qsl: working for you annual...welcomed chris leon as a non-executive director in february this year....

QSL: Working for YOUQUEENSLAND SUGAR LIMITED ANNUAL REPORT 2013/14

CONTENTS

Key achievements 1

Chairman’s Report 2

Managing Director and Chief Executive Officer’s Report 4

Value offering 6

Value snapshot 8

Market review 15

Long-term partnerships with customers 17

Our people 18

Our members and their communities 19

Environment, health and safety 20

Leadership Team 21

Corporate governance 24

Remuneration Report 28

Statutory Financial Report 30

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 CHRIS LEON GREG BEASHEL (MD and CEO)

Leadership Team

GREG BEASHELMANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER

DAMIAN ZIEBARTHGENERAL MANAGER OPERATIONS

ROBERT HINESCHIEF FINANCIAL OFFICER

JOANNE NUGENT GENERAL MANAGER HUMAN RESOURCES

AARON SEARLEFINANCE AND ACCOUNTING MANAGER

SUSAN CAMPBELLCOMPANY SECRETARY AND LEGAL COUNSEL

BRYCE WENHAMFINANCE MANAGER, SUPPLIER RELATIONS

ANDREW HARRISONTECHNICAL MARKETING MANAGER

MIKE PANKETERMINAL MANAGER – MACKAY AND BUNDABERG

STEPHEN STONETREASURER

DOUGALL LODGEGENERAL MANAGER TRADING AND RISK

ABOUT QSL

KEY ACHIEVEMENTSFOR 2013/2014: Significant improvement in health and safety, with QSL’s Total Recordable Injury Frequency Rate (TRIFR) year-on-year target of 50% reduction achieved ahead of schedule (March 2014)

Outperformed the market benchmark on a weighted average basis by more than $9 per tonne IPS in QSL-managed ICE 11 pools

Overall employee engagement improved by 5%

More than 96% of shipments to customers delivered on time and in full

Overall net value of $5.18 per tonne IPS added from chartering activities and premiums

Signed a $500 million long-term contract with Korean refiners – CJ Cheiljedang Corporation, Samyang Corporation and TS Corporation – and marked a 40-year partnership and more than 22 million tonnes in sugar sales

Marked a 40-year partnership with Japan and more than 21 million tonnes of sugar sales

Gained ongoing support from banking partners until 30 June 2017, with continued access to a $500 million syndicated facility agreement to fund the Advances Program

QSL Grower Representative Member election held and 21 representatives appointed for a three-year term

Raw Sugar Supply Agreements (RSSAs) amended to allow millers the opportunity to sell their economic interest sugar (around one third of the sugar produced) as agreed by industry

Despite Wilmar, MSF and Tully Sugar giving notice to terminate their RSSA supply beyond 30 June 2017, Mackay Sugar, Bundaberg Sugar, Isis Central Sugar Mill and W H Heck and Sons rolled over their RSSAs to the end of the 2017 season (30 June 2018)

Roof replacement project at Lucinda Bulk Sugar Terminal for sheds 1 & 2 progressed and due for completion in late 2014.

GOAL: To create prosperity for growers

and millers by maximising the

pool price

PURPOSE: To serve the interests of growers and millers for the

long-term prosperity of the Queensland sugar industry

QUEENSLAND SUGAR LIMITED ANNUAL REPORT 2013/14 1

CHAIRMAN’S REPORTMIKE CARROLL

Over the years, we have worked with our diverse membership base to adapt our services to meet our members’ needs. Only last year, the industry agreed to implement the option for millers to sell their ‘miller economic interest sugar’ (being the volume of sugar which mill owners have economic exposure to under the terms of their cane supply arrangement with growers, typically being around one third of the sugar produced). The Raw Sugar Supply Agreements (RSSAs) between millers and QSL were amended in December 2013 to reflect this change.

Just as the ink was drying on the amended RSSAs, we saw some of our miller members pursue their own distinct interests in apparent disregard of their growers’ preference and the overall interests of the entire sugar industry that are created through industry-wide collaborative arrangements. Wilmar announced a proposed ‘joint marketing company’ with its growers on 3 April 2014 and although this proposal was rejected by their growers, they provided QSL with a formal notice to leave the RSSA on 21 May 2014. Almost immediately, $1 million of additional financing costs were imposed on growers and the smaller mills. This was followed by notices from MSF (owned by Mitr Phol) and Tully Sugar Limited (owned by COFCO) on 27 and 30 June 2014 respectively. This means these three companies will depart the industry-wide collaborative marketing arrangements from July 2017. Mackay Sugar, Isis Central Sugar Mill and Bundaberg Sugar have rolled over their RSSAs for the 2017 season.

Traditionally, QSL has not been outspoken about industry developments as we are a company owned by both millers and growers and our purpose is to serve the interests of both. Indeed we have worked hard to balance these often conflicting interests. However, when we believe that something jeopardises the long-term prosperity of

the Queensland sugar industry as a whole or potentially disadvantages a substantial part of our membership, we feel duty bound to speak out.

The reality is that cane farmers and millers cannot succeed without each other. In Queensland, mills have monopoly control over where 90 percent of growers have their cane crushed, largely due to the highly perishable nature of sugar cane. Around the world, governments have implemented systems to manage similar monopolies. The collaborative sugar industry system in Australia has long been cited as a unique example of a deregulated model that works. However, we are now faced with a situation where some parties want to pursue their own interests above the interests of the industry as a whole. Monopolies allow the capture of economic rents, inequitable transfer of value, increased risk, less innovation and ultimately restrict the size of the economic pie. Consequently Australia, a country that fosters and encourages competitive markets, more often than not regulates infrastructure in a monopoly position.

Growers have been very clear that they have major concerns about potential conflicts of interest and transparency in Wilmar’s proposed model, while MSF and Tully Sugar Limited have not publicly announced their proposed marketing arrangements from July 2017. Growers have told us that they like the QSL model as it provides a check on millers’ natural monopolies because QSL is 50 percent owned and controlled by growers. Admittedly, some growers might be attracted to new marketing arrangements, however they have unanimously called for a choice in how grower economic interest sugar (being the volume of sugar which growers have traditionally had economic exposure to under the terms of their cane supply arrangements with mills, typically being around two thirds of the sugar produced) is marketed.

It has been a tumultuous year at Queensland Sugar Limited (QSL) with some of the most significant developments to marketing arrangements since the industry was deregulated in 2006.

2 QUEENSLAND SUGAR LIMITED ANNUAL REPORT 2013/14

At QSL, we believe the best outcome is not to revert to past arrangements, but to progress to the introduction of a competitive arrangement where growers can choose who markets their economic exposure to raw sugar. A grower choice model would provide competition, allow market outcomes to result in appropriate value along the supply chain, mitigate risk, encourage innovation and deliver the fairest outcome for all. This could have been implemented through contractual arrangements even if mill owners continued to acquire title to the cane on delivery, as is the case under current cane supply arrangements. The Queensland Minister for Agriculture John McVeigh asked the industry to consider a grower choice approach in June 2014 and all parties, except Wilmar, agreed to giving such a model further consideration.

Wilmar has continued to pursue its proposed ‘joint marketing company’ with an apparent disregard for its growers, government and the Queensland sugar industry. This has resulted in the industry reaching an impasse and QSL has welcomed the Queensland Government’s investigation and Federal Government’s Senate Inquiry to find a solution. We are faced with a situation where three milling companies are using their cane milling monopolies to force growers to also sell and price their raw sugar exposure through them and the confidence of growers and their willingness to continue to invest is in contention. Growers already have around $12 billion invested in cane production, but on-going reinvestment and productivity gains are essential to maintain international competitiveness. Their concerns will not only impact Queensland’s $1.5 billion per annum export raw sugar industry but also its overall economy.

Although the notices from Wilmar, MSF and Tully Sugar will have a significant impact on our system, QSL is committed to evolving its business and remains confident that by working with the industry to make the necessary

changes, it will continue to provide a strong value proposition to the industry. While QSL is accustomed to adapting to change, having evolved over the years since the Sugar Board was established in 1923, these frequent disruptive changes to the industry risk taking the QSL team’s focus away from our end goal of achieving maximum returns for the Queensland sugar industry. We have been saying for the last few years that a viable solution needs to be embedded and I hope that now we are at this crossroad, a solution will be developed that creates a sustainable and fruitful future for growers, millers and the entire Queensland sugar industry.

Let me be clear, QSL is NOT advocating a return to a single-desk. What is required is modern legislation that opens the marketing of raw sugar to competition. This will mean that QSL will need to continue to evolve to meet the needs of its members post-July 2017. Growers need a real say in their future so they have the confidence to continue to invest in this vital industry. For true competition, growers need choice in who markets the raw sugar they have economic exposure to and we will continue to advocate for this. We will work with the industry as well as State and Federal governments as part of the State Government’s investigation and the Federal Senate Inquiry.

While the debate about the future of the industry takes place, QSL is committed to serving the best interests of all RSSA participants over the next three years while strengthening the organisation to face the future post-2017 in any scenario that emerges. This means retaining our current pool of talent, and continuing to provide a range of services and pricing options while constantly seeking to offer new pools to the industry. All this with a focus on efficiency, low cost and transparency.

Moving on to other matters, there have been a few people changes at QSL that I would like to acknowledge. Firstly, we welcomed Chris Leon as a Non-Executive Director in February this year.

Chris took over from Mark Sage who was a Director of QSL for almost five years. After working in international roles for 30 years, Mark decided to relinquish the role to spend more time at home with his young family and we thank him for his service.

In our Leadership Team, we welcomed Susan Campbell into the role of Company Secretary and Legal Counsel in October 2013 and Joanne Nugent into the role of General Manager Human Resources in May 2014. Thank you to Maggie Pascoe and Belinda Watton who previously held these positions for their hard work and dedication during their service. We also welcomed Dougall Lodge to the newly-created role of General Manager Trading and Risk to oversee the combined team of Treasury and Sales and Marketing. This role was created to bring physical sales and pool pricing together and to have the Finance team provide more independent oversight. Profiles of our Leadership Team are detailed on pages 21-23.

Finally, I would like to present to you the QSL Annual Report for the 2013/14 Financial Year. Included in this report is a five-year analysis of results so our members can appreciate QSL’s underlying performance trends (see pages 9-14). All of QSL’s results are open to members so they can transparently review and assess QSL’s performance over the years. As a not-for-profit, tax-free “pass through” organisation owned by our members, all revenues are returned to our members through higher pool returns and lower costs for services provided. Our driving force is and always will be acting in the best interests of the Queensland sugar industry, including obtaining the best pool returns for our contracted suppliers and their growers.

We hope you enjoy the read and on behalf of the QSL Board of Directors and the QSL Team, we look forward to working with our members through this pivotal time for the industry. As always, we welcome your feedback.

3QUEENSLAND SUGAR LIMITED ANNUAL REPORT 2013/14

MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER’S REPORTGREG BEASHEL

It has been an eventful year for QSL and I am pleased to report that we have been successful in achieving the goals we set ourselves for the 2013/14 Financial Year, despite significant distractions. In particular, I am proud of our significant improvement in health and safety as well as our pool results, where we outperformed the market benchmark on a weighted average basis by $9.22 per tonne IPS.

Our overall goal is to create prosperity for our members by maximising the pool price. The way we perform in each of our four value offerings – financing, pricing, marketing (selling) and logistics – impacts on pool price returns to growers and millers. A detailed analysis of our performance for the year is outlined from pages 8 to 14. I will touch on the key highlights below.

HEALTH AND SAFETY We have achieved a significant improvement in health and safety, with QSL’s Total Recordable Injury Frequency Rate (TRIFR) year-on-year target of 50 percent reduction achieved ahead of schedule in March 2014.

STRONG POOL PERFORMANCES It has been another year of surplus sugar on the world market and a strong Australian dollar. Our pricing team has used its expertise to manage the sugar futures and foreign exchange markets to attain strong pool results.

Our goal was to outperform market benchmark returns and on a weighted average basis, the QSL-managed pools outperformed the market benchmark by more than $9 per tonne IPS. The strongest performing pool was the Forward Season Pool, which was

priced over two seasons and achieved a net pool price of $430.92 per tonne IPS. The Harvest Pool, which has restrictions on how much sugar can be priced in season in the event there is a crop shortfall, was the lowest returning pool but still outperformed the average market benchmark by $6.46 per tonne IPS, with a final net pool price of $389.19 per tonne IPS.

COST-EFFECTIVE FINANCING THROUGHOUT THE YEAR QSL provided ongoing financing to millers and growers throughout the year through the Advances Program. In the 2013/14 Financial Year we accessed financing through the commercial paper market and maintained a $500 million stand-by credit facility. Our weighted average cost of funds was 2.90 percent, the lowest it has been in five years.

In July 2014, QSL withdrew its Standard & Poor’s (S&P) rating due to it becoming uneconomical to continue accessing commercial paper after S&P downgraded QSL’s ‘A long-term’ credit rating following a notice from Wilmar to leave the Raw Sugar Supply Agreement from July 2017. We will utilise banking lines for future funding.

Our goal for the year was to retain low-cost financing and we achieved this regardless of the downgrade and subsequent withdrawal from the commercial market. Our banking partners have backed QSL’s financial position and risk profile by continuing to provide us with access to a $500 million syndicated facility agreement to fund the Advances Program.

One of my goals for QSL has been to achieve results that surprise on the upside and not make excuses for poor results.


While accessing this facility will allow us to continue to provide cost-effective financing (currently around 3.5 percent excluding fixed line fees), it has resulted in approximately $1 million in increased financing costs as we will no longer be using Commercial Paper.

STRENGTHENED RELATIONSHIPS WITH LONG-TERM CUSTOMERS Our Marketing Team has spent a great deal of time working with QSL’s customers to guide them through the market noise surrounding changes occurring in Australia. There has been a lot of misinformation in the market regarding the future of QSL and the Australian sugar industry. Our team has worked with customers to assure them a guarantee of supply and minimal disruptions over the next three years.

In the 2013/14 Financial Year the team sold almost three million tonnes of sugar, with key destinations being Korea, Japan and Malaysia. They also welcomed customers to Australia as part of strengthening long-term relationships (see page 17).

Our goal for the 2013/14 Financial Year was to maximise returns through optimising sales timing and customer premiums. In this respect, value was achieved by the marketing team through chartering activities and negotiated net premiums. The other origin sugar opportunities were not as prevalent as last year so our results in this area unfortunately were not as strong.

EFFICIENT STORAGE, HANDLING AND SHIPPING OF BULK SUGAR In our logistics pillar, we beat our target of 95 percent of shipments delivered on time and in full, with a result of more than 96 percent.

Overall, I am very pleased with the performance of the QSL Team in the 2013/14 Financial Year. Our focus now is squarely on ensuring we continue to derive value for all our members across our four value offerings – financing, pricing, marketing (selling) and logistics – for the 2014/15 Financial Year.

Finally, I would like to acknowledge the contribution of every person within QSL. It is the combined dedication and commitment of each person, along with their expertise, that allows QSL to continue to achieve solid results for members. I would also like to thank our long-term customers who respect the quality product produced by the Queensland sugar industry and for their continued unwavering support of QSL and its grower and miller members. Lastly, I would like to acknowledge our grower and miller members who are integral to QSL’s success and I ask that we work together to agree on a sustainable model for the prosperity of the Queensland sugar industry in the future.


Queensland Sugar Limited (QSL) is a not-for-profit, tax-exempt organisation owned by the Queensland sugar industry. Its membership is structured to have equal representation between growers and millers, with all profits returned to industry.

QSL is focused on maximising returns while reducing overall costs. It does this by moving Queensland raw sugar exports through an end-to-end supply chain model, providing a significant advantage in managing risks and seeking to outperform market benchmarks. Significant value is achieved and economies of scale are reached when Queensland’s raw sugar exports are moved through this industry collaborative system.

QSL has seven milling members and 23 Grower Representative Members who represent 4,000 growers across the state (until July 2017). The business maintains Raw Sugar Supply Agreements (RSSAs) with millers and within these is a recognition of miller and grower economic interest sugar. Essentially, grower economic interest sugar equates to around two thirds of the sugar produced through the local mill, with the miller having an interest over the remaining one third (subject to the mill owner economic interest proportion being higher where the mill also owns cane farms itself).

QSL provides four main value offerings to members: financing, pricing, marketing and logistics.

FINANCINGQSL provides ongoing cost-effective financing to millers throughout the season who subsequently pass this onto growers. This payment is on receipt of sugar at a bulk sugar terminal (BST) and is often in advance of the sugar being sold or the payment received from the customer. Incremental payments are made throughout the season based on a proportional amount of QSL’s current estimate of the final weighted average pool price that the miller will receive for raw sugar supplied under the RSSA. QSL draws on a syndicated facility agreement to fund the Advances Program.

PRICING QSL offers a range of pricing products to millers and growers tailored to different risk appetites. These options include QSL-managed pools, individual forward pricing and miller-managed pricing pools. If a pool does not exist, millers are welcome to discuss their needs with QSL and a pricing pool can be created. QSL has a team of experts who actively monitor the sugar futures and foreign exchange markets.Their pricing decisions are based on this market knowledge and the unique risk parameters set for each QSL pool product.

This team has a track record in out-performing market benchmarks.

MARKETING (SELLING) QSL has long-term relationships with customers who value its producer-seller model. Its marketing strategy platform is based on developing long-term and sustainable relationships with high-returning customers and having strong supply chain relationships where value can be optimised. This approach puts the customer first and has a focus on delivering high-quality sugar best suited to each customer’s operations, when the customer wants it. QSL sells the majority of Queensland’s export raw sugar into the Asian market.

LOGISTICS QSL manages the highly effective storage, handling and shipping of bulk sugar to customers. It operates six BSTs under a lease with Sugar Terminals Limited, and takes delivery of raw sugar, blends it to achieve the quality that meets customers’ needs and then loads all shipments leaving Queensland’s shores. QSL has a strong on-time and in-full delivery track record, collectively managing the terminals to keep costs down while maximising shipping flexibility. Throughout the operations process the key focus remains the safety of our people and our BST teams work collectively to maximise safety learnings across the business.

VALUE OFFERING

QUEENSLAND SUGAR LIMITED ANNUAL REPORT 2013/146

7

SNAPSHOT OF VALUE OFFERING

Operate safe and efficient storage and shipping

of raw sugar

GROWERSSell cane to Millers

MILLERSCrush to raw sugar

Sell to domestic market and have option to sell their economic interestsugar internationally

POOLS

MILLERS

GROWERS

Obtain financing from banks at

low interest rateSell to

International MarketKnowledge, expertise and experience

in pricing and managing Futures Market

QSL Harvest Pool

QSL Guaranteed Floor Pool

QSL Discretionary Pool

QSL Actively Managed Pool

QSL Growth Pool

QSL 2-Season Forward Pool

QSL 3-Season Forward Pool

Supplier Pools

US Quota Pool

Monitoring, analysing and hedging –

ICE11 and ICE16

$/t

$

$

QSLMaximise net returns that are

passed through to millers and growers

• Priced collectively

• Costs and revenues shared

Raw sugar supply agreement (RSSA) with QSL

• Access to low-cost financing

• Access to $500m syndicated debt facility committed to 30/6/2017

• Stable, ongoing income through regular advance payments.

International customersAsia/USA/Europe

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 ICE11

• 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

• 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(SELLING) 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 filterability) 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.

Note: Information current as at August 2014 and may change. QUEENSLAND SUGAR LIMITED ANNUAL REPORT 2013/14

VALUE SNAPSHOT

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 pool.

1Represents net physical sales premium of $17.71

KEY HIGHLIGHTS

COMPONENTS OF TOTAL QSL-MANAGED ICE 11 POOLS VERSUS THE PASSIVE MANAGEMENT BENCHMARK FOR THE 2013 SEASON

OVERALL VALUE CREATED IN THE QSL-MANAGED ICE 11 POOLS

$A/T

ONNE

IPS

Net ICE 11pools

Valueaddedabovebenchmark

PassiveManagementbenchmark

$0

$390

$410

$430

$450

$470

$370

$350

Gross ICE 11pools

$393.61

Gross CFRpremium1

+$42.19

Polarisationpremium

+$13.30

Freight andexecution costs1

-$24.48

Storage andhandling

-$21.50

Marketingservices

-$2.28

Indirectselling

-$4.55 Finance costs

-$4.50

Finance rebate

+$0.16

$391.95

$382.73

$9.22

Sharedpool

-$1.66

This graph shows the components that make up the QSL ICE 11 Shared Pool and highlights the value created above the Passive Management benchmark. Overall QSL secured strong 2013 season pool price returns and outperformed the market by an average of $9.22 per tonne IPS for QSL-managed pools.

(To convert “tonne IPS” to “tonne actual” multiply by a conversion factor of 1.037)

�QSL has maintained a strong focus on safety in the workplace, with a reduction in the Total Recordable Injury Frequency Rate from 39.9 to 12.8 in the last 12 months

�QSL outperformed the market benchmark on a weighted average basis for QSL-managed ICE11 pools by $9.22 per tonne IPS

�Value added through chartering and net premiums was $5.18 per tonne IPS

�QSL delivered 96.2% of shipments on time and in full for the 2013/14 Financial Year

�2.975m tonnes of sugar sold by QSL in the 2013/14 Financial Year

�3.765m tonnes of sugar handled through the bulk sugar terminals

�QSL’s weighted average cost of funds was 2.9% for the 2013/14 Financial Year – the lowest in five years


FINANCINGPROVIDING LOW-COST FINANCING THROUGH ADVANCE PAYMENTS TO MEMBERS

DEBT PROFILE13/14 FINANCIAL YEAR

-$500

-$300

-$400

-$200

-$100

$0

JUL 13 AUG SEP OCT NOV DEC FEB MARJAN APR MAY JUN 14

$’M

AUD

COST

OF F

UNDS

(%)

JUL 13 AUG SEP OCT NOV DEC FEB MARJAN APR MAY JUN 14

2.7

2.5

0

2.9

3.1

3.3

3.5

QSL AVERAGE COST OF FUNDS 13/14 FINANCIAL YEAR

This graph reflects QSL’s outstanding debt balance during the financial year. QSL pays Advance Payments to suppliers (millers), on receipt of raw sugar, who pass payments onto growers, before it is sold or payment is received from the customer. Therefore the debt profile fluctuates throughout the year depending on the receipt and sale of sugar. Sugar was held for longer this financial year due to significant market carry resulting in this debt profile.

This graph presents QSL’s weighted average cost of funds incurred over the financial year. QSL’s credit rating allowed QSL to borrow at low rates, reducing overall costs for suppliers (millers). However, in late May 2014, QSL’s credit rating was downgraded resulting in QSL utilising the $500m syndicated facility agreement at a higher funding cost. In July 2014, QSL retracted its credit rating and was unable to draw on borrowings from Commercial Paper. These exclude the fixed facility fees.

WEIGHTED AVERAGE COST OF FUNDSLAST 5 FINANCIAL YEARS

%

09/10 10/11 11/12 12/13 13/14QSL weighted average cost of funds1 4.03% 5.13% 4.77% 3.48% 2.90%Weighted BBSW (90 days) 3.91% 4.92% 4.44% 3.17% 2.63%Weighted margin over BBSW (90 days) 0.12% 0.21% 0.33% 0.31% 0.27%

COST

OF F

UNDS

(%)

30 JUN 09

3.91%*

30 JUN 10 30 JUN 11 30 JUN 12 30 JUN 13 30 JUN 141.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

4.92%*

4.44%*

3.17%*

2.63%*

QSL AVERAGE COST OF FUNDSLAST 5 FINANCIAL YEARS

This graph reflects QSL’s weighted average cost of borrowings over the last five financial years, excluding fixed facility fees. *Represents weighted BBSW (90days)

$0

$1,400

DOLL

ARS

ADVA

NCED

($’0

00)

$200

$400

$600

$800

$1,200

$1,000

JUN 13 JUL 13 AUG 13 SEP 13 OCT 13 NOV 13 DEC 13 JAN 14 FEB 14 MAR 14 APR 14 MAY 14 JUN 14 JUL 14

62.5

%

65% 67

.5% 70% 77.5

%

82.5

% 85%

87.5

%

90% 95

% 100%

60%

57.5

%

57.5

%

CUMULATIVE PAYMENTS TO SUPPLIERS (MILLERS)13/14 FINANCIAL YEAR (2013 SEASON)

This graph illustrates the cumulative Advance Payments made by QSL to suppliers (millers) for the 2013 season across the 13/14 Financial Year. The Advance Program allows suppliers (millers) to be paid progressively over the season on delivery of raw sugar at a bulk sugar terminal. Millers provide payments to growers. As raw sugar is received at a bulk sugar terminal, Advance Payments build and then taper off once all the raw sugar is received.

This table 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 (millers) through the Shared Pool to finance the Advances Program.

Past performance is provided for reference only and may not be indicative of future performance. Costs and charges may vary from year to year.

1Includes funding via short-term money markets and exclude the fixed facility fees.


PRICINGPROVIDING A RANGE OF PRICING OPTIONS FOR DIFFERENT RISK APPETITES AND EXPERTS TO MANAGE THE FUTURES MARKET ON YOUR BEHALF

QSL POOL PRICES FOR 2013 SEASON13/14 FINANCIAL YEAR

$350

$0

$360

$370

$380

$390

$400

$410

$420

$430

$440

Performance above benchmark A$ per mt IPS

Benchmark

POOL

PRI

CE*/

IPS

TONN

E (A

$)

$25.14

$382.73 $382.73

$389.19QSL HARVEST POOL

$6.46

$382.73

$396.63QSL DISCRETIONARY POOL

$13.90

$382.73

$391.95TOTAL QSL MANAGEDICE11 POOLS

$9.22

$382.73

$40.52

$423.25QSL GROWTH POOL

$407.87QSL ACTIVELY MANAGED POOL

$382.73

$48.19

$430.92QSL FORWARD SEASON POOL

This graph presents the net pool performance above the benchmark for the QSL-Managed Pools for the 2013 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 pool that QSL provides to suppliers (millers) and growers. In the 2013 Season, QSL outperformed the market benchmark on a weighted average basis by $9.22 per tonne IPS. The Guaranteed Floor Pool achieved a net price of $391.71 per tonne IPS however this pool has not been benchmarked as the price was locked-in at the start of the season. The US Quota Pool, which was priced on the ICE16, achieved a net price of $395.62 per tonne IPS.*After Shared Pool allocation

$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 premium1

Net $A/tonne IPS(Shared pool result)

09/10 10/11 11/12 12/13 13/14

-$0.87

$5.62$7.54

$1.03

-$1.66

THE SHARED POOL ICE 11 COMPONENTLAST 5 FINANCIAL YEARS

This graph illustrates 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 return 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. In the 2013 Season, QSL had a Shared Pool cost of $1.66 per tonne IPS. 1Made up Gross CFR premium of $42.19 less freight and execution costs of $24.48

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.


$/TONNE IPS12/13 13/14

Season 2012 2013

Benchmark Shared Pool amount -$5.08 -$7.00

Value created by QSL through:

Net physical sales premiums over benchmarks $3.92 $4.74

Chartering trading activities $1.10 $0.44

Finance Rebate from corporate activities $1.09 $0.16

Value created by QSL for the Shared Pool $6.11 $5.34

Net Shared Pool result $1.03 -$1.66

This table shows the value added by QSL in obtaining net premiums greater than benchmarks, actively managing chartering activities and the Finance Rebate from activities. If these activities were not undertaken, the ICE 11 Shared Pool result would have been the Benchmark Shared Pool amount of negative $7.00 instead of negative $1.66. 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 short freight positions within QSL’s risk policies. The Finance Rebate is a benefit to the pool charged to corporate activities.

VALUE CREATED TO THE ICE 11 SHARED POOL LAST 2 FINANCIAL YEARS

12.00

0

20.00

24.00

32.00

16.00

28.00

36.00

US c/

lb

JUL 09 DEC 09 JUN 10 DEC 10 JUN 11 DEC 11 JUN 12 DEC 12 JUN 13 DEC 13 JUN 14

18.83* 18.55*

24.48*

20.43*

17.29*

RAW SUGAR ICE 11LAST 5 FINANCIAL YEARS

AUD/USD CURRENCYLAST 5 FINANCIAL YEARS

This graph reflects the long-term trend of the raw sugar ICE 11 price for the prompt futures contract for the last five financial years. This shows an overall declining trend in the sugar price. World production responded to prices above 30c/lb in 2011, with significant increases in supply. This has led to a down-trend in sugar prices to date as the increased sugar supply finds consumer demand.*Represents average pricing achieved by QSL in QSL-Managed pools in the relevant QSL pricing period.

0.75

0

1.05

0.95

1.15

AUD/

USD

JUL 09 DEC 09 JUN 10 DEC 10 JUN 11 DEC 11

0.85

JUN 14 DEC 13 JUN 13 DEC 12JUN 12

0.7853*

0.8705*

1.0119* 1.0117*

0.9389*

This graph illustrates the long-term trend of the Australian dollar against the United States dollar for the last five financial years. This shows a consistently strong Australian dollar during the last four years. The Australian dollar had an elevated period above parity to the United State dollar which has now been reversed as the US economy recovers and Australia’s terms of trade weakens with falling commodity prices.*Represents average pricing achieved by QSL in QSL-Managed pools in the relevant QSL pricing period.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.


$A/TONNE ACTUALLAST 5 FINANCIAL YEARS

$300

$0

$500

$700

$400

$529$600

$800

AUD/

TONN

E AC

TUAL

JUL 09 JAN 10 JUL 10 JAN 11 JUL 11 JAN 12 JUL 12 JAN 13 JUN 13 JAN 14 JUL 14

$460

$533

$445$406

This graph reflects the Australian dollar per actual tonne sugar price for the prompt futures contract for the last five financial years. This shows an overall declining trend in the sugar price. This is derived from the AUD and ICE11 charts above. The dashed lines represent the average result achieved by QSL for the relevant QSL pricing period.

Past performance is provided for reference only and may not be indicative of future performance. Costs and charges may vary from year to year.

$A/TONNE ACTUAL 13/14 FINANCIAL YEAR

$350

$0

$410

$450

$390$406

$430

$470

AUD/

TONN

E AC

TUAL

JUL 13 SEP 13 NOV 13 JAN 14 MAR 14 MAY 14 JUL 14

$370

This graph represents the Australian dollar per actual tonne sugar price for the prompt futures contract for the 2013/14 Financial Year. A result of AUD 406/tonne actual was achieved for the QSL pricing period from 1 March 2013 to 30 June 2014.

PRICING CONTINUED


MARKETINGFOCUSED ON BUILDING LONG-TERM AND SUSTAINABLE RELATIONSHIPS WITH CUSTOMERS IN THE ASIA PACIFIC REGION (PRODUCER-SELLER MODEL)

NET PREMIUMS EARNED ABOVE BENCHMARK LAST 2 FINANCIAL YEARS

12/13 13/14

Season 2012 2013

QSL-Managed ICE11 Tonnage (tonnes actual)

2,520,000 2,182,236

Value added above benchmarks ($A/Tonne IPS)

$3.92 $4.74

This table illustrates 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. The value added to the ICE 11 Shared Pool through obtaining higher premiums than the benchmark was A$4.74 per tonne IPS.

VALUE ADDED FROM CHARTERING ACTIVITIES LAST 2 FINANCIAL YEARS

12/13 13/14

Season 2012 2013

*Actively managed tonnage (tonnes actual)

1,225,000 571,897

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

$1.10 $0.44

This table represents the additional value added to the ICE 11 Shared Pool due to actively managing short open positions in the freight market by QSL within the parameters of the QSL Freight Risk Management Policy. The value added was A$0.44 per tonne IPS based on the QSL-managed ICE11 tonnage.

TOTAL MARKETING COSTS LAST 5 FINANCIAL YEARS $’M09/10 10/11 11/12 12/13 13/14

Marketing costs 8.0 6.9 7.1 7.0 7.0

OTHER ORIGIN SUGAR LAST 5 FINANCIAL YEARS

09/10 10/11 11/12 12/13 13/14

Season 2009 2010 2011 2012 2013

Net operating result ($’000) - $5,635 $10,170 $2,260 $267

This table represents a summary of the tonnage and the net operating result achieved each year from Other Origin 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 13/14 Financial Year decreased due to a reduction in opportunities.

This table reflects the total marketing costs charged by QSL to suppliers (millers) over the last five financial years. QSL has managed to reduce net marketing costs to approximately $7 million in the last four years due to increased corporate activities.

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 activities.

0

500

1,000

1,500

2,000

2,5002.9M

2.2M 2.3M

2.8M

3,000

Supplier priced

QSL priced

TONN

ES A

CTUA

L (’0

00)

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

3.0M

13/140

500

1,000

1,500

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09/10 10/11 11/12 12/13 13/14

United States of America

Other

Open Destination

New Zealand

Malaysia

Taiwan

Korea

Japan

Indonesia

TONN

ES A

CTUA

L (’0

00)

European Union

QSL MARKETSLAST 5 FINANCIAL YEARS

TOTAL TONNES MARKETED (SOLD) BY QSL LAST 5 FINANCIAL YEARS

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

This graph illustrates the total tonnes sold by QSL over the last five financial years and breaks down how the raw sugar was priced; either supplier (miller) or QSL. This includes 712,000 tonnes sold to Wilmar under a long-term contract in 2013/14 and 200,000 tonnes in 2012/13.


LOGISTICSHIGHLY EFFECTIVE STORAGE, HANDLING AND SHIPPING OF BULK SUGAR TO CUSTOMERS WITH A STRONG ON-TIME AND IN-FULL DELIVERY TRACK RECORD

TONNES HANDLED THROUGH THE BULK SUGAR TERMINALSLAST 5 FINANCIAL YEARS

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2,000

3,000

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TOTA

L TON

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Storage and handling

RSSA

12/1311/1210/1109/10 13/14

ON-TIME IN-FULL DELIVERIESLAST 5 FINANCIAL YEARS

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30

40

50

60

70

80

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94%

96%

98%

93%

95%

97%

99%

100%

09/10

NUM

BER

OF S

HIPM

ENTS

ON-T

IME

IN-F

ULL D

ELIV

ERY

(%)

No. of ships

On-timein-full deliveries

12/13 13/1411/1210/110%

This graph shows the number of shipments QSL has chartered and the percentage of the deliveries that were on time and in full over the last five financial years. The flexibility provided by managing the terminals as one ensures we can meet customers’ expectations and deliver on time and in full. In the 2013/14 Financial Year, QSL delivered more than 96% of shipments on time and in full.

SAFETY PERFORMANCE – TOTAL RECORDABLE INJURY FREQUENCY RATE (TRIFR) (SINCE OCT 2012)

This graph reflects 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 the Raw Sugar Supply Agreements. QSL achieves cost reductions in the area of chartering by managing the majority of Queensland’s export raw sugar in bulk and optimising the flexibility provided through the six bulk sugar terminals it manages. In the 2013/14 Financial Year, QSL handled 3.8 million tonnes of raw sugar.

10

20

30

40

50

60

70

FREQ

UENC

Y RA

TE

TRIFR12 month rolling average

TRIFR target = 16.00 (Oct 13 to Oct 14)

64.4 64.2 63.359.6

53.750.7 50.7

41.0

39.9

44.3

31.5 30.7

20.9 20.017.1 16.7 16.3

13.415.8

12.9 12.8

OCT 12 NOV 12 DEC 12 JAN 13 FEB 13 MAR 13 APR 13 MAY 13 JUN 13 JUL 13 AUG 13 SEP 13 OCT 13 NOV 13 DEC 13 JAN 14 FEB 14 MAR 13 APR 13 MAY 14 JUN 14

This graph represents the downward trend in the number of total recordable injuries in line with a greater focus on safety after the review conducted in 2012. The Total Recordable Injury Frequency Rate is calculated by (Lost Time Injuries + Medically Treated Injuries + Restricted Work Injuries) x 1,000,000 hours.

0

1

2

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4

OCT 12 NOV 12 DEC 12 JAN 13 FEB 13 MAR 13 APR 13 MAY 13 JUN 13 FEB 14 MAR 14 APR 14 MAY 14 JUN 14JUL 13 AUG 13 SEP 13 OCT 13 NOV 13 DEC 13 JAN 14

Restricted work injuriesLost time injuriesMedically treated injuries

NO. O

F IN

JURI

ES

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

SAFETY – TOTAL RECORDABLE INJURY FREQUENCY RATE BY CATEGORY (SINCE OCT 2012)

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


MARKET REVIEWTREASURER, STEPHEN STONE

The 2013/14 Financial Year was characterised by another year of weak sugar prices and a persistently strong Australian dollar.

QSL took an active price risk management focus and combined this with expert analysis of the market and interpretation of trends to end the season returning pool prices at levels significantly higher than the market benchmark.

SUGAR The sugar market for the 2013/14 Financial Year delivered a fourth consecutive year of a global sugar surplus. This resulted in ongoing downward pressure on raw sugar prices. Reflecting Brazil’s cost of production and support from ethanol parity, the surplus sugar found price support at US15c/lb. Raw sugar futures averaged US17c/lb during the financial year, with far less price volatility than the previous financial year.

Brazil, the largest sugar producer in the world, produced another record crop, with similar positive results in other sugar exporting nations. A fire in Santos, Brazil, on 18 October 2013 destroyed 300,000 tonnes of stored sugar, causing the global sugar price to rise sharply. However, this optimism was short-lived, with sugar prices quickly declining after the event. With a global surplus of sugar in play, the sugar market found itself needing support from ethanol demand at the commencement of Brazil’s crush. The competing markets for cane have added support to raw sugar prices, however it remains difficult to determine how much sucrose can be soaked up by ethanol in any surplus period.

Key themes influencing the market:

� Thailand has increased its capacity to meet sugar demand globally and is becoming a potential threat to Australia in supplying the Asian market

� The energy market has become an important influencer over raw sugar prices, particularly with the increase in ethanol use in vehicles globally. The link to sugar pricing, however, is not always clear, as ethanol markets are heavily influenced by Government policy and a multitude of demand and supply variables

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

� Prices during the 2013/14 Financial Year may have fallen further if the Brazilian currency weakened, as many analysts predicted. Fortunately, the currency has been relatively stable and will continue to feature as an important variable in sugar pricing.

Shifting the current surplus is proving to be more difficult than many market professionals expected. High levels of sugar inventory disrupt demand patterns as prices fall. Notwithstanding, QSL expects a move away from the surplus and a transition to a more balanced trade for global sugar. Accordingly, we see an eventual recovery in raw sugar prices into 2015.


CURRENCYThe Australian dollar provided some relief for Australian exporters during the 2013/14 Financial Year, after an extended period above parity to the US dollar. The sharp depreciation which occurred at the start of the financial year saw the currency fall to US$0.86. Further falls looked likely as the Federal Reserve responded to a recovering US economy by slowly reducing financial market liquidity. However, the recovery remained fragile, with US dollar weakness re-emerging as the Australian dollar recovered to the US$0.96 level. The currency averaged a more manageable US$0.92 throughout the year.

Key themes influencing the market:

� Australia’s AAA credit rating and relatively high domestic interest rates are continuing to attract foreign investment in Government Bonds. The resulting currency flows have overwhelmed narrowing of interest rate differentials and deteriorating commodity exports

� The Australian dollar remains vulnerable to a shift in investor appetite toward the US. As our interest rates converge with the US as their economy recovers, we expect to see periods of currency weakness

� Commodity prices remain under pressure as China’s economy cools and is no longer the engine of world growth. This weakens Australia’s terms of trade and will ultimately provide a headwind for the currency.

Not unlike the sugar market, more favourable levels have been elusive during the current financial year. As China cools and the US recovers, QSL foresees further pressure on the Australian dollar, which is expected to provide relief for Australian exporters.

0.80

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USD

1 JUL 13

0.85

30 JUN 14 1 MAR 14 1 MAY 14 1 JAN 14 1 NOV 13 1 SEP 13

AUD/USD CURRENCY 13/14 FINANCIAL YEAR

This graph shows the trend of the Australian dollar against the United States dollar for the 2013/14 Financial Year. The average Australian dollar price for the 2013/14 Financial Year was US 91.82 cents.

12.00

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16.00

18.00

14.00

20.00

22.00

US c/

lb

1 JUL 13 1 SEP 13 1 NOV 13 1 JAN 14 1 MAR 14 30 JUN 141 MAY 14

RAW SUGAR ICE 11 13/14 FINANCIAL YEAR

This graph represents the trend of the raw sugar ICE 11 price for the prompt futures contract for the 2013/14 Financial Year. The average sugar price for the 2013/14 Financial Year was US 17.02 cents.

MARKET REVIEW CONTINUED


Signing ceremony for long-term contract with CJ Cheiljedang Corporation, Samyang Corporation and TS Corporation

Japanese customers visit Mossman Mill

LONG-TERM PARTNERSHIPS WITH CUSTOMERS

LONG-TERM CONTRACT SIGNED WITH KOREAN REFINERIESQSL welcomed representatives from Korea’s three sugar refineries – CJ Cheiljedang Corporation, Samyang Corporation and TS Corporation – to Queensland in June 2014 to officially sign a $500 million contract and celebrate a 40-year partnership between QSL and Korea.

An official signing ceremony was held at the QSL Brisbane office, which sealed the deal for QSL to supply 1.164 million tonnes of raw sugar to Korea’s three refineries over the 2015 and 2016 seasons.

QSL Managing Director and Chief Executive Officer Greg Beashel said the 40-year partnership was built on the principles of trust, respect and a two-way creation of value. “This is at the core of QSL’s producer-seller approach, which is about building sustainable relationships with customers. We pride ourselves on providing quality sugar that is best suited to each customer’s operations and delivering the sugar when the customer wants it, on time and in full.”

While in Queensland, Mr Danny Yoon, General Manager from CJ Cheiljedang Corporation said his company had a long history of working with QSL. “We enjoyed visiting Australia and meeting the people behind the product, including the farmers who grow the cane, millers who process it into sugar and the QSL team that markets the sugar. We appreciate the support from the Australian sugar industry and value the producer-end-user model partnership that we have with QSL.”

QSL and Korea’s history dates back to 1974 when Australia replaced Taiwan as the major supplier of raw sugar into Korea and QSL signed its first long-term contract. Long-term contracts have been a key feature of the ongoing partnership which has seen more than 22 million tonnes of Australian sugar sold to Korea.

CELEBRATING 21 MILLION TONNES EXPORTED TO JAPANQSL welcomed representatives from long-standing Japanese customers Mitsui and Mitsubishi and their associated refinery representatives to Queensland in November 2013 to

celebrate a significant milestone of 21 million tonnes of sugar sold to Japan since 1974. The occasion was marked with an industry dinner with grower and miller representatives, and a grower and mill visit.

Mitsubishi and Mitsui are two of the largest diversified trading houses in Japan and QSL is proud to do business with them.

QSL made its first sale of sugar to Japan in 1954 under the Queensland Sugar Board and the relationship gathered momentum from that point, with regular shipments from 1974 onwards.

Australia is one of two countries supplying the majority of Japanese-grade sugar, with Thailand the other. QSL has a detailed sampling system for Japan including testing on arrival at the terminal, during loading onto the ship and on arrival at its destination port. This supports QSL’s commitment to delivering a product that meets Japanese customers’ needs.


OUR PEOPLE

The QSL team is dedicated to delivering value for our members and the Queensland sugar industry as a whole.

Working in small teams across six bulk sugar terminals (Cairns, Mourilyan, Lucinda, Townsville, Mackay and Bundaberg) and one Brisbane office, our employees appreciate that every decision made and action taken impacts on the success of the entire value chain and the stakeholders within it.

To this end, QSL’s People Strategy is focused on creating a high-performance culture across the entire business by ensuring that our 160 employees have the expertise, skills and support required to safely maximise productivity. By cultivating strong relationships across our organisation, we aim to not only secure efficiencies, reduce costs and increase synergies across multiple locations but to also ensure each QSL employee knows exactly how they contribute to our business goal of maximising pool returns for growers and millers. The use of clearly articulated performance and production targets not only helps to drive progress against our business objectives but also provides performance expectations against which employees are assessed and potentially rewarded based on their success and subsequent individual contribution to our results (Please refer to page 28 for full details of QSL’s remuneration framework.)

ENGAGEMENT AND RETENTIONQSL recognises that an engaged workforce is essential if we are to foster innovation and surpass both customer and member expectations. Employee engagement levels were this year assessed via a business-wide engagement survey, with its data compared to the results of the last engagement survey conducted in 2012. The findings of this year’s survey were heartening, with overall employee engagement levels improving by 5 percent, more than double the industry average. This is a significant level of progress in what has been a challenging time for the business. What is perhaps even more encouraging is that employees reported the key drivers for this increased engagement as our commitment to safety, our customer-focused strategy and the personal sense of accomplishment and pride they derive from their work – all elements of our business that directly result in increased productivity and higher returns for our members. There is still much work to be done in this space, however we are focused on building on this positive trend through ongoing training and coaching designed to help our employees reach their potential while also leveraging maximum results for the business.

Efforts to build a collaborative culture within our workforce extended beyond our employees to their unions, and

we remain committed to working with both groups to identify and resolve employment issues and concerns swiftly and constructively. During the past financial year all staff grievances or concerns were resolved without requiring external intervention or support by Fair Work Australia.

Despite ongoing industry uncertainty regarding marketing arrangements and the potential impacts on the QSL business model, our employee turnover and absenteeism figures for the past 12 months were below current industry benchmarks. More than 50 percent of our people have worked for QSL for at least five years. In fact, 17 percent of our people have worked for QSL for over 20 years. These long-term employees are a considerable asset to our business and initiatives such as the engagement work outlined above and our remuneration program have been implemented to not only help retain valued staff members but attract high-calibre additions to the business into the future.

As a service provider, QSL’s employees and strategic leadership remain pivotal to QSL’s success in the coming year and beyond. Given the challenges currently facing the Queensland sugar industry, QSL’s people strategy will focus on building a business culture and talent capability that ensures we are nimble, innovative and able to quickly respond to a changing business environment while being willing, ready and able to do what it takes to achieve success for our members.


OUR MEMBERS AND THEIR COMMUNITIES

KEEPING MEMBERS INFORMEDIn a time of significant industry change, QSL’s Industry Relationship Managers (IRMs) have been an integral part of discussions at the grassroots level, providing regular QSL updates, fielding questions, seeking feedback and maintaining the flow of communication between QSL and cane growers throughout the state.

While regional sugar industry forums were increasingly dominated by discussion of marketing developments, the IRMs’ stakeholder engagement program continued to have four key areas of focus including:

� EDUCATION: Working to increase members’ understanding of QSL’s value offerings, including financing, pricing, selling and logistics

�UPDATES: Providing timely briefings on QSL’s pool performances, payment schedules and important sugar market developments

� MONITORING: Liaising with regional stakeholders to stay abreast of local production progress and any emerging issues which may impact on the QSL marketing program

�FEEDBACK: Seeking input from members to ensure QSL’s products and services meet their needs.

QSL presentations were delivered throughout the state in late 2013 to keep growers updated on the performance of QSL’s 2013 pricing pools and general international sugar market themes. A series of regional presentations were also held in January and February 2014, detailing the QSL pricing pools on offer for the 2014 season.

Beyond these formal sessions, our IRMs continued to have a strong presence in regional sugar-growing communities, representing QSL at local branch meetings, field days, agricultural shows and other industry events and forums in addition to regular meetings with key local industry representatives.

INDUSTRY-GOOD ACTIVITIESQSL is proud to play a vital role within the Queensland sugar industry and during the past year we continued to be a strong supporter of numerous industry-good initiatives, including the Next Gen program, the Sugar Nutrition campaign, and Free Trade negotiations and lobbying.

At a regional level, we also provided sponsorship for a wide range of industry events, including local productivity awards, Cane Competitions and initiatives which acknowledge industry excellence and innovation, encourage industry networking and collaboration, or promote knowledge of our industry to the wider community.

INDUSTRY PROMOTIONQSL’s IRMs organised customer, media and governmental visits to bulk sugar terminals and other elements of the logistics chain to promote Queensland sugar and showcase the industry.

As the 2014 season progresses, QSL’s IRMs remain focused on ensuring our members have the information and support they require as QSL works to maximise their returns for the 2014 season.

Region Mill Area Grower RepresentativeMossman Mossman Mill Gerard Puglisi Tableland Tableland Mill Nirmal Chohan Mulgrave Mulgrave Mill Jeffrey Day Northern South Johnstone Mill Barry StubbsTully Tully Mill Thomas Harney Herbert River Victoria and Macknade mills Michael Pisano and Vince RussoBurdekin Kalamia, Invicta, Pioneer and

Inkerman millsRussell Jordan, Roger Piva, David Lando, Ramon Poli

Proserpine Proserpine Mill Mark Blair Central Farleigh, Marian and Racecourse mills Anthony Ross, Frank Perna, Philip DeguaraPlane Creek Plane Creek Mill Kevin BorgSouthern Bingera and Millaquin mills Tony Castro and Kelvin GriffinIsis Isis Mill Joe RussoMaryborough Maryborough Mill Jeffrey AtkinsonRocky Point Rocky Point Mill Richard SkoppNote: CANEGROWERS and ACFA each occupy one Grower Member position (2)

QSL GROWER REPRESENTATIVESThe election process for grower representative members was completed this year. As of August 2014, QSL had 21 Grower Representative Members appointed to their positions for a three-year term (see below table). The nominations and votes received by QSL were tallied, counted and signed off by an independent scrutineer.

Under QSL’s Constitution, Grower Representative Members consist of one representative from each single mill area, and where a mill area is part of a mill group (eg Burdekin), a number of representatives from the mill area equal to the number of mills in the mill group. In addition, there is a representative from both CANEGROWERS and Australian Cane Farmers Association (ACFA). This brings the total QSL

Grower Representative Member positions to 23.

QSL sees Grower Representative Members playing a very important role in increasing the two-way flow of information and they are a pivotal communication link between QSL and growers throughout Queensland. Over the last 12 months Grower Representatives have hosted workshops on QSL’s services and offerings, and provided feedback on key issues, such as the Advances Program, QSL’s pricing products and communication initiatives. An overview document has been developed outlining the role of the QSL Grower Representative Member and QSL’s commitment to representatives.


ENVIRONMENT, HEALTH AND SAFETY ‘SAFETY STARTS WITH ME’

QSL’s safety performance has continued to improve with our 50 percent year-on-year reduction in Total Recordable Injury Frequency Rate goal (TRIFR) achieved in March 2014, as outlined on page 14. The TRIFR measures the number of medical, lost-time and restricted work injuries per million hours worked. At the completion of the 2013/14 Financial Year, QSL’s TRIFR result was 12.84, which was down from 39.89 recorded in the 2012/13 Financial Year. Our goal was to reach a TRIFR of 16 by October 2014 and this was achieved in March 2014.

The key attributes that contribute to improved safety are the values, beliefs and behaviours of QSL employees and their ongoing engagement in safety initiatives, as outlined below.

SAFETY LEADERSHIP TEAM The Safety Leadership Team (SLT) meets on a monthly basis to ensure the successful implementation of the Environment, Health and Safety (EHS) Strategy. The team incorporates representatives from across the business. These representatives play an important role in frontline employee engagement, communicating values, ideas and improvements for environment, health and safety.

SAFETY COMMUNICATION One of the key components of the EHS Strategy is to develop communication processes for QSL employees to share information and learn from each other. Being able to share safety information and learn from past and current activities keeps safety front-of-mind and provides clarity for enhancing shared values. Three key communication initiatives that have been developed include Safety Shares, Safety Alerts and Lessons Learnt.

SAFETY SHARESSafety Shares have been introduced at the start of group meetings and provide the opportunity for individuals to share their own experiences or observations on a safety-related topic with their colleagues. This process allows employees the opportunity to learn from each other’s personal experiences.

SAFETY ALERTSafety Alerts have been implemented to document safety-related events that occur within the workplace. The set format of the alert provides specific details that each site can review, discuss and practically implement. Safety alerts are sent within 24 hours of an event taking place.

LESSONS LEARNT A Lessons Learnt document is used to record a summary of a formal investigation, including contributing factors, root cause details and improvement opportunities.

TERRIBLE TEN The Terrible Ten are focused on the management of critical risks and were developed through shared learnings drawn from widespread industry knowledge and experience. They identify the controls that must be in place prior to work starting.

Building on the foundations of the Terrible Ten, a pocket guide was produced through consultation with employees. The guide outlines the hazards for each critical risk and what the individual can do to identify the hazards and implement the control measures. Employees are encouraged to use this guide in their day-to-day work.

HAZARD HUNTS The Hazard Hunt process has been implemented across all QSL sites and involves employees from one site visiting another to conduct a Hazard Hunt audit. Employees share information and ideas from other sites on how operational activities are conducted, along with identifying opportunities for improvement.

STOP AND THINK DAYS Stop and Think Days provide the opportunity for QSL team members to reflect on their safety vision, collaborate with colleagues and share learnings and opportunities for creating a safe workplace.

After the success last year, The Stop and Think days were held again at each site in 2014. The program focused on risk management and the Terrible Ten pocket guide. Each site also had guest speakers attend and discuss health and wellbeing topics.

ENVIRONMENT QSL remains focused on its environmental obligations and as a result, there were no environmental offences during this reporting period. A number of initiatives are underway for continued improvement in this area.

SAFETY MANAGEMENT SYSTEM The ability to access and manage information is vital for EHS. During the financial year, SharePoint collaboration and management software was implemented providing a platform for QSL’s management system for consistent and accessible EHS information for all employees.

The safety management system (SMS) has also been mapped to AS/NZS 4801 and the Work Health and Safety Legislation. The mapping process provides a clear path for QSL’s systems legislative and industry best-practice requirements. The details flow into the SMS hierarchy for operational application.


GREG BEASHELMANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER

Greg joined QSL in June 2000. Prior to being appointed as Managing Director and Chief Executive Officer in February 2012, Greg was responsible for QSL’s 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 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 HINESCHIEF FINANCIAL OFFICER

Rob joined QSL in April 2013, having more than 25 years’ experience working in corporate finance. His breadth of experience covers mergers and acquisitions, capital funding, strategic financial advice, liquidity management and corporate and financial risk management.

Prior to joining QSL, Rob was a Director, Chief Financial Officer (CFO) Advisory at KPMG and held CFO roles with several leading Queensland companies including QIC Limited, Bank of Queensland Limited, Energex Retail, Tarong Energy and Suncorp.

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

QUALIFICATIONS/MEMBERSHIPS:Bachelor of Financial Administration

Graduate Diploma of Advanced Accounting

Graduate Diploma in Applied Finance and Investment

Senior Fellow of FINSIA and Graduate of the Australian Institute of Company Directors, Chartered Accountants Australia and New Zealand and CPA Australia.

SUSAN CAMPBELLCOMPANY SECRETARY AND LEGAL COUNSEL

Susan joined QSL as Company Secretary and Legal Counsel in October 2013 and is responsible for QSL’s corporate governance functions and the management of QSL’s legal issues. Susan has held a number of equivalent positions in other companies, including North Queensland Bulk Ports Corporation.

Prior to QSL, Susan held the role of General Counsel and Company Secretary at Ergon Energy, having developed from the role of Group Legal Counsel. Susan brings more than 25 years’ experience in private practice and corporate in-house roles, specialising in commercial and corporate law.

QUALIFICATIONS:Bachelor of Commerce

Bachelor of Laws (Hons)

Graduate Diploma Securities Institute of Australia

Graduate Diploma Applied Corporate Governance

Graduate Certificate Business Administration

LEADERSHIP TEAM


ANDREW HARRISONTECHNICAL MARKETING MANAGER

Andrew joined QSL in February 2003, having worked in senior technical roles in a refinery and several Queensland sugar mills. Andrew recently joined the Marketing Team as Technical Marketing Manager and is responsible for maintaining relationships with QSL’s Japanese, Chinese, Taiwanese, United States of America and New Zealand customers as well as providing technical assistance across all markets.

Previous to this role, Andrew was the Manager Quality and Logistics at QSL and was responsible for ensuring the quantity and quality of supply received at the BSTs matched customers’ expectations while optimising storage to maximise pool returns.

QUALIFICATIONS:Diploma in Sugar Technology

DOUGALL LODGE GENERAL MANAGER TRADING AND RISK

Dougall has been involved in the global sugar market for around 20 years across a variety of roles within both producers and sugar users. He joined QSL in March 2014 following 15 years of working within Coca-Cola’s global procurement teams in Australia and Asia. Dougall started his career with CSR raw sugar marketing.

Dougall manages QSL’s Marketing and Treasury functions and is responsible for the delivery of pool returns.

QUALIFICATIONS:Bachelor in International Business

Diploma in Export Management

MIKE PANKETERMINAL MANAGER (MACKAY AND BUNDABERG)

Mike joined QSL in July 2012, having worked in senior roles in the fertiliser, chemical and hi-tech manufacturing industries. He has international experience in manufacturing with a particular focus on quality management and achieving cost efficiencies using 6Sigma and Lean. Mike brings to the role a track record in the safe handling of bulk material.

Mike is responsible for the management of the Mackay and Bundaberg bulk sugar terminals and the highly effective handling, storage and shipping of bulk sugar at those terminals.

QUALIFICATIONS:Military Engineer

Registered Quality Systems Auditor

JOANNE NUGENT GENERAL MANAGER HUMAN RESOURCES

Joanne joined QSL in May 2014. With experience in the infrastructure, engineering, construction and finance sectors, Joanne has a track record in change management, human resource management and building people capability in project and professional services environments. She possesses a strong commercial acumen and a focus on building and aligning organisational capability to achieve business objectives.

Joanne manages the Human Resources direction for QSL. She is responsible for fostering a diverse and dynamic culture within the business that reflects the business’s values, drives superior performance and enhances the potential of the business and its people.

QUALIFICATIONS:Bachelor of Business: Advanced major in Human Resource Management

Graduate of the Australian Institute of Company Directors

Graduate Certificate in Change Management

LEADERSHIP TEAM CONTINUED


AARON SEARLEFINANCE AND ACCOUNTING MANAGER

Aaron joined QSL in June 2010 and has extensive experience in audit, accounting and finance in a range of industries including manufacturing, property and financial services.

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

QUALIFICATIONS:Bachelor of Economics

Bachelor of Commerce

Chartered Accountant

Graduate Diploma of Applied Finance

STEPHEN STONETREASURER

Steve joined QSL in March 2010, having extensive experience working in Australia and internationally in a number of 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.

QUALIFICATIONS:Bachelor of Commerce

Master of Commerce

BRYCE WENHAMFINANCE MANAGER, SUPPLIER RELATIONS

Bryce has a long history of working in the sugar industry in marketing and finance roles and has been with QSL for 15 years in various senior roles, including Marketing Manager, Commercial Services Manager and Finance Manager, Supplier Relations.

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

QUALIFICATIONS:Bachelor of Business

Graduate Diploma of Applied Finance and Investment

DAMIAN ZIEBARTHGENERAL MANAGER OPERATIONS

Damian joined QSL in May 2012 and is an operations professional with over 25 years’ experience in heavy manufacturing industries.

Prior to joining QSL, Damian worked as the Australian Operations Manager for Incitec Pivot Ltd. His breadth of experience includes 11 years in milling and refining operations domestically for Bundaberg Sugar and internationally with Tate & Lyle Sugars.

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.

QUALIFICATIONS:Bachelor in Mechanical Engineering

Masters of Engineering23QUEENSLAND SUGAR LIMITED ANNUAL REPORT 2013/14

Queensland Sugar Limited (QSL) is a public company limited by guarantee, incorporated under the Corporations Act 2001. The principal object of the company, without limiting its powers under 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 mill areas 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.

The voting rights of members are outlined in QSL’s Constitution. A copy of QSL’s Constitution is available at www.qsl.com.au/about-qsl/corporate-structure/qsl-constitution.

THE QSL BOARD OF DIRECTORS

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

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

A copy of QSL’s Board Charter is available at www.qsl.com.au/about-qsl/governance.

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 as set out in the Charter, include the following:

� Guiding the culture of the organisation

� Strategy, planning and policy development

� Oversight of QSL’s management

� Monitoring compliance and risk management

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

� Stakeholder liaison and communication.

The Board has delegated various functions to management, but has reserved certain matters to the Board for its approval. This allocation of responsibility is set out in the ‘Financial Delegations and Authorities’ document, which has been approved by the Board.

In addition, a key function of the Board includes monitoring, reviewing and overseeing risk management, in particular financial risk. 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. A key QSL policy regarding risk management is the Corporate Risk Management Policy.

Specific policies are in place to govern the management of sugar price and foreign exchange risk, with hedging 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:

� Corporate risk management

� Financial risk management and liquidity risk management

� Customer and trade credit

� Credit risk - financial institutions and suppliers

� Freight risk management and marketing risk management

� Fraud management policies, including the Whistle Blower Policy

� Code of ethics and conduct, appropriate workplace behaviour and privacy

� Competition law compliance

� Work Health & Safety Policy

� Environmental Policy

� Media and Disclosures Policy.

CORPORATE GOVERNANCE


COMPOSITION OF THE BOARDThere are currently five Directors on the Board of QSL. QSL’s Constitution provides for a Board of a maximum of four independent Non-Executive Directors plus a Managing Director and Chief Finance Officer. There is an option in QSL’s Constitution for mill owner members and grower representative members to elect mill owner Directors and grower Directors, but this option has not been exercised.

There are four independent Non-Executive Directors on the QSL Board. Mike Carroll was appointed to the Board in January 2012 for a three-year term and is the Chairman of the Board. Guy Cowan was appointed for a three-year term and was re-appointed in January 2012 for a further three-year term. Sarah Scales was appointed to the Board in January 2013 for a three-year term. Chris Leon was appointed to the Board in February 2014 for a three-year term, replacing Mark Sage who resigned from the Board effective 31 January 2014. Greg Beashel is the Managing Director and Chief Executive Officer of QSL.

APPOINTMENT OF DIRECTORSIndependent Non-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 the 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 independent 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. In assessing the suitability of candidates, the Board Selection Committee also has regard to the independence of the candidate. The Board Selection Committee has the flexibility, under the Constitution, to re-appoint an existing Director.

Details of the experience and skills of the Directors is set out on page 31 of the Statutory Financial Report.

REMUNERATION OF DIRECTORSThe Constitution requires the aggregate fees per annum paid to independent 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 Queensland Sugar Corporation and were subsequently confirmed at QSL’s 2001 annual general meeting. A benchmarking exercise was conducted in early 2014 of fees paid to Non-Executive Directors by listed agri-business companies to establish market rates.

BOARD COMMITTEESTo assist it to carry out its functions, there are currently three Board committees; the Audit and Risk Committee, and the recently created Trading Risk Committee and People

Safety and Environment Committee. The Trading Risk Committee was formed to provide specific oversight of the management of trading risk. The People Safety and Environment Committee was created in early 2014 via the merger of the previous Remuneration and Nominations Committee and the Environment, Health and Safety Committee.

Each committee has authority from the Board to review and investigate any matter within the scope of its charter and make recommendations to the Board.

Copies of QSL’s Board Committee Charters, which set out each committee’s responsibilities, are available at www.qsl.com.au/about-qsl/governance.

AUDIT AND RISK COMMITTEEThe Audit and Risk Committee assists the Board to discharge its responsibilities via oversight of the enterprise risk management, control and compliance framework established by the Board and QSL management, and review of QSL’s risk management, finance, and internal and external audit.

The current members of the Audit and Risk Committee are Guy Cowan (Committee Chair), Sarah Scales and Chris Leon. The Managing Director and Chief Executive Officer, Chief Financial Officer, Risk and Compliance Manager and representatives of the external and internal auditors attend meetings of this committee by invitation.

From left: Mike Carroll, Guy Cowan, Sarah Scales, Chris Leon, Greg Beashel (CEO and MD)


Specific responsibilities include advising the Board on:

� QSL’s enterprise risk management framework and enterprise risk management plan and their ongoing appropriateness and effectiveness

� 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 and external audit plans and related audit reports

� Financial management reporting for the company.

TRADING RISK COMMITTEEThe Trading Risk Committee assists the Board to discharge its responsibilities via oversight of risk management, control and compliance measures established by the Board and management relating to commodity and foreign currency hedging, marketing and sale of sugar and chartering activities.

The current members of the Trading Risk Committee are Sarah Scales (Committee Chair), Guy Cowan and Mike Carroll. The Managing Director and Chief Executive Officer, Chief Financial Officer, General Manager Trading and Risk and representatives of external and internal auditors attend meetings of this committee by invitation.


� QSL’s risk management relating to commodity and foreign currency hedging, marketing and sale of sugar and chartering activities

� The continuing appropriateness and effectiveness of the above risk management policies

� Compliance with QSL’s policies, strategies, processes and controls relating to trading activities

� Reviewing QSL’s internal audit plan and reports and making recommendations to the Board on changes to that plan to cover the material risks associated with trading activities.

PEOPLE, SAFETY AND ENVIRONMENT COMMITTEEThe People, Safety and Environment Committee assists the Board to discharge its responsibilities relating to work health and safety, environmental compliance and people issues.

The current members of the People, Safety and Environment Committee are Chris Leon (Committee Chair) and Michael Carroll, with the Managing Director and Chief Executive Officer, General Manager Operations, Environment, Health and Safety Manager and General Manager Human Resources invited to attend meetings as appropriate.


� Work environment, health and safety, program and strategy to enable Directors and employees to meet their due diligence obligations under the relevant legislation

� QSL’s performance in relation to work health and safety and environmental matters, including effectiveness of the strategy, controls and assurance processes

� Design and effectiveness of QSL’s culture and organisational structure, as well as human resources and industry relations- related strategies and policies, including an appropriate remuneration framework and policies linked to performance objectives

� Performance and remuneration of the Board, senior management and employees

� Induction and professional development of Directors as well as leadership development.

BOARD EVALUATION AND PROFESSIONAL DEVELOPMENTEach year, performance of individual Directors is considered informally with the Chairman. The Board also reviews overall Board performance

against its goals, as well as committee performance. This will include a formal evaluation process to be conducted every two years. Director performance is also taken into consideration when determining a person’s eligibility to be re-appointed as a Director by the Board Selection Committee.

There is a comprehensive induction program for new Directors when they join the Board as well as ongoing training. The Board supports ongoing development of individual Directors as appropriate, which includes knowledge regarding industry-related issues as well as annual training on key laws (eg safety and competition law) that impact QSL.

BUSINESS CONDUCTThe Board has adopted a Code of Ethics and Code of Conduct which applies to Directors, senior management, employees, agents and others acting on behalf of QSL. In addition, there are Fraud management policies, including a Whistle Blower Policy.

Under the Code, all those associated with QSL must act in accordance with the fundamental principles of integrity, objectivity, confidentiality, ethical behaviour and professional standards in the performance of their duties. The Code also covers disclosure of conflicts of interest, protection of company information and property, and clear guidelines in relation to gifts and entertainment.

In addition, under the Board Charter, Directors are required to disclose conflicts of interest regarding material matters as soon as they arise. If a Director discloses a conflict in relation to a material matter being considered by the Board, then under the Corporations Act, that Director will not participate in any discussion or decision making.

CORPORATE GOVERNANCE CONTINUED


EVALUATION OF PERFORMANCE OF THE LEADERSHIP TEAM The Managing Director and Chief Executive Officer 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 performance exercises and tuition.

The Managing Director and Chief Executive Officer 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 and face-to-face meetings.

The People, Safety and Environment Committee and the Board formally review the performance of the Managing Director and Chief Executive Officer each year against agreed KPIs. Performance reviews of the Managing Director and Chief Executive Officer and the members of the Leadership Team were conducted for the year ended 30 June 2014.

CORPORATE RISK MANAGEMENT POLICYQSL takes a proactive approach to managing risk. QSL 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 risks and serves as an effective tool for managing decision making. It is designed to provide a formal, systematic and recognised framework for the identification and mitigation of risks. The framework is aligned with QSL’s corporate and operational strategies and is underpinned by an assurance program, including internal and external audits.

As noted earlier in the Corporate Governance section of the Annual Report, QSL also has a number of other policies in place to manage key risks relating to specific matters. There are two Board committees that review the effectiveness of QSL’s risk management framework, strategy and controls, being the Audit and Risk Committee and the Trading Risk Committee.

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

Having achieved compliance under the Workplace Gender Equality Agency (WGEA) review again for 2014, we can be confident that 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 2014, the proportion of women employed in permanent roles across QSL was:

Board 20%

Leadership Team 20%

Other workforce 18%

Overall workforce 18%

INTERNAL AUDITQSL has appointed PwC to undertake the internal audit function at QSL. The Audit and Risk Committee has oversight of the internal audit process. An annual internal audit plan is put in place each year, which covers material risks. Reports from the internal auditor are reviewed by this Committee, including management responses to the findings by the internal audit. The internal auditor also assesses the effectiveness of internal controls and processes.

MANAGEMENT ASSURANCE TO DIRECTORSThe Managing Director and Chief Executive Officer, and the Chief Financial Officer have provided the following declaration to the Board in relation to the production of QSL’s

full-year financial statements and reports, as required by Section 295A of the Corporations Act 2001, namely in their opinion to the best of their knowledge and belief:

� The financial records of QSL for the year ended 30 June 2014 have been properly maintained in accordance with Section 286 of the Corporations Act 2001

� QSL’s financial statements and notes to those statements for the year ended 30 June 2014 comply with the relevant accounting standards

� QSL’s financial statements and notes to those statements for the year ended 30 June 2014 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 Managing Director and Chief Executive Officer and Chief Financial Officer. 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, retain and motivate suitably skilled and experienced people to create value for the Queensland sugar industry.

Diversity of skill, experience and approach continue to be important elements of QSL’s people strategy and are key drivers for the company’s success. Value is created for QSL’s members when the people working on their behalf are aligned with the QSL strategy and business objectives, and are motivated to deliver exceptional results.

While remuneration alone is not the only mechanism available to achieve this alignment, it is an important element of any successful company. With this in mind, QSL’s remuneration framework is driven by the following principles:

� Promote value creation for our members by ensuring all QSL staff have a clear and transparent alignment with our business objectives

� Motivate performance, promote sound risk management and encourage strong business performance for the benefit of all stakeholders

� Find an appropriate balance between the market environment, company performance and the performance of individuals, and

� Attract and retain high-quality employees who will contribute to the ongoing success of the business.

QSL’s performance agreement and review process is core to our remuneration strategy and decision making. Each year in July/August, individual performance objectives are agreed and aligned to the organisational strategy or business plan. Performance against these objectives is recorded at the end of the financial year, providing an overall summary of performance, achievement and contribution throughout the year.

BOARD GOVERNANCE AND OVERSIGHTIn the 2013/14 Financial Year, the QSL Board formed the People, Safety and Environment (PS&E) Committee, which assumed the responsibilities of the former Remuneration and Nominations Committee. A new charter was formed, which specifically covers off on Board oversight into the design and effectiveness of QSL’s remuneration practices, including specific details of the remuneration packages for the Managing Director and Chief Executive Officer, Leadership Team and Directors. The Board makes all final decisions in relation to salaries, incentives and eligibility.

REMUNERATION STRUCTURE AND PACKAGE

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 fixed remuneration only.

SALARIED STAFF

Total fixed package (eg base + super) and short-term incentives (STIs) are the primary mechanisms in QSL’s remuneration framework.

Total Fixed Package: QSL utilises Hay and Mercer market data and benchmarking methodologies to ensure base salaries remain relevant and competitive for salaried employees. Each job is evaluated against bands to compare similar roles within the general market. Quarterly updates on market movements for individual positions are obtained to ensure our decision making is informed and timely.

Short-term incentives: When set business objectives and performance levels have been achieved and the Board has determined that incentives can be paid, short-term incentives are available to staff to varying levels:

� Once corporate and organisational performance and objectives have been achieved for the financial year, all salaried (non-enterprise bargaining agreement) employees are eligible to receive up to 15 percent of their base salary as an incentive payment upon the successful achievement of their own personal performance objectives, as documented in the annual performance agreement setting process. This increased from 10 percent in the previous year, following a review of the program’s effectiveness under our remuneration framework and principles. However, access to the additional five percent is only achievable if a staff member achieves a ‘superior’ level of performance (rewarding over performance and achievement beyond expectations).

� This same methodology applies for the Leadership Team, with incentive entitlement typically being up to 40 percent, with 50 percent deferred for 12 months.

REMUNERATION REPORT


The Leadership Team has Key Performance Indicators relating to ‘whole-of-business’ performance, as well as performance in their own functional areas, ensuring their team performs in the best interests of the overall company objectives.

� The Managing Director and Chief Executive Officer is eligible for up to 60 percent providing a ‘superior’ level of performance has been achieved.

OUR BULK SUGAR TERMINAL STAFFQSL currently has a three-year term enterprise bargaining agreement (EBA) in place for bulk sugar terminal (BST) staff. The EBA, due to expire in December 2014, provides for a four percent increase each year for the life of the agreement, plus an eligibility to receive a total short-term incentive of up to 2.5 percent of their annual wage, based on the achievement of both corporate and operational targets at each BST.

We will work collaboratively with our team and the unions over the coming months to set a market-relevant and strategically aligned EBA to support our vision and performance for the future.



STATUTORY FINANCIAL REPORT

CONTENTSDirectors’ Report 31

Auditor’s Independence Declaration 35

Consolidated Statement of Comprehensive Income 36

Consolidated Statement of Financial Position 37

Consolidated Statement of Changes in Equity 38

Consolidated Statement of Cash Flows 39

Notes to the Financial Statements 40

Independent Auditor’s Report 62


DIRECTORS’ REPORTFOR THE YEAR ENDED 30 JUNE 2014 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 2014 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 PEOPLE, SAFETY AND ENVIRONMENT AND TRADING RISK COMMITTEES

Mike was appointed Chairman at QSL on 1 January 2012. He has more than 25 years’ experience in food and agribusiness in executive and non-executive roles, with current directorships that include Tassal Group Ltd, Select Harvests Ltd, Sunny Queen Pty Ltd and Rural Funds Management Ltd and until April this year, Mike was a director of Warrnambool Cheese & Butter Factory Holdings Ltd.

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

NON-EXECUTIVE DIRECTOR OF THE BOARD, CHAIRMAN OF THE AUDIT & RISK COMMITTEE AND MEMBER OF THE TRADING RISK COMMITTEE

Guy was appointed as a Non-Executive Director at QSL on 1 January 2009. 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 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.

SARAH SCALES BAgSc, GAICD

NON-EXECUTIVE DIRECTOR OF THE BOARD, CHAIRMAN OF THE TRADING RISK COMMITTEE AND MEMBER OF THE AUDIT & RISK COMMITTEE

Sarah joined the QSL Board as a Non-Executive Director on 1 January 2013, and brings to the role more than 20 years of senior management experience working in domestic and international agribusiness. This includes six 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.

CHRIS LEON BSc, MEngSc NON-EXECUTIVE DIRECTOR OF THE BOARD, CHAIRMAN OF THE PEOPLE, SAFETY & ENVIRONMENT COMMITTEE AND MEMBER OF THE AUDIT & RISK COMMITTEE (APPOINTED TO THE BOARD ON 15 FEBRUARY 2014)

Chris was appointed as a Non-Executive Director of QSL on 15 February 2014. He has extensive experience in international business and driving the strategic direction of private and publicly listed and unlisted companies across a range of industries, including logistics, agribusiness, manufacturing and mining. He is currently a Non-Executive Director and member of the Audit and Risk Committee at Tassal Group Ltd and has held various Board Member positions throughout the last two decades, including at Cement Australia and its associated companies.

In his most recent executive role as Managing Director and Chief Executive Officer at Cement Australia (2003 – 2012), Chris was instrumental in bringing together two companies and driving the newly formed team to success, ensuring Cement Australia became the nation’s largest producer and distributor of cement, fly ash and slag. His other executive roles were in the industrial gases, HVACR (heating, ventilating, air-conditioning and refrigeration) and fertiliser industries.

GREG BEASHEL BE Chem (Hons), MBA, GAICD

MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER

Greg joined QSL in June 2000. Prior to being appointed as a 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 Australian Graduate School of Management MBA Executive program and has a Bachelor of Chemical Engineering (Hons) from the University of New South Wales.

MARK SAGE BCom (Hons), GAICD NON-EXECUTIVE DIRECTOR OF THE BOARD AND CHAIRMAN OF THE REMUNERATION & NOMINATION AND ENVIRONMENT HEALTH AND SAFETY COMMITTEES (RETIRED FROM THE BOARD ON 31 JANUARY 2014)

Mark joined QSL on 1 January 2009 as a Non-Executive and held the positions of Director and Chairman of the Remuneration & Nomination and Environment Health & Safety Committees. Mark resigned from the Board on 31 January 2014.

Mark has over 25 years’ management experience in a public company environment. He has particular expertise in international business development, with extensive experience in retail and commodity markets in the Asia, Middle East and Pacific regions and as well as broad expertise in export marketing, logistics and commodity markets trading.


DIRECTORS’ REPORT CONTINUED

FOR THE YEAR ENDED 30 JUNE 2014 QUEENSLAND SUGAR LIMITED AND ITS CONTROLLED ENTITIES

COMPANY SECRETARY

SUSAN CAMPBELL BComm, LLB (Hons), GradDip Sec Institute, GradDip App Corp Gov, GradCert Bus Admin

COMPANY SECRETARY AND LEGAL COUNSEL

Susan Campbell joined QSL as Company Secretary and Legal Counsel in October 2013 and is responsible for QSL’s corporate governance functions and the management of QSL’s legal issues. Susan has held a number of equivalent positions in other companies, including with North Queensland Bulk Ports Corporation.

Prior to QSL, Susan held the role of General Counsel/Company Secretary at Ergon Energy, having developed from the role of Group Legal Counsel. Susan brings more than 25 years’ experience in private practice and corporate in-house roles, specialising in commercial and corporate law.

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&RC)

REMUNERATION & NOMINATION

COMMITTEE (R&NC)

ENVIRONMENT HEALTH & SAFETY

COMMITTEE (EH&SC)

TRADING RISK COMMITTEE1

(TRC)

PEOPLE, SAFETY & ENVIRONMENT

COMMITTEE2 (PS&EC)

HE

LD3

ATTE

ND

ED

HE

LD3

ATTE

ND

ED

HE

LD3

ATTE

ND

ED

HE

LD3

ATTE

ND

ED

HE

LD3

ATTE

ND

ED

HE

LD3

ATTE

ND

ED

Michael Carroll4 16 16 - 2 3 3 - - 3 3 3 3

Guy Cowan 16 15 5 5 - - - - 3 3 - -

Mark Sage5 8 7 - - 3 3 2 2 - - - -

Sarah Scales 16 16 5 5 - - - - 3 3 - -

Chris Leon6 8 8 2 2 - - - - - 1 3 3

Greg Beashel7,8 16 15 - 3 - 3 - 2 - 3 - 3

1 TRC is a new Board Committee formed in January 2014 and held its first meeting in that month. 2 R&NC and EH&SC were merged to form the PS&EC in January 2014. The first meeting of the PS&EC was held in May 2014. 3 Represents the number of meetings held during the time the Director held office during the 2013/14 year.4 Michael Carroll is not a member of the A&RC but attended two meetings by invitation. 5 Mark Sage resigned as a Director effective 31 January 2014. 6 Chris Leon joined the Board on 15 February 2014. Chris is not a member of the TRC but attended one meeting by invitation.7 Greg Beashel is not a member of the Board Committees, but attends meetings by invitation.8 A meeting of the Non-Executive Directors was held on 18 November 2013. As Greg Beashel is an Executive Director, he does not attend these meetings.

Greg Beashel therefore attended all Director Meetings that he was eligible to attend.


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 2014 is set out below:

MARKETING ACTIVITIES

The 2014 financial year saw QSL provide raw sugar export marketing services to six Queensland milling companies (‘Suppliers’) (2013: six) under Raw Sugar Supply Agreements (‘RSSAs’) and subsequently sell 3.0 million tonnes of Australian raw sugar (2013: 2.8 million tonnes). QSL had seven (2013: seven) RSSAs with Suppliers during the year.

Mackay Sugar Limited, Bundaberg Sugar Limited, Isis Central Sugar Mill and WH Heck & Sons Pty Ltd rolled over their RSSAs during the financial year extending the term of their supply agreement with QSL until at least the end of the 2018 financial year (2017 season). Wilmar Sugar Australia Limited, Tully Sugar Limited and MSF Sugar Limited provided a termination notice in relation to their RSSA prior to 30 June 2014 which will result in those Suppliers marketing their export raw sugar beyond 30 June 2017.

REVENUES

QSL recorded sales revenue from Australian raw sugar for the 2014 financial year of $1,364.9 million, an increase of $48.9 million from the previous year. The higher sales revenue number compared to the prior year is a result of higher prices earned from a higher export tonnage. 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 to obtain the highest net return for members.

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 2014 financial year with QSL selling and purchasing 262,000 tonnes of non-Australian raw sugar (2013: 282,400 tonnes), primarily from Thailand and Brazil, in order for QSL to meet customer demand and maintain its marketing

presence in a growing Asian market. The other origin sugar opportunities were not as prevalent as prior years, resulting in a lower contribution to net pool returns. QSL will continue to buy and sell other origin sugar in the 2015 financial year as opportunities arise.

EXPENSES

Payments to Suppliers for the year ended 30 June 2014 were $1,222.4 million, an increase of $31.2 million from the prior year’s payments to Suppliers of $1,191.2 million.

Freight and brokerage costs were down by $10.4 million this year compared to the previous year primarily due to less tonnage shipped on a Cost, Insurance, and Freight (CIF) or Cost and Freight (CFR) basis. A larger quantity of sugar was sold on a Free On Board (FOB) basis compared to the prior year thus reducing freight and brokerage costs. Operating lease rental costs increased by $1.5 million to $45.6 million due to an increase in the base rental as a result of a new five-year lease with STL and a higher capital adjustment to the base rental due to replacement of a number of shed roofs.

Borrowing costs increased by $2.9 million to $16.5 million from the prior year due to a later shipping program this year compared to the last year as better overall returns were available in the latter part of the financial year.

Additionally, $0.7 million (2013: $0.7 million) was funded to the sugar industry for research and development related expenditure.

NET SURPLUS

The non-pooling activities delivered a net surplus for the Consolidated Entity in the financial year of $0.5 million, $0.4 million lower than the prior period result of $0.9 million. QSL will continue to maximise pool returns and any residual surplus will be used to promote and develop the Queensland sugar industry, as required by its constitution.

BANKING AND FINANCING

The Advances Program was funded during the year from the Commercial Paper Program, short-term money market facilities, uncommitted facilities and the syndicated facility agreement. For the majority of the year QSL utilised the Commercial Paper Program and uncommitted lines with the support of QSL’s Standard & Poor’s credit rating. Following the termination notices from Wilmar, Tully and MSF, QSL’s credit rating was downgraded, making it uneconomical for QSL to continue to access commercial paper. Subsequently, QSL also retracted its Standard & Poor’s rating and will use its syndicated facility agreement to fund advance payments until July 2017.

In the last few weeks of the financial year, QSL utilised a combination of the committed syndicated facility and uncommitted facilities including the short-term money market.

QSL retains access to a $500.0 million Australian dollar syndicated standby credit facility. This facility was extended for a further 12 months to 30 June 2017 during the year to match the term of the RSSAs at the time. Additionally, this facility was amended to allow QSL to have access to the facility limit of $500.0 million for the whole period with a step-down in facility limit during the off-season to allow a reduction in line fees.

QSL retains access to various uncommitted funding facilities with a range of financial institutions in order to obtain funds at the lowest possible funding cost.


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 continued to market a portion of the raw sugar supplied to QSL under the RSSA. Through the coming year a number of RSSA Suppliers have entered into similar arrangements, as agreed by the industry, so that the proportion of raw sugar to be marketed by QSL 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.

While a number of Suppliers have provided a termination notice in respect of supply of export raw sugar beyond 30 June 2017, QSL will endeavour to provide as many marketing services to the Queensland sugar industry as possible.

GUARANTEE AMOUNT BY MEMBERS

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

� seven mill owner members; and

� 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. During the year, two small leaks at the molasses storage facility occurred at the Bundaberg facility. QSL holds the environmental licence at the facility. The Department of Environment Heritage and Protection have been notified and no non-compliance order has been issued.

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 35 and forms part of the Directors’ Report for the year ended 30 June 2014.

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

15 September 2014

DIRECTORS’ REPORT CONTINUED



AUDITOR’S INDEPENDENCE DECLARATION FOR THE YEAR ENDED 30 JUNE 2014 QUEENSLAND SUGAR LIMITED AND ITS CONTROLLED ENTITIES

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

Ernst & Young111 Eagle StreetBrisbane QLD 4000 AustraliaGPO Box 7878 Brisbane QLD 4001

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

Auditor’s Independence Declaration to the Directors of QueenslandSugar Limited

In relation to our audit of the financial report of Queensland Sugar Limited for the financial year ended30 June 2014, to the best of my knowledge and belief, there have been no contraventions of theauditor independence requirements of the Corporations Act 2001 or any applicable code ofprofessional conduct.

Ernst & Young

Mark HaywardPartner15 September 2014


CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEFOR THE YEAR ENDED 30 JUNE 2014 QUEENSLAND SUGAR LIMITED AND ITS CONTROLLED ENTITIES

Note2014 $’000

2013 $’000

REVENUES FROM CONTINUING OPERATIONSSales of Australian raw sugar 1,364,855 1,315,977

Sales of non-Australian raw sugar 57,911 151,143

Net foreign currency exchange gain 508 11,349

Interest income 1,006 809

Dividend income 3 2,002 1,795

Other revenues 1,932 2,301

1,428,214 1,483,374

EXPENSES FROM CONTINUING OPERATIONSPayments to Suppliers for Australian raw sugar 1,222,394 1,191,235

Purchases of non-Australian raw sugar 54,308 141,023

Freight and brokerage 4 47,652 58,076

Operating lease rental 4 45,605 44,069

Salaries and employee benefits 19,788 18,566

Borrowing costs 4 16,475 13,577

Depreciation 4 2,585 2,078

Research funding to the sugar industry 4 720 718

Other expenses 5 18,191 13,147

1,427,718 1,482,489

NET SURPLUS ATTRIBUTABLE TO MEMBERS OF QUEENSLAND SUGAR LIMITED AND ITS CONTROLLED ENTITIES 496 885

OTHER COMPREHENSIVE INCOME FOR THE YEAR

Items that may be reclassified subsequently to profit or lossNet gain on available-for-sale financial assets 20 233

TOTAL COMPREHENSIVE INCOME FOR THE YEAR 516 1,118

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


CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAS AT 30 JUNE 2014 QUEENSLAND SUGAR LIMITED AND ITS CONTROLLED ENTITIES

Note

2014 $’000

2013 $’000

ASSETS

CURRENT ASSETSCash and cash equivalents 16(B) 30,948 20,722

Trade and other receivables 6 56,723 53,303

Inventories 7 353,363 223,116

Other assets 8 33,423 41,840

TOTAL CURRENT ASSETS 474,457 338,981

NON-CURRENT ASSETSAvailable-for-sale financial assets 9 23,315 23,224

Other receivables 10 1,420 1,977

Property, plant and equipment 11 17,698 15,531

Other assets 8 11,076 15,111

TOTAL NON-CURRENT ASSETS 53,509 55,843

TOTAL ASSETS 527,966 394,824

LIABILITIES

CURRENT LIABILITIESTrade and other payables 12 177,943 217,302

Interest bearing liabilities 14 289,749 113,828

Provisions 15 4,135 3,629

TOTAL CURRENT LIABILITIES 471,827 334,759

NON-CURRENT LIABILITIESTrade and other payables 13 10,078 14,910

Provisions 15 1,231 841

TOTAL NON-CURRENT LIABILITIES 11,309 15,751

TOTAL LIABILITIES 483,136 350,510

NET ASSETS 44,830 44,314

EQUITYReserves 24,488 24,468

Retained surpluses 20,342 19,846

TOTAL EQUITY 44,830 44,314

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 2014 QUEENSLAND SUGAR LIMITED AND ITS CONTROLLED ENTITIES

RETAINED EARNINGS

RESERVES TOTAL EQUITY

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

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

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

Net surplus for the year 496 - - 496

Other comprehensive income - - 20 20

Total comprehensive income for the year 496 - 20 516

BALANCE AT 30 JUNE 2014 20,342 23,242 1,246 44,830

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 2014 QUEENSLAND SUGAR LIMITED AND ITS CONTROLLED ENTITIES

2014 2013NOTE $’000 $’000

CASH FLOWS FROM OPERATING ACTIVITIES

Receipts from customers (inclusive of GST) 1,334,857 1,536,050

Payments to Suppliers for Australian raw sugar (inclusive of GST) (1,520,560) (1,380,980)

Payments to third party sugar suppliers for non-Australian raw sugar (inclusive of GST) (54,308) (141,023)

Payments to suppliers and employees (inclusive of GST) (139,232) (147,601)

GST recovered 133,459 127,690

Interest and other costs of finance paid (16,475) (16,700)

Interest received 1,006 809

Cash settlements of derivative instruments 81,803 25,535

Other receipts 8,846 20,213

NET CASH FLOWS FROM/(USED IN) OPERATING ACTIVITIES 16(A) (170,604) 23,993

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of available-for-sale financial assets (72) (1,353)

Purchase of property, plant and equipment (5,040) (6,816)

Proceeds from sale of property, plant and equipment 520 800

Dividends received 2,002 1,795

NET CASH FLOWS USED IN INVESTING ACTIVITIES (2,590) (5,574)

CASH FLOWS FROM FINANCING ACTIVITIES

Set-off loans repayments from Suppliers 8,334 17,577

Other loans advanced to Suppliers (834) (1,073)

NET CASH FLOWS FROM FINANCING ACTIVITIES 7,500 16,504

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS (165,694) 34,923

Cash and cash equivalents at beginning of the year (93,106) (127,973)

Effects of exchange rate changes on the cash and cash equivalents (1) (56)

CASH AND CASH EQUIVALENTS AT END OF YEAR 16(B) (258,801) (93,106)

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 2014 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 2014 was authorised for issue in accordance with a resolution of the Directors on 15 September 2014.

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 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) BASIS OF CONSOLIDATION

The consolidated financial statements comprise the financial statements of QSL and its Controlled Entities as at 30 June 2014. 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.

New and amended standards and interpretations

QSL has adopted the following new and amended Australian Accounting Standards and AASB Interpretations as of 1 July 2013:

� AASB 10 Consolidated Financial Statements

� AASB 13 Fair Value Measurement

� AASB 119 Employee Benefits

� AASB 1053 Application of Tiers of Australian Accounting Standards

QSL applied, for the first time, certain standards and amendments during the current financial year. The adoption of these standards and amendments had no material financial impact on the current period or any prior period and is not likely to affect future periods. The nature and the impact of each new standard and amendment is described below:

AASB 10 Consolidated Financial Statements

QSL adopted AASB 10 in the current year. The application of AASB 10 has not affected the accounting for the Group’s 100% interest in the equity shares in QSL Investments (No1) Pty Ltd and QSL Investments (No2) Pty Ltd.

AASB 13 Fair Value Measurement

AASB 13 establishes a single source of guidance under Australian Accounting Standards for all fair value measurements. AASB 13 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under Australian Accounting Standards. AASB 13 defines fair value as an exit price. As a result of the guidance in AASB 13, QSL re-assessed its policies for measuring fair values, in particular, its valuation inputs such as non-performance risk for fair value measurement of liabilities. AASB 13 also requires additional disclosures.

Application of AASB 13 has not materially impacted the fair value measurements of QSL. Additional disclosures where required, are provided in the individual notes relating to the assets and liabilities whose fair values were determined. Fair value hierarchy is provided in Note 26.

AASB 119 Employee Benefits

The amended AASB 119 was not applied to the Consolidated Entity as this standard had no material impact.

AASB 1053 Application of Tiers of Australian Accounting Standards

QSL has adopted AASB 1053 and have elected to prepare general purpose financial statements in accordance with Tier 1 reporting.

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 2014 are outlined below:

Australian Accounting Standard Effective Date

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

30 June 2015

AASB 2013-9 Amendments to Australian Accounting Standards – Conceptual Framework, Materiality and Financial Instruments

30 June 2016

AASB 9 Financial Instruments 30 June 2018

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

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Consolidated Entity and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes. The specific recognition criteria described below must also be met before revenue is recognised.

(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.

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) FAIR VALUE MEASUREMENT

QSL measures financial instruments, such as derivatives and non-financial assets, at fair value at each balance sheet date.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

� In the principal market for the asset or liability, or

� In the absence of a principal market, in the most advantageous market for the asset or liability

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

QSL uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

� Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities

� Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable

� Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable


NOTES TO THE FINANCIAL STATEMENTS CONTINUED



(I) FAIR VALUE MEASUREMENT CONTINUED

For assets and liabilities that are recognised in the financial statements on a recurring basis, QSL determines whether transfers have occurred between Levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

QSL’s directors determine the policies and procedures for both recurring fair value measurement, such as property, plant and equipment, derivatives, and for non-recurring measurement.

At each reporting date, the directors analyse the movements in the values of assets and liabilities which are required to be re-measured or re-assessed as per QSL’s accounting policies.

For the purpose of fair value disclosures, QSL has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.

(J) 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

Relates to loans to Suppliers for pre-crop financing (refer to Note 6 and 10). During the year Set-Off Loans were repaid in full. These three-year Set-Off loans were made available to Suppliers following the adverse weather events experienced in the 2011 financial year (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.

(K) 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.

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.

(L) CURRENT ASSETS

Current assets comprise cash at bank and on hand, term deposits, debtors, other receivables relating to the pre-crop 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. The Consolidated Entity classifies all other assets as non-current.

(M) 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 2014 2013

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.



(N) 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.

(O) 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.

(P) 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.

(Q) CURRENT LIABILITIES

Current liabilities comprise all amounts owing at reporting date and payable within 12 months, including amounts due to Suppliers. The Consolidated Entity classifies all other liabilities as non-current.

(R) 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.

(S) 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.

(T) 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.

(U) EMPLOYEES 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.





(V) 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.

(W) 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.

(X) 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.

(Y) 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.

(Z) GOODS AND SERVICE 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.

(AA) BORROWING COSTS

Borrowing costs are recognised as an expense when incurred.

(AB) 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.

(AC) 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 period of the lease in accordance with Interpretation 115. The related carrying amounts are disclosed in Note 15.

(AD) COMPARATIVES

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


2014 $’000

2013 $’000

3 DIVIDEND INCOME

Dividend income

Dividends from STL G class shares 2,002 1,795

TOTAL DIVIDEND INCOME 2,002 1,795

4 EXPENSES FROM CONTINUING OPERATIONS

Freight and brokerage

Sea freight 47,502 57,676

Road freight 150 400

TOTAL FREIGHT AND BROKERAGE 47,652 58,076

Operating lease rental

Minimum lease payments

Bulk sugar terminals (to STL) 45,111 43,589

Other property 494 480

TOTAL OPERATING LEASE RENTAL 45,605 44,069

Borrowing costs expense

Short-term debt 11,768 8,515

Other 4,707 5,062

TOTAL BORROWING COST EXPENSE 16,475 13,577

Depreciation expense

Plant and equipment 2,467 1,909

Buildings on freehold land 30 39

Leasehold improvements 88 130

TOTAL DEPRECIATION EXPENSE 2,585 2,078

Research funding to the sugar industry a 720 718

TOTAL RESEARCH FUNDING TO THE SUGAR INDUSTRY 720 718 a Relates to amount contributed to the sugar industry for reseach and development related expenditure

5 OTHER EXPENSES FROM CONTINUING OPERATIONS

Other Expenses 18,191 13,147 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 $8.8 million (2013: $14.5 million).




2014 2013$’000 $’000

6 TRADE AND OTHER RECEIVABLES

CURRENTTrade debtors a 23,062 1,418

Other debtors

Futures margins and deposits 4,268 1,899

GST receivable 19,370 25,792

Loan (Set-Off) agreements with Suppliers b - 8,334

Other loans to Suppliers 1,856 464

Insurance receivable c - 7,022

Receivables – terminal users 1,038 1,989

Receivables – STL d 5,830 6,121

Other 1,299 264

33,661 51,885

TOTAL TRADE AND OTHER RECEIVABLES (CURRENT) 56,723 53,303

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 for 2010 season delivery shortfall costs (Set-Off Loans) and these loans have now been repaid in full.c In February 2011, the Lucinda bulk sugar terminal was damaged by Cyclone Yasi. QSL managed the restoration works and this amount was 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.

2014 2013

$’000 $’000

7 INVENTORIES

Bulk Australian raw sugar 353,363 223,116

TOTAL INVENTORIES 353,363 223,116

At 30 June 2014, 657,643 tonnes of 2013 season raw sugar and 149,753 tonnes of 2014 season raw sugar remained on hand totalling 807,396 tonnes of inventory. At 30 June 2013, 224,424 tonnes of 2012 Season and 287,116 tonnes of 2013 season raw sugar remained on hand totalling 511,540 tonnes of inventory. The higher quantity of inventory on hand compared to the prior year was predominately due to a delayed shipping schedule to optimise sugar sale proceeds.

2014 2013

$’000 $’000

8 OTHER ASSETS

CURRENTUnrealised gains on:

Foreign currency contracts 28,816 -

Sugar futures and option contracts 4,534 37,935

33,350 37,935Deferred expenditure and prepayments relating to the next year:

Prepaid expenditure 73 3,905

TOTAL OTHER ASSETS (CURRENT) 33,423 41,840

NON-CURRENTUnrealised gains on:

Foreign currency contracts 11,076 865

Sugar futures and option contracts - 14,246

TOTAL OTHER ASSETS (NON-CURRENT) 11,076 15,111


2014 2013$’000 $’000

9 AVAILABLE-FOR-SALE FINANCIAL ASSETS

NON-CURRENT

Shares at fair value a 23,315 23,224

a QSL holds 14.5% (2013: 14.5%) 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.

2014 2013

$’000 $’000

10 OTHER RECEIVABLES

NON-CURRENTOther loans to Suppliers 1,420 1,977

TOTAL OTHER RECEIVABLES (NON-CURRENT) 1,420 1,977

11 PROPERTY, PLANT AND EQUIPMENT

Freehold land:

At cost 512 512

Leasehold land:

At cost 195 195

Leasehold improvements:

At cost 1,209 1,209

Accumulated depreciation (579) (491)

630 718Buildings on freehold land:

At cost 1,763 1,719

Accumulated depreciation (1,540) (1,510)

223 209Plant and equipment:

At cost 17,423 17,295

Accumulated depreciation (1,285) (3,398)

16,138 13,897

TOTAL PROPERTY, PLANT AND EQUIPMENT 17,698 15,531




2014 2013$’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 512 590

Disposals - (78)

Carrying amount at the end of the year 512 512

Leasehold land:

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

Leasehold improvements:


Depreciation expense (88) (130)


Buildings on freehold land:


Additions 44 -

Disposals - (15)

Depreciation expense (30) (39)


Plant and Equipment:

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

Additions 4,996 6,816

Disposals (288) (578)

Depreciation expense (2,467) (1,909)

Carrying amount at the end of the year 16,138 13,897

TOTAL PROPERTY, PLANT AND EQUIPMENT 17,698 15,531


2014 2013$’000 $’000

12 TRADE AND OTHER PAYABLES

CURRENTCreditors

Sugar Mills 126,999 159,426

Trade creditors 4,946 7,858

131,945 167,284Other creditors

Unrealised losses:

Foreign currency contracts - 30,884

Other 7,089 7,083

7,089 37,967Deferred income relating to the next year:

Amounts owing to future pools a 38,583 11,657

Prepaid income 326 247

Deferred gain - 147

38,909 12,051

TOTAL TRADE AND OTHER PAYABLES (CURRENT) 177,943 217,302

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 4,089 -

Deferred income relating to a future year:

Amounts owing to future pools a 5,972 14,878

Other 17 32

TOTAL TRADE AND OTHER PAYABLES (NON-CURRENT) 10,078 14,910

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 (251) 29,918

Money market b 290,000 83,910

TOTAL INTEREST BEARING LIABILITIES (CURRENT) 289,749 113,828

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 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

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

Arising during the year - - 1,367 1,385 300 29 3,081

Utilised - (131) (645) (1,374) (100) (29) (2,279)

Discount rate adjustment - 16 - - 78 - 94

BALANCE AT 30 JUNE 2014 175 486 1,350 1,388 1,936 31 5,366

REPRESENTED AS:Current - 131 951 1,388 1,634 31 4,135

Non-Current 175 355 399 - 302 - 1,231

TOTAL 175 486 1,350 1,388 1,936 31 5,366

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.

b QSL provides sick leave for a small number of eligible terminal employees as outlined in the QSL Bulk Terminals Agreement dated 15 August 2012.


2014 2013$’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 496 885

Adjustments for:

Depreciation of non-current assets 2,585 2,078

Gain on sale of fixed assets (232) (128)

Net foreign currency loss 1 56

Dividend income classified as an investing cash flow (2,002) (1,795)

Changes in assets and liabilities:

(Increase)/decrease in trade and other receivables (10,362) 74,955

(Increase) in inventories (130,247) (149,698)

Decrease in other current assets 8,417 6,185

Decrease in other non-current assets 4,035 10,951

(Decrease)/increase in trade and other payables (39,359) 81,228

(Decrease) in non-current payables (4,832) (745)

Increase in provisions 896 21

NET CASH FROM/(USED IN) OPERATING ACTIVITIES (170,604) 23,993

(B) RECONCILIATION OF CASH AND CASH EQUIVALENTS

Cash and cash equivalents balance comprises:

Cash on hand 30,948 20,722

Money market liabilities (290,000) (83,910)

Securities – commercial paper liabilities 251 (29,918)

TOTAL CASH AND CASH EQUIVALENTS (258,801) (93,106)

(C) FINANCING FACILITIES AVAILABLE

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

Commercial paper program

The Parent Entity had a $1.0 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 no commercial paper at 30 June 2014 (2013: $29.9 million).

Following the termination notices received from Wilmar Sugar Australia Limited, Tully Sugar Limited and MSF Sugar Limited to withdraw from the RSSA post 30 June 2017, and the subsequent downgrade by Standard & Poor’s, QSL has withdrawn its Standard & Poor’s rating and no longer accesses the commercial paper program.

Syndicated standby credit facilities

During the year, QSL continued to have access to a $500.0 million Australian dollar syndicated standby credit facility. As at 30 June 2014, $290.0 million (2013: nil) had been drawn against the facility. The facility was extended during the year and it now expires on 30 June 2017. During the year QSL renegotiated the facility limit to year-round access to $500.0 million with the flexibility to temporarily reduce the limit when funding requirements are lower, thus reducing funding costs.

Letter of credit issuance facility

The Parent Entity has in place a committed letter of credit issuance facility which matures on 31 October 2014. The facility is for issuing standby letters of credit in lieu of performance bonds in connection with contract tender terms. At 30 June 2014, nil funds (2013: US$ nil) had been drawn against the facility of US$10.0 million (2013: US$10.0 million).

Other funding facilities

At 30 June 2014, the Parent Entity had additional available facilities with various financial institutions of $125.0 million (2013: $95.0 million). As at 30 June 2014 these facilities remained undrawn (2013: $83.9 million). These facilities were available but are generally uncommitted and used as an alternative to the syndicated facilities when it is economical to do so. The Parent Entity does not rely on these facilities as they are uncommitted funding facilities.




2014 2013$’000 $’000

17 CAPITAL EXPENDITURE COMMITMENTS Estimated capital expenditure contracted for at reporting date, but not provided for, payable

Not later than one year 51 84

18 LEASE EXPENDITURE COMMITMENTS Operating leases (non-cancellable):

Minimum lease payments

Not later than one year 46,434 44,812

Later than one year but not later than five years 169,678 190,904

Later than five years - 24,760

AGGREGATE LEASE EXPENDITURE CONTRACTED FOR AT REPORTING DATE 216,112 260,476

Amounts not provided for:

Rental commitments – STL a 213,818 257,638

Other property 2,294 2,838

216,112 260,476

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 base rental

2014 2013$’000 $’000

19 EMPLOYEE BENEFITS AND SUPERANNUATION COMMITMENTSEMPLOYEE BENEFITS

Accrued wages, salaries and on-costs 1,053 672

Provisions for employee benefits (current) 4,004 3,498

Provisions for employee benefits (non-current) 701 196

TOTAL EMPLOYEE BENEFITS AND SUPERANNUATION COMMITMENTS 5,758 4,366

AMOUNT CONTRIBUTED BY QSL TO THE QSUPER DEFINED BENEFIT PLAN 95 42

20 CONTINGENT LIABILITIES

There are no known contingent liabilities at 30 June 2014 of a material nature.

21 SUBSEQUENT EVENTS

There are no known events of a material nature that have occurred after 30 June 2014.


2014 2013$ $

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 2,064,758 2,181,924

Post employment benefits 123,866 126,919

Other long-term benefits 205,635 -

Termination benefits a 113,731 -

TOTAL COMPENSATION 2,507,990 2,308,843

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

23 AUDITORS’ REMUNERATION

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

- audit or review of the financial report 125,500 125,035

- other non-audit services - 18,995

125,500 144,030

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

- internal audit services 197,973 151,470

- taxation services - 21,900

- other non-audit services 6,560 9,570

204,533 182,940

TOTAL AUDITORS’ REMUNERATION 330,033 326,970

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

2014 2013$’000 $’000

Information relating to QSL:

Current assets 484,829 350,730

TOTAL ASSETS 523,136 391,370Current liabilities 471,827 334,759

TOTAL LIABILITIES 483,136 350,510

Retained surpluses 15,512 16,392

Reserves 24,488 24,468

TOTAL EQUITY 40,000 40,860

NET LOSS (881) (399)

TOTAL COMPREHENSIVE LOSS (860) (166)

Commitments

All expenditure commitments in Note 17 and 18 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 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 AUD/USD exchange rate. The Consolidated Entity uses a variety of foreign exchange risk management instruments including foreign exchange contracts and currency options to manage exchange rate risk 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

2014 Sell US dollars 0.9053 862,649 114,260 62,513 1,524 - 1,040,946

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

Currency options a WEIGHTED AVERAGE

EXCHANGE RATES

CONTRACT MATURITIES


2014Sold AUD Put against USD 0.9375 16,000 - - - - 16,000

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

a $39.9 million of net foreign exchange contract and currency option gains (2013: $30.0 million losses) have been deferred as the gains represent amounts owed to future years’ pools (refer Notes 8 & 12). The expected timing of recognition based on the fair values at 30 June 2014 are: one year or less $28.8 million gain (2013: $30.9 million loss), one to two years $5.8 million gain (2013: $0.1 million gain), two to three years $5.1 million gain (2013: $0.8 million gain), three to four years $0.2 million gain (2013: $nil) and four to five years $nil (2013: $nil).

The following table details the Consolidated Entity’s sensitivity for financial instruments held at the 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

2014 2013 2014 2013$’000 $’000 $’000 $’000

Amounts owed to future pools (112,932) (94,032) 91,005 72,595

As at 30 June 2014, 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


2014ICE No 11 Contract 19.62 103,867 901 - - - 104,768

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

Sugar swaps a WEIGHTED AVERAGE

EXCHANGE RATES

CONTRACT MATURITIES


2014Australian dollar swaps 452.45 c 1,693 1,875 - - - 3,568

US dollar swaps 19.13 b 292,761 117,074 40,328 1,193 - 451,356

TOTAL 294,454 118,949 40,328 1,193 - 454,924

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

a $0.4 million of net price risk instrument gains (2013: $52.2 million gain) have been deferred as the gains represent amounts owed to future years’ pools (refer Note 8 & 13). The expected timing of recognition based on the fair values at 30 June 2014 are: one year or less $4.5 million gain (2013: $37.9 million gain), one to two years $2.1 million loss (2013: $12.5 million gain), two to three years $1.9 million loss (2013: $1.8 million gain), three to four years $nil (2013: $nil).

b US cents per poundc 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 results of volatility of the prompt sugar price on the ICE.

Price change sensitivity SUGAR PRICE30% DECREASE

SUGAR PRICE30% INCREASE

2014 2013 2014 2013$’000 $’000 $’000 $’000

Amounts owed to future pools 156,974 118,898 (156,974) (118,898)

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 2014, 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 $289.7 million (2013: $113.8 million) are repayable within 3 months (2013: 3 months) at an interest rate of 3.3% (2013: 2.9%) and nil% (2013: 0.4%) for borrowings in Australia and the United States, respectively. There were no borrowings denominated in United States dollars at 30 June 2014. Cash totalling $30.4 million (2013: $20.7 million) comprises bank and short-term investments maturing overnight at an interest rate of 2.9% (2013: 3.1%) and 0.2% (2013: 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 the 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


2014Current payables 4,946 - - - - 4,946

Borrowings (including interest) 289,749 - - - - 289,749

Commodity financial instruments a (4,534) 2,121 1,910 58 - (445)

Foreign currency financial instruments a (28,816) (5,824) (5,090) (162) - (39,892)

TOTAL 261,345 (3,703) (3,180) (104) - 254,358

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 a 30,884 (117) (748) - - 30,019

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

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 or CIF basis, with settlement generally on a cash against documents basis or by letter of credit. Where sales are made on a FOB basis, counterparties are vetted and credit limits are specifically determined and assigned. Payment terms require receiving immediate payment on presentation of documents. 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. The Consolidated Entity did not hold any cash deposits from counterparties at 30 June 2014.

The Consolidated Entity evaluates the concentration of credit risk with respect to trade receivables as low as customers are located in several jurisdictions and operate in independent markets. Counterparty concentration at any one time will be the sum of all contracted activity for a specific season originating from the relevant counterparty at the time. An overall counterparty concentration limit has not been established, however overall exposure to a particular counterparty is assessed and reported. 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:

2014 2013$’000 $’000

Asia 12,713 854

Australia/New Zealand 10,349 564

TOTAL 23,062 1,418





(V) CREDIT RISK CONTINUED

(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 2014, 2015, 2016, 2017 and 2018 seasons for suppliers with an RSSA for those 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 VALUE2014 2013 2014 2013$’000 $’000 $’000 $’000

FINANCIAL ASSETS

FOREIGN EXCHANGE RISK EXPOSUREForward exchange rate contracts

Sell USD 39,891 - 27,697 -

Currency options

Purchased AUD Call against USD - - - 111

TOTAL FOREIGN EXCHANGE RISK EXPOSURE 39,891 - 27,697 111

COMMODITY PRICE RISK EXPOSURESugar futures contracts 1,648 - 1,648 -

Sugar swaps

Australian dollars 87 - 87 -

US dollars - 51,962 - 51,962

TOTAL COMMODITY RISK EXPOSURE 1,735 51,962 1,735 51,962

OTHER FINANCIAL INSTRUMENTSAvailable-for-sale: shares at fair value 23,315 23,224 23,315 23,224

TOTAL 64,941 75,186 52,747 75,297

FINANCIAL LIABILITIES

FOREIGN EXCHANGE RISK EXPOSUREForward exchange rate contracts

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

Currency Options

Sold AUD Put against USD - (3,837) - (6,593)

TOTAL FOREIGN EXCHANGE RISK EXPOSURE - (30,017) - (56,085)

COMMODITY PRICE RISK EXPOSURESugar futures contracts - (7,202) - (7,202)

Sugar swaps

US dollars (1,053) - (1,053) -

TOTAL COMMODITY RISK EXPOSURE (1,053) (7,202) (1,053) (7,202)

TOTAL (1,053) (37,219) (1,053) (63,287)



(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).

2014$’000

Level 1 Level 2 Level 3 Total

FINANCIAL ASSETS

FOREIGN EXCHANGE INSTRUMENTSForward exchange rate contracts

Sell USD - 27,697 - 27,697

COMMODITY INSTRUMENTSSugar futures contracts 1,648 - - 1,648

Sugar swaps

Australian dollars - 87 - 87

OTHER FINANCIAL INSTRUMENTSAvailable-for-sale: shares at fair value 666 - 22,649 23,315

TOTAL 2,314 27,784 22,649 52,747

2013$’000


FINANCIAL ASSETS

FOREIGN EXCHANGE INSTRUMENTSCurrency options

Purchased AUD Call against USD - 111 - 111

COMMODITY INSTRUMENTSSugar 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

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 VALUE2014 2013$’000 $’000

OPENING BALANCE 22,587 21,188

Acquisitions during the year 62 1,399

CLOSING BALANCE 22,649 22,587





(VI) FAIR VALUE CONTINUED

2014$’000



COMMODITY INSTRUMENTS

Sugar swaps

US dollars - (1,053) - (1,053)

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)

COMMODITY INSTRUMENTS

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

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


DIRECTORS’ DECLARATIONFOR THE YEAR ENDED 30 JUNE 2014 QUEENSLAND SUGAR LIMITED AND ITS CONTROLLED ENTITIES

In the Directors’ opinion:

(a) The financial statements and notes set out on pages 36 to 60 for the year ended 30 June 2014 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 2014 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

15 September 2014


INDEPENDENT AUDITOR’S REPORTFOR THE YEAR ENDED 30 JUNE 2014 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

Independent auditor's report to the members of Queensland SugarLimited

Report on the financial report

We have audited the accompanying financial report of Queensland Sugar Limited, which comprises theconsolidated statement of financial position as at 30 June 2014, the consolidated statement ofcomprehensive income, the consolidated statement of changes in equity and the consolidatedstatement of cash flows for the year then ended, notes comprising a summary of significantaccounting policies and other explanatory information, and the directors' declaration of theconsolidated entity comprising the company and the entities it controlled at the year's end or fromtime 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 atrue and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001and for such internal controls as the directors determine are necessary to enable the preparation ofthe financial report that is free from material misstatement, whether due to fraud or error. In Note2(c), the directors also state, in accordance with Accounting Standard AASB 101 Presentation ofFinancial Statements, that the financial statements comply with International Financial ReportingStandards.

Auditor's responsibility

Our responsibility is to express an opinion on the financial report based on our audit. We conductedour audit in accordance with Australian Auditing Standards. Those standards require that we complywith relevant ethical requirements relating to audit engagements and plan and perform the audit toobtain 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 disclosuresin the financial report. The procedures selected depend on the auditor's judgement, including theassessment of the risks of material misstatement of the financial report, whether due to fraud orerror. In making those risk assessments, the auditor considers internal controls relevant to the entity'spreparation and fair presentation of the financial report in order to design audit procedures that areappropriate in the circumstances, but not for the purpose of expressing an opinion on theeffectiveness of the entity's internal controls. An audit also includes evaluating the appropriateness ofaccounting policies used and the reasonableness of accounting estimates made by the directors, aswell 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 basisfor our audit opinion.

Independence

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


A member firm of Ernst & Young Global Limited

Liability limited by a scheme approved under Professional Standards Legislation

Opinion

In our opinion:

a. the financial report of Queensland Sugar Limited is in accordance with the Corporations Act2001, including:

i giving a true and fair view of the consolidated entity's financial position as at 30 June2014 and of its performance for the year ended on that date; and

ii complying with Australian Accounting Standards and the Corporations Regulations2001; and

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

Ernst & Young

Mark HaywardPartnerBrisbane15 September 2014


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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

qsl: working for you annual...welcomed chris leon as a non-executive director in february this year....

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