the university of newcastle abn 15 736 576 735 · dipteach(newcastle), mba(scu), fami, cpm member...

A N N U A L R E P O R T 2 0 1 2 | 3

1 | T H E U N I V E R S I T Y O F N E W C A S T L E

ContentsVolume TwoAudited Financial Statements for the University of Newcastle and its controlled entities

03 The University of Newcastle

67 GraduateSchool.com Pty Ltd

95 UoN Services Limited

135 UoN Singapore Pte Ltd

169 Newcastle Innovation Ltd

The University of NewcastleABN 15 736 576 735

Financial RepoRt FoR the yeaR ended 31 decembeR 2012


THE UNIVERSITY OF NEWCASTLE Contents Financial Report 31 December 2012

Financial Statements

Report by Members of Council

Income statement

Statement of comprehensive income

Statement of financial position

Statement of changes in equity

Statement of cash flows

Notes to the financial statements

Statement by Members of Council

Financial Statements Income Statement Statement of Comprehensive Income Statement of Financial Position Statement of Changes in Equity Statement of Cash Flows Notes to the Financial Statements Directors' Declaration

Independent Audit Report


THE UNIVERSITY OF NEWCASTLE Report by the Members of Council

The members of the Council present their report on the consolidated entity consisting of the University of Newcastle and the entities it controlled at the end of, or during, the year ended 31 December 2012.

Members The following persons were members of the Council during the whole of the year and up to the date of this report unless otherwise specified: Official Members The Chancellor Conjoint Professor Trevor C Waring AM (ceased 30 April 2012) BA, MSc(Newcastle), FAPS The Chancellor Dr Ken Moss AM (appointed 1 May 2012 and ceased 13 October 2012) BE(Hons), PhD(Newcastle), HonFIEAust, FAICD The Acting Chancellor The Hon John Charles Price AM JP (appointed 14 October 2012) OFIE Aust, I.Eng, IMarEng(UK), MIMarEST(UK), GAICD The Vice-Chancellor and President Professor Caroline McMillen MA, DPhil(Oxon), MB, BChir(Cantab) The President of the Academic Senate Professor Val J Robertson BAppSc(Physio)(Lincoln Institute), BA(Hons), PhD(La Trobe) Members appointed by the NSW Minister for Education Ms Sharryn Brownlee (Pro Chancellor appointed 1 May 2012) MAICD

Conjoint Professor Geoff Lilliss BE(Hons), MBA(Merit)(Newcastle), FIEAust, MAICD

Dr Ken Moss AM (ceased 30 April 2012) BE(Hons), PhD(Newcastle), HonFIEAust, FAICD

The Hon John Charles Price AM JP (Deputy Chancellor) OFIE Aust, I.Eng, IMarEng(UK), MIMarEST(UK), GAICD

Senator Arthur Sinodinos AO (ceased 1 September 2012) BCom(Hons)(Newcastle), FAIM

Ms Deborah Wright DipTeach(Newcastle), MBA(SCU), FAMI, CPM Member appointed by Council Mr Brian Kennaugh (Pro Chancellor appointed 1 May 2012) BBus(Newcastle) Elected Members Dr Tom Griffiths (ceased 31 August 2012, appointed 14 September 2012) BEd(Hons), PhD(Newcastle), GradCert TESOL(UTS)

Professor John Rostas (ceased 31 August 2012, appointed 14 September 2012) BSc(Hons), PhD(Monash)



Ms Leanne Holt (ceased 31 August 2012, appointed 14 September 2012) Dip HR(HIT), MME(Newcastle)

Ms Heather Richards BMath(Hons)(Manc)

Ms Mpontseng Lydia Pama BA(Public Admin and Political Science)(National University of Lesotho) External persons who are members of Convocation appointed by the Council Ms Dianne Allen JP (Pro Chancellor ceased 6 December 2012, appointed Acting Deputy Chancellor on 7 December 2012) BCom(Newcastle), CA, MAICD Mr Peter Cockbain BScEng(Newcastle), FIEAust, CPEng, FIPENZ, FTSE Dr Geoff Leonard AM (Pro Chancellor appointed 7 December 2012) BCom, HonDBus(Newcastle), FCA, FCPA



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Principal Activities During the year the principal continuing activities of the University consisted of:

the provision of facilities for education and research the provision of courses of study across a range of disciplines the conferring of degrees at Bachelor, Master and Doctoral levels as well as the awarding of other diplomas

and certificates the encouragement, dissemination and advancement of knowledge through free enquiry participation in public discourse administration in support of teaching, learning and research activities community engagement in cultural, sporting, professional, technical and vocational services.

There were no significant changes in the nature of the activities of the University during the year. Review of Operations A review of the operations of the University of Newcastle during the year is provided in detail in Volume one of the 2012 Annual Report. Significant Changes in the State of Affairs During the year there were no significant changes in the state of the affairs of the University other than that referred to in the financial statements and notes following. Matters Subsequent to the End of the Financial Year There has not been any matter or circumstance, other than that referred to in the financial statements and notes following, that has arisen, significantly affected, or may significantly affect, the operations of the University, the results of those operations, or the state of affairs in future financial years. Likely Developments and Expected Results of Operations There are no likely developments in the operations of the University and its controlled entities that were not finalised at the date of this report. Environmental Regulation The University is subject to various Commonwealth, State and local government statutes and requirements related to environmental matters. During the year, the University fulfilled its requirements under the National Greenhouse Energy and Reporting Act 2007 to submit its 2011-12 greenhouse gas emissions and energy use reporting totals to the Australian Government by the mandated deadline. Insurance of Officers The University maintains a comprehensive insurance program that is renewed annually. The insurance program includes a suite of directors’ and officers’ liability insurances for Council members, directors and officers of the University and its controlled entities. Legal Proceedings on behalf of the University of Newcastle There are a number of matters subject to legal proceedings as at the date of this report. Further details relating to those matters are included in the financial statements and notes following. This report is made in accordance with the resolution of the members of the Council of the University of Newcastle. The Hon John Price AM Professor Caroline McMillen Acting Chancellor Vice-Chancellor and President

Dated 26 March 2013

1 0 | T H E U N I V E R S I T Y O F N E W C A S T L E

THE UNIVERSITY OF NEWCASTLE Income Statement For the year ended 31 December 2012

The accompanying notes form part of these financial statements.

Consolidated Parent

Note 2012 $’000

2011 $’000

2012 $’000

2011 $’000

Revenue from continuing operations

Australian Government financial assistance Australian Government grants 3 306,660 279,730 306,660 279,730 HELP - Australian Government Payment 3 110,460 100,623 110,460 100,623

State and local Government financial assistance 4 1,964 1,566 1,964 1,566 HECS-HELP - Student payments 9,573 9,776 9,573 9,776 Fees and charges 5 100,942 92,808 95,056 87,040 Investment revenue 6 23,354 16,408 33,590 14,251 Royalties, trademarks and licences 7 97 65 97 65 Consultancies and contracts 8 76,067 70,392 61,257 56,380 Other revenue 9 27,639 27,611 27,354 30,147

Total revenue from continuing operations 656,756 598,979 646,011 579,578

Other income Gains on disposal of assets 382 112 610 97

Total income from continuing operations 657,138 599,091 646,621 579,675

Expenses Employee related expenses 10 364,751 320,430 349,478 306,403 Depreciation and amortisation 11 38,312 42,109 37,527 41,486 Repairs and maintenance 12 23,828 22,611 23,511 22,303 Borrowing costs 3,439 649 3,541 550 Impairment of assets 13 1,480 405 1,499 405 Loss on disposal of assets 44 429 35 387 Deferred super expense 178 560 178 560 Other expenses 14 169,499 180,083 171,007 178,842

Total expenses from continuing operations 601,531 567,276 586,776 550,936

Operating result before income tax 55,607 31,815 59,845 28,739

Income tax expense 15 (1,756) (2,566) - -

Operating result after income tax for the year 53,851 29,249 59,845 28,739

Operating result attributable to members of the University of Newcastle 34 53,851 29,249 59,845 28,739


THE UNIVERSITY OF NEWCASTLE Statement of Comprehensive Income For the year ended 31 December 2012


Consolidated Parent

Note

2012 $’000

2011 $’000

2012 $’000

2011 $’000

Operating result for the year 53,851 29,249 59,845 28,739

Other comprehensive income

Gain (loss) on value of available for sale financial assets, net of tax 9,971 (8,294) 9,972 (8,297) Exchange differences on translating foreign controlled entities 129 (25) - - Cash flow hedges (4,649) - (4,649) - Net gain on revaluation of property, plant and equipment 16,235 - 16,235 -

Other comprehensive income for the year, net of tax 21,686 (8,319) 21,558 (8,297)

Total comprehensive income for the year 75,537 20,930 81,403 20,442 Total comprehensive income attributable to:

The University of Newcastle 75,537 20,930 81,403 20,442


THE UNIVERSITY OF NEWCASTLE Statement of Financial Position For the year ended 31 December 2012


Consolidated Parent

Note 2012

$’000 2011 $’000

2012 $’000

2011 $’000

ASSETS

Current assets Cash and cash equivalents 16 22,122 16,485 17,860 13,384 Trade and other receivables 17 36,111 38,090 35,280 37,984 Inventories 18 148 503 - - Other financial assets 19 194,537 143,951 178,587 127,527

Total current assets 252,918 199,029 231,727 178,895

Non-current assets Trade and other receivables 17 308,545 282,806 308,545 282,806 Other financial assets 19 208,082 86,938 207,918 86,435 Property, plant and equipment 20 833,320 816,622 831,071 814,676 Intangible assets 21 2,660 4,222 2,421 3,882

Total non-current assets 1,352,607 1,190,588 1,349,955 1,187,799

Total assets 1,605,525 1,389,617 1,581,682 1,366,694

LIABILITIES

Current liabilities Trade and other payables 22 39,929 33,666 35,002 41,555 Borrowings 23 - 250 - 250 Current tax liabilities 174 2,768 - - Provisions 24 86,437 65,180 84,581 63,756 Other liabilities 26 8,528 12,334 5,537 5,620

Total current liabilities 135,068 114,198 125,120 111,181

Non-current liabilities Trade and other payables 22 494 594 494 594 Borrowings 23 85,000 - 85,000 - Provisions 24 354,719 324,186 354,173 323,495 Derivative financial instruments 25 4,649 581 4,649 581

Total non-current liabilities 444,862 325,361 444,316 324,670

Total liabilities 579,930 439,559 569,436 435,851

Net assets 1,025,595 950,058 1,012,246 930,843 EQUITY Reserves 27 496,129 474,443 496,071 474,513 Retained earnings 27 529,466 475,615 516,175 456,330

Total equity 1,025,595 950,058 1,012,246 930,843


THE UNIVERSITY OF NEWCASTLE Statement of Changes in Equity For the year ended 31 December 2012


Note Reserves

$’000

Retained earnings

$’000 Total $’000

Consolidated Balance at 1 January 2011 482,762 446,366 929,128 Operating result for the year - 29,249 29,249 Other comprehensive income (8,319) - (8,319)

Balance at 31 December 2011 474,443 475,615 950,058

Balance at 1 January 2012 474,443 475,615 950,058 Operating result for the year - 53,851 53,851 Other comprehensive income 21,686 - 21,686

Balance at 31 December 2012 496,129 529,466 1,025,595

Parent

Balance at 1 January 2011 482,810 427,591 910,401 Operating result for the year - 28,739 28,739 Other comprehensive income (8,297) - (8,297)

Balance at 31 December 2011 474,513 456,330 930,843

Balance at 1 January 2012 474,513 456,330 930,843 Operating result for the year - 59,845 59,845 Other comprehensive income 21,558 - 21,558

Balance at 31 December 2012 496,071 516,175 1,012,246



Consolidated Parent

Note 2012 $’000

2011 $’000

2012 $’000

2011 $’000

Cash flows from operating activities Australian Government grants 3(h) 403,512 340,651 403,512 340,651 State Government grants 1,963 1,566 1,963 1,566 HECS-HELP - Student payments 9,573 9,776 9,573 9,776 Receipts from student fees and other customers 208,170 218,557 185,535 197,075 Dividends received 4,796 1,005 13,252 1,005 Payments to suppliers and employees (523,000) (522,053) (513,523) (499,662) Interest received 12,410 10,486 11,489 9,562 Interest paid (3,489) (522) (3,489) (491) GST recovered (paid) 6,056 10,805 6,541 10,807 Income taxes paid (3,555) (41) - -

Net cash provided by (used in) operating activities 34 116,436 70,230 114,853 70,289 Cash flows from investing activities Proceeds from sale of property, plant and equipment 312 310 290 279 Proceeds from sale of available-for-sale financial assets 1,303 1,669 1,188 1,302 Proceeds from redemption of held to maturity investments 371,443 280,600 350,343 271,800 Payments for purchase of property, plant and equipment (34,549) (44,528) (33,772) (44,028) Payments for purchase of available-for-sale financial assets (57,849) (9,839) (57,799) (8,589) Payments for purchase of held to maturity investments (476,222) (284,300) (455,574) (274,900) Payments from interest bearing loans 247 - 247 - Loans from (to) related parties - - - (2,033) Payments for purchase of intellectual property (287) (409) - - Proceeds of repayment of loans 100 135 100 135

Net cash used by investing activities (195,502) (56,362) (194,977) (56,034) Cash flows from financing activities Proceeds from borrowings 85,000 - 85,000 - Repayment of borrowings (400) (14,051) (400) (13,282)

Net cash used by financing activities 84,600 (14,051) 84,600 (13,282) Net increase (decrease) in cash and cash equivalents held 5,534 (183) 4,476 973 Cash and cash equivalents at beginning of year 16,485 16,675 13,384 12,411 Effects of exchange rate changes on cash and cash equivalents 103 (7) - -

Cash and cash equivalents at end of financial year 16 22,122 16,485 17,860 13,384

THE UNIVERSITY OF NEWCASTLE Statement of Cash Flows For the year ended 31 December 2012


THE UNIVERSITY OF NEWCASTLE Notes to the Financial Statements For the year ended 31 December 2012

1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of preparation The annual financial statements represent the audited general purpose financial statements of The University of Newcastle. They have been prepared on an accrual basis in accordance with Australian Accounting Standards.

Additionally the statements have been prepared in accordance with the following statutory requirements:

Higher Education Support Act 2003 (Financial Statement Guidelines)

Public Finance and Audit Act 1983, the requirements of the Department of Industry, Innovation, Science, Research and Tertiary Education (DIISRTE) and other State/Australian Government legislative requirements.

The University of Newcastle is a not-for-profit entity and these statements have been prepared on that basis. Some of the requirements for not-for-profit entities are inconsistent with the IFRS requirements.

Date of authorisation for issue The financial statements were authorised for issue by the members of The University of Newcastle on 26 March 2013.

Historical cost convention These financial statements have been prepared under the historical cost convention, as modified by the revaluation of available-for-sale financial assets, financial assets and liabilities (including derivative instruments) at fair value through profit or loss, certain classes of property, plant and equipment.

Critical accounting estimates and judgements The preparation of financial statements in conformity with Australian Accounting Standards requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying The University of Newcastle’s accounting policies. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The University of Newcastle makes estimates and assumptions covering the future. The resulting accounting estimates will, by definition, rarely equal the related actual results. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed below:

Provision for impairment of receivables – a provision is estimated when there is objective evidence that the Group will not be able to collect all amounts due according to the original forms of the receivables as outlined in note 1(j).

Impairment of Investments and other financial assets – the Group assesses at each reporting date whether there is objective evidence that a financial asset or group of financial assets is impaired as outlined in note 1(l).

Employee benefits – Long service leave – the liability for long service leave is measured at the present value of the expected future payments to be made in respect of services provided by employees up to the reporting date as outlined in note 1(v)(iii).

Employee benefits – Defined benefit plans – the liability or asset in respect of defined benefit superannuation plans and pensions is measured at the present value of the defined benefit obligation and pension at the reporting date as outlined in note 1(v)(iv). These benefits are independently valued by an actuary where certain key assumptions are taken into account as outlined in note 36(c).

Useful lives of property, plant and equipment – depreciation of property, plant and equipment is calculated over the assets estimated useful lives. Useful lives are reviewed and adjusted if appropriate at each reporting date as outlined in note 1(o).

Valuation of property, plant and equipment – land, buildings and infrastructure, artworks and rare books are independently valued as outlined in note 1(o). Certain key assumptions are taken into account as outlined in note 20(a).

(b) Principles of consolidation

(i) Subsidiaries The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of The University of Newcastle (''parent entity'') as at 31 December 2012 and the results of all subsidiaries for the year then ended. The University of Newcastle and its subsidiaries together are referred to in this financial report as the Group or the Consolidated Entity.



1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(b) Principles of consolidation (continued) Subsidiaries are all those entities (including special purpose entities) over which the Group has the ability to govern the financial and operating policies, generally accompanying a shareholding of more than one-half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date control ceases.

The acquisition method of accounting is used to account for the acquisition of subsidiaries by the Group.

Intercompany transactions, balances and unrealised gains on transactions between Group entities are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

(ii) Associates Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for in the parent entity financial statements using the cost method and in the consolidated financial statements using the equity method of accounting, after initially being recognised at cost. The Group’s investment in associates includes goodwill (net of any accumulated impairment loss) identified on acquisition.

The Group’s share of its associates’ post-acquisition profits or losses is recognised in the income statement, and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. Dividends receivable from associates are recognised in the parent entity’s income statement, while in the consolidated financial statements they reduce the carrying amount of the investment.

When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate.

(iii) Joint ventures Joint venture operations Where relevant, the proportionate interests in the assets, liabilities and expenses of a joint venture operation are incorporated into the financial statements under the appropriate headings.

(iv) Joint venture entities The interest in a joint venture entity is accounted for in the consolidated financial statements using the equity method and is carried at cost by the parent entity. Under the equity method, the share of the profits or losses of the entity is recognised in the income statement, and the share of movements in reserves is recognised in reserves in the statement of comprehensive income and statement of changes in equity.

(c) Foreign currency translation

(i) Functional and presentation currency Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in Australian dollars, which is The University of Newcastle’s functional and presentation currency.

(ii) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement. Qualifying cash flow hedges and qualifying net investment hedges in a foreign operation shall be accounted for by recognising the portion of the gain or loss determined to be an effective hedge in other comprehensive income and the ineffective portion in profit or loss.




(c) Foreign currency translation (continued) If gains or losses on non-monetary items are recognised in other comprehensive income, translation gains or losses are also recognised in other comprehensive income. Similarly, if gains or losses on non-monetary items are recognised in profit and loss, translation gains or losses are also recognised in profit or loss.

(iii) Group companies The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement of financial position;

income and expenses for each income statement are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and

all resulting exchange differences are recognised as a separate component of equity.

On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of borrowings and other financial instruments designated as hedges of such investments, are accounted for by recognising the effective portion in other comprehensive income and the ineffective portion in the income statement. When a foreign operation is sold or any borrowings forming part of the net investment are repaid, the gain or loss relating to the effective portion of the hedge that has been recognised in other comprehensive income is reclassified from equity to the income statement as a reclassification adjustment.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

(d) Revenue recognition Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, trade allowances, rebates and amounts collected on behalf of third parties.

The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the Group and specific criteria have been met for each of the Group’s activities as described below. The amount of revenue is not considered to be reliably measurable until all contingencies relating to the sale have been resolved. The Group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.

Revenue is recognised for the major business activities as follows:

(i) Government Grants The University of Newcastle treats operating grants received from Australian Government entities as income in the year of receipt.

Grants from the government are recognised at their fair value where the Group obtains control of the right to receive the grant, it is probable that economic benefits will flow to the Group and it can be reliably measured.

(ii) Student fees and charges Fees and charges are recognised as income in the year of receipt, except to the extent that fees and charges relate to courses to be held in future periods. Such income (or portion thereof) is treated as income in advance in liabilities. Conversely, fees and charges relating to debtors are recognised as revenue in the year to which the prescribed course relates.

(iii) Human resources Contract revenue is recognised in accordance with the percentage of completion method. The stage of completion is measured by reference to labour hours incurred to date as a percentage of estimated total labour hours for each contract.

Other human resources revenue is recognised when the service is provided.

(iv) Lease income Lease income from operating leases is recognised in income on a straight-line basis over the lease term.




(e) Income tax The University of Newcastle is exempt from income tax under Commonwealth income taxation legislation. Within the consolidated entity however, there are entities that are not exempt from this legislation.

The income tax expense or revenue for the period is the tax payable or receivable on the current period’s taxable income based on the national income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses.

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the reporting date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.

Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.

Current and deferred tax assets and liabilities relating to the same taxation authority are offset when there is a legally enforceable right to offset current tax assets and liabilities and they are intended to be either settled on a net basis, or the asset is to be realised and the liability settled simultaneously.

Current and deferred tax balances attributable to amounts recognised outside profit and loss are also recognised outside profit and loss.

(f) Leases Leases of property, plant and equipment where the Group as lessee, has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the lease’s inception at the lower of the fair value of the leased property and the present value of the minimum lease payments. The corresponding rental obligations, net of finance charges, are included in other short-term and long-term payables. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases are depreciated over the shorter of the asset’s useful life and the lease term.

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases (note 31). Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease.

(g) Business combinations The acquisition method shall be applied to account for each business combination; this does not include a combination of entities or businesses under common control, the formation of a joint venture, or the acquisition of an asset or a group of assets. The acquisition method requires identification of the acquirer, determining the acquisition date and recognising and measuring the identifiable assets acquired, liabilities assumed, goodwill gained, a gain from a bargain purchase and any non-controlling interest in the acquiree that are present ownership interests and entitle their holders to a proportionate share of the entity’s net assets in the event of liquidation. Identifiable assets acquired, liabilities assumed and any non-controlling interest in the acquiree shall be recognised separately from goodwill as of the acquisition date. Intangible assets acquired in a business combination are recognised separately from goodwill if they are separable, but only together with a related contract, identifiable asset or liability. Acquisition related costs are expensed in the periods in which they are incurred with the exception of costs to issue debt or equity securities, which are recognised in accordance with AASB132 and AASB139.

Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. Measurement of any non-controlling interest in the acquiree is at fair value or the present ownership instruments’ proportionate share in the recognised amounts of the acquiree’s identifiable net assets. All other components of non-controlling interests shall be measured at their acquisition-date fair values, unless another measurement basis is required by Australian Accounting Standards. Contingent liabilities assumed are recognised as part of the acquisition if there is a present obligation arising from past events and the fair value can be reliably measured. The excess at the acquisition date of the aggregate of the consideration transferred, the amount of any non-controlling interest and any previously held equity interest in the acquiree, over the net amounts of identifiable assets acquired and liabilities assumed is recognised as goodwill (refer to 1(p)(ii)). If the cost of acquisition is less than the fair value of the identifiable net assets of the subsidiary acquired, the difference is recognised directly in the income statement




(g) Business combinations (continued) of the acquirer, but only after a reassessment of the identification and measurement of the net assets acquired.

Consideration transferred in a business combination shall be measured at fair value. Where the business combination is achieved in stages, the acquirer shall remeasure previously held equity interest in the acquiree at its acquisition date fair value and recognise the resulting gain or loss in profit or loss.

(h) Impairment of assets

Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows which are largely independent of the cash inflows from other assets or groups of assets (cash generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.

(i) Cash and cash equivalents For statement of cash flows presentation purposes, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the statement of financial position.

(j) Trade receivables

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. Trade receivables are due for settlement no more than 30 days after end of month from the date of recognition.

Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. A provision for impairment of receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 30 days overdue) are considered indicators that the trade receivable is impaired. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. Cash flows relating to short-term receivable are not discounted if the effect of discounting is immaterial. The amount of the provision is recognised in the income statement.

(k) Inventories

(i) Retail stock Retail stock is stated at the lower of cost and net realisable value. Cost comprises direct materials only. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

(l) Investments and other financial assets Classification The Group classifies its investments and other financial assets in the following categories: financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, and available-for-sale financial assets. The classification depends on the purpose for which the investments were acquired. Management determines the classification of its investments at initial recognition and, in the case of assets classified as held-to-maturity, re-evaluates this designation at each reporting date.

(i) Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss include financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term. Derivatives are classified as held for trading unless they are designated as hedges. Assets in this category are classified as current assets.




(l) Investments and other financial assets (continued)

(ii) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for those with maturities greater than 12 months after the reporting date which are classified as non-current assets. Loans and receivables are included in receivables in the statement of financial position.

(iii) Held-to-maturity investments Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Group’s management has the positive intention and ability to hold to maturity.

(iv) Available-for-sale financial assets Available-for-sale financial assets, comprising principally marketable equity securities, are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the reporting date.

Initial recognition and derecognition Regular purchases of investments and other financial assets are recognised on trade-date, being the date on which the Group commits to purchase or sell the asset. Investments and other financial assets are initially recognised at fair value plus transactions costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognised at fair value and transaction costs are expensed in the income statement. Financial assets are derecognised when the rights to receive cash flows from the investments and other financial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership.

When securities classified as available-for-sale are sold, the accumulated fair value adjustments recognised in other comprehensive income are included in the income statement as gains and losses from investment securities.

Subsequent measurement Available-for-sale financial assets and financial assets at fair value through profit and loss are subsequently carried at fair value. Loans and receivables and held-to-maturity investments are carried at amortised cost using the effective interest method. Gains or losses arising from changes in the fair value of the ‘financial assets at fair value through profit or loss’ category are included in the income statement within other income or other expenses in the period in which they arise.

Changes in the fair value of monetary security denominated in a foreign currency and classified as available-for-sale are analysed between translation differences resulting from changes in amortised cost of the security and other changes in the carrying amount of the security. The translation differences related to changes in the amortised cost are recognised in profit or loss, and other changes in carrying amount are recognised in equity. Changes in the fair value of other monetary and on monetary securities classified as available-for-sale are recognised in equity.

Fair value The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active (and for unlisted securities), the Group establishes fair value by using valuation techniques. These include reference to the fair values of recent arm's length transactions, involving the same instruments or other instruments that are substantially the same, discounted cash flow analysis, and option pricing models refined to reflect the issuer's specific circumstances.

Impairment The Group assesses at each reporting date whether there is objective evidence that a financial asset or group of financial assets is impaired. In the case of equity securities classified as available-for-sale, a significant or prolonged decline in the fair value of a security below its cost is considered in determining whether the security is impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss - measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit and loss - is removed from equity and recognised in the income statement. Impairment losses recognised in the income statement on equity instruments are not reversed through the income statement.




(m) Derivatives Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group designates certain derivatives as either (1) hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedge) or (2) hedges of highly probable forecast transactions (cash flow hedges).

(i) Fair value hedge Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the income statement, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk.

(ii) Cash flow hedge The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in other comprehensive income. The gain or loss relating to the ineffective portion is recognised immediately in the income statement within other income or other expense.

Amounts that have been recognised in other comprehensive income are reclassified from equity to profit or loss as a reclassification adjustment in the periods when the hedged item affects profit or loss (for instance when the forecast sale that is hedged takes place). The gain or loss relating to the effective portion of interest rate swaps hedging variable rate borrowings is recognised in the income statement within ’finance costs’. The gain or loss relating to the effective portion of forward foreign exchange contracts hedging export sales is recognised in the income statement within sales.

However, when the forecast cash flow that is hedged results in the recognition of a non-financial asset (for example, inventory or fixed assets) the gains and losses previously recognised in other comprehensive income are either reclassified as a reclassification adjustment to the income statement or are included in the initial measurement of the cost of the asset. The deferred amounts are ultimately recognised in profit or loss as cost of goods sold in the case of inventory, or as depreciation in the case of fixed assets.

When a hedging instrument expires or is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss that has been recognised in other comprehensive income from the period when the hedge was effective shall remain separately in equity until the forecast transaction occurs. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was recognised in other comprehensive income shall be reclassified to profit or loss as a reclassification adjustment.

(iii) Derivatives that do not qualify for hedge accounting Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative instrument that does not qualify for hedge accounting are recognised immediately in the income statement and are included in other income or other expenses.

(n) Fair value estimation The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes.

Entities shall classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value of financial instruments traded in active markets (such as publicly traded derivatives, and trading and available-for-sale securities) is based on quoted market prices for identical assets or liabilities at the reporting date (Level 1). The quoted market price used for financial assets held by the Group is the current bid price.

The fair value of financial instruments that are not traded in an active market (for example, over-the-counter-derivatives) is determined using valuation techniques. The Group uses a variety of methods and makes assumptions that are based on market conditions existing at each reporting date. Quoted market prices or dealer quotes for similar instruments (Level 2) are used for long-term debt instruments held. Other techniques that are not based on observable market data (Level 3) such as estimated discounted cash flows, are used to determine fair value for the remaining financial instruments. The fair value of interest-rate swaps is calculated as the present value of the estimated future cash flows. The fair value of forward exchange contracts is determined using forward exchange market rates at the reporting date. The level in the fair value hierarchy shall be determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety.

The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values due to their short-term nature. The fair value of financial liabilities for disclosure purposes is estimated by




(n) Fair value estimation (continued) discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments.

(o) Property, plant and equipment Land, buildings and infrastructure, artworks and rare books are shown at fair value, based on periodic, but at least triennial, valuations by external independent valuers, less subsequent depreciation for buildings. Any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. Any additions to land, buildings and infrastructure, artworks and rare books since the valuation by external valuers are shown at historical cost less depreciation. All other property, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Cost may also include gains or losses that were recognised in other comprehensive income on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.

Increases in the carrying amounts arising on revaluation of land, buildings and infrastructure, artworks and rare books are recognised, net of tax, in other comprehensive income and accumulated in equity under the heading of property, plant and equipment revaluation reserve. To the extent that the increase reverses a decrease previously recognised in profit or loss, the increase is first recognised in profit and loss. Decreases that reverse previous increases of the same asset are also firstly recognised in other comprehensive income before reducing the balance of revaluation surpluses in equity, to the extent of the remaining reserve attributable to the asset; all other decreases are charged to the income statement.

Land, artworks and rare books are not depreciated. Depreciation on other assets is calculated using the straight line method to allocate their cost or revalued amounts, net of their residual values, over their estimated useful lives, as follows:

Buildings 40 - 70 years Plant and equipment 2 - 5 years Library collections 2 - 5 years

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

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

Land, buildings and infrastructure were valued by Global Valuation Services in October 2012.

(p) Intangible Assets

(i) Intellectual property Expenditure on intellectual property, being the application of research findings or other knowledge to a plan or design for the production of new or substantially improved products or services before the start of commercial production or use, is capitalised if the product or service is technically and commercially feasible and adequate resources are available to complete development. The expenditure capitalised comprises all directly attributable costs, including costs of materials, services, direct labour and an appropriate proportion of overheads. Other intellectual property expenditure is recognised in the income statement as an expense incurred. Capitalised expenditure is stated at cost less accumulated amortisation. Amortisation is calculated using the straight-line method to allocate the cost over the period of the expected benefit, which varies from 10 to 16 years.

(ii) Goodwill Goodwill represents the excess of the aggregate of the fair value measurement of the consideration transferred in an acquisition, the amount of any non-controlling interest and any previously held equity interest in the acquire, over the fair value of the Group’s share of the net identifiable assets of the acquiree at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill on acquisitions of associates is included in investments in associates. Goodwill is not amortised, instead it is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

(iii) Computer Software Expenditure on software, being software that is not an integral part of the related hardware, is capitalised. Capitalised expenditure is stated at cost less accumulated amortisation. Amortisation is calculated using the straight-line method to allocate the cost over the period of the expected benefit, to a maximum of 5 years.




(q) Unfunded superannuation

An arrangement exists between the Australian Government and the State Government to meet the unfunded liability for the University of Newcastle’s beneficiaries of the State Superannuation Schemes, on an emerging cost basis. This arrangement is evidenced by the State Grants (General Revenue) Amendment Act 1987, Higher Education Funding Act 1988 and Subsequent amending legislation. Accordingly the unfunded liabilities have been recognised in the Statement of Financial Position under provisions with a corresponding asset recognised under receivables.

The Australian Government and the State Government are reviewing the current arrangements relating to unfunded State Superannuation Schemes.

(r) Trade and other payables These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year, which are unpaid. The amounts are unsecured and are usually paid within 30 days following the end of the month they are recognised.

(s) Borrowings Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in the income statement over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities, which are not an incremental cost relating to the actual draw-down of the facility, are recognised as prepayments and recognised on a straight-line basis over the term of the facility.

Borrowings are removed from the statement of financial position when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in other income or other expenses.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date and does not expect to settle the liability for at least 12 months after the reporting date.

(t) Borrowing costs

Borrowing costs incurred for the construction of any qualifying asset are expensed at the time they are incurred.

(u) Provisions Provisions for legal claims and service warranties are recognised when: the Group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated.

Provisions are not recognised for future operating losses.

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.

Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the reporting date. The discount rate used to determine the present value reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognised as a finance cost.

(v) Employee benefits

(i) Wages and salaries Liabilities for short-term employee benefits including wages and salaries and non-monetary benefits due to be settled within 12 months after the end of the period are measured at the amount expected to be paid when the liability is settled and recognised in other payables. Liabilities for non-accumulating sick leave are recognised when the leave is taken and measured at the rates paid or payable.




(v) Employee benefits (continued)

(ii) Annual leave and sick leave The liability for long-term employee benefits such as annual leave and accumulating sick leave are recognised in current provisions for employee benefits as they are expected to be settled within 12 months after the end of the reporting period. It is measured at the amount expected to be paid when the liability is settled. Regardless of the expected timing of settlements, provisions made in respect of employee benefits are classified as a current liability, unless there is an unconditional right to defer the settlement of the liability for at least 12 months after the reporting date, in which case it would be classified as a non-current liability.

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

(iv) Retirement benefit obligations All employees of the Group are entitled to benefits on retirement, disability or death from the Group’s Superannuation plan. The Group has a defined benefit section and defined contribution section within its plan. The defined benefit section provides defined lump sum benefits based on years of service and final average salary. The defined contribution section receives fixed contributions from the Group and the Group’s legal or constructive obligation is limited to these contributions. A significant proportion of the employees of the parent entity are members of the defined contribution section of the Group's plan.

A liability or asset in respect of defined benefit Superannuation plans is recognised in the statement of financial position, and is measured as the present value of the defined benefit obligation at the reporting date plus unrecognised Actuarial gains (less unrecognised losses) less the fair value of the Superannuation fund’s assets at that date and any unrecognised past service cost. The present value of the defined benefit obligation is based on expected future payments which arise from membership of the fund to the reporting date, calculated annually by independent actuaries using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service.

Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.

Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised in the income statement in the period in which they occur.

Past service costs are recognised immediately in the income statement, unless the changes to the Superannuation plans are conditional on the employees remaining in service for a specified period of time (the vesting period). In this case, the past service costs are amortised on a straight-line basis over the vesting period.

Part of the provision of the existing benefit obligation (for example, taxes on investment income and employer contributions) are taken into account in measuring the net liability ort asset.

(v) Termination benefits Termination benefits are payable when employment is terminated before the normal retirement date, or when an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits when it is demonstrably committed to either terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal or providing termination benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due more than 12 months after reporting date are discounted to present value.




(w) Rounding of amounts The University of Newcastle is of a kind referred to in Class Order 98/0100 as amended by Class Order 04/667, issued by the Australian Securities and Investments Commission, relating to the ''rounding off'' of amounts in the financial statements. Amounts in the financial statements have been rounded off in accordance with the Class Order, to the nearest thousand dollars, or in certain cases, the nearest dollar.

(x) Goods and services tax (GST)

Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case, it is recognised as part of the cost acquisition of the asset or as part of the expense.

Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the statement of financial position.

Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the taxation authority, are presented as operating cash flows.

(y) Comparative amounts Where necessary, comparative information has been reclassified to enhance comparability in respect of changes in presentation adopted in the current year.

(z) Non-current assets (or disposal groups) held for sale and discontinued operations

Non-current assets (or disposal groups) are classified as held for sale and stated at the lower of their carrying amount and fair value less costs to sell, if their carrying amount will be recovered principally through a sale transaction rather than through continuing use.

An impairment loss is recognised for any initial or subsequent write down of the asset (or disposal group) to fair value less costs to sell. A gain is recognised for any subsequent increases in fair value less costs to sell of an asset (or disposal group), but not in excess of any cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of the sale of the non-current asset (or disposal group) is recognised at the date of derecognition.

Non-current assets (including those that are part of a disposal group) are not depreciated or amortised while they are classified as held for sale. Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale continue to be recognised.

Non-current assets classified as held for sale and the assets of a disposal group classified as held for sale are presented separately from the other assets in the statement of financial position. The liabilities of a disposal group classified as held for sale are presented separately from other liabilities in the statement of financial position.

(aa) New Accounting Standards and Interpretations Certain new Accounting Standards and Interpretations have been published that are not mandatory for 31 December 2012 reporting periods. The University of Newcastle's assessment of the impact of these new Standards and Interpretations is set out below:

AASB 9 Financial Instruments, AASB 2009-11 Amendments to Australian Accounting Standards arising from AASB 9 and AASB 2010-7 Amendments to Australian Accounting Standards arising from AASB 9 (December 2010) (effective from 1 January 2013)

AASB 10 Consolidated Financial Statements, AASB 11 Joint Arrangements, AASB 12 Disclosure of Interests in Other Entities, revised AASB 127 Separate Financial Statements, AASB 128 Investments in Associates and Joint Ventures, AASB 2011-7 Amendments to Australian Accounting Standards arising from the Consolidation and Joint Arrangements Standards (effective 1 January 2013)

AASB 13 Fair Value Measurement and AASB 2011-8 Amendments to Australian Accounting Standards arising from AASB 13 (effective 1 January 2013)

Revised AASB 119 Employee Benefits, AASB 2011-10 Amendments to Australian Accounting Standards arising from AASB 119 (September 2011) and AASB 2011-11 Amendments to AASB 119 (September 2011) arising from Reduced Disclosure Requirements (effective 1 January 2013)



2 RECLASSIFICATION OF COMPARATIVE INFORMATION

(a) Nature of the reclassification Changes have been made to the classification of certain items in the financial statements. As a result, certain amounts reported for 2011 have been reclassified as set out below. There has been no effect on operating result and net assets.

(b) Summary of reclassified comparative information Consolidated Parent

Restated

2011 $’000

Previously reported

2011 $’000

Restated

2011 $’000

Previously reported

2011 $’000

Reclassification of Income Statement

Australian Government grants 279,730 256,635 279,730 256,635 Fees and charges 92,808 93,811 87,040 88,081 Other revenue 27,611 49,703 30,147 52,201

Total 400,149 400,149 396,917 396,917

(c) Reason for the reclassification

The reclassification has been undertaken to ensure the University is classifying all Income Statement items consistently.

3 AUSTRALIAN GOVERNMENT FINANCIAL ASSISTANCE INCLUDING HECS-HELP AND OTHER AUSTRALIAN GOVERNMENT LOAN PROGRAMS

Consolidated Parent

Note

2012 $’000

2011 $’000

2012 $’000

2011 $’000

(a) Commonwealth Grants Scheme and other grants Commonwealth Grants Scheme 206,657 172,711 206,657 172,711 Indigenous Support Program 2,268 2,150 2,268 2,150 Disability Support Program 185 163 185 163 Learning and Teaching Performance Fund - 3,163 - 3,163 Capital Development Pool - 778 - 778 Diversity and Structural Adjustment Fund - 70 - 70 Transitional Cost Program 93 172 93 172 Partnership and Participation Program 6,145 4,263 6,145 4,263

Total Commonwealth Grants Scheme and other grants 37(a) 215,349 183,470 215,349 183,470

(b) Higher Education Loan Programs (HELP) HECS – HELP 96,052 88,387 96,052 88,387 FEE – HELP 13,438 12,236 13,438 12,236 SSAF – HELP 970 - 970 -

Total Higher Education Loan Programs 37(b) 110,460 100,623 110,460 100,623



3 AUSTRALIAN GOVERNMENT FINANCIAL ASSISTANCE INCLUDING HECS-HELP AND OTHER AUSTRALIAN GOVERNMENT LOAN PROGRAMS (continued)

Consolidated Parent

Note

2012 $’000

2011 $’000

2012 $’000

2011 $’000

(c) Scholarships Australian Postgraduate Awards 5,550 4,806 5,550 4,806 International Postgraduate Research Scholarships 512 493 512 493 Commonwealth Education Costs Scholarship 796 1,262 796 1,262 Commonwealth Accommodation Scholarships 428 - 428 - Indigenous Access scholarships 314 169 314 169 Indigenous Staff Scholarships 76 36 76 36

Total Scholarships 7,676 6,766 7,676 6,766

(d) DIISRTE research Joint Research Engagement Program 8,686 8,539 8,686 8,539 Research Training Scheme 15,074 14,707 15,074 14,707 Research Infrastructure Block Grants 5,971 5,482 5,971 5,482 Sustainable Research Excellence in Universities 3,660 2,913 3,660 2,913

Total DIISRTE research 37(d) 33,391 31,641 33,391 31,641

(e) Other capital funding

Education Investment Fund 14,143 15,857 14,143 15,857

Total other capital funding 14,143 15,857 14,143 15,857

(f) Australian Research Council Discovery Projects 9,351 8,436 9,351 8,436 Fellowships 3,636 2,010 3,636 2,010 Indigenous Researchers Development 199 179 199 179 Total discovery 13,186 10,625 13,186 10,625 Linkages Infrastructure 890 1,430 890 1,430 Projects 3,204 3,104 3,204 3,104 Total linkages 4,094 4,534 4,094 4,534 Networks and Centres Centres 2,215 3,376 2,215 3,376 Total Networks and Centres 2,215 3,376 2,215 3,376

Total Australian Research Council 19,495 18,535 19,495 18,535

(g) Other Australian Government financial assistance Non-capital Indigenous Tutorial Assistance Scheme 594 368 594 368 Miscellaneous government grants 11,770 10,224 11,770 10,224 Total non-capital 12,364 10,592 12,364 10,592 Capital Miscellaneous government grants 4,242 12,869 4,242 12,869 Total capital 4,242 12,869 4,242 12,869

Total other Australian Government financial assistance 16,606 23,461 16,606 23,461



3 AUSTRALIAN GOVERNMENT FINANCIAL ASSISTANCE INCLUDING HECS-HELP AND OTHER AUSTRALIAN GOVERNMENT LOAN PROGRAMS (continued)

Consolidated Parent

Note

2012 $’000

2011 $’000

2012 $’000

2011 $’000

Total Australian Government financial assistance 417,120 380,353 417,120 380,353 Reconciliation Australian Government Grants (a + c + d + e + f + g) 306,660 279,730 306,660 279,730 HECS - HELP 96,052 88,387 96,052 88,387 FEE - HELP 13,438 12,236 13,438 12,236 Student Services Amenities Fee (SSAF) - HELP 970 - 970 -

Total Australian Government financial assistance 417,120 380,353 417,120 380,353

(h) Australian Government grants received – cash basis CGS and Other DISSRTE Grants 216,516 183,084 216,516 183,084 Higher Education Loan Programs 110,558 98,968 110,558 98,968 Scholarships 8,287 7,431 8,287 7,431 DISSRTE research 33,390 31,640 33,390 31,640 Other capital funding 14,143 15,857 14,143 15,857 ARC grants - Discovery 13,186 10,625 13,186 10,625 ARC grants - Linkages 4,094 4,534 4,094 4,534 ARC grants - Networks and Centres 2,215 3,376 2,215 3,376

Total Australian Government grants received - cash basis 402,389 355,515 402,389 355,515 OS-Help (Net) 1,123 1,464 1,123 1,464

Total Australian Government funding received - cash basis 403,512 356,979 403,512 356,979

4 STATE AND LOCAL GOVERNMENT FINANCIAL ASSISTANCE

Government grants were received during the reporting period for the following purposes:

Non-Capital State Government Contributions 1,068 1,252 1,068 1,252 Local Government Contributions - 10 - 10

Total 1,068 1,262 1,068 1,262

Capital State Government Capital Contributions 896 304 896 304

Total 896 304 896 304

Total State and Local Government financial assistance 1,964 1,566 1,964 1,566



5 FEES AND CHARGES

Consolidated Parent

2012 $’000

2011 $’000

2012 $’000

2011 $’000

Course fees and charges Fee-paying overseas students 73,401 68,786 67,516 63,022 Fee-paying domestic postgraduate students 9,334 8,279 9,334 8,279 Fee-paying domestic undergraduate students 196 269 196 269 Fee-paying domestic non-award students 387 361 387 361 Course and conference fees 2,127 1,817 2,126 1,813 Course materials 666 701 666 701

Total course fees and charges 86,111 80,213 80,225 74,445

Other non-course fees and charges Library fines 184 214 184 214 Parking fees 2,223 2,197 2,223 2,197 Student accommodation 9,012 8,267 9,012 8,267 Music tuition 597 555 597 555 Other fees and charges 1,501 1,362 1,501 1,362 Student Services Amenities Fees (SSAF) 1,314 - 1,314 -

Total other fees and charges 14,831 12,595 14,831 12,595

Total fees and charges 100,942 92,808 95,056 87,040

6 INVESTMENT REVENUE

Dividends 4,340 195 15,831 195 Distributions 2,916 5,627 2,916 5,627 Interest 16,026 10,586 14,771 8,429 Net amortisation of bonds 72 - 72 -

Total investment revenue 23,354 16,408 33,590 14,251

7 ROYALTIES, TRADEMARKS AND LICENCES

Licence fees 97 65 97 65

Total royalties, trademarks and licences 97 65 97 65

8 CONSULTANCIES AND CONTRACTS

Consultancies 1,042 14,534 1,019 643 Contract research

National Health & Medical Research Council 14,958 15,201 14,958 15,201 Hunter Medical Research Institute 6,746 5,355 6,746 5,355 Co-operative research centre 1,410 1,847 1,410 1,847 Industry research 14,630 427 192 427 Other contract revenue 37,281 33,028 36,932 32,907

Total consultancies and contracts 76,067 70,392 61,257 56,380



9 OTHER REVENUE

Consolidated Parent

Note

2012 $’000

2011 $’000

2012 $’000

2011 $’000

Cost recoveries 11,406 9,891 12,054 9,798 Donations and bequests 810 2,271 809 4,460 Insurance recoveries 283 1,979 283 1,978 Other related party revenue - - 2,591 4,873 Scholarships and prizes 1,362 1,063 1,363 405 Sponsorship 3,685 4,451 3,700 4,238 Advertising 1,212 1,125 1,209 1,125 Sale of goods 1,838 2,025 - - Rents 2,531 2,196 1,099 1,040 Other revenue 4,512 2,610 4,246 2,230

Total other revenue 27,639 27,611 27,354 30,147

Distributions from the trustee of the Kelver Hartley Trust are recorded in scholarships and prizes.

10 EMPLOYEE RELATED EXPENSES

Academic Salaries 126,636 112,675 125,177 110,520 Contribution to funded superannuation and pension schemes 20,101 21,052 20,034 20,980 Payroll tax 9,454 7,070 9,452 7,068 Workers compensation 1,012 610 1,011 610 Long service leave 9,899 7,747 9,899 7,747 Annual leave 12,076 10,561 12,070 10,556 Other

Parental leave 1,891 1,017 1,891 1,017 Contract severance 1,822 (2,733) 1,822 (2,733) Voluntary separation 603 574 603 574

Total academic 183,494 158,573 181,959 156,339

Non-academic Salaries 127,801 117,527 116,790 108,233 Contribution to funded superannuation and pension schemes 18,045 17,185 17,035 16,319 Payroll tax 8,001 7,419 7,481 6,948 Workers compensation 724 574 683 546 Long service leave 9,604 8,313 9,337 8,021 Annual leave 12,962 12,158 12,075 11,366 Other

Parental leave 1,810 1,077 1,808 1,041 Contract severance 1,311 (2,733) 1,311 (2,733) Voluntary separation 999 337 999 323

Total non-academic 181,257 161,857 167,519 150,064

Total employee related expenses 364,751 320,430 349,478 306,403 Deferred government employee benefits for superannuation 36 178 560 178 560

Total employee related expenses, including deferred government employee benefits for superannuation 364,929 320,990 349,656 306,963



11 DEPRECIATION AND AMORTISATION

Consolidated Parent

2012 $’000

2011 $’000

2012 $’000

2011 $’000

Depreciation Buildings and infrastructure 20,936 20,927 20,881 20,903 Plant and equipment 14,356 17,543 14,040 17,265 Artworks and libraries 10 16 10 16

Total depreciation 35,302 38,486 34,931 38,184

Amortisation Intangibles 3,010 3,623 2,596 3,302

Total depreciation and amortisation 38,312 42,109 37,527 41,486

12 REPAIRS AND MAINTENANCE

Buildings 8,597 7,062 8,553 7,051 Cleaning 5,158 5,189 4,990 4,939 Repairs and maintenance - general 10,073 10,360 9,968 10,313

Total repairs and maintenance 23,828 22,611 23,511 22,303

13 IMPAIRMENT OF ASSETS

Impairment losses - financial assets Trade receivables 891 367 891 365 Other financial assets - Available for sale 624 - 624 -

Reversal of impairment losses - Financial assets Trade receivables (37) 38 (16) 40 Intangibles 2 - - -

Total impairment of assets 1,480 405 1,499 405

14 OTHER EXPENSES

Advertising, marketing and promotions 4,045 4,929 3,273 3,822 Consumables 25,281 24,760 22,612 22,947 Donations 16 118 11 116 Insurances 1,950 1,694 1,828 1,642 Minor equipment 10,807 10,648 10,418 10,551 Net loss on revaluation of financial assets at fair value through the

income statement - 349 - 349 Operating lease rental 4,097 4,206 4,070 4,186 Professional services 37,410 55,127 35,949 51,689 Scholarships, grants and prizes 37,579 36,568 37,496 34,394 Telecommunications 3,521 3,765 3,375 3,588 Travel, staff development and entertainment 19,441 18,602 18,663 17,384 Utilities 7,101 6,381 7,078 6,363 Related party expenses - - 8,465 8,148 Other expenses 18,251 12,936 17,769 13,663

Total other expenses 169,499 180,083 171,007 178,842



15 INCOME TAX EXPENSE

Consolidated Parent

2012 $’000

2011 $’000

2012 $’000

2011 $’000

(a) Income tax expense Current tax 1,756 1,143 - - Deferred tax - (2) - - Adjustments for current tax of prior periods - 1,425 - -

1,756 2,566 - -

Income tax expense is attributable to:

Operating result from continuing operations 1,756 2,566 - -

Aggregate income tax expense 1,756 2,566 - -

(b) Numerical reconciliation of income tax expense to prima facie tax payable

Operating results from continuing operations before income tax expense 58,118 31,815 62,356 28,739

Tax at the Australian rate of 30% (2011: 30%) 17,435 9,545 18,707 8,622 Tax effect of amounts which are not (taxable) deductible in

calculating taxable income (15,540) (8,402) (18,707) (8,622) Difference in overseas tax rates (139) - - - Adjustment for current tax of prior periods - 1,423 - -

Income tax expense 1,756 2,566 - -

16 CASH AND CASH EQUIVALENTS

Cash at bank and on hand and cash equivalents 22,122 16,485 17,860 13,384

Total cash and cash equivalent 22,122 16,485 17,860 13,384

(a) Reconciliation to cash and cash equivalents at the end of the year in the Statement of cashflows

The above figures are reconciled to cash at the end of the year as shown in the statement of cash flows as follows:

Cash and cash equivalents 22,122 16,485 17,860 13,384

Balance as per cash flow statement 22,122 16,485 17,860 13,384

(b) Cash at bank Cash at bank is interest bearing with the floating rates being determined by the daily balance of funds held in the account. This was 4.23% for 2012 (2011: 6.40%).



17 RECEIVABLES

Consolidated Parent

2012 $’000

2011 $’000

2012 $’000

2011 $’000

Current Trade receivables 23,580 26,404 20,451 23,713 Provision for impairment (1,667) (778) (1,649) (739) Prepayments 10,848 9,104 10,741 9,006 Related party receivables - - 2,432 3,412 Other receivables 3,350 3,360 3,305 2,592

Total current receivables 36,111 38,090 35,280 37,984 Non-current Deferred government contribution for superannuation 307,826 282,029 307,826 282,029 Other receivables 719 777 719 777

Total non-current receivables 308,545 282,806 308,545 282,806

(b) Impaired receivables As at 31 December 2012 current receivables of the Group with a nominal value of $1,666,921 (2011: $778,000) were impaired. The amount of the provision was $1,666,921 (2011: $778,000). The individually impaired receivables mainly relate to student fees.

The aging of these receivables is as follows: Less than 3 months - - - - Over 3 months 1,667 778 1,649 739 1,667 778 1,649 739

As of 31 December 2012, trade receivables of the Group with a nominal value of $7,025,949 (2011: $2,665,000) were past due but not impaired. These relate to a number of independent customers for whom there is no recent history of default.

The aging of these receivables is as follows: Less than 3 months 7,200 5,034 5,353 3,212 Over 3 months - 342 - - 7,200 5,376 5,353 3,212

Movements in the provision for impaired receivables are as follows: At 1 January 778 813 739 707 Provision for impairment recognised during the year 898 96 898 57 Recovery of impaired receivables (38) (103) (16) - Receivables written off during the year as uncollectable 29 (28) 28 (25) 1,667 778 1,649 739

18 INVENTORIES

Current Retail stock on hand 148 503 - -

Total current inventories 148 503 - -



19 OTHER FINANCIAL ASSETS

Consolidated Parent

2012 $’000

2011 $’000

2012 $’000

2011 $’000

Current Available-for-sale financial assets 10,737 10,527 10,587 10,527 Held to maturity investments 183,800 133,424 168,000 117,000 Total current other financial assets 194,537 143,951 178,587 127,527 Non-current Available-for-sale financial assets 137,195 71,938 137,055 71,435 Held to maturity investments 70,887 15,000 70,863 15,000 Total non-current other financial assets 208,082 86,938 207,918 86,435

20 PROPERTY, PLANT AND EQUIPMENT

Land At independent valuation 51,440 48,765 51,440 48,765 At cost 90 1,536 90 1,536

Total land 51,530 50,301 51,530 50,301

Buildings At independent valuation 643,973 612,982 643,973 612,982 At cost 13,243 47,898 13,243 47,898 Accumulated depreciation (5,568) (22,497) (5,568) (22,497)

Total buildings 651,648 638,383 651,648 638,383

Infrastructure At independent valuation 55,630 63,148 55,630 63,148 At cost 12,678 12,528 2,301 2,461 Accumulated depreciation (4,571) (7,578) (752) (3,791) Accumulated impairment (5,395) (5,395) - -

Total Infrastructure 58,342 62,703 57,179 61,818

Capital works in progress At cost 16,275 9,665 16,259 9,570

Total capital works in progress 16,275 9,665 16,259 9,570

Plant and equipment At cost 150,419 138,650 147,946 136,520 Accumulated depreciation (99,866) (87,992) (98,461) (86,827)

Total plant and equipment 50,553 50,658 49,485 49,693

Artworks and library At fair value 4,100 4,100 4,100 4,100 At cost 1,090 1,020 1,087 1,018 Accumulated depreciation (218) (208) (217) (207)

Total artworks and library 4,972 4,912 4,970 4,911

Total property, plant and equipment 833,320 816,622 831,071 814,676



20 PROPERTY, PLANT AND EQUIPMENT (continued)

Movement in the carrying amounts for each class of property, plant and equipment between the beginning and the end of the current year:

Land $’000

Buildings $’000

Infra- structure

$’000

Capital Works in Progress

$’000

Plant and equipment

$’000

Artwork and

Libraries $’000

Total $’000

Consolidated Balance at 1 January 2011 48,765 624,308 65,239 14,884 48,813 4,905 806,914 Additions (transfers) 1,536 37,111 278 (5,219) 19,859 24 53,589 Assets included in a disposal

group classified as held for sale and other disposals

- (4,924) - - (471) - (5,395)

Depreciation expense - (18,112) (2,814) - (17,543) (17) (38,486) Balance at 31 December 2011 50,301 638,383 62,703 9,665 50,658 4,912 816,622 Balance at 1 January 2012 50,301 638,383 62,703 9,665 50,658 4,912 816,622 Additions (transfers) - 13,409 1,402 6,610 14,680 70 36,171 Assets included in a disposal


- - - - (406) - (406)

Depreciation expense - (18,237) (2,699) - (14,356) (10) (35,302) Revaluation decrease recognised

in equity - - (3,087) - - - (3,087)

Revaluation increase recognised in equity

1,229 18,093 - - - - 19,322

Balance at 31 December 2012 51,530 651,648 58,342 16,275 50,553 4,972 833,320

Parent Balance at 1 January 2011 48,765 624,308 64,386 14,884 47,825 4,904 805,072 Additions (transfers) 1,536 37,112 223 (5,314) 19,546 21 53,124 Assets included in a disposal


- (4,922) - - (414) - (5,336)

Depreciation expense - (18,115) (2,791) - (17,264) (14) (38,184) Balance at 31 December 2011 50,301 638,383 61,818 9,570 49,693 4,911 814,676 Balance at the 1 January 2012 50,301 638,383 61,818 9,570 49,693 4,911 814,676 Additions (transfers) - 13,409 1,093 6,689 14,155 68 35,414 Assets included in a disposal


- - - - (323) - (323)

Depreciation expense - (18,237) (2,644) - (14,040) (10) (34,931) Revaluation decrease recognised

in equity - - (3,087) - - - (3,087)

Revaluation increase recognised in equity

1,229 18,093 - - - - 19,322

Balance at 31 December 2012 51,530 651,648 57,179 16,259 49,485 4,970 831,071

(a) Valuations of land and buildings The University's land and buildings were revalued at 30 September 2012 by independent valuers Global Valuation Services. Valuations were made on the basis of open market value. The revaluation surplus net of applicable deferred income taxes were credited to an asset revaluation reserve in equity. The valuation basis of land is the estimated amount for which an asset should exchange on the valuation date between a willing buyer and seller in an arm’s length transaction, after proper marketing and where the parties had acted knowledgably, prudently and without compulsion.



21 INTANGIBLE ASSETS

Consolidated Parent

2012 $’000

2011 $’000

2012 $’000

2011 $’000

Computer software Cost 23,026 21,719 22,793 21,678 Accumulated amortisation and impairment (20,563) (17,802) (20,372) (17,796)

Net carrying value 2,463 3,917 2,421 3,882

Intellectual property Cost 3,655 3,662 - - Accumulated amortisation and impairment (3,458) (3,357) - - Net carrying value 197 305 - - Total intangibles 2,660 4,222 2,421 3,882

Movement in the carrying amounts for each class of intangible assets between the beginning and the end of the current year:

Computer software

$’000

Intellectual property

$’000

Total $’000

Consolidated Balance at 1 January 2011 11,610 206 11,816 Additions 858 409 1,267 Work in progress (5,238) - (5,238) Amortisation expense (3,313) (310) (3,623)

Closing value at 31 December 2011 3,917 305 4,222 Balance at 1 January 2012 3,917 305 4,222 Additions 1,112 287 1,399 Work in progress 51 - 51 Amortisation expense (2,617) (393) (3,010) Impairment loss in income - (2) (2)

Closing value at 31 December 201231 December 2011 2,463 197 2,660 Parent Balance at 1 January 2011 11,610 - 11,610 Additions 811 - 811 Work in progress (5,237) - (5,237) Amortisation expense (3,302) - (3,302)

Closing value at 31 December 201131 December 2012 3,882 - 3,882 Balance at 1 January 2012 3,882 - 3,882 Additions 1,084 - 1,084 Work in progress 51 - 51 Amortisation expense (2,596) - (2,596)

Closing value at 31 December 201231 December 2011 2,421 - 2,421



22 TRADE AND OTHER PAYABLES

Consolidated Parent

2012 $’000

2011 $’000

2012 $’000

2011 $’000

Current Unsecured liabilities Trade creditors 34,360 31,552 32,734 29,971 OS-HELP liability to Australian Government 634 371 634 371 Related party payables - - - 10,019 Other payables 4,935 1,743 1,634 1,194

Total current trade and other payables 39,929 33,666 35,002 41,555 Non-current Unsecured liabilities Other non current payables 494 594 494 594 Total non-current trade and other payables 494 594 494 594

The carrying amounts of the Group's and parent entity's trade and other payables are denominated in the following currencies:

US Dollars 34 485 34 485 Euro Dollars 11 - 11 - Great British Pound 6 18 6 18 Australian Dollar 40,427 33,757 35,495 42,146

Total 40,478 34,260 35,546 42,649

For an analysis of the sensitivity of trade and other payables to foreign currency risk refer to note 35.

23 BORROWINGS

Current Unsecured liabilities Bank loans - 250 - 250 Total current borrowings - 250 - 250 Non-current Unsecured liabilities Bank loans 85,000 - 85,000 - Total non-current borrowings 85,000 - 85,000 -

(a) Financing arrangements Unrestricted access was available at reporting date to the following lines of credit:

Bank loan facilities Total facilities 95,000 92,250 95,000 92,250 Used at balance date (85,000) (250) (85,000) (250) Unused at balance date 10,000 92,000 10,000 92,000



23 BORROWINGS (continued)

(b) Fair value The carrying amounts and fair values of borrowings at reporting date are:

2012 2011

Carrying amount

$’000 Fair value

$’000

Carrying amount

$’000 Fair value

$’000

Consolidated

On-balance sheet Non-traded financial liabilities Unsecured bank loan 85,000 85,000 250 250 85,000 85,000 250 250

Other than those classes of borrowings denoted as ''traded'', none of the classes are readily traded on organised markets in standardised form.

(i) On-balance sheet The fair value of current borrowings equals their carrying amount, as the impact of discounting is not significant. The fair values of non-current borrowings are based on cash flows discounted using a borrowing rate of 5.4%, (2011: 6.4%).

24 PROVISIONS

Consolidated Parent

2012 $’000

2011 $’000

2012 $’000

2011 $’000

Current provisions expected to be settled within 12 months Employee benefits Annual leave 17,604 13,773 16,878 13,100 Long service leave 11,031 7,323 10,870 7,303 Contract severance 500 500 500 500 Short-term provisions Maternity leave 1,938 724 1,937 724 Redundancy 127 117 127 117 Pension entitlements 2,099 2,041 2,099 2,041

33,299 24,478 32,411 23,785 Current provisions expected to be settled after more than 12

months Employee benefits Annual leave 5,868 4,565 5,626 4,367 Long service leave 44,152 35,436 43,426 34,903 Contract severance 3,118 701 3,118 701

53,138 40,702 52,170 39,971

Total current provisions 86,437 65,180 84,581 63,756



24 PROVISIONS (continued)

Consolidated Parent

2012 $’000

2011 $’000

2012 $’000

2011 $’000

Non-current provisions Employee benefits Long service leave 10,983 9,880 10,437 9,189 Pension entitlements 32,227 28,772 32,227 28,772 Deferred government benefits for superannuation 311,509 285,534 311,509 285,534 Total non-current provisions 354,719 324,186 354,173 323,495

Provision for annual leave This provision is for outstanding annual leave liabilities that employees have not yet taken. It is assumed the majority of leave will be taken in the next twelve months. The measurement and recognition criteria relating to employee benefits has been included in note 1 to this report.

Provision for long service leave This provision is for outstanding long service leave liabilities that employees have not yet taken. The calculation of the present value of future cash flows in respect of long service leave being taken has been calculated by independent third parties based on historical data provided by the University.

Provision for contract severance This provision is for payouts of contracts expected to occur during the next twelve months. The measurement and recognition criteria relating to employee benefits has been included in note 1 to this report.

Provision for parental leave

A provision has been recognised for employee entitlements relating to parental leave. The measurement and recognition criteria relating to employee benefits has been included in note 1 to this report.

Provision for redundancy This provision is for costs relating to the redundancy of employees. The measurement and recognition criteria relating to employee benefits has been included in note 1 to this report.

Provision for pension entitlements A provision has been recognised for employee pension entitlements. Refer to note 36 for detail.

Provision for deferred government benefits for superannuation A provision has been recognised for employee entitlements relating to deferred government benefits for superannuation. Refer to note 36 for detail.

Movements in each class of provision during the year, are set out below:

Annual leave $’000

Long service leave $’000

Redund- ancy $’000

Pensions $’000

Other $’000

Total $’000

Consolidated Current

Opening balance at 1 January 2012 18,338 42,912 117 2,041 1,925 65,333 Additional provisions 25,321 18,662 126 2,099 6,426 52,634 Provisions used (20,187) (6,391) (116) (2,041) (2,795) (31,530)

Balance at 31 December 2012 23,472 55,183 127 2,099 5,556 86,437



24 PROVISIONS (continued)

Long service leave $’000

Pensions $’000

Deferred super-

annuation $’000

Total $’000

Consolidated Non-current Opening balance at 1 January 2012 9,718 28,772 285,533 324,023 Additional provisions 1,290 3,513 25,976 30,779 Provisions used (25) (58) - (83)

Balance at 31 December 2012 10,983 32,227 311,509 354,719

25 DERIVATIVE FINANCIAL INSTRUMENTS

Consolidated Parent

2012 $’000

2011 $’000

2012 $’000

2011 $’000

Non-current Interest rate swap - held for trading - 581 - 581 Interest rate swap - cash flow hedge 4,649 - 4,649 -

Total derivative financial instruments 4,649 581 4,649 581

(i) Interest rate swap contract – cash flow hedges During the year the University drew down on its variable rate bank loan. It is policy to protect the loan from exposure to increasing interest rates. Accordingly, the group has entered into an interest rate swap contract under which it is obliged to receive interest at the variable loan rate and to pay interest at a fixed rate. The swap contract has been nominated as a cash flow hedge.

The swap covers 100% of the variable loan principal outstanding and is timed to expire as the bank loan expires. The fixed interest rate is 5.42% and the variable rate is at the end of the reporting period was 4.11%.

The contracts require settlement of net interest receivable or payable quarterly. The settlement dates coincide with the dates on which interest is payable on the underlying debt. The contracts are settled on a net basis.

The gain or loss from remeasuring the hedging instrument at fair value is recognised in other comprehensive income and deferred in equity in the hedging reserve to the extent that the hedge is effective. There was no hedge ineffectiveness during the year.

(ii) Interest rate swap contract – held for trading During the year the University held an interest rate swap, which was an economic hedge but did not satisfy the requirements for hedge accounting. This contract was subject to the same risk management policies as all other derivative contracts (see note 35 for details), however, it was accounted for as held for trading. This swap contract was terminated and settled during the year.

26 OTHER LIABILITIES

Current Income received in advance 8,528 12,334 5,537 5,620 Total current other liabilities 8,528 12,334 5,537 5,620



27 RESERVES AND RETAINED SURPLUS

Consolidated Parent

2012 $’000

2011 $’000

2012 $’000

2011 $’000

(a) Reserves Property, plant and equipment revaluation 489,600 473,365 489,600 473,365 Foreign currency translation surplus (47) (176) - - Cash flow hedge (4,649) - (4,649) - Available-for-sale investments revaluation 11,225 1,254 11,120 1,148

Total reserves 496,129 474,443 496,071 474,513

(b) Movements in reserves Property, plant and equipment revaluation Balance as at 1 January 473,365 473,365 473,365 473,365 Revaluation increment (decrement) 16,235 - 16,235 -

489,600 473,365 489,600 473,365 Cash flow hedge Revaluation increment (decrement) (4,649) - (4,649) -

(4,649) - (4,649) - Available-for-sale investments revaluation Balance as at 1 January 1,254 9,549 1,148 9,445 Revaluation increment (decrement) 9,347 (8,295) 9,348 (8,297) Transfers to income statement 624 - 624 -

11,225 1,254 11,120 1,148 Foreign currency translation surplus Balance as at 1 January (176) (151) - - Currency translation differences arising during the year 129 (25) - -

(47) (176) - -

Total reserves 496,129 474,443 496,071 474,513

(c) Retained earnings Retained earnings at the beginning of the year 475,615 446,366 456,330 427,591 Operating result for the year 53,851 29,249 59,845 28,739

Retained earnings at end of the year 529,466 475,615 516,175 456,330

(c) Nature and purpose of reserves Property, plant and equipment revaluation - used to record increments and decrements on the revaluation of property, plant and equipment, as described in note 1. In the event of a sale of an asset, any balance in the reserve in relation to the asset is transferred to retained earnings.

Available-for-sale investment revaluation - changes in the fair value and exchange differences arising on translation of investments, such as equities, classified as available-for-sale financial assets, are recognised in other comprehensive income, as described in note 1 and accumulated in a separate reserve within equity. Amounts are reclassified to profit or loss when the associated assets are sold or impaired.

Cash flow hedge - the hedging reserve is used to record gains or losses on a hedging instrument in a cash flow hedge that are recognised in other comprehensive income, as described in note 1. Amounts are reclassified profit or loss when the associated hedged transaction affects profit or loss.

Foreign currency translation surplus - exchange differences arising on translation of the foreign controlled entity are recognised in other comprehensive income as described in note 1 and accumulated in a separate reserve within equity. The cumulative amount is reclassified to profit or loss when the net investment is disposed of.



28 KEY MANAGEMENT PERSONNEL DISCLOSURES

(a) Names of responsible persons and executive officers The following persons were members of the Council of The University of Newcastle during the financial year:

Official Members Conjoint Professor Trevor C Waring AM, Chancellor (ceased 30 April 2012)

Dr Ken Moss AM – Appointed, Chancellor (appointed 1 May 2012, deceased 13 October 2012)

The Hon John Charles Price AM, Acting Chancellor (appointed 14 October 2012)

Professor Caroline McMillen, Vice Chancellor and President

Professor Val J Robertson, President of the Academic Senate

Members appointed by the NSW Minister for Education and Training The Hon John Charles Price AM, Deputy Chancellor

Ms Sharryn Brownlee, Pro Chancellor (appointed 1 May 2012)

Conjoint Professor Geoff Lilliss

Dr Ken Moss AM (ceased 30 April 2012)

Senator Arthur Sinodinos AO (ceased 1 September 2012)

Ms Deborah Wright

Member appointed by Council

Mr Brian Kennaugh, Pro Chancellor (appointed 1 May 2012)

Elected Members Academic staff member elected by academic staff body Dr Tom Griffiths (ceased 31 August 2012, appointed 14 September 2012)

Professor John Rostas (ceased 31 August 2012, appointed 14 September 2012)

Non-academic staff member elected by non-academic staff body Ms Leanne Holt (ceased 31 August 2012, appointed 14 September 2012)

Undergraduate student elected by undergraduate student body Ms Heather Richards

Postgraduate student elected by postgraduate student body Ms Mpontseng Lydia Pama

External persons who are members of Convocation appointed by the Council Ms Dianne Allen, Acting Deputy Chancellor (appointed 7 December 2012), Pro Chancellor (ceased 6 December 2012)

Mr Peter Cockbain

Dr Geoff Leonard AM, Pro Chancellor (appointed 7 December 2012)

By virtue of their office all of the above persons were key management personnel during the year ended 31 December 2012.



28 KEY MANAGEMENT PERSONNEL DISCLOSURES (continued)

(b) Other key management personnel The following persons were members of the Executive Committee of The University of Newcastle and as such also had authority and responsibility for planning, directing and controlling the activities of The University of Newcastle during the financial year:

Professor Caroline McMillen, Vice Chancellor and President

Professor Michael Calford, Deputy Vice-Chancellor (Research)

Mr Trevor Gerdsen, Acting Deputy Vice-Chancellor (Services) (ceased 4 November 2012)

Mr Nat McGregor, Acting Deputy Vice-Chancellor (Services) (appointed 5 November 2012)

Dr Susan Gould, Deputy Vice-Chancellor (Services) (ceased employment 30 November 2012)

Professor Kevin McConkey, Deputy Vice-Chancellor (Academic and Global Relations) (ceased 29 October 2012)

Professor Andrew Parfitt, Deputy Vice-Chancellor (Academic) (appointed 15 December 2012)

Professor John Carter AM, Pro Vice-Chancellor (Engineering and Built Environment)

Professor Stephen Crump, Pro Vice-Chancellor (External Relations)

Professor Richard Dunford, Pro Vice-Chancellor (Business and Law) (appointed 16 July 2012)

Professor John Germov, Pro Vice-Chancellor (Education and Arts)

Professor Bill Hogarth, Pro Vice-Chancellor (Science and IT)

Professor Amir Mahmood, Acting Pro Vice-Chancellor (Business and Law) (appointed 1 January 2012, ceased 15 July 2012)

Professor Nicholas Talley, Pro Vice-Chancellor (Health)

Mr Craig Wallis, Chief Financial Officer

Dr Peter Waring, Acting Pro Vice-Chancellor (International) (appointed 1 November 2012)

Professor Val Robertson, President of Academic Senate

(c) Remuneration of key management personnel Consolidated Parent

2012

Number 2011

Number 2012

Number 2011

Number Council and Board Members $nil 16 16 - 1 $1 to $9,999 10 15 2 7 $10,000 to $19,999 8 9 7 8 $20,000 to $29,999 3 - 3 - $40,000 to $49,999 - 1 - 1 $100,000 to $109,999 - 1 - 1 $120,000 to $129,999 1 1 1 1 $130,000 to $139,999 - 1 - 1 $150,000 to $159,999 1 - 1 - $210,000 to $219,999 - 1 - 1 $220,000 to $229,999 1 1 1 1 $250,000 to $259,999 - 1 - - $300,000 to $309,999 1 - - - $800,000 to $809,999 - 1 - 1



28 KEY MANAGEMENT PERSONNEL DISCLOSURES (continued)

(c) Remuneration of key management personnel (continued) Consolidated Parent

2012

Number 2011

Number 2012

Number 2011

Number Other key management personnel $nil 1 - 1 - $50,000 to $59,999 1 - 1 - $100,000 to $109,999 1 - 1 - $160,000 to $169,999 1 - 1 - $220,000 to $229,999 - - 1 - $230,000 to $239,999 1 - - - $240,000 to $249,999 2 - - - $250,000 to $259,999 1 - 1 - $280,000 to $289,999 - 1 - 1 $300,000 to $309,999 - 2 - 2 $310,000 to $319,999 2 1 2 1 $320,000 to $329,999 1 - 1 - $340,000 to $349,999 1 - 1 - $350,000 to $359,999 - 1 - 1 $360,000 to $369,999 1 1 1 1 $390,000 to $399,999 - 1 - 1 $410,000 to $419,999 - 1 - 1 $420,000 to $429,999 1 - 1 - $430,000 to $439,999 2 2 2 2 $490,000 to $499,999 - 1 - 1 $510,000 to $519,999 - 1 - 1 $570,000 to $579,999 1 - 1 - $590,000 to $599,999 1 - 1 - $1,030,000 to $1,039,999 1 - 1 -

Remuneration bands for the Vice-Chancellor and the President of Academic Senate appear in both tables above as these positions are members of both Council and the Executive Committee.

(d) Key management personnel compensation Consolidated Parent

2012 $’000

2011 $’000

2012 $’000

2011 $’000

Short-term employee benefits 6,692 6,859 5,854 5,857 Termination benefits 798 538 799 538

Total key management personnel compensation 7,490 7,397 6,653 6,395



29 REMUNERATION OF AUDITORS

During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related practices and non-related audit firms.

Consolidated Parent

2012 $’000

2011 $’000

2012 $’000

2011 $’000

Audit services Audit and review of financial statements Audit Office of NSW 406 394 308 275 KPMG 23 14 - -

Total remuneration for audit services 429 408 308 275

30 CONTINGENCIES Contingent liabilities

The University has a $500,000 bank guarantee as security for a rental bond which expires on 31 November 2014.

The University currently has a number of legal matters outstanding, which, if they result in a financial settlement, are not expected to exceed $1 million. It is estimated that all of the matters will be resolved by the end of 2013.

Contingent assets The University has no contingent assets as at 31 December 2012.

31 COMMITMENTS

Consolidated Parent

2012 $’000

2011 $’000

2012 $’000

2011 $’000

(a) Capital commitments Capital expenditure contracted for at the reporting date but not recognised as liabilities are:

Property, plant and equipment Within one year 84,972 29,571 84,972 29,571 Later than one year 58,013 9,471 58,013 9,471

Total 142,985 39,042 142,985 39,042

(b) Lease commitments Operating leases Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows:

Within one year 3,410 3,328 3,155 3,175 Between one year and five years 2,814 2,445 2,736 2,400

Total future minimum lease payments 6,224 5,773 5,891 5,575 The weighted average interest rate implicit in the non-cancellable operating leases is nil% (2011:nil%):

(c) Other expenditure commitments (GST excl.)

Commitments in existence at the reporting date but not recognised as liabilities payable: Due within one year 61,072 51,433 61,072 51,433 Due after one year, but within five years 870 1,639 870 1,639

Net commitments 61,942 53,072 61,942 53,072



32 SUBSIDIARIES The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in note 1(b):

Equity interest

Name of entity Country of

incorporation Class of shares

2012 %

2011 %

Newcastle Innovation Ltd Australia Not applicable 100 100 GraduateSchool.com Pty Ltd Australia Ordinary 100 100 UoN Services Limited Australia Not applicable 100 100 UON Singapore Pte Ltd Singapore Ordinary 100 100

33 EVENTS OCCURRING AFTER REPORTING DATE No matters or circumstances have arisen since the end of the financial year which significantly affected or could significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial years.

34 RECONCILIATION OF OPERATING RESULT AFTER INCOME TAX TO NET CASH FLOWS FROM OPERATING ACTIVITIES

Consolidated Parent

2012 $’000

2011 $’000

2012 $’000

2011 $’000

Operating result for the year 53,851 29,249 59,845 28,739 Add non-cash items: Depreciation and amortisation 38,312 42,109 37,527 41,485 Impairment of available-for-sale financial assets 624 (4) 624 - Net (gain) loss on sale of property, plant and equipment 44 158 35 387 Net (gain) loss on disposal of financial assets (382) (97) (610) (97) Fair value losses (gains) on other financial assets at fair value

through the income statement - 367 - 349 Fair value of assets donated to the Group - (478) - - Net exchange differences 45 (22) - - Net amortisation of bond premiums (discounts) (72) - (72) - Changes in operating assets and liabilities: (Increase) decrease in trade debtors 3,939 (10,946) 3,476 (10,997) (Increase) decrease in other receivables (35,562) (91,556) (28,348) (97,405) (Increase) decrease in related party receivables - - 979 5,926 (Increase) decrease in inventories 355 (50) - - (Increase) decrease in other financial assets (688) (4,870) (757) (4,816) Increase (decrease) in other operating assets 6,347 (3,548) 11 9 Increase (decrease) in trade creditors 2,240 8,388 (13) 3,525 Increase (decrease) in related party payables - - (10,019) 4,076 Increase (decrease) in other operating liabilities (2,558) (808) 673 (381) Increase (decrease) in provision for income taxes payable (1,897) 2,585 - - Increase (decrease) in other provisions 51,838 99,753 51,502 99,489

Net cash provided by operating activities 116,436 70,230 114,853 70,289



35 FINANCIAL RISK MANAGEMENT The Group's activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk. The Group's overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. The Group uses derivative financial instruments such as foreign exchange contracts and interest rate swaps to hedge certain risk exposures. The Group uses different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate, foreign exchange and other price risks, ageing analysis for credit risk and beta analysis in respect of investment portfolios to determine market risk.

Risk management is carried out by a central treasury department (Group Treasury) under policies approved by the University Council. Group Treasury identifies, evaluates and hedges financial risks in close co-operation with the Group’s operating units. The University Council provides written principles for overall risk management, as well as policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity.

(a) Market risk

(i) Foreign exchange risk The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the Singapore and US dollars.

Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities that are denominated in a currency that is not the entity’s functional currency. The risk is measured using sensitivity analysis and cash flow forecasting.

Management has set up a policy requiring group companies to manage their foreign exchange risk against their functional currency.

The Group Treasury’s risk management position is not to hedge the cash flows at present, because the amount of exposure has been determined to be immaterial in terms of the possible impact on the income statement or total equity. It has therefore not been included in the sensitivity analysis.

(ii) Price risk The Group and the parent entity are exposed to equity securities price risk. This arises from investments held by the Group and classified on the statement of financial position either as available-for-sale or at fair value through the income statement. Neither the Group nor the parent entity is exposed to commodity price risk.

To manage its price risk arising from investments in equity securities, the Group diversifies its portfolio. Diversification of the portfolio is done in accordance with the limits set by the Group.

The majority of the Group’s and the parent entity’s equity investments are publicly traded and are included either in the ASX200 Index or NYSE International 100 index.

The price risk for unlisted securities is immaterial in terms of the possible impact on the income statement or total equity. It has therefore not been included in the sensitivity analysis.

(iii) Cash flow and fair value interest rate risk The Group's main interest rate risk arises from long-term borrowings. Borrowings issued at variable rates expose the Group to cash flow interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk. Group policy is to maintain approximately 100% of its borrowings at fixed rates using interest rate swaps to achieve this when necessary. During 2012 and 2011, the Group's borrowings at variable rate were denominated in Australian Dollars.

The Group analyses its interest rate exposure on a dynamic basis. Various scenarios are simulated taking into consideration refinancing, renewal of existing positions, alternative financing and hedging. Based on these scenarios, the Group calculates the impact on the income statement of a defined interest rate shift. The scenarios are run only for liabilities that represent the major interest-bearing positions.

Based on the various scenarios, the Group manages its cash flow interest rate risk by using floating-to-fixed interest rate swaps. Such interest rate swaps have the economic effect of converting borrowings from floating rates to fixed rates. The Group has raised long-term borrowings at floating rates and swapped them into fixed rates that are lower than those that were available if the Group borrowed at fixed rates directly. Under the interest rate swaps, the Group agrees with other parties to exchange, at monthly intervals, the difference between fixed contract rates and floating-rate interest amounts calculated by reference to the agreed notional principal amounts.

At 31 December 2012, if interest rates had changed by ± 1% from the year end rates with all other variables held constant, the result for the year would have changed by ± $3.618 million (2011: ± $156,540), mainly as a result of the impact on interest income from cash and cash equivalents.



35 FINANCIAL RISK MANAGEMENT (continued)

(a) Market risk (continued)

(iv) Summarised sensitivity analysis The following table summarises the sensitivity of the Group's financial assets and financial liabilities to interest rate risk, foreign exchange risk and other price risk.

Interest rate risk Foreign exchange risk Other prince risk Carrying

amount $’000

-1% +1% -1% +1% -1% +1%

31 December 2012 Result $’000

Equity $’000

Result $’000

Equity $’000

Result $’000

Equity $’000

Result $’000

Equity $’000

Result $’000

Equity $’000

Result $’000

Equity $’000

Financial assets Cash and cash

equivalents 22,122 (221) (221) 221 221 (33) (33) 32 32 - - - - Trade and other

receivables 344,656 - - - - (1) (1) 2 2 - - - - Financial assets -

Available-for-sale 147,932 - - - - - - - - - (1,507) - 1,507 Financial assets - Held

to maturity 254,687 (2,547) (2,547) 2,547 2,547 - - - - - - - -

Financial liabilities Trade and other

payables 40,423 - - - - (1) (1) 1 1 - - - - Bank loans 85,000 850 850 (850) (850) - - - - - - - - Derivative financial

instruments 4,649 (850) (850) 850 850 - - - - - - - -

Total increase (decrease) (2,768) (2,768) 2,768 2,768 (35) (35) 35 35 - (1,507) - 1,507

31 December 2011

Financial assets Cash and cash

equivalents - at bank 16,486 (165) (165) 165 165 (27) (27) 27 27 - - - - Trade and other

receivables 321,674 - - - - (2) (2) 2 2 - - - - Financial assets -

Available-for-sale 82,465 - - - - - - - - - (825) - 825 Financial assets - Held

to maturity 148,424 - - - - - - - - - - - -

Financial liabilities Trade and other

payables 34,259 - - - - 12 12 (12) (12) - - - - Bank loans 250 3 3 (3) (3) - - - - - - - - Derivative financial

instruments 581 (6) (6) 6 6 - - - - - - - -

Total increase (decrease) (168) (168) 168 168 (17) (17) 17 17 - (825) - 825

(b) Credit risk Credit risk is managed on a group basis. Credit risk arises from cash and cash equivalents, and deposits with banks and financial institutions, as well as credit exposures to wholesale and retail customers, including outstanding receivables and committed transactions. For banks and financial institutions, only independently rated parties with a minimum rating of ‘BBB+’ are accepted. If wholesale customers are independently rated, these ratings are used. Otherwise, if there is no independent rating, risk control assesses the credit quality of the customer, taking into account its financial position, past experience and other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set by the Council. Fees from students are settled in cash or using major credit cards, mitigating credit risk.

The carrying amount of financial assets (as contained in the table in subnote (d) below) represents the groups maximum exposure to credit risk.




(c) Liquidity risk Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. Due to the dynamic nature of the underlying businesses, Group Treasury aims at maintaining flexibility in funding by keeping committed credit lines available.

The following tables summarise the maturity of the Group’s financial assets and financial liabilities:

Average interest

rate %

Variable interest

rate $’000

Within 1 year $’000

1 – 5 years $’000

Greater than 5 years $’000

Non- interest

$’000 Total $’000

31 December 2012 Financial assets Cash and cash equivalents 4.2 22,122 - - - - 22,122 Trade and other receivables - - - - - 344,656 344,656 Other financial assets - - 183,800 70,887 - 147,932 402,619

Total financial assets 22,122 183,800 70,887 - 492,588 769,397 Financial liabilities Trade and other payables - - - - - 40,423 40,423 Borrowings 5.4 85,000 - - - - 85,000 Derivative financial instruments - - - 4,649 - - 4,649

Total financial liabilities 85,000 - 4,649 - 40,423 130,072

31 December 2011 Financial assets Cash and cash equivalents 6.4 16,485 - - - - 16,485 Trade and other receivables - - - - - 311,791 311,791 Other financial assets 6.4 148,424 - - - 82,464 230,888

Total financial assets 164,909 - - - 394,255 559,164 Financial liabilities Trade and other payables - - - 594 - 33,665 34,259 Borrowings 6.4 - 250 - - - 250 Derivative financial instruments - 581 - - - - 581

Total financial liabilities 581 250 594 - 33,665 35,090

(d) Fair value estimation The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes.

The fair value of financial instruments traded in active markets (such as publicly traded derivatives) is based on quoted market prices at the balance sheet date. The quoted market price used for financial assets held by the Group is the current bid price.

The fair values of unlisted shares are based on cash flows discounted using a rate based on the market interest rate and the risk premium specific to the unlisted securities (2012: nil%; 2011: nil%).

Derivative contracts classified as held for trading are fair valued by comparing the contracted rate to the current market rate for a contract with the same remaining period to maturity.




(d) Fair value estimation (continued) The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined using valuation techniques. The Group uses a variety of methods and makes assumptions that are based on market conditions existing at each balance date. Quoted market prices or dealer quotes for similar instruments are used for long-term debt instruments held. Other techniques, such as estimated discounted cash flows, are used to determine fair value for the remaining financial instruments. The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows. The fair value of forward exchange contracts is determined using forward exchange market rates at the balance sheet date.

The carrying value less impairment provision of trade receivables and payables is a reasonable approximation of their fair values due to the short-term nature of trade receivables. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments.

Due to the short-term nature of the current receivables, their carrying value is assumed to approximate their fair value and based on credit history it is expected that the receivables that are neither past due nor impaired will be received when due.

The carrying amounts and aggregate net fair values of financial assets and liabilities at balance date are:

Carrying amount Fair value

2012 $’000

2011 $’000

2012 $’000

2011 $’000

Financial assets Cash and cash equivalents 22,122 16,486 22,122 16,486 Trade and other receivables 344,656 321,674 344,656 321,674 Financial assets - Available-for-sale 147,932 82,465 147,932 82,465 Financial assets - Held-to-maturity 254,687 148,424 254,687 148,424

Total financial assets 769,397 569,049 769,397 569,049 Financial liabilities Trade and other payables 40,423 33,294 40,423 33,294 Bank loan 85,000 250 85,000 250 Derivative financial instruments 4,649 581 4,649 581

Total financial liabilities 130,072 34,125 130,072 34,125

Fair value measurements recognised in the statement of financial position are categorised into the following levels:

Total $’000

Level 1 $’000

Level 2 $’000

Level 3 $’000

31 December 2012 Financial assets Financial assets – available-for-sale 147,932 147,295 637 -

Total 147,932 147,295 637 - Financial liabilities Derivative financial instruments 4,649 4,649 - -

Total 4,649 4,649 - -




(d) Fair value estimation (continued)

Total $’000

Level 1 $’000

Level 2 $’000

Level 3 $’000

31 December 2011 Financial assets Financial assets – available-for-sale 82,464 70,826 11,638 -

Total 82,464 70,826 11,638 - Financial liabilities Derivative financial instruments 581 581 - -

Total 581 581 - -

36 DEFINED BENEFITS PLANS

(a) Fund specific disclosures The University of Newcastle incurs an obligation for deferred contributions which become payable on and after retirement of staff in respect of the following defined benefit schemes:

State Superannuation Scheme (SSS)

State Authorities Superannuation Scheme (SASS)

State Authorities Non-Contributory Superannuation Scheme (SANCS)

Pension entitlements arising from the former University of Newcastle Staff Superannuation Scheme (Pension)

The University expects to make a contribution of $nil (2011: $nil) to the defined benefit plan during the next financial year.

As an unfunded, non-contributory entitlement, the University will not make a contribution to the pension entitlement during the next financial year.

(b) Present value obligations

SASS $’000

SANCS $’000

SSS $’000

Pension $’000

Total $’000

2012 Present value of defined benefit obligations Opening present value of defined benefit obligations 53,099 9,439 356,214 30,813 449,565 Current service cost 1,795 386 346 - 2,527 Interest cost 1,865 323 12,829 1,102 16,119 Contributions from plan participants 833 - 706 - 1,539 Actuarial losses (gains) 4,320 451 23,771 1,206 29,748 Benefits paid (5,039) (1,190) (17,773) (2,099) (26,101)

Closing present value of defined benefit obligations 56,873 9,409 376,093 31,022 473,397

Fair value of plan assets Opening fair value of plan assets 45,478 5,934 81,806 - 133,218 Expected return on plan assets 3,679 568 6,220 - 10,467 Actuarial gains (losses) 2,735 126 3,976 - 6,837 Contributions from the employer 1,913 289 606 - 2,808 Contributions from plan participants 833 - 706 - 1,539 Benefits paid (5,039) (1,191) (17,773) - (24,003)

Closing fair value of plans assets 49,599 5,726 75,541 - 130,866



36 DEFINED BENEFITS PLANS (continued)

(b) Present value obligations (continued)

SASS $’000

SANCS $’000

SSS $’000

Pension $’000

Total $’000

2012

Net liability Present value of defined benefit obligations 56,873 9,409 376,093 31,022 473,397 Fair value of plan assets (49,599) (5,726) (75,541) - (130,866)

Total net liability (asset) in the statement of financial position 7,274 3,683 300,552 31,022 342,531

Expense recognised Current service cost 1,795 386 346 - 2,527 Interest on obligation 1,865 323 12,829 1,102 16,119 Actuarial losses (gains) - - - 1,206 1,206 Expected return on plan assets (3,679) (567) (6,219) - (10,465)

Expense (income) (19) 142 6,956 2,308 9,387

Actual returns

Actual return on plan assets 5,360 695 9,196 - 15,251 2011

Present value of defined benefit obligations Opening present value of defined benefit obligations 49,697 9,247 287,052 28,567 374,563 Current service cost 1,700 405 241 - 2,346 Interest cost 2,656 482 15,548 1,540 20,226 Contributions from plan participants 780 - 862 - 1,642 Actuarial losses (gains) 2,215 287 69,214 2,747 74,463 Benefits paid (3,949) (982) (16,703) (2,041) (23,675)

Closing present value of defined benefit obligations 53,099 9,439 356,214 30,813 449,565

Fair value of plan assets Opening fair value of plan assets 46,902 6,302 98,490 - 151,694 Expected return on plan assets 3,846 618 7,704 - 12,168 Actuarial gains (losses) (3,727) (728) (9,130) - (13,585) Contributions from the employer 1,626 725 582 - 2,933 Contributions from plan participants 780 - 862 - 1,642 Benefits paid (3,949) (983) (16,702) - (21,634)

Closing fair value of plans assets 45,478 5,934 81,806 - 133,218

Net liability Present value of defined benefit obligations 53,099 9,439 356,214 30,813 449,565 Fair value of plan assets (45,478) (5,934) (81,806) - (133,218)

Total net liability (asset) in balance sheet 7,621 3,505 274,408 30,813 316,347




(b) Present value obligations (continued)

SASS $’000

SANCS $’000

SSS $’000

Pension $’000

Total $’000

2011

Expense recognised Current service cost 1,700 405 241 - 2,346 Interest on obligation 2,656 482 15,548 1,540 20,226 Actuarial losses (gains) - - - 2,748 2,748 Expected return on plan assets (3,845) (617) (7,706) - (12,168)

Expense (income) 511 270 8,083 4,288 13,152

Actual returns

Actual return on plan assets (913) (110) (1,900) - (2,923)

(c) Principal assumptions The principal assumptions used for the purposes of the actuarial valuations were as follows (expressed as weighted averages):

2012

% 2011

% Discount rate(s) 3.30 3.70 Expected return on plan assets (not applicable to Pension) 8.60 8.60 Expected rate(s) of salary increase 3.00 2.50

(d) Analysis of plan assets

The analysis of the plan assets for the State Schemes (SASS, SANCS, SSS) and the expected rate of return at the reporting date is as follows:

2012

% 2011

% Australian equities 31.00 32.10 Overseas equities 24.30 29.00 Australian fixed interest securities 6.20 5.60 Overseas fixed securities 2.40 2.60 Property 8.70 9.50 Cash 13.40 6.60 Other 14.00 14.60 100.00 100.00

The overall expected rate of return is a weighted average of the expected returns of the various categories of plan assets held. The University's assessment of the expected returns is based on historical return trends and actuarial predictions of the market for the asset in the next twelve months.




(e) History of experience adjustments The history of experience adjustments for State Schemes (SASS, SANCS, SSS) is as follows:

SASS, SANCS, SSS 2012 2011 2010 2009

Present value of defined benefit obligation 442,375 418,752 345,996 332,033 Fair value of plan assets (130,866) (133,218) (151,694) (159,917)

Surplus (deficit) 311,509 285,534 194,302 172,116

Experience adjustments on plan liabilities 28,542 71,715 12,994 (31,774)

Experience adjustments on plan assets (6,837) 13,585 3,891 (5,119)

The history of experience adjustments for the Pension is as follows:

Pension 2012 2011 2010 2009

Present value of defined benefit obligation 31,022 30,813 28,567 27,095 Fair value of plan assets - - - -

Surplus (deficit) 31,022 30,813 28,567 27,095



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37 ACQUITTAL OF AUSTRALIAN GOVERNMENT FINANCIAL ASSISTANCE

(g) OS-HELP Note Parent

2012 $’000

2011 $’000

Cash received during the reporting period 1,123 1,464 Cash spent during the reporting period (797) (1,350) Net cash received 326 114 Cash surplus (deficit) from the previous period 371 257 Cash surplus (deficit) for the reporting period 22 697 371

(h) Student Services and Amenities Fee (SSAF) Note Parent

2012 $’000

2011 $’000

Unspent (overspent) revenue from previous period - - SSAF-HELP 3(b) 970 - Student Services Fee 5 1,314 - Total amounts available to be expended 2,284 - Student services expenses during the period (2,284) - Unspent (overspent) Student Services and Amenities Fee -

END OF AUDITED FINANCIAL STATEMENTS


In accordance with a resolution of the members of Council under s.16 of the University of Newcastle Act, 1989 and pursuant to Section 41C of the Public Finance & Audit Act 1983, we state that to the best of our knowledge and belief:

1. The attached general purpose financial reports present a true and fair view of the financial position of the University at 31 December 2012 and its financial performance for the year then ended

2. The financial reports have been prepared in accordance with the provisions of the New South Wales Public Finance & Audit Act 1983, the Public Finance & Audit Regulations 2010 and the Financial Statement Guidelines for Australian Higher Education Providers for the 2012 Reporting Period issued by the Australian Government Department of Industry, Innovation, Science, Research and Tertiary Education

3. The financial reports has been prepared in accordance with Australian Accounting Standards (AASB), AASB Interpretations and other mandatory professional reporting requirements

4. We are not aware of any circumstances which would render any particulars included in the financial reports to be misleading or inaccurate

5. There are reasonable grounds to believe that the University will be able to pay its debts as and when they fall due

6. The amount of Australian Government financial assistance expended during the reporting period was for the purpose for which it was intended and the University has complied with applicable legislation, contracts, agreements and programme guidelines in making expenditure

7. The University of Newcastle charged Student Services and Amenities Fees strictly in accordance with the Higher Education Support Act 2003 and the Administration Guidelines made under the Act. Revenue from the fee was spent strictly in accordance with the Act and only on services and amenities specified in subsection 19-38(4) of the Act.

On Behalf of the Council of the University of Newcastle. The Hon John Price AM Professor Caroline McMillen Chancellor Vice-Chancellor and President Dated 26 March 2013

THE UNIVERSITY OF NEWCASTLE Statement by Members of Council For the year ended 31 December 2012

GraduateSchool.com Pty LtdABN 72 092 374 546



GRADUATESCHOOL.COM PTY LTD Contents For the year ended 31 December 2012

Financial Statements Directors' Report Income Statement Statement of Comprehensive Income Statement of Financial Position Statement of Changes in Equity Statement of Cash Flows Notes to the Financial Statements Directors' Declaration Independent Audit Report


GRADUATESCHOOL.COM PTY LTD Directors’ Report For the year ended 31 December 2012

Directors

The names of the directors in office at any time during, or since the end of, the year are: Names Position Term Susan Mary Gould Chairperson Resigned 30/11/2012 Bradley Wilson Director (Chairperson from 30/11/2012) Full year Clinton Marquet Director Full year Val Robertson Director Full year

Directors have been in office since the start of the financial year to the date of this report unless otherwise stated.

Meetings of directors

During the financial year, 2 meetings of directors were held. Attendances by each director during the year were as follows:

Directors' Meetings

Number eligible to

attend Number attended Susan Mary Gould 2 - Bradley Wilson 2 2 Clinton Marquet 2 1 Val Robertson 2 2

Principal Activities

The principal activities of the company during the financial year were the development, promotion and administration of the University of Newcastle's online postgraduate coursework programs. The company ceased operating on 11 September 2012. An application was made to the Australia Securities and Investments Commission in February 2013 to deregister the company.

Review of operations

During the year the company's parent, The University of Newcastle, resolved to transfer the company's activities to the University and commence the deregistration of GraduateSchool.com Pty Ltd.

Significant changes in state of affairs

The company ceased trading on 11 September 2012 and all activities were transferred to the University of Newcastle. There was no gain or loss to the Company on this transfer.

Matters subsequent to the end of the financial year

There has not been any matter or circumstance, other than referred to in the financial statements and notes following, that has arisen, significantly affected, or may significantly affect, the operations of the company, the results of those operations, or the state of affairs in future financial years.


GRADUATESCHOOL.COM PTY LTD Directors’ Report For the year ended 31 December 2012

Likely development and expected results of operations

It is expected that the company's deregistration will be finalised by mid 2013.

Environmental regulation

During the year there were no significant environmental regulations of GraduateSchool.com Pty Ltd other than that referred to in the financial statements and notes following.

Insurance of officers

University of Newcastle maintains comprehensive insurance policies in relation to Directors and Officers, Industrial Special Risk, Professional Indemnity, Motor Vehicle and Personal Accident (including travel). All of these policies include GraduateSchool.com Pty Ltd as an insured party and are current.

Directors’ and Officers’ Liability insurance covers damages (not fines and penalties) and legal expenses incurred due to a breach or alleged breach of duty, misleading statement or wrongful act by a director or officer acting in that capacity.

Directors’ and Officers’ Supplementary Legal Expenses covers legal expenses on behalf of directors, employees and organisations defending against actions which are not covered in the standard Directors’ and Officers’ Liability Policy.

Proceedings on behalf of GraduateSchool.com Pty Ltd

Nil.

Declaration of Audit Independence

A copy of the Auditor's Independence Declaration as required under section 307C of the Corporations Act 2001 is attached to this report.

This report is made in accordance with a resolution of the Board of Directors of GraduateSchool.com Pty Ltd.

Bradley Wilson Director

26 March 2013 Newcastle


GRADUATESCHOOL.COM PTY LTD Income Statement For the year ended 31 December 2012


2012 $

2011 $

Revenue Fees and charges 2 8,103,294 6,879,719 Investment revenue 3 272,464 592,021 Other revenue 4 70,465 105,312

Total revenue 8,446,223 7,577,052

Gains on disposal of assets - 11,109

Total revenue and income 8,446,223 7,588,161

Employee benefits expenses 5 734,450 615,748 Depreciation and amortisation 6 27,572 74,249 Repairs and maintenance 7 2,268 222 Impairment of intangible assets 2,003 - Loss on disposal of assets 234 8,550 Other expenses 8 2,277,636 3,319,796

Total expenses 3,093,198 4,018,565

Operating result before income tax 5,402,060 3,569,596 Income tax expense 9 (1,592,313) (1,105,607)

Operating result after income tax for the year 3,809,747 2,463,989

Operating result attributable to members of GraduateSchool.com Pty Ltd 3,809,747 2,463,989


GRADUATESCHOOL.COM PTY LTD Statement of Comprehensive Income For the year ended 31 December 2012


2012

$ 2011

$

Operating result after income tax for the year 3,809,747 2,646,989

Total comprehensive income for the year attributable to members 3,809,747 2,646,989


GRADUATESCHOOL.COM PTY LTD Statement of Financial Position For the year ended 31 December 2012


Note 2012

$ 2011

$

ASSETS

Current assets Cash and cash equivalents 10 - 94,722 Receivables 11 3 10,037,011 Inventories 12 - 408,783

Total current assets 3 10,540,516

Non-current assets Property, plant and equipment 13 - 44,477 Intangible assets 14 - 22,559

Total non-current assets - 67,036

Total assets 3 10,607,552

LIABILITIES

Current liabilities Trade and other payables 15 - 188,730 Current tax liabilities 16 - 2,684,270 Provisions 17 - 29,161

Total current liabilities - 2,902,161

Non-current liabilities Provisions 17 - 24,897

Total non-current liabilities - 24,897

Total liabilities - 2,927,058

Net assets 3 7,680,494

EQUITY Issued capital 18 3 3 Retained Earnings 19 - 7,680,491

Total equity 3 7,680,494


GRADUATESCHOOL.COM PTY LTD Statement of Changes in Equity For the year ended 31 December 2012


Issued Capital

$

Retained Earnings

$ Total

$ Balance at 1 January 2011 3 5,216,501 5,216,504 Total comprehensive income - 2,463,990 2,463,990

Sub-total 3 7,680,491 7,680,494

Balance at 31 December 2011 3 7,680,491 7,680,494

Issued Capital

$

Retained Earnings

$ Total

$ Balance at 1 January 2012 3 7,680,491 7,680,494 Total comprehensive income - 3,809,747 3,809,747

Sub-total 3 11,490,238 11,490,241 Dividends paid or provided for - (11,490,238) (11,490,238)

Balance at 31 December 2012 3 - 3


GRADUATESCHOOL.COM PTY LTD Statement of Cash Flows For the year ended 31 December 2012


Note 2012

$ 2011

$

Cash flows from operating activities Receipts from customers 14,742,632 3,288,468 Investment income 28 58 Payments to suppliers and employees (incl. of GST) (2,890,675) (3,263,836) Income taxes paid (3,478,898) (7,232) Net cash provided by operating activities 24 8,373,087 17,458

Cash flows from investing activities Proceeds from sale of property, plant and equipment - 11,109 Payments for purchase of property, plant and equipment (11,809) (40,928) Net cash used by investing activities (11,809) (29,819)

Cash flows from financing activities Payment of dividends (8,456,000) - Net cash used by financing activities (8,456,000) - Net increase (decrease) in cash and cash equivalents held (94,722) (12,361) Cash and cash equivalents at beginning of year 94,722 107,083 Cash and cash equivalents at end of financial year 10 - 94,722


GRADUATESCHOOL.COM PTY LTD Notes to the Financial Statements For the year ended 31 December 2012

1 Summary of significant accounting policies

GraduateSchool.com Pty Ltd (the Company) is a registered company limited by shares, and is a controlled entity of the University of Newcastle. GraduateSchool.com Pty Ltd is a not for profit entity. The principal place of business is:

GraduateSchool.com Pty Ltd University Drive Callaghan NSW 2308 Australia

The principal activities of the Company were to administer the delivery, promotion and development of online post graduate coursework on behalf of the University of Newcastle. On 11 September 2012, the Company ceased trading and transferred all assets and liabilities to the parent entity, The University of Newcastle. Subsequent to year end an application has been made to deregister the Company (refer to note 23).

The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

(a) Basis of preparation

The annual financial statements represent the audited general purpose financial statements of GraduateSchool.com Pty Ltd. They have been prepared on an accrual basis in accordance with Australian Accounting Standards.

Additionally the statements have been prepared in accordance with following statutory requirements: Higher Education Support Act 2003 (Financial Statement Guidelines) Public Finance and Audit Act 1983, the requirements of the Department of Industry, Innovation, Science,

Research and Tertiary Education (DIISRTE) and other State/Australian Government legislative requirements.

The Company is a not-for-profit entity and these statements have been prepared on that basis. Some of the requirements for not-for-profit entities are inconsistent with the IFRS requirements.

Date of authorisation for issue

The financial statements were authorised for issue on 26 March 2013.

Historical cost convention

These financial statements have been prepared under the historical cost convention.

Critical accounting estimates

The preparation of financial statements in conformity with Australian Accounting Standards requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Company’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in the relevant notes to the financial statements.



1 Summary of significant accounting policies (continued)

(b) Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, trade allowances rebates and amounts collected on behalf of third parties.

The Company recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the Company and specific criteria have been met for each of the Company’s activities as described below. The amount of revenue is not considered to be reliably measurable until all contingencies relating to the sale have been resolved. The Company bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.

Revenue is recognised for the major business activities as follows

(i) Service fees

Service fees are recognised as income in the year of receipt, except to the extent that fees and charges relate to courses to be held in future periods. Such income is treated as income in advance.

(c) Income tax

The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the national income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses.

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the reporting date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred tax assets are recognised for deductible temporary differences and unused tax losses, only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity.

(d) Impairment of assets

Assets that are subject to amortisation are reviewed annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are reviewed annually for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows which are largely independent of the cash inflows from other assets or groups of assets (cash generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.




(e) Cash and cash equivalents

For statement of cash flows presentation purposes, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the statement of financial position.

(f) Trade receivables


Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. A provision for impairment of receivables is established when there is objective evidence that the Company will not be able to collect all amounts due according to the original terms of receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 30 days overdue) are considered indicators that the trade receivable is impaired. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows.

Cash flows relating to short-term receivable are not discounted if the effect of discounting is immaterial. The amount of the impairment loss is recognised in the income statement in impairment of assets. When a trade receivable for which an impairment had been recognised becomes uncollectible in a subsequent period, it is written off. Subsequent recoveries of amounts previously written off are credited against impairment of assets.

(g) Inventories

Inventories are stated at the lower of cost and net realisable value. Costs are assigned to individual items of inventory on a first-in-first-out basis. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

(h) Property, plant and equipment

All items of plant and equipment are carried at cost less any accumulated depreciation and any accumulated impairment losses.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.

Depreciation is calculated using the straight line method to allocate the cost, net of any residual values, over their estimated useful life of the asset.

The estimated useful life of each asset class are as follows: Plant and equipment 5 years Motor vehicle 8 years





(h) Property, plant and equipment (continued)


Gains and losses on disposal are determined by comparing proceeds with carrying amount. These are included in the income statement.

(i) Intangible Assets

(i) Website redevelopment

Expenditure on website redevelopment has been capitalised as it is expected to return future economic benefits to the Company. The expenditure capitalised comprises all directly attributable costs, including costs of materials, services and direct labour. Capitalised expenditure is stated at cost. Amortisation has been calculated from the date of commission, using the straight-line method to allocate the cost over the period of the expected benefit, being 3 years.

(j) Trade and other payables

These amounts represent liabilities for goods and services provided to the Company prior to the end of the financial year, which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition.

(k) Employee benefits

(i) Wages and salaries

Liabilities for short-term employee benefits including wages and salaries and non-monetary benefits due to be settled within 12 months after the end of the year are measured at the amount expected to be paid when the liability is settled and recognised in other payables. Liabilities for non-accumulating sick leave are recognised when the leave is taken and measured at the rates paid or payable.

(ii) Annual leave and sick leave

The liability for long-term employee benefits such as annual leave are recognised in current provisions for employee benefits as they are expected to be settled within 12 months after the end of the reporting period. It is measured at the amount expected to be paid when the liability is settled. Regardless of the expected timing of settlements, provisions made in respect of employee benefits are classified as a current liability, unless there is an unconditional right to defer the settlement of the liability for at least 12 months after the reporting date, in which case it would be classified as a non-current liability.

(iii) Long service leave

The liability for long service leave is recognised in the provision for employee benefits and measured as the outstanding long service leave liabilities that employees have not yet taken and are measured at the amounts payable in respect of services provided by employees at the reporting date. The measurement of long service leave employee benefits has not been calculated using the present value of expected future payments to be made in respect of services provided by employees as the financial impact of doing so has been determined to be immaterial.

(l) Rounding of amounts

All amounts rounded in the financial report have been rounded to the nearest dollar.



1 Summary of significant accounting policies continued

(m) Goods and services tax (GST)

Revenues, expenses, assets and certain liabilities are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Taxation Office. In these circumstances, the GST is recognised as part of the cost acquisition of the asset or as part of the expense.

Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the Australian Taxation Office is included with other receivables or payables in the statement of financial position.

Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the Australian Taxation Office, are presented as operating cash flows.

(n) New accounting standards and interpretations

Certain new Accounting Standards and Interpretations have been published that are not mandatory for 31 December 2012 reporting periods. GraduateSchool.com Pty Ltd's assessment of the impact of these new Standards and Interpretations is set out below: AASB 9 Financial Instruments, AASB 2009-11 Amendments to Australian Accounting Standards arising from

AASB 9 and AASB 2010-7 Amendments to Australian Accounting Standards arising from AASB 9 (December 2010) (effective from 1 January 2013)

AASB 10 Consolidated Financial Statements, AASB 11 Joint Arrangements, AASB 12 Disclosure of Interests in

Other Entities, revised AASB 127 Separate Financial Statements, AASB 128 Investments in Associates and Joint Ventures, AASB 2011-7 Amendments to Australian Accounting Standards arising from the Consolidation and Joint Arrangements Standards(effective 1 January 2013)

AASB 13 Fair Value Measurement and AASB 2011-8 Amendments to Australian Accounting Standards arising

from AASB 13 (effective 1 January 2013) Revised AASB 119 Employee Benefits, AASB 2011-10 Amendments to Australian Accounting Standards arising

from AASB 119 (September 2011) and AASB 2011-11 Amendments to AASB 119 (September 2011) arising from Reduced Disclosure Requirements (effective 1 January 2013)

2 Fees and charges

2012

$ 2011

$ Service fees 8,103,294 6,879,719

Total fees and charges 8,103,294 6,879,719

3 Investment revenue

Interest 272,464 592,021

Total investment revenue 272,464 592,021

1 Summary of significant accounting policies continued

(m) Goods and services tax (GST)

Revenues, expenses, assets and certain liabilities are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Taxation Office. In these circumstances, the GST is recognised as part of the cost acquisition of the asset or as part of the expense.

Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the Australian Taxation Office is included with other receivables or payables in the statement of financial position.

Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the Australian Taxation Office, are presented as operating cash flows.

(n) New accounting standards and interpretations

Certain new Accounting Standards and Interpretations have been published that are not mandatory for 31 December 2012 reporting periods. GraduateSchool.com Pty Ltd's assessment of the impact of these new Standards and Interpretations is set out below: AASB 9 Financial Instruments, AASB 2009-11 Amendments to Australian Accounting Standards arising from

AASB 9 and AASB 2010-7 Amendments to Australian Accounting Standards arising from AASB 9 (December 2010) (effective from 1 January 2013)

AASB 10 Consolidated Financial Statements, AASB 11 Joint Arrangements, AASB 12 Disclosure of Interests in

Other Entities, revised AASB 127 Separate Financial Statements, AASB 128 Investments in Associates and Joint Ventures, AASB 2011-7 Amendments to Australian Accounting Standards arising from the Consolidation and Joint Arrangements Standards(effective 1 January 2013)

AASB 13 Fair Value Measurement and AASB 2011-8 Amendments to Australian Accounting Standards arising

from AASB 13 (effective 1 January 2013) Revised AASB 119 Employee Benefits, AASB 2011-10 Amendments to Australian Accounting Standards arising

from AASB 119 (September 2011) and AASB 2011-11 Amendments to AASB 119 (September 2011) arising from Reduced Disclosure Requirements (effective 1 January 2013)

2 Fees and charges

2012

$ 2011

$ Service fees 8,103,294 6,879,719

Total fees and charges 8,103,294 6,879,719


Interest 272,464 592,021




4 Other revenue and income

2012

$ 2011

$ Recovery of costs - 41,578 Other revenue 70,465 63,734

Total other revenue 70,465 105,312

5 Employee benefits expenses

Academic Salaries 81,513 36,315 Superannuation 8,107 2,818 Payroll tax 4,884 2,081 Worker's compensation 766 363 Long service leave expense 1,670 - Annual leave 5,664 - Maternity leave 454 - Fixed-term contract separation 86 -

Total academic 103,144 41,577

Non-academic Salaries 486,949 448,323 Superannuation 54,614 40,053 Payroll tax 29,808 28,435 Worker's compensation 1,918 4,336 Long service leave expense 8,639 11,017 Annual leave 48,250 42,007 Maternity leave 1,128 -

Total non-academic 631,306 574,171

Total employee benefits expenses 734,450 615,748



6 Depreciation and amortisation

2012

$ 2011

$

Depreciation Plant and equipment 3,896 4,285 Motor vehicles 3,120 2,235

Total depreciation 7,016 6,520

Amortisation Website redevelopment costs 20,556 67,729

Total amortisation 20,556 67,729

Total depreciation and amortisation 27,572 74,249

7 Repairs and maintenance Repairs and maintenance - general 2,268 222

Total repairs and maintenance 2,268 222

8 Other expenses Advertising, marketing and promotions 621,280 866,082 Course development expenditure - 393,600 General consumables 1,401,066 1,131,447 Interest (98,027) 98,027 Non-capitalised equipment 16,704 26,677 Other expenses 38,425 66,444 Professional services 135,856 169,571 Scholarships, grants and prizes 54,039 27,279 Service fees - related entities - 441,734 Telecommunications 10,382 33,040 Travel, staff development and entertainment 97,911 65,895

Total other expenses 2,277,636 3,319,796



9 Income tax expense

(a) Income tax expense

2012 $

2011 $

Current tax 1,592,313 1,070,879 Deferred tax - (2,130) Adjustments for current tax of prior periods - 36,858

1,592,313 1,105,607

Income tax expense is attributable: Operating result from operations 1,592,313 1,105,607

Aggregate income tax expense 1,592,313 1,105,607

(b) Numerical reconciliation of income tax expense to prima facie tax payable Operating result from operations before income tax expense 5,402,060 3,569,597 Tax at the Australian tax rate of 30% (2011: 30%) 1,620,618 1,070,879 Tax effect of amounts which are not deductible / (taxable) in calculating taxable income: (28,305) 440 Adjustment for current tax of prior periods - 34,288

1,592,313 1,105,607

10 Cash and cash equivalents Cash at bank and on hand - 94,722

Total cash and cash equivalent - 94,722

(a) Reconciliation to cash and cash equivalents at the end of the year in the statement of cash flows

The above figures are reconciled to cash and cash equivalents at the end of the year as shown in the statement of cash flows as follows: Balances as above - 94,722

Balance as per cash flow statement - 94,722



11 Receivables

2012 $

2011 $

Current Related parties 3 10,013,428 Prepayments - 3,434 Other receivables - 20,149

Total current receivables 3 10,037,011

12 Inventories

Current Course materials - 408,783

Total current inventories - 408,783

13 Property, plant and equipment

Motor Vehicles

$

Plant and Equipment

$ Total

$

At 1 January 2011 Cost 15,909 19,846 35,755 Accumulated depreciation (6,413) (10,723) (17,136)

Net book amount 9,496 9,123 18,619

Year ended 31 December 2011 Opening net book amount 9,496 9,123 18,619 Additions 33,254 7,674 40,928 Disposals (7,671) (879) (8,550) Depreciation charge (2,235) (4,285) (6,520)

Closing net book amount 32,844 11,633 44,477

At 31 December 2011 Cost 33,254 18,896 52,150 Accumulated depreciation (410) (7,263) (7,673)

Net book amount 32,844 11,633 44,477

Year ended 31 December 2012 Opening net book amount 32,844 11,633 44,477 Additions - 11,806 11,806 Disposals (29,724) (19,543) (49,267) Depreciation charge (3,120) (3,896) (7,016)

Closing net book amount - - -

At 31 December 2012 Cost - - - Accumulated depreciation - - -

Net book amount - - -



14 Intangible Assets

2012

$ 2011

$ Website Re-development Cost - 203,186 Accumulated amortisation and impairment - (180,627)

Net carrying value - 22,559

Total Intangibles - 22,559

Movements in the carrying amount of intangible assets between the beginning and the end of the year:

Website Re-development

$

Year ended 31 December 2012 Opening net book amount 22,559 Additions - Impairment expense (2,003) Amortisation expense (20,556)

Closing value at 31 December 2012 -

Year ended 31 December 2011 Opening net book amount 90,287 Amortisation expense (67,728)

Closing value at 31 December 2011 22,559

15 Trade and other payables

2012 $

2011 $

Current Trade payables - 188,543 Other current payables - 187

Total current trade and other payables - 188,730

16 Current tax liabilities Current tax payable - 2,684,270

Total current tax liabilities - 2,684,270



17 Provisions

2012 $

2011 $

Current provisions expected to be settled within 12 months

Employee benefits Annual leave - 29,161

Total current provisions - 29,161

Non-Current provisions

Employee benefits Long service leave - 24,897

Total non-current provisions - 24,897

Total Provisions - 54,058

Provision for Annual Leave

This provision is for outstanding annual leave liabilities that employees have not yet taken. It is assumed the leave will be taken in the next twelve months. The measurement and recognition criteria relating to employee benefits had been included in note 1 to this report.

Provision for Long Service Leave

This provision is for outstanding long service leave liabilities that employees have not yet taken. The measurement and recognition criteria relating to the employee benefits has been included in note 1 to this report.

(a) Movements in provisions

Movements in each class of provision during the year are set out below:

Annual Leave

$

Long Service Leave

$ Total

$ Carrying amount at start of year 29,161 24,897 54,058 Additional provisions recognised 31,931 4,989 36,920 Amounts used (11,630) - (11,630) Amounts transferred to the University of Newcastle (49,462) (29,886) (79,348) - - -



18 Issued Capital

2012 $

2011 $

Share capital (3 ordinary shares of $1 each) 3 3

Total 3 3

The parent entity of the Company is The University of Newcastle, by virtue of its full ownership.

19 Retained Earnings

Movements in retained earnings were as follows: Retained earnings at 1 January 7,680,491 5,216,501 Operating result for the year 3,809,747 2,463,990 Dividends paid (11,490,238) -

Retained earnings at 31 December - 7,680,491

20 Key management personnel disclosures

(a) Names of responsible persons and executive officers

The following persons were responsible persons and executive officers of GraduateSchool.com Pty Ltd for the year, or part thereof: Dr Susan Mary Gould - Chairperson Mr Bradley Stephen Wilson - Director Mr Clinton Marquet - Director Mr Val Robertson - Director

(b) Other key management personnel

The following persons also had authority and responsibility for planning, directing and controlling the activities of GraduateSchool.com Pty Ltd during the year: Professor Kevin McConkey - Chief Executive Officer

No Board members or Executive officers receive any remuneration.



21 Remuneration of Auditors

During the year, the following fees were paid or payable for services provided by the auditor of the Company, its related practices and non-related audit firms:

Assurance Services

2012

$ 2011

$

(a) Audit services Fees paid or payable to Audit Office of NSW: Auditing or reviewing the financial report 26,500 16,000

26,500 16,000

The auditor remuneration has been paid for by the parent entity.

22 Related Parties

(a) Parent entities

The ultimate parent entity is the University of Newcastle, by virtue of its full ownership of the Company's issued share capital.

(b) Key management personnel

Disclosures relating to directors and specified executives are set out in Note 20.

(c) Transactions with related parties

The following transactions occurred with related parties:

Transactions during the year i) The University of Newcastle

Services provided to the University Course service fees 8,198,242 6,893,901 Recovery of academic salaries 24,253 41,578 Interest on receivable 272,436 591,963

8,494,931 7,527,442

Services provided by the University Program course development activities 42,705 393,600 Consumables and overseas agent commissions 113,727 187,628 Payment for seconded staff salaries 281,834 441,734

438,266 1,022,962



22 Related parties continued


ii) Newcastle Innovation

2012 $

2011 $

Payments for contract teaching - 2,800

- 2,800 iii) UoN Services Limited Payments for advertising - 6,000

- 6,000

(d) Outstanding balances

The following balances are outstanding at the reporting date in relation to transactions with related parties:

Current receivables (sale of services) The University of Newcastle - 10,019,427

Current Payables (purchase of services) UoN Services Limited - 6,000

23 Events occurring after the reporting date

Application was made to the Australian Securities and Investments Commission to deregister GraduateSchool.com Pty Ltd in February 2013.

The Company is not aware of any other material financial impacts or changes after 31 December 2012.

24 Reconciliation of operating results after income tax to net cash flows from operating activities Operating result for the year 3,809,747 2,463,990 Depreciation and amortisation 27,572 74,249 Impairment of intangible assets 2,003 - Net (gain) loss on sale of non-current assets 234 (2,559)

Changes in operating assets and liabilities:

(Increase) decrease in inventories 408,783 (150,584) (Increase) decrease in other operating assets 6,331,997 (3,676,908) Increase (decrease) in trade creditors (19,013) 22,573 Increase (decrease) in other operating liabilities (203,625) 90,295 Increase (decrease) in income taxes payable (1,984,612) 1,198,532 Increase (decrease) in deferred tax liability - (2,130)

Net cash provided by (used in) operating activities 8,373,087 17,458


GRADUATESCHOOL.COM PTY LTD Directors’ Declaration

The directors of the Company declare that: 1. The financial statements and notes are in accordance with the Corporations Act 2001 and:

a. comply with Accounting Standards and the Corporations Regulations 2001; and

b. comply with the Public Finance and Audit Act 1983, and the Public Finance and Audit Regulations 2010; and

c. give a true and fair view of the company's financial position as at 31 December 2012 and of its performance for the year ended on that date.

2. In the directors' opinion, there are reasonable grounds to believe that the Company will be able to pay its debts as and

when they become due and payable.

This declaration is made in accordance with a resolution of the Board of Directors pursuant to s.41C of the Public Finance and Audit Act 1983.

Bradley Wilson Director 26 March 2013 Newcastle

UoN Services LimitedABN 22 121 393 306



UON SERVICES LIMITED Contents For the year ended 31 December 2012

Financial Statements Directors' Report Income Statement Statement of Comprehensive Income Statement of Financial Position Statement of Changes in Equity Statement of Cash Flows Notes to the Financial Statements Independent Audit Report


UON SERVICES LIMITED Directors’ Report 31 December 2012

Directors The following persons were Directors of UoN Services Limited during the whole of the year and up to the date of this report:

Sharon Waterhouse – Chairperson Tim Shanley – Independent Director Kelly Lofberg – Independent Director Kristen Perry – Independent Director Peter Cockbain – University Council Appointed Director Ian Baker - University Council Appointed Director

The following persons were appointed Director during the year and continue in office at the date of this report:

Liam Sanders - Student Director (appointed 01 April 2012) Lara Field - Student Director (appointed 01 April 2012) Emily Wood - Student Director (appointed 01 April 2012)

The following persons were Directors from the beginning of the year until end of their term:

Adriana Sung - Student Director (term expired 31 March 2012) Nicholas Williams - Student Director (term expired 31 March 2012) Jeffrey Evans - Student Director (term expired 31 March 2012)

Board Meetings The numbers of meetings of the Board of Directors the year ended 31 December 2012, and the numbers of meetings attended by each member were: Board Meetings

A B Sharon Waterhouse 7 8 Tim Shanley 3 8 Kelly Lofberg 4 8 Kristen Perry 6 8 Peter Cockbain 3 8 Ian Baker 7 8 Liam Sanders 5 6 Lara Field 5 6 Emily Wood 4 6 Adriana Sung 2 2 Nicholas Williams 2 2 Jeffrey Evans - 2 A = Number of meetings attended B = Number of meetings held during the time the member held office or was a member of the committee during the year Contributions on winding up In the event of the company being wound up, members are required to contribute a maximum of $20 each. Auditor's independence declaration A copy of the Auditor's Independence Declaration as required under section 307C of the Corporations Act 2001 is attached to this report.


UON SERVICES LIMITED Directors’ Report 31 December 2012

Principal Activities The principal activities of the company during the financial year were to enhance the shared University experience and academic pursuits of the University community through the commercially responsible provision of facilities and services; and to provide a common meeting ground and social centre for Members, Students, graduates and staff of the University.

Review of operations This was the sixth year of operations for UoN Services Limited (UoNS). UoNS commenced trade on 1 April 2007. UoNS is effectively the replacement organisation for University of Newcastle Union Limited (UNUL) on the University of Newcastle’s Callaghan and City campuses.

Significant changes in state of affairs During the year there was no significant change in the state of the affairs of the company.

Matters subsequent to the end of the financial year There has not been any matter or circumstance, other that referred to in the financial statements and notes following, that has arisen, significantly affected, or may significantly affect, the operations of the Company, the results of those operations, or the state of affairs in future financial years.

Likely development and expected results of operations The company will continue to operate in accordance with its Constitution and Objects therein.

Environmental regulation During the year there were no significant environmental regulations of UoNS other than that referred to in the financial statements and notes following.

Insurance of officers University of Newcastle maintains comprehensive insurance policies in relation to Directors and Officers, Industrial Special Risk, Professional Indemnity, Motor Vehicle and Personal Accident (including travel). All of these policies include UoNS as an insured party and are current. Directors' and Officers' Liability insurance covers damages (not fines and penalties) and legal expenses incurred due to a breach or alleged breach of duty, misleading statement or wrongful act by a director or officer acting in that capacity. Directors' and Officers' Supplementary Legal Expenses covers legal expenses on behalf of directors, employees and organisations defending against actions which are not covered in the standard Directors' and Officers' Liability Policy.

Proceedings on behalf of UoN Services Limited UoNS has no legal proceedings in process. This report is made in accordance with the resolution of the Board of Directors of UoN Services Limited. Sharon Waterhouse Chair Newcastle 26 March 2013

Principal Activities The principal activities of the company during the financial year were to enhance the shared University experience and academic pursuits of the University community through the commercially responsible provision of facilities and services; and to provide a common meeting ground and social centre for Members, Students, graduates and staff of the University.

Review of operations This was the sixth year of operations for UoN Services Limited (UoNS). UoNS commenced trade on 1 April 2007. UoNS is effectively the replacement organisation for University of Newcastle Union Limited (UNUL) on the University of Newcastle’s Callaghan and City campuses.

Significant changes in state of affairs During the year there was no significant change in the state of the affairs of the company.

Matters subsequent to the end of the financial year There has not been any matter or circumstance, other that referred to in the financial statements and notes following, that has arisen, significantly affected, or may significantly affect, the operations of the Company, the results of those operations, or the state of affairs in future financial years.

Likely development and expected results of operations The company will continue to operate in accordance with its Constitution and Objects therein.

Environmental regulation During the year there were no significant environmental regulations of UoNS other than that referred to in the financial statements and notes following.

Insurance of officers University of Newcastle maintains comprehensive insurance policies in relation to Directors and Officers, Industrial Special Risk, Professional Indemnity, Motor Vehicle and Personal Accident (including travel). All of these policies include UoNS as an insured party and are current. Directors' and Officers' Liability insurance covers damages (not fines and penalties) and legal expenses incurred due to a breach or alleged breach of duty, misleading statement or wrongful act by a director or officer acting in that capacity. Directors' and Officers' Supplementary Legal Expenses covers legal expenses on behalf of directors, employees and organisations defending against actions which are not covered in the standard Directors' and Officers' Liability Policy.

Proceedings on behalf of UoN Services Limited UoNS has no legal proceedings in process. This report is made in accordance with the resolution of the Board of Directors of UoN Services Limited. Sharon Waterhouse Chair Newcastle 26 March 2013


UON SERVICES LIMITED Income Statement For the year ended 31 December 2012


Note 2012

$ 2011

$

Revenue from continuing operations Sale of goods 1,857,573 1,943,474 Investment revenue 3 237,279 255,917 Rental revenue 4 1,436,991 1,192,969 Contributions - related entities 5 3,341,630 350,000 Other revenue 6 635,433 732,624

Total revenue from continuing operations 7,508,906 4,474,984

Total revenue and income from continuing operations 7,508,906 4,474,984

Expenses from continuing operations Cost of goods sold 742,573 919,863 Employee related benefits 8 3,057,281 1,933,153 Depreciation and amortisation 9 185,927 147,556 Repairs and maintenance 10 342,153 293,763 Impairment of assets 11 - (54) Net losses on disposal of property, plant and equipment - 29,699 Other expenses 12 2,540,536 1,029,085

Total expenses from continuing operations 6,868,470 4,353,065

Operating result from continuing operations 640,437 121,919 Operating result from discontinued operations 7 - 218,193

Operating result for the year 640,437 340,112 Operating result attributable to non-controlling interest - -

Operating result attributable to members of UoN Services Ltd 640,437 340,112

Operating result attributable to members from: Continuing operations 640,437 121,919 Discontinued operations - 218,193

Total 640,437 340,112

1 0 0 | T H E U N I V E R S I T Y O F N E W C A S T L E

UON SERVICES LIMITED Statement of Comprehensive Income For the year ended 31 December 2012


2012

$ 2011

$

Operating result for the year 640,437 340,111

Other comprehensive income - -

Total comprehensive income 640,437 340,111 Total comprehensive income attributable to non-controlling interest - -

Total comprehensive income attributable to members of UoN Services Ltd 640,437 340,111

640,437 340,111


UON SERVICES LIMITED Statement of Financial Position For the year ended 31 December 2012


Note 2012

$ 2011

$

ASSETS

CURRENT ASSETS Cash and cash equivalents 13 576,120 249,861 Trade and other receivables 14 709,782 373,781 Inventories 15 148,008 94,608 Other financial assets 16 3,900,000 4,200,000

TOTAL CURRENT ASSETS 5,333,910 4,918,250

NON-CURRENT ASSETS Other financial assets 16 1,000 1,000 Property, plant and equipment 17 1,822,057 1,454,649 Intangible assets 18 39,904 34,688

TOTAL NON-CURRENT ASSETS 1,862,961 1,490,337

TOTAL ASSETS 7,196,871 6,408,587

LIABILITIES

CURRENT LIABILITIES Trade and other payables 19 666,493 638,731 Provisions 20 209,924 58,896 Other liabilities 21 113,808 98,128

TOTAL CURRENT LIABILITIES 990,225 795,755

NON-CURRENT LIABILITIES Provisions 20 28,900 75,523

TOTAL LIABILITIES 1,019,125 871,278

NET ASSETS 6,177,746 5,537,309

EQUITY Retained earnings 22 6,177,746 5,537,309

TOTAL EQUITY 6,177,746 5,537,309


UON SERVICES LIMITED Statement of Changes in Equity For the year ended 31 December 2012


Retained Earnings

$ Total

$ Balance at 1 January 2011 5,197,198 5,197,198 Operating result for the year 340,111 340,111 Other comprehensive income - -

Balance at 31 December 2011 5,537,309 5,537,309 Balance at 1 January 2012 5,537,309 5,537,309 Operating result for the year 640,437 640,437 Other comprehensive income - -

Balance at 31 December 2012 6,177,746 6,177,746


UON SERVICES LIMITED Statement of Cash Flows For the year ended 31 December 2012


Note 2012

$ 2011

$

CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers 5,719,038 5,350,423 Interest received 175,938 200,118 Payments to suppliers and employees (inclusive of GST) (5,212,018) (4,937,394) GST recovered (paid) (99,261) (168,432)

Net cash provided by (used in) operating activities 28 583,697 444,715

CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of property, plant and equipment - 20,155 Payments for purchase of property, plant and equipment (557,438) (256,313) Proceeds from sale of other financial assets - 366,453 Proceeds from redemption of held to maturity investments 8,100,000 8,800,000 Payments for purchase of held to maturity investments (7,800,000) (9,400,000)

Net cash provided by (used) in investing activities (257,438) (469,705) Net increase (decrease) in cash and cash equivalents held 326,259 (24,990)

Cash and cash equivalents at beginning of year 249,861 274,851 Cash and cash equivalents at end of year 576,120 249,861


UON SERVICES LIMITED Notes to the Financial Statements For the year ended 31 December 2012

1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

UoN Services Limited (the Company) is a registered company limited by guarantee and is a controlled entity of the University of Newcastle. UoN Services Limited is a not for profit entity.

The principal accounting policies adopted in the preparation of the financial report are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. The Company was established on 21 December 2006 and commenced trading on 1 April 2007. The Company has its domicile in Australia. The principal place of business is: Level 5, Shortland Building University of Newcastle University Drive Callaghan NSW 2308

The principal activities of the Company are: To enhance the shared University experience and academic pursuits of the University community through the commercially responsible provision of facilities and services.


The annual financial statements represent the audited general purpose financial statements of UoN Services Limited. They have been prepared on an accrual basis in accordance with Australian Accounting Standards.


• Higher Education Support Act 2003 (Financial Statement Guidelines)

• Public Finance and Audit Act 1983, the requirements of the Department of Industry, Innovation, Science, Research and Tertiary Education (DIISRTE) and other State/Australian Government legislative requirements.

UoN Services Limited is a not-for-profit entity and these statements have been prepared on that basis. Some of the requirements for not-for-profit entities are inconsistent with the IFRS requirements.


The financial statements were authorised for issue by the members of UoN Services Limited on 26 March 2013.


These financial statements have been prepared under the historical cost convention, as modified by the revaluation of available-for-sale financial assets, financial assets and liabilities (including derivative instruments) at fair value through profit or loss, certain classes of property, plant and equipment and investment property.


The preparation of financial statements in conformity with Australian Accounting Standards requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying UoN Services Limited’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed below:



1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED

(a) Basis of preparation continued

Impairment of Investments and other financial assets – The Company assesses at each reporting date, whether there is objective evidence that a financial asset or group of financial assets is impaired as outlined in note 1 (j).

Employee benefits – long service leave – the liability for long service leave is measured at the present value of the expected future payments to be made in respect of services provided by employees up to the reporting date as outlined in note 1 (p) (iii).

Useful lives of property, plant and equipment – depreciation of property, plant and equipment is calculated over the assets estimated useful lives as outlined in note 1 (l).

(b) Revenue Recognition




(i) Trading income Food and beverage, and retail income are recognised as income in the year of receipt.

(ii) Contributions - Related Entities University Contribution to student services and capital expenditure are recognised at their fair value when the Company obtains control of the right to receive the contribution, it is probable that economic benefits will flow to the Company and it can be reliably measured.

(iii) Rental income Leasing contracts are recognised as income in the year they relate to, except to the extent that they relate to future periods. Such income is treated as income in advance in liabilities.

(c) Income Tax

The Company is exempt from income tax under subdivision 50-B of the Income Tax Assessment Act 1997.

(d) Leases

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases (note 26). Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease.



1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued

(e) Impairment of assets

Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows which are largely independent of the cash inflows from other assets or groups of assets (cash generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.

(f) Cash and cash equivalents

For statement of cash flows presentation purposes, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown with interest bearing liabilities in current liabilities on the balance sheet.

(g) Trade receivables


Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. A provision for impairment of receivables is established when there is objective evidence that the Company will not be able to collect all amounts due according to the original terms of receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 30 days overdue) are considered indicators that the trade receivable is impaired. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. Cash flows relating to short-term receivable are not discounted if the effect of discounting is immaterial. The amount of the provision is recognised in the income statement.

(h) Inventories

Beverage, food and retail are stated at the lower of average cost and net realisable value. Cost comprises direct materials. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs necessary to make the sale.

(i) Non-current assets (or disposal groups) held for sale and discontinued operations

Non-current assets (or disposal groups) are classified as held for sale and stated at the lower of their carrying amount and fair value less costs to sell, if their carrying amount will be recovered principally through a sale transaction rather than through continuing use.

An impairment loss is recognised for any initial or subsequent write down of the asset (or disposal group) to fair value less costs to sell. A gain is recognised for any subsequent increases in fair value less costs to sell of an asset (or disposal group), but not in excess of any cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of the sale of the non-current asset (or disposal group) is recognised at the date of derecognition.




(i) Non-current assets (or disposal groups) held for sale and discontinued operations continued

Non-current assets (including those that are part of a disposal group) are not depreciated or amortised while they are classified as held for sale. Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale continue to be recognised.

Non-current assets classified as held for sale and the assets of a disposal group classified as held for sale are presented separately from the other assets in the balance sheet. The liabilities of a disposal group classified as held for sale are presented separately from other liabilities in the balance sheet.

(j) Investments and other financial assets

The Company classifies its investments and other financial assets in the following categories: financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, and available-for-sale financial assets. The classification depends on the purpose for which the investments were acquired. Management determines the classification of its investments at initial recognition and, in the case of assets classified as held-to-maturity, re-evaluates this designation at each reporting date.

(i) Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss include financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term. Derivatives are classified as held for trading unless they are designated as hedges. Assets in this category are classified as current assets.

(ii) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for those with maturities greater than 12 months after the reporting date which are classified as non-current assets. Loans and receivables are included in receivables in the statement of financial position.

(iii) Held-to-maturity investments

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that management has the positive intention and ability to hold to maturity.

(iv) Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated in this category or are not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the reporting date.

Initial recognition and derecognition

Regular purchases and sales of investments and other financial assets are recognised on trade-date, being the date on which the Company commits to purchase or sell the asset. Investments and other financial assets carried are fair value through profit or loss are initially recognised at fair value and transaction costs are expensed in the income statement. Investments and other financial assets are derecognised when the rights to receive cash flows from the investments and other financial assets have expired or have been transferred and the Company has transferred substantially all the risks and rewards of ownership.





(j) Investments and other financial assets continued

Subsequent measurement

Available-for-sale financial assets and financial assets at fair value though profit and loss are subsequently carried at fair value. Loans and receivables and held-to-maturity investments, are carried at amortised cost using the effective interest method. Gains or losses arising from changes in the fair value of the 'financial assets at fair value through profit or loss' category are included in the Income Statement within other income or other expenses in the period in which they arise.


Fair value

The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active (and for unlisted securities), the Company establishes fair value by using valuation techniques. These include reference to the fair values of recent arm's length transactions, involving the same instruments or other instruments that are substantially the same, discounted cash flow analysis, and option pricing models refined to reflect the issuer's specific circumstances.

Impairment

The Company assesses at each reporting date whether there is objective evidence that a financial asset or group of financial assets is impaired. In the case of equity securities classified as available-for-sale, a significant or prolonged decline in the fair value of a security below its cost is considered in determining whether the security is impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss (measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit and loss) is removed from equity and recognised in the income statement. Impairment losses recognised in the income statement on equity instruments are not reversed through the income statement.

(k) Fair value estimation

The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes.

Entities shall classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value of financial instruments traded in active markets (such as publicly traded derivatives, and trading and available-for-sale securities) is based on quoted market prices for identical assets or liabilities at the reporting date (Level 1). The quoted market price used for financial assets held by the Company is the current bid price.




(k) Fair value estimation continued

The fair value of financial instruments that are not traded in an active market (for example, over-the-counter-derivatives) is determined using valuation techniques. The Company uses a variety of methods and makes assumptions that are based on market conditions existing at each balance date. Quoted market prices or dealer quotes for similar instruments (Level 2) are used for long-term debt instruments held. Other techniques that are not based on observable market data (Level 3) such as estimated discounted cash flows, are used to determine fair value for the remaining financial instruments. The fair value of interest-rate swaps is calculated as the present value of the estimated future cash flows. The fair value of forward exchange contracts is determined using forward exchange market rates at the balance sheet date. The level in the fair value hierarchy shall be determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety.

The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values due to their short-term nature. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the company for similar financial instruments.

(l) Property, Plant and Equipment

Property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.


Art Works are not depreciated.

Depreciation on other assets is calculated using the straight line method to allocate their cost or revalued amounts, net of their residual values, over their estimated useful lives, is as follows:

Motor vehicles 7 years

Plant and equipment 3 - 10 years

Lease hold improvements 40 years

The asset's residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date.


(m) Intangible Assets

(i) Software

Expenditure on software, being software that is not an integral part of the related hardware, is capitalised. Capitalised expenditure is stated at cost less accumulated amortisation. Amortisation is calculated using the straight-line method to allocate the cost over the period of the expected benefit, to a maximum of 5 years.




(n) Trade and other payables

These amounts represent liabilities for goods and services provided to the Company prior to the end of the financial year, which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition occurred.

(o) Provisions

Provisions for legal claims and service warranties are recognised when: the Group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated.




(p) Employee benefits


Liabilities for short-term employee benefits including wages and salaries, non-monetary benefits and profit-sharing bonuses due to be settled within 12 months after the end of the period are measure at the amount expected to be paid when the liability is settled and recognised in other payables. Liabilities for non-accumulating sick leave are recognised when the leave is taken and measured at the rates paid or payable.


The liability for long-term employee benefits such as annual leave and accumulating sick leave is recognised in current provisions for employee benefits as it is not due to be settled within 12 months after the end of the reporting period. It is measured at the amount expected to be paid when the liability is settled. Regardless of the expected timing of settlements, provisions made in respect of employee benefits are classified as a current liability, unless there is an unconditional right to defer the settlement of the liability for at least 12 months after the reporting date, in which case it would be classified as a non-current liability.


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

(q) Rounding of amounts

All amounts appearing in the financial report have been rounded to the nearest dollar.




(r) Goods and services tax (GST)

Revenues, expenses, assets and certain liabilities are recognised net of the amount of associated GST, except where the amount of GST incurred is not recoverable from the Australian Taxation Office. In this case, it is recognised as part of the cost of acquisition of the asset or part of the expense.

Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the balance sheet.


(s) New accounting standards and interpretations

Certain new Accounting Standards and Interpretations have been published that are not mandatory for 31 December 2012 reporting periods. The Company’s assessment of the impact of these new Standards and Interpretations is set out below:

AASB 9 Financial Instruments, AASB 2009-11 Amendments to Australian Accounting Standards arising from AASB 9 and AASB 2010-7 Amendments to Australian Accounting Standards arising from AASB 9 (December 2010) (effective from 1 January 2013)

AASB 10 Consolidated Financial Statements, AASB 11 Joint Arrangements, AASB 12 Disclosure of Interests in Other Entities, revised AASB 127 Separate Financial Statements, AASB 128 Investments in Associates and Joint Ventures, AASB 2011-7 Amendments to Australian Accounting Standards arising from the Consolidation and Joint Arrangements Standards (effective 1 January 2013)

AASB 13 Fair Value Measurement and AASB 2011-8 Amendments to Australian Accounting Standards arising from AASB 13 (effective 1 January 2013)

Revised AASB 119 Employee Benefits, AASB 2011-10 Amendments to Australian Accounting Standards arising from AASB 119 (September 2011) and AASB 2011-11 Amendments to AASB 119 (September 2011) arising from Reduced Disclosure Requirements (effective 1 January 2013)

The Company has assessed the impact of these new standards and Interpretations and considers the impact to be insignificant.




(a) Nature of the reclassification

Changes have been made to the classification of certain items in the financial statements. As a result, certain amounts reported for 2011 have been reclassified as set out below. There has been no effect on operating result and net assets.

(b) Summary of reclassified comparative information

(i) Reclassification of Income Statement items

2011 Restated

$

2011 Previously Reported

$

Expenses from continuing operations Impairment of assets 1,714 - Other expenses - 1,714

Total reclassification of Income Statement 1,714 1,714

3 INVESTMENT REVENUE

2012

$ 2011

$ Interest received 237,279 255,917


4 RENTAL REVENUE Rental revenue 1,293,859 1,032,835 Hire income 10,475 59,990 Tenant outgoings 132,657 100,144

Total revenue income 1,436,991 1,192,969

5 CONTRIBUTIONS - RELATED ENTITIES Service fees from The University of Newcastle 3,341,630 350,000

Total contributions - related entities 3,341,630 350,000



6 OTHER REVENUE

2012

$ 2011

$ Advertising income 90,982 68,339 Commissions received 288,877 277,442 Event revenue 54,456 77,381 Merchandise - 10,581 Rebates from unrelated parties 48,223 47,092 Sponsorship - 24,812 Student membership fees 19,613 24,436 Workers compensation insurance refunded - 107,844 Other revenue 133,282 94,697


7 DISCONTINUED OPERATIONS

(a) Description of discontinued operation

(i) Description

In November 2010, the directors of the Company decided to sell the Shortland U Shop and Post Office retail business and initiated an active program to locate a buyer and complete the sale. The business was sold on 31 January 2011 with effect from 1 February 2011 and the outlet disposed of is reported in these financial statements as a discontinued operation.

Financial information relating to the discontinued operation for the period to date of disposal is set out below.

(ii) Financial performance and cash flow information

The financial performance and cash flow information presented are for the month ending 31 January 2011 (2011 column) and the year ended 31 December 2010.

(b) Profit (loss) of discontinued operations Revenue - 100,373 Expenses - 141,256

Profit (loss) of discontinued operations - (40,883) Gain on sale of division - 259,076

Gain on sale of division - 259,076

Profit from discontinued operation -

218,193



7 DISCONTINUED OPERATIONS continued

(b) Profit (loss) of discontinued operations continued

2012

$ 2011

$

Profit attributable to owners of the parent entity relates to: Profit from continuing operations - 121,918 Profit from discontinued operations - 218,193

- 340,111


Employee related expense - Trading Salaries 392,847 464,702 Contribution to funded superannuation 33,058 36,313 Worker's compensation 6,700 7,250 Long service leave expense 2,404 (6,693) Annual leave 8,670 6,860

Other

Total trading 443,679 508,432

Employee related expense - Non-Academic Salaries 2,145,662 1,104,661 Contribution to funded superannuation 211,410 130,075 Payroll tax 11,304 20,861 Worker's compensation 35,130 18,553 Long service leave expense 6,686 24,361 Annual leave 201,013 109,145

Other Maternity leave 2,397 2,371 Voluntary separation - 14,694

Total non-academic 2,613,602 1,424,721

Total employee related expenses 3,057,281 1,933,153



9 DEPRECIATION AND AMORTISATION

2012

$ 2011

$

Depreciation Leasehold improvements 31,856 23,553 Plant and equipment 133,352 120,024


Amortisation Intangibles – computer software 20,719 3,979



10 REPAIRS AND MAINTENANCE Buildings 44,254 10,875 Cleaning 218,498 242,198 Repairs and maintenance - general 79,401 40,690

Total repairs and maintenance 342,153 293,763

11 IMPAIRMENT OF ASSETS

Impairment losses - financial assets Trade receivables - 1,714

Reversal of impairment losses - Financial assets Trade receivables - (1,768)

Total impairment of assets - (54)



12 OTHER EXPENSES

2012

$ 2011

$ Advertising, marketing and promotions 104,414 62,928 General consumables 1,052,400 61,682 Insurances (5,364) 426 Minor equipment 157,915 65,799 Student support 551,595 270,943 Operating lease rental 25,665 9,544 Professional services 168,479 177,253 Scholarships, grants and prizes 118,647 19,505 Telecommunications 45,045 35,398 Travel, staff development and entertainment 87,033 152,027 Utilities 182,725 151,458 Other expenses 51,982 22,122


13 CASH AND CASH EQUIVALENTS Cash at bank and on hand 576,120 249,861

Total cash and cash equivalent 576,120 249,861


The above figures are reconciled to cash at the end of the year as shown in the statement of cash flows as follows: Balances as above 576,120 249,861

Balance as per cash flow statement 576,120 249,861

(b) Cash at bank

Cash at bank is interest bearing with the floating rates being determined by the daily balance of funds held in the account. This was 2.56% for 2012 (2011:0.88%).

14 RECEIVABLES

Current Trade receivables 292,936 325,871 Prepayments 50,386 26,721 Related party receivables 358,661 6,000 Other receivables 7,799 15,189

Total current receivables 709,782 373,781



14 RECEIVABLES continued

(a) Impaired trade receivables

As at 31 December 2012 current trade receivables of the Company with a nominal value of $nil (2011: $nil) were impaired. During 2012 the amount of the provision was $nil (2011: $nil).

Movements in the provision for impaired receivables are as follows:

2012

$ 2011

$ At 1 January - 3,169 Provision for impairment recognised during the year - - Receivables written off during the year as uncollectable - (1,768) Unused amounts reversed - (1,401)

- -

The creation and release of the provision for impaired receivables has been included in 'impairment of assets' in the income statement. Amounts charged to the provision are generally written off when there is no expectation of recovering additional cash.

(b) Past due but not impaired

As of 31 December 2012, trade receivables of $101,045 were past due but not impaired. These relate to a number of customers for whom there is no history of recent default or expectation of same.

The ageing of these receivables is: 2 to 3 months 101,045 75,469 Over 3 months - -

101,045 75,469



15 INVENTORIES

2012

$ 2011

$

Retail inventory - at cost Inventory 148,008 94,608

Total inventories 148,008 94,608


Current Held-to-maturity investments 3,900,000 4,200,000

Non-current Available for sale financial assets 1,000 1,000 Total other financial assets 3,901,000 4,201,000


Leasehold improvements Cost 10,376,809 10,067,627 Accumulated impairment adjustment (5,394,963) (5,394,963) Accumulated depreciation (3,818,881) (3,787,025) Total leasehold improvements 1,162,965 885,639

Capital works in progress At cost 15,933 94,324

Total capital works in progress 15,933 94,324

Plant and equipment Cost 1,258,163 956,338 Accumulated depreciation (616,814) (483,462)

Total plant and equipment 641,349 472,876

Artwork and Libraries Cost 2,800 2,800 Accumulated depreciation (990) (990)

Total artworks and libraries 1,810 1,810

Total property, plant and equipment 1,822,057 1,454,649



17 PROPERTY, PLANT AND EQUIPMENT continued

Movement in the carrying amounts for each class of property, plant and equipment between the beginning and the end of the current year:

Leasehold improvements

$

Capital works in progress

$

Plant and equipment

$

Artwork and Libraries

$ Total

$

Balance at 31 December 2011 Balance at the beginning of year 853,329 - 565,834 1,810 1,420,973 Additions 55,863 94,324 76,918 - 227,105 Disposals - - (49,853) - (49,853) Depreciation expense (23,553) - (120,024) - (143,577)

Balance at 31 December 2011 885,639 94,324 472,876 1,810 1,454,649

Balance at 31 December 2012

Balance at the beginning of year 885,639 94,324 472,875 1,810 1,454,648 Additions 230,791 - 301,826 - 532,617 Transfers 78,391 (78,391) - - - Depreciation expense (31,856) - (133,353) - (165,208)

Balance at 31 December 2012 1,162,965 15,933 641,349 1,810 1,822,057



18 INTANGIBLE ASSETS

2012

$ 2011

$ Computer software Cost 66,652 40,718 Accumulated amortisation (26,748) (6,030)

Net carrying value 39,904 34,688

Total Intangibles 39,904 34,688

Movement in the carrying amounts of intangible assets between the beginning and the end of the current year:

Computer software

$ Total

$

Year ended 31 December 2011 Balance at the beginning of the year 249 249 Additions 38,418 38,418 Amortisation expense (3,979) (3,979)

Closing value at 31 December 2011 34,688 34,688

Year ended 31 December 2012 Balance at the beginning of the year 34,688 34,688 Additions 25,935 25,935 Amortisation expense (20,719) (20,719)

Closing value at 31 December 2012 39,904 39,904


2012

$ 2011

$

Current Trade payables 666,255 270,715 Related party payables - 364,055 Other current payables 238 3,961

Total current trade and other payables 666,493 638,731



20 PROVISIONS

2012

$ 2011

$

Current provisions expected to be settled within 12 months Employee benefits:

Annual leave 110,012 44,275 Long service leave 11,100 14,621

Short-term provisions Parental leave 1,041 -

Subtotal 122,153 58,896

Current provisions expected to be settled after more than 12 months

Employee benefits: Annual leave 36,671 - Long service leave 51,100 -

Subtotal 87,771 -

Total current provisions 209,924 58,896

Non-current Employee benefits:

Long service leave 28,900 75,523

Total non-current provisions 28,900 75,523 Total provisions 238,824 134,419

Provision for annual leave

This provision is for outstanding annual leave liabilities that employees have not yet taken. It is assumed the leave will be taken in the next twelve months. The measurement and recognition criteria relating to employee benefits has been included in note 1 to these financial statements.

Provision for long service leave

This provision is for outstanding long service leave liabilities that employees have not yet taken. The measurement and recognition criteria relating to employee benefits has been included in note 1 these financial statements. The calculation of the present value of future cash flows in respect of long service being taken has been calculated by independent third parties based on historical data provided by the Company.



20 PROVISIONS continued

(a) Movements in provisions

Annual leave

$ Long service

leave

Parental Leave

$ Total

$

Current Carrying amount at 1 January 2012 44,275 14,621 - 58,896 Additional provisions recognised 210,722 76,123 1,041 287,886 Amounts Used (108,315) (28,544) - (136,859)

Balance at 31 December 2012 146,682 62,200 1,041 209,924

(b) Movements in provisions - Non current

Long service leave

$ Total

$

Non-current Opening balance at 1 January 2012 75,523 75,523 Amounts transferred to current (46,623) (46,623)

Balance at 31 December 2012 28,900 28,900

21 OTHER LIABILITIES

2012

$ 2011

$

Current Income received in advance 113,808 98,128

Total current other liabilities 113,808 98,128



22 RETAINED EARNINGS

2012

$ 2011

$

Movements in retained earnings were as follows: Balance as at 1 January 5,537,309 5,197,198 Operating result for the year 640,437 340,111

Retained earnings at 31 December 6,177,746 5,537,309



The following persons were responsible persons and executive officers of the Company for the year, or part thereof: Sharon Waterhouse – Independent Director and Chairperson Peter Cockbain – University Council Representative Ian Baker – University Council Representative Nicholas Williams - Student Director (term expired 31 March 2012) Jeffrey Evans - Student Director (term expired 31 March 2012) Adriana Sung - Student Director (term expired 31 March 2012) Liam Sanders - Student Director (appointed 01 April 2012) Emily Wood - Student Director (appointed 01 April 2012) Lara Field - Student Director (appointed 01 April 2012) Tim Shanley - Independent Director Kelly Lofberg - Independent Director Kristen Perry - Independent Director

(b) Other key management personnel

The following persons also had authority and responsibility for planning, directing and controlling the activities of the Company during the year: Nat McGregor - Chief Executive Officer (1January 2012 to 4 November 2012) Noel McMahon - Acting Chief Executive Officer (17 November 2012 to 31 December 2012)



23 KEY MANAGEMENT PERSONNEL DISCLOSURES continued

(c) Remuneration of Board members and Executives

2012

Number 2011

Number Nil 12 11

(d) Remuneration of other key management personnel

$240,000 to $249,999 1 - $260,000 to $269,999 - 1

(e) Key management personnel compensation

2012

$ 2011

$ Short-term employee benefits 240,921 261,620

Total 240,921 261,620


During the year the following fees were paid or payable for services provided by the auditor of the Company, its related practices and non-related audit firms.

2012

$ 2011

$

Assurance services

- Audit services

- Fees paid to Audit Office of NSW - Audit and review of financial statements 28,500 25,000

28,500 25,000

25 CONTINGENCIES

The Company has agreed to indemnify and keep indemnified, the University of Newcastle Union Limited and its directors in respect of any act, matter or thing, arising under or connected with, the transfer of the assets, liabilities and undertakings, from University of Newcastle Union Limited to UoN Services Limited on the 1 April 2007. There were no other contingent assets or liabilities at the end of the reporting period.



26 COMMITMENTS

(a) Operating lease commitments (GST excl.)

(i) Operating Leases

Expenditure contracted for at the reporting date but not recognised as liabilities is as follows:

2012

$ 2011

$

Operating lease commitments

Commitments for minimum lease payments in relation to non-cancellable operations leases are payable as follows: - within one year 39,082 24,685 - Later than one year but not later than five years 20,090 35,908 59,172 60,593

27 EVENTS OCCURRING AFTER REPORTING DATE

No matters or circumstances have arisen since the end of the year which significantly affected or could significantly affect the operations of the Company, the results of those operations, or the state of affairs of the Company in future years.



28 RECONCILIATION OF OPERATING RESULT TO NET CASH FLOWS FROM OPERATING ACTIVITIES

2012

$ 2011

$ Operating result for the year 640,437 340,111

Depreciation and amortisation 185,927 147,557 Impairment loss - (1,768) Net (gain) loss on sale of non-current assets - 29,699 Gain on disposal of retail outlet - (259,076)

Changes in operating assets and liabilities: (Increase) decrease in trade debtors 32,935 (96,428) (Increase) decrease in related party receivables (352,660) 20,627 (Increase) decrease in inventories (53,400) 100,723 Increase (decrease) in other operating assets (40,699) 164,901 Increase (decrease) in trade creditors (12,769) (61,129) Decrease (increase) in related party payables (364,055) - Increase (decrease) in other operating liabilities 443,577 171,234 Increase (decrease) in other provisions 104,404 (111,736)

Net cash provided by operating activities 583,697 444,715

29 FINANCIAL RISK MANAGEMENT

The Company's activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk. The Company's overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Company. The Company uses different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate and other price risks.

Risk management is carried out under direction by the Board of Directors. The Company has engaged the University of Newcastle's Treasury to administer, provide management services and engage expert consultants to maximise the returns on the Company's cash and other investments in accordance with the University's Investment Policy.

(a) Market risk

(i) Price risk

The Company does not have any investments in equity securities and as such is not exposed to price risk.

(ii) Cash flow and fair value interest rate risk

The Company's main interest rate risk arises from cash and cash equivalents and held to maturity investments. At 31 December 2012, if interest rates had changed by ± 1% from the year end rates with all other variables held constant, post-tax profit for the year would have been ± $44,761.



29 FINANCIAL RISK MANAGEMENT continued

(a) Market risk

(iii) Summarised sensitivity analysis 31 December 2012 Interest rate risk

-1% +1%

2012

$ Result

$ Equity

$ Result

$ Equity

$

Financial assets Cash and Cash Equivalents 576,120 (5,761) (5,671) 5,761 5,761 Other financial assets - Held to maturity investments 3,900,000 (39,000) (39,000) 39,000 39,000 Total increase (decrease) (44,761) (44,671) 44,761 44,761

31 December 2011 Interest rate risk

-1% +1%

2011

$ Result

$ Equity

$ Result

$ Equity

$ Cash and Cash Equivalents - at bank 249,861 (2,499) (2,499) 2,499 2,499 Other financial assets - Held to maturity investments 4,200,000 (42,000) (42,000) 42,000 42,000 Total increase (decrease) (44,499) (44,499) 44,499 44,499

(b) Credit risk

Credit risk arises from cash and cash equivalents and deposits with banks and financial institutions, as well as outstanding receivables and committed transactions.

Credit risk management is carried out by the University of Newcastle's Treasury under appointment by the Board of Directors.




(c) Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. Due to the dynamic nature of the underlying businesses, Group Treasury aims at maintaining flexibility in funding by keeping committed credit lines available.

The following tables summarise the maturity of Company’s financial assets and financial liabilities:

Average Interest

rate

Variable interest

rate Within 1

year Non

Interest Total 31 December 2012 % $’000 $’000 $’000 $’000 Financial assets Cash and cash equivalents 2.56 576 - - 576 Receivables - - - 710 710 Other financial assets 5.92 - 3,900 1 3,901 Total financial assets 576 3,900 711 5,187 Financial liabilities Trade and other payables - - - 666 666 Total financial liabilities - - 666 666 31 December 2011 Financial assets Cash and cash equivalents 0.88 250 - - 250 Receivables - - - 374 374 Other financial assets 6.01 - 4,200 1 4,201 Total financial assets 250 4,200 375 4,825 Financial liabilities Trade and other payables - - - 639 639 Total financial liabilities - - 639 639

(d) Fair value estimation


The fair value of financial instruments traded in active markets is based on quoted market prices at the reporting date.

The fair value of financial instruments that are not traded in an active market is determined using valuation techniques. The Company uses a variety of methods and makes assumptions that are based on market conditions existing at each balance date.

The carrying value of financial assets less impairment provision of trade receivables is a reasonable approximation of their fair values due to the short-term nature of trade receivables. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Company for similar financial instruments.




(d) Fair value estimation continued

The carrying amounts and aggregate net fair values of financial assets and liabilities at reporting date are:

Carrying Amount Fair Value

2012 $'000

2011 $'000

2012 $'000

2011 $'000

Financial assets Cash and cash equivalents 576 250 576 250 Receivables 710 374 710 374 Other financial assets 3,901 4,201 3,901 4,201 Total Financial Assets 5,187 4,825 5,187 4,825

Financial liabilities Trade and other payables 666 639 666 639 666 639 666 639

Fair value measurements recognised in the balance sheet are categorised into the following levels:

2012

$ Level 1

$ Level 2

$ Level 3

$ Financial assets - available for sale 1,000 - 1,000 - Total 1,000 - 1,000 -

2011

$ Level 1

$ Level 2

$ Level 3

$ Financial assets - available for sale 1,000 - 1,000 - Total 1,000 - 1,000 -


UON SERVICES LIMITED Directors’ Declaration For the year ended 31 December 2012

The directors of the company declare that;

1. The financial statements and notes are in accordance with the Corporations Act 2001 and:

a) comply with Accounting Standards and the Corporations Regulations 2001; and

b) comply with the Public Finance and Audit Act 1983, and the Public Finance and Audit Regulation 2005; and

c) give a true and fair view of the company’s financial position as at 31 December 2012 and of its performance for the year ended on that date.

2. In the directors’ opinion, there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable.

This declaration is made in accordance with a resolution of the Board of the Directors pursuant to s.41C of the Public Finance and Audit Act 1983.

Sharon Waterhouse

Director

Newcastle

26 March 2013

UoN Singapore Pte Ltd



UON SINGAPORE PTE LTD Contents For the year ended 31 December 2012



Independent Audit Report


UON SINGAPORE PTE LTD Income Statement For the year ended 31 December 2012


Note 2012

$ 2011

$

Revenue from continuing operations

Australian Government financial assistance Fees and charges 3 5,887,623 5,766,799 Investment revenue 4 166 272 Consultancy and contracts 5 52,570 183,652 Other revenue 6 170,254 265,675

Total revenue from continuing operations 6,110,613 6,216,398 Employee Related Expenses 7 2,183,497 2,875,178 Depreciation 8 27,940 33,041 Repairs and maintenance 9 10,032 15,457 Borrowing costs - 31,440 Loss on disposal of assets 9,353 - Other expenses 10 2,818,044 2,634,139


Operating result before income tax 1,061,747 627,143 Income tax expense 11 (163,723) (72,216)

Operating result after income tax for the year 898,024 554,927

Operating result attributable to members of UoN Singapore Pte Ltd 898,024 554,927


UON SINGAPORE PTE LTD Statement of Comprehensive Income For the year ended 31 December 2012


2012

$ 2011

$

Operating result after income tax for the year 898,024 554,927

Other comprehensive income: Exchange differences on translation of foreign operations 124,511 (25,440)

Other comprehensive income for the year, net of tax 124,511 (25,440)

Total comprehensive income for the year 1,022,535 529,487


UON SINGAPORE PTE LTD Statement of Financial Position For the year ended 31 December 2012


Note 2012

$ 2011

$

ASSETS

CURRENT ASSETS Cash and cash equivalents 12 3,151,971 2,124,624 Trade and other receivables 13 239,939 213,254

TOTAL CURRENT ASSETS 3,391,910 2,337,878

NON-CURRENT ASSETS Other financial assets 14 24,508 23,556 Property, plant and equipment 15 33,197 30,537

TOTAL NON-CURRENT ASSETS 57,705 54,093

TOTAL ASSETS 3,449,615 2,391,971

LIABILITIES

CURRENT LIABILITIES Trade and other payables 16 848,196 908,829 Current tax liabilities 173,833 83,592 Provisions 17 95,124 89,623

TOTAL CURRENT LIABILITIES 1,117,153 1,082,044

TOTAL LIABILITIES 1,117,153 1,082,044

NET ASSETS 2,332,462 1,309,927

EQUITY Issued Capital 27 86,036 86,036 Reserves 19 (51,244) (175,755) Retained Earnings 19 2,297,670 1,399,646

2,332,462 1,309,927

TOTAL EQUITY 2,332,462 1,309,927


UON SINGAPORE PTE LTD Statement of Changes in Equity For the year ended 31 December 2012


2011

Note

Issued Capital

$

Foreign Currency

Translation Reserve

$

Retained Earnings

$ Total

$ Balance at 1 January 2011 86,036 (150,315) 844,719 780,440 Operating results for the year - - 554,927 554,927 Other comprehensive income - (25,440) - (25,440)

Balance at 31 December 2011 86,036 (175,755) 1,399,646 1,309,927 2012

Note

Issued Capital

$

Foreign Currency

Translation Reserve

$

Retained Earnings

$ Total

$ Balance at 1 January 2012 86,036 (175,755) 1,399,646 1,309,927 Operating results for the year - - 898,024 898,024 Other comprehensive income - 124,511 - 124,511

Balance at 31 December 2012 86,036 (51,244) 2,297,670 2,332,462


UON SINGAPORE PTE LTD Statement of Cash Flows For the year ended 31 December 2012


Note 2012

$ 2011

$

CASH FLOWS FROM OPERATING ACTIVITIES:

Receipts from student fees and other customers 6,507,465 5,955,735 Payments to suppliers and employees (5,083,004) (5,530,674) Interest received 166 272 Interest paid - (31,440) GST recovered (paid) (383,574) (500,108) Income taxes paid (78,483) (33,581) Net cash provided by (used in) operating activities 26 962,570 (139,796)

CASH FLOWS FROM INVESTING ACTIVITIES:

Payments for purchase of property, plant and equipment (38,692) (8,857) Net cash used by investing activities

(38,692) (8,857)

CASH FLOWS FROM FINANCING ACTIVITIES:

Repayment of borrowings - (771,140) Net cash used by financing activities

- (771,140) Net increase (decrease) in cash and cash equivalents held 923,878 (919,793) Cash and cash equivalents at beginning of year 2,124,624 3,050,230 Effects of exchange rate changes on cash and cash equivalents 103,469 (5,813) Cash and cash equivalents at end of year 12 3,151,971 2,124,624


UON SINGAPORE PTE LTD Notes to the Financial Statements For the year ended 31 December 2012

1 Summary of Significant Accounting Policies

(a) Basis of Preparation

The principal accounting policies adopted in the preparation of the financial report are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. The amounts presented are in Australian Dollar. The Company was established and has its domicile in the Republic of Singapore. The principal place of business is: 491B River Valley Road #04-02 Valley Point Singapore 248373

The principal activities of the Company are:

Creating, developing and delivering educational programmes business, management and related fields on behalf of The University of Newcastle.

The annual financial statements represent the audited general purpose financial statements of UON Singapore Pte Ltd. They have been prepared on an accrual basis in accordance with Australian Accounting Standards.

Additionally the statements have been prepared in accordance with following statutory requirements:



UON Singapore Pte Ltd is a for-profit entity and these statements have been prepared on that basis.


The financial statements were authorised for issue by the members of UON Singapore Pte Ltd on 26 March 2013.




The preparation of financial statements in conformity with Australian Accounting Standards requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Company’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in the relevant notes to the financial statements.

Financial assets - managements makes judgements in determining whether assets are classified as available-for-sale, held-to-maturity or other.



1 Summary of Significant Accounting Policies continued

(b) Foreign currency translation

(i) Functional and presentation currency

Items included in the financial statements of the Company are measured using the currency of the primary economic environment (Singaporean) in which the entity operates (‘the functional currency’).

The Company's financial statements are presented in Australian dollars, which is The University of Newcastle's functional and presentation currency.

(ii) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement. Qualifying cash flow hedges and qualifying net investment hedges in a foreign operation shall be accounted for by recognising the portion of the gain or loss determined to be an effective hedge in other comprehensive income and the ineffective portion in profit or loss.

If gains or losses on non-monetary items are recognised in other comprehensive income, translation of gains or losses are also recognised in other comprehensive income. Similarly, if gains or losses on non-monetary items are recognised in profit and loss, translation of gains or losses are also recognised in profit or loss.

(c) Revenue Recognition




(i) Student fees and charges

Fees and charges are recognised as income in the year of receipt, except to the extent that fees and charges relate to courses to be held in future periods. Such income (or portion thereof) is treated as income in advance in liabilities. Conversely, fees and charges relating to debtors are recognised as revenue in the year to which the prescribed course relates.

(d) Income Tax

The Company is subject to income tax under Singaporean Legislation.

The income tax expense or revenue for the period is the tax payable/receivable on the current period’s taxable income based on the national income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses.




(d) Income Tax continued

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects either accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the reporting date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred tax assets are recognised for deductible temporary differences and unused tax losses, only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.

Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.

Current and deferred tax assets and liabilities relating to the same taxation authority are offset when there is a legally enforceable right to offset current tax assets and liabilities and they are intended to be either settled on a net basis, or the asset is to be realised and the liability settled simultaneously. Current and deferred tax balances attributable to amounts recognised outside profit and loss are also recognised outside profit and loss.

(e) Impairment of assets

Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows which are largely independent of the cash inflows from other assets or groups of assets (cash generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.

(f) Cash and cash equivalents

For statement of cash flows presentation purposes, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the statement of financial position.

(g) Trade receivables


Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. A provision for impairment of receivables is established when there is objective evidence that the Company will not be able to collect all amounts due according to the original terms of receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 30 days overdue) are considered indicators that the trade receivable is impaired. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. Cash flows relating to short-term receivable are not discounted if the effect of discounting is immaterial. The amount of the provision is recognised in the income statement.




(h) Investments and other financial assets

Classification

The Company classifies its investments and other financial assets in the following categories: financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, and available-for-sale financial assets. The classification depends on the purpose for which the investments were acquired. Management determines the classification of its investments at initial recognition and, in the case of assets classified as held-to-maturity, re-evaluates this designation at each reporting date.





(iii) Held-to-maturity investments

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Company’s management has the positive intention and ability to hold to maturity.

(iv) Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated in this category or are not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the reporting date.


Regular purchases and sales of investments and other financial assets are recognised on trade-date - the date on which the Company commits to purchase or sell the asset. Investments are initially recognised at fair value plus transactions costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognised at fair value and transaction costs are expensed in the income statement. Financial assets are derecognised when the rights to receive cash flows from the investments and other financial assets have expired or have been transferred and the Company has transferred substantially all the risks and rewards of ownership.


Subsequent measurement

Available-for-sale financial assets and financial assets at fair value though profit and loss are subsequently carried at fair value. Loans and receivables are carried at amortised cost using the effective interest method. Gains or losses arising from changed in the fair value of the 'financial assets at fair value through profit or loss' category are included in the income statement within other income or other expenses in the period in which they arise.




(h) Investments and other financial assets continued

Subsequent measurement continued


Fair value

The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active (and for unlisted securities), the Company establishes fair value by using valuation techniques. These include reference to the fair values of recent arm's length transactions, involving the same instruments or other instruments that are substantially the same, discounted cash flow analysis, and option pricing models refined to reflect the issuer's specific circumstances.

Impairment

The Company assesses at each reporting date whether there is objective evidence that a financial asset or group of financial assets is impaired. In the case of equity securities classified as available-for-sale, a significant or prolonged decline in the fair value of a security below its cost is considered in determining whether the security is impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss - measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit and loss - is removed from equity and recognised in the income statement. Impairment losses recognised in the income statement on equity instruments are not reversed through the income statement.

(i) Property, Plant and Equipment

Property, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.


Depreciation is calculated using the straight line method to allocate their cost or revalued amounts, net of their residual values, over their estimated useful lives, as follows:

Plant and equipment - Furniture and fittings 3 years - Other equipment 1 - 3 years






(i) Property, Plant and Equipment continued

Gains and losses on disposals are determined by comparing proceeds with carrying amounts. These are included in the income statement. When revalued assets are sold, it is Group policy to transfer the amounts included in other reserves in respect of those assets to retained earnings.

(j) Trade and other payables

These amounts represent liabilities for goods and services provided to the Company prior to the end of the financial year, which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition.

(k) Provisions

Provisions for legal claims and service warranties are recognised when: the Company has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Provisions are not recognised for future operating losses.



(l) Employee benefits


Liabilities for short-term employee benefits including wages, salaries and non-monetary benefits due to be settled within 12 months after the end of the period are measured at the amount expected to be paid when the liability is settled and recognised in other payables. Liabilities for non-accumulating sick leave are recognised when the leave is taken and measured at the rates paid or payable.


The liability for long-term employee benefits such as annual leave and accumulating sick leave is recognised in current provisions for employee benefits as it is not due to be settled within 12 months after the end of the reporting period. It is measured at the amount expected to be paid when the liability is settled. Regardless of the expected timing of settlements, provisions made in respect of employee benefits are classified as a current liability, unless there is an unconditional right to defer the settlement of the liability for at least 12 months after the reporting date, in which case it would be classified as a non-current liability.




(m) Goods and Services Tax (GST)


Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the balance sheet.


(n) Comparative Amounts

Where necessary, comparative information has been reclassified to enhance comparability in respect of changes in presentation adopted in the current year.

(o) New Accounting Standards and Interpretations

Certain new Accounting Standards and Interpretations have been published that are not mandatory for 31 December 2012 reporting periods. UON Singapore Pte Ltd's assessment of the impact of these new Standards and Interpretations is set out below:

• AASB 9 Financial Instruments, AASB 2009-11 Amendments to Australian Accounting Standards arising from AASB 9 and AASB 2010-7 Amendments to Australian Accounting Standards arising from AASB 9 (December 2010) (effective from 1 January 2013)

• AASB 10 Consolidated Financial Statements, AASB 11 Joint Arrangements, AASB 12 Disclosure of Interests in Other Entities, revised AASB 127 Separate Financial Statements, AASB 128 Investments in Associates and Joint Ventures, AASB 2011-7 Amendments to Australian Accounting Standards arising from the Consolidation and Joint Arrangements Standards(effective 1 January 2013)

• AASB 13 Fair Value Measurement and AASB 2011-8 Amendments to Australian Accounting Standards arising from AASB 13 (effective 1 January 2013)

• Revised AASB 119 Employee Benefits, AASB 2011-10 Amendments to Australian Accounting Standards arising from AASB 119 (September 2011) and AASB 2011-11 Amendments to AASB 119 (September 2011) arising from Reduced Disclosure Requirements (effective 1 January 2013)





Changes have been made to the classification of certain items in the financial statements. As a result, certain amounts reported for 2011 have been reclassified as set out below. There has been no effect on operating result and net assets.



Restated 2011

$

Previously Reported

2011 $

Revenue from continuing operations Consultancy and contracts 183,652 - Other revenue 265,675 449,327

Expenses from continuing operations Repairs and maintenance (15,457) - Borrowing costs (31,440) - Other expenses (2,634,139) (2,681,036)

Total reclassification of Income Statement (2,231,709) (2,231,709)


The reclassification has been undertaken to ensure the Company is classifying all Income Statement items consistently with its parent entity, The University of Newcastle.

3 FEES AND CHARGES

2012

$ 2011

$

Course Fees and Charges Fee-paying overseas students 5,885,863 5,763,900 Course and conference fees 1,760 2,899

Total Fees and Charges 5,887,623 5,766,799

4 INVESTMENT REVENUE Interest 166 272 Total investment revenue 166 272



5 CONSULTANCY AND CONTRACTS

2012 $

2011 $

Consultancy 23,184 62,677 Contract research Other contract revenue 29,386 120,975

Total consultancy and contracts 52,570 183,652

6 OTHER REVENUE

Sponsorship - 2,121 Other revenue 170,254 263,554



Academic Salaries 1,438,026 2,118,715 Contribution to funded superannuation and pension schemes 65,360 69,992 Annual leave 6,037 12,577

Total academic 1,509,423 2,201,284

Non-academic Salaries 609,264 595,317 Contribution to funded superannuation and pension schemes 65,984 67,661 Annual leave (1,174) 10,916

Total non-academic 674,074 673,894

Total employee related expenses 2,183,497 2,875,178



8 DEPRECIATION

2012

$ 2011

$

Depreciation Furniture and fittings 22,787 25,878 Office equipment 5,153 7,163


9 REPAIRS AND MAINTENANCE Buildings 1,393 - Cleaning 8,343 8,116 Repairs and maintenance - general 296 7,341

Total repairs and maintenance 10,032 15,457

10 OTHER EXPENSES Advertising, marketing and promotions 15,495 85,570 Rent 144,964 112,319 General consumables 38,835 52,480 Insurances 17,462 16,583 Minor equipment 18,098 32,797 Operating lease rental 12,405 10,469 Professional services 620,768 232,857 Scholarships, grants and prizes 11,504 3,413 Service fees (Parent) 1,563,210 1,746,988 Telecommunications 24,890 22,677 Travel, staff development and entertainment 258,082 284,196 Utilities 12,997 13,146 Other expenses 79,334 20,644




11 INCOME TAX EXPENSE

2012

$ 2011

$

(a) Income tax expense Current tax 163,723 72,216 Deferred tax - -

Total income tax expense 163,723 72,216

Income tax expense is attributable: Operating result from continuing operations 163,723 72,216

Aggregate income tax expense 163,723 72,216

(b) Numerical reconciliation of income tax expense to prima facie tax payable Operating result from continuing operations before income tax expense 1,061,746 627,143 Tax at the Singaporean tax rate of 17% (2011 - 17%) 180,497 106,614 Tax effect of amounts which are not deductible (taxable) in calculating taxable income (16,774) (34,398)

Income tax expense 163,723 72,216

12 CASH AND CASH EQUIVALENTS

Cash at bank and on hand 3,151,971 2,124,624

Total cash and cash equivalents 3,151,971 2,124,624

(a) Reconciliation to cash and cash equivalents at the end of the year

The above figures are reconciled to cash at the end of the year as shown in the statement of cash flows as follows: Balances as above 3,151,971 2,124,624

Balance as per cash flow statement 3,151,971 2,124,624



13 RECEIVABLES

2012 $

2011 $

Current Trade receivables 174,703 170,054 Prepayments 7,852 14,569 Other receivables 57,384 28,631

Total current receivables 239,939 213,254

(a) Past due but not impaired

As at 31 December 2012, trade receivables of $174,308 were past due but not impaired. These relate to a number of independent customers for whom there is no recent history of default.

The ageing analysis of these receivables is as follows: Less than 3 months 174,308 -

174,308 -


Non-Current Held to maturity investments 24,508 23,556 Total other financial assets 24,508 23,556

(a) Held to Maturity Investments

A deposit of SGD$31,121 is assigned to the Comptroller of Goods and Services Tax (GST) of Singapore for the purposes of obtaining status under the Singaporean GST Scheme. The deposit will be held until 29 November 2014.




2012 $

2011 $

PLANT AND EQUIPMENT At cost 135,891 176,533 Accumulated depreciation (102,694) (145,996)

Total property, plant and equipment 33,197 30,537

Movement in the carrying amounts for each class of property, plant and equipment between the beginning and the end of the current financial year:

Plant and equipment

$ Total

$

Balance at 31 December 2011 Balance at the beginning of year 54,685 54,685 Additions 8,694 8,694 Depreciation expense (33,041) (33,041) Foreign exchange movements 199 199



Balance at the beginning of year 30,537 30,537 Additions 39,428 39,428 Disposals (9,532) (9,532) Depreciation expense (27,940) (27,940) Foreign exchange movements 704 704



Current Unsecured liabilities Trade creditors 255,163 413,199 Related party payables 556,336 483,463 Other payables 36,697 12,167

848,196 908,829

Total current trade and other payables 848,196 908,829



16 TRADE AND OTHER PAYABLES continued

(a) Foreign currency risk

The carrying amounts of the Company's trade and other payables are denominated in the following currencies:

2012

$ 2011

$ Singapore Dollars 848,196 908,829

848,196 908,829

17 PROVISIONS

Current provisions expected to be settled within 12 months Employee benefits

Annual leave 95,124 89,623

Total current provisions 95,124 89,623

Provision for annual leave This provision is for outstanding annual leave liabilities that employees have not yet taken. It is assumed the majority of leave will be taken in the next twelve months. The measurement and recognition criteria relating to employee benefits has been included in note 1 to this report.

Movements in each class of provision during the year is set out below:

Annual leave $

Total $

Current Opening balance at 1 January 2012 89,623 89,623 Additional provisions 123,587 123,587 Provisions used (118,086) (118,086)




18 CURRENT TAX LIABILITIES

2012

$ 2011

$ Income tax payable 173,833 83,592

Total current tax liabilities 173,833 83,592

19 RESERVES AND RETAINED EARNINGS

(a) Reserves

2012

$ 2011

$

Reserves Foreign currency translation reserve (51,244) (175,755)

Total Reserves (51,244) (175,755)

(b) Movements

Foreign currency translation reserve Balance as at 1 January (175,755) (150,315) Currency translation differences arising during the year 124,511 (25,440)

(51,244) (175,755)

Movements in retained earnings Retained earnings at the beginning of the year 1,399,646 844,719 Operating result for the year 898,024 554,927

Retained earnings at end of the financial year 2,297,670 1,399,646

(c) Nature and purpose of reserves Foreign currency translation reserve - exchange differences arising on translation of the Singapore dollar financial statements into Australian dollars are taken to the foreign currency translation reserve.



The following persons were responsible persons and executive officers of UON Singapore Pte Ltd during the financial year:

(i) Chairman and Executive Council members Professor John Phillip Carter - Chairperson Mr Robert John Cochrane - Director, Chief Executive Officer Mr Craig John Waliis - Director (appointed 23 March 2012) Dr Susan Mary Gould - Director (resigned 28 June 2012 Mr Tao Yeoh Chi - Independent Director Mr Peter Tay Buan Huat - Independent Director Ms Sandra Davie D/O Persasmy - Independent Director Mr Michael Grenville Gray - Independent Director



20 KEY MANAGEMENT PERSONNEL DISCLOSURES continued

(b) Remuneration of key management personnel

2012

Number 2011

Number

Remuneration of executive officers Nil 3 3 $1 to $9,999 4 4 $310,000 to $319,999 1 - $380,000 to $389,999 - 1

(c) Remuneration of key management personnel

2012 $

2011 $

Short-term employee benefits 307,277 389,662

Total key management personnel compensation 307,277 389,662


During the year the following fees were paid or payable for services provided by the auditor of the Company, its related practices and non-related audit firms.

2012 $

2011 $

Assurance services

Audit services

- Audit and review of financial reports - Fees paid to KPMG for Singaporean statutory requirements 23,277 26,990 - Fees paid to NSW Audit Office for Audit of financial report 25,300 14,200

48,577 41,190



22 CONTINGENCIES

Contingent liabilities

UON Singapore Pte Ltd currently has no contingent liabilities as at 31 December 2012 (2011: NIL).

Contingent assets

UON Singapore Pte Ltd currently has no contingent assets as at 31 December 2012 (2011: NIL).

23 COMMITMENTS

(a) Operating lease commitments (GST excl.)

(i) Operating Leases

Commitments in relation to leases contracted for at the reporting date but not recognised as liabilities:

2012 $

2011 $

Due within one year 216,545 128,109 Due after one year, but within five years 56,722 8,949 Net commitments 273,267 137,058

24 RELATED PARTIES

(a) Parent entity

The ultimate parent entity is The University of Newcastle, by virtue of its full ownership of the Company's issued share capital.

(b) Key management personnel

Disclosures relating to responsible officers and specified executives are set out in note 20


The following transactions occurred with related parties:

2012

$ 2011

$

i) The University of Newcastle

Services provided to the University Service fees charged on services rendered 1,521,212 1,746,990

1,521,212 1,746,990



24 RELATED PARTIES continued

(d) Outstanding balances

The following balances are outstanding at the reporting date in relation to transactions with related parties:

2012

$ 2011

$

Current Payables (purchase of services) The University of Newcastle 556,336 483,463

556,336 483,463

(e) Terms and Conditions

All transactions with related parties were conducted under normal terms and conditions.

25 EVENTS OCCURRING AFTER REPORTING DATE

No matters or circumstances have arisen since the end of the year which significantly affected or may significantly affect the operations of the Company, the results of those operations, or the state of affairs of the Company in future years.

26 RECONCILIATION OF OPERATING RESULT AFTER INCOME TAX TO NET CASH FLOWS FROM OPERATING ACTIVITIES

2012

$ 2011

$ Operating result for the year 898,024 554,927

Add non-cash items: Depreciation 27,940 33,041 Net (gain) loss on sale of non-current assets 9,354 - Net exchange differences 45,031 (21,857)

Changes in operating assets and liabilities: (Increase) decrease in trade debtors 2,226 (65,319) (Increase) decrease in other receivables (18,571) (62,062) Increase (decrease) in trade creditors (19,682) (511) Increase (decrease) in related party payables 62,248 (695,467) Increase (decrease) in other operating liabilities (132,740) 23,509 Increase (decrease) in provision for income taxes payable 86,862 70,883 Increase (decrease) in other provisions 1,878 23,060

Net cash provided by (used in) operating activities 962,570 (139,796)

27 ISSUED CAPITAL Fully paid ordinary shares (2 shares) 86,036 86,036



28 FINANCIAL RISK MANAGEMENT

(a) Introduction

The Company's activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk. The Company's overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Company.

Risk management is carried out under the direction of the Board of Directors.

(b) Market risk

(i) Foreign exchange risk

The Company operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the Singapore and Australian dollar.

Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities that are denominated in a currency that is not the Company's functional currency. The risk is measured using sensitivity analysis and cash flow forecasting.

Management has set up a policy to manage their foreign exchange risk against their functional currency.

At 31 December 2012, had the Australian Dollar weakened/strengthened by 10% against the Singapore Dollar with all other variables held constant, post-tax profit for the year would have been $55,634 higher/ $55,634 lower (2011:$48,346 higher/lower), mainly as a result of foreign exchange gains/losses on translation of Singapore dollar denominated related party payables and financial assets at fair value through profit or loss.

(ii) Price risk

The Company does not have any investments in equity securities and as such is not exposed to price risk.

(iii) Cash flow and fair value interest rate risk

The Company's main interest rate risk arises from cash and cash equivalents. At 31 December 2012, if interest rates had changed by -/+ 1% from the year end rates of with all other variables held constant, the result for the year would have been $31,520 lower/$31,520 higher (2011: $21,246 higher/lower), mainly as a result of higher interest income from cash and cash equivalents.




(b) Market risk continued

(iv) Summarised sensitivity analysis

The following table summarises the sensitivity of Company's financial assets and financial liabilities to interest rate risk and foreign exchange risk.

31 December 2012 Interest rate risk Foreign exchange risk

-1% +1% -1% +1%

2012 $

Result $

Equity $

Result $

Equity $

Result $

Equity $

Result $

Equity $

Financial assets Cash and Cash Equivalents - at bank 3,151,971 (31,520) (31,520) 31,520 31,520 - - - -

Financial liabilities Related party payables (nominated in $SGD) 556,336 - - - - (55,634) (55,634) 55,634 55,634 Total increase/(decrease) (31,520) (31,520) 31,520 31,520 (55,634) (55,634) 55,634 55,634

31 December 2011 Interest rate risk Foreign exchange risk

-1% +1% -1% +1%

2011

$ Result

$ Equity

$ Result

$ Equity

$ Result

$ Equity

$ Result

$ Equity

$

Financial assets Cash and Cash Equivalents - at bank 2,124,624 (21,246) (21,246) 21,246 21,246 - - - -

Financial liabilities Related party payables (nominated in $SGD) (483,463) - - - - 48,346 48,346 (48,346) (48,346) Total increase/(decrease) (21,246) (21,246) 21,246 21,246 48,346 48,346 (48,346) (48,346)

(c) Credit risk

Credit risk arises from cash and cash equivalents, and deposits with banks and financial institutions, as well as outstanding receivables and committed transactions.

(d) Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. Due to the dynamic nature of the underlying businesses, The board aims at maintaining flexibility in funding by keeping sufficient cash reserves on hand.




(d) Liquidity risk continued

The following tables summarise the maturity of the Company’s financial assets and financial liabilities:

Average

Interest rate Variable

interest rate Within 1 year Non Interest Total

2012

% 2011

% 2012

$ 2011

$ 2012

$ 2011

$ 2012

$ 2011

$ 2012

$ 2011

$

Financial Assets: Cash and cash equivalents - - 3,152 2,125 - - - - 3,152 2,125 Receivables - - - - - - 238 213 238 213 Other financial assets 0.70 0.92 - - 25 24 - - 25 24

Total Financial Assets 3,152 2,125 25 24 238 213 3,415 2,362

Financial Liabilities: Payables - - - - - - 290 425 290 425 Amounts payable to related parties - - - - - - 556 483 556 483

Total Financial Liabilities - - - - 846 909 846 909

(e) Fair value estimation


The fair value of financial instruments traded in active markets (such as publicly traded derivatives) is based on quoted market prices at the reporting date. The quoted market price used for financial assets held by the Company is the current bid price.

The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined using valuation techniques. The Company uses a variety of methods and makes assumptions that are based on market conditions existing at each reporting date.

The carrying value less impairment provision of trade receivables is a reasonable approximation of their fair values due to the short-term nature of trade receivables. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Company for similar financial instruments.





(e) Fair value estimation continued


Carrying Amount Fair Value

2012

$ 2011

$ 2012

$ 2011

$

Financial Assets Cash and Cash Equivalents 3,151,971 2,124,624 3,151,971 2,124,624 Receivables 239,938 213,254 239,938 213,254 Other financial assets 24,508 23,556 24,508 23,556 Total Financial Assets 3,416,417 2,361,434 3,416,417 2,361,434

Financial Liabilities Trade and other payables 848,194 908,829 848,194 908,829 Total Financial Liabilities 848,194 908,829 848,194 908,829


UON SINGAPORE PTE LTD Directors’ Declaration For the year ended 31 December 2012

The directors declare that;

1. In the directors opinion, there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable;

2. In the directors’ opinion, the attached financial statements and notes thereto are in accordance with the

Public Finance and Audit Act, 1983, including compliance with accounting standards, and giving a true and fair view of the financial position and performance of the company;

3. The financial reports have been prepared in accordance with Australian Accounting Standards, Urgent

Issues Group Interpretations, and other mandatory professional requirements. Signed in accordance with a resolution of the directors made pursuant to s.41C of the Public Finance and Audit Act, 1983. On behalf of the Directors. Professor John Carter Director and Chairperson 26 March 2013

1 6 5 | T H E U N I V E R S I T Y O F N E W C A S T L E A N N U A L R E P O R T 2 0 1 2 | 1 6 5

Newcastle Innovation LtdABN 97 000 710 074



NEWCASTLE INNOVATION LTD Contents For the year ended 31 December 2012

Financial Statements Directors' Report Income Statement Statement of Comprehensive Income Statement of Financial Position Statement of Changes in Equity Statement of Cash Flows Notes to the Financial Statements Directors' Declaration Independent Audit Report


NEWCASTLE INNOVATION LTD Directors’ Report 31 December 2012

Your directors present their report on Newcastle Innovation Ltd for the financial year ended 31 December 2012.

Directors

The following persons were directors of Newcastle Innovation Ltd during the whole of the year and up to the date of this report: Names Geoffrey James Leonard (Chairman) – resigned 31 January 2013 Glenn Thurston Turner (Deputy Chairman) John Coyle John James O'Brien Lisa Maree Suttton Gardener Michael Brian Calford

The particulars of the qualifications, experience and special responsibilities of each director are as follows:

Geoffrey James Leonard (Chairman - resigned)

B.Com. (NCLE, NSW) Hon.D.Bus (NCLE, NSW) F.C.A., F.C.P.A.Chartered Accountant. Graduate University of Newcastle in Commerce 1968. Director, Council University of Newcastle, 2006-2012. Member, Audit and Risk Management Committee, University of Newcastle 2006-2012. Chair, Faculty of Business and Law Advisory Board 2006-2012. Chairman, Newcastle Innovation 2006-2012. Chairman, The Salvation Army Newcastle Advisory Board 2001 - 2012. Chairman, Special Names Salvation Army Red Shield Appeal. Director, The University of Newcastle Foundation Advisory Committee 2004-2012. Chair, The University of Newcastle Endowment & Bequest Committee, 2005 – 2006. Awarded Hon. Doctor of Business, The University of Newcastle, 2002. Awarded the University of Newcastle Newton-John Award 1999. Awarded Member of Order of Australia (AM) 2009.

Glenn Thurston Turner (Deputy Chairman)

B Comm, FCPA, Chairman Hunter Medical Research Institute. Chairman, Hunter Medical Research Foundation. Newcastle Innovation (formerly TUNRA) Director since May, 1995, Deputy Chairman since 2006.

John Coyle

Commerce (Ecs) (Uni of NSW), Varley Group Ltd - Director, HunterNet Co-operative Ltd - Past Chairman, HunterNet Group Training Company - Director, Australian Industry Group NSW - Selection Councillor, Australian Industry Group, Hunter Manufacturing Council - Member and Past Chairman, Hunter Export Centre - Past Vice Chairman. TAFE NSW – Hunter Institute Advisory Council - Deputy Chairman, Hunter Community Foundation - Director. The Salvation Army 2008 Red Shield Appeal Central Committee - Member, Hunter Manufacturing Association - Director, NSW Co-operatives Federation - Director, Graduate of the Institute of Company Directors, Newcastle Innovation (formerly TUNRA) Director since October 2005.

John James O'Brien

B.V.Sc (Sydney). Managing Director of Jurox Pty Ltd. Past Chairman of the listed fashion group, Palmer Corporation (1994-2000). Past Chair of the Hunter Area Consultative Committee, Past Director of the National Basketball League representing Singapore, Director of Basketball Enterprises, Singapore and Director of the Hunter Founders Forum. Newcastle Innovation (formerly TUNRA) Director since August 2007.



Lisa Maree Sutton Gardner

Business owner and Managing Director Enigma Group (1992-current). Young Business Person of the Year (2003) Hunter Business Chamber. Newcastle Innovation (formerly TUNRA) Director since August 2007.

Michael Brian Calford

Deputy Vice-Chancellor (Research) (2009 - current), Pro Vice-Chancellor of the Faculty of Health, University of Newcastle (2006-2009), Professor of Human Physiology. Has held research academic appointments at The University of Melbourne, City University of New York, Oxford, The University of Queensland, The University of California at Irvine, and The Australian National University. Director NEURA Ltd, Director Hunter Medical Research Institute. Newcastle Innovation (formerly TUNRA) Director since March 2009.

Meetings of Directors

The numbers of meetings of the members of Newcastle Innovation Ltd and of each board committee held during the year ended 31 December 2012, and the numbers of meetings attended by each member were:

Board Meetings

Number of Meetings Attended

Number of Meetings Held

Geoffrey James Leonard 5 5 Glenn Thurston Turner 3 5 John Coyle 4 5 John James O'Brien 4 5 Lisa Maree Sutton Gardner 4 5 Michael Brian Calford 3 5

The Company is a company limited by guarantee and has no share capital. Newcastle Innovation currently has 6 directors.

Objectives and strategies

The objective of the company is to create value from knowledge transfer from the University of Newcastle to industry and government partners. The main strategies involve building internal resources to access intellectual property and research capabilities at the University and connecting these opportunities to target markets both in Australia and internationally.

Performance measures and key performance indicators

Performance is measured in relation to financial performance against budget for key business lines, but also against measures such as the number of new IP disclosures and research projects operated, as well as occupational health and safety standards.



Principal activities

The principal activities of the entity during the financial year were the undertaking of research and consulting projects and the commercialisation of intellectual property (IP). No significant changes in the nature of these activities occurred during the year. These activities are necessary to enable economic value to be created from the knowledge and capabilities residing at the University of Newcastle.

Dividends

The Company, has not paid a dividend during the year ended 31 December 2012 (2011: $Nil).

Review of operations

Operations of the entity during the financial year were consistent with those of prior years. The entity achieved a surplus of $22,161 (2011: $318,083) for the year. The main source of income was from research, consulting and testing services provided to industry and commerce.

Significant changes in state of affairs

No significant changes in the company's state of affairs occurred during the financial year.

Likely development and expected results of operations

The entity will continue to pursue continuing viability of its major divisions and projects in the next financial year.

Further information is not included on the likely developments of the operations of the entity and the expected results of those operations because disclosure of the information would be likely to result in unreasonable prejudice to the entity.

Matters subsequent to the end of the financial year

There are no matters to report subsequent to the end of the financial year.

Insurance of officers

During the year the Company paid a premium for the Directors and Officers Liability insurance policy. This insurance policy provides cover for the Directors named in this report, the Company Secretary, Officers and former Directors and Officers of the Company. The contract prohibits the disclosure of the nature of the liability and the amount of the premium.

Contributions on winding up

In the event of the company being wound up, members are required to contribute a maximum of $20 each.

Auditor's independence declaration

A copy of the Auditor's Independence Declaration as required under section 307C of the Corporations Act 2001 is attached to this report.

This report is made in accordance with a resolution of the Board of Directors, pursuant to s.296(2) of the Corporations Act 2001.

Glenn Thurston Turner Director Newcastle 26 March 2013


NEWCASTLE INNOVATION LTD Income Statement For the year ended 31 December 2012


Note 2012

$ 2011

$

Revenue from continuing operations Consultancy and contracts 3 15,223,679 14,786,781 Investment revenue 4 744,793 722,661

Total revenue from continuing operations 15,968,472 15,509,442

Other income

Net gain on sale of available-for-sale financial assets 116,430 -

Total income from continuing operations 16,084,902 15,509,442

Employee benefits expenses 5 9,821,465 9,027,860 Depreciation and amortisation 6 543,592 368,407 Repairs and maintenance 35,551 - Impairment of assets 7 - 9,339 Net loss on disposal of plant and equipment 961 - Other expenses 8 5,661,172 5,785,753



Operating result attributable to members of Newcastle Innovation Ltd 22,161 318,083


NEWCASTLE INNOVATION LTD Statement of Comprehensive Income For the year ended 31 December 2012


2012

$ 2011

$


Other comprehensive income: Gain (loss) on value of available-for-sale financial assets, net of tax 40,092 2,190

Total comprehensive income 62,253 320,273


NEWCASTLE INNOVATION LTD Statement of Financial Position For the year ended 31 December 2012


Note 2012

$ 2011

$

ASSETS

Current assets Cash and cash equivalents 9 683,013 631,205 Trade and other receivables 10 2,871,804 3,559,401 Other financial assets 11 11,900,000 12,200,000

Total current assets 15,454,817 16,390,606

Non-current assets Other financial assets 11 542,209 588,018 Plant and equipment 12 391,840 416,707 Intangible assets 13 197,084 283,380

Total non-current assets 1,131,133 1,288,105

Total assets 16,585,950 17,678,711

LIABILITIES

Current liabilities Trade and other payables 14 6,745,604 8,424,620 Provisions 15 1,550,753 1,408,262 Other liabilities 16 2,864,604 2,571,093

Total current liabilities 11,160,961 12,403,975

Non-current liabilities Provisions 15 517,000 429,000

Total non-current liabilities 517,000 429,000

Total liabilities 11,677,961 12,832,975

Net assets 4,907,989 4,845,736

EQUITY Reserves 17 145,490 105,398 Retained surplus 17 4,762,499 4,740,338

4,907,989 4,845,736

Total equity 4,907,989 4,845,736


NEWCASTLE INNOVATION LTD Statement of Changes in Equity For the year ended 31 December 2012


Reserves $

Retained Earnings

$ Total

$ Balance at 1 January 2011 103,208 4,422,255 4,525,463 Total comprehensive income for the year 2,190 318,083 320,273

Balance at 31 December 2011 105,398 4,740,338 4,845,736

Reserves $

Retained Earnings

$ Total

$ Balance at 1 January 2012 105,398 4,740,338 4,845,736 Total comprehensive income for the year 40,092 22,161 62,253



NEWCASTLE INNOVATION LTD Statement of Cash Flows For the year ended 31 December 2012


Note 2012

$ 2011

$

Cash flows from operating activities Receipts from customers 10,490,745 15,709,925 Payments to suppliers and employees (incl. GST) (11,206,777) (14,538,065) Interest received 744,793 722,661 Net cash provided by operating activities 22 28,761 1,894,521

Cash flows from investing activities Proceeds from sale of plant and equipment 21,818 - Proceeds from sale of available-for-sale financial assets 115,219 - Proceeds from redemption of held to maturity investments 13,000,000 - Payments for purchase of plant and equipment (168,434) (193,589) Payments for purchase of available-for-sale financial assets (50,000) (1,250,000) Payments for purchase of held to maturity investments (12,700,000) - Payments for purchase of intellectual property (195,556) (409,088) Net cash used by investing activities 23,047 (1,852,677) Net increase (decrease) in cash and cash equivalents held 51,808 41,844 Cash and cash equivalents at the beginning of the year 631,205 589,361 Cash and cash equivalents at the end of the year 9 683,013 631,205


NEWCASTLE INNOVATION LTD Notes to the Financial Statements For the year ended 31 December 2012

1 Summary of significant accounting policies

Newcastle Innovation Ltd (the Company) is a registered company limited by guarantee and is a controlled entity of the University of Newcastle. The Company is a not-for-profit entity (as profit is not its principal object) and it has no cash generating units. The company was established and has its domicile in Australia. The principal place of business is:

The University of Newcastle Industry Development Centre Callaghan NSW 2308 Australia

The principal activities of the Company are to undertake research and consulting projects.

The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.


The annual financial statements represent the audited general purpose financial statements of Newcastle Innovation Ltd. They have been prepared on an accrual basis in accordance with Australian Accounting Standards.




Newcastle Innovation Ltd is a not-for-profit entity and these statements have been prepared on that basis. Some of the requirements for not-for-profit entities are inconsistent with the IFRS requirements.


The financial statements were authorised for issue by the members of Newcastle Innovation Ltd on 26 March 2013.



Critical accounting estimates and judgements

The preparation of financial statements in conformity with Australian Accounting Standards requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Company’s accounting policies. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Newcastle Innovation makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, rarely equal the related actual results. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed below:

• Impairment of investments and other financial assets – the Company assesses at each reporting date whether there is effective evidence that a financial asset or group of financial assets is impaired as outlined in note 1 (g).




(a) Basis of preparation (continued)

• Employee benefits – long service leave – the liability for long service leave is measured at the present value of the expected further payments to be made in respect of services provided by employees up to the reporting date as outlined in note 1 (m)(iii).

• Useful lives of property, plant and equipment – depreciation of plant and equipment is calculated over the assets estimated useful life as outlined in note 1 (i).

• Useful lives of intangible assets – amortisation of intangible assets is calculated over the assets estimated useful lives as outlines in note 1 (j).

• Financial assets – management makes judgements in determining whether assets are classified as available-for-sale, held to maturity or other.

(b) Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, trade allowances, rebates and amounts collected on behalf of third parties.

The amount of revenue is not considered to be reliably measured until all contingencies relating to the sale have been resolved. The company bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.

Revenue is recognised for the major business activities as follows:

(i) Consultancy and research contracts

Revenue from consultancy and research contracts is recognised in the period in which the consultancy/research is provided, except to the extent that revenue relates to consultancy/research to be undertaken in future periods. Such revenue is treated as income in advance in liabilities. Revenue derived from certain consulting activities in which the Company does not take significant risk in the outcomes will not be included as principal revenue of the Company.

(ii) Interest

Interest income is recognised as it accrues.

(c) Income tax

The Company is exempt from income tax under subdivision 50-B of the Income Tax Assessment Act 1997.

(d) Impairment of assets

Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows which are largely independent of the cash inflows from other assets or groups of assets (cash generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.




(e) Cash and cash equivalents

For statement of cash flows presentation purposes, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet.

(f) Trade receivables

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. Trade receivables are generally due for settlement within 30 days.

Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. A provision for impairment of receivables is established when there is objective evidence that the company will not be able to collect all amounts due according to the original terms of receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 30 days overdue) are considered indicators that the trade receivable is impaired. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. Cash flows relating to short-term receivable are not discounted if the effect of discounting is immaterial.

The amount of the provision is recognised in the income statement. When a trade receivable for which an impairment allowance had been recognised becomes uncollectible in a subsequent period, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against impairment of assets in the income statement.

(g) Investments and other financial assets

Classification

The company classifies its investments in the following categories: financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, and available-for-sale financial assets. The classification depends on the purpose for which the investments were acquired. Management determines the classification of its investments at initial recognition and, in the case of assets classified as held-to-maturity, re-evaluates this designation at each reporting date.





(i) Held-to-maturity investments

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the company’s management has the positive intention and ability to hold to maturity.




(g) Investments and other financial assets (continued)

(ii) Available-for-sale financial assets

Available-for-sale financial assets, comprising principally of marketable equity securities, are non-derivatives that are either designated in this category or are not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the reporting date.


Regular purchases and sales of financial assets are recognised on trade-date - the date on which the company commits to purchase or sell the asset. Investments and other financial assets are initially recognised at fair value plus transactions costs for all financial assets not carried are fair value through profit or loss. Financial assets carried are fair value through profit or loss are initially recognised at fair value and transaction costs are expensed in the income statement. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the company has transferred substantially all the risks and rewards of ownership.

When securities classified as available-for-sale are sold, the accumulated fair value adjustments recognised in other comprehensive income are included in the income statement as gains and losses from investment securities. !Subsequent!measurement! Available-for-sale financial assets and financial assets at fair value through profit and loss are subsequently carried at fair value. Loans and receivables and held-to-maturity investments are carried at amortised cost using the effective interest method. Gains or losses arising from changes in the fair value of the ‘financial assets at fair value through profit or loss’ category are included in the income statement within other income or other expenses in the period in which they arise. Changes in the fair value of monetary security denominated in a foreign currency and classified as available-for-sale are analysed between translation differences resulting from changes in amortised cost of the security and other changes in the carrying amount of the security. The translation differences related to changes in the amortised cost are recognised in profit or loss, and other changes in carrying amount are recognised in equity. Changes in the fair value of other monetary and on monetary securities classified as available-for-sale are recognised in equity. Fair!value! The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active (and for unlisted securities), the Company establishes fair value by using valuation techniques. These include reference to the fair values of recent arm's length transactions, involving the same instruments or other instruments that are substantially the same, discounted cash flow analysis, and option pricing models refined to reflect the issuer's specific circumstances. Impairment!!The Company assesses at each reporting date whether there is objective evidence that a financial asset or group of financial assets is impaired. In the case of equity securities classified as available-for-sale, a significant or prolonged decline in the fair value of a security below its cost is considered in determining whether the security is impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss - measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit and loss – is removed from equity and recognised in the income statement. Impairment losses recognised in the income statement on equity instruments are not reversed through the income statement.

(h) Fair value estimation

The fair value of financial assets and financial liabilities have been estimated for recognition and measurement or for disclosure purposes.




(h) Fair value estimation (continued)

The fair value of financial instruments traded in active markets (such as trading and available-for-sale securities) is based on quoted market prices at the reporting date. The quoted market price used for financial assets held by the company is the current bid price; the appropriate quoted market price for financial liabilities is the current ask price.

The fair value of financial instruments that are not traded in an active market is determined using valuation techniques. The Company uses a variety of methods and makes assumptions that are based on market conditions existing at each reporting date. The nominal value less estimated credit adjustments of trade receivables and payables are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discontinuing the future contractual cash flows at the current market interest rate that is available to the Company for similar financial instruments.

(i) Plant and equipment

Plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the company and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.

The useful life of asset classes is: Equipment and vehicles 3 - 5 years



(j) Intangible assets

(i) Intellectual property

Expenditure on intellectual property, being the application of research findings or other knowledge to a plan or design for the production of new or substantially improved products or services before the start of commercial production or use, is capitalised if the product or service is technically and commercially feasible and adequate resources are available to complete development. The expenditure capitalised comprises all directly attributable costs, including costs of materials, services, direct labour and an appropriate production of overheads. Other intellectual property expenditure is recognised in the Income Statement as an expense incurred. Capitalised expenditure is stated at cost over the period of the expected benefit; calculations start from 10 years.

Trademarks and licences have a finite useful life and are carried at cost less accumulated amortisation and impairment losses. Amortisation is calculated using the straight-line method to allocate the cost of trademarks and licences over their estimated useful lives, which vary from 3-10 years.




(j) Intangible assets (continued)

(ii) Software

Expenditure on software, being software that is not an integral part of the related hardware, is capitalised. Capitalised expenditure is stated at cost less accumulated amortisation. Amortisation is calculated using the straight-line method to allocate the cost over the period of the expected benefit, which is 3-5 years.

(k) Trade and other payables

These amounts represent liabilities for goods and services provided to the company prior to the end of the financial year, which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition.

(l) Provisions

Provisions for legal claims and service warranties are recognised when the company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and the amount can be reliably estimated.




(m) Employee benefits

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

Liabilities for short-term employee benefits including wages and salaries and non-monetary benefits due to be settled within 12 months after the end of the period are measured at the amount expected to be paid when the liability is settled and recognised in other payables. Liabilities for non-accumulating sick leave are recognised when the leave is taken and measured at the rates paid or payable.

ii) Annual leave and sick leave

The liability for long-term employee benefits such as annual leave and accumulating sick leave are recognised in current provisions for employee benefits as they are expected to be settled within 12 months after the end of the reporting period. It is measured at the amount expected to be paid when the liability is settled. Regardless of the expected timing of settlements, provisions made in respect of employee benefits are classified as a current liability, unless there is an unconditional right to defer the settlement of the liability for at least 12 months after the reporting date, in which case it would be classified as a non-current liability.




(m) Employee benefits (continued)


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

(n) Rounding of amounts

All amounts appearing in the financial report have been rounded to the nearest dollar. The company is of a kind referred to in Class order 98/0100 as amended by Class order 04/667, issued by the Australian Securities and Investments Commission, relating to the ''rounding off'' of amounts in the financial report.

(o) Goods and services tax (GST)


Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the statement of financial position.

Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the taxation authority, are presented as operating cash flows

(p) New accounting standards and interpretations

Certain new Accounting Standards and Interpretations have been published that are not mandatory for 31 December 2012 reporting periods. Newcastle Innovation Ltd's assessment of the impact of these new Standards and Interpretations is set out below:

• AASB 9 Financial Instruments, AASB 2009-11 Amendments to Australian Accounting Standards arising from AASB 9 and AASB 2010-7 Amendments to Australian Accounting Standards arising from AASB 9 (December 2010) (effective from 1 January 2013)

• AASB 10 Consolidated Financial Statements, AASB 11 Joint Arrangements, AASB 12 Disclosure of Interests in Other Entities, revised AASB 127 Separate Financial Statements, AASB 128 Investments in Associates and Joint Ventures, AASB 2011-7 Amendments to Australian Accounting Standards arising from the Consolidation and Joint Arrangements Standards(effective 1 January 2013)

• AASB 13 Fair Value Measurement and AASB 2011-8 Amendments to Australian Accounting Standards arising from AASB 13 (effective 1 January 2013)

• Revised AASB 119 Employee Benefits, AASB 2011-10 Amendments to Australian Accounting Standards arising from AASB 119 (September 2011) and AASB 2011-11 Amendments to AASB 119 (September 2011) arising from Reduced Disclosure Requirements (effective 1 January 2013)



2 Reclassification of comparative information


Changes have been made to the classification of certain items in the financial statements. As a result, certain amounts reported for 2012 have been reclassified as set out below. There has been no effect on operating result or net assets.



2011 Restated

$

2011 Previously reported

$ Project expenses and consumables - 3,745,461 Professional services - 2,040,292 Other expenses 5,785,753 -

5,785,753 5,785,753

(ii) Reclassification of Statement of Financial Position items

2011 Restated

$

2011 Previously reported

$ Trade and other payables 8,424,620 4,790,493 Other liabilities 2,571,093 6,205,220

10,995,713 10,995,713


The reclassification has been undertaken to ensure the company is classifying all income, expense and Statement of Financial Position items consistently with its parent entity, The University of Newcastle.



3 Consultancy and contracts

2012

$ 2011

$ Consultancy and research contracts income 15,223,679 14,786,781

Total consultancy and contracts 15,223,679 14,786,781


2012

$ 2011

$ Interest 744,793 722,661


5 Employee benefits expenses

2012 $

2011 $

Salaries 7,705,416 6,984,910 Superannuation 695,112 657,803 Payroll tax 499,480 444,500 Long service leave 258,903 279,662 Annual leave 662,554 660,985

Total employee benefits expenses 9,821,465 9,027,860

6 Depreciation and amortisation

2012

$ 2011

$

Depreciation Equipment and vehicles 170,522 126,539


Amortisation Intangibles 373,070 241,868



7 Impairment of assets

Impairment losses – financial assets Other financial assets – Available for sale - 9,339

Total impairment of assets - 9,339



8 Other expenses

2012

$ 2011

$ Advertising, marketing and promotions 133,199 102,211 Donations 5,282 2,155 General consumables 308,821 584,509 Impairment of available-for-sale financial assets 101,874 - Insurances 109,664 34,677 Minor equipment 236,505 - Rental, hire and other leasing fees - 93,965 Operating lease rental 5,423 - Professional services 4,110,658 4,017,853 Scholarships, grants and prizes 42,008 47,212 Telecommunications 63,789 66,867 Travel, staff development and entertainment 465,182 789,125 Utilities 137 3,112 Other expenses 78,630 44,067


9 Cash and cash equivalents

2012 $

2011 $

Cash at bank and on hand 683,013 631,205

Total cash and cash equivalents 683,013 631,205


The above figures are reconciled to cash and cash equivalents at the end of the year as shown in the statement of cash flows as follows: Balances as above 683,013 631,205

Balance as per cash flow statement 683,013 631,205

(b) Cash at bank

Cash at bank is interest bearing with the floating rates being determined by the daily balance of funds held in the account. This was 2.89% for 2012 (2011:4.61%).

10 Receivables

Current Trade receivables 2,659,518 3,089,620 Provision for impairment (17,885) (39,526) Prepayments 49,570 54,000 Related party receivables 180,601 42,252 Other receivables - 413,055

Total current receivables 2,871,804 3,559,401



10 Receivables (continued)

(a) Impaired receivables

As at 31 December 2012 current receivables of the company with a nominal value of $17,885 (2011: $39,526) were impaired. The amount of the provision was $17,885 (2011: $39,526). The individually impaired receivables relate to those debtors that are in unexpectedly difficult economic situations.

The aging of these receivables is as follows: 2012

$ 2011

$ Over 3 months 17,885 39,526

17,885 39,526

As of 31 December 2012, trade receivables of the company with a nominal value of $1,571,951 (2011: $2,163,604) were past due but not impaired. These relate to a number of independent customers for whom there is no recent history of default. The ageing analysis of these receivables is as follows: Less than 3 months 1,571,951 1,821,723 Over 3 months - 341,881

1,571,951 2,163,604

Movements in the provision for impaired receivables are as follows: At 1 January 39,526 103,180 Provision for impairment recognised during the year 7,245 39,526 Recovery of impaired receivables (28,886) (103,180)

17,885 39,526

11 Other financial assets

Current Held to maturity investments 11,900,000 12,200,000

Total current other financial assets 11,900,000 12,200,000

Non-current Available-for-sale financial assets 542,209 588,018

Total non-current other financial assets 542,209 588,018

(a) Investments held on behalf of third parties

Included as part of available-for-sale financial assets is $316,648 of investments held by the company on behalf of third parties. A current liability of $316,648, relating to these investments, has been recognised as part of trade and other payables (refer to note 14).



12 Plant and equipment

2012 $

2011 $

At cost 1,078,794 853,309 Accumulated depreciation (686,954) (436,602)

Total plant and equipment 391,840 416,707

Movement in the carrying amounts for each class of plant and equipment between the beginning and the end of the current year:

Plant and equipment

$

Balance at 31 December 2012 Balance at the beginning of year 416,707 Additions 168,436 Disposals (22,781) Depreciation expense (170,522)

Balance at 31 December 2012 391,840


Balance at the beginning of year 349,657 Additions 193,589 Depreciation expense (126,539)

Balance at 31 December 2011 416,707

13 Intangible assets

2012 $

2011 $

Computer software Cost 91,218 91,218 Accumulated amortisation and impairment (91,218) (91,218)

Net carrying value - - Intellectual property Cost 3,654,790 3,459,234 Accumulated amortisation and impairment (3,457,706) (3,175,854)

Net carrying value 197,084 283,380

Total Intangibles 197,084 283,380



13 Intangible assets (continued)

Movement in the carrying amounts of intangible assets between the beginning and the end of the current year:

Intellectual

property $

Year ended 31 December 2012 Balance at the beginning of the year 283,380 Additions 195,556 Amortisation (281,852)


Year ended 31 December 2011 Balance at the beginning of the year 116,160 Additions 409,088 Amortisation (241,868)


14 Trade and other payables

2012 $

2011 $

Current Unsecured liabilities Trade creditors 3,888,209 4,617,564 Related parties 2,234,588 3,094,216 Investments held in trust for third parties 316,648 407,260 Other payables 306,159 305,580

Total current trade and other payables 6,745,604 8,424,620

15 Provisions

2012

$ 2011

$

Current provisions expected to be settled within 12 months Employee benefits

Annual leave 544,571 509,858 Long service leave 150,000 106,000

694,571 615,858

Current provisions expected to be settled after more than 12 months

Employee benefits Annual leave 181,524 198,278 Long service leave 674,658 594,126

856,182 792,404

Total current provisions 1,550,753 1,408,262



15 Provisions (continued)

2012

$ 2011

$

Non-current provisions Employee benefits

Long service leave 517,000 429,000

Total non-current provisions 517,000 429,000

Provision for annual leave This provision is for outstanding annual leave liabilities that employees have not yet taken. It is assumed the majority of leave will be taken in the next twelve months. The measurement and recognition criteria relating to employee benefits has been included in note 1 to these financial statements.

Provision for long service leave This provision is for outstanding long service leave liabilities that employees have not yet taken. The calculation of the present value of future cash flows in respect of long service leave being taken has been calculated by independent third parties based on historical data provided by the Company.

Movements in each class of provision during the year are set out below:

Annual leave $

Long service leave

$ Total

$ Opening balance at 1 January 2012 708,135 1,120,721 1,828,856 Additional provisions 671,497 267,308 938,805 Provisions used (653,537) (46,371) (699,908)


16 Other liabilities

2012

$ 2011

$

Current Income received in advance 2,864,604 2,571,093 Total other liabilities 2,864,604 2,571,093

17 Reserves and retained earnings

(a) Reserves

2012

$ 2011

$

Reserves Available-for-sale financial assets revaluation reserve 145,490 105,398

Total reserves 145,490 105,398



17 Reserves and retained surplus (continued)

(a) Reserves (continued)

2012

$ 2011

$

Movements

Available-for-sale financial assets reserve Balance as at 1 January 105,398 103,208 Revaluation increment (decrement) 40,092 2,190

Balance at 31 December 145,490 105,398

(b) Retained earnings Retained earnings at the beginning of the year 4,740,338 4,422,255 Operating result for the year 22,161 318,083

Retained earnings at end of the year 4,762,499 4,740,338

(c) Nature and purpose of reserves

The available-for-sale financial assets reserve is used to record gains and losses arising from changes in the fair value of available-for-sale financial assets, until the investment is disposed of or is determined to be impaired, at which time the cumulative gain or loss recognised in the reserve is included in the income statement for the year.

18 Key management personnel disclosures


The following persons were responsible persons and executive officers of the Company during the year:

(i) Board members

Geoffrey James Leonard Glenn Thurston Turner John Coyle John James O'Brien Lisa Maree Sutton Gardner Michael Brian Calford

(ii) Other key management personnel

The following persons also had authority and responsibility for planning, directing and controlling the activities of the company during the year:

Brent Alan Jenkins (Chief Executive Officer)



18 Key management personnel disclosures (continued)

(b) Remuneration of board members and other key management personnel

Board members receive remuneration for their services to the Company, details of amounts paid in the current and prior years are as follows:

2012

Number 2011

Number

Remuneration of Board Members $nil 1 1 $1 to $9,999 4 4 $10,000 to $19,999 1 1

Certain key management personnel receive remuneration for their services to the Company details of amounts paid in the current and prior year are as follows:

2012

Number 2011

Number

Remuneration of other key management personnel $230,000 to $239,999 - 1 $240,000 to $249,999 1 -

(c) Key management personnel compensation

2012

$ 2011

$ Short-term employee benefits 289,900 238,200

Total 289,900 238,200

(d) Other transactions with key management personnel

A director, Mr J Coyle, was Chief Executive Officer of HunterNet during the year. The Company paid membership fees to HunterNet during the year. The membership fee is based on normal commercial terms and conditions.

Directors, Dr GJ Leonard and Mr GT Turner, are Directors of Hunter Medical Research Institute (HMRI). The Company provided services to HMRI during the year and sponsored HMRI to undertake certain research activities. Both transactions were based on normal commercial terms and conditions, and were subject to approval by the CEO.

Aggregate amounts of the above types of other transactions with key management personnel of the Company:

2012

$ 2011

$

Amounts recognised as revenue Service fees 2,135 -

2,135 -

Amounts recognised as expense Membership fees 3,590 6,858 Sponsorships 5,500 7,800

9,090 14,658



19 Remuneration of auditors

During the year, the following fees were paid or payable for services provided by the auditor of the Company, its related practices and non-related audit firms:

2012

$ 2011

$

Assurance services

Audit services Fees paid to The Audit Office of NSW 44,000 51,000

44,000 51,000

20 Contingencies

The company has no contingent assets or liabilities as at 31 December 2012.

21 Events occurring after reporting date

No matters of circumstances have arisen since the end of the year which significantly affected or could significantly affect the operations of the Company, the results of those operations, or the state of affairs of the Company in future years.

22 Reconciliation of operating result after income tax to net cash flows from operating activities

Reconciliation of net cash from operating activities to net operating result 2012

$ 2011

$ Operating result for the year 22,161 318,083 Depreciation and amortisation 543,592 368,407 Net (gain) loss on sale of plant and equipment 961 - Fair value losses (gains) on other financial assets at fair value through profit and loss - 18,309 Net (gain) loss on sale of available-for-sale financial assets (116,429) - Impairment of available-for-sale financial assets 101,874 - (Increase) decrease in trade receivables 249,501 (682,443) (Increase) decrease in other receivables (421,532) (54,000) Increase (decrease) in trade payables (279,796) 1,573,621 Increase (decrease) in other operating liabilities (302,062) - Increase (decrease) in other provisions 230,491 352,544

Net cash provided by (used in) operating activities 28,761 1,894,521



23 Financial risk management

The company's activities expose it to a variety of financial risks: market risk including currency risk (price risk, cash flow interest rate risk and fair value risk), credit risk and liquidity risk. The company's overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Company. The Company uses different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate and other price risks.

Risk management is carried out under guidance provided by the Board of Directors.

(a) Market risk

(i) Foreign exchange risk

As the company does not operate internationally the risk is minimal. The company makes small, infrequent transactions in foreign currencies which do not pose a significant financial risk.

(ii) Price risk

The Group is exposed to equity securities risk. This arises from investments held by the Company and classified on the Statement of Financial Position as available-for-sale financial assets. The risk is managed by management obtaining regular updates from those companies which the Company holds equity, and making regular assessments on whether to hold or sell these securities. The Company is not exposed to commodity price risk.

(iii) Cash flow and fair value interest rate risk

The Company’s main interest rate risk arises from cash and cash equivalents and held to maturity investments. At 31 December 2012, if interest rates had changed by ± 1% from the year end rates with all other variables held constant, post tax profit for the year would have been ± $125,830.

(iv) Summarised sensitivity analysis 31 December 2012 Interest rate risk

2012 -1% +1%

$ Profit

$ Equity

$ Profit

$ Equity

$

Financial assets Cash and cash equivalents 683,013 (6,830) (6,830) 6,830 6,830 Financial assets - Held to maturity investments 11,900,000 (119,000) (119,000) 119,000 119,000

Total increase (decrease) 12,583,013 (125,830) (125,830) 125,830 125,830



23 Financial risk management (continued)

(a) Market risk (continued)

31 December 2011 Interest rate risk

2011 -1% +1%

$ Profit

$ Equity

$ Profit

$ Equity

$

Financial assets Cash and cash equivalents 631,205 (6,312) (6,312) 6,312 6,312 Financial assets - Held to maturity investments 12,200,000 (122,000) (122,000) 122,000 122,000

Total increase (decrease) 12,831,205 (128,312) (128,312) 128,312 128,312

(b) Credit risk

Credit risk arises from cash and cash equivalents, deposits with banks and financial institutions, as well as credit exposures to wholesale and retail customers, including outstanding receivables and committed transactions. For banks and financial institutions, only independently rated parties with a minimum rating of 'BBB+' are accepted. The company has policies in place to ensure that sales of products and services are made to customers with an appropriate credit history.

(c) Liquidity risk

The company maintains sufficient liquid assets to meet its short term obligations. Sufficient cash reserves are kept in our 24 hour access account. These cash accounts are reviewed regularly by management to ensure all payments can be made when they fall due.

The following tables summarise the maturity of the company’s financial assets and financial liabilities:

31 December 2012 Average

interest rate Variable

interest rate Less than 1

year Non Interest Total

Financial assets: % $ $ $ $ Cash and cash equivalents 2.89 683,013 - - - 683,013 Receivables - - - 2,871,804 2,871,804 Held to maturity investments - - 11,900,000 - 11,900,000

Available-for-sale financial assets - - - 542,209 542,209

2.89 683,013 11,900,000 3,414,013 15,997,026

Financial liabilities:

Trade and other payables - - - 6,745,604 6,745,604

- - - 6,745,604 6,745,604




(c) Liquidity risk (continued)

31 December 2011 Average

interest rate Variable

interest rate Less than 1

year Non Interest Total

Financial assets: % $ $ $ $

Cash and cash equivalents 4.61 631,205 - - - 631,205 Receivables - - - 3,559,401 3,559,401 Held to maturity investments - - 12,200,000 - 12,200,000

Available-for-sale financial assets - - - 588,018 588,018

631,205 12,200,000 4,147,419 16,978,624

Financial liabilities:

Trade and other payables - - - 8,424,620 8,424,620

- - - 8,424,620 8,424,620

(d) Fair value estimation


The fair value of financial instruments traded in active markets (such as publicly traded shares) is based on quoted market prices at the balance sheet date. The quoted market price used for financial assets held by the Company is the current bid price.

The carrying value of financial assets less impairment provision of trade receivables is a reasonable approximation of their fair values due to the short-term nature of trade receivables. Due to the short-term nature of financial liabilities, their carrying value is assumed to approximate their fair value.



Carrying amount Fair value

Financial assets 2012

$ 2011

$ 2012

$ 2011

$ Cash and cash equivalents 683,013 631,205 683,013 631,205 Receivables 2,871,804 3,559,401 2,871,804 3,559,401 Other financial assets 12,442,209 12,788,018 12,442,209 12,788,018

Total financial assets 15,997,026 16,978,624 15,997,026 16,978,624

Financial liabilities Trade and other payables 6,745,604 8,424,620 6,745,604 8,424,620

Total financial liabilities 6,745,604 8,424,620 6,745,604 8,424,620





(d) Fair value estimation (continued)

The following table presents the Company's assets and liabilities measured and recognised at fair value at the reporting date into the following levels:

2012

$ Level 1

$ Level 2

$ Level 3

$

Available-for-sale financial assets Equity securities 542,209 492,209 - 50,000

Total 542,209 492,209 - 50,000

2011

$ Level 1

$ Level 2

$ Level 3

$ Equity securities 588,018 452,116 - 135,902 Total 588,018 452,116 - 135,902

Refer to note 1(h) for the accounting policy of fair value estimation.


NEWCASTLE INNOVATION LTD Directors’ Declaration For the year ended 31 December 2012

The directors of the Company declare that: 1. The financial statements and notes are in accordance with the Corporations Act 2001 and:

a. comply with Accounting Standards and the Corporations Regulations 2001; and

b. comply with the Public Finance and Audit Act 1983, and the Public Finance and Audit Regulations 2010; and

c. give a true and fair view of the company's financial position as at 31 December 2012 and of its performance for the year ended on that date.

2. In the directors' opinion, there are reasonable grounds to believe that the Company will be able to pay its debts as and

when they become due and payable.

This declaration is made in accordance with a resolution of the Board of Directors pursuant to s.41C of the Public Finance and Audit Act 1983.

Glenn Thurston Turner Director Newcastle 26 March 2013

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and Chancellery) E [email protected] www.newcastle.edu.au

This Annual Report is available in electronic form at the following address: www.newcastle.edu.au/service/annual-reports

Edited by Rebecca Thurlow and Ellen Carlson, Secretariat, Council Services and Chancellery, The University of Newcastle

Design Marketing & Public Relations, The University of Newcastle

Photography Murray McKean Photography Intervision Photography Conor Ashleigh

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UoN 2013/1002 | CRICOS Provider 00109J

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