MELBOURNE FOOTBALL CLUB LIMITED (ACN 005 686 902)

DIRECTORS' REPORT To the Members of the Limited ("the Club" or "MFC")

The Directors hereby present their report pursuant to the requirements of the Corporations Act 2001 on the state of affairs of the Club at 31 October 2010.

Jim Stynes Jim has been a director and President of the Melbourne Football Club Limited since 12 June 2008. Jim has particular involvement at Board level on our playing list management, our supporter groups, and our relationships with the AFL and the Melbourne Cricket Club. Jim played his first senior game for the Melbourne Football Club in 1987 and retired 264 games later in 1998. He received the in 1991, and won four Melbourne Football Club Best & Fairest awards (1991, 1995, 1996, 1997), equalling the Club record. He played an AFL record-breaking 244 consecutive games between 1987 and 1998. Jim was inducted into the AFL Hall of Fame in 2003 and Melbourne’s Hall of Fame in 2006. Jim co-founded The Reach Foundation in 1994, and currently serves as an executive director, having recently stepped down as CEO. Reach is a non-profit, non-denominational organisation committed to supporting young people. Reach works with over 50,000 teenagers a year, encouraging them to discover their purpose and realise their potential in a positive and supportive learning environment.

Jim was awarded the Order of Medal in 2007 for his work with youth and contribution to AFL.

Don McLardy Don has been a director of the Melbourne Football Club Limited since 12 June 2008, and was appointed Vice President on 27 June 2008. Don has particular involvement at Board level on our membership and sponsorship, our marketing and communications, and our supporter groups and stakeholders. Don has a Diploma in Financial Services (Broking) and is a Qualified Practicing Insurance Broker (QPIB). Don is a Managing Director and major shareholder of McLardy McShane & Associates Pty Ltd, an Insurance & Financial Services intermediary. He is also on the Board of directors of the Reach Foundation, and a member of the MCC, Metropolitan Golf Club and VRC.

Guy Jalland Guy has been a director and Vice President of the Melbourne Football Club Limited since 12 June 2008. Guy is a member of the Club’s Finance and Governance Committees, and has particular involvement at Board level on our strategic projects including, gaming, facilities and Casey. Guy holds a Bachelor of Laws. Guy is a senior executive at Consolidated Press Holdings Limited, and has been employed by CPH and Publishing and Broadcasting Limited (formerly 38% owned by CPH) since 1998.

Stuart Grimshaw Stuart has been a director of the Melbourne Football Club Limited since 12 June 2008. Stuart is the Chairman of the Club’s Finance Committee and is a member of the Governance Committee. Stuart holds a Bachelor of Commerce & Administration and a Masters of Business Administration. Stuart is currently the CEO of Caledonia Funds Management, and is a Director of Suncorp-Metway Ltd. Stuart has extensive experience in the banking and finance industries, formerly working as Group Executive: Premium Business Services for the Commonwealth Bank of Australia, having previously performed the role of CFO and Group Executive Financial and Risk Management.

Karen Hayes Karen has been a director of the Melbourne Football Club Limited since 21 January 2006. Karen is the Chair of the Club’s Governance Committee, and has particular involvement at Board level with the Women of Melbourne supporter group and on our relationship with the Melbourne Cricket Club. Karen is Director Corporate Engagement and Human Capital with UXC Limited. Karen was previously CEO of Planpower, one of the business units within the UXC Group. Karen is a past finalist in the Business Woman of the Year Awards and has sat on the Board of the Breast Cancer Network Australia since its establishment in 1998.

Page 2 MELBOURNE FOOTBALL CLUB LIMITED (ACN 005 686 902)

DIRECTORS' REPORT (CONTINUED) 1. DIRECTORS (CONTINUED)

Russel Howcroft Russel has been a director of the Melbourne Football Club Limited since 12 June 2008. Russel has particular involvement at Board level with our marketing and communications, our membership and sponsorship, our supporter groups and our relationship with the AFL. Russel is and New Zealand CEO of the Y&R Brands group of companies. Companies include: George Patterson Y&R, The Campaign Palace, Ideaworks, Wunderman, CAW, Blaze and Brand Asset Consulting. He is also a member of the Y&R global management team. Russel was previously CEO of The Furnace, the Havas-owned agency he co-founded as Brandhouse in 1995. Russel has also worked for McCann Erickson, Lowe Howard-Spink (in London), and George Patterson. Russel is a permanent panel member of the ABC TV show “The Gruen Transfer,” and is a regular media commentator on the world of marketing and advertising.

Andrew Leoncelli Andrew has been a director of the Melbourne Football Club Limited since 24 October 2007. Andrew has particular involvement at Board level on our football department and playing list management. Andrew played a total of 146 games with the Melbourne Football Club between 1996 and 2003, was deputy vice captain between 1998 and 2003, and a Grand Finalist in 2000. Andrew finished third in the Club in 1997 and 1999, and fifth in 1998 and 2000. He was awarded Best Clubman in 1998. Andrew was the AFL Players’ Association Vice President between 2000 and 2003. Andrew is the Director of the Residential Projects Team in for CB Richard Ellis. He has an undergraduate Commerce Degree from the University of Melbourne and Graduate Diploma in Applied Finance and Investment (FINSA).

Peter Spargo Peter has been a director of the Melbourne Football Club since 13 March 2008. Peter served as interim CEO of the Club during 2008 before the appointment of Cameron Schwab. Peter is a member of the Club’s Finance and List Management Committees, and has particular involvement at Board level on our gaming investments and our relationship with the Melbourne Cricket Club. Peter holds a Bachelor of Economics. Peter is the Managing Director and owner of family companies associated in the oil industry, retail businesses and property development.

David Thurin David has been a director of the Melbourne Football Club Limited since 12 June 2008 and is a member of the Club’s List Management Committee and Strategic Relationships and Facilities Project Team. David is Managing Director and owner of Tigcorp, a privately owned company that owns, develops and manages retirement communities. David has previously been involved in the Gandel Group of Companies, as a director for fourteen years and as a Joint Managing Director of both the Gandel Group and Gandel Retail Management for six years. David has been the President of the International Diabetes Institute and currently is a Director of the Baker IDI Heart and Diabetes Institute. He also has been a member of the Young Presidents Organisation since 1999. David holds a Bachelor of Medicine with post- graduate qualifications in family medicine and obstetrics and gynaecology, as well as a Masters Degree in Management from Stanford University in California.

Page 3 MELBOURNE FOOTBALL CLUB LIMITED (ACN 005 686 902) DIRECTORS' REPORT (CONTINUED) 2. CHIEF EXECUTIVE OFFICER AND COMPANY SECRETARY Cameron Schwab Cameron was appointed Chief Executive Officer of the Melbourne Football Club Limited on 29 September 2008. Cameron is an executive member of the Club’s Finance, Governance and List Management Committees. Cameron holds a Master of Business Administration, a Master of Marketing and has completed an Advanced Management Program with the Harvard Business School. Cameron commenced his working life as a cadet administrator with Melbourne Football Club in 1982, and was later appointed Recruiting Manager. In 1988 Cameron was appointed General Manager of . He returned to Melbourne Football Club as CEO in 1997 following the failed merger with Hawthorn. In 2000 he was appointed CEO of afl.com.au, the AFL’s official website. In September 2001, Cameron commenced the role as CEO of the , the position he held until returning to Melbourne.

Matthew Green Matthew has been the Company Secretary of the Melbourne Football Club Limited since 5 February 2009 after joining the club on 27 November 2008. Matthew is the Chief Operations Officer of the Club, sits on the Senior Executive team and is an executive member of the Club’s Finance, Governance and List Management Committees. Matthew is a Chartered Accountant and holds a Bachelor of Commerce/Arts degree. Matthew joined MFC from a large accounting firm and has had extensive experience in turnaround consulting and restructuring.

3. PRINCIPAL ACTIVITIES The principal activities of the Club are to conduct the operations of the Melbourne Football Club and manage its affairs, to promote the playing of the Australian game of football in general and, in particular, to promote the game by maintaining, controlling and otherwise providing a team or teams of footballers bearing the name of the Club. There was no significant change in the nature of the Club’s activities during the year.

4. OPERATING RESULTS AND REVIEW OF OPERATIONS

The Club has reported a 'normalised' operating profit of $724,458 (FY09: $20,051) for the year ended 31 October 2010.

It is pleasing for the Club to be able to declare its second successive profit, continuing the trend of financial improvement in recent times. This represents a strong return given the reinvestment in key areas of the business (in accordance with our strategic plan the Red and Blueprint) that commenced during the year - in particular in the areas of football, list management and revenue generation.

There are a number of contributing factors to this year's result: breaking our membership record again; the continued support of all of our sponsors, in particular Hankook and Kaspersky; ongoing MCC and AFL support; improved match day returns following the renegotiation of the stadium deal; grants from the State Government and the AFL for the fit out of our new AAMI Park and Casey Fields facilities; and other improvements across the Club in key areas.

In particular we would like to recognise the extraordinary efforts of the Foundation Heroes and members in raising over $5 million over the last three years. In our Debt Demolition event this year over $1 million was raised which wiped out the remaining debt and it is great to issue a financial report that shows the Club is debt free. Thank you to all of you who donated, you have now put the club on a solid financial footing from which we can now look to create assets and invest strategically in key areas of the Club.

The statutory profit for the year is $3.525 million (FY09: $587,183) - this result is driven by a number of non-recurring items during the year as reconciled below: $ Item Normalised Operating Profit 724,458 Debt Demolition fundraising (net) 1,311,925 1 Stadium Returns (2009 match return payment) 1,000,000 2 Grant income (net) 1,347,047 3 Bentleigh Club write-offs (100,585) 4 TPP Strategic Payment (757,500) 5 Net Profit as reported in Statement of Comprehensive Income 3,525,345 Items: 1 The net proceeds from the 2010 Debt Demolition fundraising campaign 2 Income received in 2010 that related to the 2009 season 3 The net return from grant income received for the fit out of AAMI Park 4 Income from the promotions agreement that is not expected to be received 5 Front ending of player contracts (allowable under AFL rules) to create room in the salary cap in the future

Page 4 MELBOURNE FOOTBALL CLUB LIMITED (ACN 005 686 902)

DIRECTORS' REPORT (CONTINUED)

As outlined previously, on 5 August 2010 the Club's debt was demolished. The Club had set a target at the start of the year to reduce the debt from $1.5 million to $800,000 on the back of tight financial management and another Debt Demolition campaign. We were humbled by the generosity of our members in raising $1.31 million through the campaign and the Debt Demolition function. We hope all donors feel a strong sense of pride in this achievement and feel strongly connected to the progress the Club is making. However we will always remember where we have come from to ensure we do not repeat the experience the Club found itself in two years ago.

A full reconciliation of the Debt Demolition contribution is detailed below:

2008 2009 2010 Total Notes Debt Demolition Funding $'000 $'000 $'000 $'000 Foundation Heroes - 709 1,035 1,744 Other Donations 3,076 268 302 3,646 Total Pledges & Other Income 3,076 977 1,337 5,390

Less Pledges to be invoiced - (19) (11) (30) 1 Less Pledges Outstanding (113) 50 (44) (107) 1 Less Future Year Pledges (100) 100 - - Less Unearned Income (30) 30 (202) (202) Add R&B Foundation drawn down by MFC - - 801 801 2 Less R&B Foundation Payments Received (115) (266) (363) (744) 3 Less R&B Foundation Payments Outstanding - (166) (15) (181) 3 Less Expenditure incurred (217) (139) (192) (548) Total Adjustments (575) (410) (26) (1,011)

Net Debt Demolition Funds 2,501 567 1,311 4,379

1. Due to Accounting Standards, these pledges have not met the criteria for recognition as revenue in the Financial Reports. 2. These funds relate to prior year Debt Demolition receipts that were drawn down from the Red & Blue Foundation during the year as part of the AAMI Park development 3.The Red & Blue Foundation does not form part of the consolidated results of the Club shown in this Financial Report.

Growing our community programs was a strong focus in 2010, particularly in the City of Casey. A number of programs were run throughout the year including "Read Like a Demon", "Don't Drive like a Demon", community recreational footy, and an indigenous health program focussed in the eradication of Trachoma, all of which received tremendous feedback. 2011 will see further programs launched including "Digital Demons" (an anti cyber bullying program) and "Dare to Dream" (a program to inspire teenage girls to pursue their dreams). In addition to the benefits received by the communities in which we invest, these programs provide an invaluable life and learning experience for our players and form an integral part of the education programs we have established for the group. Community programs remain one of the highest priorities of the Board and we will continue to invest in this area.

The potential opportunity to build a fully integrated training and administration base in the Docklands precinct continues to be explored. The concept is still in its early stages and will continue to be analysed, but at this stage no decision has been made on this project. Even if approved and funded the development would still be at least three and more likely five years away. The idea is being explored as a training base only, not as a potential venue for matches. We thank key stakeholders, including the State Government, for their support.

The improvement in returns from our gaming operation, The Leighoak, continued in 2010 with an overall profit of $383,000. The Club also took a strong position in the industry during 2010 by securing rights to acquire gaming machines under the new State Government gaming regime. We are hopeful gaming returns will increase when the new gaming regime commences in August 2012 justifying our further investment.

The on field performance of the Club also improved during 2010 with the team playing more consistent, competitive football. We saw the debuts of exciting talent in , , Jordan Gysberts and James Strauss as well as Joel McDonald playing his first game for the Club. 2010 also saw the continued development of players including , , , Jordie McKenzie, , , Colin Garland and Lynden Dunn. In round 21 James McDonald reached the 250 game milestone placing him 7th on the all time club games record holders list. played his 200th game in round 2 and , and Colin Sylvia all chalked up 100 games during the season.

The outstanding seasons of three players were recognised with selection in the All Australian squad in , James Frawley and Brad Green. While we feel Brad was very unlucky to miss out on final selection it was very exciting to see Mark and James recognised in the best 22 players of the year.

The outstanding players in red and blue for 2010 were recognised at our Best and Fairest with Brad Green taking out the Keith 'Bluey' Truscott trophy after an outstanding year. James Frawley, Mark Jamar, and Colin Sylvia filled out the rest of the top five positions respectively and we congratulate all winners on their great seasons.

The National Draft saw plenty of height added to the list with all four draftees standing at least 190cm. Lucas Cook, , Troy Davis and Tom McDonald are welcomed to the Club.

Page 5 MELBOURNE FOOTBALL CLUB LIMITED (ACN 005 686 902)

DIRECTORS' REPORT (CONTINUED) 2010 saw the retirement of one of the great MFC players in our captain James McDonald (251 games). We would like to pay tribute to James who was one of MFC's unsung heroes for a long time before going on to lead the club with distinction. James was All Australian in 2006 and Club Champion in 2006 and 2007. We wish James all the best for his future endeavours.

Another fantastic servant of the Club moved on this year with deciding to continue his career at another club. We thank Cameron for his outstanding contribution over 224 games and wish him all the best in the next phase of his career.

We would also like to pay tribute to (133 games) who not only gave great service to the club as a player but was also an inspiring and selfless leader on and off the field. Daniel Bell (66 games) and Paul Johnson (69 games) also leave with our best wishes. MFC also acknowledges the contributions of John Meesen, Rhys Healey, and Kyle Cheney.

As previously mentioned, ongoing MCC and AFL support were significant factors contributing to this year's result. The Club's reinstatement in 2009 as a sporting section of the MCC restored a vital part of our heritage and we are determined to ensure our relationship is valuable and rewarding for the MCC. As in 2008 and 2009, we thank the AFL for the very considerable support they provide as we re-establish the Club.

The Board would like to acknowledge the passing during the year of one of our Directors, Peter Szental. Peter served on the Board from 12 June 2008 to 14 July 2010. Peter's passion for the Club was second to none and he demonstrated that passion through his involvement in governance, risk management and List Management in particular. Peter's contribution went beyond just the significant amount of time he spent at the Club, and while he never sought public recognition, was one of the highest individual donors to the Club in the three Debt Demolition campaigns. Peter is sadly missed and we thank him for his immense contribution.

The Board would also like to again acknowledge the extraordinary contribution of our President. Jim's personal battle continues and we are constantly amazed at the energy, enthusiasm and strength he is able to bring to the Club at this time.

The improvement in the Club both on-field and off continued in 2010 with a number of key achievements throughout the year. However we feel that we are still at 'Base Camp' with a lot more work to be done as we continue the climb. Your Board is energised by the progress made to date and the challenge ahead as we seek to grow the Melbourne Football Club and form a stable, financially sound business off the field and deliver a sustained period of success on the field. We again thank all members for permitting us the privilege of serving as your Directors of this great club.

5. EVENTS SUBSEQUENT TO BALANCE DATE

There are no events subsequent to balance date likely to materially impact the Club.

6. LIKELY DEVELOPMENTS There are no developments likely to materially impact the Club.

7. ENVIRONMENTAL REGULATION

The Directors believe that the operations of the Club are not subject to any particular or significant environmental regulation.

8. AUDITORS INDEPENDENCE DECLARATION

The Directors have received the Independence Declaration from the auditor of the Club. The Independence Declaration is set out on page 8 and forms part of the Directors’ Report for the year ended 31 October 2010.

The following non-audit services were provided by the entity’s auditor, Ernst & Young. The directors are satisfied that the provision of non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001 . The nature and scope of each type of non-audit service provided means that auditor independence was not compromised.

Ernst & Young received or are due to receive the following amount for the provision of other services: - Other assurance related services $9,750

Page 6

MELBOURNE FOOTBALL CLUB LIMITED (ACN 005 686 902)

STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 OCTOBER 2010

NOTE 2010 2009 $ $

Revenue 3 32,829,956 26,152,171

Other income 3 42,822 13,826

Social club and gaming expenses (2,528,400) (2,510,667) Football department costs (15,330,598) (13,551,787) Cost of sales (782,872) (640,310) Administration costs (3,859,288) (2,515,748) Corporate, membership and marketing expenses (6,742,664) (5,797,375) Finance costs 4 (74,472) (84,492) Other expenses (1,341,064) (1,045,567)

Profit/(loss) attributable to the operations of Melbourne Football Club Limited 2,213,420 20,051

Net income derived from debt demolition fundraising 1,311,925 567,132

Net profit/(loss) for the period 13 3,525,345 587,183

Other comprehensive income for the period - - Total comprehensive income for the period 3,525,345 587,183

Net profit/(loss) for period attributable to members of Melbourne Football Club Limited 3,525,345 587,183

Total comprehensive income for period attributable to members 3,525,345 587,183 of Melbourne Football Club Limited

The accompanying notes form an integral part of these financial statements.

Page 9 MELBOURNE FOOTBALL CLUB LIMITED (ACN 005 686 902)

STATEMENT OF FINANCIAL POSITION AS AT 31 OCTOBER 2010

NOTE 2010 2009 $ $ CURRENT ASSETS Cash and cash equivalents 5 807,777 369,373 Trade and other receivables 6 619,037 524,354 Inventories 7 81,063 64,694 Other assets 8 263,301 209,669 TOTAL CURRENT ASSETS 1,771,178 1,168,090

NON CURRENT ASSETS Receivables 16 140,000 - Plant and equipment 9 2,445,238 632,906 TOTAL NON CURRENT ASSETS 2,585,238 632,906

TOTAL ASSETS 4,356,416 1,800,996

CURRENT LIABILITIES Bank overdraft 5- 89,038 Trade and other payables 10 2,621,595 2,184,774 Interest bearing liabilities 11 - 1,530,000 Provisions 12 266,761 231,463 Income received in advance 2(p) 1,105,395 966,256 TOTAL CURRENT LIABILITIES 3,993,751 5,001,531

NON CURRENT LIABILITIES Provisions 12 47,723 9,868 TOTAL NON CURRENT LIABILITIES 47,723 9,868

TOTAL LIABILITIES 4,041,474 5,011,399

NET ASSETS/(DEFICIENCY) 314,942 (3,210,403)

MEMBERS' FUNDS Retained earnings/(accumulated losses) 13 314,942 (3,210,403)

TOTAL MEMBERS' FUNDS/(DEFICIENCY) 314,942 (3,210,403)

The accompanying notes form an integral part of these financial statements.

Page 10 MELBOURNE FOOTBALL CLUB LIMITED (ACN 005 686 902)

STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 OCTOBER 2010

NOTE 2010 2009 $ $ CASH FLOWS FROM OPERATING ACTIVITIES Receipts from members and operations 32,165,821 26,101,960 Interest received 42,822 13,826 Payments to suppliers and employees (30,314,798) (25,344,808) Interest and other costs of finance paid (74,472) (84,492) Receipt of grants 1,900,000 - NET CASH PROVIDED BY/(USED IN) OPERATING ACTIVITIES 5 3,719,373 686,486

CASH FLOWS FROM INVESTING ACTIVITIES Payments for plant and equipment (1,521,931) (163,873) NET CASH PROVIDED BY/(USED IN) INVESTING ACTIVITIES (1,521,931) (163,873)

CASH FLOWS FROM FINANCING ACTIVITIES Loan provided to key management personnel (140,000) - Repayment of borrowings (1,530,000) (515,000) NET CASH PROVIDED BY/(USED IN) FINANCING ACTIVITIES (1,670,000) (515,000)

Net increase/(decrease) in cash held 527,442 7,613 Cash at the beginning of the year 280,335 272,722 CASH AT THE END OF THE FINANCIAL YEAR 5 807,777 280,335

The accompanying notes form an integral part of these financial statements.

Page 11 MELBOURNE FOOTBALL CLUB LIMITED (ACN 005 686 902)

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 OCTOBER 2010

(Accumulated losses)/ Retained earnings Total Equity $ $

BALANCE AS AT 1 NOVEMBER 2008 (3,797,586) (3,797,586)

Profit for the year 587,183 587,183 Other comprehensive income - - Total comprehensive income for the period 587,183 587,183

BALANCE AS AT 31 OCTOBER 2009 (3,210,403) (3,210,403)

BALANCE AS AT 1 NOVEMBER 2009 (3,210,403) (3,210,403)

Profit for the year 3,525,345 3,525,345 Other comprehensive income - - Total comprehensive income for the period 3,525,345 3,525,345

BALANCE AS AT 31 OCTOBER 2010 314,942 314,942

The accompanying notes form an integral part of these financial statements.

Page 12 MELBOURNE FOOTBALL CLUB LIMITED (ACN 005 686 902)

NOTES TO AND FORMING PART OF THE ACCOUNTS

NOTE 1 - CLUB INFORMATION

Melbourne Football Club Limited is incorporated in Australia and is a company limited by guarantee. Statutory members of the Club guarantee its liabilities to the extent of $5 each (refer note 2(q)).

The registered office and principle place of business of the Club is located at: , Great Southern Stand Brunton Avenue East Melbourne VIC 3002

The principal activities of the Club is the playing and promotion of the game of Australian Rules Football and the operation of related facilities. The Club is a member of the Australian Football League.

The financial report of the Club for the year ended 31 October 2010 was authorised for issue in accordance with a resolution of the Directors on 10th December 2010.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Basis of accounting This financial report is a general purpose financial report which has been prepared in accordance with the Corporations Act 2001 , Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board.

The financial report has been prepared on a historical cost basis.

Both the functional and presentation currency of the Club is Australian dollars ($). All amounts are rounded to the nearest dollar.

The financial report has been prepared on a going concern basis.

The Club reported a profit of $3.525 million for the year ended 31 October 2010. The Club had positive operating cashflows of $3.719 million during the 2010 year, and a net asset position of $314,942. The Club had a net current asset deficiency of $2.222 million at 31 October 2010. This amount includes unearned income accrued amounts with no cash outflow impact, and other payables to be repaid from operating cashflows generated by the Club, or through access to commercial bill and overdraft facilities.

The Directors have assessed that the positive financial performance and financial position of the Club at 31 October 2010, together with the Club’s ongoing operating activities and cashflows, are such that the going concern basis of accounting continues to be appropriate. The Directors have determined that appropriate cashflows and financing facilities are available to the Club for the purposes of capital and operational investments in the next 12 month period.

(b) Principles of Consolidation At 31 October 2010 the Melbourne Football Club Limited did not have any subsidiaries.

(c) Statement of compliance The financial report complies with Australian Accounting Standards and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board. The accounting policies adopted in preparing the financial statements are consistent with those adopted in previous years except as follows:

The Club has adopted the following new and amended Australian Accounting Standards as of 1 November 2009. When the adoption of the Standard or Interpretation is deemed to have an impact on the financial statements or performance of the Club, its impact is described below:

- AASB 101 Presentation of Financial Statements (revised 2007) effective 1 January 2009

The revised Standard separates owner and non-owner changes in equity. The statement of changes in equity includes only details of transactions with owners, with non-owner changes in equity presented in a reconciliation of each component of equity and included in the new Statement of Comprehensive Income. The Statement of Comprehensive Income presents all items of recognised income and expense in one single statement.

Page 13 MELBOURNE FOOTBALL CLUB LIMITED (ACN 005 686 902)

NOTES TO AND FORMING PART OF THE ACCOUNTS

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) (c) Statement of compliance (continued)

Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet effective and have not been adopted by the Club for the annual reporting period ending 31 October 2010, are outlined in the table below:

Impact on the Club's Reference Title Summary Application date of standard financial report Application day for Club AASB 124 (Revised) Related Party The revised AASB 124 simplifies the definition of a related 1-Nov-11 The Club has not yet 1-Jul-11 Disclosures party, clarifying its intended meaning and eliminating determined the extent of (December 2009) inconsistencies from the definition, including: the impact, if any. (a) the definition now identifies a subsidiary and an associate with the same investor as related parties of each other; (b) entities significantly influenced by one person and entities significantly influenced by a close member of the family of that person are no longer related parties of each other; and (c) the definition now identifies that, whenever a person or entity has both joint control over a second entity and joint control or significant influence over a third party, the second and third entities are related to each other.

AASB 1053 Application of This Standard establishes a differential financial reporting 1-Nov-13 The Club has not yet 1-Jul-13 Tiers of framework consisting of two Tiers of reporting requirements for determined the extent of Australian preparing general purpose financial statements: the impact, if any. Accounting (a) Tier 1: Australian Accounting Standards; and Standards (b) Tier 2: Australian Accounting Standards – Reduced Disclosure Requirements. Tier 2 comprises the recognition, measurement and presentation requirements of Tier 1 and substantially reduced disclosures corresponding to those requirements. The following entities apply Tier 1 requirements in preparing general purpose financial statements: (a) for-profit entities in the private sector that have public accountability (as defined in this Standard); and (b) the Australian Government and State, Territory and Local Governments. The following entities apply either Tier 2 or Tier 1 requirements in preparing general purpose financial statements: (a) for-profit private sector entities that do not have public accountability; (b) all not-for-profit private sector entities; and (c) public sector entities other than the Australian Government and State, Territory and Local Governments.

AASB 2010-2 Amendments to This Standard gives effect to Australian Accounting Standards 1-Nov-13 The Club has not yet 1-Jul-13 Australian – Reduced Disclosure Requirements. AASB 1053 provides determined the extent of Accounting further information regarding the differential reporting the impact, if any. Standards arising framework and the two tiers of reporting requirements for from reduced preparing general purpose financial statements. disclosure requirements

(d) Revenue Recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Club and the revenue can be reliably measured.

Revenues are detailed in Note 3 and comprise revenue earned from AFL dividends and distributions, membership, reserved seating, sponsorships, fundraising, gate receipts, corporate hospitality and gaming activities. Revenues are recognised at the fair value of the consideration received, net of the amount of goods and services tax (GST). Sponsorships involving contra arrangements are recognised as revenue equivalent to the fair value of the services provided by the sponsor. Interest income is recognised as it accrues using the effective interest method. Fundraising and membership income is accounted for on the basis of the period to which it relates. Income received in the year ended 31 October 2010, but relating to future accounting periods is carried on the Statement of Financial Position and will be recognised in FY11. Grant income, including contributions of assets, is recognised when the Club controls the contribution or right to receive the contribution, and it is probable that the economic benefits comprising the contributions will flow to the Club, and the amount of the contribution can be measured reliably.

Page 14 MELBOURNE FOOTBALL CLUB LIMITED (ACN 005 686 902)

NOTES TO AND FORMING PART OF THE ACCOUNTS

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(e) Plant and Equipment Cost Plant and equipment is stated at historical cost less accumulated depreciation and any accumulated impairment losses. All acquisitions of plant and equipment and leasehold improvements are recorded at cost.

Depreciation and Amortisation of Plant and Equipment

Depreciation is calculated on a straight-line basis over the estimated useful life of the specific assets, from the time the asset is held ready for use, as follows:

Furniture and fittings 10% - 33% Computer hardware 25% - 33% Computer software 33% - 40% Plant and equipment 7.5% - 15% Motor vehicles 12.5% Purchased memorabilia 0%

Leasehold improvements are amortised over the period of the Club's lease arrangements or the estimated useful life of the improvement, whichever is the shorter. Items of purchased memorabilia are recorded at cost of acquisition. Memorabilia assets are kept under special conditions so that there is no physical deterioration and they are anticipated to have a very long and indeterminate useful life. No amount of depreciation has been recognised in respect of purchased memorabilia as their service potential has not, been consumed during the period.

Depreciation methods, useful lives and residual values are reviewed at each financial year-end date and adjusted if appropriate on a prospective basis.

(f) Inventories

Inventories are valued at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.

(g) Impairment

The carrying values of property, plant and equipment are reviewed for impairment at each reporting date, with recoverable amount being estimated when events or changes in circumstances indicate that the carrying value may be impaired.

The recoverable amount of plant and equipment is the higher of fair value less costs to sell and value in use. In assessing value in use in the instance indicators of impairment are present, an assessment of the current value of the assets was made on the basis of an earnings multiple.

An impairment exists when the carrying value of an asset or cash-generating units exceeds its estimated recoverable amount. The asset or cash-generating unit is then written down to its recoverable amount.

For plant and equipment, impairment losses are recognised in the Statement of Comprehensive Income.

(h) Income tax No income tax is payable by Melbourne Football Club Limited as it is an exempt sporting organisation in accordance with Section 50-45 of the Income Tax Assessment Act 1997 .

Page 15 MELBOURNE FOOTBALL CLUB LIMITED (ACN 005 686 902)

NOTES TO AND FORMING PART OF THE ACCOUNTS

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(i) Provisions and employee benefits (i) Wages, salaries and annual leave

Liabilities for wages and salaries, including non-monetary benefits and annual leave expected to be settled within 12 months of the reporting date are recognised in respect of employees' services up to the reporting date. They are measured at the amounts expected to be paid when the liabilities are settled plus related on-costs. (ii) Long service leave The liability for long service leave is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date. Other employee benefits payable later than one year have been measured at the present value of the estimated future cash outflows to be made for those benefits.

Consideration is given to expected future wage and salary levels, experience of employee departures, and periods of service. Expected future payments are discounted using market yields at 31 October 2010 on national government bonds with terms to maturity and currencies that match, as closely as possible, the estimated future cash outflows.

Contributions are made by the Club to an employee superannuation fund and are charged as expenses when incurred. All superannuation guarantee legislative requirements are met.

(j) Goods and Services Tax Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST). The amounts reported for receivables and payables are inclusive of GST. The net amount of GST receivable from, or payable to, the ATO is included as a current asset or liability in the Statement of Financial Position. Cash flows from operating activities are included in the Statement of Cash Flows on a gross basis. The GST components of cash flows applicable to investing and financing activities that are recoverable from, or payable to, the ATO are classified in operating cash flows.

Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.

(k) Comparative Figures Where necessary comparative figures have been adjusted to conform with changes in presentation in the current year.

(l) Cash and cash equivalents Cash and cash equivalents in the Statement of Financial Position comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

For the purposes of the Statement of Cash Flows, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts. Bank overdrafts are shown as a current liability in the Statement of Financial Position.

(m) Trade and other receivables Trade receivables, which generally have 0 - 30 day terms, are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less an allowance for impairment. Collectability of trade receivables is reviewed on an ongoing basis. An allowance for impairment is made when there is objective evidence the Club will not be able to collect the debts. The amount of the impairment loss is the receivable carrying amount compared to the present value of estimated future cash flows, discounted at the original effective interest rate. Bad debts are written off when identified. Non current receivables are carried at the net present value of the future cash flows that they represent.

(n) Trade and other payables Trade and other payables are carried at amortised cost and due to their short-term nature they are not discounted. They represent liabilities for goods and services provided to the Club prior to the end of the financial year that are unpaid and arise when the Club becomes obliged to make future payments in respect of the purchase of these goods and services. The amounts are unsecured and are usually paid within 30 days of recognition.

Page 16 MELBOURNE FOOTBALL CLUB LIMITED (ACN 005 686 902)

NOTES TO AND FORMING PART OF THE ACCOUNTS

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(o) Interest-bearing loans and borrowings All loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable transaction costs. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate method. Fees paid on the establishment of loan facilities that are yield related are included as part of the carrying amount of the loans and borrowings.

Borrowings are classified as current liabilities unless the Club has an unconditional right to defer settlement of the liability for at least 12 months after the Balance Sheet date. Borrowing Costs Borrowing costs are expensed in the period they are incurred.

(p) Income received in advance Income received in advance is recognised in line with the terms of specific contracts. Membership subscription income in advance is recognised in line with the membership subscription period and the service obligations of the Club.

(q) Members' liability on winding up The Club is a company limited by guarantee and domiciled in Australia. Accordingly the liability of the members of the Club is limited. As stated in clause 2.2 of the Club's Constitution, if the Club is wound up each Member undertakes to contribute to the assets of the Club up to an amount not exceeding $5 for payment of the debts and liabilities of the Club, including the costs of winding up. This undertaking continues for one year after a person ceases to be a Member.

(r) Leases The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset.

(i) The Club as a lessee

Operating lease payments are recognised as an expense in the Statement of Comprehensive Income on a straight-line basis over the lease term. Operating lease incentives are recognised as a liability when received and subsequently reduced by allocating lease payments between rental expense and reduction of the liability.

(s) Other financial assets Loans and receivables including loans to key management personnel are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are carried at amortised cost using the effective interest rate method. Gains and losses are recognised in profit or loss when the loans and receivables are derecognised or impaired. These are included in current assets, except for those with maturities greater than 12 months after balance date, which are classified as non-current.

(t) Significant accounting judgments, estimates and assumptions In applying the Club's accounting policies management continually evaluates judgments, estimates and assumptions based on experience and other factors, including expectations of future events that may have an impact on the Club. All judgments, estimates and assumptions made are believed to be reasonable based on the most current set of circumstances available to management. Actual results may differ from the judgments, estimates and assumptions. Significant judgments, estimates and assumptions made by management in the preparation of these financial statements are outlined below:

Long service leave provision As discussed in Note 2(i), the liability for long service leave is recognised and measured at the present value of the estimated future cash flows to be made in respect of all employees at balance date. In determining the present value of the liability, attrition rates and pay increases through promotion and inflation have been taken into account. The related carrying amounts are disclosed in note 12. Estimation of useful lives of assets The estimation of the useful lives of assets has been based on historical experience and manufacturers warranties. In addition, the condition of the assets is assessed at least once per year and considered against the remaining useful life. Adjustments to useful life are made when considered necessary. The related carrying amounts are disclosed in note 9.

Page 17 MELBOURNE FOOTBALL CLUB LIMITED (ACN 005 686 902)

NOTES TO AND FORMING PART OF THE ACCOUNTS

NOTE 2010 2009 $ $ NOTE 3 - REVENUE

Revenue from Football related activities Gate receipts (i) 5,440,371 2,852,282 Distributions from the AFL 8,129,500 7,873,252 Merchandise 746,131 562,357 Membership and annual reserved seating 5,024,803 4,214,337 Marketing/corporate sponsorship and general fundraising 7,531,850 6,851,477 Grant income 1,664,437 - Other revenue 1,147,939 602,983 Total revenue from Football related activities 29,685,031 22,956,688

(i) As a result of the agreement reached between the Australian Football League, Melbourne Cricket Club and the State Government, an extra $100,000 distribution was received for each home game played at the Melbourne Cricket Ground in the 2010 year. This amounted to an additional $1 million in gate receipts for the year ended 31 October 2010. This agreement also resulted in an additional $1 million relating to 2009 gate receipts being received and recognised in the 2010 year.

Revenue from other activities Marketing and promotion fee - Bentleigh Club - 111,448 Social and gaming revenue 3,144,925 3,084,035 Total revenue from other activities 3,144,925 3,195,483

Total revenue 32,829,956 26,152,171

Other income Interest 42,822 13,826

NOTE 4 - EXPENSES

Expenses Finance Costs - Interest paid to external entities 74,472 84,492 Total finance costs 74,472 84,492

Depreciation and amortisation Amortisation of leasehold improvements 46,105 12,471 Depreciation of furniture and fittings 13,140 5,932 Depreciation of plant and equipment 146,932 128,559 Depreciation of motor vehicles 3,422 3,422 Total depreciation and amortisation expense 209,599 150,384

Employee benefits expense Salary, wages and termination expense 15,380,175 13,993,962 Superannuation expense 1,051,208 927,869 Total employee benefits expense 16,431,383 14,921,831

Occupancy Expenses Minimum lease payments 1,143,611 987,580

Other Bad debts written off 9,193 5,261 Doubtful debts 110,700 -

Page 18 MELBOURNE FOOTBALL CLUB LIMITED (ACN 005 686 902)

NOTES TO AND FORMING PART OF THE ACCOUNTS

NOTE 2010 2009 $ $

NOTE 5 - CASH AND CASH EQUIVALENTS

Cash on hand and at bank 807,777 369,373 Bank overdraft - (89,038) 807,777 280,335

Financing facilities At 31 October 2010, the Club had a $500,000 overdraft facility with Westpac (which is undrawn). The overdraft facility, if utilised, will impose an interest rate of 10.26% per annum, with interest charged monthly. At the date of this report the Club has received a letter of offer, supported by a guarantee provided by the Australian Football League, for total bill facilities of $1 million.

Reconciliation of net profit/(loss) to net cash flows from operating activities

Net profit/(loss) 3,525,345 587,183 Depreciation and amortisation 209,599 150,384 Bad debts 9,193 5,261 Doubtful debts 110,700 - Employee entitlements 73,153 16,945 Write off of assets 624 3,766 Changes in assets and liabilities: (Increase)/decrease in trade and other receivables (205,383) 29,423 (Increase)/decrease in prepayments and other assets (53,632) (97,197) (Increase)/decrease in inventories (16,369) 32,696 (Decrease)/increase in trade creditors and accruals (63,179) 599,529 (Decrease)/increase in other liabilities 129,322 (641,504)

Cash flows from operating activities 3,719,373 686,486

Page 19 MELBOURNE FOOTBALL CLUB LIMITED (ACN 005 686 902)

NOTES TO AND FORMING PART OF THE ACCOUNTS

NOTE 2010 2009 $ $ NOTE 6 - TRADE AND OTHER RECEIVABLES

Current Trade debtors 658,194 328,629 Less provision for impairment loss (a) (112,927) (2,227) Other receivables 73,770 197,952 619,037 524,354

(a) Provision for impairment loss Trade receivables are non-interest bearing and are generally on 0-30 day terms. A provision for impairment loss is recognised when there is objective evidence that an individual trade receivable is impaired. An impairment loss of $110,700 (2009: $0) has been recognised by the Club in the current year. This amount has been included in the other expense item. No individual amount within the impairment allowance is material.

Movements in the provision for impairment loss were as follows:

At 1 November 2,227 2,227 Charge for the year 110,700 - At 31 December 112,927 2,227

Other balances within trade and other receivables do not contain impaired assets and are not past due. It is expected that these other balances will be received when due.

Terms and conditions Terms and conditions relating to the above financial instruments: (i) Due to the short term nature of these receivables, their carrying value is assumed to materially approximate their fair value. (ii) The maximum exposure to credit risk is the fair value of receivables. Detail regarding interest rate exposure is disclosed in note 18. (iii) Collateral is not held as security.

(c) Aging Analysis At 31 October, the aging analysis of trade receivables is as follows:

0 - 1 month 225,137 106,275 1 - 2 months PDNI* 120,105 79,466 2 - 3 months PDNI* 97,252 17,306 > 3 months PDNI* 102,773 123,355 < 1 month CI** - - > 1 month CI** 112,927 2,227 658,194 328,629 * Past Due Not Impaired (PDNI) ** Considered Impaired (CI)

NOTE 7 - INVENTORIES

Merchandise 58,243 39,974 Food and beverage 22,820 24,720 81,063 64,694 (a) Cost of Sales Cost of Sales for the year ended 31 October 2010 totalled $782,872 (2009: $640,310) for the Club. Inventory assets have been pledged as security for commercial bill and overdraft liabilities as disclosed in note 5 and 11.

Page 20 MELBOURNE FOOTBALL CLUB LIMITED (ACN 005 686 902)

NOTES TO AND FORMING PART OF THE ACCOUNTS

NOTE 2010 2009 $ $ NOTE 8 - OTHER ASSETS

Prepayments 248,301 209,669 Other 15,000 - 263,301 209,669

NOTE 9 - PLANT AND EQUIPMENT

Furniture and fittings Cost Opening balance 311,556 308,373 Additions 172,998 3,183 Closing balance 484,554 311,556 Accumulated depreciation Opening balance 276,744 270,812 Depreciation for the year 13,140 5,932 Closing balance 289,884 276,744 Net book value 194,670 34,812

Plant and equipment Cost Opening balance 1,157,146 1,036,042 Additions 253,165 160,691 Disposals/retirements - (39,587) Closing balance 1,410,311 1,157,146 Accumulated depreciation Opening balance 843,802 748,604 Depreciation for the year 146,932 128,559 Disposals/retirements - (33,361) Closing balance 990,734 843,802 Net book value 419,577 313,344

Leasehold improvements Cost Opening balance 219,850 219,850 Additions 1,266,496 - Transfers from capital work in progress 250,000 - Closing balance 1,736,346 219,850 Accumulated depreciation Opening balance 206,194 193,723 Depreciation for the year 46,105 12,471 Closing balance 252,299 206,194 Net book value 1,484,047 13,656

Page 21 MELBOURNE FOOTBALL CLUB LIMITED (ACN 005 686 902)

NOTES TO AND FORMING PART OF THE ACCOUNTS NOTE 2010 2009 NOTE 9 - PLANT AND EQUIPMENT (CONTINUED) $ $

Motor vehicles Cost Opening balance 27,376 27,376 Closing balance 27,376 27,376 Accumulated depreciation Opening balance 6,282 2,860 Depreciation for the year 3,422 3,422 Closing balance 9,704 6,282 Net book value 17,672 21,094

Purchased Memorabilia Cost Opening balance - - Additions 97,918 - Closing balance 97,918 - Net book value 97,918 -

Capital work in progress Cost Opening balance 250,000 250,000 Additions 231,354 - Transfers to leasehold improvements (250,000) - Closing balance 231,354 250,000 Net book value 231,354 250,000

Total plant and equipment 2,445,238 632,906

All plant and equipment assets have been pledged as security for commercial bill and overdraft liabilities as disclosed in note 5 and 11.

Page 22 MELBOURNE FOOTBALL CLUB LIMITED (ACN 005 686 902)

NOTES TO AND FORMING PART OF THE ACCOUNTS

NOTE 2010 2009 $ $

NOTE 10 - TRADE AND OTHER PAYABLES Current Trade creditors (a) 677,267 1,147,683 Other creditors and accruals 1,944,328 1,037,091 2,621,595 2,184,774 ` (a) Terms and Conditions (i) All payables are non-interest bearing and are normally settled on 30 day terms. (ii) Due to the short term nature of these payables, their carrying value is assumed to approximate their fair value. (iii) Information regarding interest rate and liquidity risk exposure is set out in note 18.

NOTE 11 - INTEREST BEARING LOANS AND LIABILITIES

Current

Commercial bill facility - secured (i)-(iii) - 1,530,000

- 1,530,000

(i) This Commercial Bill Facility up to 31 October 2010 enabled the Club to draw funds up to a limit of $4.5 million up to 31 October 2010. This loan was secured by a guarantee provided by the Australian Football League up to 31 October 2010 and subject to monitoring by Westpac. At the date of this report the Club has received a letter of offer from Westpac for total overdraft and commercial bill facilities of $1 million. These facilities are supported by a guarantee provided by the Australian Football League to 31 October 2011. (ii) The carrying amount of the Club's borrowings approximate their fair value. (iii) The facilities are also secured by a fixed and floating charge over all assets of the Club, as well as a specific mortgage charge over the Club's liquor licence, gaming licences, and leasehold interest relating to the Leighoak Club gaming venue. (iv) The Club at 31 October 2010 had in place, and as part of the Westpac finance offer, is set to continue with certain banker's undertakings in respect of its leased premises, merchant arrangements, transaction authorities, and corporate credit card arrangements. Capital Management When managing capital, management's objective is to ensure the Club continues as a going concern, and has available funds to execute the Club's operational and strategic activities. The capital structure of the Club during the year consisted of debt, which included interest bearing loans as disclosed above (which were repaid by year end) and cash and cash equivalents. Management monitor capital through its interest bearing debt and overdraft facilities with Westpac. During 2010, the Club reduced interest bearing debt by $1.53 million. The Club is not subject to any externally imposed capital requirements. The Club is prohibited by its Constitution from making distributions to the members.

NOTE 12 - PROVISIONS Long service Annual Leave leave Total $ $ $

At 31 October 2010 246,544 67,940 314,484

Current 246,544 20,217 266,761 Non-current - 47,723 47,723 246,544 67,940 314,484

At 31 October 2009 200,590 40,741 241,331

Current 200,590 30,873 231,463 Non-current - 9,868 9,868 200,590 40,741 241,331

Page 23 MELBOURNE FOOTBALL CLUB LIMITED (ACN 005 686 902)

NOTES TO AND FORMING PART OF THE ACCOUNTS

NOTE 2010 2009 $ $ NOTE 13 - RETAINED EARNINGS/ACCUMULATED LOSSES

Accumulated losses at the beginning of the financial year (3,210,403) (3,797,586) Net profit/(loss) 3,525,345 587,183 Retained earnings/(accumulated losses) at the end of the financial year 314,942 (3,210,403)

NOTE 14 - COMMITMENTS FOR EXPENDITURE

Operating leases Commitments in relation to leases contracted for at reporting date but not recognised as liabilities are payable as follows:

- Not later than 1 year 1,041,419 546,735 - Later than 1 year but not later than 5 years 3,910,080 2,367,269 - Later than 5 years - 162,727 4,951,499 3,076,731

The Club has entered into commercial leases on its premises at the Leighoak Club and for certain fixed assets. These leases have a terms of between 3 years and 5 years. There are no restrictions placed upon the Club by entering into these leases. The option to extend the lease on the Leighoak Club until 2015 was exercised during 2008.

The Club entered into a number of commercial leases with Melbourne and Olympic Parks Trust in June 2010. These leases have a term of 5 years. At the end of this period, the Club has the option to extend the lease for a further two 5 years periods and one 6 year period. There are no restrictions placed upon the Club by entering into these leases.

Player and coaching staff commitments In relation to the future seasons, the Club has a liability for player and coaching contracts which comply with AFL regulations. Included in this, the following commitments exist in relation to signed player contractual arrangements. This excludes player payments associated with contingent performance obligations which are deemed not to be reliably measurable. These contingencies will only arise subject to the inclusion of the players on the Club's official list and performances. Player payments are underwritten by the AFL in accordance with the Collective Bargaining Agreement between the AFL and the AFL Players Association.

- Not later than 1 year 7,723,490 7,112,867 - Later than 1 year but not later than 2 years 5,092,500 2,385,000 - Later than 2 years but not later than 5 years 1,580,000 800,000 14,395,990 10,297,867

Gaming machine entitlement commitments The Club purchased 92 gaming machine entitlements from the State Government during the year ended 31 October 2010. At balance date, the Club has contractual commitments in respect of gaming machine entitlements which are expected to be settled as follows:

- Not later than 1 year - - - Later than 1 year but not later than 5 years 1,297,917 - - Later than 5 years 599,038 - 1,896,955 - The deposit of $99,840 paid for these gaming machine entitlements has been reflected in the financial statements as a prepayment (refer note 8).

NOTE 15 - REMUNERATION OF AUDITORS

Remuneration of Ernst & Young for audit of the financial reports of the Melbourne Football Club Limited 47,500 44,500 47,500 44,500

Remuneration for other services (a) 9,750 8,000 9,750 8,000 (a) Includes assurance related services.

Page 24 MELBOURNE FOOTBALL CLUB LIMITED (ACN 005 686 902)

NOTES TO AND FORMING PART OF THE ACCOUNTS

NOTE 16 - REMUNERATION OF KEY MANAGEMENT PERSONNEL Key management personnel are determined to be the Board of Directors, Chief Executive Officer, Chief Operating Officer, Chief Commercial Officer, General Manager Football Operations, General Manager List Management and the Senior Coach.

Compensation for key management personnel 2010 2009 $ $

Short-term employee benefits 1,642,627 1,406,530 Other employee benefits - - Post-employment and superannuation benefits 98,662 84,312 Total compensation 1,741,289 1,490,842

Loan receivable from key management personnel During the year, the Club provided a loan to a key management person of $140,000 at an arms length commercial fixed interest rate of 6.2%. Repayment of the loan is due by 30 October 2013. The loan is secured by a mortgage over property owned by the key management person. Interest was received as contracted. $64,200 of principal was repaid subsequent to year end leaving a balance of $75,800.

NOTE 17 - RELATED PARTIES Parent entity Melbourne Football Club Limited is the parent and ultimate parent entity.

Directors and director-related entities The names of the persons who were Directors of the Club for all or part of the financial year are listed below. Andrew Leoncelli Guy Jalland Russel Howcroft Don McLardy Peter Spargo Stuart Grimshaw Peter Szental Karen Hayes David Thurin

Certain director related transactions occur within a normal customer or supplier relationship on terms and conditions no more favourable than those with which it is reasonable to expect the Club would have adopted if dealing with the director or director-related entity at arms length in similar circumstances. 2010 2009 $ $ Amounts provided to the Club: Jim Stynes (Reach Foundation) - Corporate Packages and Debt Demolition Fundraising - 288 Guy Jalland (Consolidated Press Holdings) - Corporate Packages and Debt Demolition Fundraising 7,159 7,009 Don McLardy (McLardy McShane & Associates Pty Ltd) - Corporate Packages and Debt Demolition Fundraising 49,844 33,209 Stuart Grimshaw (Caledonia) - Corporate Packages and Debt Demolition Fundraising 4,470 10,182 Russel Howcroft (George Patterson Y & R) - Corporate Packages and Debt Demolition Fundraising 6,622 13,814 Peter Spargo (Spargo Group) - Corporate Packages and Debt Demolition Fundraising 21,330 25,285 Peter Szental (Szencorp Group) - Debt Demolition Fundraising 18,837 28,450 David Thurin (Applewood) - Corporate Packages 19,420 11,847 Karen Hayes - (UXC) - Corporate Packages and Debt Demolition Fundraising 13,247 16,127 Andrew Leoncelli - Corporate Packages 670 3,948

The following balances owing from related parties were unpaid at 31 October: - Stuart Grimshaw 1,680 2,750 - Andrew Leoncelli 910 780 - Peter Spargo 7,840 - - David Thurin 6,380 - - Don McLardy 11,380 9,552

Outstanding balances at year end are unsecured, interest free and settlement occurs in cash. For the year ended 31 October 2010, the Club has not made any allowance for impairment loss relating to amounts owed by related parties. All balances have been paid subsequent to year end on normal terms.

Page 25 MELBOURNE FOOTBALL CLUB LIMITED (ACN 005 686 902)

NOTES TO AND FORMING PART OF THE ACCOUNTS NOTE 18 – FINANCIAL INSTRUMENTS

This note presents information about the Club's exposure to financial risks, the Club's objectives, policies and the processes for measuring and managing risk. Further quantitative disclosures are included throughout this financial report.

The Club's principal financial instruments comprise cash and short term deposits, receivables, payables, bank loans and overdrafts.

The Club manages its exposure to key financial risks through the monthly Finance Committee meetings as well as monthly meetings with the Chief Financial Officer of the AFL and the relationship manager from Westpac. The objective of both these meetings are to support the delivery of the Club's financial targets whilst protecting future financial security.

The main risks arising from the Club's financial instruments are interest rate risk, credit risk and liquidity risk. The Club uses different methods to measure and manage these risks including assessment of market forecasts for interest rate risk, aging analyses to monitor credit and cash flow forecast to monitor liquidity risk.

Risk exposures and responses (a) Interest rate risk The Club has interest rate risk exposures from the holding of financial assets and liabilities and these are summarised in the table below.

At balance date the Club had the following mix of financial assets and liabilities exposed to variable interest rate risk.

NOTE 2010 2009 $ $ Financial Assets Cash and cash equivalents 5 807,777 369,373 807,777 369,373

Financial Liabilities

Bank overdraft 5 - 89,038 Commercial bills (floating interest rate) 11 - 1,530,000 - 1,619,038 Net exposure 807,777 (1,249,665)

The following sensitivity analysis is based on the interest rate risk exposures in existence at balance sheet date. At 31 October 2010, if interest rates had moved, as illustrated in the table below, with all other variables held constant, profit and other comprehensive income would have been affected as follows:

Profit Other comprehensive income Sensitivity Analysis Higher/(Lower) Higher/(Lower) Higher/(Lower) Higher/(Lower) 2010 2009 2010 2009 $$$$

+1.0% (100 basis points) 8,078 (12,497) - - -1.0% (100 basis points) (8,078) 12,497 - -

The movements in profit are due to higher/lower interest costs from variable rate debt and cash balances. A 100 basis point increase or decrease is used and represents management’s assessment of a reasonably possible change in interest rates.

Page 26 MELBOURNE FOOTBALL CLUB LIMITED (ACN 005 686 902)

NOTES TO AND FORMING PART OF THE ACCOUNTS

NOTE 18 – FINANCIAL INSTRUMENTS (CONTINUED)

Risk exposures and responses (continued) (b) Credit risk Credit risk is the risk of financial loss to the Club if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Club's trade and other receivables.

The Club trades only with recognised, creditworthy third parties, negating the requirement to request collateral. It is the Club’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. There are no significant concentrations of credit risk within the Club. In addition, receivable balances are monitored on an ongoing basis with the result that the Club’s exposure to bad debts is not significant.

The credit risk on financial assets of the Club is the carrying amount, net of any provisions for impairment loss and has been addressed in each applicable note.

(c) Liquidity risk Liquidity risk is the risk that the Club will not be able to meets its financial obligations as they fall due. The Club’s objective is to maintain a balance between continuity of funding and flexibility through the use of term loans.

The Club's approach to managing liquidity is to ensure as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Club's reputation. The Club monitors cash flow requirements daily, ensuring there is sufficient cash on demand to meet expected operational expenses.

The following table below reflects all undiscounted cash flows for contractually fixed pay-offs, repayments and interest resulting from recognised financial liabilities.

< 6 months > 6 months $ $ 2010 Payables (i) 2,621,595 - Interest bearing liabilities - - 2,621,595 -

2009 Payables 2,184,774 - Interest bearing liabilities 1,530,000 - 3,714,774 -

(i) This amount includes unearned income accrued amounts with no cash outflow impact, and other payables to be repaid from operating cashflows generated by the Club, or through access to commercial bill and overdraft facilities.

NOTE 19 - ECONOMIC DEPENDENCY The Melbourne Football Club Limited is economically dependant on the ongoing support of the Australian Football League through receipt of distributions and dividends.

NOTE 20 - EVENTS AFTER THE BALANCE SHEET DATE There are no events subsequent to balance date likely to materially impact the Club.

Page 27