Your directors submit their report for the year ended 30 June 2009.
DIRECTORS
The names and details of the company’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.
Names, qualifications, experience and special responsibilities
Paul Lawrence McKenzie, B.Sc (Agric), B.Com, FAICD, AAAC (Independent) – Non-executive Chairman
Paul is the Managing Partner of Agrarian Management, a leading Western Australian agriculture consultancy with offices in Geraldton, Perth and Katanning. Paul has more than 17 years experience in agribusiness, management and finance and primary production. He is a past President of the Australian Association of Agricultural Consultants (WA) Inc and a Ministerial Appointee to the Dry Season dvisory Committee. Paul was the founding Chairman of Gage Roads Brewing Co (“GRB”), from concept to private company to ASX listing. Paul resigned as a non-executive director of GRB in May 2008. In June 2008, Paul was appointed director of Rural Financial Counselling Service (WA) (“RFCS”). RFCS administrates a federal government funded program in WA under the Department of Agriculture, Fisheries and Forestry.
Paul was appointed Chairman of the group on 1 July 2009 following the retirement of George Gear.
Ian Peter Olson, CA, B.Com, MAICD, AIMM – Non Executive Director
An experienced Chartered Accountant, Ian brings extensive knowledge in corporate advisory, audit and assurance to the Board. Until recently Ian was Managing Partner of PKF Chartered Accountants in Western Australia and is now owner and Executive Chairman of the King Group, a diversified surveying, drafting, mapping and GIS business. Ian is currently also a Non-Executive Director of ASX listed company Diploma Group Limited, appointed 10 October 2007 and Non-Executive Chairman of ASX listed company Gage Roads Brewing Co Limited, appointed 12 November 2007.
Peter Wallace, SF FIN, FAICD, AFAIM – Non Executive Director
Peter has more than 42 years experience in the banking and investment industry. He was Chief Operating Officer for Challenge Bank, held senior executive positions with Westpac in Western Australia and was Head of Corporate WA with Bell Potter Securities Limited.
Peter is currently also a non-executive director with Katana Capital Limited, appointed 19 September 2005. He resigned as a non-executive director of Paladio Group Ltd on 23 April 2009 (appointed 25 October 2005), resigned as non-executive director of Evans & Tate Limited on 22 August 2007(appointed 13 October 2005) and resigned as non-executive director of Tethyan Copper Limited on 10 January 2007 (appointed on 22 January 2005).
Frederick Raymond Woollard, B.Ec, F.Fin, GAICD – Non Executive Director
Fred is Managing Director of Samuel Terry Asset Management Pty Ltd (“Samuel Terry”), a Sydney-based funds manager.
Fred has worked in stock broking and funds management for over 23 years, in Australia and in Europe. Before establishing Samuel Terry, he was a director of Hunter Hall International Ltd in London.
CORPORATE INFORMATION
Corporate structure
The consolidated entity employed 7 employees as at 30 June 2009 (2008: 7 employees).
OPERATING AND FINANCIAL REVIEW
Group overview
Results of Operations
Income from lease and management fees for the period was $833,000, which is an increase of 2% from the previous year. (2008: $816,000). This is due to indexing for inflation on the previous years lease and management fees.
In the previous year’s accounts, shareholders had been advised in the contingent asset note that there existed a claim for damages against a company in relation to breaches of a contract for plantation work on Kangaroo Island. The amount of the claim was $1.2m plus costs however, the company in which the claim was awarded against was placed into liquidation by the company’s former directors. The Group had been seeking recourse against the directors of that company. However, the solicitors acting for the Group have advised that, due to lack of evidence, it would appear that there is little benefit in pursuing the matter further and have advised that any further action should be stopped. Given this, it is likely now that any further action will cease.
During the year, the group completed a viability review of all plantation schemes managed by the Group. The results have been passed to the Responsible Entity and will be released to growers once the Responsible Entity has had the opportunity to fully review the reports.
Interest revenue for the period totalled $1,621,000 (2008: $1,795,000), which reflects the reduction in the overall number of loans outstanding.
Performance Indicators
Management and the board monitor the Group’s overall performance, from its strategic business plan through to the performance of the company against operating plans and financial budgets. The board, together with management regularly review such plans, budgets and comparative results at each Board meeting. All directors actively monitor the Group’s performance.
The change in the net assets of the Group is largely attributable to the write off of uncollectable loans and lease and management fee accounts.
Future Developments
At present, there are no changes to the current operations of the Group, being forestry, the orderly realisation of the Groups’ land assets and recovery of the loan book.
With the rehabilitation work having been completed, we now wait for the trees to grow to maturity for harvest. It is expected that the first trees will likely be harvested sometime during 2014.
It has always been the intention of the Group to review investment opportunities as and when those may arise, however, despite reviewing some opportunities in the past, none has met the main investment criteria of the Group to add to shareholder wealth. This position is not likely to change in the immediate future, however, given the current economic climate, there may be new opportunities presented to the Group. These opportunities will be reviewed if and when they arise and will only be pursued by the company if they add to shareholder wealth.
During the year, competitors in the forestry industry, Great Southern Limited (“GTP”) and Timbercorp Limited were each placed into Receivership. Whilst this has had no direct impact on the operations of RuralAus, it has placed in doubt the establishment of a port on Kangaroo Island. Previous assessments of viability of the plantations on Kangaroo Island had anticipated that GTP would establish a port. RuralAus is currently investigating alternatives to ensure that the trees managed by the Group are dealt with in a timely manner for harvest commencing in approximately 2014.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
There have been no significant changes in the state of affairs of the Group.
SIGNIFICANT EVENTS AFTER THE BALANCE DATE
There have been no significant events after balance date.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS
ENVIRONMENTAL REGULATION AND PERFORMANCE
The company’s operations are subject to environmental regulations pursuant to the conditions of tree farm planning permissions and the requirements of planning and regulatory approvals of local government councils. To the best of the director’s knowledge, the company has complied with all environmental regulations relating to its activities during the year.
INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS
During the financial period a controlled entity, on behalf of the Group, paid insurance premiums in respect of directors' and officers' liability insurance against liability, except wilful breach of duty, of a nature that is required to be disclosed under section 300(8) of the Corporations Act 2001. In accordance with the insurance policy, further details of the nature of the liabilities insured against and the amount of the premium are prohibited from being disclosed.
DIRECTORS’ MEETINGS
Committee membership
As at the date of this report, the company had an Audit and Compliance Committee and a Remuneration Committee of the Board of Directors.
From 24 July 2009, all directors will form the Audit and Compliance Committee and all directors excepting P Wallace form the Remuneration Committee.
ROUNDING
AUDITOR INDEPENDENCE AND NON-AUDIT SERVICES
The directors have received the auditors’ independence declaration, which is included on page 13 of this report. The declaration forms part of the Directors’ report.
No director of the Group is currently or was formerly a partner of Ernst & Young.
Non-Audit Services
REMUNERATION REPORT (Audited)
This Remuneration Report outlines the director and executive remuneration arrangements of the company and the Group in accordance with the requirements of the Corporations Act 2001 and its Regulations. For the purposes of this report Key Management Personnel (“KMP”) of the Group are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the company and the Group, directly or indirectly, including any director (whether executive or otherwise) of the parent company, and includes the two executives in the parent and the Group receiving the highest remuneration.
For the purpose of this report, the term “executive” encompasses the Chief Executive Officer and Chief Financial Officer of the Parent and the Group.
Key management personnel
Key management personnel are as follows:
Directors
Executives
Remuneration Committee
The Remuneration Committee of the Board of Directors of the company is responsible for determining and reviewing remuneration arrangements for the directors and executives.
The Remuneration Committee assesses the appropriateness of the nature and amount of remuneration of executives on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder benefit from the retention of a high quality, high performing directors and executive team.
Remuneration philosophy and structure
The company has structured remuneration packages for its executives and directors in order to attract and retain people with the necessary qualifications, skills and experience to assist the company in achieving its desired results.
Remuneration is reviewed on an annual basis, taking into consideration both qualitative and quantitative performance indicators, with reference to industry benchmarks. A review has been conducted in the period of this annual report.
Overall performance of the directors and the two executives of the company are considered against:
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Timely production of company accounts and records;
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Management of the portfolio of loans against acceptable write off and performance standards
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Maintenance/improvement of the Net Tangible Assets of the company;
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Control of costs;
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Investor relations;
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Assessment of new opportunities; and
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Employee performance.
Remuneration is recommended by the Audit Committee to the Board and is set at around the mid point for professional personnel as measured by knowledge of the members of the Audit Committee and augmented by reference to reports produced by professional Human Resources consultants.
The company currently does not have a board policy in relation to Key Management Personnel limiting their exposure to risk in relation to securities held.
Non-executive director remuneration
The non-executive directors are paid a set amount per year. They are not eligible for any additional payments, other than reimbursement of expenses incurred on behalf of the Group. No director is employed under contract.
The non-executive directors do not receive retirement benefits, nor do they participate in any incentive programs.
The company aims to reward executives with a level and mix of remuneration commensurate with their position and responsibilities within the company so as to:
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Align the interests of executives with those of shareholders; and
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Ensure total remuneration is competitive by market standards.
Executives are employed under normal statutory contractual employment terms. Termination payments are paid as per statutory termination arrangements. There are no termination obligations with any of the executives. The total amount paid to executives is determined by the Board on an annual basis as part of the annual performance review of executives conducted by the Board and is at the Board's ultimate discretion. The Group does not have a policy of hedging of shares by executives.
