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GrainCorp Limited 2002 Annual Report has over 100,000 tonnes of permanent storage and over 50,000 tonnes of bunker storage.

Contents

2002 Financial Highlights 1 2002 Business Highlights 1 GrainCorp Products and Services 2 Our Storage Network 3 Chairman’s & Managing Director’s Report 7 Investor Information 11 Financial Performance 12 Key Business Areas 14 Review of Operations 16 Supporting Our Communities 22 Executive Management 23 Board of Directors 24 Corporate Governance Statement 26 2002 Concise Report 31

Annual General Meeting GrainCorp’s 2003 Annual General Meeting will be held at , on Friday, 28 February, 11am.

GrainCorp Limited ABN 60 057 186 035 2002 Financial Highlights 2002 Business Highlights

• Total revenue $700 million • 12 million tonnes of grain received with increased speed and efficiency • EBITDA $119.8 million • 6.8 million tonnes of exports • Depreciation and amortisation $41.1 million • Purchased the milling assets of Goodman Fielder in • Net profit before tax $67.8 million partnership with Cargill • Net profit after tax $48.6 million • Created Bulk Terminals Australia (BTA) in partnership with • Earnings per share 121.2 cents Grainco Australia

• Dividend per share 78.0 cents • Moved into rail operation through the lease of two engines and 40 wagons • Dividend yield (30/09/02) 8.0% • Expanded grain handling operations into South Australia with the opening of a grain receival facility at Naracoorte

• Extracted $4 million cost saving from Vicgrain merger synergies

• 1% of profit after tax dedicated to GrainCorp Foundation

GrainCorp Annual Report 2002 1 GrainCorp Products and Services

Storage & Handling

GrainCorp’s core business. Over 300 storage facilities throughout prime grain growing regions. Four port terminals located in NSW and VIC and Bulk Terminals Australia allows access to a 5th in QLD.

Trading

Domestic - Grain merchants provide risk management solutions, marketing and contracting alternatives. Export - GrainCorp is now a direct exporter of barley and canola.

Merchandising

GrainCorp’s 18 strategically located Service Centres offer farm input needs such as fertiliser, seeds, agricultural chemicals and seasonal finance.

Transport

Rail - GrainCorp’s move into rail is designed to offer seamless operation and negotiate the supply chain from silo to port. Road - Extensive road operations through eastern Australia.

Research & Development

GrainCorp with SunPrime breeds some of the highest yielding wheat varieties in production. 80% of SunPrime’s pre-tax profits are reinvested in Research and Development.

Technical Services

GrainCorp provides a crop monitoring and analysis service.

Processing

GrainCorp entered the flour milling business through the purchase of a 60% equity share of Allied Mills.

Community Development

The GrainCorp Foundation - GrainCorp contributes 1% of its annual after tax profits to rural and regional communities via the GrainCorp Foundation.

GrainCorp Annual Report 2002 2 Pinkenba QLD Fisherman Islands Goondiwindi

Boggabilla

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Willaura Ballarat Division Hamilton Skipton Westmere VIC Sunshine Berrybank Portland Geelong VIC Our Storage Network

GrainCorp’s acquisition of Allied Mills has added a truly national character to the existing unrivalled network of physical grain handling assets.

Allied Mills National Business

F Rockhampton

F Toowoomba Brisbane S Dalby Tennyson F

F Flour Milling F Tamworth Adelaide M Maize Milling North Fremantle Mile End F R Rice Milling F Sydney Albury S Soya Milling Summer Hill F R Bridgewater M Kingsgrove Industrial Mixing F Ballarat Melbourne Industrial & Retail Mixing Kensington F Packing

QLD

Northern Division

NSW

Western Division

Central Division

Seaboard Terminal Southern Division Service Centre Storage Site

Sub Terminal VIC Service Centre & Sub Terminal Broad Gauge

Standard Gauge Dual Gauge Narrow Guage Portland Terminal handles products such as wheat, barley, legumes, oilseeds and woodchips. Chairman’s & Managing Director’s Report

Ron Greentree Tom Keene Chairman Managing Director

The past year has been an exciting one for GrainCorp The 2001/02 receival figure of over 12 million tonnes with significant growth in both core operations and underpinned an excellent export performance of 6.8 million related functions along the supply chain. tonnes. This allowed us to confirm an after tax full year profit of $48.6 million. We were pleased to announce a second half All of GrainCorp’s activity has been focussed on continuing dividend of 44 cents per share which brought the full year to mould the Company into a modern, seamless and figure to a fully franked 78 cents per share. All shareholders integrated operation. This strategy has involved an have been offered the opportunity to participate in the acquisition in milling and activity in rail, partnerships in port Company’s re-activated Dividend Re-investment Plan. operations, capital investment and geographic expansion into new grain growing areas. Since the last annual report Allied Mills - diversification and strength GrainCorp has: GrainCorp entered the milling arena through the purchase of a 60% equity share of Allied Mills. This purchase is a key • Purchased the milling assets of Goodman Fielder in plank in GrainCorp’s strategy of increasing diversification, partnership with Cargill Australia - now known as and enhancing activity along the supply chain. ‘Allied Mills’.

It resulted from a rigorous assessment of growth • Created Bulk Terminals Australia (BTA) in partnership with opportunities aimed at increasing and diversifying our Grainco Australia as a joint venture for the operation of earnings base. Allied Mills also presents a unique port facilities in Queensland and New South Wales. opportunity for GrainCorp to enter into the flour milling sector as a major player. The investment in Allied Mills • Leased two engines and 40 rail wagons to transport grain will be earnings per share positive, and will strengthen and bulk goods from country receival centres to our port GrainCorp’s performance by helping to even out seasonal facilities in . variations in future years.

• Continued to make strategic investments in capital to Allied Mills is a national milling company with the largest ensure a modern and efficient delivery of services, bringing single share of the milling market and an impressive list of capital investment to nearly $300 million since 1996. customers. It can also look forward to a long-term supply arrangement with Goodman Fielder Ltd for its Baking and • Expanded our grain handling operations into South Consumer Foods divisions. Australia with the opening of a grain receival facility at Naracoorte.

GrainCorp Annual Report 2002 7 Our partner in the joint venture, Cargill Australia, brings a Capital investment will continue where an appropriate rate of wealth of experience in milling operations. Allied Mills builds return can be demonstrated. While competition and capacity on our existing relationship with Cargill Australia in the is increasing, so too is the overall market as Australian operation of grain receival centres at Red Bend and Henty growers become more productive in yields per hectare and in New South Wales. the steady increase in hectares planted year on year continues.

Rail - integration opportunity The lease of two locomotives and 40 rail wagons heralds Expansion of Receival Network - extending our reach GrainCorp’s entry into another segment of the grain supply This year GrainCorp expanded its receival network into chain. South Australia with the opening of the facility at Naracoorte. The receival centre is strategically located to make use of a Transport, particularly by rail, is a critical component of least-cost path to haul grain to GrainCorp’s terminal at our operations. This expansion is designed to offer a Portland in Victoria. Geographic expansion of operations competitive, seamless service to customers from grain will assist in managing seasonal variations and increase accumulation right through to delivery at port. receivals overall.

GrainCorp took delivery of the train on 1 November 2002 In addition, our Service Centres provide a year round which is destined for hauling grain from western Victoria to relationship with customers and reinforce our presence during our Victorian ports and for the domestic market. This initial harvest. They sell fertiliser, seed, chemicals and provide move into rail will provide a solid platform for future information on GrainCorp storage and handling services. expansion. 2002/03 - looking forward Bulk Terminals Australia (BTA) - a bigger footprint in Droughts are a regular part of life in the agricultural sector Queensland and have historically been followed by very good harvests. GrainCorp’s access to port facilities now extends into The current dry conditions have had an undeniable impact Queensland in the form of Bulk Terminals Australia (BTA). on everyone involved in the grains industry. With receivals BTA is a joint venture partnership with Grainco Australia and forecast to be well down on last year, this will clearly have commenced operations from 1 November 2002. BTA will an impact on GrainCorp’s business. operate Grainco Australia’s existing port facilities in Brisbane, at Fisherman Islands and Pinkenba, together with However, the Company enjoys good fundamentals, solid GrainCorp’s facilities at Carrington and Kooragang Island in assets and a strong brand presence in the marketplace. Newcastle under a long term licence agreement. Variable costs will be adjusted to reflect the needs of the season. BTA provides both organisations with the ability to cooperate to build better services at both ports. This will include Financial Summary 2002 2001 sharing of knowledge, skills and intellectual property, as $’000 $’000 well as the ability to manage capital more efficiently and Storage and handling revenue 275,856 264,564 save costs. The partnership represents a ‘common-sense’ utilisation of existing port capacity and capital and will Marketing revenue 424,150 254,713 generate cost savings which improve competitiveness Total revenue 700,006 519,277 and can be passed back to customers. EBITDA 119,771 115,005 Borrowing costs 10,888 11,884 Capital Investment - targeted growth Depreciation and amortisation 41,091 38,933 GrainCorp has invested nearly $300 million over the past six Net profit before tax 67,792 64,188 years to grow and rejuvenate our physical assets in strategic Tax 19,189 19,627 areas. Investment has been highly selective and targeted Net profit after tax 48,603 44,561 towards ensuring that GrainCorp strengthens its competitive position by delivering a modern and efficient service. Earnings per share 121.2 109.4 Dividend per share 78 72

8 GrainCorp Annual Report 2002 Newcastle Terminal handles products such as wheat, barley, sorghum, chickpeas and cottonseed.

GrainCorp’s strategy of supply chain and geographic GrainCorp is well placed to build on these strengths over the diversification provides a solid foundation for ongoing next twelve months. growth and future profitability. We would like to thank our staff once again for their GrainCorp will focus on long term sustainable averages exceptional contribution in an active and exciting year for and will continue to build on the successful strategy of GrainCorp. expansion and diversification. While the 2002/03 harvest is a lean one for everyone in the At GrainCorp we recognise that our staff are our key asset. grains industry, GrainCorp can look forward to emerging as The Company operates with a focus on developing their a stronger and more focussed operation. skills and providing opportunities for advancement within the Company where possible. We have maintained our Our expansion both geographically and along the supply commitment to retaining the skills in our permanent staff chain, combined with the dynamic state of our industry, despite the reduced harvest. promises to vault GrainCorp into a new era of growth in the coming years. In the past twelve months we have expanded our network of grain merchants and continued to modernise and streamline our corporate structure - importantly, we launched a joint venture with Cargill that sees our grain accumulation teams working together to buy grain for GrainCorp, Cargill Australia Ron Greentree Tom Keene and Allied Mills. Chairman Managing Director

GrainCorp Annual Report 2002 9 Moree has received a record of 18,000 tonnes in a 24 hour period.

10 GrainCorp Annual Report 2002 Investor Information

GrainCorp’s structure is based on public ownership and Share Structure grower control. Grower control is maintained through a Foundation Share that confers defined voting rights and is Grain Growers Public Association Shareholders held by Grain Growers Association Limited. The status of 31.8m Ordinary Shares the Foundation Share is reviewed every five years when all shareholders are entitled to vote. The next review is at the 2003 Annual General Meeting of GrainCorp. GrainCorp

1 Foundation Share

In 2002 the company undertook a buy back of shares with Shares 8.3m Ordinary a view to optimising the company’s debt/equity mix and 40.1 million enhancing shareholder value. In total 291,434 shares were Ordinary Shares purchased in the buy-back, leaving around 40.1 million ordinary shares on issue.

The company also re-activated its Dividend Re-investment Plan (DRP) and all shareholders were invited to participate. The DRP represents an opportunity to retain capital in the company and allows shareholders to acquire more shares without incurring the usual associated costs.

Share Information Earnings per Share 200 High share price $13.75 Low share price $9.70 150 Closing share price at 30.09.02 $9.77 Market capitalisation at 30.09.02 $391.5 million

Interim dividend (fully franked) 34 cents 100 Interim dividends paid $13.7 million

Final dividend (fully franked) 44 cents Cents per Share Final dividends paid $17.6 million 50 Basic earnings per ordinary share $1.21 Return on equity (as at balance sheet date) 17% 0 Increase in shareholders’ funds 5% 95/96 96/97 97/98 98/99 99/00 00/01 01/02 Shareholder equity $287.3m Assets $569.1m Debt $187.6m

GrainCorp Annual Report 2002 11 Financial Performance

Five Year Financial History

2002 2001 2000 1999 1998

Tonnages Receivals (m) 12.0 12.1 8.3 6.7 5.4

Export (m) 6.8 7.2 4.7 3.7 3.7

Revenue Storage & handling revenue ($m) 265.8 253.9 166.9 121.1 117.4

Marketing revenue ($m) 422.5 253.3 118.1 134.1 53.2

Other revenue ($m) 11.7 12.1 16.3 9.5 10.0

Total operating revenue ($m) 700.0 519.3 301.2 264.6 180.6

Earnings Profit from ordinary activities before interest, tax and significant items ($m) 78.7 76.1 71.6 42.2 37.7

Profit from ordinary activities after tax and before significant items ($m) 48.6 44.6 48.7 29.8 27.9

Significant items after tax ($m) - - - - 7.3

Profit from ordinary activities after tax and significant items ($m) 48.6 44.6 48.7 29.8 35.2

Earnings per Ordinary Share * (cents) 121.2 109.4 155.6 95.2 112.7

Dividends Fully franked dividend per Ordinary Share # (cents) 78.0 72.0 79.0 47.6 56.3

Other Information Number of Ordinary Shares # (m) 40.1 40.2 31.3 31.3 31.2

Ordinary capital ($m) 96.5 99.5 57.7 57.7 57.7

Shareholders’ funds ($m) 287.3 273.3 201.0 177.0 161.7

Return on shareholders’ funds as at balance date (%) 16.9 16.3 24.2 16.8 21.8

Total assets ($m) 569.1 532.8 335.1 255.1 224.8

Net tangible assets per Ordinary Share ($) 7.0 6.6 6.4 5.7 5.2

Total interest bearing borrowings less cash on hand/ Total shareholders’ funds (debt to equity) (%) 65.3 66.0 36.3 22.7 4.1

Total liabilities/Total tangible assets (%) 50.2 49.6 40.2 30.6 28.1

Current assets/Current liabilities (%) 106.5 98.5 113.4 83.1 93.5

Notes

*Basic earnings per share #Adjusted for 3 for 5 bonus issue and 10 for 1 share split

12 GrainCorp Annual Report 2002 Receivals & Exports 15 150 Operating Cash Flow Receivals Dividends Paid Export Borrowing Costs 12 120 Capital Expenditure Cash from Operations 9 90

6 $ Millions 60 Million Tonnes

3 30

0 0 1998 1999 2000 2001 2002 1998 1999 2000 2001 2002

Receival tonnes have increased by 122% over Operating cashflow has increased by 40% from the past five years. Exports tonnes have $65.4 million to $91.3 million over the past five increased by 84% over the same period. years. Significant surplus cashflow available for servicing debt, rewarding shareholders and continued infrastructure and other investment activities.

EBITDA & PAT Assets, Equity & Debt 120 600 EBITDA Total Assets PAT Shareholders' Equity 100 500 Total Debt

80 400

60 300 $ Millions $ Millions

40 200

20 100

0 0 1998 1999 2000 2001 2002 1998 1999 2000 2001 2002

EBITDA has increased 113% from $58.7 million to Shareholders’ equity increased from $161.7 million $119.8 million over the past five years. Profit margins to $287.3 million over the past five years. Net debt per tonne of grain handled have been maintained. to equity at a moderate 65%.

GrainCorp Annual Report 2002 13 Key Business Areas

Storage & Handling Grain Marketing

Goals • To operate a competitive storage and handling • To secure grain ownership and capture value network throughout the supply chain

Strategies • Optimise the silo network through targeted capital • To provide a highly efficient supply chain for both investment domestic and export clients

• Maintain low operating base • Develop and implement risk management strategies for producer and end clients • Seek opportunities for further integration of accumulation, storage and transport • Generate leverage for other services provided by GrainCorp • Host an open market place at GrainCorp silos to add value for customers

Achievements • 12 million tonnes of grain received with increased • Increased profit efficiency • Improved trading margins • 6.8 million tonnes exported through GrainCorp • Trading turnover continues to grow terminals • New marketing alternatives launched • Maintained low cost base with 9 million tonnes of permanent storage • Popularity of GrainCorp Pools resulted in record volumes and revenue • Capital works program lifted efficiency and capacity • Completed the export of several bulk export shipments • Over 1 million tonnes of grain moved on GrainCorp operated trains • Strengthened GrainCorp presence in Western Australia

• Managed Marketing Program (MMP) developed and added to range of contracting options available to grain growers

Outlook • Greater efficiencies generated with integration of • Seasonal conditions will result in lower trading supply chain activities turnover

• Continued targeted capital investment at key sites • Volatility in domestic and export markets resulting from drought (in Australia and North America) • Improved customer service through additional segregations, sealing, elevator speed and out- • Continued development of the supply chain to loading efficiency domestic and export clients

• Increased handling of non-grain bulk commodities • Develop further contracting alternatives better able to accommodate seasonal variability

14 GrainCorp Annual Report 2002 Merchandising Transport

• To supply a range of products and services to • To operate competitive transport, specifically rail Goals grain producers to enhance mutual benefit service, using State open access arrangements throughout the production cycle to add value throughout the grain supply chain to the benefit of growers and shareholders

• Provide a clearly defined range of production • Demonstrate a rail commitment to grain haulage Strategies input solutions to producer customers over branch and main line networks

• Linkage of core business activities of grain • Provide greater reliability and customer service accumulation and handling to growers and end user customers as a fully accredited rail operator

• Develop a consistent and reliable approach to rail safety, scheduling, handling and on time delivery of grain

• Seek freight rate opportunities at GrainCorp sites

• Promotion of service culture across the Company • Achieved rail accreditation in New South Wales, Achievements Victoria, South Australia and Queensland • Centres opened in West Wyalong and Coonamble • Introduction of a single grain train to facilitate • Continued to expand whole business - seasonal grain supply chain efficiencies in three states finance, seed, fertilisers, agricultural-chemicals • Demonstrated rail safety performance to the • Promotion of GrainCorp farming inputs through Australian rail standards branded fertiliser • Provided a total logistics package from farm to • Continued growth of core products in seed and export terminals and local user customers fertiliser

• Service Centres will underpin GrainCorp’s year- • Further develop rail service opportunities to Outlook round business relationship with producers growers and end users in the deregulated grain markets of New South Wales and Victoria • Continue to build product and service base • Encourage increased rail competition to force • Continued expansion of Service Centre network further efficiencies in the grain supply chain

• Ensure continued strategic investment in rail to support branch line operations

GrainCorp Annual Report 2002 15 Review of Operations

Storage and Handling Expenditure of over $40 million in upgrading facilities Storage and handling remains the core business for GrainCorp continues to improve its storage facilities to GrainCorp. Our unmatched physical assets and expansive provide better service to both grower and end user network continue to provide a strong competitive advantage. customers. Over $40 million has been spent across the GrainCorp has invested nearly $300 million in strategically network to ensure site turn around times remain competitive important areas over the past six years to ensure our assets for the in-loading of grain from growers and the out-loading provide a modern and efficient service. of grain to end users via rail.

Highlights Naracoorte Grain Receival Facility opened The facility, which boasts four 20,000 tonne bunkers at an 12 million tonne receival and 6.8 million tonne investment of $3.35 million, opened for operation in the export figure 2002/2003 harvest. Efficiencies will be captured by the site A 12 million tonne receival figure from last harvest resulted in through the transport of grain, via the least cost path, from exports of 6.8 million tonnes of grain which underpinned Naracoorte to GrainCorp’s Port of Portland Terminal in Victoria. GrainCorp’s performance. GrainCorp’s network of This adds to the strategy of geographic expansion designed to permanent grain storage facilities which can conduct minimise exposure to unfavourable weather patterns. outloading in all weather types assisted in ensuring export schedules were met. Kooragang Agri-Food Terminal GrainCorp invested $10 million jointly with P&O Ports to Port terminals develop an integrated agri-food storage and loading facility GrainCorp’s four seaboard terminals at Newcastle, Port at Kooragang Island. The terminal allows agri-food products Kembla, Geelong and Portland saw 7.9 million tonnes of to be loaded directly from storage onto berthed vessels throughput (including woodchips) over the past year. This delivering substantial cost savings. marks a drop of 0.5 million tonnes from the previous year however shipments of rice, pulses, oats and maize are It is designed to load bulk agricultural products such as continuing to increase and exports of woodchips remains cottonseed, cottonseed meal, peas and beans and other bulk over one million tonnes per annum. Commodities shipped non-wheat grains. It may also be used for non-agricultural included wheat, barley, canola, sorghum, maize, chickpeas, exports such as mineral sands and fertilisers. The multi- lupins, beans, paddy rice, rice, legumes, peas, lentils and purpose storage facility has a combined capacity of 30,000 woodchips. tonnes. The facility will also handle imported agri-food products, for example soya bean meal and palm kernel meal. The biggest monthly shipment for all four ports combined was in January 2002 with a total of 879,094 tonnes (including 118,000 tonnes of woodchips). Bulk Terminals Australia (BTA) BTA will operate Grainco Australia’s existing port facilities in The average country outloading per month to export ports Brisbane, at Fisherman Islands and Pinkenba and was 571,000 tonnes (loaded in country onto rail). The largest GrainCorp’s facilities in Newcastle at Carrington and was 685,000 tonnes. Kooragang Island.

Total for year Largest Shipment The joint venture will lead to better utilisation of existing Grain Woodchips terminal capacity while avoiding duplication of capital ‘000 tonnes Tonnes investment. GrainCorp and Grainco Australia will continue Newcastle 1,780 N/A 56,020 to compete for product with each other and with other Port Kembla 2,300 N/A 70,744 companies along the supply chain. Geelong 1,780 533 52,500 Portland 973 469 61,500

16 GrainCorp Annual Report 2002 Junee Sub Terminal services one of Australia’s prime grain growing regions with 150,200 tonnes of permanent storage and 170,000 of bunker storage.

Warehousing E-commerce Tonnes delivered into GrainCorp’s warehousing service have In an industry first, GrainCorp provided e-commerce increased on the last reporting period. 31.9% of total solutions to growers for the transfer of warehoused grain to GrainCorp receivals were warehoused in the 2000/01 pool or contract. The service has proven popular with uptake harvest compared with 38.8% during the 2001/02 harvest. stronger than predicted at approximately 2,000 registrations. Warehousing provides growers with the opportunity to sell their grain after carefully reviewing what can be complex pricing structures for grain.

GrainCorp Annual Report 2002 17 During the first year of full operation, Burren Junction’s Service Centre distributed 9,950 tonnes of fertiliser.

Grain Marketing Growers can be certain that they are selling their grain to someone who will be dealing with the end customer, and GrainCorp’s trading division has expanded steadily since customers know they are buying their grain from someone its creation in 1995. Marketing of grain complements our who deals directly with the grower. This direct link helps to storage and handling business and provides further ensure premium quality and cost efficiency. competition in the marketplace. It is an important element in the provision of an integrated suite of services for GrainCorp’s customers. Suite of marketing products expanded GrainCorp Marketing provides simple, transparent, cost Highlights effective and well managed Pool products.

Large volumes traded This year, the first Malt Barley Pool was offered in Victoria Over the past 12 months GrainCorp Marketing has produced along with the successful completion of GrainCorp’s first large trading volumes and further increased sales turnover. Pre-harvest Pool. The Marketing Division also launched a Overseas client relationships have advanced with the new contracting alternative known as a Managed Marketing completion of several export shipments. Program (MMP). The MMP focuses on price management, not prediction and uses tools to manage associated risk. GrainCorp’s unmatched network provides the flexibility that allows customers access to grain from a range of locations Network extended and at a variety of grades. This network also offers a Seven fully trained Grain Merchants were added to the solutions orientated approach to growers combined with GrainCorp network this year. They bring new skills and fast and responsive service. provide customer focused support to our growing client base.

One of the key benefits of GrainCorp Marketing is that international customers are provided with a gateway to Australian grain producers, accessing an integrated, efficient supply chain.

18 GrainCorp Annual Report 2002 Merchandising Transport Service centres provide year round contact with grower Greater participation in grain transport logistics is a key customers, promote a holistic package of GrainCorp services element in GrainCorp’s competitive positioning. Our strategy of and attract grain to our storage facilities. They are an diversification and expansion will be significantly enhanced important component in our strategy of diversification and through the realisation of seamless integration from country expansion designed to cement our presence in grain growing storage to port. areas. Volumes of products sold have continued to increase. Highlights

Highlights Geelong balloon loop A dual gauge rail loop connection to GrainCorp’s terminal at Infrastructure Port of Geelong has recently been completed. This is the only GrainCorp’s multi-million dollar investment in infrastructure port in Victoria where this is available, offering significant for the handling of farm inputs through the country storage operational savings. network allows quick supply during peak demand periods. This network offers greater flexibility to customers, allowing This dual gauge rail loop paves the way for a flow of grain them to get what they demand, when they need it and from the standardised rail networks in the western areas of where they require it. Victoria and the southern areas of NSW. GrainCorp’s end user and grower customers will benefit through a least cost path from farm to port. Efficiencies will be realised through time ‘Real time’ based accounting system saved in unloading trains that do not require shunting. The implementation of a corporate resource system was undertaken throughout the Service Centre network. Investment in rolling stock This system is an online ‘real time’ Service Centre based GrainCorp has opened a new chapter in the grain supply accounting system that allows all customers immediate chain. On 1 November 2002, the Company took delivery of access to account information. two locomotives and 40 wagons. This dynamic expansion is designed to offer a competitive, improved service in hauling grain to port. Train crews have been hired for the operation of Employee development the rolling stock. A large number of GrainCorp employees started their careers in the Merchandising Division and have progressed The intended primary geographic area of operation for the within the Company throughout various areas. This train is in western Victoria, comprising two branch lines demonstrates our commitment to staff and the opportunity managed by Freight Australia and one mainline managed by for their career development. the Australian Rail Transport Corporation.

Accredited rail operator SunPrime Seeds In the past 12 months GrainCorp received rail operator GrainCorp is continuing its joint investment with the Grains accreditation in the States of South Australia, Victoria, New Research & Development Corporation and The University of South Wales and Queensland. Gaining this accreditation Sydney to promote innovation through new wheat varieties removes an important hurdle in commencing intended rail from SunPrime Seeds Pty Ltd. operations and will open opportunities to haul grain in the areas where larger parcels can be located. This strategy will auger well in a harvest where tonnes will be well down on historical averages.

Road transport GrainCorp makes substantial use of road transport for hauling of grain where the use of rail is not appropriate. Services such as on farm pick-up have proven valuable in providing an added level of service to grower customers and securing their business. GrainCorp plans to develop road transport into a separate focussed operating division of the Company.

GrainCorp Annual Report 2002 19 Technical Services Information Services Quality of grain is a critical issue for end user customers and for Information Services is focussed on providing effective and growers. GrainCorp continues to invest in the latest and most valued solutions to improve business practices by delivering reliable equipment to ensure we can provide the best service quality products and quantifiable business services. offered in the market.

Highlights Highlights Web functionality Operational efficiencies realised Existing internal applications have been leveraged to The Technical Services laboratories at Gilgandra and Parkes deploy GrainCorp’s stock systems to external customers have been integrated into the one laboratory at Parkes. This has over the past twelve months. Through the redeployment allowed greater utilisation of existing capital resources and has of established technologies, projects undertaken by the generated considerable operational efficiencies. Information Services Department are now being delivered to market faster.

Integration of quality standards Technical Services have played a critical role in the creation of Further integration of the corporate resource systems national barley receival standards which now apply to deliveries GrainCorp has integrated its Service Centres across the in all the eastern states of Australia. The benefits of these network into the enterprise resource planning system. This national standards flow to both customers in export markets means online invoicing, real time stock control and visibility and to growers. Export customers are able to determine the true of merchandise across the entire GrainCorp network are quality of barley more accurately and growers can now find it now available. easier to discern differences in prices from which to base marketing decisions. Upgrade of Port Kembla process control GrainCorp’s Information Services played an integral role in Improvements in grain testing accuracy the research and development of a process control system A further significant investment was made to purchase 18 Near which integrates the stock system with the process controls Infra Red (NIR) Whole Grain Analysers allowing coverage by this at the Port Kembla terminal. A roll-out of this ‘turn-key’ type of equipment at almost all sites across the GrainCorp system is planned across all terminals. network. On-site testing of oil content and impurities in canola has expanded to six sites in New South Wales in addition to the Implementation of second phase of Microsoft 100 per cent coverage already existing in Victoria. infrastructure The business has entered its second phase in the adoption The benefits of more accurate testing are passed onto growers of Microsoft technologies. This phase is designed to provide through the receipt of payments which reflect the true quality of improved security and ‘fail over’ capabilities for GrainCorp’s the grain. This enables growers to make canola marketing central stock system. GrainCorp will benefit from an decisions at the site based on immediate knowledge of improved ability to provide its customers true online services moisture, oil and impurities. around the clock.

A new laboratory at Geelong Terminal Buyer to buyer services A new quality testing laboratory at Geelong Terminal was Twelve of the key stock reports/inquiries along with buyer completed and features automatic sample delivery of both rail transfers have been deployed through online services. These and shipping samples directly into the laboratory testing area. services provide buyers with up to date information and This state-of-the-art facility will ensure compliance with out-turn transaction capabilities. This initiative is in line with the specifications for all customers utilising this seaboard terminal. strategic direction of improving efficiencies and lowering costs to the core business.

20 GrainCorp Annual Report 2002 The operators at Temora Sub Terminal, which has 136,100 tonnes of permanent storage, are capable of outloading in excess of 2,000 tonnes per hour. Employee Relations Occupational health and safety Human Resources commenced a comprehensive strategy GrainCorp maintains a comprehensive Occupational Health that includes a continued focus on building the capabilities and Safety system. The Company is pleased to report a of our people to deliver on GrainCorp’s business strategy, marked improvement in injury and illness statistics over the more rigorous and effective performance management past 12 months due to enhancements of existing and processes at all levels and more effective communication development of new innovative systems. and consultation with staff. Commitment to OH&S begins with the Board and Executive OH&S committees extending to many regionally based Highlights committees. This ensures a fair representation of employees, Training and development contractors and management, consult to make decisions Another 10 trainees graduated from GrainCorp’s traineeship affecting the health and well-being of everyone at or around program this year, all taking up positions within the GrainCorp sites. Company. Another 11 trainees were recruited this year and can expect to complete their traineeship in 2004. A commitment to training all staff in sound OH&S procedures has ensured a greater awareness and ability The Company has continued to provide training to its to recognise and manage risk at the workplace. existing Bulk Grain Workers providing nationally recognised formal qualifications to a number of staff. The continued adoption of new and innovative OH&S systems will ensure GrainCorp meets and exceeds GrainCorp also introduced the Frontline Management legislative and best practice standards in the future. Initiative for line supervisors and managers in 2002. 23 supervisors and line managers will participate in the Industrial relations program over the next 12 months. Participants graduate During the year, a review of industrial relations in our from the program with a Certificate IV in Business (Frontline operational areas commenced. The review of our seaboard Management). terminals has been completed and produced a number of efficiencies. These included right–sizing of the award workforce at Geelong and Sunshine and a reduction in staffing levels on a number of specific functions at Newcastle.

Supporting Our Communities

The GrainCorp Foundation has just completed its second in 2002, via an assortment of worthwhile ventures. These round of funding for 2002, its fourth round since its have included such projects as the supply of new equipment inception, with each round attracting interest from more to the Warracknabeal Youth Drop-In Centre, the provision of community-based projects. two new Alpha helmets for Careflight and the purchase of new play equipment for the children at the Junee Preschool. The Foundation was established as an initiative of the GrainCorp Board, with the mission to represent the The GrainCorp Foundation is continuing its support of the Company’s social responsibility to the communities in which Loddon Murray Community Leadership Program, the GrainCorp staff, shareholders and customers live and work. University of New South Wales and the Country Education Foundation, which is being implemented across regional and Due to the provision that the GrainCorp Foundation would rural Victoria and New South Wales. receive 1% of GrainCorp’s after tax profits, the Foundation was able to contribute over $480,000 to these communities

22 GrainCorp Annual Report 2002 Executive Management

The Executive and Senior Management teams are focussed on growing business solutions for GrainCorp customers and shareholders. Over the past year, the Executive reviewed business performance and developed strategies that provide continued business growth and position the Company for the future.

The GrainCorp Foundation donated $50,000 to Telstra Childflight which transports critically ill children from rural areas.

GrainCorp Annual Report 2002 23 Board of Directors

The GrainCorp Board of 11 Directors is made up of six Grain Growers Association Directors (one of whom must be the Chairman of GrainCorp), four Directors elected by ordinary shareholders and the Managing Director.

Ron Greentree Allan McCallum Tom Keene Graham Barron Nick Burton Taylor Chairman Deputy Chairman Managing Director

R.L. (Ron) Greentree (Chairman) W.G. (Graham) Barron Grower from Merrywinebone, NSW. Principal of an Grower from Ungarie, NSW. Chairman of the Risk agricultural machinery business and Director of BRI Australia Management Committee and member of the Capital Works Ltd. Chairman of Vicgrain Limited and Victorian Grain Review Committee. Services Limited. Chairman of the Remuneration and member of the Capital Works Review and Equity N. (Nick) Burton Taylor AM B.Ec, ASIA, FCA, FAICD Committees. Grower from Boorowa, NSW. Principal Hillgrove Pastoral Company. Director of Rural Press Limited, Bankstown A.D. (Allan) McCallum (Deputy Chairman) Dip Ag.Sc Airport Limited, Heggies Bulk Haul Limited and The Grower from Kerang, Victoria. Director of Vicgrain Limited Australian Agricultural Company Limited. Member Public and Victorian Grain Services Limited. Deputy Chairman of Transport Union (Loco Division). Chairman of the Audit Pivot Limited, Chairman of Nugrain Pty Limited, Chairman of Committee, the GrainCorp Foundation and member of the Farm Horizons Limited and President of Australian Oilseeds Remuneration Committee. Federation. Chairman of the Capital Works Review and Occupational Health, Safety and Environment Committees. R.R. (Ross) Flanery Grower from Harden, NSW. Commercial interests in forestry T.B. (Tom) Keene (Managing Director) B.Ec, MAICD and hydro-electric power. Chairman of the Equity Committee Managing Director of GrainCorp Group and member and member of the Capital Works Review Committee. of the Risk Management Committee. Chairman of Allied Mills Australia Pty Limited.

24 GrainCorp Annual Report 2002 Ross Flanery Rick Freeman David Groves Donald Julian Menegazzo David Trebeck McGauchie

R.G. (Rick) Freeman J.A. (Julian) Menegazzo B.Sc Grower from Edgeroi, NSW. Company principal of Norseman Grower from Balliang, Victoria. Active in horticulture Machinery Imports Pty Limited. Member of the Capital marketing business. Member of the Audit Committee and Works Review Committee. Director of GrainCorp GrainCorp Foundation. Superannuation Pty Limited.

D.B. (David) Trebeck B.Sc.Agr (Hons), M.Ec. D. (David) Groves B.Com, M.Com, CA Consultant, Grower and Company Director from , Chartered Accountant and Company Director. Director of ACT. Executive Chairman of ACII Tasman Pty Limited. Masling Industries Pty Limited and Equity Trustees Limited. Director of Incitec Limited, National Grazing Services Pty Active in the management of companies involved in Limited. Member of Audit Committee and OH&S Committee. viticulture and investment. Member of the Equity, Risk Management and Remuneration Committees.

D.G. (Donald) McGauchie Grower from Prairie, Victoria. Director of Reserve Bank of Australia, Director of Telstra Corporation Limited, Ridley Corporation Limited, National Foods Limited and Deputy Chairman of Australian Wool Testing Authority Limited. Member of the Equity and Remuneration Committees.

GrainCorp Annual Report 2002 25 Corporate Governance Statement

This statement outlines the principal corporate governance Non-executive directors comprise up to six “group” practices that were followed by the company throughout the directors, whom are all the directors of Grain Growers 2001/2002 financial year. Association Limited (“GGA”) and up to four “elected” directors whom are subject to re-election by rotation at the Company’s annual general meeting. Group directors must be Role of Shareholders members of GGA and there must be two directors appointed The shareholders of GrainCorp Limited play an important from each of three geographical zones across New South role in corporate governance by virtue of their responsibility Wales/Victoria. In subsequent years, Group directors are for voting for the appointment of Directors. The Foundation subject to re-election by rotation at GGA’s annual general shareholder, Grain Growers Association Limited, who meetings. The Chairman is elected by the group directors. represents 14,000 grain growers is consulted on a regular Details of experience and qualifications are set out on page basis on the strategic direction and performance of the 35 of this annual report. The performance of each non- Company. executive director is reviewed by the Chairman, The Chairman’s performance is reviewed by the full Board. An The Board ensures that shareholders are kept fully informed independent external consultant is retained to assist the on developments affecting the company through: Chairman and Directors in this review process.

• The annual and interim results which are released through The Managing Director automatically relinquishes his reports, newsletters and presentations; position on the Board in the event that his executive position with the Company ceases. • Compliance with Australian Stock Exchange’s continuous disclosure listing rules; The Work of Directors In addition to the preparation for and attendance at Board • The annual general meeting and other meetings called to and committee meetings, non-executive directors visit obtain approval for board action. operational sites and are involved in local and national industry matters. Business planning meetings, attendance Board of Directors at conferences and other industry occasions also require involvement of directors. The GrainCorp Board is accountable to shareholders for the business and affairs of the group and it sets the framework for the Company’s long term success. It approves the The Board reviews the objectives and performance of Company’s goals, direction, long term strategic plans and GrainCorp Group alliances and joint ventures. The Board provides overall policy guidance. The Board ensures that considers it appropriate that for good corporate governance appropriate policies and procedures for the management of practice non-executive directors will not sit on joint venture business and financial risks and associated internal controls or alliance Boards. are in place and monitors environmental and safety performance. It also monitors compliance with laws and Directors have access to the Company’s solicitors and ethical behaviour. auditors at the Company’s expense should they wish to seek advice on matters relating to their duties as directors of the Company, after first notifying the Board or Chairman of the Size and Composition of the Board Board. There are currently 11 directors on the Board - 10 non- executive directors, including the Chairman, and one Each Director is covered by relevant company insurance executive director, being the Managing Director. policies and enters into a Deed of Indemnity with the Group.

26 GrainCorp Annual Report 2002 Condobolin is one of the biggest receival sites in NSW with a storage capacity of approximately 348,000 tonnes.

GrainCorp Annual Report 2002 27 Emoluments of Board Members business and reports to the Board on any material item. The Board recommends to shareholders, from time to time, It develops audit policy and monitors audit functions within a quantum of total directors fees. Non-executive annual the companies. The BAC has, during the year, reviewed and Directors Fees are established based on independent advice. approved an Internal Business Audit Plan incorporating a With the exception of the Chairman and Deputy Chairman, comprehensive business review process in respect of additional yearly fees are paid to directors who are members internal audit management functions. The committee will of committees. The Annual General Meeting of shareholders also review any material changes in accounting policy. in 2001 approved a total non-executive director remuneration The Committee reports to the Board after each meeting. pool of up to $1million annually for a three year period. Management, internal and external auditors are invited to In addition to reimbursement of expenses, any allowance attend BAC meetings to ensure that adequate controls and paid to directors is in line with rates prescribed for members practices are maintained throughout the Group. The BAC of the Senior Executive Service, Australian Public Service. reviews progress in and reports arising from the Internal Details of current remuneration and meeting attendance can Business Audit Plan as well as specific issues or matters be found on pages 36 and 38. which may arise from the internal and external audit process. The external auditors will have direct access on a regular basis to the BAC without management involvement. Retiring non-executive Directors are entitled to an allowance up to a maximum of their last three years remuneration after nine years service (pro-rata for a lesser period with a In addition it has oversight of financial investments. minimum of three years). GrainCorp seeks to minimise the risk that arises through the Company’s activities in financial risk management.

Board and Committee Agendas External auditors are appointed for a term of three years The Chairman and Managing Director establish the agendas and are not automatically reinstated. The committee plays for Board meetings, although directors have the right to add an active role in reviewing the adequacy of the existing items for directors’ consideration. Each committee chairman arrangements, and is responsible for ensuring that the decides the length and frequency of committee meetings in auditors have the necessary qualifications and skills and consultation with committee members and consults with that the scope and quality of their audit is appropriate. management on preparation of agendas. Senior executives The committee makes recommendations to the Board in attend Board and committee meetings when relevant relation to the appointment of external auditors. An Auditor matters are under consideration. Committee chairmen report Independence Policy has been adopted which sets out the work of their committee to the Board on a regular basis. the key principles to be followed by the Audit firm in its relationship with the Company. The BAC will conduct a Board Committees formal assessment of external auditor performance each year and report the outcome to the Board. The Board has established seven committees to increase its efficiency and effectiveness. Each committee has a formal The Committee reviews disclosure practices of the Company charter approved by the Board. to shareholders and relevant external agencies.

Board Audit Committee (BAC) Risk Management Committee The BAC Committee comprises three non-executive The Company’s Risk Management Committee (“RMC”) directors. Meetings are held at least four times a year. specifically develops and oversees policy for all risk The committee ensures that the financial statements are associated with grain marketing, merchandising and other prepared in accordance with appropriate standards and areas of operations. The policies specify trading limits, statutory requirements and reviews all matters raised by approved risk management tools, credit management and the internal and external auditors, risks associated with the

28 GrainCorp Annual Report 2002 delegations for authorising transactions and segregation of The committee sets, reviews and monitors policy on all staff duties. The committee comprises two non-executive remuneration and other conditions of employment. The directors, the Managing Director, the Chief Operating Officer committee monitors a management succession plan. and one external appointment.

Occupational Health, Safety and Environment Equity Committee Committee The Equity Committee comprises four non-executive The OHS and E Committee is comprised of one non- directors and is responsible for recommending to the Board executive Director, Chief Operating Officer, Company matters pertaining to shareholders’ interest and the capital Secretary and Risk and Safety Manager. The principal role structure of the company. of the Committee is to review and recommend to the Board proactive strategies for providing a safe and healthy workplace for all employees, growers, customers, Capital Works Review Committee contractors and local communities. The Capital Works Review Committee consists of four non- executive directors and the Chief Operating Officer. The A monthly reporting system for compliance and purpose of this committee is to review strategic operational performance against agreed performance objectives is issues, including utilisation of storage, future requirements, reviewed by the Board. harvest performance, service standards and overview of capital expenditure. The committee recommends to the Board policy on disposal, leasing and the Company’s long Foundation Committee term operational needs. The Foundation committee will comprise seven members two of whom will be non-executive directors, one employee and four community representatives (selected by the Remuneration and Appointments Committee GrainCorp Board). The Remuneration and Appointments Committee comprises four non-executive directors. The principal role of the The aim of the GrainCorp Foundation is to represent the committee is to maintain a remuneration policy which Company’s social responsibility to the communities - ensures the remuneration package of senior executives particularly rural and regional - in which GrainCorp staff, properly reflects their duties and responsibilities. This shareholders and customers live and work. includes ensuring that remuneration is competitive in attracting, retaining and motivating people of the highest quality and aligns the interests of senior management with The GrainCorp Foundation seeks to create and support shareholders. opportunities that build on the initiative and potential of rural people in developing and growing communities in which GrainCorp operates. GrainCorp allocate 1% of after tax The committee reviews and recommends to the Board, after profits annually to sponsorship activities. The primary reference to performance and published remuneration objective is to provide financial support, in an objective and surveys and market information, the remuneration of the programmed fashion, to the rural communities in which Managing Director and other senior executives. GrainCorp is based.

The committee also reviews the non-executive directors’ remuneration arrangements and details are then submitted to the Board for their review and subsequently to a general meeting of GrainCorp Limited for approval by shareholders. In determining the level of fees, survey data on fees paid by comparable companies is considered together with changes in the level of responsibilities.

GrainCorp Annual Report 2002 29 Policies and Procedures Ethical Standards All directors and employees are expected to act with the Health and Safety utmost integrity and objectivity, striving at all times to GrainCorp is committed to ensuring compliance with enhance the reputation and performance of the Company. relevant health, safety and environmental legislation. The The Company has implemented a Code of Conduct and Board requires a best practice approach in these areas and Diversity and Equity Policy for all directors and employees. has implemented appropriate management objectives and Membership of appropriate professional bodies is structures and a regular reporting process to ensure that this encouraged. objective is achieved. GrainCorp’s health, safety and environmental policies are under continuous review and are updated when required. In general terms, GrainCorp’s Continuous Disclosure policies are designed to eliminate injury to people and to As a guiding principal GrainCorp must ensure it does not minimise loss or damage to product stored and handled communicate material price or value sensitive information on behalf of customers. to an external party except where that information has previously been disclosed to the market generally. The Company has adopted a continuous disclosure policy Trading of GrainCorp Shares and financial markets communication policy to ensure The following policy applies for the trading of GrainCorp compliance with disclosure obligations. shares by directors and employees.

Related Party Transactions That buying or selling of GrainCorp Limited shares by directors, officers, all staff agreement employees, Transactions by directors for storage, handling, testing, contractors located at any of the company’s offices, users of seed, sales and purchases of grain are undertaken on terms the general ledger financial systems and related parties, who no more favourable than available to other customers and are aware of price sensitive information not available to the apart from standard business transactions are reviewed market, be restricted to the following time periods: and approved by the Chairman of the Audit Committee in accordance with the corporate governance policy of the Company. (i) Six weeks commencing 48 hours from the date of lodgement of the half yearly accounts of GrainCorp Limited with ASIC and the ASX.

(ii) Six weeks commencing 48 hours from the date of lodgement of the preliminary final report of GrainCorp Limited with the ASX.

(iii) Four weeks commencing 48 hours from the date of the Annual General Meeting of the Company.

These trading windows are open subject to an individual not being in possession of market-sensitive information.

Each Director has entered into an agreement “Director and disclosure of interests and transactions in Securities” with GrainCorp Limited in accordance with ASX Listing Rules.

30 GrainCorp Annual Report 2002 2002 Concise Report for the year ended 30 September 2002 GrainCorp Limited and Controlled Entities

Contents Directors’ Report 32

Consolidated Statement of Financial Performance 40

Discussion & Analysis of Consolidated Statement of Financial Performance 41

Consolidated Statement of Financial Position 42

Discussion & Analysis of Consolidated Statement of Financial Position 43

Consolidated Statement of Cash Flows 44

Discussion & Analysis of Consolidated Statement of Cash Flows 45

Notes to the Consolidated Financial Statements 46

Directors’ Declaration 55

Independent Audit Report 56

Shareholder Information 57

GrainCorp Annual Report 2002 31 Directors’ Report GrainCorp Limited and Controlled Entities

The directors present their report on the consolidated entity Review of Operations consisting of GrainCorp Limited and the entities it controlled The consolidated entity recorded a profit after tax of at the end of, or during, the year ended 30 September 2002. $48.6 million (EBITDA $119.8 million) for the financial year compared with $44.6 million (EBITDA $115.0 million) for the Directors previous year. Despite lower receivals and exports, profit The following persons are directors of GrainCorp Limited at after tax increased by $4 million primarily due to operational the date of this report: efficiencies and synergies from the successful merger with R.L. Greentree (Chairman) Victorian Grain Services Limited. A.D. McCallum (Deputy Chairman) A more detailed review of the operations during the financial T.B. Keene (Managing Director) year and the results of those operations appear elsewhere in W.G. Barron the Annual Report. N. Burton Taylor AM R.R. Flanery Significant Changes in State of Affairs R.G. Freeman Share Buy Back D. Groves D.G. McGauchie GrainCorp Limited (GrainCorp) commenced an on-market J.A. Menegazzo buy back of ordinary shares on 3 October 2000 for the D.B. Trebeck (Appointed 27 February 2002) period to 31 July 2002. The maximum number of shares that could be acquired was 4.1 million, per annum. The number Mr P.B. Wade was a director from the beginning of the of shares purchased in the year to 30 September 2002 was financial year until his retirement on 27 February 2002. 291,434 shares bringing the overall total purchased to Mr D.B. Trebeck was appointed as a director at the 1,355,452 shares. Annual General Meeting on 27 February 2002. Other than the above, there were no significant changes in the Principal Activities consolidated entity’s state of affairs during the year in review. The nature and scope of the main activities undertaken by the consolidated entity during the year were the provision of services to the grain industry including:

• Receival, handling, storage and transportation of grain and other bulk commodities as an agent for marketing organisations, end users and growers;

• Marketing of grain and agricultural supplies and the operation of grain pools;

• Provision of agronomic services and farm input products.

Dividends The following dividends have been paid or declared for payment to members:

Date Rate Amount (Cents) $’000

Paid 21 December 2001 - Final for 2001 29.0 11,655 Paid 28 June 2002 - Interim for 2002 34.0 13,713 Declared for payment on 6 January 2003 - Final for 2002 44.0 17,632

32 GrainCorp Annual Report 2002 Directors’ Report GrainCorp Limited and Controlled Entities

Matters Subsequent to the End of the Financial Year Drought Due to current drought conditions in most of New South Wales Allied Mills and Victoria, receivals will be significantly lower in the next GrainCorp and Cargill Australia Ltd (Cargill), a fully owned financial year. However, cost management measures have subsidiary of international agribusiness company, Cargill been implemented to lessen the impact on next years results. Incorporated, have bought the milling and mixing business from Goodman Fielder Ltd. The acquisition is a joint venture Other between GrainCorp and Cargill and will trade as Allied Mills. Other than reported elsewhere in the Annual Report, no The business was acquired on 4 October 2002 for other matter or circumstance has arisen since 30 September approximately $200 million, and GrainCorp has a 60% 2002 which has significantly affected or may significantly ownership interest. All necessary regulatory approvals have affect: been obtained by both companies. (a) the consolidated entity’s operations in future financial Bulk Terminals Australia years; or

On 1 November 2002, GrainCorp joined with Grainco (b) the results of those operations in future financial years; or Australia Ltd (Grainco) to form a new joint venture company (c) the consolidated entity’s state of affairs in future financial called Bulk Terminals Australia (BTA) which will operate their years. respective Newcastle and Brisbane terminals.

BTA, in which GrainCorp and Grainco maintain an equal Likely Developments shareholding, will operate GrainCorp’s existing port facilities at All information on future likely developments is contained Carrington and Kooragang Island in Newcastle and Grainco’s elsewhere in the Annual Report. The directors believe that facilities at Fisherman Islands and Pinkenba in Brisbane. additional information as to likely developments in the operations of the consolidated entity in future financial years, Tax Consolidation including the expected results of those operations, would likely The first two tranches of the tax consolidation legislation result in unreasonable prejudice to the consolidated entity. became substantively enacted on 21 October 2002 when the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Bill 2002 was passed by the Senate. GrainCorp intends to adopt the legislation in the next financial year.

The financial effect of the legislation has not been recognised in this financial report in accordance with UIG 39 Effect of Proposed Tax Consolidation Legislation on Deferred Tax Balances. It is not possible to disclose the effect of the legislation in this financial report as it cannot yet be reliably estimated.

GrainCorp Annual Report 2002 33 Directors’ Report GrainCorp Limited and Controlled Entities

Environment GrainCorp is committed to ensuring business practices are conducted in an environmentally responsible manner. Management of operations and assets are such that adverse environmental impacts are minimised. Notwithstanding compliance to environmental laws as a minimum standard, GrainCorp strives to ensure best practice principles are adopted in managing environmental issues. Strategies include, but are not limited to:

• Development and implementation of sound environmental management systems to ensure legislative requirements are met;

• Engaging independent specialists to assess current practice and assist in improvement strategies;

• Develop and encourage employee awareness and responsibility to environmental issues;

• Monitor performance of the consolidated entity in respect of environmental issues and adjust processes accordingly;

•Introduce procedural guidelines to address task-specific environmental concerns.

An important part of the GrainCorp Environmental Management System includes the recording of any incident that may have a potential environmental impact. During the financial year, no fines or penalties were imposed on any member of the consolidated entity under environmental regulation and all required environmental licenses and permits are current.

Occupational Health and Safety GrainCorp is committed to ensuring compliance with relevant health, safety and environmental legislation. The Board requires a best practice approach in these areas and has implemented appropriate management objectives and structures and a regular reporting process to ensure that this objective is achieved. GrainCorp’s health, safety and environmental policies are under continuous review and are updated when required. In general terms, GrainCorp’s policies are designed to eliminate injury to people and to minimise loss or damage to product stored and handled on behalf of customers.

34 GrainCorp Annual Report 2002 Directors’ Report GrainCorp Limited and Controlled Entities

Information on Directors Particulars of Directors’ beneficial interest in ordinary shares.

R.L. (Ron) Greentree (Chairman) 757,152 shares Grower from Merrywinebone, NSW. Principal of an agricultural machinery business and Director of BRI Australia Ltd. Chairman of Vicgrain Limited and Victorian Grain Services Limited. Chairman of the Remuneration and member of the Capital Works Review and Equity Committees.

A.D. (Allan) McCallum (Deputy Chairman) Dip Ag.Sc 126,615 shares Grower from Kerang, Victoria. Director of Vicgrain Limited and Victorian Grain Services Limited. Deputy Chairman of Pivot Limited, Chairman of Nugrain Pty Limited, Chairman of Farm Horizons Limited and President of Australian Oilseeds Federation. Chairman of the Capital Works Review and Occupational Health, Safety and Environment Committees.

T.B. (Tom) Keene (Managing Director) B.Ec, MAICD 170,026 shares Managing Director of GrainCorp Group and member of the Risk Management Committee. Chairman of Allied Mills Australia Pty Limited.

W.G. (Graham) Barron 154,982 shares Grower from Ungarie, NSW. Chairman of the Risk Management Committee and member of the Capital Works Review Committee.

N. (Nick) Burton Taylor AM B.Ec, ASIA, FCA, FAICD 1,520,038 shares Grower from Boorowa, NSW. Principal Hillgrove Pastoral Company. Director of Rural Press Limited, Bankstown Airport Limited, Heggies Bulk Haul Limited and The Australian Agricultural Company Limited. Member Public Transport Union (Loco Division). Chairman of the Audit Committee, the GrainCorp Foundation and member of the Remuneration Committee.

R.R. (Ross) Flanery 223,372 shares Grower from Harden, NSW. Commercial interests in forestry and hydro-electric power. Chairman of the Equity Committee and member of the Capital Works Review Committee.

R.G. (Rick) Freeman 136,192 shares Grower from Edgeroi, NSW. Company principal of Norseman Machinery Imports Pty Limited. Member of the Capital Works Review Committee. Director of GrainCorp Superannuation Pty Limited.

D. (David) Groves B. Com, M.Com, CA 1,633,099 shares Chartered Accountant and Company Director. Director of Masling Industries Pty Limited and Equity Trustees Limited. Active in the management of companies involved in viticulture and investment. Member of the Equity, Risk Management and Remuneration Committees.

D.G. (Donald) McGauchie 93,543 shares Grower from Prairie, Victoria. Director of Reserve Bank of Australia, Director of Telstra Corporation Limited, Ridley Corporation Limited, National Foods Limited and Deputy Chairman of Australian Wool Testing Authority Limited. Member of the Equity and Remuneration Committees

J.A. (Julian) Menegazzo B.Sc. 472,365 shares Grower from Balliang, Victoria. Active in horticulture marketing business. Member of the Audit Committee and GrainCorp Foundation.

D.B. (David) Trebeck B.Sc.Agr (Hons), M.Ec. 13,158 shares Consultant, Grower and Company Director from Canberra, ACT. Executive Chairman of ACII Tasman Pty Limited. Director of Incitec Limited, National Grazing Services Pty Limited. Member of Audit Committee and OH&S Committee.

GrainCorp Annual Report 2002 35 Directors’ Report GrainCorp Limited and Controlled Entities

The particulars of Directors’ beneficial interests in shares are as at the date of this report.

As at the date of this report, Grain Growers Association “GGA” owned 1 Foundation share and 8,253,709 ordinary shares in GrainCorp Limited. Messrs Greentree, McCallum, Barron, Flanery, Freeman and McGauchie are directors of GGA and members of GGA. Messrs Burton Taylor, Menegazzo and Trebeck are members of GGA and in that capacity have an interest in the above shares owned by GGA.

Meetings of Directors The following table sets out the number of meetings of GrainCorp’s Directors (including meetings of committees of Directors) held during the twelve months to 30 September 2002, and the number of meetings attended by each director.

Director Board Meetings Committee Meetings Number held during Number Number held Number period in office attended during period in office attended

Total Number of Meetings Held R.L. Greentree 12 12 17 16 A.D. McCallum 12 12 20 20 T.B. Keene 12 12 5 5 W.G. Barron 12 12 11 11 N. Burton Taylor 12 12 11 11 R.R. Flanery 12 11 19 19 R.G. Freeman 12 12 13 13 D. Groves 12 12 13 13 D.G. McGauchie 12 11 9 8 J.A. Menegazzo 12 12 5 5 D.B. Trebeck (Appointed 27/2/02) 7 6 2 2 P.B. Wade (Retired 27/2/02) 5 2 4 2

36 GrainCorp Annual Report 2002 Directors’ Report GrainCorp Limited and Controlled Entities

Emoluments of Board Members and Senior Executives The criteria for reviewing the emoluments of the Managing Director and senior executive include achievement of individual performance objectives as defined by the internal Performance Management System, advice from external consultants on the prevailing market for equivalent positions, the company’s overall performance and achievement of key strategic goals, increased and changed work loads, increased responsibilities and interaction of the incumbent with the Board and external parties.

The Remuneration Committee is responsible for ensuring the emoluments of senior executives reflect their responsibilities and performance. Further details are provided in the Corporate Governance Statement in the Annual Report.

Non-executive annual Directors Fees from 1 March 2002 are $44,700 per director, $111,700 for the Chairman and $74,400 for the Deputy Chairman. With the exception of the Chairman and Deputy Chairman, additional yearly fees of $4,650 are paid to directors who are members of committees other than audit. The Chairman of these committees is paid $6,950.

Yearly fees for the Audit Committee are $6,000 for members and $8,950 for the Chairman. $1,110 per meeting will be paid to a director who chairs an ad hoc committee and $800 per meeting to a director who is a member of an ad hoc committee. In addition to reimbursement of expenses, any allowance paid to directors is in line with rates prescribed for members of the Senior Executive Service, Australian Public Service.

Retiring non-executive Directors are entitled to an allowance up to a maximum of their last three years remuneration after nine years service (pro-rata for a lesser period with a minimum of three years).

Details of emoluments paid or payable to each director of GrainCorp Limited and each of the five executive officers of the company and the consolidated entity receiving the highest emoluments in the financial year are set out in the following tables.

GrainCorp Annual Report 2002 37 Directors’ Report GrainCorp Limited and Controlled Entities

Non-Executive Directors of GrainCorp Limited Directors’ Fees Superannuation Total & Allowances Contributions $$$ R.L. Greentree 109,441 9,056 118,497 A.D. McCallum 89,375 5,513 94,888 W.G. Barron 56,679 6,737 63,416 N. Burton Taylor 55,999 5,748 61,747 R.R. Flanery 50,554 12,679 63,233 R.G. Freeman 49,058 9,757 58,815 D. Groves 57,414 4,728 62,142 D.G. McGauchie 51,842 5,226 57,068 J.A. Menegazzo 49,860 5,274 55,134 D.B. Trebeck (Appointed 27/2/02) 29,446 2,473 31,919 P.B. Wade (Retired 27/2/02) 140,529* 5,180 145,709

* Includes retirement benefit Note: Directors’ fees include applicable committee fees.

Executive Director of GrainCorp Limited Salary Bonus Motor Super- Total Vehicle annuation Name $$$$$ T.B. Keene Managing Director 377,152 97,200 48,878 40,211 563,441

Other Executives of GrainCorp Limited Salary Bonus Motor Super- Total Vehicle annuation Name and position $$$$$ M. Watts, Chief Financial Officer 362,658* 23,220 - 4,060 389,938 J. Di Leo, Chief Operating Officer 248,818 43,200 41,010 24,435 357,463 A. Johns, Business Development Manager 140,443 21,000 16,040 20,622 198,105 J. Tansley, Southern Division Manager 136,875 17,273 9,091 28,594 191,833 N. Hart, Corporate Services Manager 142,989 9,844 21,192 14,164 188,189

*Includes retirement payment and leave entitlements. Note: Emoluments reported are those paid or payable for the 12 months ended 30 September 2002. The amounts shown include fringe benefits tax where applicable.

38 GrainCorp Annual Report 2002 Directors’ Report GrainCorp Limited and Controlled Entities

Share Options Two additional executive options plans were approved by shareholders at the 2002 Annual General Meeting allowing a total of 940,000 shares to be acquired. The number of options granted to the Managing Director and the five most highly remunerated executives were as follows:

Name and Position Number of Options Directors Tom Keene, Managing Director 250,000

Other Executives M. Watts, Chief Financial Officer * - J. Di Leo, Chief Operating Officer 100,000 A. Johns, Business Development Manager 50,000 J. Tansley, Southern Division Manager 50,000 N. Hart, Corporate Services Manager 50,000 * Retired.

The options were granted under the executive option plans 2a and 2b.

Unissued ordinary shares of GrainCorp Limited under option at the date of this report are as follows:

Option Plan Number Issue Price Expiry Date

GrainCorp Executive Option Plan 2a 250,000 $8.85 30 September 2005 GrainCorp Executive Option Plan 2b 690,000 $10.93 30 September 2005

A total of 68,000 ordinary shares of GrainCorp Limited were Rounding of Amounts to Nearest Thousand Dollars issued during the year ended 30 September 2002 on the The company is of a kind referred to in Class Order 98/0100 exercise of options granted under the GrainCorp Executive issued by the Australian Securities and Investments Option Plan 1b. The amount paid on each of the shares was Commission, relating to the “rounding off” of amounts in the $6.25. No amounts are unpaid on any of the shares. directors’ report and financial report. Amounts in the Since 30 September 2002, 88,000 shares of GrainCorp directors’ report and financial report have been rounded off Limited were issued on exercise of options granted under to the nearest thousand dollars in accordance with that the GrainCorp Executive Option Plan 1c. The amount paid Class Order. on each of the shares was $6.25. No amounts are unpaid on Auditor any of the shares. PricewaterhouseCoopers continues in office in accordance Insurance of Officers with Section 327 of the Corporations Act 2001.

During the financial year, the consolidated entity has paid, or This report is made in accordance with a resolution of the agreed to pay, premiums to insure persons who are, or have directors. been, an officer of the company or a related entity, or any past, present or future director or officer of the company, or any of it’s subsidiaries or related entities. The contracts prohibit disclosure of the amount of the premium paid. R.L. Greentree The liabilities insured include costs and expenses that may Chairman be incurred in defending civil or criminal proceedings that Sydney may be brought against the officers in their capacity as 4 December 2002 officers of entities in the consolidated entity.

GrainCorp Annual Report 2002 39 Consolidated Statement of Financial Performance for the year ended 30 September 2002 GrainCorp Limited and Controlled Entities

Consolidated 2002 2001 $’000 $’000 Revenue from operating activities 688,284 507,203

Other revenue 11,722 12,074

Total revenue from ordinary activities 700,006 519,277

Goods purchased for resale (401,552) (227,566)

Raw materials and consumables used (20,132) (22,704)

Employee benefits expense (86,706) (87,663)

Depreciation and amortisation expenses (41,091) (38,933)

Borrowing costs expense (10,888) (11,884)

Repairs and maintenance (13,459) (15,199)

Other expenses from ordinary activities (58,296) (51,140)

Expenses from ordinary activities (632,124) (455,089)

Shares of net profits of associate accounted for using the equity method (90) -

Profit from ordinary activities before income tax expense 67,792 64,188

Income tax expense (19,189) (19,627)

Profit from ordinary activities after income tax expense 48,603 44,561

Outside equity interests in profit from ordinary activities after income tax 93 19

Net profit attributable to members of GrainCorp Limited 48,696 44,580

Total changes in equity other than those resulting from transactions with owners 48,696 44,580

Cents Cents Basic earnings per share 121.2 109.4 Diluted earnings per share 118.2 109.0

The above statement of financial performance should be read in conjunction with the attached notes.

40 GrainCorp Annual Report 2002 Discussion and analysis of Consolidated Statement of Financial Performance for the year ended 30 September 2002 GrainCorp Limited and Controlled Entities

Financial Performance Summary Profit after tax for the year ended 30 September 2002 was $48.6 million, compared to $44.6 million for the corresponding year. Despite lower receivals and exports, profit after tax increased by $4 million, primarily due to operational efficiencies and synergies from the successful merger with Victorian Grain Services Limited. Earnings before interest, tax, depreciation and amortisation (EBITDA) also increased from $115.0 million to $119.8 million.

An analysis of revenue and profit after tax by segment is set out in Note 2. A further review of the operations and results is contained elsewhere in the Annual Report.

Storage & Handling GrainCorp received a total of 12 million tonnes of grain, which was slightly lower than last years 12.1 million tonnes, and exported 6.8 million tonnes, also lower than the 7.2 million tonnes exported last year. The lower exports contributed to a higher carryover at 30 September 2002 of 4.7 million tonnes, up from 4.4 million tonnes for the previous year. The segmented profit for storage & handling was $102.1 million based on revenue of $280.2 million (2001: $263.7 million).

Marketing For the year ended 30 September 2002, Marketing reported a segmented profit of $7 million which was 32% higher than the previous year’s profit of $5.3 million. This increase in profit is a result of a significant increase in revenue from $254.7 million to $424.2 million. The 67% increase in revenue is due to increased trading volumes, continued growth in market share and favourable trading conditions.

Marketing has developed close relationships with end users of grains and improved throughput of grain through the storage network. This is now being reflected in better overall profitability.

Depreciation, Interest and Taxation Increased depreciation on a higher asset base was offset by lower borrowing costs due to a reduction in interest rates and a lower effective tax rate.

GrainCorp Annual Report 2002 41 Consolidated Statement of Financial Position as at 30 September 2002 GrainCorp Limited and Controlled Entities

Consolidated 2002 2001 $’000 $’000 Current Assets Receivables 95,949 63,748 Inventories 8,588 9,416 Other 7,991 8,611

Total Current Assets 112,528 81,775

Non-Current Assets Receivables 83 94 Other financial assets 25,695 25,269 Property, plant & equipment 416,402 413,115 Deferred tax assets 6,381 3,319 Intangible assets 8,047 9,224

Total Non-Current Assets 456,608 451,021

Total Assets 569,136 532,796

Current Liabilities Payables 29,469 26,141 Interest bearing liabilities 42,401 34,449 Current tax liabilities 5,274 2,091 Provisions 28,473 20,380

Total Current Liabilities 105,617 83,061

Non-Current Liabilities Interest bearing liabilities 145,211 145,972 Deferred tax liabilities 15,884 14,926 Provisions 15,137 15,501

Total Non-Current Liabilities 176,232 176,399

Total Liabilities 281,849 259,460

Net Assets 287,287 273,336

Equity Contributed equity 96,524 99,531 Reserves 18,430 18,430 Retained profits 172,333 154,987

Total GrainCorp Limited Interest 287,287 272,948 Outside equity interest: - 388

Total Equity 287,287 273,336

The above statement of financial position should be read in conjunction with the attached notes.

42 GrainCorp Annual Report 2002 Discussion and analysis of Consolidated Statement of Financial Position as at 30 September 2002 GrainCorp Limited and Controlled Entities

Total assets increased by $36.3 million and total liabilities increased by $22.4 million during the year ended 30 September 2002. The following key transactions were the main movements in the balance sheet items:

Assets • Receivables, prepayments and other current assets increased by $31.6 million primarily due to higher marketing activity levels;

• Increase in property, plant and equipment through capital expenditure of $43.9 million, offset by a depreciation charge of $40.6 million.

Liabilities • Interest bearing liabilities required for the funding of capital expenditure and working capital requirements increased by $7.2 million;

• Increase in current provisions of $8.1 million is mainly due to a higher final dividend provision. For September 2002, final dividend declared is 44 cents per share compared to 29 cents per share at the same time last year;

• Payables and other creditors have increased moderately, reflecting the increased size of GrainCorp’s business.

Shareholders Equity Contributed equity reduced by $3 million for the year due to:

• Share buy-back of 0.3 million shares for $3.4 million, offset by

• 68,000 ordinary shares issued for $0.4 million on exercise of executive share options.

GrainCorp Annual Report 2002 43 Consolidated Statement of Cash Flows for the year ended 30 September 2002 GrainCorp Limited and Controlled Entities

Consolidated 2002 2001 $’000 $’000 Cash Flows from Operating Activities Receipts from customers (inclusive of goods & services tax) 727,417 505,510 Payments to suppliers and employees (inclusive of goods & services tax) (636,105) (384,204) 91,312 121,306 Interest received 238 690 Borrowing costs (10,924) (11,884) Income taxes paid (18,299) (23,998)

Net Cash Inflow / (Outflow) from Operating Activities 62,327 86,114

Cash Flows from Investing Activities Cash acquired on merger - 4,192 Payments for property, plant and equipment (46,925) (52,311) Purchases of investments / business (50) (25,219) Dividends received 1,917 571 Proceeds from sale of property, plant and equipment 1,760 1,833 Loans repaid by associates 1,577 - Cash decrease on deconsolidation of group entity 585 - Loans from related parties - 157

Net Cash Inflow / (Outflow) from Investing Activities (41,136) (70,777)

Cash Flows from Financing Activities Proceeds from interest bearing liabilities 97,300 55,655 Repayment of interest bearing liabilities (88,099) (1,250) Payments for shares bought back (3,421) (10,530) Proceeds from executive share options exercised 425 425 Purchase of Class B shares from GGA - (37,575) Share buy-back transaction costs (11) (43) Dividends paid (25,373) (32,211)

Net Cash Inflow / (Outflow) from Financing Activities (19,179) (25,529)

Net increase / (decrease) in cash held 2,012 (10,192) Cash at the beginning of the financial year (10,618) (426)

Cash at the End of the Financial Year (8,606) (10,618)

The above statement of cash flows should be read in conjunction with the accompanying notes.

44 GrainCorp Annual Report 2002 Discussion and analysis of Consolidated Statement of Cash Flows for the year ended 30 September 2002 GrainCorp Limited and Controlled Entities

Cash Flows from Operating Activities For the year ended 30 September 2002, net cash inflow from operating activities was $62.3 million, a decrease of $23.8 million from 2001’s net inflow of $86.1 million. The decrease is due to the higher working capital commitments of the marketing division, which is reflected in current receivables on the statement of financial position.

Cash Flows from Investing Activities The significant items in the net cash outflow from investing activities of $41.1 million (2001: Outflow $70.8 million) were:

$ million Sale of property, plant and equipment 1.8 Dividends received from investments 1.9 Loans repaid by associate companies 1.6 Purchase of property, plant and equipment (46.9)

Cash Flows from Financing Activities Net cash outflow from financing activities was $19.2 million (2001: Outflow $25.5 million). The major contributors to this years net outflow were:

$ million Dividends paid - 2001 final & 2002 interim (25.4) On-market buy back of ordinary shares (3.4) Net receipts from borrowings 9.2

GrainCorp Annual Report 2002 45 Notes to the Consolidated Financial Statements for the year ended 30 September 2002 GrainCorp Limited and Controlled Entities

1.Summary of Significant Accounting Policies Principles of Consolidation This general purpose financial report has been prepared in The consolidated financial statements incorporate the accordance with Accounting Standards, other authoritative assets and liabilities of all entities controlled by GrainCorp pronouncements of the Australian Accounting Standards as at 30 September 2002 and the results of all controlled Board, Urgent Issues Group Consensus Views and the entities for the year then ended. The effects of all Corporations Act 2001. transactions between entities in the consolidated entity are eliminated in full. Outside equity interests in the results The principal accounting policies adopted by GrainCorp and equity of controlled entities are shown separately in Limited “GrainCorp” and the consolidated entity the consolidated statement of financial performance and (i.e. GrainCorp and its controlled entities GrainCorp statement of financial position respectively. Services Limited “Services”, GrainCorp Operations Limited “Operations”, GrainCorp Victoria Pty Limited “Victoria”, Where control of an entity is obtained during a financial GrainCorp National Pty Limited “National”, GrainCorp year, its results are included in the consolidated statement Queensland Pty Limited “Queensland”, Victorian Grain of financial performance from the date on which control Services Limited “VGS”, Vicgrain Limited “Vicgrain”, commenced. Where control of an entity ceases during a Vicgrain Assets Pty Limited “Assets”, Vicgrain Finance Pty financial year its results are included for that part of the Limited “Finance”) are stated to assist the general period during which control exists. understanding of these statements. Investments in associates are accounted for in the Unless otherwise noted, the accounting policies adopted consolidated financial statements using the equity are consistent with those of the previous year. method. Under this method, the consolidated entity’s Comparative information is reclassified where appropriate share of the profits or losses of associates is recognised in to enhance comparability. The accounts are drawn up on the consolidated statement of financial performance, and historical cost principles. its share of post-acquisition movements in reserves is recognised in consolidated reserves. The cumulative post- New Accounting Standards acquisition movements are adjusted against the cost of As a result of applying the revised accounting standard the investment. Associates are those entities over which AASB 1005 Segment Reporting, a number of comparative the consolidated entity exercises significant influence, but amounts were represented or reclassified to ensure not control. comparability with the current accounting period.

46 GrainCorp Annual Report 2002 Notes to the Consolidated Financial Statements for the year ended 30 September 2002 GrainCorp Limited and Controlled Entities

2.Segment Information Storage & Marketing Intersegment Consolidation Handling Eliminations 2002 $’000 $’000 $’000 $’000

Sales to customers outside consolidated entity 265,762 422,522 - 688,284 Intersegment sales 14,397 1,628 (16,025) - Total sales revenue 280,159 424,150 (16,025) 688,284

Share of net (loss) of associates (90) - - (90) Other revenue 7,888 3,834 - 11,722 Total segment revenue 287,957 427,984 (16,025) 699,916

Segment result 102,103 6,986 - 109,089 Unallocated expenses (41,297) Profit from ordinary activities before income tax 67,792

Income tax expense (19,189) Profit from ordinary activities after income tax 48,603

Segment assets 462,373 67,145 - 529,518 Unallocated assets 39,618 Total assets 569,136

Segment liabilities 241,150 19,541 - 260,691 Unallocated liabilities 21,158 Total liabilities 281,849

Investments in associates ---- Unallocated investments in associates 500 Total investments in associates 500

Acquisitions of property, plant and equipment, intangibles and other non-current segment assets 46,855 70 - 46,925

Depreciation and amortisation expense 40,541 550 - 41,091

Net cash inflow from operating activities 98,368 (7,056) - 91,312 Unallocated cashflows (28,985) Net cash inflow from operating activities 62,327

GrainCorp Annual Report 2002 47 Notes to the Consolidated Financial Statements for the year ended 30 September 2002 GrainCorp Limited and Controlled Entities

2.Segment Information (continued) Storage & Marketing Intersegment Consolidation Handling Eliminations 2001 $’000 $’000 $’000 $’000

Sales to customers outside consolidated entity 253,856 253,347 - 507,203 Intersegment sales 9,834 1,366 (11,200) - Total sales revenue 263,690 254,713 (11,200) 507,203

Other revenue 10,571 1,503 - 12,074 Total segment revenue 274,261 256,216 (11,200) 519,277

Segment result 106,789 5,252 - 112,041 Unallocated expenses (47,853) Profit from ordinary activities before income tax 64,188

Income tax expense (19,627) Profit from ordinary activities after income tax 44,561

Segment assets 447,667 42,317 - 489,984 Unallocated assets 42,812 Total assets 532,796

Segment liabilities 233,046 9,397 - 242,443 Unallocated liabilities 17,017 Total liabilities 259,460

Investments in associates ---- Unallocated investments in associates 50 Total investments in associates 50

Acquisitions of property, plant and equipment, intangibles and other non-current segment assets 51,255 56 - 51,311

Depreciation and amortisation expense 38,818 115 - 38,933

Net cash inflow from operating activities 106,754 14,552 - 121,306 Unallocated cashflows (35,192) Net cash inflow from operating activities 86,114

48 GrainCorp Annual Report 2002 Notes to the Consolidated Financial Statements for the year ended 30 September 2002 GrainCorp Limited and Controlled Entities

2.Segment Information (continued)

Notes to and forming part of the segment information: a) The previous industry segments derive revenue from the following operations and activities: Storage and Handling: includes fees for receival, storage and testing of wheat, other grains and bulk commodities. Marketing: Marketing and transportation of grain and agricultural products, and the operation of grain pools. b) Intersegment pricing is on an “arm’s length” basis. c) The consolidated entity only operates in one geographical segment - Australia.

3.Dividends Parent Entity 2002 2001 $’000 $’000 Ordinary shares: Interim dividend paid of 34 cents (2001 - 43 cents) Franked at 30% (2001 - 34%) 13,713 17,513 Final dividend proposed of 44 cents (2001 - 29 cents) Franked at 30% (2001 - 30%) 17,632 11,655 31,345 29,168

The franked dividends proposed as at 30 September 2002 will be paid out of existing franking credits or out of franking credits arising from the payment of income tax in the year ending 30 September 2003.

Consolidated Parent Entity 2002 2001 2002 2001 $’000 $’000 $’000 $’000

Franking credits available for the subsequent financial year 29,339 22,901 8,353 9,391

Note: The comparative for franking credits available for the subsequent financial year has been restated to reflect the changes that took place to the dividend imputation system effective from 1 July 2002, introduced by the New Business Tax System (Imputation) Bill 2002.

The above amounts represent the balances of the franking accounts as at the end of the financial year, adjusted for: (a) franking credits that will arise from the payment of income tax payable as at the end of the year; (b) franking debits that will arise from the payment of dividends proposed as at the end of the financial year; and (c) franking credits that may be prevented from being distributed in the subsequent financial year.

GrainCorp Annual Report 2002 49 Notes to the Consolidated Financial Statements for the year ended 30 September 2002 GrainCorp Limited and Controlled Entities

4. Earnings Per Share Consolidated 2002 2001 Cents Cents

Basic earnings per share 121.2 109.4 Diluted earnings per share 118.2 109.0

Weighted average number of ordinary shares used as the denominator in the calculation of basic earnings per share. 40,174,806 40,756,968

Weighted average number of ordinary shares and potential ordinary shares used as the denominator in the calculation of diluted earnings per share. 41,202,806 40,912,968

5. Financial Instruments (b) Foreign Exchange Risk GrainCorp and its controlled entities are parties to The consolidated entity hedges against exposures from derivative financial instruments with associated risk in the grain futures taken in the US, Canada and Europe. When normal course of business in order to hedge exposure to required to, hedging is undertaken through transactions fluctuations in commodity prices, foreign exchange and entered into in foreign exchange markets. Forward interest rates. Their use is subject to a comprehensive set exchange contracts and currency option contracts have of policies, procedures and limits approved by the Board been used for hedging purposes. The contracts are timed of Directors. to mature when the grain futures expire.

(a) Commodity Price Risk The consolidated entity is exposed to grain price fluctuations through its grain trading activities. To hedge this commodity price risk, the consolidated entity has entered into grain commodity futures contracts and grain commodity options contracts with terms between 2 and 16 months depending on the underlying transactions.

At balance date, net outstanding commodity futures contracts had a fair value of $189,122,792 (2001 - $81,038,256) with various maturities up to December 2003. If settled at balance date, these contracts would have resulted in a net loss of $10,279,000 (2001 - $58,882) which is offset by an unrecognised net gain on the underlying transactions being hedged.

Commodity sold and bought options are marked to market at each balance date. These options with maturities up to April 2003, if closed out at balance date, would have resulted in a net gain of $1,088,873 (2001 - $2,453,113) which may be offset by an unrecognised net loss on the underlying transactions being hedged.

50 GrainCorp Annual Report 2002 Notes to the Consolidated Financial Statements for the year ended 30 September 2002 GrainCorp Limited and Controlled Entities

5. Financial Instruments (continued) At balance date, the outstanding foreign exchange contracts are (Australian Dollar equivalent).

2002 2002 Average 2001 2001 Average A$’000 Exchange A$’000 Exchange Rate Rate

Buy US Dollars / Sell Australian Dollars 0 - 6 months 41,527 0.5419 1,120 0.5594 6-12 months 955 0.5016 15,563 0.5005 12-18 months - - 883 0.4972

Buy Australian Dollars / Sell US Dollars 0 - 6 months 86,038 0.5396 66,839 0.5326 6-12 months 8,008 0.5370 4,316 0.5097 12-18 months 458 0.5459 2,932 0.5115

Buy Canadian Dollars / Sell Australian Dollars 0 - 6 months 349 0.8596 3,730 0.8071

Buy Australian Dollars / Sell Canadian Dollars 0 - 6 months 31,128 0.8327 16,277 0.7861 6-12 months - - 760 0.7899

Buy Euros / Sell Australian Dollars 0 - 6 months 1,805 0.5540 173 0.5781

Buy Australian Dollars / Sell Euros 0 - 6 months - - 244 0.5329 6-12 months - - 3,922 0.5736 12-18 months - - 1,476 0.5625

As these contracts are hedging future settlement of US, European and Canadian grain and oilseed futures, any unrealised gains or losses on the contracts, together with the cost of the contracts, are deferred and will be recognised when the underlying transaction occurs.

The following foreign exchange gains and losses have been deferred.

2002 2001 $’000 $’000 Unrealised gains 1,614 1,105 Unrealised losses (936) (6,839) Net gain (loss) 678 (5,734)

GrainCorp Annual Report 2002 51 Notes to the Consolidated Financial Statements for the year ended 30 September 2002 GrainCorp Limited and Controlled Entities

5. Financial Instruments (continued)

(c) Interest Rate Swap Contracts Bank loans of the consolidated entity currently bear an average variable interest rate of 5.42% (2001: 4.60%). It is the consolidated entity’s policy to protect part of the loans from exposure to increasing interest rates. Accordingly, it has entered into interest rate swap contracts under which the consolidated entity is entitled to receive interest at variable rates and is obliged to pay interest at fixed rates. The contracts require settlement of net interest receivable or payable each 90 or 180 days. The settlement dates coincide with the dates on which interest is payable on the underlying debt.

Swaps currently in place cover 37% (2001: 40%) of the total borrowings outstanding. The average fixed interest rate is 6.81% (2001: 7.17%) and the variable rates are between 0.30% and 0.50% (2001: 0.30% and 0.50% respectively) above 90 or 180 day bank bill rate.

At 30 September 2002, the notional principal amounts and periods of expiry of the interest rate swap contracts are as follows:

2002 2001 $’000 $’000 0-1 years 25,000 5,980 2-3 years 40,000 60,000

The fair values of interest rate swaps are determined as the difference in present value of the future interest cashflow, amounting to a financial liability of $1,325,133 (2001: financial liability $3,659,634). GrainCorp also has a nominal $1.5 million interest rate collar amortising until March 2003, with an interest cap rate of 5.95% and an interest floor rate of 4.95%.

52 GrainCorp Annual Report 2002 Notes to the Consolidated Financial Statements for the year ended 30 September 2002 GrainCorp Limited and Controlled Entities

5. Financial Instruments (continued)

(d) Interest Rate Risk Exposures The consolidated entity’s exposure to interest rate risk and the effective weighted average interest rate for each class of financial assets and financial liabilities is set out below: Average Floating Fixed interest maturing in: Non interest interest 1 year over 1 year more than interest rate rate or less to 5 years 5 years bearing Total 2002 % $’000 $’000 $’000 $’000 $’000 $’000 Financial assets Investments 25,695 25,695 Cash and deposits - Receivables 95,949 95,949 Interest rate collar* 5.95 1,500 1,500 Interest rate swaps* 5.41 65,000 65,000 65,000 1,500 - - 121,644 188,144 Financial liabilities Bank overdrafts 8.45 8,606 8,606 Trade and other creditors 29,469 29,469 Bills payable 5.42 176,100 176,100 Other loans 800 800 Finance leases 7.13 195 1,911 2,106 Interest rate collar* 4.95 1,500 1,500 Interest rate swaps* 6.81 25,000 40,000 65,000 184,706 26,695 41,911 - 30,269 283,581 Net financial assets (liabilities) (95,437) *notional principal Average Floating Fixed interest maturing in: Non interest interest 1 year over 1 year more than interest rate rate or less to 5 years 5 years bearing Total 2001 % $’000 $’000 $’000 $’000 $’000 $’000 Financial assets Investment 25,269 25,269 Cash and deposits - Receivables 63,748 63,748 Interest rate collar* 5.95 1,250 1,500 2,750 Interest rate swaps* 5.20 65,980 65,980 65,980 1,250 1,500 - 89,017 157,747 Financial liabilities Bank overdrafts 8.45 10,618 10,618 Trade and other creditors 26,141 26,141 Bills payable 5.01 165,500 165,500 Other loans 1,205 1,205 Finance leases 7.13 826 2,272 3,098 Interest rate collar* 4.95 1,250 1,500 2,750 Interest rate swaps* 7.17 5,980 60,000 65,980 176,118 8,056 63,772 - 27,346 275,292 Net financial assets (liabilities) (117,545) *notional principal

GrainCorp Annual Report 2002 53 Notes to the Consolidated Financial Statements for the year ended 30 September 2002 GrainCorp Limited and Controlled Entities

5. Financial Instruments (continued)

Reconciliation of Net Financial Assets to Net Assets 2002 2001 $’000 $’000

Net financial assets (liabilities) as above (95,437) (117,545) Non-financial assets and liabilities Inventories 8,588 9,416 Property, plant and equipment 416,402 413,115 Intangibles 8,047 9,224 Other assets 14,455 12,024 Provisions (64,768) (52,898) Other liabilities -- Net assets per balance sheet 287,287 273,336

(e) Credit Risk The credit risk on financial assets of the consolidated entity which have been recognised on the statement of financial position, other than investments in shares, is generally the carrying amount, net of any provision for doubtful debts.

There is potential for the current dry conditions to increase credit risk through counterparties not being able to meet their obligations. The consolidated entity considered this exposure and associated provisions at balance date and continue to monitor these risks.

6. Full Financial Report Further financial information can be obtained from the full financial report which is available free of charge, on request from the company. A copy may be requested by calling 1800 809482 (free call). Alternatively, both the full financial report and the concise report can be accessed via the internet at www.graincorp.com.au.

54 GrainCorp Annual Report 2002 Directors’ Declaration for the year ended 30 September 2002 GrainCorp Limited and Controlled Entities

Directors’ Declaration The directors declare that in their opinion, the concise financial report of the consolidated entity for the year ended 30 September 2002 as set out on pages 40 to 54 complies with Accounting Standard AASB 1039: Concise Financial Reports.

The financial statements and specific disclosures included in this concise financial report have been derived from the full financial report for the year ended 30 September 2002.

The concise financial report cannot be expected to provide as full an understanding of the financial performance, financial position and financing and investing activities of the consolidated entity as the full financial report, which as indicated in note 6, is available on request.

This declaration is made in accordance with a resolution of the directors.

R.L. Greentree Chairman

Sydney 4 December 2002

GrainCorp Annual Report 2002 55 Independent Audit Report to the members of GrainCorp Limited and its Controlled Entities

Audit Opinion The procedures included:

In our opinion, the concise financial report of GrainCorp • testing that the information included in the concise Limited for the year ended 30 September 2002, set out on financial report is consistent with the information in the full pages 40 to 55 complies with Australian Accounting financial report; Standard AASB 1039: Concise Financial Reports. • selecting and examining evidence, on a test basis, as This opinion must be read in conjunction with the following required by auditing standards, to support amounts, explanation of the scope and summary of our role as auditor. discussion and analysis, and other disclosures in the concise financial report which were not directly derived Scope and Summary of our Role from the full financial report. We did not examine every The concise financial report - responsibility and content item of available evidence; The preparation and content of the concise financial report •reviewing the overall presentation of information in the for the year ended 30 September 2002 are the responsibility concise financial report. of the directors of GrainCorp Limited (the Company). Our audit opinion was formed on the basis of these The auditor’s role and work procedures.

We conducted an independent audit of the concise financial Independence report in order to express an opinion on it to the members of As auditor, we are required to be independent of the the Company. Our role was to conduct the audit in Company and its controlled entities and free of interests accordance with Australian Auditing Standards to provide which could be incompatible with integrity and objectivity. In reasonable assurance as to whether the concise financial respect of this engagement, we followed the independence report is free of material misstatement. requirements set out by The Institute of Chartered We have also performed an independent audit of the full Accountants in Australia, the Corporations Act 2001 and the financial report of the Company for the financial year ended Auditing and Assurance Standards Board. 30 September 2002. Our audit report on the full financial In addition to our statutory audit work, we were engaged to report was signed on 4 December 2002, and was not undertake other services for the Company and its controlled subject to any qualification. Our audit did not involve an entities. In our opinion the provision of these services has analysis of the prudence of business decisions made by the not impaired our independence. directors or management.

In conducting the audit of the concise financial report, we carried out a number of procedures to assess whether in all material respects the concise financial report is presented fairly in accordance with Australian Accounting Standard AASB 1039: Concise Financial Reports. PricewaterhouseCoopers

P J Carney Partner

Sydney 4 December 2002

56 GrainCorp Annual Report 2002 Shareholder Information as at 29 November 2002 GrainCorp Limited and Controlled Entities

The Shareholder information set out below was applicable as at 29 November 2002.

A. Distribution of Ordinary Shares 1 - 1,000 6,313 1,001 - 5,000 2,929 5,001 - 10,000 698 10,001 - 100,000 410 100,001 - and over 27

10,377

B. Twenty Largest Shareholders The names of the twenty largest holders of each class of shares are listed below: Ordinary Shares Number of Percentage of shares held issued shares 1. Grain Growers Association Limited 8,253,709 20.63 2. NBT Pty Ltd 1,470,823 3.68 3. DB Capital Pty Limited 595,568 1.49 4. Mr R Greentree & Mr B Harris 528,640 1.32 5. Victorian Farmers Federation Property Trust Ltd 499,967 1.25 6. UBS Warburg Private Clients 412,081 1.03 7. Janvin Pty Limited 285,168 0.71 8. Linkshore Pty Limited 278,850 0.70 9. Mr G Watsford 261,763 0.65 10. Janvin Pty Limited 250,000 0.62 11. Menegazzo Enterprises Pty Ltd 241,783 0.60 12. R & D Pastoral Pty Ltd 230,950 0.58 13. Mr P Menegazzo 227,867 0.57 14. Rupert Baroona Pty Ltd 200,000 0.50 15. Ms N Der Sarkissian 174,464 0.44 16. Mr P Cameron 173,401 0.43 17. DB Capital 163,408 0.41 18. Accounter Nominees Pty Ltd 140,000 0.35 19. J P Morgan Nominees Australia Limited 139,334 0.35 20. Mr J Menegazzo 127,583 0.32 14,655,359 37

GrainCorp Annual Report 2002 57 Shareholder Information as at 29 November 2002 GrainCorp Limited and Controlled Entities

C. Substantial Shareholders The following shareholder had a substantial shareholding in GrainCorp Limited shares as at 29 November 2002.

Ordinary Shares Number of Percentage of shares held issued shares 1Grain Growers Association Limited 8,253,709 20.63%

D. Voting Rights The voting rights attached to each class of shares are set out below:

(a) Ordinary shares - on a show of hands every member present in person or by proxy shall have one vote and upon a poll each share shall have one vote.

(b) Foundation share:

(i) No ordinary resolution can be passed without the affirmative role of the Foundation Share, except for the appointment of elected Directors;

(ii) For a special resolution, the Foundation Share carried 75% of the total number of votes entitled to be cast.

58 GrainCorp Annual Report 2002 Enquiries Australian Stock Exchange Nigel Hart GrainCorp shares are classified under the Miscellaneous Company Secretary Industrials Index (code GNC) and have been listed on the Australian Stock Exchange (ASX) since 1998. Share prices are reported in major daily newspapers and can be GrainCorp Registered Office accessed online at www.asx.com.au. Level 10 51 Druitt Street Sydney NSW 2000 Dividend Policy Postal Address: GrainCorp has a dividend payout ratio of 65 per cent. PO Box A268 Sydney South NSW 1235 GrainCorp Website www.graincorp.com.au - GrainCorp’s interactive website Phone: 02 9325 9100 features the current Annual Report and full financials, plus Freecall: 1800 809 482 interim financial reports. News and corporate information is Fax: 02 9325 9180 regularly updated for shareholders. Details of Board members and executive management team are also provided.

Shareholder Inquiries GrainCorp Limited shareholders requiring information regarding their shareholdings should contact the Company’s registry at:

Computershare Investor Services Pty Ltd GPO Box 7045 Sydney NSW 1115 Telephone: 1300 855 080 Fax: (02) 8234 5050

GrainCorp sponsoring broker is: ABN AMRO Morgans Limited GPO Box 202 Brisbane QLD 4001 Telephone: 1800 777 946

Removal from Annual Report mailing list Modernisation of annual reporting processes has meant that some shareholders would prefer not to receive a hard copy report. Shareholders can elect not to receive an Annual Report (but still receive a Notice of Meeting and Proxy Form) by contacting the share registry.

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