Annual Report

annual report

04 Contents

1 Letter to the Minister 2 Chairman’s Report 3 Chief Executive’s Report 4 Corporate Governance 6 VicTrack’s Activities 7 Board of Directors 8 Report of Operations 10 Commercial 13 Property 15 Asset Management

16 Customer Services 17 Environmental Management 18 Rollingstock Holdings (Victoria) Pty Limited 19 Human Resources 20 Financial Performance 21 Statutory Information

23 Financial Statements

Head Ofﬁ ce: Level 17, 589 Collins Street Melbourne Victoria 3000 Postal Address: GPO Box 1681P Melbourne Victoria 3001 Telephone: 03 9619 8850 Facsimile: 03 9619 8851 Website: www.victrack.com.au

VicTrack Annual Report 2004 Letter to the Minister

22 October 2004

The Hon Peter Batchelor MP Minister for Transport Level 26 Nauru House 80 Collins Street Melbourne Victoria 3000

Dear Minister

I am pleased to submit the Annual Report of Victorian Rail Track (VicTrack) for the period 1 July 2003 to 30 June 2004.

During 2003-04, we successfully performed our core roles of property and facilities manager, custodian of Victoria’s rail assets (infrastructure and rolling-stock) and provider of telecommunications services.

In addition, during the year, the organisation engaged in various activities that generated social and environmental beneﬁts to the Victorian community and which complemented Government policy objectives. Further, 2003-04 was a year in which VicTrack staff, through their signiﬁcant knowledge and expertise, made a substantial contribution to the delivery of various Government initiatives and projects.

I am also pleased to report that in 2003-04, VicTrack met its operational and ﬁnancial targets.

The Board and management are committed to ensuring that the strong performance of VicTrack continues over the coming years.

Regards

Dr Thomas W Quirk Chairman

1 Chairman’s Report

On behalf of the Board of Directors, I am Significant commercial activities pleased to present the 2003-04 Annual undertaken during the year included Report of Victorian Rail Track (VicTrack). the substantial completion of the regional telecommunications project During the last twelve months, VicTrack and continuation of the initiative has successfully pursued its principal to redevelop VicTrack’s outdoor objectives, being to undertake various advertising portfolio. custodial activities and responsibilities as owner of the majority of the During 2004-05, the challenge State’s rail infrastructure and rolling- for VicTrack will be to continue to stock, grow the core property and successfully combine the pursuit telecommunications businesses, and of commercial initiatives whilst at the develop and implement commercial same time growing the core business opportunities and initiatives aimed at sectors and addressing our social and improving transport facilities and cash environmental responsibilities. flows for the State. In closing, I would like to thank the For the period under review, all financial Board of Directors, management and and operational performance targets set staff for a job well done. In particular, by the Board were achieved. As a result, I would like to acknowledge the we were able to fund our operations contribution of Christine O’Reilly who from revenue generated from the resigned as a Director during the year. provision of services to customers with Christine was one of VicTrack’s inaugural no Government funding being required Directors, being appointed in 1997, and for operating purposes. Indeed, the has been a highly valued colleague who financial returns generated from the has made a substantial contribution to organisation’s activities were sufficient the organisation. to enable a dividend of $5 million to be I would also like to thank the Minister paid to Government in June 2004. for Transport, the Hon Peter Batchelor, VicTrack’s custodial activities are and the Secretary of the Department further outlined in other sections of this of Infrastructure, Howard Ronaldson, Annual Report. In brief, these activities for their support during the year. include protecting the environment, restoring heritage rail assets and investing in public safety by managing the program to enhance road and Dr Thomas W Quirk pedestrian rail crossings.

2 VicTrack Annual Report 2004 Chief Executive’s Report

Upon reflection, 2003-04 was a VicTrack staff also continued to perform particularly busy year for VicTrack staff. a range of custodial activities during In addition to their day-to-day activities, the year including dealing with inquiries our staff were involved in a range on property related matters varying of other rail related tasks, including from planning referrals to applications delivering a number of significant for the purchase of land, undertaking capital projects and providing advice to restoration and refurbishment works Government as part of the refranchising on a number of heritage listed stations of suburban train and tram services and and rail buildings, managing the level the sale of the Victorian freight business. crossing and pedestrian crossing upgrade projects and proactively addressing our Whilst representing an additional environmental responsibilities. burden, these tasks presented a unique opportunity for VicTrack to grow its During the past twelve months, During 2004-05, in addition to our business, particularly as the provider of additional rolling-stock (suburban regular activities, there will be an telecommunications services, but also trains and trams) was transferred to increased focus on managing the to enhance the reputation of its staff as VicTrack, via its wholly-owned subsidiary delivery of a number of key State possessing considerable knowledge and Rollingstock Holdings (Victoria) Pty projects. Two major projects, regional expertise on rail matters. Limited (RSH). As part of its custodial telecommunications and Marshall role, VicTrack has commenced a program During the year, significant progress Station (near Geelong), are scheduled which will lead to the disposal of was made on several business activities/ for completion in the first half of the obsolete Hitachi trains and Z1 and Z2 initiatives including the installation financial year. class trams. of a fibre optic backbone to the In closing, I would like to thank the regional centres of Ballarat, Bendigo, VicTrack’s reported financial performance dedicated staff at VicTrack for their Geelong and Traralgon, expanding the for 2003-04 includes the value of rolling- continued efforts and assistance and the number of customers and range of stock now owned by the Group and Board for its valued support and positive telecommunications services provided, brought to account for the first time. contribution during the year. commissioning redeveloped advertising Notwithstanding these significant one- sites in Cheltenham and Geelong, off transactions, VicTrack’s underlying negotiating new commercial leases and operations continue to be profitable, continuing the development of land and/ leading to an increase in net assets and John Sutton or air space at various locations. a cash surplus.

3 Corporate Governance

Role of the Board Board Composition

VicTrack has a Board of Directors who The VicTrack Board comprises of are appointed by, and report to, the ﬁ ve independent, non-executive Minister for Transport. The Board is Directors, including the Chairman. responsible for corporate governance The Board’s current term expires practices and VicTrack’s overall in December 2004. business performance. The strength of the Board comes The functions of the Board include: from the interaction of experienced and informed Directors who provide • Ensuring appropriate controls, the wide range of knowledge and systems and procedures are in business experience necessary to place to manage business risks meet VicTrack’s objectives. and ensure compliance with Government, occupational VicTrack’s Directors also constitute health and safety, community, the Boards of the Rollingstock Holdings environmental and other group of companies. regulatory requirements;

• Reviewing and adopting annual Chairman ﬁ nancial budgets and assessing Dr Thomas W Quirk is VicTrack’s and monitoring results on a independent, non-executive Chairman. regular basis as well as approving Dr Quirk has held the position of the annual ﬁ nancial statements; Chairman of the Board since 1997. • Reviewing and evaluating the John Chambers, Deputy Chairman, performance of senior management; has also been a Director since 1997.

• Preparing a three-year Corporate Plan for the approval of the Minister Chief Executive Ofﬁ cer

for Transport; and The Chief Executive Ofﬁ cer (CEO) is • Considering management’s appointed by the Board and is subject to recommendations on major annual performance reviews, also by the investments and strategies to Board. The CEO recommends strategies achieve VicTrack’s objective of and policies for Board approval and is creating and adding value to responsible for VicTrack’s day-to-day assets under its custodianship. operations. John Sutton has held the position of CEO since VicTrack’s inception There is also a Board of Directors in April 1997. for each subsidiary company (forming the Rollingstock Holdings group of companies) that has the same functions as the VicTrack Board.

4 VicTrack Annual Report 2004 Board Meetings Independent Professional Advice

During the year, the Directors met Subject to prior notiﬁ cation to the 11 times. The attendance of Directors Chairman, Directors are entitled was as follows: to obtain independent professional advice in relation to matters pertaining Dr Thomas W Quirk 10 to the performance of their role at Mr John Chambers 11 VicTrack’s cost. Ms Christine O’Reilly (*) 5

Mr John Anderson 9 Corporate Plan

Ms Elana Rubin 11 The Rail Corporations Act 1996 requires the preparation of a Corporate Plan, (*) Ms Christine O’Reilly resigned as which is to be agreed between the a Director on 5 March 2004. Board and the Minister for Transport. The Corporate Plan is prepared each Board Committees ﬁ nancial year for that year and the following two years. This establishes the The Board has established a framework for business strategies and Remuneration Committee and an Audit performance monitoring. and Risk Management Committee. Both Committees comprise all independent, non-executive Directors.

The Remuneration Committee meets as required, with one meeting occurring in 2003-04.

The Audit and Risk Management Committee is chaired by Mr John Directors with a new country passenger train. From left to right, Chambers. Its role is to assist the Board Dan Osborne – Bombardier, Tom Quirk, John Sutton, in relation to the reporting of fi nancial Gary Jackson – Bombardier, John Chambers. information, the appropriate application and amendment of accounting policies and the identifi cation and management of risk and internal control systems. The Committee arranges to meet on a quarterly basis and may hold additional meetings as required. The Chief Executive Offi cer and the General Manager, Finance attend meetings of the Committee except when the Committee wishes to meet alone. The Committee has access to internal and external auditors as required.

5 VicTrack’s Activities

VicTrack’s business and custodial activities encompass the whole State. The following selection of activities undertaken during 2003–04 indicate the diverse nature and extent of VicTrack’s operations.

4 7 8 6,7 2 3 1 6 6 1 5

10 8 7

17 14 16

12,13 11

12 9 SEE INSET

12,15 8,12

Number Activity 1 Environmental remediation projects underway at Spotswood and South Melbourne 2 Investigating development options at Stubbs Street, Kensington 3 Sale and lease of land at Melbourne Central Railway Station 4 Craigieburn electrification project 5 Commenced upgrade works at Elsternwick Station 6 Upgraded pedestrian crossings at Glen Waverley, Ringwood and Tooronga 7 Proactive environmental investigations carried out at Lilydale, Frankston and Ringwood - no significant issues were encountered 8 Proactive environmental investigations carried out at Mildura, Traralgon and Swan Hill – no significant issues were encountered 9 Passenger train services reintroduced to Ararat and Bairnsdale 10 Ouyen - investigated possible landcare projects in consultation with the local community 11 Completed restoration works at Maryborough Station 12 Installation of fibre optic cabling to Ballarat, Bendigo, Geelong and Traralgon 13 Redevelopment of the former Bendigo Workshops site 14 Establishment of “Oppy Museum” at Rochester Railway Station 15 Construction of Marshall Station (near Geelong) 16 Upgraded roof at historic Wangaratta Station 17 Purchase of land for the Wodonga by-pass project

6 VicTrack Annual Report 2004 Board of Directors

From left to right

Dr Thomas W Quirk Mr John Chambers Ms Christine O’Reilly MSc, DPhil, MA, SMP BCom, MBA (Melb), CA, ASIA, FAICD BBus, Dip Securities Inst. Chairman Deputy Chairman, Chairman of the Audit and Risk Management Committee Christine O’Reilly’s appointment as a Director Thomas Quirk was appointed to the Board of VicTrack commenced in April 1997 and of VicTrack as Chairman in April 1997. He John Chambers was appointed to the Board continued until her resignation on 5 March is also Chairman of Virax Holdings Limited. of VicTrack as Deputy Chairman in April 2004. Christine is currently the Chief Executive He is a Principal of Quirk Partners which has 1997. John is also a member of VicTrack’s Offi cer of GasNet Australia. She has extensive interests in publishing and direct marketing. Heritage Advisory Panel. He is currently commercial, fi nancial and management Tom has previously worked for CRA as Chairman of Tectonica Australia Pty Ltd and experience. Prior to joining GasNet in 1995, Chief Consultant primarily engaged in new a Director of Virax Holdings Limited. John’s her previous roles included Associate Director business development and in the United previous roles have included Managing of Centaurus Corporate Finance Pty Ltd States’ venture capital industry for James D Director of Daiwa Securities Stockbroking and an accountant with Price Waterhouse. Wolfensohn. Prior to joining CRA in 1979 he Limited, Chairmanships of Potter Warburg Christine is a member of the Board of the was a Fellow and Lecturer at the University Discount Limited and the Authorised Dealers Australian Pipeline Industry Association of Oxford. Association Inc., and Directorships of the and a Director of Gas Industry Education Victorian Power Exchange and the Australian Pty Limited. Meat and Livestock Corporation. He was Mr John Anderson Cert EDP, MACS formerly an Affi liate of the Australian Stock Exchange. John practices as a corporate John Anderson was appointed a Director advisor and is a Director of McDouall Stuart of VicTrack in April 2000. John is also Corporate Finance Pty Ltd. He is also Chairman of VicTrack’s Heritage Advisory a Committee Member of the Victoria Panel. He holds a senior fi eld position for Day Council. Sun Microsystems in their Asia Pacifi c Division. John is also a Director of the West Gippsland Ms Elana Rubin Healthcare Group. MA, ASIA

Elana Rubin was appointed a Director of VicTrack in July 2000. She is currently Executive Director – Investments of Australian Retirement Fund. Elana is also a Director of UniSuper, Industry Super Property Trust, Hotel Leisure and Tourism Trust of Australia, Victorian Workcover Authority and Victorian Transport Accident Commission.

7 Report of Operations

Establishment various suburban and country passenger trains that are currently being Victorian Rail Track (VicTrack) was manufactured (see section on established on 1 April 1997 following RSH on page 18). proclamation of Section 8 of the Rail Corporations Act 1996 (the Act). Overview of VicTrack’s Role

VicTrack’s Assets VicTrack’s primary role is to grow and add value to assets under its custodial VicTrack owns all Victorian rail and ownership and to improve public tram fi xed infrastructure apart from transport facilities by seeking and the Spencer Street Station Precinct, developing commercial opportunities privately owned sidings and certain in areas other than public transport tourist lines. Infrastructure assets delivery and rail freight. owned by VicTrack include: Although VicTrack owns most of • All land and interests in the land; Victoria’s rail and tram fi xed • Track; infrastructure, and a signifi cant • Signals; proportion of the State’s suburban passenger rolling-stock, the majority • Buildings and structures; of these assets are leased to the • Overhead wiring; Director of Public Transport (DPT). In turn, the DPT sub-leases the • Power substations; infrastructure/ rolling-stock to various The Minister for Transport, the Hon • Communications networks; and transport operators and track access Peter Batchelor, launches the return of passenger services to Bairnsdale • Communications base stations. providers (see The Rail Infrastructure and on 2 May 2004. Rolling-stock Leases on page 9). Assets owned by VicTrack include the electrifi ed train and tram networks in As a consequence of these leases, suburban Melbourne, as well as the non- VicTrack, as infrastructure and rolling- electrifi ed network in country Victoria as stock owner, is not directly involved in far as the Victorian border and including the provision of passenger or freight some branch infrastructure in southern transport services. New South Wales. Under the leases to the DPT, VicTrack VicTrack, through its wholly-owned reserves the exclusive right to undertake subsidiary Rollingstock Holdings (Victoria) non-transport commercial activities in Pty Limited (RSH), also owns a signifi cant the areas of telecommunications, proportion of the State’s existing property leasing and licensing, outdoor suburban passenger rolling-stock (trains advertising and commercial property and trams). In addition, RSH will own development. However, in undertaking its non-transport activities, VicTrack must not adversely interfere with transport operations.

8 VicTrack Annual Report 2004 In the telecommunications arena, Certain closed rail lines in Victoria The lease of non-electrifi ed, intrastate VicTrack itself is a direct supplier of and other land surplus to transport infrastructure (excluding certain country telecommunications services to the rail requirements are not included in stations) to the DPT commenced in May industry. By utilising its communications the infrastructure leases, with 1999 and is for a period of 15 years with network and telecommunications responsibility for maintenance and two further options of 15 years each. expertise, VicTrack supplies a full range management of these assets remaining A lease with the DPT for certain of voice and data communications with VicTrack. Under the rolling-stock country stations commenced in services in both general business and leases, VicTrack is also responsible for the October 2003 and is scheduled to rail operations applications, under fully disposal of obsolete assets, such as the conclude in August 2019. competitive conditions. VicTrack’s Hitachi trains and Z1 and Z2 class trams. customer base for these activities The lease of the non-electrifi ed, The infrastructure leases mentioned is primarily confi ned to rail operators interstate infrastructure to the DPT above also specifi cally exclude in Victoria, including their contractors commenced in July 1999 and is for communications trunk infrastructure – and associated bodies. VicTrack also a period of 15 years. these assets remain under the direct participates in the wholesale management of VicTrack. The lease of the suburban rolling-stock telecommunications market, utilising to the DPT commenced in April 2004 Suburban infrastructure is leased excess capacity in its network assets. and is for a period of 20 years. to the DPT under arrangements that Apart from these clear commercial commenced in April 2004 and which are Under each of these leases, day-to-day activities, VicTrack undertakes a variety scheduled to expire in November 2008. responsibility for conducting transport of administrative tasks and manages As part of the refranchising of suburban operations and maintaining the a wide range of responsibilities that train and tram services, the previous infrastructure and rolling-stock is come with the role of being one of lease, which commenced in August 1999 effectively contracted to the lessees/ Victoria’s largest property owners for a period of 15 years, was terminated. sub-lessees. and landlords. These custodial tasks and responsibilities include environmental management, heritage preservation, public safety issues and community liaison.

The Rail Infrastructure and Rolling-stock Leases

The majority of VicTrack’s assets are leased to the Director of Public Transport (DPT), who in turn sub-leases the infrastructure and rolling-stock to various transport operators and track access providers.

The clock tower at the Newport Workshops Heritage Precinct.

9 Commercial

Introduction Major achievements during the year included: The Commercial Group is responsible for the identifi cation and development • Completion of the refurbishment of major commercial opportunities of the disused Bendigo Workshops, and initiatives in the following enabling the premises to be leased, business sectors: on commercial terms, to a private sector organisation for the purpose • Commercial Development; of manufacturing vehicle • Telecommunications; and components. An additional 150 • Outdoor Advertising. full time positions have been created in Bendigo as a result of Redevelopment at Melbourne this development. The facility was Central Railway Station. Commercial Development offi cially opened by the Victorian VicTrack identifi es and facilitates the Treasurer in May 2004; commercial development of surplus land • Finalised VicTrack’s involvement in the and air space. The primary purpose of redevelopment of Melbourne Central this activity is to capture the value of Railway Station. VicTrack has sold and these assets to attract private sector leased land at Melbourne Central investment for the upgrading of public Railway Station to facilitate the transport facilities and the achievement $200 million redevelopment of the of a positive fi nancial return. shopping complex adjacent to, and Typically, projects undertaken involve the above, the station; sale of land or air space for a range of • The proposed development at Burke residential, retail, commercial or Road, Camberwell has moved into industrial developments. Whilst the the community consultation phase Commercial Group directly manages and with the formation of a Council implements these projects, it does so in working group. VicTrack has agreed conjunction with, and in support of, the to consider the recommendations existing transport franchisees and other emanating from the Council’s Government initiatives (such as the working group before moving Melbourne 2030 Strategy), to ensure forward with the project; and that a ‘whole of Government’ perspective is maintained at all times. • The planned subdivision of VicTrack To this end, it maintains close links land at Bow Crescent, East with the Director of Public Transport, Camberwell has been certifi ed by rail operators and other relevant the City of Boroondara and the Government agencies. land will be offered to the market in late 2004.

A number of other potential development opportunities are in the feasibility stage, including Stubbs Street, Kensington; air space on the south side of Toorak Road, South Yarra; Thornbury Tram Depot; and Commercial Road, Prahran.

10 VicTrack Annual Report 2004 Telecommunications Another key undertaking during the year was the installation of new fi bre optic VicTrack is the key supplier of cable links to the regional locations of telecommunications services to Ballarat, Bendigo, Geelong and Traralgon the public transport sector. Using (regional telecommunications project). its extensive network of fi xed fi bre The primary objective of this project is optic and copper cabling as well as to facilitate a signifi cant upgrade to the a substantial wireless radio network, signalling systems along these corridors VicTrack supplies Victoria’s rail and (as part of the regional fast rail project). tram operators with a diverse range of telecommunications services VicTrack is seeking to improve regional under commercial contracts. and suburban telecommunications connectivity by making surplus capacity During the year, relationships were on the network available to the broader enhanced with the transport operators community, not just the transport by delivering considerable effi ciency operators. improvements, cost reductions and better services. Working together, Already, VicTrack has engaged with the VicTrack and the transport operators education sector, other Government are modernising public transport Departments at State and local level, communications. Some of the projects an emergency services provider and now being developed include: other telecommunications carriers with a view to utilising the VicTrack network. • Virtual private networks; In particular, it is anticipated that the • Enhanced passenger upgraded telecommunications network information systems; will be utilised to provide improved • Better ticketing data exchange; communications services to regional communities. • New train radio communications;

• Wireless internet connections; and

• Better security systems.

During the year, suburban train and tram services were refranchised, resulting in considerable dislocation and change amongst the transport operators. These changes presented Construction activities on the regional a signiﬁ cant challenge to our staff telecommunications project. both in terms of keeping abreast with developments as well as ensuring that essential communications services continued to be provided to the transport operators. It was a credit to staff that the communications services remained so reliable during this period of change.

11 Commercial – continued

Outdoor Advertising

VicTrack owns a portfolio of outdoor advertising panels situated primarily in suburban Melbourne. During the year, the Commercial Group commenced a substantial redevelopment of its portfolio following a strategic review. The redevelopment involves reducing the total number of advertising panels by some 70% with new and more attractive panels being constructed at a number of sites. The redevelopment process involves extensive consultation with local Councils and Government agencies.

During the year, as part of the progressive redevelopment of the portfolio, ﬁve new panels were New advertising panel on a bridge at constructed and 22 existing Bay Road, Cheltenham. panels were removed.

Other initiatives to use outdoor advertising to assist in reducing vandalism, grafﬁti and illegal bill posting continue to be explored.

New panel as viewed from Princes Highway, North Geelong.

12 VicTrack Annual Report 2004 Property

The Property Group manages VicTrack’s corporate real estate.

Functions undertaken by the Group include property management, land assessment, services, sales and acquisitions and land management.

VicTrack is one of the largest landowners in Victoria, owning land that is used for both rail operations (rail reserves) and for non-rail purposes (land generally adjoining the rail reserve that can be used for shops, car-parks or leased for general business purposes).

The majority of rail reserve land is leased to the Director of Public Transport for nominal rental.

One of the major objectives of the Group is to earn a commercial return on non-rail land, through leases and licences. More than 2,000 leases and 16,000 licences are managed by the Group, returning a total income of $24.9 million.

The Property Group also provides beneﬁts to various community groups by offering discounted rents and assisting individuals and organisations New Moorabool River Bridge being constructed for the regional fast involved in the beautiﬁcation and rail project (Ballarat line) on a parcel of land acquired for the project. revegetation of railway land by facilitating access to properties.

A car dealership at Cranbourne built on land leased from VicTrack.

13 Property – continued

Highlights for the year included: • Finalisation of a number of land sales and acquisitions – sales for the year • Successful negotiation of a exceeded $0.6 million, whilst number of new leases, generating acquisitions totalled some $12 million; annual rental in excess of $0.5 million; • Dealing with more than 900 sales, • Provision of expert advice and lease, survey and planning enquiries assistance to Government during from external organisations; the process of refranchising suburban train and tram services and the sale • Management of VicTrack’s heritage of Freight Australia Ltd; properties, including marketing leasing opportunities for restored heritage buildings at Kangaroo Flat, Creswick, Manangatang, Pirron Yallock and Minyip;

• Progressing the sale of land at Cohuna as part of the strategy to dispose of valuable disused railway land; and

• Further developing the new Geographic Information System to enable registered users to access information regarding VicTrack’s land holdings through the internet.

During the year, the Property Group Rochester Railway Station is a VicTrack also made a signiﬁ cant contribution to owned property used by a community the delivery of a number of important group that has recently undertaken Government initiatives including refurbishment works with funding managing the land acquisition process assistance from Heritage Victoria. The Station houses the “Oppy Museum” for the regional fast rail, Wodonga by- containing memorabilia about the life pass, Craigieburn electriﬁ cation and the of the great cyclist Sir Hubert Opperman reintroduction of country passenger who was born in Rochester. services projects. The Group also continues to work with a number of local authorities, assisting with their strategic town planning processes in line with the Government’s Transit Cities and Melbourne 2030 initiatives.

14 VicTrack Annual Report 2004 Asset Management

The Asset Management Group is • Development of a new system responsible for the maintenance and to store technical infrastructure management of infrastructure not drawings to enable the management leased to the Director of Public of these drawings to be in-sourced; Transport. These assets include common • Completion of major station and access track, closed lines, 130 country platform works at various sites as stations and 88 road over rail bridges, part of the project to reintroduce all of which require day-to-day passenger services to Bairnsdale and management. Ararat; and The Group is also responsible for agency • Refurbishment of a number of liaison, project management and heritage listed station buildings. engineering support and advice. The Group liaises with external agencies such as the Department of Infrastructure, VicRoads, Heritage Upgraded pedestrian crossing at Victoria and local Councils, providing Rose Avenue, Glen Waverley. a signiﬁ cant level of knowledge and expertise on rail infrastructure maintenance and management matters. The Group also manages the majority of VicTrack’s capital expenditure program through its specialised project management role.

Major projects in which the Group was involved during the year included:

• Management of the level crossing and pedestrian crossing upgrade programs – as at June 2004, works to the value of some $5 million are in progress at more than 50 sites;

• Substantial involvement in a number of signiﬁ cant State projects, including the Flinders Street Station concourse upgrade project and the construction of Marshall Station (near Geelong);

Completed works on the heritage station at Maryborough.

15 Customer Services

In the past year, the Customer Services As an additional initiative, a number Group has been involved in developing of under-utilised sites have been made several new commercial initiatives aimed available, on commercial terms, to at increasing the utilisation of shared various operators to meet industry infrastructure facilities and under-utilised needs for storage capacity. Newport rail assets, as well as implementing Workshops, Spotswood Depot, enhanced rail safety and risk Tottenham Yard, and sites at West management regimes across VicTrack’s Footscray and Brooklyn have presented business groups. The Group has also opportunities for the storage of obsolete provided invaluable strategic input to a Hitachi train sets, as well as for the number of key State planning strategies short-term storage of infrastructure and project steering committees. components to be used on a range of rail projects. VicTrack has a number of common user rail assets and valuable railhead land VicTrack is the owner of the majority VicTrack has assisted the John Holland parcels that are not leased to the of the State’s heritage tram and train Group in establishing its rail welding depot for the regional fast rail project Director of Public Transport (DPT). ﬂ eets. Many of these items are allocated at its Spotswood Depot. A priority of the Group is to increase to heritage volunteer groups for the usage of these sites (particularly restoration and occasional operational in the strategically important Dynon use. VicTrack is working with the DPT Precinct) by introducing existing and and heritage volunteer groups to ensure potential new entrants into the rail that appropriate safety and industry to these facilities. Increasing maintenance regimes are in place the usage of these facilities not only to protect the State’s heritage assets improves VicTrack’s bottom line, but and enable the operation of heritage also encourages increased competition rolling-stock into the future. and the development of Australia’s Throughout the year, VicTrack has rail industry. been actively involved in a number of State planning and steering committees. In particular, VicTrack has played a key role in the establishment of the important Melbourne Portal project and has also provided strategic advice on the Geelong rail access improvement and Craigieburn electriﬁ cation projects as well as providing input to the Victorian Rail Safety Group.

16 VicTrack Annual Report 2004 Environmental Management

Railway operations in Victoria over more To encourage community involvement in than a century have presented VicTrack, improving the environment, VicTrack has as land owner, with a broad range of developed a leafl et, explaining where and environmental challenges and conditions how opportunities for community to be managed, from nationally revegetation and beautifi cation signifi cantly fl ora to contaminated land. programs exist. As a responsible corporate citizen, In other signifi cant environmental VicTrack has, and will continue to, management initiatives, VicTrack is proactively address its environmental liaising with the Department of responsibilities. Sustainability and Environment in VicTrack has an extensive contamination developing a strategic weed and vermin management strategy based on the management program and supporting proactive investigation of high-risk green initiatives such as Greenfl eet and As a member of Greenfl eet, the rail and non-rail sites. As part of this Landcare Australia through sponsorship CO2 emitted by VicTrack’s motor strategy a program has been developed and consultation. vehicle fl eet is offset by tree planting. to assess and remediate sites to facilitate property leasing or development opportunities.

In managing signiﬁ cant remediation projects at Spotswood and South Melbourne, VicTrack has engaged in an extensive interactive consultative process with local communities, relevant authorities and contaminated land specialists to develop programs to remove the potential environmental risks posed by these sites.

VicTrack has also commenced a program to monitor existing site and operation management by tenants to ensure no further environmental damage or issues arise from the current usage of land. VicTrack staff provide advice and guidance to land users and other Beautiﬁ cation of Moonee Ponds Government agencies on the Creek, along VicTrack land at North development of formal management Melbourne. This area, previously plans, the documentation of procedures the subject of regular dumping of and best practice techniques in rubbish and parking of trucks and trailers, has been revegetated with environmental management. Australian natives, limiting erosion and forming a much improved visual landscape.

17 Rollingstock Holdings (Victoria) Pty Limited

Rollingstock Holdings (Victoria) Pty Limited (RSH) was established in May 2003, primarily to facilitate the manufacture and supply of new country passenger trains for use on the regional fast rail corridors. During 2003-04, a signiﬁ cant proportion of the State’s existing suburban passenger rolling-stock (trains and trams) was transferred to RSH.

Also during the year, RSH ﬁ nalised contractual arrangements for the manufacture and supply of a further 10 three carriage suburban passenger trains.

In addition, during 2003-04, RSH has brought to account a series of transactions to recognise ﬁ nance lease arrangements for various items of new rolling-stock (suburban trains The Minister for Transport, the Hon Peter Batchelor, and trams). launches the new country passenger trains. The majority of the existing rolling-stock owned by RSH is leased to the Director of Public Transport (DPT) who sub-leases the assets to the public transport franchisees. Under the leases, RSH’s role as owner and lessor is largely passive, with the responsibility for all operational and maintenance issues being transferred to the lessees. Passenger trains currently being manufactured will also be leased to the DPT once delivered and accepted into service.

RSH’s major responsibility during the 2004-05 ﬁ nancial year will be to manage the process of disposing of obsolete rolling-stock, including Hitachi trains and Z1 and Z2 class trams, and ensuring all of the owners’/ lessors’ contractual obligations with respect to the new trains are met as the vehicles are delivered.

18 VicTrack Annual Report 2004 Human Resources

Services provided by VicTrack’s Human Equal Opportunity Resources Group during the year VicTrack is an equal opportunity included industrial relations, personnel employer. Policies and practices in administration, employee services, staff relation to the recruitment, reward, training, human resources development promotion and termination of staff and occupational health and safety. are based on principles of equity, merit VicTrack’s overall human resources and fairness. A Merit and Equity Policy strategy involves strengthening has been adopted, covering the key and developing the skills and key issues of discrimination, harassment, competencies of existing staff as well victimisation and equal employment as recruiting additional staff, where opportunity. necessary, to increase the organisation’s overall level of commercial and Workplace Health and Safety technical expertise. For the second year in succession, During 2003-04, VicTrack negotiated VicTrack achieved its target of zero New Siemens transmission system ‘in principle’ approval for its new workplace injuries. equipment to be used as part of the Enterprise Bargaining Agreement. regional fast rail project. This Agreement, effective from 1 July 2003, is a commitment for three years, Rail Safety incorporating a number of productivity An audit conducted in June 2004 initiatives and improvements in return renewed VicTrack’s Rail Safety for salary and wage increases. The new Compliance Accreditation, with no non- Agreement was formally approved and conformances being noted. certiﬁ ed in August 2004. VicTrack arranges rail safety awareness Total Staff 2004 2003 training for its employees and contractors. During 2003-04, 19 staff Commercial 60 61 and 40 external contractors successfully Property 24 26 completed rail safety training. Asset Management 6 6 Customer Services 3 3 Employee Relations

Corporate 10 9 During the year, no time was Total 103 105 lost due to industrial disputes.

19 Financial Performance

All of VicTrack’s budget targets for the 2003-04 ﬁ nancial year were achieved.

VicTrack’s fi nancial performance for 2003-04 includes the value of rolling- stock acquired during the year as part of the Group’s new role as the owner of trains and trams. The recognition of existing rolling-stock as assets received free of charge resulted in the increase in total revenue. The higher expenditure for the year was caused by the income tax expense associated with this transaction. The fair value of existing rolling-stock, and the fi nance lease asset associated with new rolling-stock, are included in total assets. The fi nance lease liability for the new rolling-stock, combined with the provision for income tax, are the main contributors to the increase in liabilities.

5 Year Financial Summary Notes Note 2004(*) 2003(*) 2002 2001 2000 1 Revenue in 2004 includes the fair value of existing rolling-stock. Revenue ($M) ($M) ($M) ($M) ($M) from 2001 onwards includes leasehold Total Revenue 1 669.2 150.8 157.5 152.3 85.2 improvements. Revenue excludes the Victorian Government’s capital assets Total Expenditure 2 (194.4) (102.2) (102.2) (94.4) (96.3) charge. 2 Expenditure in 2004 includes income tax Net Profi t/ (Loss) 474.8 48.6 55.3 57.9 (11.1) expense and depreciation/ amortisation of suburban rolling-stock. Expenditure Net Cash Infl ow from excludes the Victorian Government’s 24.1 29.8 31.8 23.2 21.0 Operating Activities capital assets charge. 3 Increase in total assets in 2004 refl ects Total Assets 3 5,855.5 4,496.4 3,948.1 3,641.0 3,353.2 transfer of suburban rolling-stock and value of leasehold improvements. Increase Total Liabilities 4 (922.3) (360.5) (13.6) (14.5) (7.8) in other years largely represents value of leasehold improvements. Net Assets 4,933.2 4,135.9 3,934.5 3,626.5 3,345.4 4 Liabilities in 2004 includes fi nance lease obligations relating to new rolling-stock. Total Staff 103 105 99 97 99

(*) Consolidated results, including Rollingstock Holdings (Victoria) Pty Limited.

20 VicTrack Annual Report 2004 Statutory Information

Statutory Framework Availability of Information Telecommunications Carrier Licence Victorian Rail Track is a Victorian In accordance with the requirements of statutory authority established under the Ministerial Directions of the Minister VicTrack holds a telecommunications the Rail Corporations Act 1996 and for Finance, details in respect of the carrier licence which, under the operating under the registered business additional items listed in Financial Telecommunications Act 1997, name VicTrack. Reporting Directive 22 have been is required in order to provide prepared and are fully available to telecommunications services the relevant Minister, Members of in the privatised environment. Engagement of Consultants Parliament and the public on request. VicTrack commissioned 11 consultancies Sponsorship of Committees during 2003-04 at a total cost of National Competition Policy $383,737 (2002-03 seven consultancies VicTrack is a member of the Australasian at a total cost of $364,180). All infrastructure leases with the Railway Association Inc. Director of Public Transport (DPT) provide for open access to Victoria’s rail Compliance with Building Act 1993 Acts of Parliament infrastructure. The DPT’s sub-leases to Transport Act (Miscellaneous VicTrack is working towards full Freight Australia Ltd, the Australian Rail The Amendments) Act 2004 compliance with the building and Track Corporation Ltd and suburban , assented to maintenance provisions of the train and tram franchisees facilitate the on 15 June 2004, made amendments to Rail Corporations Act 1996 Building Act 1993. State’s open access regime, fostering both the (RCA) and the Transport Act 1983 (TA) that are The vast majority of buildings owned by competition among intrastate and relevant to VicTrack. The most signifi cant VicTrack were leased out during the year, interstate transport companies. of these are: with the contractual responsibility for VicTrack has approached its other compliance transferred to lessees/ non-transport opportunities within the • Amendments to the TA providing for sub-lessees. framework of maintaining an open the extension of regulations regarding rail safety work to require A compliance program has access regime. That is, no one party is accredited managers of rail been developed in order to meet given exclusive rights to the rail corridor infrastructure and providers and all guidelines. to the detriment of competition. operators of rolling-stock to ensure that persons employed or engaged by Implementation of the Victorian Freedom of Information (FOI) them who carry out railway safety Industry Participation Policy VicTrack received two FOI requests during work are fi t to do so; and In October 2003, the Victorian 2003-04 (six in 2002-03). • Amendments to the RCA allowing Parliament passed the Victorian Industry A valid request under the FOI Act 1982 contracts between VicTrack and Participation Policy Act 2003 which must be made in writing, be the Secretary of the Department requires public bodies and Departments accompanied by a $20 lodgement fee of Infrastructure or the Director to report on the implementation of the and clearly identify the document(s) of Public Transport in relation to the Victorian Industry Participation Policy required. provision of public transport services (VIPP). Departments and public (as defi ned) to include provision for Requests should be submitted to the bodies are required to apply VIPP the imposition of civil penalties for Chief Executive, Victorian Rail Track, in all tenders over $3 million in suburban breach of contract. GPO Box 1681P, Melbourne, Victoria 3001. Melbourne and $1 million in regional Victoria.

21 Statutory Information – continued

Whistleblowers Protection Records and Documents Amendment of Personal Records Act 2001 In line with the requirements of the Applicants may request the amendment The Whistleblowers Protection Public Record Act, the FOI Act, the of any information held on their file Act 2001 became operative on Evidence Act, the Privacy Act and all where it is considered inaccurate, 1 January 2002. other Federal and State Acts, VicTrack incomplete or misleading. Where and its contractors maintain management cannot agree, the The purposes of this Act are: computerised record management applicant is entitled to have a concise (a) to encourage and facilitate systems. Records relating to matters of note setting out the reasons for disclosures of improper conduct policy and procedure, reference material disagreement placed in their file. Such by public officers and public and documents of organisation-wide requests must be in writing and must bodies; interest are maintained. identify the information alleged to be inaccurate, incomplete or misleading. (b) to provide protection for: During the year, VicTrack contracted the (i) persons who make those Department of Infrastructure to disclosures; maintain records from antecedent Transport Authorities. (ii) persons who may suffer reprisals in relation to Correspondence to the Board, Chief those disclosures; and Executive and senior management is maintained in their respective offices (c) to provide for the matters unless belonging to the categories disclosed to be properly described above. Records are kept investigated and dealt with. by subject matter. There have been no disclosures Records and documents not made relating to VicTrack since required for active use are retained the commencement of the Act. in secondary storage at a facility in Spotswood, Melbourne. Regulations

No statutory regulation of signiﬁcance was made affecting VicTrack during the year.

Judicial Decisions

No signiﬁcant judicial decisions affecting VicTrack were made during the year.

22 VicTrack Annual Report 2004 Financial Statements For the year ended 30 June 2004

23 ~ AUDITOR GENERAL VICTORIA

AUDITOR-GENERAL'S REPORT To the Members of the Parliament of Victoria, responsible Ministers and Members of the Board of Victorian Rail Track Matters relating to the electronic presentation of the Audited Financial Report This audit report relates to the financial report of Victorian Rail Track for the financial year ended 30 June 2004 included on its web site. The Members of the Board of Victorian Rail Track are responsible for the integrity of the web site. I have not been engaged to report on the integrity of the web site. The audit report refers only to the statements named below. An opinion is not provided on any other information which may have been hyperlinked to or from these statements. If users of this report are concerned with the inherent risks arising from electronic data communications they are advised to refer to the hard copy of the audited financial report to confirm the information included in the audited financial report presented on this web site. Audit Scope The accompanying financial report of Victorian Rail Track for the financial year ended 30 June 2004, comprising statement of financial performance, statement of financial position, statement of cash flows and notes to the [mancial statements, has been audited. The financial report includes the consolidated financial statements of the economic entity, comprising Victorian Rail Track and the entities it controlled at the year's end or from time to time during the financial year as disclosed in note lea) to the [mancial statements. The Members of the Board are responsible for the preparation and presentation of the financial report and the information it contains. An independent audit of the financial report has been carried out in order to express an opinion on it to the Members of the Parliament of Victoria, responsible Ministers and Members of the Board as required by the Audit Act 1994. The audit has been conducted in accordance with Australian Auditing Standards to provide reasonable assurance as to whether the financial report is free of material misstatement. The audit procedures included an examination, on a test basis, of evidence supporting the amounts and other disclosures in the financial report, and the evaluation of accounting policies and significant accounting estimates. These procedures have been undertaken to form an opinion as to whether, in all material respects, the financial report is presented fairly in accordance with Accounting Standards and other mandatory professional reporting requirements in Australia, and the [mancial reporting requirements of the Financial Management Act 1994, so as to present a view which is consistent with my understanding of the Corporation's and the economic entity's financial position, and their financial performance and cash flows. The audit opinion expressed in this report has been formed on the above basis. Audit Opinion In my opinion, the financial report presents fairly in accordance with applicable Accounting Standards and other mandatory professional reporting requirements in Australia, and the financial reporting requirements of the Financial Management Act 1994, the financial position of Victorian Rail Track and the economic entity as at 30 June 2004 and their financial performance and cash flows for the year then ended.

MELBOURNE r J.W A~ON 22 October2004 ditor-General Victorian Auditor-General's Office Level 34, 140 William Street, MelbourneVV' oria 3000 Telephone (03) 8601 7000Facsimile (03) 8601 7010 Email [email protected] We ite www.auditvic.gov.au

Auditing in the Public Interest Statutory Statement We certify that the attached financial statements for Victorian Rail Track have been prepared in accordance with Standing Direction 4.2 of the Financial Management Act 1994, applicable Financial Reporting Directions, Australian accounting standards and other mandatory professional reporting requirements. We further state that, in our opinion, the information set out in the Statement of Financial Performance, Statement of Financial Position, Statement of Cash Flows and notes to and forming part of the financial statements, presents fairly the financial transactions during the year ended 30 June 2004 and the financial position of Victorian Rail Track as at 30 June 2004. We are not aware of any circumstance that would render any particulars included in the financial statements to be misleading or inaccurate. Signed in accordance with a resolution of the Directors:

Dr Thomas W Quirk Dated 22 October 2004 Chairman

John Sutton Dated 22 October 2004 Chief Executive Officer

Mark Scully Dated 22 October 2004 General Manager, Finance

25 Statement of Financial Performance For the year ended 30 June 2004

Consolidated Parent 2004 2003 2004 2003 Note $’000 $’000 $’000 $’000 Revenue from ordinary activities:

Customers Telecommunications services 14,603 12,361 14,603 12,361 Property related income 24,868 24,246 24,868 24,246 Leasehold improvements/renewals received 99,765 87,343 99,765 87,343 Rolling-stock received free of charge 448,177 – – – Other revenue 2 81,835 26,875 72,018 26,875

669,248 150,825 211,254 150,825

Capital assets charge 1(u) 564,000 501,000 564,000 501,000

564,000 501,000 564,000 501,000

Total revenue 1,233,248 651,825 775,254 651,825

Expenses from ordinary activities:

Employee benefits 3 8,923 8,244 8,923 8,244 Depreciation and amortisation 4 89,968 68,196 74,657 68,196 Interest expense 1(e) 12,682 – – – Capital assets charge 1(u) 564,000 501,000 564,000 501,000 Supplies and services 5 22,846 19,515 22,846 19,515 Other operating expenses 6 9,266 6,259 5,044 6,259

Total expenses 707,685 603,214 675,470 603,214

Profit from ordinary activities 525,563 48,611 99,784 48,611

Tax equivalent expense/(benefit) 1(f) 50,779 – (78,834) –

Net profit for the reporting period 474,784 48,611 178,618 48,611

Total changes in equity other than those resulting from transactions with the Victorian State Government in its capacity as owner 474,784 48,611 178,618 48,611

The Statement of Financial Performance should be read in conjunction with the accompanying notes.

26 VicTrack Annual Report 2004 Statement of Financial Position As at 30 June 2004

Consolidated Parent 2004 2003 2004 2003 Note $’000 $’000 $’000 $’000 Current assets

Cash assets 4,914 3,421 2,438 3,414 Other financial assets 7 174,363 87,447 60,427 66,153 Receivables 8(a) 59,702 13,087 188,782 9,556 Inventory 9 258 493 258 493 Prepayments 121 2,273 121 2,273

Total current assets 239,358 106,721 252,026 81,889

Non-current assets

Other financial assets 7 71,955 140,980 – – Receivables 8(a) 143 145 143 145 Property, infrastructure, plant and equipment 10 5,480,594 4,181,821 4,456,826 4,069,827 Intangible assets 1(m) 63,417 66,754 – –

Total non-current assets 5,616,109 4,389,700 4,456,969 4,069,972

Total assets 5,855,467 4,496,421 4,708,995 4,151,861

Current liabilities

Payables 8(b) 69,468 13,995 65,866 10,008 Employee benefits 11 1,498 2,001 1,498 2,001 Interest bearing liabilities 12 18,546 – – –

Total current liabilities 89,512 15,996 67,364 12,009

Non-current liabilities

Employee benefits 11 4,633 3,964 4,633 3,964 Interest bearing liabilities 12 828,158 340,573 – –

Total non-current liabilities 832,791 344,537 4,633 3,964

Total liabilities 922,303 360,533 71,997 15,973

Net assets 4,933,164 4,135,888 4,636,998 4,135,888

Equity

Contributed capital 13(a) 3,720,349 3,392,857 3,720,349 3,392,857 Asset revaluation reserve 13(b) 558,870 558,870 558,870 558,870 Accumulated surplus 13(c) 653,945 184,161 357,779 184,161

Total equity 4,933,164 4,135,888 4,636,998 4,135,888

The Statement of Financial Position should be read in conjunction with the accompanying notes. 27 Statement of Cash Flows For the year ended 30 June 2004

Consolidated Parent 2004 2003 2004 2003 Note $’000 $’000 $’000 $’000 Cash flows from operating activities

Receipts from customers (inclusive of GST) 55,861 53,156 51,269 53,156 Interest received 3,582 3,105 3,527 3,098

Receipts from Victorian Government for: – Capital assets charge (*) 564,000 501,000 564,000 501,000 – Capital and related works (inclusive of GST) and termination payments (#) 15,805 10,628 5,991 10,628

639,248 567,889 624,787 567,882 Payments to:

Suppliers (inclusive of GST) and employees (#) (45,657) (37,061) (33,666) (37,061) Borrowing costs paid (5,457) – – – Capital assets charge (*) (564,000) (501,000) (564,000) (501,000)

(615,114) (538,061) (597,666) (538,061)

Net cash inflow from operating activities 14 24,134 29,828 27,121 29,821

Cash flows from investing activities

Proceeds from/(payments) for: Investments 26,662 (9,401) 5,726 (9,401) Acquisition of property, plant and equipment (105,216) (26,180) (35,803) (26,180)

Proceeds from: Sale of property, plant and equipment 6,980 1,298 6,980 1,298

Net cash outflow from investing activities (71,574) (34,283) (23,097) (34,283)

Cash flows from financing activities

Payments for: Dividend (5,000) – (5,000) –

Proceeds from: Borrowings 53,933 – – –

Net cash inflow/(outflow) from financing activities 48,933 – (5,000) –

Net increase/(decrease) in cash held 1,493 (4,455) (976) (4,462)

Cash at the beginning of the financial year 3,421 7,876 3,414 7,876

Cash at the end of the financial year 4,914 3,421 2,438 3,414

(*) The receipt and payment of the capital assets charge does not represent physical movements of cash between Victorian Rail Track and the Victorian Government. In accordance with the provisions of the Financial Management Act 1994, the capital assets charge is considered a cash equivalent item and is therefore included in the Statement of Cash Flows. (#) Receipts from VictorianVictorian Government and payments to suppliers include non-cash transfers of $9.815 million relating to rolling-stock finance lease payments.

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

28 VicTrack Annual Report 2004 Notes to and forming part of the 2004 financial statements Note 1 Summary of Significant Accounting Policies This general-purpose financial report has been prepared on an accruals basis in accordance with the Financial Management Act 1994, Australian Accounting Standards, Statements of Accounting Concepts and other authoritative pronouncements of the Australian Accounting Standards Board, and Urgent Issues Group Consensus Views. It is prepared in accordance with the historical cost convention, except for certain assets allocated to Victorian Rail Track which were valued by the previous owner at valuations other than historical cost and land which is recorded at independent valuation. The accounting policies adopted, and the classification and presentation of items, are consistent with those of the previous year, except where a change is required to comply with an Australian Accounting Standard or Urgent Issues Group Consensus View, or an alternative accounting policy or an alternative presentation or classification of an item, as permitted by an Australian Accounting Standard, is adopted to improve the relevance and reliability of the financial report. Where practicable, comparative amounts are presented and classified on a basis consistent with the current year. a) Principles of Consolidation The consolidated financial statements incorporate the assets and liabilities of all entities controlled by Victorian Rail Track (Parent entity) as at 30 June 2004 and the results of all controlled entities for the year then ended. Victorian Rail Track and its controlled entities together are referred to in this financial report as the Consolidated entity. The effects of all transactions between entities within the Consolidated entity are eliminated in full. Where control of an entity is obtained during a financial year, its results are included in the consolidated Statement of Financial Performance from the date on which control commences. Where control of an entity ceases during a financial year its results are included for that part of the year during which control existed. The following entities are controlled by Victorian Rail Track (Parent entity) as at 30 June 2004: Rollingstock Holdings (Victoria) Pty Limited Rollingstock (Victoria–VL) Pty Limited Rollingstock (VL-1) Pty Limited Rollingstock (VL-2) Pty Limited Rollingstock (VL-3) Pty Limited The above-mentioned companies have been established to own various items of rolling-stock (passenger trains and trams) that are leased to public transport operators. b) Contributed Capital The Consolidated entity’s contributed capital comprises the value (at the date of transfer) of the majority of the State’s rail and tram fixed infrastructure as well as leasehold improvements undertaken by lessees/sub-lessees. The major movements of contributed capital (comprising property, rights and liabilities) from the inception of the Consolidated entity have been as follows:

Financial Year $000’s 1997–1998 Non-electrified rail infrastructure 772,981 1999–2000 Electrified rail infrastructure 2,560,180 2000–2001 Spencer Street Station infrastructure to Spencer Street Station Authority (80,528) 2001–2002 Leasehold improvements 62,068 2001–2002 Surrender of land (Birrarung Marr) to the State (64,800) 2002–2003 Leasehold improvements 150,347 2003–2004 Leasehold improvements 327,492

29 Note 1 Summary of Significant Accounting Policies – continued

c) Acquisitions of Assets All assets acquired, including property, infrastructure, plant and equipment (but excluding goodwill) are initially recorded at their cost of acquisition at the date of acquisition, being the fair value of the consideration provided plus incidental costs directly attributable to the acquisition.

d) Revenue Recognition Amounts disclosed as revenue are, where applicable, net of returns, allowances, duties and taxes. Revenue for telecommunications services, property related income, advertising, lease of the interstate rail corridors and Government contributions towards capital and related costs are recognised when services are provided by the Consolidated entity. Leasehold improvements/renewals undertaken by lessees/sub-lessees and assets provided by other parties are recognised as works are performed on the assets/improvements based on confirmations received from the other parties. Proceeds from asset sales are recognised at the time the asset is sold, while interest revenue is brought to account when earned. Rolling-stock received free of charge is recognised at its fair value at the time of acquisition.

e) Borrowing Costs Borrowing costs represents interest incurred on loans taken out primarily for the purpose of acquiring new passenger rolling-stock. Borrowing costs also includes the amortisation of discounts or premiums relating to these borrowings and interest charges on finance leases. Borrowing costs are expensed as incurred unless they relate to qualifying assets. Qualifying assets are assets which take more than 12 months to get ready for their intended use or sale. In these circumstances, borrowing costs are capitalised to the cost of the assets. Where funds are borrowed specifically for the acquisition, construction or production of a qualifying asset, the amount of borrowing costs capitalised is that amount incurred in relation to the borrowing, net of any interest earned on those borrowings.

f) National Tax Equivalent Regime (NTER) By direction of the Treasurer of Victoria under the State Owned Enterprises Act 1992, the Consolidated entity is subject to the NTER in 2003–04, but limited to the income tax component of the NTER. Any NTER expense payable is calculated on operating profit or loss adjusted for permanent and timing differences between NTER income and accounting income (see reconciliation in Note 15). In 2003–04, the Consolidated entity made a profit for tax purposes of $450.0 million (loss of $6.7 million in 2002–03). In past years the tax effect of timing differences arising from items being brought to account for tax and accounting purposes in different reporting periods has resulted in a carried forward tax loss of $282.4 million – these tax losses have been used to partly offset the tax payable for the 2003–04 financial year. The carried forward tax losses had not been recognised in prior years’ financial statements due to uncertainties regarding the ability of the Consolidated entity to realise the benefit of these losses. For the purposes of income tax, Victorian Rail Track and its 100% owned subsidiaries will form a tax consolidated group for the 2003–04 financial year. Victorian Rail Track will need to formally notify the Australian Taxation Office of its adoption of the tax consolidation regime. As at 30 June 2004, Victorian Rail Track’s subsidiaries have Federal income tax losses carried forward from the period of private sector ownership. As these entities are now under the control of a Government entity and are subject to the NTER it is the Directors’ view that their carried forward tax losses ($3.4 million) will not be able to be utilised in subsequent income years. For current reporting purposes, this potential benefit has not been included in the financial statements. As at 30 June 2004, Victorian Rail Track is awaiting a decision by the Australian Taxation Office in respect to the availability of tax depreciation deductions for assets that are received by way of capital contributions. The tax calculations disclosed in these financial statements have recognised depreciation deductions for capital contributions for the 2003–04 financial year.

30 VicTrack Annual Report 2004 g) Cash Assets For the purposes of the Statement of Cash Flows, cash includes short-term deposits that are readily convertible to cash on hand and which are subject to an insignificant risk of changes in value, net of outstanding cheques yet to be presented. h) Other Financial Assets Other financial assets represent fixed term deposits held by the Consolidated entity and investments with Treasury Corporation of Victoria and are valued at their fair value. Fixed term deposits are subject to draw down restrictions and a fixed rate of return. Investments with Treasury Corporation of Victoria are held on deposits ranging from 30 days to 90 days – these investments are ear-marked for use on future infrastructure improvement projects. i) Receivables All debtors are recognised at the amounts receivable as they are due for settlement at no more than 30 days from the date of recognition. The collectability of debtors is reviewed on an ongoing basis. Debts which are known to be uncollectable are written off. A provision for doubtful debts is raised when some doubt as to collection exists. j) Inventory Items held in stores at the reporting date include spare parts and componentry generally used for the maintenance of rail infrastructure assets. Inventory is stated at the lower of cost and net realisable value. The provision for stock obsolescence relates to inventory which has not moved for three years or more, excluding inventory specifically held for emergency situations. k) Property, Infrastructure, Plant and Equipment All rail infrastructure assets owned by the Consolidated entity when it commenced operations were transferred from the previous owners, the Public Transport Corporation and the V/Line Freight Corporation, by way of statutory allocation under the Rail Corporations Act 1996, effective from 1 July 1997. The Allocation Statement (as amended) included the carrying value for the rail infrastructure assets to be adopted by the Consolidated entity. There have been a number of subsequent Allocation Statements since the commencement of operations, having the effect of transferring ownership both to and from the Consolidated entity. These Allocation Statements also included the carrying value of the rail infrastructure assets adopted by the Consolidated entity at the time of transfer. The initial Allocation Statement (and amendment) and subsequent Allocation Statements were ratified by the relevant Minister under Section 40 of the Rail Corporations Act 1996, and as such, the values ascribed to the rail infrastructure assets, apart from land, have been adopted by the Directors of the Consolidated entity as the appropriate cost for reporting purposes. Pursuant to Australian Accounting Standard AAS10 – Recoverable Amount of Non-Current Assets, the recoverable amounts test generally applied when valuing non-current assets is not applicable to the rail infrastructure assets of the Consolidated entity. At 30 June 2004, apart from land, rail infrastructure assets are stated at either Allocation Statement valuation (if allocated to the Consolidated entity) or at cost if the assets were constructed by the Consolidated entity or lessees/ sub-lessees. In the absence of a formal revaluation being undertaken of the Consolidated entity’s infrastructure assets the Allocation Statement valuations are deemed to be cost. The Victorian Government’s policy Revaluation of Non-Current Assets prescribes the measurement basis for non- current physical assets. The policy, issued in May 2002, requires non-current assets, other than plant and equipment, to be reported at fair value.

31 Note 1 Summary of Significant Accounting Policies – continued

k) Property, Infrastructure, Plant and Equipment – continued In recognition of the difficulties in determining the fair value of infrastructure assets of rail and water entities, rail and water entities have been granted a temporary exemption from complying with the policy. Therefore, and in accordance with the Victorian Government’s Department of Treasury & Finance’s Financial Reporting Directive 6A, the Consolidated entity will report infrastructure assets at their existing valuation basis for reporting periods up to and including 30 June 2005. Notwithstanding the above, the Consolidated entity has undertaken some preliminary work on revaluing its rail infrastructure assets. Work is currently underway on reviewing the basis on which the rail infrastructure assets are recorded. The most appropriate fair value basis for rail infrastructure assets will be written down replacement cost, which will involve identifying the current replacement cost of the assets and assessing their remaining useful lives to determine the extent to which the replacement costs are to be written down. Plant and equipment, which includes rolling-stock, is stated at cost. Where assets are revalued, revaluations are undertaken with sufficient regularity to ensure that the carrying amount of each asset does not differ materially from its fair value at the reporting date. Revaluations are conducted in accordance with the Victorian Government’s policy – Revaluation of Non-Current Physical Assets. Revaluation increments are credited directly to the asset revaluation reserve, except to the extent that an increment reverses a revaluation decrement in respect of that class of asset previously recognised as an expense in net result. Where this situation arises, the increment is recognised immediately as revenue in the net result. Revaluation decrements are recognised immediately as expenses in the net result, except to the extent that a credit balance exists in the asset revaluation reserve in respect of the same class of assets. Where this situation arises, the revaluation decrement is debited to the asset revaluation reserve. Revaluation increments and decrements are offset against one another within classes of non-current assets. Land The Consolidated entity recognises two classes of land – rail corridor land and non-rail corridor land. Non-rail corridor land is used for commercial purposes whilst rail corridor land is used as a rail reserve. Rail corridor land was revalued in June 2002, while non-rail corridor land was revalued in June 2001. Advice received from external valuers (Charter Keck Cramer) indicates that during the period from the latest revaluation to 30 June 2004 there has not been a material movement in the valuation of either rail corridor land or non-rail corridor land, and therefore no adjustment has been reflected in the financial statements. During 2004-05 it is planned to undertake a formal revaluation of all land owned by the Consolidated entity. Other rail infrastructure assets The previous owner of the allocated rail infrastructure assets, the Public Transport Corporation (PTC), had conducted a series of valuations over recent years, which included the assets transferred from V/Line Freight Corporation. The methods of valuation used by the PTC were as follows: 1984 Valuation Property, plant and equipment (excluding land) vested in the former Metropolitan Transit Authority is stated at 1984 valuation. 1985 Valuation Property, plant and equipment (excluding land) vested in the former State Transport Authority is stated at 1985 valuation. 1996 Valuation Certain buildings were revalued to recoverable amounts based on external valuations carried out by valuers engaged by the Valuer-General. Notwithstanding previous valuation exercises undertaken by the PTC, the carrying value of other rail infrastructure assets allocated to the Consolidated entity is deemed to be cost.

32 VicTrack Annual Report 2004 Lease of infrastructure assets The Consolidated entity leases the majority of its rail infrastructure assets to the Director of Public Transport (DPT) for the purposes of conducting passenger and freight train and tram operations. The DPT then sub-leases the assets to various transport operators and track access providers. Under the leases, responsibility for conducting transport operations and maintaining the infrastructure assets is effectively transferred to the lessees/sub-lessees. The Consolidated entity reserves the exclusive right to engage in non-transport activities on its assets and specifically excludes trunk telecommunications infrastructure from the leases. The following table sets out details of the infrastructure leases:

Description of Leased Assets Lessee Asset Value Start Date Term Rental

Suburban train and tram DPT $2,875 M 18 April 2004 4.5 years Nil infrastructure (*)

Country non-electrified 15 years, plus two intrastate infrastructure DPT $1,105M 1 May 1999 Nil 15 year options. (excluding certain stations)

Country stations (**) DPT Included above 1 Oct 2003 16 years Nil

Non-electrified interstate < 1 yr. $2.4M DPT $176 M 1 Jul 1999 15 years infrastructure (***) 1 to 9 yrs. $21.6M

(*) In accordance with refranchising arrangements that came into effect in April 2004, the initial lease of the suburban train and tram infrastructure, which commenced in August 1999 for a period of 15 years, was terminated. (**) The original country station lease, that commenced in August 1999 for a period of 20 years, has been terminated. (***) Under the interstate lease, rental is payable to the Consolidated entity by the DPT’s sub-lessee of the interstate track, the Australian Rail Track Corporation Ltd (ARTC). Leasehold improvements Infrastructure improvements undertaken by lessees/sub-lessees have been recorded as assets of the Consolidated entity in accordance with a direction from the Victorian Government’s Department of Treasury and Finance. Infrastructure improvements undertaken by the ARTC have also been recognised as assets of the Consolidated entity. These leasehold improvements have been recognised at cost. Significant leasehold improvements recognised as assets during the year include costs incurred on the regional fast rail, country passenger line reopening (Ararat and Bairnsdale), Craigieburn electrification, Knox tram extension, as well as various other track upgrading works undertaken on the suburban train and tram networks. Rolling-stock The Consolidated entity has entered into contracts for the supply and manufacture of new passenger trains. As at 30 June 2004, $136.6 million is recorded as works in progress for these assets. Rolling-stock, transferred as assets received free of charge to the Consolidated entity in April 2004, has been recognised at a fair value of $448.2 million, which was accepted as the appropriate valuation and has been adopted as deemed cost. The fair value was determined on the basis of depreciated replacement cost. The Consolidated entity also recognises rolling-stock, that is the subject of a number of finance leases, which has a carrying value of $451.3 million as at 30 June 2004. l) Capital Works in Progress The Consolidated entity’s works in progress includes rail infrastructure and rolling-stock projects underway, but not yet complete or ready for service. The incomplete rail infrastructure projects are recorded at cost. The recorded value of rolling-stock works in progress includes payments made to the manufacturer and borrowing costs. The funds acquired specifically method has been used to capitalise borrowing costs – where the amount of borrowing costs capitalised is that amount incurred in relation to the borrowing, net of any interest earned on those borrowings and fair value unwinds.

33 Note 1 Summary of Significant Accounting Policies – continued

m) Intangible Assets (Goodwill) Where an entity or operation is acquired, the identifiable net assets acquired are measured at fair value. The excess of the fair value of the cost of acquisition over the fair value of the identifiable net assets acquired, is brought to account as goodwill and amortised on a straight-line basis over 20 years i.e. the period during which the benefits are expected to arise.

n) Depreciation All non-current assets, including leasehold improvements and renewals but excluding land, have been depreciated using the straight-line method of depreciation over their estimated useful lives to the Consolidated entity. The range of depreciation rates used for each class of asset is as follows: % • Buildings and structures (*) 1.7 – 5.0 • Track (*) 2.0 – 5.0 • Signals and communications (*) 2.0 – 7.7 • Plant and equipment (*) 2.0 – 33.0 • Rolling-stock 3.0 – 50.0

(*) The above rates are the same as those applied in the 2002–03 financial year.

o) Leased Assets Operating leases The Consolidated entity operates a fleet of motor vehicles under an operating lease from the Commonwealth Bank of Australia. The Consolidated entity also leases certain office equipment. Operating lease payments are expensed in the period incurred. Finance leases Leases are classified at their inception as either operating or finance leases based on the economic substance of the agreement, so as to reflect the risks and benefits incidental to ownership. Leases of fixed assets where substantially all the risks and benefits incidental to the ownership of the asset, but not the legal ownership, are transferred to the Consolidated entity are classified as finance leases. Finance leases are capitalised, recording an asset and a liability equal to the present value of the minimum lease payments, including any guaranteed residual values. Leased assets are depreciated on a straight-line basis over their estimated useful lives, where it is likely the Consolidated entity will obtain ownership of the asset, or over the term of the lease. Lease payments are allocated between the reduction of the lease liability and the lease interest expense for the period. While the Consolidated entity has recognised finance leases relating to the introduction of new rolling-stock within its financial statements, the risks associated with these leases remains with the Department of Infrastructure. A further lease for suburban trains, in which the State has an interest, is currently considered to be an operating lease. The future categorisation of this lease will need to be assessed under the requirements of the International Financial Reporting Standards.

p) Payables These amounts represent liabilities for goods and services provided to the Consolidated entity prior to the end of the financial year and which are unpaid. The amounts are unsecured and are usually paid within 45 days of recognition.

34 VicTrack Annual Report 2004 q) Employee Benefits (i) Wages, salaries and annual leave Liabilities for wages, salaries and annual leave expected to be settled within 12 months of the reporting date are recognised in respect of employees’ services up to the reporting date and are measured as the amounts expected to be paid when the liabilities are settled. (ii) Long service leave The liability for long service leave expected to be settled within 12 months of the reporting date is recognised in the provision for employee benefits and is measured in accordance with (i) above. The liability for long service leave expected to be settled more than 12 months from the reporting date is recognised in the provision for employee benefits and is measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using interest rates on Commonwealth Government guaranteed securities with terms to maturity that match, as closely as possible, the estimated future cash outflows. (iii) Superannuation The amount charged to the Statement of Financial Performance in respect of superannuation represents the employers’ contributions made by the Consolidated entity to superannuation funds of which employees are members. Further details are provided in Note 16. (iv) Employee benefit on-costs Employee benefit on-costs, including payroll tax, are recognised and included in employee benefit liabilities and costs when the employee benefits to which they relate are recognised as liabilities. r) Interest Bearing Liabilities Secured loans are carried on the Statement of Financial Position at their fair value at the time the loan was taken out or acquired, net of fair value unwinds. Interest is accrued over the period it becomes due and is recorded as part of payables at year end. Interest expense represents interest incurred by the Consolidated entity during the year, net of any capitalised interest costs. The finance lease liability is determined in accordance with the requirements of AASB1008 Leases. The premium that arose on the secured loans as a result of being recorded at their fair value is being amortised over the repayment period of the secured loans. s) Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of GST except where the amount of GST incurred is not recoverable, in which case it is recognised as part of the cost of acquisition of an asset or part of an item of expense. The net amount of GST recoverable from, or payable to, the Australian Taxation Office is included as part of receivables or payables in the Statement of Financial Position. The GST component of a receipt or payment is recognised on a gross basis in the Statement of Cash Flows in accordance with Australian Accounting Standard AAS 28 – Statement of Cash Flows. t) Dividends Section 36 of the Rail Corporations Act 1996, provides for a rail corporation to pay to the State amounts as directed by the Treasurer of Victoria after consultation with the Board of the rail corporation and the Minister. In June 2004, a determination was received from the Treasurer requiring the Consolidated entity to make a dividend payment of $5.0 million to the Consolidated Fund in respect to the 2003–04 financial year ($0 for 2002–03) – this payment was made on 25 June 2004.

35 Note 1 Summary of Significant Accounting Policies – continued

u) Capital Assets Charge The capital assets charge is the estimate of the cost of capital investment in Government assets i.e. the return that could be achieved were the Government to direct its capital towards the next best investment of comparable risk. It is imposed on the Consolidated entity by the Victorian Government’s Department of Treasury and Finance. The purpose of this notional charge is to increase the awareness of the costs of assets for management to make improved resource allocation and investment decisions. The capital assets charge is shown as both a receipt and an expense from ordinary activities in the Statement of Financial Performance, meaning that there is no impact on the operating result for the year nor on the Statement of Financial Position as at 30 June 2004. Although the receipt and payment of the capital assets charge does not represent physical movements of cash, the capital assets charge has been disclosed in the Statement of Cash Flows as it is considered a cash equivalent item under the provisions of the Financial Management Act 1994. The charge equates to approximately 13% on the Parent entity’s average net assets for the 2003–04 financial year. The Directors of the Consolidated entity believe the rate at which the capital assets charge is applied does not reflect recent changes in interest rates, however it is noted that the charge is fully funded by the State.

v) Comparatives Where practicable, comparative amounts are presented and classified on a basis consistent with the current year.

w) Rounding All amounts shown in the financial statements are expressed by reference to the nearest thousand dollars unless otherwise specified.

x) The Impacts of Adopting AASB Equivalents to IASB Standards For interim and annual reporting periods ending on or after 30 June 2004, AASB 1047 Disclosing the Impacts of Adopting AASB Equivalents to International Financial Reporting Standards requires narrative disclosure of how the transition process is being managed and an explanation of the key differences in accounting policies that are expected to arise from the transition of AASB equivalents to IASB pronouncements. Refer to Note 24 for further details.

36 VicTrack Annual Report 2004 Note 2 Other Revenue

Consolidated Parent 2004 2003 2004 2003 $’000 $’000 $’000 $’000

Advertising 1,541 830 1,541 830 Interest received 3,519 3,100 3,519 3,100 Assets provided by other parties 258 4,180 258 4,180 Proceeds from sale of assets 5,274 2,984 5,274 2,984 Lease of the interstate rail corridors 3,345 3,318 3,345 3,318 Government contributions towards capital and related works 66,190 10,133 56,375 10,133 Other 1,708 2,330 1,706 2,330

Total Other Revenue 81,835 26,875 72,018 26,875

Note 3 Employee Benefits

Salaries and wages 6,880 6,638 6,880 6,638 Associated labour costs: On-costs 844 804 844 804 Superannuation contributions 716 682 716 682

Sub-total associated labour costs 1,560 1,486 1,560 1,486

Increase in provision for employee entitlements 192 18 192 18 Termination payments 291 102 291 102

Total Employee Benefits 8,923 8,244 8,923 8,244

Note 4 Depreciation and Amortisation

Buildings and structures 22,095 20,422 22,095 20,422 Track 31,752 28,701 31,752 28,701 Signals and communications 15,796 14,541 15,796 14,541 Plant and equipment 16,987 4,532 5,014 4,532 Amortisation of goodwill 3,338 – – –

Total Depreciation and Amortisation 89,968 68,196 74,657 68,196

Note 5 Supplies and Services

Property services (including land tax) 10,062 8,073 10,062 8,073 Telecommunications expenses 5,883 5,179 5,883 5,179 Contract payments 3,500 3,109 3,500 3,109 Other 3,401 3,154 3,401 3,154

Total Supplies and Services 22,846 19,515 22,846 19,515

37 Note 6 Other Operating Expenses Consolidated Parent 2004 2003 2004 2003 Note $’000 $’000 $’000 $’000

Increase/(decrease) in provision for doubtful debts (*) (870) 1,241 (870) 1,241 Increase in provision for stock obsolescence 195 162 195 162 Bad debts 11 23 11 23 Insurance premiums 743 574 743 574 Legal fees 538 505 538 505 Occupancy costs 580 635 580 635 Written down value of assets sold and costs incurred in selling assets 3,191 2,609 3,191 2,609 Write down of maintenance spares 4,083 – – – Other expenses 795 510 656 510

Total Other Operating Expenses 9,266 6,259 5,044 6,259

(*) The majority of the movement in the provision for doubtful debts relates to unpaid services provided to National Express Group (PLC) up to 22 December 2002 (the date they withdrew from their Victorian public transport franchise contracts).

Note 7 Other Financial Assets

Funds on deposit – at fair value 1(h) 138,616 162,274 – – Funds advanced 47,275 – – – Investments – Treasury Corporation of Victoria 60,427 66,153 60,427 66,153

Other Financial Assets 246,318 228,427 60,427 66,153

Reported as:

Current

Funds on deposit – at fair value 66,661 21,294 – – Funds advanced 47,275 – – – Investments – Treasury Corporation of Victoria 60,427 66,153 60,427 66,153 174,363 87,447 60,427 66,153 Non-current

Funds on deposit – at fair value 71,955 140,980 – – 71,955 140,980 – –

Total Other Financial Assets 246,318 228,427 60,427 66,153

Use of funds on deposit is restricted to payments of interest on borrowings and payments to suppliers in relation to the construction of new rolling-stock (trains). The amount on deposit is subject to a fixed interest rate of 5.15% with quarterly payments of interest. Funds currently held with Treasury Corporation of Victoria are ear-marked for use on future infrastructure improvement projects.

38 VicTrack Annual Report 2004 Note 8(a) Receivables Consolidated Parent 2004 2003 2004 2003 $’000 $’000 $’000 $’000

Receivables 10,172 14,729 139,252 11,198 DoI tax receivable 50,300 – 50,300 – Less provision for doubtful debts (627) (1,497) (627) (1,497)

Receivables 59,845 13,232 188,925 9,701

Reported as:

Current Receivables 10,029 14,584 139,109 11,053 DoI tax receivable 50,300 – 50,300 – Less provision for doubtful debts (627) (1,497) (627) (1,497) 59,702 13,087 188,782 9,556 Non-current Receivables 143 145 143 145 143 145 143 145

Total Receivables 59,845 13,232 188,925 9,701

Note 8(b) Payables

Payables 18,689 13,995 15,587 10,008 Tax accrual 50,779 – 50,279 –

Total Payables 69,468 13,995 65,866 10,008

Note 9 Inventory

Stores and materials 872 912 872 912 Less provision for stock obsolescence (614) (419) (614) (419)

Total Inventory 258 493 258 493

All inventory has been classified as current as it is likely to move in the next 12 months. A provision for stock obsolescence is raised when stock has not moved for a period of three years or more, excluding stock held for emergency situations.

39 Note 10 Property, Infrastructure, Plant and Equipment Consolidated Parent 2004 2003 2004 2003 $’000 $’000 $’000 $’000

Land Rail corridor land – at independent valuation – 30 June 2002 1,151,883 1,152,068 1,151,883 1,152,068 Non–rail corridor land – at cost 14,382 2,284 14,382 2,284 Non-rail corridor land – at independent valuation – 30 June 2001 450,693 451,958 450,693 451,958

Land 1,616,958 1,606,310 1,616,958 1,606,310

Buildings and structures Allocation statement valuation 799,448 799,450 799,448 799,450 Accumulated depreciation (103,837) (84,861) (103,837) (84,861) 695,611 714,589 695,611 714,589

Leasehold improvements/renewals 83,962 30,321 83,962 30,321 Accumulated depreciation (4,124) (1,774) (4,124) (1,774) 79,838 28,547 79,838 28,547

Cost 26,155 19,993 26,155 19,993 Accumulated depreciation (2,236) (1,468) (2,236) (1,468) 23,919 18,525 23,919 18,525

Buildings and structures after depreciation 799,368 761,661 799,368 761,661

Track Allocation statement valuation 895,468 895,468 895,468 895,468 Accumulated depreciation (125,387) (103,264) (125,387) (103,264) 770,081 792,204 770,081 792,204

Leasehold improvements/renewals 373,885 169,618 373,885 169,618 Accumulated depreciation (14,806) (7,694) (14,806) (7,694) 359,079 161,924 359,079 161,924

Cost 67,884 58,823 67,884 58,823 Accumulated depreciation (12,783) (10,266) (12,783) (10,266) 55,101 48,557 55,101 48,557

Track after depreciation 1,184,261 1,002,685 1,184,261 1,002,685

40 VicTrack Annual Report 2004 Consolidated Parent 2004 2003 2004 2003 $’000 $’000 $’000 $’000

Signals and communications Allocation statement valuation 313,028 313,028 313,028 313,028 Accumulated depreciation (63,943) (52,758) (63,943) (52,758) 249,085 260,270 249,085 260,270

Leasehold improvements/renewals 91,533 48,698 91,533 48,698 Accumulated depreciation (7,061) (4,242) (7,061) (4,242) 84,472 44,456 84,472 44,456

Cost 29,290 21,026 29,290 21,026 Accumulated depreciation (4,413) (2,620) (4,413) (2,620) 24,877 18,406 24,877 18,406

Signals and communications after depreciation 358,434 323,132 358,434 323,132

Plant and equipment Allocation statement valuation 444,094 – – – Accumulated depreciation (8,238) – – – 435,856 – – –

Leasehold improvements/renewals 1,888 – 1,888 – Accumulated depreciation (94) – (94) – 1,794 – 1,794 –

Finance leases at cost 455,045 – – – Accumulated amortisation (3,736) – – – 451,309 – – –

Cost 94,432 93,272 94,432 93,272 Accumulated depreciation (12,998) (8,174) (12,998) (8,174) 81,434 85,098 81,434 85,098

Plant and equipment after depreciation 970,393 85,098 83,228 85,098

Capital works in progress Leasehold improvements/renewals 380,673 264,819 380,673 264,819 Rolling-stock under construction 136,603 111,994 – – Other 33,904 26,122 33,904 26,122

Capital works in progress 551,180 402,935 414,577 290,941

Total Property, Infrastructure, Plant and Equipment 5,480,594 4,181,821 4,456,826 4,069,827

41 Note 10 Property, Infrastructure, Plant and Equipment - continued

2004 Land Buildings & Track Signals & Plant & W.I.P. Total Consolidated Structures Comms. Equipment $’000 $’000 $’000 $’000 $’000 $’000 $’000

Carrying amount at start of year 1,606,310 761,661 1,002,685 323,132 85,098 402,935 4,181,821

Additions (*) 11,900 59,802 213,328 51,098 906,840 148,245 1,391,213

Disposals (1,252) – – – (475) – (1,727)

Write down of maintenance spares – – – – (4,083) – (4,083)

Depreciation expense – (22,095) (31,752) (15,796) (16,987) – (86,630)

Carrying Amount at the end of the Financial Year 1,616,958 799,368 1,184,261 358,434 970,393 551,180 5,480,594

(*) Includes infrastructure improvements/ renewals undertaken by lessees/ sub-lessees.

2004 Land Buildings & Track Signals & Plant & W.I.P. Total Parent Structures Comms. Equipment $’000 $’000 $’000 $’000 $’000 $’000 $’000

Carrying amount at start of year 1,606,310 761,661 1,002,685 323,132 85,098 290,941 4,069,827

Additions (*) 11,900 59,802 213,328 51,098 3,619 123,636 463,383

Disposals (1,252) – – – (475) – (1,727)

Depreciation expense – (22,095) (31,752) (15,796) (5,014) – (74,657)

Carrying Amount at the end of the Financial Year 1,616,958 799,368 1,184,261 358,434 83,228 414,577 4,456,826

(*) Includes infrastructure improvements/ renewals undertaken by lessees/ sub-lessees.

42 VicTrack Annual Report 2004 Note 11 Employee Benefits Consolidated Parent 2004 2003 2004 2003 Note $’000 $’000 $’000 $’000

Long service leave 3,790 3,580 3,790 3,580 Annual leave 2,133 2,160 2,133 2,160 Other 208 225 208 225

Employee Benefits 6,131 5,965 6,131 5,965

Reported as:

Current

Long service leave 491 925 491 925 Annual leave 843 893 843 893 Other 164 183 164 183 1,498 2,001 1,498 2,001 Non-current

Long service leave 3,299 2,655 3,299 2,655 Annual leave 1,290 1,267 1,290 1,267 Other 44 42 44 42 4,633 3,964 4,633 3,964

Total Employee Benefits 6,131 5,965 6,131 5,965

Note 12 Interest Bearing Liabilities

Secured loan 1(r) 393,494 340,573 – – Lease liability 18 453,210 – – –

Interest Bearing Liabilities 846,704 340,573 – –

Reported as:

Current

Secured loan 5,303 – – – Lease liability 13,243 – – – 18,546 – – – Non-current

Secured loan 388,191 340,573 – – Lease liability 439,967 – – – 828,158 340,573 – –

Total Interest Bearing Liabilities 846,704 340,573 – –

43 Note 13 Equity and Movements in Equity – Consolidated Entity

(a) Contributed Capital Capital Capital 1 July Capital Additional 30 June 2003 Returned Capital 2004 $’000 $’000 $’000 $’000

Assets Inventory 205 – – 205 Receivables 2,715 – – 2,715 Land 1,061,765 – 9,368 1,071,133 Buildings and structures 808,927 – 10,133 819,060 Track 906,687 – 132,569 1,039,256 Signals and communications 324,192 – 13,737 337,929 Plant and equipment 106,575 – – 106,575 Works in progress/other assets 188,750 – 161,685 350,435

Total assets 3,399,816 – 327,492 3,727,308

Liabilities Provision for employee benefits (6,959) – – (6,959)

Total liabilities (6,959) – – (6,959)

Contributed Capital at the end of the Financial Year 3,392,857 – 327,492 3,720,349

Consolidated Parent 2004 2003 2004 2003 $’000 $’000 $’000 $’000

(b) Asset Revaluation Reserve Asset revaluation reserve at the beginning of the financial year 558,870 558,870 558,870 558,870

Asset Revaluation Reserve at the end of the Financial Year 558,870 558,870 558,870 558,870

(c) Accumulated Surplus Accumulated surplus at the beginning of the financial year 184,161 135,550 184,161 135,550 Net profit for the reporting period 474,784 48,611 178,618 48,611 Dividend (5,000) – (5,000) –

Accumulated Surplus at the end of the Financial Year 653,945 184,161 357,779 184,161

44 VicTrack Annual Report 2004 Note 14 Reconciliation of Net Profit for the Reporting Period to Net Cash Inflow from Operating Activities

1. Reconciliation of cash assets For the purpose of the Statement of Cash Flows, cash includes short-term deposits that are readily convertible to cash on hand and which are subject to an insignificant risk of changes in value, net of outstanding cheques yet to be presented. 2. Non-cash financing and investing facilities The Consolidated entity has no non-cash financing and investment facilities in place. 3. Credit facilities The Consolidated entity does not have any credit facilities in place. 4. Reconciliation of net profit for the reporting period to net cash inflow from operating activities: Consolidated Parent 2004 2003 2004 2003 $’000 $’000 $’000 $’000

Net profit for the reporting period 474,784 48,611 178,618 48,611 Depreciation/amortisation 89,968 68,196 74,657 68,196 Increase/(decrease) in provisions (483) 1,455 (483) 1,455 Decrease/(increase) in receivables (48,355) 1,289 (180,949) 1,282 Decrease/(increase) in prepayments 2,152 326 2,152 326 Decrease/(increase) in inventory 4,123 42 40 42 Cash receipts recognised as contributed capital – 450 – 450 Assets received under lease agreements (99,765) (88,413) (99,765) (88,413) Rolling-stock received free of charge (448,177) – – – Fair value adjustments (1,228) – – – Increase/(decrease) in payables 53,781 (1,753) 55,517 (1,753) Loss/(profit) on sale of assets (2,666) (375) (2,666) (375)

Net Cash Inflow From Operating Activities 24,134 29,828 27,121 29,821

Note 15 National Tax Equivalent Regime Reconciliation of profit from ordinary activities to the tax profit/(loss):

Profit from ordinary activities 525,563 48,611 99,784 48,611

Permanent differences:

Depreciation on assets subject to capital contribution – 6,003 – 6,003 Other non deductible expenditure 4,153 64 71 64 Finance lease payment (9,815) – – – Depreciation on other non tax depreciable assets 18,637 14,851 16,458 14,851 Amortisation of finance lease 3,736 – – – Finance lease interest 7,980 – – – Profit on sale of assets not subject to Capital Gains Tax (2,083) (375) (2,083) (375)

Sub-total – permanent differences 22,608 20,543 14,446 20,543

45 Note 15 National Tax Equivalent Regime – continued

Consolidated Parent 2004 2003 2004 2003 $’000 $’000 $’000 $’000

Timing differences:

Difference in accounting and tax depreciation rates (97,790) (77,344) (94,172) (77,344) Movement in prepayments 8 8 8 8 Movement in provisions (508) 1,455 (508) 1,455 Movement in accruals 108 (9) 54 (9)

Sub-total – timing differences (98,182) (75,890) (94,618) (75,890)

Tax Profit/(Loss) 449,989 (6,736) 19,612 (6,736)

Note 16 Employee Superannuation Funds No liability is recognised in the Statement of Financial Position for the Consolidated entity’s share of the State’s unfunded superannuation liability. The State’s unfunded superannuation liability has been reflected in the financial statements of the Victorian Government’s Department of Treasury and Finance. However, the Consolidated entity’s (i.e. employer) superannuation contributions for the reporting period are included as part of employee benefits in the Statement of Financial Performance. The number of employees as at 30 June 2004 was 103 (30 June 2003 – 105). Details of employee superannuation funds to which the Consolidated entity contributes are as follows:

Contributions Contributions 2003–04 Outstanding as 2002–03 Outstanding as Contributions at 30/6/04 Contributions at 30/6/03 Superannuation Fund (*) $’000 $’000 $’000 $’000

Transport Superannuation Scheme 243 9 240 – State Superannuation Scheme 370 14 376 – VicSuper Scheme 84 3 52 – Other (#) 19 – 14 –

Total 716 26 682 –

(*) These superannuation contributions relate to Victorian Rail Track as the Parent entity – Rollingstock Holdings (Victoria) Pty Limited and its subsidiary companies, which forms the Consolidated entity with the Parent entity, do not employ any staff. (#) The superannuation funds summarised under “Other” comprise no more than one employee in each fund. Employer contributions to the Transport Superannuation Scheme and the State Superannuation Scheme are based on actuarial assessments as advised by the Government Superannuation Office. Employer contributions to the other funds are made in accordance with the Commonwealth Superannuation Guarantee Legislation.

46 VicTrack Annual Report 2004 Note 17 Capital Commitments

Consolidated Parent 2004 2003 2004 2003 $’000 $’000 $’000 $’000

Within one year 58,780 34,698 9,015 17,700 One year or later and not later than five years 114,524 159,035 – –

Total Capital Commitments 173,304 193,733 9,015 17,700

Note 18 Lease Commitments

Operating leases Within one year 189 230 189 230 One year or later and not later than five years 334 434 334 434

Total Operating Lease Commitments 523 664 523 664

Finance leases Within one year 88,305 – – – One year or later and not later than five years 388,494 – – – Beyond five years 912,083 – – –

Total Finance Lease Commitments 1,388,882 – – –

Less : Future rolling-stock to be acquired (317,204) – – – Recoverable GST (126,262) – – – Future finance lease charges (492,206) – – –

Total Finance Lease Liability 453,210 – – –

Finance leases relating to the introduction of new rolling-stock have an average lease term of 15 years and an average implicit discount rate of 12.4%. There is an option under the Rolling Stock Lease Direct Agreements for the Director of Public Transport (or his nominee) to purchase the rolling-stock at the expiry of the leases. The payment of the finance lease liabilities will be funded by the State. Finance lease liability commitments are expected to increase by June 2005 as additional rolling-stock subject to these leases is introduced into service.

47 Note 19 Contingent Liabilities

Environmental contingent liabilities Upon establishment, and in subsequent asset allocations, the Public Transport Corporation did not grant the Consolidated entity an indemnity for any environmental contamination of land and property that may have been transferred along with the ownership of the land and property. An action plan has been prepared for the rectification of environmental contamination at a number of high priority sites.

Indemnities On 1 May 1999, the Consolidated entity entered into a lease with the Director of Public Transport (DPT) for the intrastate non-electrified rail infrastructure (excluding certain country stations) for a period of 15 years with the option to extend the term by a further two 15 year periods. In October 2003, the Consolidated entity entered into a lease with the DPT for certain country stations. This lease is scheduled to conclude in August 2019. Under these leases, the Consolidated entity provides indemnities to the DPT consistent with its status as land and property owner. The Consolidated entity has entered into leases with the DPT for the metropolitan electrified rail and tram infrastructure. These leases commenced in April 2004 and terminate in November 2008. Under the leases, the Consolidated entity provides indemnities to the DPT consistent with its status as land and property owner. On 28 October 2000, the Consolidated entity entered into a lease, effective from 1 July 1999, with the DPT for the interstate rail infrastructure for a period of 15 years. Under the lease, the Consolidated entity provides indemnities to the DPT consistent with its status as land and property owner. The Consolidated entity has entered into various Service Level Agreements, effective 1 July 1999, for the provision of telecommunications services with each of the rail operators and their sub-contractors in Victoria, including the Australian Rail Track Corporation Ltd. Under these Agreements, indemnities have been granted relating to the provision of the services under the Agreements that are generally consistent with normal commercial practice. Subject to the note below relating to litigation, the Directors of the Consolidated entity are unaware of any circumstances that would lead them to believe that these contingent liabilities will result in any material actual liability, and consequently no provisions are included in the financial statements in respect of these matters.

Litigation The Consolidated entity is involved in legal proceedings relating to works undertaken at the Kororoit Creek Bridge. The Consolidated entity is also involved in legal proceedings relating to land at Fyansford, near Geelong and at Deniliquin in New South Wales. At this stage, it is too early to predict the outcome of these actions and whether any significant liabilities will be incurred by the Consolidated entity as a result.

Note 20 Minister, the Board of Directors and Accountable Officer The names of persons who were Responsible Persons of the Consolidated entity at any time during the financial year were: Responsible Minister: The Hon Peter Batchelor, Minister for Transport Directors of the Board: Dr Thomas W Quirk Mr John Chambers Ms Christine O’Reilly (resigned 5 March 2004) Mr John Anderson Ms Elana Rubin Accountable Officer: Mr John Sutton

48 VicTrack Annual Report 2004 Remuneration of Responsible Persons: Remuneration paid to Responsible Persons during the year was:

Consolidated Parent No. No. No. No. 2004 2003 2004 2003 $20,000 to $29,999 1 – 1 – $30,000 to $39,999 3 4 3 4 $60,000 to $69,999 1 1 1 1 $240,000 to $249,999 1 1 1 1

Total Remuneration of Responsible Persons: $436,204 ($441,333 in 2002–03) Responsible Persons’ remuneration shown in aggregate above includes Directors’ fees and superannuation contributions paid on behalf of Directors by the Consolidated entity. The amount excludes insurance premiums paid by the Consolidated entity in respect of Directors’ and Officers’ insurance contracts. The Accountable Officer’s remuneration, included above, includes the total salary package received during the year as well as performance bonuses relating to the 2002–03 year. The remuneration of the Minister for Transport is reported in the financial statements of the Department of Premier and Cabinet. Note 21 Executive Officers’ Remuneration The number of executive officers of the Consolidated entity, other than the Accountable Officer, and their total remuneration are shown in the second and third columns in the table below in their relevant income bands. The base remuneration of executive officers is shown in the fourth and fifth columns. Base remuneration is exclusive of bonus payments, long service leave payments, redundancy payments and retirement benefits. Several factors have affected total remuneration payable to executives over the past two years. These include the payment of resignation benefits and an allowance paid to an executive in 2002–03 whilst acting as the Consolidated entity’s Chief Executive Officer.

Income Band Total Remuneration Base Remuneration No. No. No. No. 2004 2003 2004 2003 $100,000 – $109,999 – – – 1 $110,000 – $119,999 1 – – – $120,000 – $129,999 – 2 2 2 $130,000 – $139,999 2 – 1 1 $140,000 – $149,999 – 1 – – $160,000 – $169,999 1 – – – $170,000 – $179,999 – 1 – –

Total Numbers 4 4 3 4 Total Amount $552,608 $559,266 $381,911 $488,653

49 Note 22 Financial Instruments

Terms, conditions and accounting policies The Consolidated entity’s terms, conditions and accounting policies in respect of financial instruments, both recognised and unrecognised, are as follows:

Financial Instrument Accounting Policy Terms and Conditions Financial assets Cash assets Cash deposits are recognised at the account Cash is held at deposit, earning interest at a balance at reporting date, including accrued variable rate. interest. Interest is recorded as revenue as it accrues.

Other financial assets Fixed term deposits are recognised at fair The interest earned from fixed term deposits value. Investments are recognised at the is set at 5.15%, whilst investments earn nominal face value of the investment. interest at a variable rate. Interest is recorded as revenue as it accrues.

Receivables Receivables are carried at amounts due, less Receivables are on 30-day terms from date of any provision for doubtful debts. invoicing. Where debts become long overdue, e.g. in excess of 90 days, an assessment is made of collectability, and provision is made for any doubtful accounts. Financial liabilities Payables Liabilities are recognised for amounts to Trade liabilities are normally settled within be paid in the future for goods or services 45 days from the date of recognition. received, whether or not billed to the Consolidated entity. Interest bearing Secured loans are recognised at their fair Secured loans are fixed interest and liabilities value at the time the loan was taken out are repayable on an agreed plan to or acquired. September 2021. Finance leases are recognised at the present Finance leases commenced on value of the minimum lease payments, 18 April 2004 for a term of 15 years. including any guaranteed residual values, less principal amounts repaid.

Interest rate risk exposure The Consolidated entity is not exposed to any interest rate risk in respect of any financial liabilities as the interest rates are fixed for the term of the borrowings. Interest earned on cash assets is equivalent to the 11.00am cash rate less a fixed premium agreed by the Consolidated entity and the bank. The weighted average interest rate for 2003–04 was 4.15% (3.75% in 2002–03). Earnings from interest vary according to movements in the 11.00am cash rate. Interest income from funds on deposit is fixed at the rate of 5.15%. Interest income earned on investments is variable. For the year ended 30 June 2004, the Consolidated entity had interest bearing investments with a weighted average interest rate of 5.14% (5.04% in 2002–03). The Consolidated entity’s exposure to interest rate risk is set out on page 51.

50 VicTrack Annual Report 2004 2004 Consolidated Fixed Fixed Fixed Interest Interest Interest Rate Rate Rate Floating Maturing Maturing Maturing in Non- Interest in 1 Year or Over 1 to More Than Interest Rate Less 5 Years 5 Years Bearing Total Note $’000 $’000 $’000 $’000 $’000 $’000

Financial assets Cash assets 2,438 2,464 – – 12 4,914 Other financial assets 7 60,427 66,661 71,855 100 47,275 246,318 Receivables 8(a) – – – – 59,845 59,845

Total Financial Assets 62,865 69,125 71,855 100 107,132 311,077 Weighted Average Interest Rate 5.11% 5.16% 5.15% 5.15%

Financial liabilities Payables 8(b) – – – – (69,468) (69,468) Interest bearing liabilities 12 – (18,546) (135,490) (692,668) – (846,704)

Total Financial Liabilities – (18,546) (135,490) (692,668) (69,468) (916,172) Weighted Average Interest Rate 9.45% 9.45% 9.45%

Net Financial Assets 62,865 50,579 (63,635) (692,568) 37,664 (605,095)

51 Note 22 Financial Instruments – continued

2003 Consolidated Fixed Fixed Fixed Interest Interest Interest Rate Rate Rate Floating Maturing in Maturing Maturing in Non- Interest 1 Year or Over 1 to 5 More Than Interest Rate Less Years 5 Years Bearing Total Note $’000 $’000 $’000 $’000 $’000 $’000

Financial assets Cash assets 3,414 – – – 7 3,421 Other financial assets 7 66,153 21,294 140,980 – – 228,427 Receivables 8(a) – – – – 13,232 13,232

Total Financial Assets 69,567 21,294 140,980 – 13,239 245,080 Weighted Average Interest Rate 4.78% 5.15% 5.15%

Financial liabilities Payables 8(b) – – – – (13,995) (13,995) Interest bearing liabilities 12 – – (46,048) (294,525) – (340,573)

Total Financial Liabilities – – (46,048) (294,525) (13,995) (354,568) Weighted Average Interest Rate 6.59% 6.59%

Net Financial Assets 69,567 21,294 94,932 (294,525) (756) (109,488)

Reconciliation of net financial assets and net assets for the Consolidated entity 2004 2003 $’000 $’000

Net financial assets (605,095) (109,488)

Inventory 258 493 Prepayments 121 2,273 Property, infrastructure, plant and equipment 5,480,594 4,181,821 Intangible assets 63,417 66,754 Less: Employee benefits (6,131) (5,965)

Net Assets 4,933,164 4,135,888

52 VicTrack Annual Report 2004 Credit risk exposure The Consolidated entity’s maximum exposure to credit risk at the reporting date is the carrying amount of receivables as indicated in the Statement of Financial Position. The receivables mainly relate to payment for the provision of telecommunications services by the Consolidated entity and property rentals outstanding. The Consolidated entity provided a range of telecommunications services under contract to a number of Government controlled and private companies during 2003–04. The nature of the entities, in the opinion of the Directors of the Consolidated entity, has created a low level of credit risk. The significant movements in the provision for doubtful debts resulted from exceptional circumstances regarding the withdrawal of the National Express Group (PLC) in December 2002 from their Victorian public transport franchise contracts. The Consolidated entity’s credit exposure in the real estate industry is characterised by a large and diverse range of lessees and licensees. To this extent, the credit risk exposure is regarded as minimal.

Net fair value of financial assets and liabilities The net fair value of cash, other financial assets, non-interest bearing receivables and payables and interest bearing liabilities of the Consolidated entity compared to their carrying amount is as follows:

2004 2003 Carrying Net Fair Carrying Net Fair Amount Value Amount Value $’000 $’000 $’000 $’000 Financial assets Cash assets 4,914 4,914 3,421 3,421 Other financial assets 246,318 246,318 228,427 228,427 Receivables 59,845 59,845 13,232 13,232

Total financial assets 311,077 311,077 245,080 245,080

Financial liabilities Payables (69,468) (69,468) (13,995) (13,995) Interest bearing liabilities (846,704) (827,258) (340,573) (340,573)

Total financial liabilities (916,172) (896,726) (354,568) (354,568)

Net Financial Assets (605,095) (585,649) (109,488) (109,488)

The Consolidated entity determines net fair values in the following manner:

Cash assets The carrying amount represents fair value as it equates to the account balance withdrawable by the Consolidated entity at any time without notice.

Other financial assets For investments, the carrying amount represents fair value as it comprises a contractual obligation on the financial institution to repay principal to this value upon maturity. For funds on deposit, the fair value represents the present value of interest and the amount on deposit. Receivables The carrying amount represents fair value, as it is a contractual obligation on the debtor, usually payable within 30 days of the date of recognition.

Payables The carrying amount represents fair value, as it comprises a contractual obligation on the Consolidated entity, usually payable within 45 days of the date of recognition.

Interest bearing liabilities The fair value represents the present value of interest and principal repayments.

53 Note 23 Remuneration of Auditors

Consolidated Parent 2004 2003 2004 2003 ($) ($) ($) ($) Audit fees paid or payable to the Victorian Auditor- General’s Office for the audit of the financial statements: Paid as at 30 June 27,277 31,000 18,527 31,000 Payable as at 30 June 114,050 75,900 60,500 40,900

Note 24 Impacts of Adopting AASB Equivalents to IASB Standards For reporting periods beginning on or after 1 January 2005, all Australian reporting entities are required to adopt the financial reporting requirements of the Australian equivalents to International Financial Reporting Standards (IFRS). This requirement also extends to any comparative financial information included within the report. The first day of the comparative period, 1 July 2004, effectively becomes the transition date for VicTrack. VicTrack has taken the following steps in managing the transition to Australian equivalents to IFRS: • Established a steering committee for the oversight of the transition to and implementation of the Australian equivalents to IFRS; • Commenced an education and training process for key staff to raise the awareness of the changes in reporting requirements and the processes to be undertaken; • Commissioned a high-level review to identify areas of potential impact associated with the adoption of the new standards; and • In conjunction with the Department of Infrastructure, engaged a specialist accounting organisation to assist with identifying requirements associated with conversion. VicTrack has identified a number of changes to existing accounting policies that are required under IFRS and that may have a material impact on the organisation’s future financial position and performance following the adoption of the requirements of Australian equivalents to IFRS. At this stage, the Consolidated entity has not quantified the impacts on the financial report of these changes. Under IFRS, existing accounting policies are likely to be impacted in the areas of: • Valuation of assets: Any change to the existing valuation basis will have a significant impact on VicTrack’s financial position. The Victorian Government is yet to determine the basis of the valuation of the Consolidated entity’s non-current assets under IFRS. • Intangible assets: Under IFRS, goodwill will need to be assessed for impairment at least annually rather than being amortised over 20 years. • Financial instruments: Under IFRS, financial instruments will be required to be classified into one of five categories which will, in turn, determine the accounting treatment of the item. The classifications are loans and receivables – measured at amortised cost, held to maturity - measured at amortised cost, held for trading – measured at fair value with fair value changes charged to net profit or loss, available for sale – measured at fair value with fair value changes taken to equity and non-trading liabilities - measured at amortised cost. This will result in a change in the current accounting policy that classifies financial instruments as being either funds on deposit at fair value or investments with Treasury Corporation of Victoria.

54 VicTrack Annual Report 2004 • Impairment of assets: Under IFRS, the recoverable amount of an asset is determined as the higher of net selling price and value in use. The significance of this change on the Consolidated entity is unclear and will largely depend on whether the Consolidated entity is classified as for profit or not for profit. Where the carrying value of an asset exceeds its recoverable amount, the difference will be written-off as an impairment loss to the Statement of Financial Performance except to the extent that the write down can be debited to an asset revaluation reserve amount applicable to that asset. Any impairment losses at transition date will be adjusted against the accumulated funds. • Income taxes: Under IFRS, the Consolidated entity will be required to use a balance sheet liability method which focuses on the tax effects of transactions and other events that affect amounts recognised in either the Statement of Financial Position or a tax-based balance sheet. The impact of IFRS on entities subject to the National Tax Equivalent Regime will also need to be considered.

Note 25 Subsequent Event In August 2004, the Victorian Government approved the sale of Freight Australia Ltd (FAL) to Pacific National Pty Limited. The Consolidated entity has a substantial relationship with FAL, with FAL being the sub-lessee of the country non-electrified intrastate network, the lessee of various commercial properties and the recipient of telecommunications services. At this stage, the sale of FAL is not expected to have a significant financial impact on the Consolidated entity in the short to medium term.

55 Disclosure Index

The Annual Report of Victorian Rail Track is prepared in accordance with all relevant Victorian legislation. This index has been prepared to facilitate identiﬁ cation of the compliance with statutory disclosure requirements.

Ministerial Directions Legislation Requirement Page Report of Operations Charter and purpose FRD 22 Manner of establishment and the relevant Ministers 8, 48 FRD 22 Objectives, functions, powers and duties 8 FRD 22 Nature and range of services provided 8 Management and structure FRD 22 Organisational structure 4, 19 Financial and other information FRD 22 Statement of workforce data and merit and equity 19 FRD 22 Summary of the fi nancial results for the year 20 FRD 22 Signifi cant changes in fi nancial position during the year 20 FRD 22 Operational and budgetary objectives and performance against objectives 20 FRD 22 Major changes or factors affecting performance 20 FRD 22 Subsequent events 55 FRD 22 Application and operation of Freedom of Information Act 1982 21 FRD 22 Compliance with building and maintenance provisions of Building Act 1993 21 FRD 22 Statement on National Competition Policy 21 FRD 22 Application and operation of the Whistleblowers Protection Act 2001 22 FRD 22 Details of consultancies over $100,000 N/A FRD 22 Details of consultancies under $100,000 21 FRD 12 Disclosure of major contracts N/A FRD 22 Statement of availability of other information 21 FRD 22 Occupational health and safety 19 FRD 15 Executive offi cer disclosures 49 FRD 10 Disclosure index 56 FRD 24 Reporting of offi ce-based environmental impacts N/A FRD 25 Victorian Industry Participation Policy disclosures 21 FRD 8 Budget portfolio outcomes N/A

Financial Statements Financial statements required under Part 7 of the Financial Management Act 1994 Legislation Requirement Page SD 4.2 (c) Compliance with Australian accounting standards and other 25 authoritative pronouncements SD 4.2 (c) Compliance with ministerial directions 25 SD 4.2 (d) Rounding of amounts 36 SD 4.2 (c) Accountable offi cer’s declaration 25 SD 4.2 (f) Model fi nancial report 25 SD 4.2 (b) Statement of fi nancial performance 26 SD 4.2 (b) Statement of fi nancial position 27 SD 4.2 (b) Statement of cash fl ows during the year 28 Other disclosures in notes to the fi nancial statements FRD 9 Department disclosure of administered assets and liabilities N/A FRD 11 Disclosure of ex-gratia payments N/A FRD 13 Disclosure of parliamentary appropriations N/A FRD 21 Responsible person and executive offi cer disclosures 48, 49 FRD 23 Superannuation liabilities and disclosure 46

Legislation Act Page Freedom of Information Act 1982 21 Building Act 1993 21 Whistleblowers Protection Act 2001 22 Victorian Industry Participation Policy Act 2003 21

56 VicTrackVicTrack Annual Report 2004 annual report

04 annual report