High: AUD/USD 1.0594 Low: AUD/USD 0.9207


QSL PEOPLE AND COMMUNITY

OUR PEOPLE It’s the dedication, values and spirit of the team at QSL that drives the business to achieve success for its members. The QSL team is a collaboration of people with diverse backgrounds steeped in industry and professional corporate experience.

The QSL team consists of around 160 employees who work across Queensland at the six BSTs at Cairns, Mourilyan, Lucinda, Townsville, Mackay and Bundaberg, and the corporate office in Brisbane. The team effectively delivers QSL’s value offerings to members providing low-cost financing through advance payments; knowledge, expertise and experience in pricing and managing futures markets; maintaining strong relationships with high-returning customers in the Asia Pacific region and managing the safe and efficient storage and shipping of raw sugar.

Recognising the importance of maintaining an engaged workforce to deliver results for members, this year QSL conducted an engagement survey with employees. The results showed some of the key drivers for engagement with QSL include job stability and security, work/life balance, quality of work provided and relationships with co-workers. QSL’s people strategy continues to build on these attributes to retain, develop and attract the best people to help create value for the Queensland sugar industry.

The QSL people strategy focuses on increasing communication flow

throughout the organisation and empowering leaders to build and challenge the team to strive to always achieve the best returns for members.

QSL maintains good overall retention rates with the average employee working with QSL for 10 years. This year, 11 team members celebrated significant milestones of 10, 25 and 30 years working with QSL.

OUR MEMBERS AND THEIR COMMUNITIES In working for our members to maximise value, it’s essential that QSL actively builds its relationships with its grower and miller members and develops its understanding of their unique needs, challenges and priorities.

This has been a primary focus of Industry Relationship Managers Cathy Kelly and Carla Keith, who during the past year have played an integral role in regional sugar communities and formed an important link between QSL’s operations and its members. Based in the cane-growing hubs of Mackay and Ayr, the pair have traversed the state to provide face-to-face updates on QSL’s activities, answer questions and elicit member feedback. As well as regularly liaising with sugar industry participants, Cathy and Carla also sought to promote the work of the Queensland sugar industry to the wider community, using avenues such as displays at country shows and agricultural field days, hosting tours of QSL’s BSTs and stories in regional media.

KEY ACTIVITIES UNDERTAKEN BY THE INDUSTRY RELATIONSHIP MANAGERS THIS FINANCIAL YEAR:

Regularly attending and addressing a wide range of regional grower forums including; CANEGROWERS and Australian Canefarmers Association (ACFA) branch meetings, information sessions, field days, harvest meetings, local productivity board meetings, Women in Sugar meetings, Next Generation meetings, and Sugar Research and Development Corporation expos.

Facilitating the QSL road show to explain pooling product options prior to the pricing declaration date.

Managing information stands at local shows and field days.

Managing a community sponsorship program for events which promoted sugar industry excellence, innovation and improvement, encouraged industry collaboration and/or promoted the Queensland sugar industry to the wider community.

Showcasing the world-leading storage, handling and shipping facilities operated by QSL at the BSTs to growers, international customers, media and industry visitors.


ENVIRONMENT, HEALTH AND SAFETY

SAFETY IS AN IMPORTANT PART OF QSL’S CULTURE. SAFETY VALUES AND BELIEFS ARE THE PRIME FOUNDATIONS OF HOW THE TEAM CONDUCTS ITS BUSINESS EVERY DAY.

SAFETY STARTS WITH ME The focus for driving improvement in Environment, Health and Safety (EHS) is through shared learnings, education and a combination of knowledge. In this respect, the Safety Leadership Team (SLT) in consultation with employees throughout the business developed a new EHS vision: Safety Starts With Me. It’s a vision that is owned by every individual member of the QSL team and is one that encapsulates each person’s commitment to improving safety at work and in their home.

This vision, combined with the outcomes of a cultural safety survey conducted with the QSL team, informs the three-year EHS strategy and associated plan that have been developed. Key outputs of the plan for year one included: the Terrible Ten, Take 5 and the Stop and Think initiative.

TERRIBLE TENThe Terrible Ten underpins the QSL vision and is owned by each member of the QSL team. It outlines the critical controls that must be in place prior to work being undertaken. It has been developed through shared learnings and draws on widespread industry knowledge and experience from a risk management foundation.

TAKE 5 HAZARD AWARENESS The Take 5 Hazard Awareness tool is a key component of the QSL risk management framework and ensures continual vigilance of safety in the workplace. In further supporting the Terrible Ten, this tool allows people to assess potential risks and make conscious and informed decisions prior to starting work. It is also used by team members to provide valuable input to colleagues undertaking a task to further increase safety in the workplace.

STOP AND THINK DAYS Stop and Think Days provide QSL team members the opportunity to reflect on their safety vision, collaborate with colleagues and share learnings and opportunities for creating a safe workplace. This year, the teams across QSL’s sites stopped work for half a day to rollout the Terrible Ten and Take 5 Hazard Awareness initiatives.

TOTAL RECORDABLE INJURY FREQUENCY RATE (TRIFR) To ensure full visibility of QSL’s EHS performance, QSL moved towards a TRIFR. This includes a target of 50 percent reduction year on year. This measurement tracks medical treatment injuries, lost time injuries, and restricted work injuries.

SAFETY LEADERSHIP TEAMAn SLT was formed and meets on a monthly basis to ensure the successful implementation of the EHS strategy. The team incorporates representatives from across the business, including operators from each of the BSTs and team members from the Brisbane office. To ensure continuous EHS communication and consultation, each QSL site has a Safety Environment and Training Committee (EHS Committee) which meets monthly to look at operational improvements and provides feedback to the SLT.

ENVIRONMENTEnvironmental improvement programs remain an important element of our combined EHS success. QSL continues to focus on its environmental obligations with no environmental non-conformances during this reporting period.


THE LEADERSHIP TEAM IS COMPOSED OF SENIOR MANAGERS, EACH WITH SPECIALIST SKILLS. THE TEAM AIMS TO GUIDE AND DRIVE THE QSL TEAM TO OPTIMISE VALUE AND MAXIMISE RETURNS FOR QSL’S MEMBERS.

GREG BEASHEL CHIEF EXECUTIVE OFFICER (CEO)

AND MANAGING DIRECTOR (MD) Greg joined QSL in June 2000, having extensive experience working in the sugar industry, in particular in the area of sugar refining. Prior to being appointed as CEO and MD in February 2012, Greg was the General Manager of Operations.

Greg is responsible for overseeing the strategic direction of the business with the goal of maximising pool returns for members.

QUALIFICATIONS Bachelor of Chemical Engineering (Hons)

Graduate of the Australian Graduate School of Management MBA Executive program

Graduate of the Australian Institute of Company Directors

ROBERT HINES CHIEF FINANCIAL OFFICER (CFO)

Robert joined QSL in April 2013, having extensive experience working in senior roles in corporate finance.

Robert is responsible for the accounting, financial risk management, reporting, and information and technology functions of QSL.

QUALIFICATIONS Bachelor of Financial Administration

Graduate Diploma of Advanced Accounting

Graduate Diploma in Applied Finance and Investment

Fellow of the Australian Institute of Company Directors, Institute of Chartered Accountants, Australian Society of CPA’s and FINSIA

MARGARET PASCOE COMPANY SECRETARY/LEGAL COUNSEL

Maggie joined QSL in June 2012, having extensive experience working in senior roles as a lawyer and company secretary.

Maggie is responsible for providing legal counsel for the business and managing corporate governance. She is also a participant on the Director’s Team.

QUALIFICATIONS Chartered Secretary

Bachelor of Laws/Bachelor of Arts

Graduate Diploma in Applied Finance and Investment

BELINDA WATTON GENERAL MANAGER,

HUMAN RESOURCES

AND COMMUNICATIONS

Belinda joined QSL in July 2012, having extensive experience working in senior Human Resource management roles in public, private and not-for-profit organisations in various industry sectors.

Belinda manages the human resources and communication direction of the business. She is responsible for fostering a diverse and dynamic culture within QSL that reflects the business’s values, drives superior performance and enhances QSL’s reputation with its stakeholders.

QUALIFICATIONS Bachelor of Commerce

Masters of Applied Law — Litigation and Dispute Resolution

DAMIAN ZIEBARTH GENERAL MANAGER, OPERATIONS

Damian joined QSL in May 2012, having extensive experience working as an Operations professional in heavy manufacturing industries.

Damian is responsible for overseeing QSL’s integrated storage, shipping and logistics management to ensure the reliable delivery of raw sugar that meets customer requirements.

QUALIFICATIONSBachelor in Mechanical Engineering

Masters of Engineering

BRENT CASEY GENERAL MANAGER, SALES AND

BUSINESS DEVELOPMENT

Brent was responsible for the marketing of pool sugar, chartering activities and diversifying QSL’s earnings base outside of the Sugar Pool, including Other Origin trading and supply chain services.

Brent resigned from QSL in July 2013.

LEADERSHIP TEAM


ANDREW HARRISON MANAGER QUALITY AND LOGISTICS

Andrew joined QSL in February 2003, having worked in senior technical roles in a refinery and several Queensland sugar mills.

Andrew is responsible for ensuring the quantity and quality of supply received across QSL’s terminals is matched against customers’ requirements while optimising storage to maximise pool returns.

QUALIFICATIONSDiploma in Sugar Technology

MIKE PANKE TERMINAL MANAGER - MACKAY AND

BUNDABERG

Mike joined QSL in July 2012, having worked in senior roles in the fertiliser, chemical and hi-tech manufacturing industries.

Mike is responsible for the management of the Mackay and Bundaberg bulk sugar terminals and in ensuring the world-class handling, storage and shipping of bulk sugar at those terminals.

QUALIFICATIONSMilitary Engineer

Registered Quality Systems Auditor

AARON SEARLE FINANCE AND ACCOUNTING MANAGER

Aaron joined QSL in June 2010, having extensive experience in audit, accounting and finance roles in a wide range of industries.

Aaron is responsible for a number of the accounting functions within the organisation including management and statutory reporting, corporate activities and projects.

QUALIFICATIONSBachelor of Economics

Bachelor of Commerce

Chartered Accountant

Graduate Diploma of Applied Finance

STEPHEN STONE TREASURER

Steve joined QSL in March 2010, having extensive experience working in Australia and internationally in a number trading and risk management roles in the banking industry.

Steve uses his experience in managing risk and in-depth knowledge of risk management products to deliver solid returns for the QSL managed pools.

QUALIFICATIONSBachelor of Commerce

Master of Commerce

BRYCE WENHAM FINANCE MANAGER, SUPPLIER

RELATIONS

Bryce has a long history of working in the sugar industry in marketing and finance roles. Bryce has been with QSL for 14 years in various senior roles including: Marketing Manager, Commercial Services Manager and Financial Manager – Supplier Relations.

Bryce manages the direct relationship with QSL’s suppliers and maintains an in-depth understanding of growers’ needs. He is responsible for the negotiation and management of Raw Sugar Supply Agreements with suppliers and providing pooling and loan products, and general support to members.

QUALIFICATIONBachelor of Business

Graduate Diploma of Applied Finance and Investment


QSL IS A PUBLIC COMPANY LIMITED BY GUARANTEE, INCORPORATED UNDER THE CORPORATIONS ACT 2001.

The principal objective of the company, without limiting its powers under the law, is to promote the development of the sugar industry.

The company has 30 members representing the Australian sugar industry. These members consist of:

�� Seven mill owner members

�� 23 grower representative members, comprising:

– 21 elected holders, who are growers elected to represent the 21 sugar-growing regions in Queensland

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

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

A copy of QSL’s Constitution is available at www.qsl.com.au

THE QSL BOARD OF DIRECTORS

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

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

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

�� Guiding the culture of the organisation

�� Strategy, planning and policy development

�� Oversight of QSL’s management

�� Monitoring compliance and risk management

�� Delegation of authority

�� Health, safety and wellbeing of employees, contractors and the wider environment

�� Stakeholder liaison and communication.

Monitoring, reviewing and overseeing risk management, in particular financial risk, is a key function of the Board. Policies and procedures are in place to manage QSL’s strategic and operational

risks. The Board ensures the overall risk management framework remains appropriate for QSL’s business at all times and regularly reviews individual policies.

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

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

�� Appropriate workplace behaviour

�� Code of ethics and code of conduct incorporating conflicts of interest

�� Competition and consumer policy

�� Contract management and procurement

�� Corporate risk management

�� Credit risk — financial institutions

�� Credit risk — suppliers

�� Customer and trade credit

�� Environmental management and compliance

�� Financial delegations and authorities

�� Financial risk management

�� Freight risk management

�� Liquidity risk management

�� Marketing risk management

�� Media and disclosures policy

�� Privacy

�� Whistle-blower policy

�� Workplace health and safety.

CORPORATE GOVERNANCEQUEENSLAND SUGAR LIMITED


COMPOSITION OF THE BOARDQSL’s Constitution provides for a Board consisting of up to a maximum of four Non-executive Directors and a Managing Director. Two of the four current Non-executive Directors were originally appointed to the Board in January 2009 and have been re-appointed since then. Guy Cowan was appointed for a three-year term and was re-appointed in January 2012 for a further three-year term. Mark Sage was initially appointed to a one-year term and was re-appointed by the Board Selection Committee for further three-year terms commencing January 2010 and January 2013. QSL’s Chairman Michael Carroll was appointed to the Board in January 2012 for a three-year term. Sarah Scales was appointed to the Board in January 2013 for a three-year term.

APPOINTMENT OF DIRECTORSNon-executive Directors are appointed to the QSL Board by QSL’s Board Selection Committee. The role and composition of the Board Selection Committee are set out in QSL’s Constitution. The Board Selection Committee comprises four members; two members elected for a three-year term by mill owner members and two members elected for a three-year term by grower representative members.

Under the constitution, when selecting Non-executive Directors, the Board Selection Committee has regard to the mix of skills required for the Board to properly meet the company’s objectives and carry out its charter, including experience in the fields of corporate strategy, finance, audit and risk, human resources, employee safety, stakeholder engagement, public relations and communications, and international trade and logistics. In assessing the suitability of candidates, the Board Selection Committee also has regard to the independence of the candidate. In seeking to fulfill its role under the constitution, the Board Selection Committee must except in limited circumstances, engage the services of an external search firm. The Board Selection Committee has the flexibility, under the constitution, to re-appoint an existing Director.

REMUNERATION OF DIRECTORSThe constitution requires the aggregate fees per annum paid to Non-executive Directors to be set by the company at a general meeting of members. The initial aggregate fees were agreed with the sugar industry representative bodies, based on remuneration previously determined by the Queensland Government for the Queensland Sugar Corporation and were subsequently confirmed at the company’s 2001 annual general meeting.

BOARD COMMITTEESTo assist it to carry out its functions, the Board has established three Board committees: the Audit and Risk Committee, the Remuneration and Nominations Committee, and the Environment, Health and Safety Committee.

Copies of QSL’s Board committee charters are available at www.qsl.com.au

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

The current members of the Audit and Risk Committee are Guy Cowan (Committee Chair) and Sarah Scales. The CEO and MD, CFO, Company Secretary and representatives of the external and internal auditors attend meetings of this committee by invitation.

Left to right: Mike Carroll, Guy Cowan, Sarah Scales, Mark Sage, Greg Beashel (CEO and MD)


Specific responsibilities include advising the Board on:

�� QSL’s risk management framework and risk management plan

�� The continuing appropriateness and effectiveness of QSL’s risk management policies

�� QSL’s insurance strategy

�� QSL’s compliance principles, policies, strategies, processes and controls

�� Appointment and remuneration of QSL’s internal and external auditors

�� QSL’s internal audit plan and internal audit reports, and management response to findings

�� QSL’s external audit plan and external audit reports, and management response to findings

�� Financial management reporting for the company.

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

The current members of the Remuneration and Nominations Committee are Mark Sage (Committee Chair) and Michael Carroll. The CEO and MD, Company Secretary and General Manager Human Resources and Communications are invited to attend meetings as appropriate.

Matters dealt with by this committee include:

�� Recruitment and performance evaluation of the CEO and MD

�� Management succession planning

�� Development of leadership and performance systems

�� Review of QSL’s human resources policies

�� Establishment of an appropriate remuneration framework and development of policies linked to performance objectives

�� The composition, performance and remuneration of the QSL Board

�� The induction and professional development of Directors.

ENVIRONMENT, HEALTH AND SAFETY COMMITTEEIn July 2012 the Board approved the appointment of an Environment, Health and Safety Committee, to assist QSL fulfill its environment, health and safety obligations.

The Environment, Health and Safety Committee assists the Board to discharge its responsibilities relating to health, safety and environment issues that may affect employees, contractors and the broader community in which QSL operates. The committee has authority from the Board to review and investigate any matter within the scope of its charter and make recommendations to the Board in relation to the outcomes.

The current members of the Environment, Health and Safety Committee are Mark Sage (Committee Chair), Greg Beashel (CEO and MD) and Damian Ziebarth (General Manager, Operations) with the Company Secretary invited to attend meetings as appropriate.

Matters dealt with by this committee include:

�� Providing advice and guidance to the Board to assist it to comply with its obligations in relation to environment, health and safety matters

�� Reviewing the company’s environment, health and safety strategy

�� Analysing the company’s environment, health and safety performance

�� Reviewing QSL’s organisational structure to ensure appropriate resources can be employed to eliminate or reduce QSL’s environment, health and safety risks

�� Reviewing the design of QSL’s environment, health and safety management system.

BOARD EVALUATIONPerformance of Directors is considered informally with the Chairman and is taken into consideration when determining a person’s eligibility to be re-appointed as a Director by the Board Selection Committee.

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

Under the code, all those associated with QSL must act in accordance with the fundamental principles of integrity, objectivity, confidentiality, ethical behaviour and professional competencies.

The Board has also adopted a Code of Conduct, which covers such matters as conflicts of interest, confidentiality, company property, gifts and entertainment.

CORPORATE GOVERNANCE CONTINUEDQUEENSLAND SUGAR LIMITED


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

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

EVALUATION OF PERFORMANCE OF THE LEADERSHIP TEAMThe CEO and MD is responsible for the performance of each member of the Leadership Team and their succession. All members of the Leadership Team have written position descriptions, employment contracts and annual Key Performance Indicators (KPIs) to assess performance each year. The Leadership Team meets regularly to review business performance and strategic issues and to build alignment across the business, and this year has participated in individual and team performance exercises and tuition.

The CEO and MD reviews the performance of the Leadership Team individually and collectively against their agreed KPIs. The Board and its committees also monitor the performance of the Leadership Team through regular reporting of Executives to the Board and its committees.

The Remuneration and Nominations Committee and the Board formally review the performance of the CEO and MD each year against agreed KPIs.

Performance reviews of the CEO and MD and the members of the Leadership Team were conducted for the year ended 30 June 2013.

CORPORATE RISK MANAGEMENT POLICYQSL has adopted a Corporate Risk Management Policy, which is based on the standard for risk management:-AS/NZ ISO 31000:2009/Risk Management. The policy provides an effective framework for the management of risk and serves as an effective tool for management decision making. It is designed to provide a formal, systematic and recognised framework for the identification and mitigation of risks.

DIVERSITYQSL is committed to developing a workplace culture that is diverse, inclusive and representative of the communities within which it operates.

QSL has policies and practices in place which promote the principles of diversity and assist it to comply with equal opportunity laws.

For the year ended 30 June 2013, the proportion of women employed in permanent roles across QSL was:

Board 20%

Executive 40%

Other workforce 21%

Overall workforce 17%

MANAGEMENT ASSURANCE TO DIRECTORSThe CEO and MD and CFO have provided the following declaration to the Board in relation to the production of QSL’s full-year financial statements and reports, namely in their opinion to the best of their knowledge and belief:

�� The financial records of QSL for the year ended 30 June 2013 have been properly maintained in accordance with Section 286 of the Corporations Act 2001

�� There is no reason to believe that QSL will not be able to pay its debts when they become due and payable

�� QSL’s financial statements and notes to those statements for the year ended 30 June 2013 comply with the relevant accounting standards

�� QSL’s financial statements and notes to those statements for the year ended 30 June 2013 give a true and fair view of the financial position and performance of the company

�� The statements referred to above are founded on a system of risk management and internal compliance and control which implements the policies adopted by the Board

�� QSL’s risk management and compliance and control system is operating effectively in all material respects in relation to financial reporting risks.

Supporting this declaration are certifications of assurance provided by relevant management including finance managers within QSL. These certifications comprise representations and responses to questions concerning QSL’s financial results, disclosure processes and controls and other matters in relation to QSL’s external reporting obligations.

The effective control environment established by the Board supports this declaration provided by the CEO and MD and the CFO. Further, this declaration provides a reasonable, but not absolute, level of assurance of QSL’s risk management, internal compliance and control systems, but does not imply a guarantee against any adverse events or more volatile conditions and outcomes that may occur in the future.


QSL’S REMUNERATION FRAMEWORK AIMS TO ATTRACT AND SUPPORT THE RETENTION OF SUITABLY SKILLED AND EXPERIENCED PEOPLE TO CREATE VALUE FOR THE QUEENSLAND SUGAR INDUSTRY.

Diversity of skill, experience and style are all important elements of QSL’s people strategy and are key drivers for the company’s success and therefore recruitment program. Risk is reduced and value created for QSL’s members when the people essential to executing business objectives are retained, aligned and motivated.

QSL’s remuneration provides fair and reasonable levels of pay that reflect current market/sector roles and are linked to performance outcomes. Frameworks are in place to ensure corporate and individual performance is linked to performance incentives, and that senior management is motivated to drive teams to achieve QSL’s objectives and strategic goals.

QSL’s remuneration framework aims to:

�� Support the attraction and retention of a highly capable workforce

�� Provide fair and reasonable levels of pay consistent with the skills required, scope and responsibilities of each role

�� Link remuneration to performance outcomes

�� Reflect current relevant market/sector rates

�� Provide a level of flexibility in order to respond to relevant pay-related variables

�� Ensure that remuneration is appropriate and motivates employees to perform

�� Satisfies the requirements of the Board and meets business objectives.

REMUNERATION AND NOMINATIONS COMMITTEEThe Remuneration and Nominations Committee reviews the annual performance of the company and provides recommendations to the Board in relation to the remuneration package of the CEO and MD, Executives and Directors. The Board makes all final decisions in relation to salary and incentives paid.

REMUNERATION SETTINGSRemuneration at QSL consists primarily of a base salary and a short-term incentive. The short-term incentive is a monetary payment provided to employees based on QSL’s overall performance for the financial year combined with the individual employee’s performance based on an agreed set of key KPIs. Employees must take part in a performance review process and agree on a set of KPIs they must meet to be eligible for the short-term incentive.

SHORT-TERM INCENTIVE PAYMENTSWith the exception of the Enterprise Bargaining Agreement and executive employees, the maximum incentive applicable to contract employees in the 2012/13 Financial Year was 10 percent contingent upon the delivery of overall performance criteria. The Leadership Team was eligible to receive up to 30 percent, while the CEO and MD was eligible to receive up to 60 percent.

REMUNERATION PACKAGES

A. EXECUTIVESThe CEO and MD and Leadership Team is responsible for executing the strategic direction of the business with the goal of maximising returns for members. The Leadership Team is responsible for guiding and driving the QSL team to optimise value and maximise returns for members. Executive salaries are benchmarked on roles of similar size within the industry with remuneration set by the QSL Board.

Short-term incentives are paid on the basis of individuals achieving or exceeding annual targets, which are agreed during the performance review process, and approved by the Board of Directors.

B. NON EXECUTIVE DIRECTORSQSL’s Board of Directors is responsible to QSL’s members for the strategic direction of QSL, the monitoring of risk matters and governance and for the overall performance of QSL. The Directors are paid for their services and the total remuneration available to Directors is set by QSL at a general meeting of members. This is based on their time, commitment, personal risk and responsibilities. Non-executive Directors receive a fixed remuneration only.

REMUNERATION REPORT


INDEPENDENT ADVICEQSL utilises the Mercer job evaluation methodology to compare similar roles within the general market. This approach provides a sound evaluation of jobs at all levels based on job content, skill requirements, the business/organisational environment, job challenges and position accountabilities.

In 2009, QSL employed Mercer to undertake a benchmarking exercise, which identified QSL’s pay positioning being at the median of the general market. The median is the position at which 50 percent of organisations pay less for positions of equivalent work value and 50 percent pay more.

Further, in 2012 QSL engaged Ernst & Young to review QSL’s short-term incentive with a view to assessing QSL’s current incentive scheme arrangements against suitable benchmarks and identifying potential directions for change. Ernst & Young found:

�� QSL’s current incentive scheme is considered to be well aligned to the benchmark in terms of a short-term objective scheme, but less aligned with the benchmark if medium-term or long-term objectives are considered important to be incentivised.

�� QSL’s current relative weighting of ‘pay’ to ‘at risk’ component was considered not to be an incentive for behaviour change.

QSL is currently reviewing its incentive scheme.

RETENTIONTurnover to-date for QSL is better than the general industry standard and stood at 9.05 percent from 30 June 2012 to 30 June 2013.


26 Queensland Sugar Limited Annual Report 2012/13

STATUTORY FINANCIAL REPORT

CONTENTSDirectors’ Report 27

Auditor’s Independence Declaration 31

Consolidated Statement of Comprehensive Income 32

Consolidated Statement of Financial Position 33

Consolidated Statement of Changes in Equity 34

Consolidated Statement of Cash Flows 35

Notes to the Financial Statements 36

Independent Auditor’s Report 59

Queensland Sugar Limited Annual Report 2012/13 27

DIRECTORS’ REPORTFOR THE YEAR ENDED 30 JUNE 2013 QUEENSLAND SUGAR LIMITED AND ITS CONTROLLED ENTITIES

The Directors of Queensland Sugar Limited (‘QSL’ or ‘Parent Entity’) present their report on QSL and its Controlled Entities (‘Consolidated Entity’) for the year ended 30 June 2013 and the auditor’s report thereon.

DIRECTORS

The names and details of QSL’s Directors in office during the financial year and until the date of this report are as follows. Directors were in office for the entire period unless otherwise stated.

MICHAEL CARROLL BAgSc, MBA, FAICD

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

Mike joined QSL as its Chairman on 1 January 2012. He has more than 25 years’ experience in food and agribusiness in executive and non-executive roles, with other current directorships including Warrnambool Cheese & Butter Factory Holdings Ltd, Select Harvests Ltd, Sunny Queen Pty Ltd and Rural Finance Corporation of Victoria.

During his executive career, Mike established and led the agribusiness division of the National Australia Bank, following senior management roles in marketing, investment banking and corporate advisory services. Prior to this he worked for a number of companies in agricultural research and product development. His family has been involved in agriculture for over 130 years and he has a strong personal commitment to Australian agriculture.

Mike holds a Bachelor of Agricultural Science from La Trobe University and a Master of Business Administration from The University of Melbourne’s Melbourne Business School. He has also completed the Advanced Management Program at Harvard Business School, Boston.

GUY COWAN BSc (Hons), FCA (UK), MAICD

DIRECTOR AND CHAIRMAN OF THE AUDIT & RISK COMMITTEE

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

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

In addition to his role on the QSL Board, Guy holds directorships with UGL (formerly United Group Limited), Coffey International Limited and Beak and Johnston Pty Ltd.

MARK SAGE BCom (Hons), GAICD

DIRECTOR AND CHAIRMAN OF THE REMUNERATION & NOMINATIONS AND ENVIRONMENT HEALTH & SAFETY COMMITTEES

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

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

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

Mark holds Australian Institute of Company Directors qualifications, and in addition to his role on the QSL Board, holds non-executive directorships with Paradise Foods Ltd, the Emerald Agribusiness Group Pty Ltd and is Chairman of Philp Brodie Grains.

SARAH SCALES BAgSc, GAICD – APPOINTED WITH EFFECT FROM 1 JANUARY 2013

DIRECTOR AND MEMBER OF THE AUDIT & RISK COMMITTEE

Sarah joined the QSL Board as a Director on 1 January 2013. Sarah brings to the role more than 20 years of senior management experience working in domestic and international agribusiness. This includes 6 years working as the General Manager AWB International Limited looking after the Single Desk wheat business for AWB Limited.

Sarah has extensive experience in business strategy development and soft commodity marketing with specific skills in the area of managing pools and price risk, including foreign exchange and commodity derivatives. Through her company, Clear Point Consulting, Sarah provides strategic management advice to agribusinesses and new entrants to the Australian agriculture sector.

Sarah’s non-executive directorships include Goulburn Murray Water Corporation and InterGrain Pty Ltd.

GREG BEASHEL BE Chem (Hons), MBA, GAICD

MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER AND MEMBER OF THE ENVIRONMENT HEALTH & SAFETY COMMITTEE

Greg joined QSL in June 2000. Prior to being appointed as Managing Director and Chief Executive Officer on 1 February 2012, Greg was responsible for operations including port terminal management, capital and maintenance management, shipping operations, chartering and trade finance.

Before joining QSL, Greg spent seven years with CSR in a range of roles including operations, sugar marketing, hedging and trading. He has extensive experience in sugar refining and a strong understanding of customer perspectives and requirements. Greg is a graduate of the AGSM MBA Executive program and has a Bachelor of Chemical Engineering (Hons) from the University of New South Wales.

Queensland Sugar Limited Annual Report 2012/1328

DIRECTORS’ REPORT CONTINUED

FOR THE YEAR ENDED 30 JUNE 2013 QUEENSLAND SUGAR LIMITED AND ITS CONTROLLED ENTITIES

NICOLE BIRRELL MSc, FAICD – RESIGNED WITH EFFECT FROM 31 DECEMBER 2012

DIRECTOR AND MEMBER OF THE AUDIT & RISK COMMITTEE

Nicole joined QSL on 1 January 2009 as a Director and Member of the Audit & Risk Committee and retired from the Board on 31 December 2012.

DIRECTORS’ MEETINGS

The number of meetings of QSL’s Directors (including meetings of Committees of Directors) and the number of meetings attended by each Director during the financial year were:

BOARD OF DIRECTORS AUDIT & RISK COMMITTEE (A&R)

REMUNERATION & NOMINATIONS COMMITTEE

(R&N)

ENVIRONMENT HEALTH & SAFETY COMMITTEE

HELD 1 ATTENDED HELD 1 ATTENDED HELD 1 ATTENDED HELD 1 ATTENDED

Michael Carroll 15 15 - - 3 3 - -

Guy Cowan 15 14 5 5 - - - -

Mark Sage 15 15 - - 3 3 3 3

Sarah Scales 2 8 8 2 2 - - - -

Greg Beashel 3 15 15 5 5 3 3 3 3

Nicole Birrell 4 7 7 3 3 - - - -

1 Represents the number of meetings held during the time the Director held office during the year.2 Sarah Scales was appointed Director effective 1 January 2013.3 Greg Beashel is not a member of the A&R Committee and R&N Committee but attended meetings by invitation.4 Nicole Birrell resigned as a Director effective 31 December 2012.

COMPANY SECRETARY

MARGARET PASCOE BA, LLB, Grad Dip App Fin & Inv, Grad Dip App Corp Gov

LEGAL COUNSEL AND COMPANY SECRETARY

Maggie joined QSL in June 2012, having spent a number of years working in the financial services industry as a lawyer and company secretary. Her most recent role was working as legal counsel for a large corporate superannuation fund. Maggie’s breadth of experience covers investments, governance, commercial, trust law, compliance and risk matters.


SIGNIFICANT CHANGES

There were no significant changes in the state of affairs or in the nature of QSL’s or its Controlled Entity’s principal operations during the year.

PRINCIPAL OPERATIONS AND OBJECTIVES

The principal operations of the Consolidated Entity are the marketing of raw sugar, the management of financial risk in connection with such marketing, and ancillary services in transport and logistics. In pursuing its objectives the company seeks to maximise the returns to members through revenues generated from pooling activity, enhancing its product and service offering to members and focusing on growing the business for the benefit of members. The company seeks to do this by keeping a tight control of sales and marketing costs, efficient operation of the terminals, outperforming relevant benchmarks, offsetting marketing costs with other revenue using surplus terminal capacity to generate additional revenue and continuing to develop our suite of pooling products.

The company measures its performance on the revenues generated to members from pooling activity against relevant benchmarks.

REVIEW OF OPERATIONS AND RESULTS

A review of the Consolidated Entity’s operations and results for the year ended 30 June 2013 is set out below:

MARKETING ACTIVITIES

The 2013 financial year saw QSL provide marketing services to six Queensland milling companies (‘Suppliers’) (2012: eight) under Raw Sugar Supply Agreements (‘RSSAs’) and subsequently sell 2.8 million tonnes of Australian raw sugar (2012: 2.3 million tonnes). The 2013 financial year production recovered significantly from the last two years which were severely affected by weather events.

All Suppliers rolled over their RSSAs during the financial year with QSL marketing sugar on their behalf until at least the end of the 2017 financial year. MSF Sugar Limited did not rollover its RSSA at 30 June 2011 and it will not supply sugar to QSL for marketing in the 2015 financial year. In May 2013, MSF Sugar Limited publicly announced their intention to sign a RSSA.

REVENUES

QSL recorded sales revenue from Australian raw sugar for the 2013 financial year of $1,316.0 million, an increase of $3.5 million from the previous year. The consistent sales revenue number compared to the prior year is a result of lower prices earned from a higher export tonnage. QSL implemented a new pooling system for the 2013 financial year with all the QSL-managed pools being committed sugar pools, with the exception of the QSL Harvest Pool. The main purpose of the QSL Harvest Pool is to provide a production buffer for unforseen and extreme weather conditions. A committed sugar pool is a pool which requires a Supplier to commit a contracted fixed volume of raw sugar before the season commences. All pools have outperformed the passive management benchmark, establishing strong returns for QSL’s members. Consistent with prior years, QSL continues to be focused on marketing raw sugar to Asian markets.

QSL operates an other origin sugar business to complement the existing marketing program by allowing pool sales to be fulfilled through either supplying Queensland sugar or by supplying sugar from other destinations. Other origin sugar sales and purchases continued during the 2013 financial year with QSL selling

and purchasing 282,400 tonnes of non-Australian raw sugar (2012: 506,000 tonnes), primarily from Thailand and Brazil, in order for QSL to meet customer demand and maintain its marketing presence in a growing Asian market. QSL will continue to buy and sell other origin sugar in the 2014 financial year.

EXPENSES

Payments to Suppliers for the year ended 30 June 2013 were $1,191.2 million, a decrease of $15.9 million from the prior year’s payments to Suppliers of $1,207.1 million.

Freight and brokerage costs were up by $6.9 million this year compared to the previous year due to an increase in export tonnage. Operating lease rental costs increased by $0.3 million to $44.1 million due to the impact of an increased capital spend by the owners of the bulk sugar terminals, Sugar Terminals Limited (‘STL’). Subsequent to the end of the financial year, QSL signed a new five year lease with STL to manage and operate its Queensland bulk sugar terminals for the period 1 January 2014 until 31 December 2018.

In January 2013, heavy rain and flooding caused silting of the Burnett river in Bundaberg, preventing large export cargo ships from accessing Bundaberg Port. As a result, QSL delayed shipment from Bundaberg Port of 2012 season raw sugar until late June 2013. This is reflected in the large volume of raw sugar in inventory held by QSL at 30 June 2013. Emergency dredging work was undertaken by the port authority allowing smaller ships to enter the port and take the sugar to Mackay bulk sugar terminal for export by ship, resulting in QSL incurring $6.4m in Shared Pool additional expenses relating to the transportation of this raw sugar.

Borrowing costs decreased by $4.2 million to $13.6 million from the prior year, reflecting the lower short-term interest rate environment and lower peak debt.

NET SURPLUS

The non-pooling activities delivered a net surplus for the Consolidated Entity in the financial year. Non-pooling activities produced an operating result of $5.9 million before any corporate charges, a decrease of $7.4 million from the prior year result of $13.3 million reflecting mainly the impact of fewer other origin sugar activities.

The amount of non-Australian raw sugar purchased and sold during the year decreased to 282,400 tonnes (2012: 506,000 tonnes) due to a reduction in opportunities, resulting in a contribution of $2.3 million for the year (2012: $10.2 million). Equity investments and other activities also recorded a small increase of $0.5 million from the prior year with a contribution of $3.6 million as opposed to a contribution in the prior period of $3.1 million.

Internal financing charges of $4.3 million (2012: $12.6 million) were levied by the pools to the non-pooling activities. These finance charges incurred by non-pooling activities reduce the finance costs incurred by the Shared Pool. Of this internal financing charge, $3.1 million (2012: $11.0 million) related to the other origin sugar business.

Additionally, $0.7 million (2012: $0.1 million) was funded to the sugar industry for research and development related expenditure.

The resulting net surplus for the year was $0.9 million, $0.2 million higher than the prior period result of $0.7 million. QSL will continue to maximise pool returns any residual surplus will be used to promote and develop the Queensland sugar industry, as required by its constitution.


BANKING AND FINANCING

During the year, QSL continued to have access to a $500 million Australian dollar syndicated standby credit facility. This facility expired on 30 June 2013 and was re-financed prior to year end for three years on similar terms to the two-year facility. The facility remained undrawn during the year but supported the commercial paper program used to fund the Advances Program and manage pricing on behalf of RSSA participants.

The only significant change in terms to the new facility is that the facility limit moves between $300 million to $500 million to reflect QSL’s cashflow funding profile during the course of a season, generating savings in line fees.

During the year, QSL maintained its strong credit rating with Standard & Poor’s of A-1 (short-term) and A (long-term). QSL’s rating outlook was updated from ‘negative’ to ‘stable’ post-year end.

EVENTS AFTER REPORTING DATE

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

� The Consolidated Entity’s operations in future financial years

� The result of those operations in future financial years

� The Consolidated Entity’s state of affairs in future financial years.

LIKELY DEVELOPMENTS

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

During the year, one of the company’s mill members and RSSA Suppliers started to market a portion of the raw sugar supplied to QSL under the RSSA. Through the coming year, it is expected that more of the company’s mill members and RSSA Suppliers will enter into similar arrangements, as agreed by the industry, so that the proportion of raw sugar to be marketed by the company compared to previous years is expected to reduce over time. QSL will continue to provide a marketing function and expects to market between 1.7 and 2.5 million tonnes per annum over the next three years. Regardless, QSL will continue to provide valuable logistics, financing and pricing support on all sugar tonnage for the benefit of the Queensland sugar industry.

GUARANTEE AMOUNT BY MEMBERS

The Company has 30 members representing the Australian sugar industry. These members consist of:

� seven mill owner members

� 23 grower representative members

For each class of membership in the Company the amount which a member of that class is liable to contribute if the Company is wound up is $100 per member. The total amount that mill owner members and grower representative members of the Company are liable to contribute if QSL is wound up is $700 and $2,300 respectively, totalling $3,000.

ENVIRONMENTAL REGULATION

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

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

INDEMNITIES AND INSURANCE

The Constitution of QSL provides that the company, to the extent permitted by law, must indemnify each person who is, or has been, a Director or Secretary of the company against any liability (resulting directly or indirectly from facts or circumstances relating to the person serving in that capacity in relation to the company):

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

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

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

AUDITOR INDEPENDENCE

The auditor’s independence declaration is set out on page 31 and forms part of the Directors’ Report for the year ended 30 June 2013.

ROUNDING OF AMOUNTS

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

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

Michael Carroll Chairman

16 September 2013

DIRECTORS’ REPORT CONTINUED



AUDITOR’S INDEPENDENCE DECLARATION FOR THE YEAR ENDED 30 JUNE 2013 QUEENSLAND SUGAR LIMITED AND ITS CONTROLLED ENTITIES

A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation

Ernst & Young 111 Eagle Street Brisbane QLD 4000 Australia GPO Box 7878 Brisbane QLD 4001

Tel: +61 7 3011 3333 Fax: +61 7 3011 3100 ey.com/au

Auditor’s Independence Declaration to the Directors of Queensland Sugar Limited In relation to our audit of the financial report of Queensland Sugar Limited for the financial year ended 30 June 2013, to the best of my knowledge and belief, there have been no contraventions of the auditor independence requirements of the Corporations Act 2001 or any applicable code of professional conduct.

Ernst & Young

Mark Hayward Partner 16 September 2013


CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEFOR THE YEAR ENDED 30 JUNE 2013 QUEENSLAND SUGAR LIMITED AND ITS CONTROLLED ENTITIES

NOTE 2013 2012$’000 $’000

REVENUES FROM CONTINUING OPERATIONSSales of Australian raw sugar 1,315,977 1,312,521

Sales of non-Australian raw sugar 3 151,143 342,196

Net foreign currency exchange gain 11,349 14,092

Interest income 809 640

Dividend income 3 1,795 1,689

Other revenues 1,029 1,404

1,482,102 1,672,542

EXPENSES FROM CONTINUING OPERATIONSPayments to Suppliers for Australian raw sugar 1,191,235 1,207,129

Purchases of non-Australian raw sugar 3 141,023 320,518

Freight and brokerage 4 58,076 51,207

Operating lease rental 4 44,069 43,720

Salaries and employee benefits 18,566 18,269

Borrowing costs 4 13,577 17,822

Depreciation 4 2,078 1,755

Research funding to the sugar industry 3 718 50

Other expenses 5 11,875 11,421

1,481,217 1,671,891

NET SURPLUS ATTRIBUTABLE TO MEMBERS OF QUEENSLAND SUGAR LIMITED AND ITS CONTROLLED ENTITIES

885

651

OTHER COMPREHENSIVE INCOME FOR THE YEAR

Items that may be reclassified subsequently to profit or lossNet gain on available-for-sale financial assets 233 96

TOTAL COMPREHENSIVE INCOME FOR THE YEAR 1,118 747

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


CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAS AT 30 JUNE 2013 QUEENSLAND SUGAR LIMITED AND ITS CONTROLLED ENTITIES

NOTE 2013 2012$’000 $’000

ASSETS

CURRENT ASSETSCash and cash equivalents 16(b) 20,722 11,188

Trade and other receivables 6 53,303 132,616

Inventories 7 223,116 73,418

Other assets 8 41,840 48,025

TOTAL CURRENT ASSETS 338,981 265,247

NON-CURRENT ASSETSAvailable-for-sale financial assets 9 23,224 21,638

Other receivables 10 1,977 14,124

Property, plant and equipment 11 15,531 11,464

Other assets 8 15,111 26,062

TOTAL NON-CURRENT ASSETS 55,843 73,288

TOTAL ASSETS 394,824 338,535

LIABILITIES

CURRENT LIABILITIESTrade and other payables 12 217,302 136,074

Interest bearing liabilities 14 113,828 139,161

Provisions 15 3,629 3,532

TOTAL CURRENT LIABILITIES 334,759 278,767

NON-CURRENT LIABILITIESTrade and other payables 13 14,910 15,655

Provisions 15 841 917

TOTAL NON-CURRENT LIABILITIES 15,751 16,572

TOTAL LIABILITIES 350,510 295,339

NET ASSETS 44,314 43,196

EQUITYReserves 24,468 24,235

Retained surpluses 19,846 18,961

TOTAL EQUITY 44,314 43,196

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


CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED 30 JUNE 2013 QUEENSLAND SUGAR LIMITED AND ITS CONTROLLED ENTITIES

RETAINED EARNINGS

RESERVES TOTAL EQUITY

Capital Available-for-sale$’000 $’000 $’000 $’000

BALANCE AT 1 JULY 2011 18,310 23,242 897 42,449

Net surplus for the year 651 - - 651

Other comprehensive income - - 96 96

Total comprehensive income for the year 651 - 96 747

BALANCE AT 30 JUNE 2012 18,961 23,242 993 43,196

BALANCE AT 1 JULY 2012 18,961 23,242 993 43,196

Net surplus for the year 885 - - 885

Other comprehensive income - - 233 233

Total comprehensive income for the year 885 - 233 1,118

BALANCE AT 30 JUNE 2013 19,846 23,242 1,226 44,314

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


CONSOLIDATED STATEMENT OF CASH FLOWSFOR THE YEAR ENDED 30 JUNE 2013 QUEENSLAND SUGAR LIMITED AND ITS CONTROLLED ENTITIES

NOTE 2013 2012$’000 $’000

CASH FLOWS FROM OPERATING ACTIVITIES

Receipts from customers (inclusive of GST) 1,536,050 1,659,819

Payments to Suppliers for Australian raw sugar (inclusive of GST) (1,380,980) (1,304,117)

Payments to third party sugar suppliers for non-Australian raw sugar (inclusive of GST) (141,023) (320,518)

Payments to suppliers and employees (inclusive of GST) (147,601) (140,927)

GST recovered 127,690 135,151

Interest and other costs of finance paid (16,700) (17,822)

Interest received 809 604

Cash settlements of derivative instruments 25,535 (54,805)

Other receipts 20,213 19,826

NET CASH FLOWS FROM/(USED IN) OPERATING ACTIVITIES 16(a) 23,993 (22,789)

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of available-for-sale financial assets (1,353) (1,919)

Proceeds from sale of Tully Sugar Limited shares - 26,440

Purchase of property, plant and equipment (6,816) (1,839)

Proceeds from sale of property, plant and equipment 800 1,415

Dividends received 1,795 1,689

NET CASH FLOWS FROM/(USED IN) INVESTING ACTIVITIES (5,574) 25,786

CASH FLOWS FROM FINANCING ACTIVITIES

Set-off loans repayments from Suppliers 17,577 10,632

Other loans advanced to Suppliers (1,073) (904)

NET CASH FLOWS FROM FINANCING ACTIVITIES 16,504 9,728

NET INCREASE IN CASH AND CASH EQUIVALENTS 34,923 12,725

Cash and cash equivalents at beginning of the year (127,973) (139,801)

Effects of exchange rate changes on the cash and cash equivalents (56) (897)

CASH AND CASH EQUIVALENTS AT END OF YEAR 16(b) (93,106) (127,973)

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


NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2013 QUEENSLAND SUGAR LIMITED AND ITS CONTROLLED ENTITIES

1 CORPORATE INFORMATION

The financial report of QSL and its Controlled Entities for the year ended 30 June 2013 was authorised for issue in accordance with a resolution of the Directors on 16 September 2013.

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

QSL’s Controlled Entities comprise of QSL Investments (No1) Pty Ltd and QSL Investments (No2) Pty Ltd.

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

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(A) BASIS OF ACCOUNTING

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

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

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

(B) PRINCIPLES OF CONSOLIDATION

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

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

(C) STATEMENT OF COMPLIANCE

The financial report complies with Australian Accounting Standards as issued by the Australian Accounting Standards Board and International Financial Reporting Standards (‘IFRS’) as issued by the International Accounting Standards Board.

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

We have adopted the following new and amended Australian Accounting Standards and AASB Interpretations as of 1 July 2012:

� AASB 2011-9 Amendments to Australian Accounting Standards – Presentation of Other Comprehensive Income

Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet effective and have not been adopted by the Consolidated Entity for the annual reporting period ended 30 June 2013 are outlined below:

Australian Accounting Standard Effective Date

AASB 10 Consolidated Financial Statements 30 June 2014

AASB 13 Fair Value Measurement 30 June 2014

AASB 119 Employee Benefits 30 June 2014

AASB 1053 Applications of Tiers of Australian Accounting Standards

30 June 2014

AASB 2012-2 Amendments to Australian Accounting Standards arising from reduced disclosure requirements

30 June 2014

AASB 2012-10 Amendments to Australian Accounting Standards – Transition Guidance and Other Amendments

30 June 2014

AASB 2012-3 Amendments to Australian Accounting Standards – Offsetting Financial Assets and Liabilities

30 June 2015

AASB 9 Financial Instruments 30 June 2016

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


2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED

(D) REVENUE RECOGNITION

(i) Sales of raw sugar

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

(ii) Dividend Income

Revenue is recognised when the Consolidated Entity’s right to receive the payment is established.

(iii) Interest Income

Interest income is recorded using the effective interest rate method.

(E) FUTURES AND OPTIONS MARKET HEDGING

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

(F) FOREIGN CURRENCY TRANSLATION

The US dollar is the principal currency in which sugar is traded. The financial statements are presented in Australian dollars, which is the Consolidated Entity’s functional and presentation currency.

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

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

(G) DERIVATIVES

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

(G) DERIVATIVES CONTINUED

Forward foreign currency and sugar swap contract terms do not exceed five years. Sugar futures and option contracts are entered into with terms no greater than three years. Details of open contracts at reporting date are provided in Note 26.

Amounts receivable or payable at reporting date under sugar futures and options and foreign currency transactions relating to future pools’ production are recognised as amounts owing to or amounts owing from future pools, and are included in the Statement of Financial Position on a net basis with gains or losses arising from changes in the value of amounts owing to or amounts owing from future pools taken directly to the Consolidated Statement of Comprehensive Income (refer to Notes 12 and 13).

(H) CASH AND CASH EQUIVALENTS

For the purposes of the Consolidated Statement of Cash Flows, cash includes cash on hand and at bank, money market positions, securities and funding swaps connected with the pooling and sale of raw sugar, net of interest bearing liabilities.

Cash and cash equivalents are stated at the lower of cost and net realisable value.

(I) TRADE AND OTHER RECEIVABLES

(i) Trade Receivables

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

(ii) Amounts Owing from Suppliers

Following the adverse weather events experienced in the 2011 financial year, the Consolidated Entity has made available three year set-off loans to all Suppliers (‘Set-Off loans’). As at 30 June 2013, all amounts are classified as current receivables according to the expected repayment schedule of these loans (refer to Note 6).

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

(J) INVENTORIES

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

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

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


NOTES TO THE FINANCIAL STATEMENTS CONTINUED



(J) INVENTORIES CONTINUED

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

(i) sugar priced - valued at the lower of cost and net realisable value and converted to Australian dollars at the exchange rate ruling at reporting date

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

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

(K) CURRENT ASSETS

Current assets comprise cash at bank and on hand, term deposits, debtors, other receivables relating to the Set-Off loans, prepayments, raw sugar stock on hand, amounts owing from future pools, unrealised gains on foreign currency transactions and unrealised gains on sugar futures and options contracts that are expected to be realised within 12 months from balance date.

(L) PROPERTY, PLANT AND EQUIPMENT

Plant and equipment is stated at cost less accumulated depreciation and any accumulated impairment losses. Such costs include the costs of replacing parts that are eligible for capitalisation when the cost of replacing the part is incurred.

(i) Depreciation

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

Asset Class 2013 2012

Freehold buildings 50 years 50 years

Leasehold improvements lease term lease term

Plant and equipment 4 to 25 years 4 to 25 years

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

(ii) Impairment

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

The recoverable amount of plant and equipment is the higher of fair value less costs to sell and value in use. Impairment exists when the carrying value of an asset or cash-generating unit exceeds its estimated recoverable amount. The asset or cash-generating unit is then written down to its recoverable amount.

(iii) Derecognition and disposal

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

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

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

(M) IMPAIRMENT OF ASSETS

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

In assessing value in use, the estimated cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Impairment losses relating to continuing operations are recognised in those expense categories consistent with the function of the impaired asset unless the asset is carried at the revalued amount (in which case the impairment loss is treated as a revaluation decrease).

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



(N) OTHER NON-CURRENT ASSETS

Expenditure carried forward

Significant items of carry forward expenditure having a benefit or relating to more than one year are written off over the years to which such expenditure relates.

(O) LEASED ASSETS

Operating leases

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

(P) CURRENT LIABILITIES

Current liabilities comprise all amounts owing at reporting date and payable within 12 months, including amounts due to Suppliers.

(Q) TRADE AND OTHER PAYABLES

Trade payables and other payables are carried at amortised cost and represent liabilities for goods and services provided to the Consolidated Entity prior to the end of the financial year that are unpaid and arise when the Consolidated Entity becomes obliged to make future payments in respect of the purchase of those goods and services.

(R) INTEREST BEARING LOANS AND BORROWINGS

All loans and borrowings are initially recognised at fair value of the consideration received less directly attributable transaction costs.

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

(S) PROVISIONS

Provisions are recognised when the Consolidated Entity has a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

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

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

(T) EMPLOYEE LEAVE BENEFITS

(i) Wages, salaries, annual leave and sick leave

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

(ii) Long service leave

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

(U) POST-EMPLOYMENT BENEFITS

Defined Benefit Plan

The Consolidated Entity contributes to one defined benefit superannuation plan on behalf of certain eligible employees.

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

Employees of QSL who have a defined benefit plan are members of QSuper (refer Note 19).

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

No liability is recognised for accruing the above superannuation benefit in these financial statements; the liability being held on a whole-of-government basis and reported in the whole-of-government financial report prepared pursuant to AAS 31 - Financial Reporting by Governments.

(V) NATURE AND PURPOSE OF RESERVES

(i) Capital reserve

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

(ii) Available-for-sale reserve

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

(W) INCOME TAX

Parent Entity

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

Controlled Entities

The Controlled Entities are income tax paying entities. However, the Controlled Entities have made tax losses as a result of excess franking credits from the dividends from their holding in STL G class shares. These Controlled Entities continue to carry forward their tax losses to offset their taxable income. No deferred tax asset has been recognised in relation to these tax losses.





(X) DEFERRED INCOME AND EXPENSES

Income and expenses have been carried forward only in circumstances relating to future sales proceeds, the receipt of which is reasonably assured.

(Y) GOODS AND SERVICES TAX

Revenues, expenses and assets are recognised net of the amount of Goods and Services Tax (‘GST’), except:

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

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

(Z) BORROWING COSTS

Borrowing costs are recognised as an expense when incurred.

(AA) MAKE GOOD PROVISION

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

(AB ) RENTAL INCENTIVE

Provision has been made for the present value of fit-out incentive benefit of the leased office premises as specified in the Incentive Deed between Harburg Investments Pty Ltd and QSL which concludes on 30 April 2018. The provision represents the present value of the total incentive benefit of $1,048,800 over the remaining four and a half years of the lease in accordance with Interpretation 115. The related carrying amounts are disclosed in Note 15.

(AC) COMPARATIVES

Where necessary, comparative information has been reclassified to achieve consistency in disclosure with current financial year amounts and other disclosures.


3 INCOME AND EXPENSES FROM NON-POOLING ACTIVITIES

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

2013 2012$’000 $’000

Non-Australian raw sugar activitiesSales of non-Australian raw sugar 151,143 342,196

Purchases of non-Australian raw sugar (141,023) (320,518)

Freight and brokerage (4,246) (5,406)

Salaries and employee costs (724) (716)

Direct selling expenses (958) (2,743)

Other expenses (1,932) (2,643)

2,260 10,170

Equity investment activitiesDividend income 1,795 1,689

1,795 1,689

Other activities

Gain on sale of non-current assets 128 833

Other income 4,106 4,317

Salaries and employee costs (1,203) (1,677)

Other expenses (1,152) (2,073)

1,879 1,400

NON-POOLING ACTIVITIES (PRE-CORPORATE CHARGE) 5,934 13,259

Research funding to the sugar industry a (718) (50)

Internal financing cost on non-Australian Raw Sugar Activities b (3,123) (11,008)

Internal financing cost on Equity Investment Activities b (1,015) (1,269)

Internal financing cost on Other Activities b (193) (281)

(5,049) (12,608)

NET SURPLUS 885 651

a Relates to amount contributed to the sugar industry for research and development related expenditure.b Relates to internal corporate financing costs for the relevant activity from the pools. This internal corporate charge reduces borrowing costs for the pools.




2013 2012$’000 $’000

4 EXPENSES FROM CONTINUING OPERATIONSFreight and brokerage

Sea freight 57,676 51,207

Road freight 400 -

TOTAL FREIGHT AND BROKERAGE 58,076 51,207

Operating lease rental

Minimum lease payments

Bulk sugar terminals (to STL) 43,589 43,278

Other property 480 442

TOTAL OPERATING LEASE RENTAL 44,069 43,720

Borrowing costs expense

Short-term debt 8,515 12,246

Other 5,062 5,576

TOTAL BORROWING COSTS EXPENSE 13,577 17,822

Depreciation expense

Plant and equipment 1,909 1,568

Buildings on freehold land 39 48

Leasehold improvements 130 139

TOTAL DEPRECIATION EXPENSE 2,078 1,755

5 OTHER EXPENSES FROM CONTINUING OPERATIONS

Other Expenses 11,875 11,421

These expenses predominately relate to net operating expenditure incurred in operating the bulk sugar terminals. This amount includes a recovery of expenses by QSL under the Storage and Handling (‘S&H’) Agreements for users of the bulk sugar terminals for storage, handling and outloading of raw sugar. Included in the Other Expenses figure above are these off-setting S&H recovery amounts of $14.5 million (2012: $14.7 million).


2013 2012$’000 $’000

6 TRADE AND OTHER RECEIVABLES

CURRENTTrade debtors a 1,418 67,028

Other debtors

Futures margins and deposits 1,899 4,929

GST receivable 25,792 18,539

Loan (Set-Off) agreements with Suppliers b 8,798 13,156

Insurance receivable c 7,022 19,815

Receivables – terminal users 1,989 3,510

Receivables – STL d 6,121 4,506

Other 264 1,133

51,885 65,588

TOTAL TRADE AND OTHER RECEIVABLES (CURRENT) 53,303 132,616

a Under contractual terms and conditions, any collateral held and the timing of the payments are set out in Note 26(v)(b).b Relates to amounts loaned to mill owners relating to the 2010 season for delivery shortfall costs and pre-crop loans (Refer Note 10).C In February 2011, the Lucinda bulk sugar terminal was damaged by Cyclone Yasi. QSL has managed the restoration works and this amount is a

receivable under the insurance policy held by the owner of the terminal, STL.d Under the sub-lease agreement with STL, QSL purchases capital items on behalf of STL. These receivables relate to these capital purchases.

2013 2012

$’000 $’000

7 INVENTORIES

Bulk Australian raw sugar 223,116 73,418

TOTAL INVENTORIES 223,116 73,418

At 30 June 2013, 224,424 tonnes of 2012 season raw sugar and 287,116 tonnes of 2013 season raw sugar remained on hand totalling 511,540 tonnes of inventory. At 30 June 2012, 49,518 tonnes of 2011 season and 95,641 tonnes of 2012 season raw sugar remained on hand totalling 145,159 tonnes of inventory. The higher quantity of inventory on hand compared to the prior year was predominately due to delayed shipment as a result of siltage problems at the Bundaberg bulk sugar terminal.

2013 2012

$’000 $’000

8 OTHER ASSETS

CURRENTUnrealised gains on:

Foreign currency contracts - 40,402

Sugar futures and option contracts 37,935 2,119

37,935 42,521Deferred expenditure and prepayments relating to the next year:

Prepaid expenditure 3,905 3,842

Amounts owing from future pools a - 1,662

3,905 5,504

TOTAL OTHER ASSETS (CURRENT) 41,840 48,025a Represents unrealised losses on sugar hedges and foreign exchange hedges and option contracts which will be allocated against next year’s raw sugar sales.

NON-CURRENTUnrealised gains on:

Foreign currency contracts 865 26,062

Sugar futures and option contracts 14,246 -

TOTAL OTHER ASSETS (NON-CURRENT) 15,111 26,062




2013 2012$’000 $’000

9 AVAILABLE-FOR-SALE FINANCIAL ASSETS

NON-CURRENT

Shares at fair value a 23,224 21,638

a QSL holds 14.5% (2012: 13.5%) of the G (Grower) class of share capital of STL, a company that owns bulk raw sugar storage facilities in Queensland. QSL has a sub-lease agreement with STL, to operate and maintain these facilities until 31 December 2018. The STL G class shares are traded on the National Stock Exchange of Australia. Given the illiquid or thinly traded market in STL G class shares, QSL’s investment in STL has been valued using a Directors’ Valuation to determine a fair value pursuant to AASB 139 Financial Instruments: Recognition and Measurement. QSL has determined that fair value for the investment in STL is cost, consistent with the prior year.

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

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

2013 2012

$’000 $’000

10 OTHER RECEIVABLES

NON-CURRENTLoan (Set-Off) agreements with Suppliers a - 13,220

Other loans to Suppliers 1,977 904

TOTAL OTHER RECEIVABLES (NON-CURRENT) 1,977 14,124

a To mitigate the impact of the severe weather on the 2010 season, QSL offered to enter into Set-Off loans with Suppliers (refer Note 6).

2013 2012$’000 $’000

11 PROPERTY, PLANT AND EQUIPMENT

Freehold land:

At cost 512 590

Leasehold land:

At cost 195 195

Leasehold improvements:

At cost 1,209 1,209

Accumulated depreciation (491) (361)

718 848Buildings on freehold land:

At cost 1,719 1,849

Accumulated depreciation (1,510) (1,586)

209 263Plant and equipment:

At cost 17,295 14,164

Accumulated depreciation (3,398) (4,596)

13,897 9,568

TOTAL PROPERTY, PLANT AND EQUIPMENT 15,531 11,464


2013 2012$’000 $’000

11 PROPERTY, PLANT AND EQUIPMENT CONTINUED

Reconciliations

Reconciliations of the carrying amounts of freehold land, leasehold land, leasehold improvements, buildings on freehold land and plant and equipment at the beginning and end of the financial year are set out below.

Freehold land:

Carrying amount at the beginning of the year 590 960

Disposals (78) (370)

Carrying amount at the end of the year 512 590

Leasehold land:

Carrying amount at the beginning and end of the year 195 195

Leasehold improvements:

Carrying amount at the beginning of the year 848 1,004

Disposals - (17)

Depreciation expense (130) (139)


Buildings on freehold land:

Carrying amount at the beginning of the year 263 403

Disposals (15) (92)

Depreciation expense (39) (48)


Plant and Equipment:

Carrying amount at the beginning of the year 9,568 9,400

Additions 6,816 2,023

Disposals (578) (287)

Depreciation expense (1,909) (1,568)

Carrying amount at the end of the year 13,897 9,568

TOTAL PROPERTY, PLANT AND EQUIPMENT 15,531 11,464




2013 2012$’000 $’000

12 TRADE AND OTHER PAYABLES

CURRENTCreditors

Suppliers 159,426 88,942

Trade creditors 7,858 3,064

167,284 92,006Other creditors

Unrealised losses:

Sugar futures and options contracts - 33,372

Foreign currency contracts 30,884 -

Other 7,083 10,696

37,967 44,068Deferred income relating to the next year:

Amounts owing to future pools a 11,657 -

Prepaid income 247 -

Deferred gain 147 -

12,051 -

TOTAL TRADE AND OTHER PAYABLES (CURRENT) 217,302 136,074

a Represents unrealised gains on sugar hedges, foreign exchange hedges and option contracts which will be allocated against next year’s raw sugar sales

13 TRADE AND OTHER PAYABLES

NON-CURRENTOther creditors

Unrealised losses on sugar futures and option contracts - 7,103

Deferred income relating to a future year:

Amounts owing to future pools a 14,878 8,510

Other 32 42

TOTAL TRADE AND OTHER PAYABLES (NON-CURRENT) 14,910 15,655

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

14 INTEREST BEARING LIABILITIES

CURRENTUnsecured

Securities - commercial paper a 29,918 108,151

Money market b 83,910 31,010

TOTAL INTEREST BEARING LIABILITIES (CURRENT) 113,828 139,161

a Represents funding for advances to Suppliers, sugar futures settlements and margins, repayable within 30 to 90 days.b These short-term loans are repayable within 14 days.


15 PROVISIONS MAKEGOOD a

RENTAL INCENTIVE

STAFF INCENTIVE

ANNUAL LEAVE

LONG SERVICE

LEAVE

SICK LEAVE TOTAL

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

BALANCE AT 1 JULY 2011 175 793 124 1,331 1,710 35 4,168

Arising during the year - - 763 1,269 172 29 2,233

Utilised - (131) (124) (1,271) (583) (35) (2,144)

Discount rate adjustment - 61 - - 131 - 192

BALANCE AT 30 JUNE 2012 175 723 763 1,329 1,430 29 4,449

REPRESENTED AS:Current - 131 763 1,329 1,280 29 3,532

Non-Current 175 592 - - 150 - 917

TOTAL 175 723 763 1,329 1,430 29 4,449

BALANCE AT 1 JULY 2012 175 723 763 1,329 1,430 29 4,449

Arising during the year - - 649 1,370 134 25 2,178

Utilised - (131) (784) (1,322) (30) (23) (2,290)

Discount rate adjustment - 9 - - 124 - 133

BALANCE AT 30 JUNE 2013 175 601 628 1,377 1,658 31 4,470

REPRESENTED AS:Current - 131 628 1,377 1,462 31 3,629

Non-Current 175 470 - - 196 - 841

TOTAL 175 601 628 1,377 1,658 31 4,470

a In May 2010 the Parent Entity commenced a lease agreement with Harburg Investments Pty Ltd, which concludes on 30 April 2018. In accordance with the lease agreement the Parent Entity must restore its leased premises to the original condition upon expiry of the agreement. The provision has been calculated using a rate per square metre giving a provision of $175,000.




2013 2012$’000 $’000

16 CASH AND CASH EQUIVALENTS

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

Surplus attributable to the members of QSL and its Controlled Entities for the year 885 651

Adjustments for:

Depreciation of non-current assets 2,078 1,755

Gain on sale of fixed assets (128) (833)

Net foreign currency loss 56 897

Dividend income classified as an investing cash flow (1,795) (1,689)

Changes in assets and liabilities:

(Increase)/decrease in trade and other receivables 74,955 (31,315)

(Increase)/decrease in inventory (149,698) (3,664)

(Increase)/decrease in other current assets 6,185 94,636

(Increase)/decrease in other non-current assets 10,951 67,441

(Decrease)/increase in trade and other payables 81,228 (73,003)

(Decrease)/increase in non-current payables (745) (77,946)

(Decrease)/increase in provisions 21 281

NET CASH FROM/(USED IN) OPERATING ACTIVITIES 23,993 (22,789)

(B) RECONCILIATION OF CASH AND CASH EQUIVALENTS

Cash and cash equivalents balance comprises:

Cash on hand 20,722 11,188

Money market liabilities (83,910) (31,010)

Securities – commercial paper liabilities (29,918) (108,151)

TOTAL CASH AND CASH EQUIVALENTS (93,106) (127,973)

(C) FINANCING FACILITIES AVAILABLE

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

Commercial paper program

In conjunction with a number of Australian financial institutions, the Parent Entity has a $1 billion (2012: $1 billion) Australian dollar revolving commercial paper borrowing program entered into for the purpose of funding advance payments to Suppliers and associated responsibilities. The Parent Entity had $29.9 million (2012: $108.2 million) in commercial paper outstanding at 30 June 2013.

The commercial paper program is used to the extent of the backing of the syndicated standby credit facilities referred to below.

Syndicated standby credit facilities

During the year, QSL continued to have access to a $500 million Australian dollar syndicated standby credit facility. The facility remained undrawn during the year but supported the commercial paper program used to fund the advance program and manage pricing on behalf of RSSA participants. Prior to year end, this facility expired on 30 June 2013 and was re-financed for three years on similar terms to the previous two-year facility.

The re-financed syndicated credit facility commenced in 1 July 2013 and expires on 30 June 2016. The terms are similar to the current facility with the only significant change in terms is that the limit moves between $300 million to $500 million to reflect QSL’s cashflow funding required during the course of a season thus reducing facility costs.

Letter of credit issuance facility

The Parent Entity has in place a committed letter of credit issuance facility which matures on 31 October 2013. The facility is for issuing standby letters of credit in lieu of performance bonds in connection with contract tender terms. At 30 June 2013, nil funds (2012: US$ nil) had been drawn against the facility of US$10.0 million (2012: US$10.0 million).

Uncommitted funding facilities

In addition, the Parent Entity had available at 30 June 2013 uncommitted facilities with various financial institutions of $95.0 million (2012: $125.0 million). As at 30 June 2013, $83.9 million (2012: $31.0 million) had been utilised.


2013 2012$’000 $’000

17 COMMITMENTS(A) CAPITAL EXPENDITURE COMMITMENTS

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

Not later than one year 84 2,203

(B) LEASE EXPENDITURE COMMITMENTSOperating leases (non-cancellable):

Minimum lease payments

Not later than one year 44,812 43,438

Later than one year but not later than five years 190,904 23,223

Later than five years 24,760 507

AGGREGATE LEASE EXPENDITURE CONTRACTED FOR AT REPORTING DATE 260,476 67,168

Amounts not provided for:

Rental commitments – STL a 257,638 63,934

Other property 2,838 3,234

260,476 67,168

Aggregate lease expenditure contracted for at reporting datea The Parent Entity executed a new 5 year lease agreement with STL effective from 1 January 2014.

The terms of the agreement are largely the same as the current lease with the only significant change resulting in an annual increase in the base rental. The key features are:

• Base rental starting at $44.9 million per annum (subject to quantum of capital expenditure and an annual increase of 2.5%)

• Capital expenditure above or below a set threshold adding to or reducing the fixed charge

18 NON-HEDGED FOREIGN CURRENCY BALANCES

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

US Dollars

Current assets (34,555) 11,908

Current liabilities (43,287) (33,431)

19 EMPLOYEE BENEFITS AND SUPERANNUATION COMMITMENTSEMPLOYEE BENEFITS

Accrued wages, salaries and on-costs 672 834

Provisions for employee benefits (current) 3,498 3,401

Provisions for employee benefits (non-current) 196 150

TOTAL EMPLOYEE BENEFITS AND SUPERANNUATION COMMITMENTS 4,366 4,385

AMOUNT CONTRIBUTED BY QSL TO THE QSUPER DEFINED BENEFIT PLAN 42 119

20 CONTINGENT LIABILITIES

There are no known contingent liabilities at 30 June 2013 of a material nature.




21 SUBSEQUENT EVENTS

On 1 August 2013, the Parent Entity executed a new 5 year agreement with STL effective from 1 January 2014 and expiring 31 December 2018. The terms of the agreement are largely the same as the prior lease except for the allowance of annual increase in base rentals. The base rental starts at $44.9 million per annum (subject to quantum of capital expenditure which accumulates annually, with an annual increase of 2.5%). The fugure lease expenditure has been included in commitments in Note 17(b).

2013 2012$ $

22 DIRECTOR AND EXECUTIVES DISCLOSURES

Compensation of Key Management Personnel and Directors

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

Short-term benefits 2,181,924 2,405,926

Post employment benefits 126,919 155,894

Other long-term benefits - 208,069

Termination benefits a - 553,766

TOTAL COMPENSATION 2,308,843 3,323,655

a Termination benefits only includes the bona fide portion of any termination payment

23 AUDITORS’ REMUNERATION

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

- audit or review of the financial report 125,035 127,715

- other non-audit services 18,995 68,752

144,030 196,467

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

- internal audit services 151,470 159,006

- taxation services 21,900 36,150

- other non-audit services 9,570 87,488

182,940 282,644

TOTAL AUDITORS’ REMUNERATION 326,970 479,111

24 RELATED PARTY DISCLOSURES

Under raw sugar supply contracts with a number of milling companies in Queensland, which first came into effect on 1 January 2006 and new supply agreements entered into in 2013, QSL purchases those milling companies’ (Suppliers) sugar production destined for the export market. Under the terms of contracts with Suppliers, sugar on receival becomes the absolute property of QSL, free of all encumbrances or adverse claims. In return Suppliers receive a right of payment for the sugar delivered, to be calculated in accordance with the pricing options and other provisions within the contracts. The amount in respect to each season’s production is determined by QSL, following the sale and pricing of that season’s production on commercial terms, and progressive payments are made in accordance with the terms of the contracts. The final payment to each Supplier is made in July each year in respect to sugar production in the previous calendar year.

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

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


25 PARENT ENTITY INFORMATION AND CONTROLLED ENTITIES

(A) CONTROLLED ENTITIES

CONTROLLED ENTITY COUNTRY OF INCORPORATION

PERCENTAGE OWNERSHIP

DATE OF INCORPORATION

QSL Investments (No1) Pty Ltd Australia 100% 16/10/2009

QSL Investments (No2) Pty Ltd Australia 100% 16/10/2009

(B) PARENT ENTITY DISCLOSURES

2013 2012$’000 $’000

Information relating to QSL:

Current assets 338,977 265,244

TOTAL ASSETS 379,617 323,330Current liabilities 334,759 278,767

TOTAL LIABILITIES 335,691 280,276

Retained surpluses 19,458 18,819

Reserves 24,468 24,235

TOTAL EQUITY 43,926 43,054

NET SURPLUS 639 537

TOTAL COMPREHENSIVE INCOME 872 633

Commitments

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

Contingent Liabilities

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

Guarantees

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

26 FINANCIAL RISK MANAGEMENT AND INSTRUMENTS

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

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

(I) FOREIGN EXCHANGE RISK

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

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

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




26 FINANCIAL RISK MANAGEMENT AND INSTRUMENTS CONTINUED

(I) FOREIGN EXCHANGE RISK CONTINUED

Foreign exchange contracts a WEIGHTED AVERAGE

EXCHANGE RATES

CONTRACT MATURITIES

< 1 YEAR 1-2 YEARS 2-3 YEARS 3-4 YEARS 4-5 YEARS TOTAL$’000 $’000 $’000 $’000 $’000 $’000

2013 Sell US dollars 0.9598 570,370 120,121 30,298 - - 720,789

2012 Sell US dollars 0.9356 668,773 207,060 92,462 24,708 - 993,003

Currency options a WEIGHTED AVERAGE

EXCHANGE RATES

CONTRACT MATURITIES


2013Purchased AUD Call against USD 1.0064 70,151 - - - - 70,151

Sold AUD Put against USD 0.9507 105,818 - - - - 105,818

TOTAL 175,969 - - - - 175,969

2012Purchased AUD Call against USD 1.0354 111,066 - - - - 111,066

Sold AUD Put against USD 0.9786 117,518 - - - - 117,518

TOTAL 228,584 - - - - 228,584

a $30.0 million of net foreign exchange contract and currency option losses (2012: $66.5 million gains) have been deferred as the losses represent amounts owed to future years’ pools (refer Notes 8 & 12). The expected timing of recognition based on the fair values at 30 June 2013 are: one year or less $30.9 million losses (2012: $40.4 million gains), one to two years $0.1 million gains (2012: $15.0 million gains), two to three years $0.8 million gains (2012: $8.4 million gains), three to four years $nil (2012: $2.7 million gains) and four to five years $nil (2012: $nil).

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

Price change sensitivity EXCHANGE RATE EXCHANGE RATE10% DECREASE 10% INCREASE

2013 2012 2013 2012$’000 $’000 $’000 $’000

Amounts owed to future pools (94,032) (99,308) 72,595 82,754

As at 30 June 2013, had the Australian dollar been 10% weaker/stronger against the US dollar with all other variables held constant, surplus for the year would have been unchanged as a result of amounts owed to or from future years’ pools absorbing any impact of foreign exchange fluctuations.



(II) COMMODITY PRICE RISK

The following tables summarise the notional contract amounts, maturity dates and average contract rates for sugar futures, sugar option and sugar swap contracts outstanding at reporting date. The notional contract amounts are denominated in Australian dollars derived from the settlement price of the respective futures contract and converted to Australian dollars at the hedge settlement rate at reporting date.

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

Sugar futures contracts a WEIGHTED AVERAGE

PRICE

b

CONTRACT MATURITIES


2013ICE No 11 Contract 15.16 48,632 (1,353) - - - 47,279

2012ICE No 11 Contract 22.00 (51,570) (39,252) - - - (90,822)

Sugar swaps a WEIGHTED AVERAGE

EXCHANGE RATES

CONTRACT MATURITIES


2013US dollar swaps 20.29 c 243,344 106,183 37,619 - - 387,146

2012Australian dollar swaps 425.00 d 4,868 - - - - 4,868

US dollar swaps 19.97 c 328,815 200,043 81,643 27,821 - 638,322

TOTAL 333,683 200,043 81,643 27,821 - 643,190

a $52.2 million of net price risk instrument gains (2012: $51.3 million losses) have been deferred as the gains represent amounts owed from future years’ pools (refer Note 8). The expected timing of recognition based on the fair values at 30 June 2013 are: one year or less $37.9 million gains (2012: $44.3 million losses), one to two years $12.0 million gains (2012: $2.6 million losses), two to three years $2.3 million gains (2012: $2.9 million losses), three to four years $nil (2012: $1.5 million losses).

c US cents per pound d Australian dollars per tonne

The following table details the Consolidated Entity’s sensitivity of financial instruments held at reporting date to movements in the sugar price with all other variables held constant. The 30% sensitivity is based on reasonable price changes, over a financial year, based on the result of volatility of the prompt sugar price on the ICE.

Price change sensitivity SUGAR PRICE30% DECREASE

SUGAR PRICE30% INCREASE

2013 2012 2013 2012$’000 $’000 $’000 $’000

Amounts owed to future pools 118,898 (158,652) (118,898) 158,652

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

As at 30 June 2013, had the sugar price been 30% weaker/stronger with all other variables held constant, surplus for the year would have been unchanged as a result of amounts owed to or from future years’ pools absorbing any impact of sugar price fluctuation.

(III) INTEREST RATE RISK

The Consolidated Entity does not enter into financial instruments to manage cash flow risks associated with interest rate movements on borrowings. Short-term loans totalling $113.8 million (2012: $139.2 million) are repayable within 3 months (2012: 3 months) at an interest rate of 2.9% (2012: 4.0%) and 0.4% (2012: 0.2%) for borrowings in Australia and the United States, respectively. Cash totalling $20.7 million (2012: $11.2 million) comprises bank and short-term investments maturing overnight at an interest rate of 3.1% (2012: 3.9%) and 0.2% (2012: 0.2%) for investments in Australia and the United States, respectively. All remaining financial assets and liabilities are non-interest bearing.





(IV) LIQUIDITY RISK

Liquidity risk management requires maintaining sufficient cash, committed and uncommitted facilities and reserve borrowing facilities by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. Details of credit facilities and their maturity profile are detailed in Note 16.

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

CONTRACT MATURITIES


2013Current payables 7,858 - - - - 7,858

Borrowings (including interest) 113,828 - - - - 113,828

Commodity financial instruments a (37,935) (12,465) (1,781) - - (52,181)

Foreign currency financial instruments 30,884 (117) (748) - - 30,019

TOTAL 114,635 (12,582) (2,529) - - 99,524

2012Current payables 3,064 - - - - 3,064

Borrowings (including interest) 139,161 - - - - 139,161

Commodity financial instruments a 33,372 2,630 2,934 1,539 - 40,475

Foreign currency financial instruments (40,402) (14,963) (8,380) (2,719) - (66,464)

TOTAL 135,195 (12,333) (5,446) (1,180) - 116,236

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

(V) CREDIT RISK

(a) Financial instruments

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

At reporting date, the Consolidated Entity had no significant concentrations of credit risk to a single counterparty or group of counterparties. The Consolidated Entity’s exposure to credit risk from financial instruments is indicated by the carrying amounts of those financial assets on the Consolidated Statement of Financial Position.

(b) Trade debtors

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

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

At reporting date, the Consolidated Entity had no significant concentration of credit risk with any single counterparty or group of counterparties. The geographic concentrations of credit risk are disclosed in the following table:

2013 2012$’000 $’000

Asia 854 36,831

New Zealand 564 8,600

North America - 4

TOTAL 1,418 45,435

(c) Credit risk against Suppliers

Under RSSAs, Suppliers are able to price raw sugar committed to future years’ pools by the Consolidated Entity entering into derivative contracts. The RSSAs limit the quantity of raw sugar that each Supplier can price from a given season’s forecast production. Currently forward pricing is able to be undertaken for 2013, 2014, 2015, 2016 and 2017 seasons. Credit limits have been set for each Supplier under the Credit Risk Policy - RSSA Suppliers and the mark-to-market position of forward pricing is monitored weekly and reported to Directors on a monthly basis.



(VI) FAIR VALUE

The estimate of the fair values of each class of financial instrument is as follows:

CARRYING AMOUNT NET FAIR VALUE2013 2012 2013 2012$’000 $’000 $’000 $’000

FINANCIAL ASSETS

FOREIGN EXCHANGE RISK EXPOSUREForward exchange rate contracts

Sell USD - 66,877 - 44,942

Currency options

Purchased AUD Call against USD - - - 1,747

Purchased AUD Put against USD - - 111 -

TOTAL FOREIGN EXCHANGE RISK EXPOSURE - 66,877 111 46,689

COMMODITY PRICE RISK EXPOSURESugar swaps

US Dollars 51,962 - 51,962 -

TOTAL COMMODITY RISK EXPOSURE 51,962 - 51,962 -

OTHER FINANCIAL INSTRUMENTSAvailable-for-sale: shares at fair value 23,224 21,638 23,224 21,638

TOTAL 75,186 88,515 75,297 68,327

FINANCIAL LIABILITIES

FOREIGN EXCHANGE RISK EXPOSUREForward exchange rate contracts

Sell USD (26,180) - (49,492) -

Currency Options

Sold AUD Put against USD (3,837) (413) (6,593) (1,382)

TOTAL FOREIGN EXCHANGE RISK EXPOSURE (30,017) (413) (56,085) (1,382)

COMMODITY PRICE RISK EXPOSURESugar futures contracts (7,202) (11,402) (7,202) (11,402)

Sugar swaps

Australian dollars - (442) - (442)

US dollars - (39,480) - (39,480)

TOTAL COMMODITY RISK EXPOSURE (7,202) (51,324) (7,202) (51,324)

TOTAL (37,219) (51,737) (63,287) (52,706)





(VI) FAIR VALUE CONTINUED

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

� Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for financial assets or liabilities

� Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices)

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

2013$’000

Level 1 Level 2 Level 3 Total

FINANCIAL ASSETS

FOREIGN EXCHANGE INSTRUMENTSCurrency options

Purchased AUD Call against USD - 111 - 111

COMMODITY INSTRUMENTS

Sugar Swaps

US Dollars - 51,962 - 51,962

OTHER FINANCIAL INSTRUMENTSAvailable-for-sale: shares at fair value 637 - 22,587 23,224

TOTAL 637 52,073 22,587 75,297

2012$’000


FINANCIAL ASSETS

FOREIGN EXCHANGE INSTRUMENTSForward exchange rate contracts

Sell USD - 44,942 - 44,942

Currency options

Purchased AUD Call against USD - 1,747 - 1,747

OTHER FINANCIAL INSTRUMENTSAvailable-for-sale: shares at fair value 450 - 21,188 21,638

TOTAL 450 46,689 21,188 68,327

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

RECONCILIATION OF LEVEL 3 FAIR VALUE MEASUREMENTS NET FAIR VALUE2013 2012$’000 $’000

OPENING BALANCE 21,188 19,236

Acquisitions during the year 1,399 1,952

CLOSING BALANCE 22,587 21,188



(VI) FAIR VALUE CONTINUED

2013$’000



FOREIGN EXCHANGE INSTRUMENTS

Forward exchange rate contracts

Sell USD - (49,492) - (49,492)

Currency options

Sold AUD Put against USD - (6,593) - (6,593)


Sugar futures contracts (7,202) - - (7,202)

TOTAL (7,202) (56,085) - (63,287)

2012$’000



FOREIGN EXCHANGE INSTRUMENTS

Currency options

Sold AUD Put against USD - (1,382) - (1,382)


Sugar futures contracts (11,402) - - (11,402)

Sugar swap

Australian dollars - (442) - (442)

US dollars - (39,480) - (39,480)

TOTAL (11,402) (41,304) - (52,706)


DIRECTORS’ DECLARATIONFOR THE YEAR ENDED 30 JUNE 2013 QUEENSLAND SUGAR LIMITED AND ITS CONTROLLED ENTITIES

In the Directors’ opinion:

(a) The financial statements and notes set out on pages 32 to 57 for the year ended 30 June 2013 are in accordance with the Corporations Act 2001, including:

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

(ii) giving a true and fair view of the Consolidated Entity’s financial position as at 30 June 2013 and of its performance for the financial year ended on that date.

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

(c) There are reasonable grounds to believe that the Consolidated Entity and 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.

Michael Carroll Chairman

16 September 2013


INDEPENDENT AUDITOR’S REPORTFOR THE YEAR ENDED 30 JUNE 2013 QUEENSLAND SUGAR LIMITED AND ITS CONTROLLED ENTITIES


Ernst & Young 111 Eagle Street Brisbane QLD 4000 Australia GPO Box 7878 Brisbane QLD 4001

Tel: +61 7 3011 3333 Fax: +61 7 3011 3100 ey.com/au

Independent auditor's report to the members of Queensland Sugar Limited

Report on the financial report

We have audited the accompanying financial report of Queensland Sugar Limited, which comprises the consolidated statement of financial position as at 30 June 2013, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, notes comprising a summary of significant 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 financial year.

Directors' responsibility for the financial report

The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal controls as the directors determine are necessary to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error. In Note 2(c), the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements comply with International Financial Reporting Standards.

Auditor's responsibility

Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance about whether the financial report is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor's judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to the entity's preparation and fair presentation of the financial 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 entity's internal controls. 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 financial report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Independence

In conducting our audit we have complied with the independence requirements of the Corporations Act 2001. We have given to the directors of the company a written Auditor’s Independence Declaration, a copy of which is included in the directors’ report.



Opinion In our opinion:

a. the financial report of Queensland Sugar Limited is in accordance with the Corporations Act 2001, including:

i giving a true and fair view of the consolidated entity's financial position as at 30 June 2013 and of its performance for the year ended on that date; and

ii complying with Australian Accounting Standards and the Corporations Regulations 2001; and

b. the financial report also complies with International Financial Reporting Standards as disclosed in Note 2(c).

Ernst & Young

Mark Hayward Partner Brisbane 16 September 2013

Queensland Sugar Limited ABN 76 090 152 211

Level 14 348 Edward Street Brisbane Queensland 4000

GPO Box 891 Brisbane Queensland 4001 Australia

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

[email protected] www.qsl.com.au

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