Brisbane Broncos Limited and its controlled entities

2006 annual financial statements and reports Broncos Limited and its controlled entities 

Contents

CORPORATE INFORMATION 1

YEAR IN REVIEW 2

SPONSOR OVERVIEW 2006 AND BEYOND 5

DIRECTORS’ REPORT 7

AUDITOR’S INDEPENDENCE DECLARATION TO THE DIRECTORS OF LIMITED 16

CORPORATE GOVERNANCE STATEMENT 17

BALANCE SHEET AS AT 31 DECEMBER 2006 20

INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2006 21

CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2006 22

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2006 23

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2006 24

DIRECTORS’ DECLARATION 47

INDEPENDENT AUDIT REPORT TO THE MEMBERS OF BRISBANE BRONCOS LIMITED 48

ASX ADDITIONAL INFORMATION 50

Corporate Information

A.B.N. 41 009 570 030

Directors D C Somerville (Chairman) B P Cullen (Managing Director) D S Jackson P W Jourdain D M Watt

Company Secretary L A Lanigan

Registered Office and Level 1 Principal Place of Business 92 Fulcher Road, Red Hill 4059 , Australia

Share Register Computershare Investor Services Level 19, 307 Queen Street, Brisbane 4000 Queensland, Australia Brisbane Broncos Limited shares are listed on Stock Exchange.

Solicitors Creagh Weightman Level 19, 200 Mary Street, Brisbane 4000 Queensland, Australia

Bankers Queensland Country Credit Union 410 Ann Street, Brisbane 4000 Queensland, Australia

Auditors Ernst & Young 1 Eagle Street, Brisbane Queensland, Australia

2006 annual financial statements and reports  Brisbane Broncos Limited and its controlled entities

Year in review

FINANCIAL PERFORMANCE 2006 was a successful year both on and off the field for the Brisbane Broncos. The Brisbane Broncos Group achieved another before tax profit in excess of $2 million whilst the football team won the National Premiership. The 2006 before tax profit for the Group was $2,261,054 (2005: $2,321,259) and the after tax profit was $1,536,403 (2005: $2,781,935). In 2005 the Group enjoyed an income tax benefit of $460,676 as a result of the recognition of previous losses that were available at that time. However, in 2006 an income tax expense of $724,651 has been recorded.

HIGHLIGHTS The standout performances from a financial perspective were the increases in revenue from sponsorship, corporate sales, merchandise, and sustaining the very high level of income from season membership and ticketing achieved in 2005. The Group has positioned itself as an ‘in demand’ corporate partner in the Queensland and Australian market. As such, sponsorship levels have been maintained at record highs and close to capacity. Independent surveys have identified the Brisbane Broncos as the most popular and valuable sporting brand in Australia for the past two years.

Although the football team had its highs and lows throughout the season, it played attractive football to still achieve an improved average crowd attendance compared to the 2005 season. Achieving an average attendance of 31,177 per match (30,055 in 2005) ensured the Group’s major income stream remained at a very healthy level. The season opened with a blockbuster against the (46,229), and finished with the (40,159) and the New Zealand Warriors (47,193), with healthy crowds in attendance generally across the board. The New Zealand Warriors match was ’s final premiership game at Suncorp Stadium and with the game promoted as his farewell, the public responded in a fine tribute to this wonderful campaigner for the Club.

BRISBANE BRONCOS RUGBY LEAGUE FOOTBALL TEAM The Broncos football team and coaching staff achieved the ultimate success at the end of the 2006 season, winning the NRL Premiership for the sixth time in the on 1 October 2006 at Telstra Stadium. It was a wonderful end to a season that began with dramatic changes to the coaching staff at the end of 2005. I would like to take this opportunity to record congratulations to coach Wayne Bennett, captain and all of the coaches and players who worked so hard together to achieve their deserved success.

The Brisbane Broncos players also contributed so much to the success of the Queensland side in regaining the title, and to the Australian Tri Nations team who were also successful against New Zealand. Congratulations again to all involved and especially to Darren Lockyer who captained all three sides to success and for the second time in his career won the ‘Golden Boot’ award as the world’s best player.

BOARD AND SENIOR MANAGEMENT The Board of Directors remained unchanged throughout the reporting period with Chairman Darryl Somerville completing his first financial year in that position. Donald Jackson, Peter Jourdain, Dennis Watt and myself maintained our directorships for the reporting period.

Individual director details are listed in the Directors’ Report and notes to the financial statements in this publication.

There were no changes in the senior management team as reported in the 2005 annual report. Myself as Managing Director, Louise Lanigan as General Manager Finance and Administration and Company Secretary, and Marty Rowen as Marketing Manager, maintained their positions on the executive team.

I take this opportunity to thank my fellow directors for their support and guidance over the past twelve months. The management team and the entire staff appreciate it. I also pass on my thanks to all in the Brisbane Broncos front office for their dedicated contribution to the commercial side of our business. Their management, planning and job execution has ensured the Group enjoyed another productive year.

2006 annual financial statements and reports Brisbane Broncos Limited and its controlled entities 

Year in review (continued)

THE YEAR AHEAD The 2006 financial result has facilitated the commencement of a $2 million long overdue renovation and extension to the football team’s gymnasium and training facility. No borrowings will be necessary to fund this project.

The early signs for 2007 are positive and it appears that the current levels of sponsorship, season membership, ticketing and corporate sales will be maintained. The football team will remain competitive, and given favourable weather conditions and suitable scheduling of home matches by the , we can look forward with confidence to the coming year.

Last year the Group committed to launch a community benefits program to assist charities and the needy. I am pleased to report that this has taken place and in 2007 the Brisbane Broncos Brand will be seen supporting a number of organisations this year both financially and physically. Project Safehands (reducing child violence), Epilepsy Queensland, Motor Neurone Disease Association of Queensland, Rosies (helping the homeless), St Vincent de Paul Society, Diabetes Qld, and the Queensland RSL are all early recipients of the Brisbane Broncos work in this area.

Our sponsorship family continues to grow, and headed up by naming rights sponsor Ergon Energy they all deserve our appreciation. Sponsors are the rock we build each year on and without them we would struggle. On behalf of all at the Brisbane Broncos a sincere thank you to this exciting group of businesses who throw their corporate support behind this wonderful organisation. They are all listed elsewhere in this document and deserve your recognition and support in return.

I look forward to continuing the momentum the Group has established over the past few years throughout 2007.

Brian Patrick Cullen Managing Director

2006 annual financial statements and reports  Brisbane Broncos Limited and its controlled entities

BRONCOS LEADERSHIP TEAM 2006

Darryl Somerville Bruno Cullen Wayne Bennett Darren Lockyer Chairman Managing Director Coach Captain BRONCOS ACHIEVEMENTS 2006

Petero Civoniceva Darren Lockyer Player of the Year Best Forward Best Back Most Consistent

Sam Thaiday Shane Webcke Tonie Carroll Most Improved Players’ Player Rookie of the Year Defence Player of the Year

Andrew Gee Darren Lockyer Darren Lockyer Clubman of the Year Play of the Year Encouragement Award People’s Choice Player of the Year

2006 annual financial statements and reports Brisbane Broncos Limited and its controlled entities 

Sponsor Overview 2006 and Beyond

2006 was a very impressive year for the Brisbane Broncos not only on the field in winning the National Rugby League Premiership, but also off the field as sponsor exposure results were at an all time high. Independent sponsorship measurement company, SCOMM Australia, measured the media exposure generated by all sporting clubs’ major sponsorship assets and then benchmarked each property against all teams in the National Rugby League (NRL), Australian Football League (AFL), Super 14 Rugby Union and A-League Soccer. The 2006 benchmarking results confirmed the Brisbane Broncos as number one in almost every sponsorship category amongst other NRL teams while finishing fourth when measured against all football codes for exposure generated by the Broncos playing jersey. The Brisbane Broncos were a close second to AFL grand finalist Sydney Swans in the total benchmarking results for exposure generated by sporting teams on television. This is a great result considering that AFL is telecast in every state of Australia.

2006 was the first year of the new three year Ergon Energy naming rights agreement with the Broncos football team now known as the Ergon Energy Brisbane Broncos. A number of new sponsors of varying levels also joined the Broncos sponsorship family in 2006; these new partners included Queensland Transport, WOW Sight and Sound, Bundaberg Rum, Strathfield and Quest Newspapers. Our sponsorship portfolio again increased in 2006 with a growth of 2.3% from 2005 - a very positive result, considering the substantial 14% increase the previous year.

The end of season 2006 saw nine of the clubs eleven largest sponsorship contracts expire. This brought with it a significant level of contract negotiations which became more complex when new potential sponsors expressed interest in a number of the expiring sponsorship categories. The end result is a new look for sponsorship in 2007. Despite such a large number of major contact renewals, the Broncos will start 2007 in an improved financial position on the sponsor front.

The Broncos sponsorship associations ended with QLD Group, Holden, B105FM, QR, Strathfield, Jim Beam, XBOX, Quest Newspapers and Sports Acumen at the end of 2006. These changes are due to a number of factors unique to each sponsor but despite these resignations the Broncos sponsorship portfolio will be more profitable in 2007. We thank these companies for their support during their time with the Broncos.

The Brisbane Broncos sponsorship portfolio shows strength heading into 2007 with new or improved deals with XXXX Bitter, NRMA Insurance, Coca-Cola, Channel Nine, Broncos Leagues Club and Bundaberg Rum. WOW Sight and Sound also progress up the Broncos sponsorship hierarchy to become the sleeve sponsor in 2007. The Broncos were also delighted to welcome Nova 106.9FM, 4BC, Alfa Sports, Elite Fitness, New-Loan and Toyota to the sponsorship family in 2007. Toyota has signed a platinum sponsorship arrangement and will become the official car sponsor of the Broncos and occupy branding space on the back of the playing jersey for the next three seasons.

Principal Sponsor Ergon Energy

Platinum Sponsor XXXX Bitter, Nike, WOW Sight & Sound, Toyota, Broncos Leagues Club, Coca Cola Amatil, NRMA Insurance, Queensland Transport, Nova 106.9 FM & Channel 9

Major Sponsors Bundaberg Rum, Queensland Country Credit Union, Harvey Norman & Four N Twenty/Streets

Associate Sponsors Wyndham Estate, New-Loan, Musashi, Radio 4BC, Birch Carroll & Coyle, Yellow Cabs & Australia Post

Official Suppliers / Supporters Elastoplast Sport, Elite Fitness, Tender Plus, Hans, Il Centro Restaurant & Cha Cha Char Restaurant

2006 annual financial statements and reports  Brisbane Broncos Limited and its controlled entities

Sponsor Overview 2006 and Beyond (continued) Principal Sponsor

2006 PRINCIPAL SPONSOR is in the business of continuing to help Ergon Energy – has been our principal Queenslanders and is proud to be behind sponsor for over seven years and the Broncos. entered the first of a new three year Queensland Transport – Government naming rights agreement. Ergon Energy organisation onboard as a sponsor is a Queensland Government owned for the first time in 2006. Queensland organisation, committed to delivery of Transport and the Broncos are proud to sustainable, quality energy solutions to be working together to promote road an area over six times the size of Victoria safety in Queensland. - from the Torres Strait to Queensland’s major regional centres and from the Broncos Leagues Club – sharing our coast to the outback. intellectual property and many associated Platinum Sponsors resources, the success of both the 2006 PLATINUM SPONSORS Broncos Leagues Club and the Broncos XXXX Bitter – in 2006 Queensland’s Football Club is of great importance. As favourite beer renewed its long-term such, our partnership is a strong and association with the Broncos for a further effective one. five years until the end of 2011. This Q.L.D Group –Sleeve and platinum partnership has enabled two Queensland sponsor of the Broncos in 2006. The icons to further entrench their position Q.L.D Group is a state property developer in not only the Queensland marketplace and marketer of residential subdivisions but also in other states where the and master planned communities with XXXX brand is becoming more widely the core of its interests in the Brisbane recognised. Western Corridor. 2006 brought to an end Nike – sharing strong and common the two year relationship the Broncos brand values as market leaders, in 1996 shared with the Q.L.D Group. the Broncos established a partnership Channel Nine Queensland – Queensland’s with Nike as our exclusive apparel, number one television network, proudly accessory and equipment sponsor. Our supporting the Broncos and broadcasting close working relationship has allowed all Broncos games to Queenslanders since for many new and exciting Nike product 1991. innovations on the football field and beyond. 2006 MAJOR SPONSORS Holden, WOW Sight and Sound, Coca Cola – another market leader and Bundaberg Rum, Strathfield, B105FM, a longstanding partner of the Broncos, Queensland Rail, Queensland Country Coca-Cola is the official non-alcoholic Credit Union, Harvey Norman & Four N drink supplier of the Broncos. Coca Cola’s Twenty / Streets. current agreement expired in 2006 with a contract renewal agreed for the next 2006 ASSOCIATE SPONSORS three years. Jim Beam, XBOX, Wyndham Estate, NRMA Insurance – Australia’s largest Musashi, Birch Carroll and Coyle, Yellow general insurer. NRMA Insurance was Cabs, Quest Newspapers & Australia again the Broncos short sponsor with Post. the initial three year agreement expiring 2006 SUPPLIERS / SUPPORTERS at the end of the 2006 season. During Elastoplast Sport, Hans, Tenderplus, season 2006 NRMA Insurance and the Sports Acumen, TDK, Cha Cha Char & Il Broncos agreed a two year contract Centro. renewal which will see NRMA Insurance remain as the Broncos Insurance partner for the next two seasons. NRMA Insurance

2006 annual financial statements and reports Brisbane Broncos Limited and its controlled entities 

Directors’ Report

Your directors submit their report for the year ended 31 December 2006.

DIRECTORS

The names and details of Brisbane Broncos Limited’s (the Company) directors in office during the financial year and until the date of this report are as follows. Directors were in office for this entire period unless otherwise stated.

Names, qualifications, experience and special responsibilities

Darryl Craig Somerville Mr Somerville was appointed as a director on 24 February 2005. On 29 April 2005 he was elected Non-Executive Chairman as Non-Executive Chairman. Prior to his retirement in 2005, Mr Somerville had a long and Independent esteemed career in the accounting industry. He joined PriceWaterhouseCoopers in 1982 after 10 years at the Australian Taxation Office. His tenure at PriceWaterhouseCoopers spanned 23 years including 19 years as partner of which 8 ½ were as Managing Partner. He is a Fellow of the Institute of Chartered Accountants of Australia, a Fellow of the Australian Society of Certified Practising Accountants and a member of the Australian Institute of Company Directors. Mr Somerville is Chairman of Devine Limited and is Chairman of the Queensland Government’s Energy Competition Committee (overseeing the introduction of Full Retail Contestability).

Brian Patrick Cullen Prior to Mr Cullen’s appointment as Managing Director on 6 January 2003 he was employed by Managing Director Queensland Country Credit Union for 26 years – 12 of those as Chief Executive Officer. He is also Executive a director of Queensland Country Credit Union Limited and Brisbane Broncos Leagues Club. Mr Cullen is a member of the Australian Institute of Credit Union Directors.

Donald Stanley Jackson Mr Jackson was appointed as a director on 20 November 2001. Mr Jackson was employed by Non-Executive Director Castlemaine Perkins in the liquor industry spanning a period of almost 25 years. He is a member Independent of the board of Brisbane Markets Limited, Golden Casket Lottery Corporation Limited and Chairman and Managing Director of DBCT Holdings Pty Ltd. Mr Jackson is a member of the Australian Institute of Company Directors.

Peter William Jourdain Mr Jourdain was appointed as a director on 11 February 2003. Mr Jourdain is a Chartered Non-Executive Director Accountant and is the Business Development Manager and Company Secretary for the News Limited group of companies. He is a director of the North Queensland Cowboys, the Melbourne Storm Rugby League Clubs, and is also on the board of the Rugby League.

Dennis Michael Watt Mr Watt was appointed as a director on 11 February 2003. Mr Watt has had a career in print media Non-Executive Director and for the past seven years he has been general manager of Quest Community Newspapers, which publishes 19 community newspapers from Noosa to Ipswich. He was previously Chief of Staff and Assistant Editor with The Courier Mail.

COMPANY SECRETARY

Louise Anna Lanigan Ms Lanigan has been Company Secretary and General Manager of Finance and Administration since Company Secretary 3 July 2000. She has been a Chartered Accountant for 13 years. Prior to holding this position she was Group Financial Controller of an ASX listed company for two years and worked in the Chartered Accounting industry for eight years.

2006 annual financial statements and reports  Brisbane Broncos Limited and its controlled entities

Directors’ Report (continued)

DIRECTORS (continued)

Interests in the shares and options of the company and related bodies corporate

As at the date of this report, the interests of the directors in the shares and options of Brisbane Broncos Limited were:

Directors Number of Ordinary Shares Number of Options Over Ordinary Shares

D C Somerville - - B P Cullen - - D S Jackson 28,500 - P W Jourdain - - D M Watt - -

EARNINGS PER SHARE Cents Basic Earnings Per Share 1.57 Diluted Earnings Per Share 1.57

DIVIDENDS No dividends have been paid, declared or recommended since the end of the preceding financial year.

PRINCIPAL ACTIVITIES The principal activity of the Brisbane Broncos Group (“the Group”) during the 2006 financial year was the management and operation of the Brisbane Broncos Rugby League Football Team (“the Broncos”). There were no significant changes in the nature of those activities during the year.

OPERATING AND FINANCIAL REVIEW

Operating results for the year 2006 was a very successful year on and off the field for the Group. The directors are very happy with the final result achieved in a year which saw the Broncos claim its sixth Premiership title.

The Group recorded an after tax profit for the 31 December 2006 financial year of $1,536,403 compared to the $2,781,935 achieved in 2005. When comparing the after tax profits it should be noted that in 2005, an income tax benefit of $460,676 was recognised as a result of tax losses that were available to the Group at that time. In contrast, an income tax expense of $724,651 has been recognised in 2006. For comparison, the before tax profits for the 2005 and 2006 financial years were $2,321,259 and $2,261,054 respectively.

Review of operations The Group recorded gross revenue for the 2006 financial year of $22,947,926, which is a $1,876,898 increase from 2005. This successful result can be attributed to a combination of factors - namely crowd attendances, corporate sales, sponsorship strength, merchandise sales and the ultimate Premiership win on 1 October 2006.

Crowd attendances improved again in 2006 by 3.7% to achieve an average of 31,177 (2005: 30,055). This is the second year in a row that the crowd average has exceeded 30,000 which is an enormous achievement. A number of factors affected the result, the most significant being the three home games that attracted crowds in excess of 40,000 – in particular Shane Webcke’s farewell match against the New Zealand Warriors that drew a crowd of 47,193. Season membership numbers grew from 7,729 in 2005 to 8,944 in 2006 which also contributed to the average crowd attendance. Weather conditions were favourable again in 2006 as rain did not adversely affect any games during the season. The average crowd is particularly satisfying considering that on three occasions the Broncos home game schedule experienced clashes with other major Brisbane sporting events. From experience, such clashes can significantly affect crowd attendances. There were minimal clashes with other non-sporting events in Brisbane throughout the year. As a result of all of these factors, the combined season membership and gate takings gross revenue increased by $410,212 from 2005.

2006 annual financial statements and reports Brisbane Broncos Limited and its controlled entities 

Directors’ Report (continued)

OPERATING AND FINANCIAL REVIEW (continued)

Review of operations (continued) The Group had another very successful sponsorship year with total sponsorship revenue achieving a growth of $147,329 (2.3%) from 2005. This was a result of upgrades of existing sponsors and also new signings such as Bundaberg Rum, Quest Newspapers, Strathfield and WOW Sight and Sound. The Group also received sponsorship bonuses of $40,000 as a result of winning the National Rugby League Premiership. Signage sales also increased by $107,106 from 2005 and corporate sales revenue experienced growth of 7% increasing by $169,276 from the previous year.

The Broncos’ Premiership win resulted in an increase in gross revenue for the Group in the areas of merchandise and prize money. Merchandise revenue increased by $278,423 which is due to a combination of the high demand for Broncos attire during the lead up to the Grand Final and also the sale of memorabilia items that were created after the Premiership win. The Broncos received $400,000 prize money for winning the Grand Final which is recorded in gross revenue. However, the majority of this amount was distributed to players and also used to fund additional expenses associated with the Finals Series.

Total operating expenses were $20,686,872, which is $1,937,103 more than last year. This is mainly due to increased game day related and football operations expenditure. Game day related costs increased as a direct result of the growth in game day revenue. Football related expenditure increased as a result of additional costs associated with the Finals Series and ultimately the Grand Final which includes the distribution of prize money to players. The costs of football operations also increased in 2006 due to the investment in the future of the Club by allocating further additional funds to an elite player development program and player rosters.

The 2006 financial year also saw the commencement of a major renovation to the Broncos gymnasium and training facility. This project is expected to be completed in March 2007. An additional storey is being added to the existing structure which will provide a more modern facility with spacious training and weights areas, offices, meeting rooms and an increased standard of technology.

Performance indicators Management and the Board monitor the Group’s overall performance from a strategic level through to the operating and financial performance of the Group. They regularly compare actual results of the business to operating plans and financial budgets to assess the Group’s overall ongoing performance.

The Board and management have identified key performance indicators (KPIs) that are used together with budgeted targets to measure performance. Directors receive a monthly operational and financial report each month to enable all directors to actively monitor the Group’s performance. These reports provide an operational update of all aspects of the business and a comprehensive financial analysis of actual results compared to budgets, full year forecasts, KPIs and a detailed explanation of all variances.

Risk management The Group takes a proactive approach to risk management. The Board is responsible for ensuring that risks, and also opportunities, are identified on a timely basis and that the Group’s objectives and activities are aligned with the risks and opportunities identified by the Board.

The Group believes that it is crucial for all Board members to be a part of this process, and as such the Board has not established a separate Risk Management Committee.

The Board has a number of mechanisms in place to ensure that management’s objectives and activities are aligned with the risks identified by the Board. These include the following:

- Implementation of Board approved operating plans and budgets and Board monitoring of progress against these budgets, including the establishment and monitoring of KPIs of both a financial and non-financial nature.

- Annual review of the Group’s insurance coverage.

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS Total equity increased to $21,530,795 from $19,994,392, an increase of $1,536,403. The movement is due to the result of profits earned in the year.

2006 annual financial statements and reports 10 Brisbane Broncos Limited and its controlled entities

Directors’ Report (continued)

SIGNIFICANT EVENTS AFTER THE BALANCE DATE

There have been no significant events since balance date other than the settlement of the Delaware North legal action in relation to the ANZ Stadium departure which is explained in note 27(b).

LIKELY DEVELOPMENTS AND EXPECTED RESULTS The directors have excluded from this report any further information on the likely developments in the operations of the Group and the expected results of those operations in future financial years, as the directors believe that it would be likely to result in unreasonable prejudice to one or more entities in the Group.

SHARE OPTIONS At 31 December 2006, there were no share options granted to directors or relevant officers as part of their remuneration. There are no share options issued by the Company.

INDEMNIFICATION AND INSURANCE OF OFFICERS AND DIRECTORS Insurance and indemnity arrangements established in the previous year concerning officers of the Group were renewed during 2006. Each of the directors of the Company named earlier in this report and each full-time executive officer, director and secretary of all group entities are indemnified via insurance cover against any claim or for any expenses or costs which may arise as a result of work performed in their respective capacities. The monetary limit is $10 million for each and every claim and in the aggregate during the policy period.

REMUNERATION REPORT (audited) This Remuneration Report outlines the director and executive remuneration arrangements of the Company and the Group in accordance with the requirements of the Corporations Act 2001 and its Regulations. It also provides the remuneration disclosures required by paragraphs Aus 25.4 to Aus 25.7.2 of AASB 124 Related Party Disclosures, which have been transferred to the Remuneration Report in accordance with Corporations Regulation 2M.6.04. For the purposes of this report Key Management Personnel (KMP) of the Group are defined as those persons having authority and responsibility for planning, directing, and controlling major activities of the Company and the Group, directly or indirectly, including any director (whether executive or otherwise) of the Company, and includes the five executives in the Company and the Group receiving the highest remuneration.

For the purposes of this report, the term ‘executive’ encompasses the Managing Director, senior executives, general managers and secretaries of the Company and the Group.

Remuneration committee Due to the small size of the Board, a separate Remuneration Committee has not been established. The Board as a whole assesses the appropriateness of the nature and the amount of remuneration of key management personnel on a periodic basis by reference to relevant employment market conditions. The overall objective of this process is to ensure maximum stakeholder benefit from the retention of a high quality, high performing Board and executive team. The Board also consider all matters relevant to the nomination of directors. The non-executive directors are responsible for evaluating the performance of the Managing Director, who in turn evaluates the performance of all other senior executives.

Remuneration philosophy The performance of the Company depends on the quality of its directors and executives. To prosper, the company must attract, motivate and retain highly skilled directors and executives. To achieve this, the Company embodies the following principles in its remuneration framework: − Provide competitive rewards to attract high calibre executives; − Annual performance reviews to ensure executives are meeting pre-determined performance benchmarks; and − In depth recruitment program to ensure executives with the appropriate skills and experience are employed.

Remuneration structure In accordance with best practice corporate governance, the structure of non-executive director and executive remuneration is separate and distinct.

2006 annual financial statements and reports Brisbane Broncos Limited and its controlled entities 11

Directors’ Report (continued)

REMUNERATION REPORT (audited) (continued)

Non-executive director remuneration Objective The Board seeks to set aggregate remuneration at a level that provides the Company with the ability to attract and retain directors of the highest calibre, whilst incurring a cost that is acceptable to shareholders.

Structure The Constitution and ASX Listing Rules specify that the aggregate remuneration of non-executive directors shall be determined from time to time by a general meeting. An amount not exceeding the determined amount is then divided between the directors as agreed. The latest determination was at the Annual General Meeting held on 20 April 1995 where shareholders approved an aggregate remuneration of $110,000 per year. Each director receives a fixed fee for being a director of the Company. Historically the Company’s annual directors’ fees paid have been below this limit. The total directors’ fees paid for the 2006 financial year were $50,000.

The amount of aggregate remuneration sought to be approved by shareholders and the manner in which it is apportioned amongst directors is reviewed periodically. The Board considers fees paid to non-executive directors of comparable companies when undertaking the periodical review process.

Each non-executive director receives an annual fee of $10,000 for being a director of the Company other than the Chairman who receives $20,000. The non-executive directors do not receive retirement benefits nor do they participate in any incentive program.

The remuneration of non-executive directors for the period ended 31 December 2006 and 31 December 2005 is detailed in Table 1 and 2 of this report.

Executive remuneration Objective The Company aims to reward executives with a level and mix of remuneration commensurate with their position and responsibilities within the Company so as to:

− Reward executives for Company, business unit and individual performance against budgets and targets; and − Ensure total remuneration is competitive by market standards.

Structure The non-executive directors are responsible for evaluating the performance of the Managing Director, who in turn evaluates the performance of all other senior executives. In determining the level and composition of executive remuneration, comparable executive roles and individual skill and experience are taken into consideration. The executives of the Company are subject to a formal annual performance review. The results of this performance review, the financial and/or operational performance of the Company and market conditions are all taken into consideration when determining revisions to remuneration.

It is Company policy that an employment contract is entered into only with the Managing Director and not with any other executives. Details of this contract are provided below. Remuneration consists of the following key elements:

− Fixed remuneration − Variable remuneration

The proportion of fixed remuneration and variable remuneration (potential short term and long term incentives) for each executive is set out in Table 1 and 2 of this report.

Fixed remuneration Objective Fixed remuneration is reviewed annually by the Board. The process consists of a review of companywide, business unit and individual performance, and relevant comparative remuneration in the market and internally. The Board has access to external advice independent of management if required.

2006 annual financial statements and reports 12 Brisbane Broncos Limited and its controlled entities

Directors’ Report (continued)

REMUNERATION REPORT (audited) (continued)

Fixed remuneration (continued) Structure Senior managers and executives are given the opportunity to receive their fixed remuneration in a variety of forms including cash and fringe benefits such as motor vehicles. It is intended that the manner of payment chosen will be optimal for the recipient without creating undue cost for the Group.

The fixed remuneration component of the Group and Company executives is detailed in Table 1 and 2.

Variable remuneration – Short Term Incentive (STI) and Long Term Incentive (LTI) Structure There are no formal STI or LTI payment programs in place for senior management. Senior management may be paid annual bonuses at the Managing Director’s discretion with the approval of the Board of directors. The Managing Director considers results of performance reviews, effort, commitment, the financial and/or operational performance of the Company, and market conditions when considering the payment of bonuses.

The Managing Director’s employment agreement provides for annual bonuses to be paid at the complete discretion of the Board. In considering this discretionary amount, the Board take into consideration such factors as the Company’s overall financial performance, the personal efforts, dedication, commitment and contribution of the Managing Director, and the external conditions prevailing in the economy.

Employment contracts The Managing Director, Mr Brian Cullen, is employed under contract which expires on 30 September 2009. At this time the Group may choose to commence negotiation to enter into a new employment contract with Mr Cullen if both parties agree.

Mr Cullen’s salary package is reviewed annually as determined by the Board of directors. The review is based on individual and Group performances, effort, commitment and the market rates for the salary packages of similar packages elsewhere in Australia.

Details of Mr Cullen’s employment contract are as follows:

− Mr Cullen receives fixed remuneration of $250,000 plus 9% superannuation and a fully maintained motor vehicle.

− Mr Cullen is entitled to an increase of his fixed remuneration of at least CPI each year.

− Mr Cullen is entitled to be paid annual bonuses as a result of individual achievement, effort, dedication, commitment and overall Company performance at the discretion of the Board of Directors.

− Mr Cullen may resign from his position and thus terminate his contract by giving three months written notice.

− The Company may terminate the contract immediately following notice given by Mr Cullen providing payment of a minimum three months salary in lieu of the notice period (based on the fixed component of Mr Cullen’s remuneration).

− The Company may terminate the contract by giving three months written notice and providing a payment in lieu of three months salary in lieu of the notice period. A payment of not less than six months salary will also be paid in these circumstances. These payments are based on the fixed component of Mr Cullen’s remuneration.

− The Company may terminate the contract at any time without notice if serious misconduct has occurred. Where termination with cause occurs, the Managing Director is only entitled to that portion of remuneration that is fixed, and only up to the date of termination.

2006 annual financial statements and reports Brisbane Broncos Limited and its controlled entities 13

Directors’ Report (continued)

REMUNERATION REPORT (audited) (continued)

Remuneration of key management personnel

Table 1: Remuneration for the year ended 31 December 2006

Short Term Post Employment Total Performance Related Salary & Fees Cash Bonus Non Monetary Benefits Superannuation $ $ $ $ $ %

Non-executive directors D C Somerville - Chairman - - - 20,000 20,000 - D S Jackson - Non-executive - - - 10,000 10,000 - P W Jourdain - Non-executive + 10,000 - - - 10,000 - D M Watt - Non-executive + 10,000 - - - 10,000 - Sub-total non-executive directors 20,000 - - 30,000 50,000 -

Executive director B P Cullen – Managing Director 250,000 50,000 20,000 22,500 342,500 14.60%

Other key management personnel L A Lanigan – Company Secretary & General Manager Finance & Administration 135,000* 7,500 15,000 12,150** 169,650 4.89% M A Rowen – Marketing Manager 97,000 1,500 15,000 8,730 122,230 1.22% Sub-total executive KMP 482,000 59,000 50,000 43,380 634,380 Totals 502,000 59,000 50,000 73,380 684,380

*Includes unused annual leave payout of $15,000. ** Includes superannuation on unused annual leave payout of $1,350. + Fees for Peter Jourdain and Dennis Watt are paid directly to their employer.

If a person was not employed for the full year, the amounts above reflect the remuneration for the period the individual was employed.

2006 annual financial statements and reports 14 Brisbane Broncos Limited and its controlled entities

Directors’ Report (continued)

REMUNERATION REPORT (audited) (continued)

Remuneration of key management personnel (continued)

Table 2: Remuneration for the year ended 31 December 2005

Short Term Post Employment Total Performance Related Salary & Fees Cash Bonus Non Monetary Benefits Superannuation $ $ $ $ $ %

Non-executive directors D C Somerville - Chairman 5,150 - - 10,464 15,614 - D S Jackson - Non-executive 10,000 - - 900 10,900 - P W Jourdain - Non-executive + 10,000 - - - 10,000 - D M Watt – Non-executive + 10,000 - - - 10,000 - W K Goss - Non-executive (Resigned 14-02-05) 1,250 - - 113 1,363 Sub-total non-executive directors 36,400 - - 11,477 47,877

Executive director B P Cullen – Managing Director 208,500 50,000 20,000 21,500 300,000 16.67%

Other key management personnel L A Lanigan – Company Secretary & General Manager Finance & Administration 107,000 7,500 15,000 9,630 139,130 5.40% M A Rowen – Marketing Manager (Appointed 01-09-05) 30,000 500 5,000 2,700 38,200 1.00% Fraser Kendall – Marketing Manager (Resigned 17-06-05) 38,531 - 10,168 3,256 51,955 Sub-total executive KMP 384,031 58,000 50,168 37,086 529,285 Totals 420,431 58,000 50,168 48,563 577,162

+ Fees for Peter Jourdain and Dennis Watt are paid directly to their employer.

If a person was not employed for the full year, the amounts above reflect the remuneration for the period the individual was employed.

2006 annual financial statements and reports Brisbane Broncos Limited and its controlled entities 15

Directors’ Report (continued) DIRECTORS’ MEETINGS The number of meetings of directors (including meetings of committees of directors) held during the year and the number of meetings attended by each director was as follows: Board or Committee Number of Meetings

Full Board 8 Audit and Risk Management 2 The attendance of the directors at meetings of the Board and of its Committees was:

Full Board Audit & Risk Management Committee

B P Cullen 8 (8) 2 (2) D C Somerville 8 (8) 2 (2) D S Jackson 7 (8) 2 (2) P W Jourdain 7 (8) 2 (2) D M Watt 7 (8) 1 (2) Where a director did not attend all meetings of the Board or relevant committee (or was not a director for the entire year), the number of meetings for which the director was eligible to attend is shown in brackets. The Board met twice during the 2006 financial year in their capacity as the Audit and Risk Management Committee. Given the size of the Company and the Board, it had been previously resolved that the entire Board comprises the Audit and Risk Management Committee.

CORPORATE GOVERNANCE In recognising the need for the highest standards of corporate behaviour and accountability, the directors of Brisbane Broncos Limited support and adhere to where practical the principles of corporate governance. The Company’s Corporate Governance Statement is contained in the following section of this annual report.

AUDITOR INDEPENDENCE AND NON-AUDIT SERVICES The directors received the declaration on page 16 from the auditor of Brisbane Broncos Limited.

NON-AUDIT SERVICES Details of non-audit services provided by the entity’s auditor, Ernst & Young, are included at note 28 of the financial report. 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. The nature and scope of each type of non-audit service provided means that auditor independence was not compromised.

Signed in accordance with a resolution of the directors.

Darryl Somerville Brian Cullen Chairman Managing Director Brisbane Brisbane 27 February 2007 27 February 2007

2006 annual financial statements and reports 16 Brisbane Broncos Limited and its controlled entities

Auditor’s Independence Declaration to the Directors of Brisbane Broncos Limited

In relation to our audit of the financial report of Brisbane Broncos Limited for the financial year ended 31 December 2006, to the best of my knowledge and belief, there have been no contraventions of the auditor independence requirements of the Corporations Act 2001 or any applicable code of professional conduct.

Ernst & Young

M J Hayward Partner 27 February 2007

2006 annual financial statements and reports Brisbane Broncos Limited and its controlled entities 17

Corporate Governance Statement

The Board of directors of Brisbane Broncos Limited is responsible for the corporate governance of the Group. The Board guides and monitors the business affairs of the Group on behalf of its shareholders by whom they are elected and to whom they are accountable.

Brisbane Broncos Limited’s Corporate Governance Statement is structured with reference to the Corporate Governance Council’s principles and recommendations which are as follows:

Principle 1 Lay solid foundations for management and oversight. Principle 2 Structure the board to add value. Principle 3 Promote ethical and responsible decision making. Principle 4 Safeguard integrity in financial reporting. Principle 5 Make timely and balanced disclosure. Principle 6 Respect the rights of shareholders. Principle 7 Recognise and manage risk. Principle 8 Encourage enhanced performance. Principle 9 Remunerate fairly and responsibly. Principle 10 Recognise the legitimate interests of stakeholders.

NON COMPLIANCE WITH BEST PRACTICE RECOMMENDATIONS OF ASX CORPORATE GOVERNANCE COUNCIL Where practical, the Group has complied with the Best Practice Recommendations suggested by the ASX Corporate Governance Council. However, there are some instances whereby due to the limited size of the Board, or News Limited’s substantial shareholding in the Company, it is not considered economical or practical to implement some Recommendations. The Best Practice Recommendations that have not been complied with are disclosed below.

Composition of Board of Directors Directors of Brisbane Broncos Limited are classified as either executive or non-executive, with the former being those directors engaged in full time employment by the Group. As at the end of the financial year the Board comprised of five members, four non- executive and one executive member being the Managing Director. Of the four non-executive board members, two were independent.

Therefore, ASX Best Practice Recommendation 2.1 “A majority of the Board should be independent directors” is not complied with.

At this point in time, due to the size of the Company, it is considered most practical and economical to limit the size of the Board to five members. As News Limited controls 69% of the Company, it intends to maintain at least two non-executive Board members.

Performance Evaluation of Board and Key Executives The Group has a formal, documented process in place for the review and evaluation of all employees, including key executives. This occurs on an annual basis.

This formal review process does not encompass the Board of Directors. Given the size of the Board and the absence of a Nomination Committee, ASX Best Practice Recommendation 8.1 has not been complied with. The Board as a whole regularly reviews their own performance and that of the Managing Director.

Board Committees The Board has established an Audit and Risk Management Committee to deal with audit issues. However, due to the limited size of the Board it is impractical to comply with ASX Best Practice Recommendation 4.3 that dictates the recommended composition of the Audit Committee. The full Board comprises the Audit and Risk Management Committee of Brisbane Broncos Limited. The Chairman of the Audit and Risk Management Committee is Mr Peter Jourdain.

Given the size of the Board, separate Nomination and Remuneration Committees have not been established. Therefore, ASX Best Practice Recommendations 2.4 and 9.2 have not been complied with. The full Board deals with nomination and remuneration issues as and when required.

For further information on corporate governance policies adopted by Brisbane Broncos Limited, refer to our website: www.broncos.com.au.

2006 annual financial statements and reports 18 Brisbane Broncos Limited and its controlled entities

Corporate Governance Statement (continued)

BOARD OF DIRECTORS The Board of directors and executive management operate in accordance with a Board Charter. The Board oversees the business of the Brisbane Broncos Limited (“the Company”) and its controlled entities and is responsible for corporate governance of the Group. The Board establishes broad corporate policies, sets the strategic direction for the Group and oversees management. They are also responsible for guiding and monitoring the Group on behalf of the shareholders.

Executive directors do not receive any additional compensation for serving as a director. Non-executive directors receive fees for serving on the Board. Details of the members of the Board, their experience, remuneration, qualifications and term in office are set out in the Directors’ Report.

Directors are considered to be independent when they are independent of management and free from any business or other relationship that could materially interfere with – or could reasonably be perceived to materially interfere with – the exercise of their independent judgement.

The Board is responsible for overseeing the financial position and for monitoring the business and affairs on behalf ofthe shareholders, by whom the directors are elected and to whom they are accountable. It also addresses issues relating to internal controls and approaches to risk management.

Various information reports are sent to the Board in order to keep them informed of the Group’s business. Directors also receive operating and financial reports and access to senior management at Board and Committee meetings. The Board holds regular meetings (average six) each year and special meetings if necessary.

The responsibility for the operation and administration of the Company is delegated by the Board to the Managing Director and the executive management team. The Board ensures that this team is appropriately qualified and experienced to discharge their responsibilities and has in place procedures to assess the performance of this team. It is the Board’s responsibility to appoint or remove the Managing Director and to ratify the appointment or removal of key executives and the Company Secretary.

In the event that a potential conflict of interest may arise, involved directors withdraw from all deliberations concerning the matter and are not permitted to exercise any influence over other Board members or receive relevant Board papers. The Board is empowered to seek external professional advice as considered necessary at the Company’s expense, subject to prior consultation with the Chair. If appropriate, any advice so received will be made available to all directors.

The Audit and Risk Management Committee is responsible for monitoring the independence and suitability of all professional advisors.

DISCLOSURES ABOUT DIRECTORS Details of the directors’ remuneration and retirement benefits are disclosed in note 25(b) and in the Directors’ Report. Details of the indemnity given to directors are disclosed in the Directors’ Report. Details of directors’ shareholdings are disclosed in note 25(c) and in the Directors’ Report.

INTERNAL CONTROLS AND RISK MANAGEMENT The full Board in conjunction with the Audit and Risk Management Committee and management oversee the establishment and implementation of the risk management system, and review at least annually the effectiveness of this system. Due to its size, the Company does not have an internal audit function, however it is Company policy for management to regularly conduct an assessment of the following:

• Adequacy, appropriateness and effectiveness of accounting and operating controls • A continuous improvement program for accounting and operating controls • Extent of compliance with Group policies and procedures • Accuracy and security over data and information • Accountability for Group’s assets to safeguard against loss • Continual review of the cost structure of the business in an attempt to identify inefficiencies • Economy and efficiency with which resources are employed.

If deficiencies in any of the above are identified, management will promptly implement a policy to overcome the deficiency.

2006 annual financial statements and reports Brisbane Broncos Limited and its controlled entities 19

Corporate Governance Statement (continued)

CODE OF CONDUCT FOR THE CHIEF EXECUTIVE AND KEY EXECUTIVES To further promote ethical and responsible decision making, the Board has established a Code of Conduct for the Managing Director and key executives that is included in the Group’s Code of Conduct. The full text of the Code of Conduct is available on the Group’s website (www.broncos.com.au).

SHAREHOLDER COMMUNICATION The Board of Directors aims to ensure that the shareholders are informed of all major developments affecting the Company’s state of affairs. Information is communicated to shareholders through: • The annual report and interim report • Disclosures made to the Australian Stock Exchange • Notices and explanatory memoranda of annual general meetings • The annual general meeting • The Group’s website (www.broncos.com.au) which has a dedicated investor relations section

It is both Company policy and the policy of the auditor for the lead engagement partner to be present at the annual general meeting and to answer questions if necessary about the conduct of the audit and the preparation and content of the Independent Audit Report. Shareholders are invited to raise matters of concern at general meetings.

ETHICAL STANDARDS AND PERFORMANCE The Board acknowledges the need for and continued maintenance of the highest standards of corporate governance practice and ethical conduct by all directors and employees of the Group. Consistent with its legal obligations, as well as part of its commitment to corporate governance, the Board has implemented an overall framework of internal control and business risk management process, and established a Standards of Business Conduct for directors, officers and employees and a Code of Ethics for the Managing Director and key executives.

2006 annual financial statements and reports 20 Brisbane Broncos Limited and its controlled entities

Balance Sheet as at 31 December 2006

Note Consolidated Parent 2006 2005 2006 2005 $ $ $ $

ASSETS Current Assets Cash and cash equivalents 10 9,783,044 5,443,349 9,346,032 5,410,179 Trade and other receivables 11 2,299,717 3,003,574 192,954 1,236,832 Inventories 12 229,847 18,799 - - Other current assets 296,073 399,517 73,298 114,105

Total Current Assets 12,608,681 8,865,239 9,612,284 6,761,116

Non-current Assets Receivables 13 - 1,200,000 - 1,200,000 Other financial assets 15 - - 5 5 Property, plant and equipment 14 928,704 420,736 - - Intangible assets 16 12,482,580 12,482,580 - - Deferred income tax asset 8(c) 126,024 850,676 121,282 722,995

Total Non-current Assets 13,537,308 14,953,992 121,287 1,923,000

TOTAL ASSETS 26,145,989 23,819,231 9,733,571 8,684,116

LIABILITIES Current Liabilities Trade and other payables 17 1,255,826 1,265,681 133,726 221,263 Provisions 18 367,878 294,582 86,030 81,860 Unearned revenue 2,899,994 2,171,120 - -

Total Current Liabilities 4,523,698 3,731,383 219,756 303,123

Non-current Liabilities Trade and other payables 19 - - 3,859,733 2,434,790 Provisions 20 91,496 93,456 30,232 17,015

Total Non-current Liabilities 91,496 93,456 3,889,965 2,451,805

TOTAL LIABILITIES 4,615,194 3,824,839 4,109,721 2,754,928

NET ASSETS 21,530,795 19,994,392 5,623,850 5,929,188

EQUITY Equity attributable to equity holders of the parent Contributed equity 21 28,991,500 28,991,500 28,991,500 28,991,500 Accumulated losses (7,460,705) (8,997,108) (23,367,650) (23,062,312)

TOTAL EQUITY 21,530,795 19,994,392 5,623,850 5,929,188

The above balance sheet should be read in conjunction with the accompanying notes.

2006 annual financial statements and reports Brisbane Broncos Limited and its controlled entities 21

Income Statement for the year ended 31 December 2006

Note Consolidated Parent 2006 2005 2006 2005 $ $ $ $

Continuing operations Sales revenue 21,988,306 20,349,465 - - Interest revenue 694,812 569,920 693,800 561,440 Other revenue 264,808 151,643 36,085 42,376 Revenue 6(a) 22,947,926 21,071,028 729,885 603,816 Expenses 6(b) (20,686,872) (18,749,769) (1,186,222) (1,060,335)

Profit/(loss) from continuing operations before income tax 2,261,054 2,321,259 (456,337) (456,519)

Income tax benefit/(expense) 8(a) (724,651) 460,676 150,999 332,995

Net profit/(loss) for the period attributable to members of the Parent 1,536,403 2,781,935 (305,338) (123,524)

Earnings per share for profit from continuing operations attributable to the ordinary equity holders of the company:

Basic earnings per share 1.57 cents 2.84 cents

Diluted earnings per share 1.57 cents 2.84 cents

Earnings per share for profit attributable to the ordinary equity holders of the company:

Basic earnings per share 1.57 cents 2.84 cents

Diluted earnings per share 1.57 cents 2.84 cents

Dividends per share - -

The above income statement should be read in conjunction with the accompanying notes.

2006 annual financial statements and reports 22 Brisbane Broncos Limited and its controlled entities

Cash Flow Statement for the year ended 31 December 2006

Note Consolidated Parent 2006 2005 2006 2005 $ $ $ $

CASH FLOWS FROM OPERATING ACTIVITIES

Receipts from customers 22,215,397 19,671,969 - - Payments to suppliers & employees (20,750,808) (18,462,620) (618,968) (1,053,321) Rent received 36,000 36,000 36,000 36,000 Other revenue received 228,808 115,643 85 6,376 Interest received 694,812 569,920 693,800 561,440 Interest and other costs of finance paid (21) (544) (7) (7,462)

Net cash flows from/(used in) operating activities 23 2,424,188 1,930,368 110,910 (456,967)

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of property, plant and equipment (484,493) (213,836) - -

Net cash flows used in investing activities (484,493) (213,836) - -

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from loan repayment 2,400,000 1,200,000 2,400,000 1,200,000 Proceeds from controlled entities - - 1,424,943 2,373,982

Net cash flows from financing activities 2,400,000 1,200,000 3,824,943 3,573,982

Net increase in cash and cash equivalents 4,339,695 2,916,532 3,935,853 3,117,015 Cash and cash equivalents at beginning of the period 5,443,349 2,526,817 5,410,179 2,293,164

Cash and cash equivalents at end of period 10 9,783,044 5,443,349 9,346,032 5,410,179

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

2006 annual financial statements and reports Brisbane Broncos Limited and its controlled entities 23

Statement of Changes in Equity for the year ended 31 December 2006

Note Attributable to equity holders of the parent

Issued Capital Retained Total CONSOLIDATED Earnings Equity

At 1 January 2005 28,991,500 (11,779,043) 17,212,457

Profit for the year - 2,781,935 2,781,935 At 31 December 2005 28,991,500 (8,997,108) 19,994,392

Profit for the year - 1,536,403 1,536,403 At 31 December 2006 21/22 28,991,500 (7,460,705) 21,530,795

Attributable to equity holders of the parent

Issued Capital Retained Total PARENT Earnings Equity

At 1 January 2005 28,991,500 (22,938,788) 6,052,712

Loss for the year - (123,524) (123,524) At 31 December 2005 28,991,500 (23,062,312) 5,929,188

Loss for the year - (305,338) (305,338) At 31 December 2006 21/22 28,991,500 (23,367,650) 5,623,850

The above statement of changes in equity should be read in conjunction with the accompanying notes.

2006 annual financial statements and reports 24 Brisbane Broncos Limited and its controlled entities

Notes to the financial statements for the year ended 31 December 2006

1. CORPORATE INFORMATION The financial report of Brisbane Broncos Limited for the year ended 31 December 2006 was authorised for issue in accordance with a resolution of directors on 27 February 2007.

Brisbane Broncos Limited (“the parent”) is a company limited by shares incorporated in Australia whose shares are publicly traded on the Australian stock exchange. The ultimate parent of Brisbane Broncos Limited is Nationwide News Pty Ltd which owns 68.83% of the ordinary shares.

The nature of operations and principal activities of the Group are described in the Directors’ Report.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Table of Contents (a) Basis of preparation (b) Comparatives (c) Statement of compliance (d) Basis of consolidation (e) Cash and cash equivalents (f) Trade and other receivables (g) Inventories (h) Investments and other financial assets (i) Property, plant and equipment (j) Leases (k) Impairment of non-financial assets (l) Intangible assets (m) Trade and other payables (n) Interest-bearing loans and borrowings (o) Provisions and employee leave benefits (p) Contributed equity (q) Revenue recognition (r) Income tax and other taxes (s) Earnings per share

(a) Basis of preparation The financial report is a general-purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001 and Australian Accounting Standards. The financial report has been prepared on a historical cost basis. The financial report is presented in Australian dollars.

(b) Comparatives The Balance Sheet and Cash Flow Statement in 2005 have been amended to include the assets and liabilities of Brisbane Broncos Rugby League Club Limited. The impact is $nil on net assets and a decrease of $14,452 in the cash and cash equivalents balance.

(c) Statement of compliance The financial report complies with Australian Accounting Standards, which include Australian equivalents to International Financial Reporting Standards (AIFRS). Compliance with AIFRS ensures that the financial report, comprising the financial statements and notes thereto, complies with International Financial Reporting Standards (IFRS).

Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet effective have not been adopted for the annual reporting period ended 31 December 2006. These are outlined in the table below:

2006 annual financial statements and reports Brisbane Broncos Limited and its controlled entities 25

Notes to the financial statements (continued) for the year ended 31 December 2006

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

Application Nature of change to Application Reference Title Summary date of accounting policy date for Group standard Amendments to Australian AASB 7 is a disclosure standard Accounting Amendments so will have no direct impact Standards [AASB arising from on the amounts included in the AASB 132, AASB 101, the release in Group’s financial statements. 2005-10 AASB 114, AASB August 2005 of 1 January 2007 However, the amendments 1 January 2007 117, AASB 133, AASB 7 Financial will result in changes to the AASB 139, AASB Instruments: financial instrument disclosures 1, AASB 4, AASB Disclosures included in the Group’s financial 1023 & AASB report. 1038]

New standard Financial replacing AASB 7 Instruments: disclosure 1 January 2007 As above. 1 January 2007 Disclosures requirements of AASB 132.

(d) Basis of consolidation The consolidated financial statements comprise the financial statements of Brisbane Broncos Limited and its subsidiaries as at 31 December each year (the Group).

Subsidiaries are all those entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies so as to obtain benefits from their activities. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether a group controls another entity.

The financial statements of subsidiaries are prepared for the same reporting period as the parent company using consistent accounting policies.

In preparing the consolidated financial statements, all intercompany balances and transactions, income and expenses and profit and losses resulting from intra-group transactions have been eliminated in full.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group.

(e) Cash and cash equivalents Cash and cash equivalents in the balance sheet 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 Cash Flow Statement, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts. Bank overdrafts are included within interest-bearing loans and borrowings in current liabilities on the balance sheet.

(f) Trade and other receivables Trade receivables, which generally have 30-90 day terms, are recognised at original invoice amount less an allowance for any uncollectible amounts.

Collectibility of trade receivables is reviewed on an ongoing basis. Debts that are known to be uncollectible are written off when identified. An allowance for doubtful debts is raised when there is objective evidence that the Group will not be able to collect the debt.

2006 annual financial statements and reports 26 Brisbane Broncos Limited and its controlled entities

Notes to the financial statements (continued) for the year ended 31 December 2006

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(g) 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.

(h) Investments and other financial assets Financial assets in the scope of AASB 139 Financial Instruments: Recognition and Measurement are classified as either financial assets at fair vale through profit or loss, loans and receivables, held-to-maturity investments, or available-for-sale financial assets. When financial assets are recognised initially, they are measured at fair value, plus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs. The Group determines the classification of its financial assets after initial recognition and, when allowed and appropriate, re-evaluates this designation at each financial year-end.

(i) Financial assets at fair value through profit or loss Financial assets classified as held for trading are included in the category ‘financial assets as fair value through profit or loss’. Financial assets are classified as held for trading if they are acquired for the purpose of selling in the near term with the intention of making a profit. Derivatives are also classified as held for trading unless they are designated as effective hedging instruments. Gains or losses on investments held for trading are recognised in profit or loss.

(ii) Held-to-maturity Non-derivative financial assets with fixed or determinable payments and fixed maturity are classified as held-to-maturity when the Group has the positive intention and ability to hold to maturity. Investments intended to be held for an undefined period are not included in this classification. Investments that are intended to be held-to-maturity, such as bonds, are subsequently measured at amortised cost. This cost is computed as the amount initially recognised minus principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between the initially recognised amount and the maturity amount. This calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums and discounts. For investments carried at amortised cost, gains and losses are recognised in profit or loss when the investments are derecognised or impaired, as well as through the amortisation process.

(iii) Loans and receivables Loans and receivables including loan notes and 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 method. Gains and losses are recognised in profit or loss when the loans and receivables are derecognised or impaired, as well as through the amortisation process.

(iv) Available-for-sale investments Available-for-sale investments are those non-derivative financial assets that are designated as available-for-sale or are not classified as any of the three preceding categories. After initial recognition available-for-sale investments are measured at fair value with gains or losses being recognised as a separate component of equity until the investment is derecognised or until the investment is determined to be impaired, at which time the cumulative gain or loss previously reported in equity is recognised in profit or loss.

(i) Property, plant and equipment Plant and equipment is stated at cost less accumulated depreciation and any accumulated impairment losses. Such cost includes the cost of replacing parts that are eligible for capitalisation when the cost of replacing the parts is incurred. Similarly, when each major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement only if it is eligible for capitalisation. All other repairs and maintenance are recognised in profit or loss as incurred.

Depreciation is calculated on a diminishing value basis over the estimated useful life of the asset as follows:

Plant and equipment – over 4 to 8 years Leasehold improvements – over 10 years

2006 annual financial statements and reports Brisbane Broncos Limited and its controlled entities 27

Notes to the financial statements (continued) for the year ended 31 December 2006

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(i) Property, plant and equipment (continued) The assets’ residual values, useful lives and amortisation methods are reviewed, and adjusted if appropriate, at each financial year-end.

An item of property, plant and equipment is derecognised upon disposal or when no further future economic benefits are expected from its disposal.

Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the year the asset is derecognised.

(j) Leases The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and requires 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) Group as lessee Finance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against income.

Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term.

Operating lease payments are recognised as an expense in the income statement on a straight-line basis over the lease term.

(k) Impairment of non-financial assets Intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If such an indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset’s recoverable amount. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount.

Recoverable amount is the higher of an asset’s fair vale less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows that are largely independent of the cash inflows from other assets or groups (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are tested for possible reversal of the impairment whenever events or changes in circumstances indicate that the impairment may have reversed.

(l) Intangible assets Intangible assets acquired separately or in a business combination are initially measured at cost. The cost of an intangible asset acquired in a business combination is its fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. Internally generated intangible assets are not capitalised and expenditure is charged against profits in the year in which the expenditure is incurred.

Intangible assets with indefinite useful lives are tested for impairment annually either individually or at the cash-generating unit level. Such intangibles are not amortised. The useful life of an intangible asset with an indefinite life is reviewed at each report period to determine whether indefinite life assessment continues to be supportable. If not, the change in the useful life assessment from indefinite to definite is accounted for as a change in an accounting estimate and is thus accounted for on a prospective basis.

2006 annual financial statements and reports 28 Brisbane Broncos Limited and its controlled entities

Notes to the financial statements (continued) for the year ended 31 December 2006

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) (l) Intangible assets (continued) A summary of the policies applied to the Group’s intangible asset is as follows:

Sporting Franchise

Useful life Indefinite

Method used No amortisation

Internally generated/acquired Acquired Annually and more frequently where an indication of Impairment testing impairment exists

Gains or losses arising from de-recognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in profit or loss when the asset is derecognised.

(m) Trade and other payables Trade payables and other payables are carried at amortised cost. They represent liabilities for goods and services provided to the Group prior to the end of the financial year that are unpaid and arise when the Group 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.

(n) Interest–bearing loans and borrowings All loans and borrowings are initially recognised at fair value of the consideration received less directly attributable transaction costs.

After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method. 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 Group has unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

Borrowing Costs Borrowing costs are recognised as an expense when incurred.

(o) Provisions and employee leave benefits Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

Where the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the Income Statement net of any reimbursement.

Provisions are measured at the present value of managements best estimate of the expenditure required to settle the present obligation at balance sheet date. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects the time value of money and the risks specific to the liability. The increase in the provision resulting from the passage of time is recognised in finance costs.

Employee leave benefits (i) Wages, salaries, annual leave and sick leave Liabilities for wages and salaries, including non-monetary benefits and annual leave expected to be settled within twelve months of the reporting date are recognised in respect of employees’ services up to the reporting date. They are measured at amounts expected to be paid when the liabilities are settled. The Group does not accumulate sick leave. Liabilities for non-accumulating sick leave are recognised when the leave is taken and are measured at the rates paid or payable.

2006 annual financial statements and reports Brisbane Broncos Limited and its controlled entities 29

Notes to the financial statements (continued) for the year ended 31 December 2006

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(o) Provisions and employee leave benefits (continued)

Employee leave benefits (continued)

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

(p) Contributed equity

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

(q) Revenue recognition Revenue is recognised and measured at the fair value of the consideration received or receivable to the extent it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. The revenue of the Group is recognised as income in the relevant sporting year on the following bases:

Sponsorship revenue Sponsorship revenue is recognised evenly on a monthly basis wholly within the financial year to which it relates.

Game day related revenue Revenue relating to Brisbane Broncos home games is recognised in the period in which the game is held. Revenues received in advance of a playing season are deferred as unearned income in the Balance Sheet and brought to account over the respective sporting seasons.

NRL grant revenue NRL grant revenue is recognised evenly on a monthly basis over the course of the year to which the grant relates.

Prize money Prize money is recognised in the financial year in which it is earned.

Interest Revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset.

Rental income Rental income is accounted for in the period in which it is earned.

(r) Income tax and other taxes Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities based on the current period’s taxable income. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date.

Deferred income tax is provided on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred income tax liabilities are recognised for all taxable temporary differences except:

- when the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction affects neither the accounting profit nor taxable profit or loss; or

2006 annual financial statements and reports 30 Brisbane Broncos Limited and its controlled entities

Notes to the financial statements (continued) for the year ended 31 December 2006

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(r) Income tax and other taxes (continued)

- when the taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, and the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax assets and unused tax losses can be utilised except:

- when the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or

- when the deductible temporary differences is associated with investments in subsidiaries, associates or interests in joint ventures, in which case a deferred tax asset is only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.

Unrecognised deferred income tax assets are reassessed at each balance date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.

Income taxes relating to items recognised directly in equity are recognised in equity and not in profit or loss.

Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority.

Tax consolidation legislation Brisbane Broncos Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation as of 1 January 2004.

Brisbane Broncos Limited and the controlled entities in the tax consolidated group continue to account for their own current and deferred tax amounts. The Group has applied the group allocation approach in determining the appropriate amount of current taxes and deferred taxes to allocate to members of the tax consolidated group.

Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts receivable from or payable to other entities in the Group.

Any difference between the amounts assumed and amounts receivable or payable under the tax funding agreement are recognised as a contribution to (or distribution from) wholly-owned consolidated entities.

Other taxes Revenues, expenses and assets are recognised net of the amount of GST except:

- when the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and

- receivables and payables are stated with the amount of GST included.

2006 annual financial statements and reports Brisbane Broncos Limited and its controlled entities 31

Notes to the financial statements (continued) for the year ended 31 December 2006

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(r) Income tax and other taxes (continued)

Other taxes (continued)

The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet.

Cash flows are included in the Cash Flow Statement on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority, are classified as operating cash flows.

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

(s) Earnings per share Basic earnings per share is calculated as net profit attributable to members of the parent, adjusted to include any costs of servicing equity (other than dividends), divided by the weighted average number of ordinary shares, adjusted for any bonus element.

3. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES The principal financial instruments of the Group are cash and short-term deposits. The Group has various other financial assets and liabilities such as trade receivables and trade payables which arise directly from operations. Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement, and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in note 2 to the financial statements.

The Group invests its cash in short-term deposits earning interest at an average rate of 6% (2005: 5.25%) per annum.

The Group is exposed to minimal risk from its financial instruments as a result of its debt free status. Therefore the main risk affecting the Group is credit risk. To minimise credit risk exposure, the Group trades only with recognised, creditworthy third parties. It is Group policy that all customers who wish to trade on credit terms are subject to credit verification procedures.

In addition, receivable balances are monitored on an ongoing basis with the result that the Group’s exposure to bad debts is not significant.

4. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS In applying the Group’s accounting policies, management continually evaluates judgements, estimates and assumptions based on experience and other factors, including expectations of future events that may have an impact on the Group. All judgements, 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 judgements, estimates and assumptions. Significant judgements, estimates and assumptions made by management in the preparation of the financial statements are outlined below:

(i) Significant accounting judgements

Recovery of deferred tax assets Deferred tax assts are recognised for deductible temporary differences as management considers that it is probably that future taxable profits will be available to utilise those temporary differences.

Impairment of non-financial assets The Group assesses impairment of all assets at each reporting date by evaluating conditions specific to the Group and to the particular asset that may lead to impairment. If an impairment trigger exists the recoverable amount of the asset is determined. This involves the value in use calculations, which incorporate a number of key estimates and assumptions.

(ii) Significant accounting estimates and assumptions Impairment of intangibles with indefinite lives The Group determines whether intangibles with indefinite useful lives are impaired at least on an annual basis. This requires an estimation of the recoverable amount of the cash generating units to which the intangibles with indefinite useful lives are allocated. The assumptions used in this estimation of recoverable amount and the carrying amount of intangibles with indefinite useful lives are discussed in note 16.

2006 annual financial statements and reports 32 Brisbane Broncos Limited and its controlled entities

Notes to the financial statements (continued) for the year ended 31 December 2006

4. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS (continued)

(ii) Significant accounting estimates and assumptions (continued)

Long service leave provision As discussed in note 2(o), 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 to 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.

Estimate of useful lives of assets The estimation of useful lives of assets has been based on historical experience. 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. Depreciation charges are included at note 6.

5. SEGMENT INFORMATION The principal activity of the Group during the 2006 financial year was the management and operation of the Brisbane Broncos Rugby League Football Team. There were no significant changes in the nature of those activities during the year. The Group operates in Australia only.

Consolidated Parent 2006 2005 2006 2005 $ $ $ $

6. REVENUE AND EXPENSES (a) Revenue

Sales revenue 19,154,973 17,807,798 - - Grant received from National Rugby League 2,833,333 2,541,667 - - Interest revenue 694,812 569,920 693,800 561,440 Rent revenue 36,000 36,000 36,000 36,000 Other revenue 228,808 115,643 85 6,376 22,947,926 21,071,028 729,885 603,816

(b) Expenses

Administration expense 2,122,844 1,849,434 1,186,215 1,060,312 Stadium operations expense 1,796,218 1,847,482 - - Corporate sales and ticketing expense 4,352,486 4,186,024 - - Marketing, sponsorship and advertising expense 2,827,931 2,444,698 - - Football related expense 9,587,372 8,421,587 - - Borrowing costs 21 544 7 23 20,686,872 18,749,769 1,186,222 1,060,335

Included in the above expenses are the following: Lease payments – operating leases 135,850 223,992 6,330 7,439 Depreciation of property, plant and equipment 130,241 121,535 - - Provision for employee benefits 111,030 85,549 77,340 36,788 Provision for doubtful debts (7,320) - - -

2006 annual financial statements and reports Brisbane Broncos Limited and its controlled entities 33

Notes to the financial statements (continued) for the year ended 31 December 2006

7. REVISIONS OF ACCOUNTING ESTIMATES

During the financial year, the directors approved a change to the calculation of long service leave entitlements for all employees with continuous service in a permanent position. Employees are now eligible to seven weeks of long service leave after seven years and pro-rata thereafter at the same entitlement rate. Previously, employees were entitled to 8.667 weeks after 10 years and pro-rata thereafter. As at 31 December 2006, the effect of this change in accounting estimate is considered to be immaterial. The effect on future periods is impractical to estimate.

Consolidated Parent 2006 2005 2006 2005 $ $ $ $

8. INCOME TAX

(a) Income tax expense

Income Statement The major components of income tax expense/(benefit) are: Current income tax Current income tax charge - - (186,486) -

Deferred income tax Relating to origination and reversal of temporary differences 72,325 (460,676) 32,487 (332,995) Recoupment of losses 566,226 - - - Adjustment in respect of previous years 86,100 - 3,000 - Income tax expense/(benefit) reported in the Income Statement 724,651 (460,676) (150,999) (332,995)

(b) Numerical reconciliation between aggregate tax expense recognised in the income statement and tax expense calculated per the statutory income tax rate:

A reconciliation between tax expense and the product of accounting profit before income tax multiplied by the Group’s applicable income tax rate is as follows:

Accounting profit/(loss) before tax from continuing operations 2,261,054 2,321,259 (456,337) (456,519)

At the Group’s statutory income tax rate of 30% (2005: 30%) 678,316 696,378 (136,901) (136,956)

Expenditure not allowed for income tax purposes 35,919 42,893 2,768 5,024 Other deductible items (148,009) (54,665) (52,353) (19,911) 566,226 684,606 (186,486) (151,843)

Utilisation of tax losses (566,226) (684,606) - 151,843 Adjustment to prior years 86,100 - 3,000 - Deferred tax asset recognised for previously unrecognised losses - (460,676) - (332,995) Deferred tax asset utilised 638,551 - 32,487 -

Aggregate income tax expense/(benefit) 724,651 (460,676) (150,999) (332,995)

2006 annual financial statements and reports 34 Brisbane Broncos Limited and its controlled entities

Notes to the financial statements (continued) for the year ended 31 December 2006

Balance Sheet Income Statement 2006 2005 2006 2005 $ $ $ $

8. INCOME TAX (continued) (c) Recognised deferred tax assets and liabilities Deferred income tax at 31 December relates to the following:

CONSOLIDATED (i) Deferred tax assets Unearned revenue (101,294) (51,000) (50,294) (51,000) Doubtful debts 30,914 32,123 (1,209) 32,123 Employee benefits 70,598 58,841 11,757 58,841 Provision for inter company loan write off - 3,000 (3,000) 3,000 Prepayments (1,730) - (1,730) - Accruals 16,131 131,437 (115,305) 131,437 Expenses capitalised for income tax purposes 1,356 - 1,356 - Losses available for offset against future taxable income 110,049 676,275 (566,226) 286,275 Deferred tax assets 126,024 850,676 Deferred tax income/(expense) (724,651) 460,676

PARENT (ii) Deferred tax assets Unearned revenue (34,571) - (34,571) - Employee benefits 32,585 27,221 5,365 27,220 Provisions for inter company loan write off - 3,000 (3,000) 3,000 Prepayments (211) - (211) - Accruals 12,795 16,500 (3,705) 16,500 Expenses capitalised for income tax purposes 635 - 635 Losses available for offset against future taxable income 110,049 676,274 186,486 286,275 Deferred tax assets 121,282 722,995 Deferred tax income/(expense) 150,999 332,995

(d) Tax losses The Group has tax losses arising in Australia of $366,828 (2005: $2,254,000) that are available indefinitely for offset against future taxable profits of the companies in which the losses arose, subject to passing certain tax loss carry forward tests under the Australian Tax Acts.

(e) Tax Consolidation Brisbane Broncos Limited and its 100% owned Australian resident subsidiaries have formed a tax consolidated group with effect from 1 January 2004. Brisbane Broncos Limited is the head entity of the tax consolidated group.

2006 annual financial statements and reports Brisbane Broncos Limited and its controlled entities 35

Notes to the financial statements (continued) for the year ended 31 December 2006

9. EARNINGS PER SHARE Basic earnings per share amounts are calculated by dividing net profit for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year.

No dilution factors need to be taken into consideration for Brisbane Broncos Limited. The following reflects the income and share data used in the total operations basic earnings per share computation:

Consolidated

2006 2005 cents cents

Net profit attributable to equity holders of the parent 1,536,403 2,781,935 Weighted average number of ordinary shares for basic earnings per share 98,040,631 98,040,631

There have been no transactions involving ordinary shares since the reporting date and before the completion of these financial statements.

Consolidated Parent 2006 2005 2006 2005 $ $ $ $

10. CURRENT ASSETS - CASH AND CASH EQUIVALENTS Cash at bank and in hand 4,634,277 5,443,349 4,197,265 5,410,179 Short-term deposit 5,148,767 - 5,148,767 - 9,783,044 5,443,349 9,346,032 5,410,179

Cash at bank earns interest at fixed rates based on the Group’s bank deposit rates.

Excess cash is placed on short-term deposit for varying periods depending on the immediate cash requirements of the Group and earn interest at the Queensland Country Credit Union’s short term deposit rate.

11. CURRENT ASSETS - TRADE AND OTHER RECEIVABLES

Trade receivables 1,681,191 1,385,434 16,935 25,000 Allowance for impairment loss (a) (3,046) (10,367) - -

1,678,145 1,375,067 16,935 25,000 Other receivables 621,572 428,507 176,019 11,832

Receivables on sale of land (b) - 1,200,000 - 1,200,000

2,299,717 3,003,574 192,954 1,236,832

(a) Trade receivables are non-interest bearing and are generally on 30-90 day terms. An allowance for impairment loss is recognised when there is objective evidence that a trade receivable is impaired.

(b) The receivable on the sale of land was paid in full in December 2006.

(c) Details regarding the credit risk and effective interest rate risk of current receivables are disclosed in notes 3 and 25 respectively.

2006 annual financial statements and reports 36 Brisbane Broncos Limited and its controlled entities

Notes to the financial statements (continued) for the year ended 31 December 2006

Consolidated Parent 2006 2005 2006 2005 $ $ $ $

12. CURRENT ASSETS - INVENTORIES Merchandise – at cost 229,847 18,799 - -

13. NON-CURRENT ASSETS - RECEIVABLES Receivable on sale of land (a) - 1,200,000 - 1,200,000 Receivables from controlled entities - - 13,900,000 13,900,000 Provision for non-recovery - - (13,900,000) (13,900,000) - 1,200,000 - 1,200,000

(a) The receivable on the sale of the land was paid in full in December 2006.

14. NON CURRENT ASSETS - PROPERTY, PLANT AND EQUIPMENT (a) Reconciliation of carrying amounts at the beginning and end of the period

Consolidated Plant and Leasehold Total Equipment Improvements $ $ $ Year ended 31 December 2006 At 1 January 2006 net of accumulated depreciation and impairment 391,098 29,638 420,736 Additions 84,262 553,947 638,209 Depreciation charge for year (103,407) (26,834) (130,241) At 31 December 2006 net of accumulated depreciation and impairment 371,953 556,751 928,704

At 1 January 2006 Cost at fair value 1,392,665 258,768 1,651,433 Accumulated depreciation and impairment (1,001,567) (229,130) (1,230,697) Net carrying amount 391,098 29,638 420,736

At 31 December 2006 Cost at fair value 1,476,928 812,712 2,289,640 Accumulated depreciation and impairment (1,104,975) (255,961) (1,360,936) Net carrying amount 371,953 556,751 928,704

Year ended 31 December 2005 At 1 January 2005 net of accumulated depreciation and impairment 272,992 55,441 328,433 Additions 213,838 - 213,838 Depreciation charge for year (95,732) (25,803) (121,535) At 31 December 2005 net of accumulated depreciation and impairment 391,098 29,638 420,736

At 1 January 2005 Cost at fair value 1,178,827 258,768 1,437,595 Accumulated depreciation and impairment (905,835) (203,327) (1,109,162) Net carrying amount 272,992 55,441 328,433

At 31 December 2005 Cost at fair value 1,392,665 258,768 1,651,433 Accumulated depreciation and impairment (1,001,567) (229,130) (1,230,697) Net carrying amount 391,098 29,638 420,736

2006 annual financial statements and reports Brisbane Broncos Limited and its controlled entities 37

Notes to the financial statements (continued) for the year ended 31 December 2006

14. NON CURRENT ASSETS - PROPERTY, PLANT AND EQUIPMENT (continued) (a) Reconciliation of carrying amounts at the beginning and end of the period (continued) Parent Plant and Equipment $

Year ended 31 December 2006 At 1 January 2005 net of accumulated depreciation and impairment - Additions - Depreciation charge for year - At 31 December 2006 net of accumulated depreciation and impairment -

At 1 January 2006 Cost at fair value 15,729 Accumulated depreciation and impairment 15,729 Net carrying amount -

At 31 December 2006 Cost at fair value 15,729 Accumulated depreciation and impairment 15,729 Net carrying amount -

Year ended 31 December 2005 At 1 January 2005 net of accumulated depreciation and impairment - Additions - Depreciation charge for year - At 31 December 2005 net of accumulated depreciation and impairment -

At 1 January 2005 Cost at fair value 15,729 Accumulated depreciation and impairment 15,729 Net carrying amount -

At 31 December 2005 Cost at fair value 15,729 Accumulated depreciation and impairment 15,729 Net carrying amount -

Consolidated Parent 2006 2005 2006 2005 $ $ $ $

15. NON-CURRENT ASSETS - OTHER FINANCIAL ASSETS

Unlisted Shares in controlled entities – at cost - - 130,005 130,005 Provision for diminution - - (130,000) (130,000) - - 5 5

Further information regarding shares in controlled entities is shown in note 24.

2006 annual financial statements and reports 38 Brisbane Broncos Limited and its controlled entities

Notes to the financial statements (continued) for the year ended 31 December 2006

Consolidated Parent Sporting Franchise Total Total $ $ $

16. NON-CURRENT ASSETS - INTANGIBLE ASSETS (a) Reconciliation of carrying amounts at the beginning and end of the period

At 31 December 2006 Sporting franchise – at cost 13,382,857 13,382,857 - Accumulated impairment (900,277) (900,277) - Net carrying amount 12,482,580 12,482,580 -

At 31 December 2005 Sporting franchise – at cost 13,382,857 13,382,857 - Accumulated impairment (900,277) (900,277) - Net carrying amount 12,482,580 12,482,580 -

(b) Description of Group’s intangible assets The Sporting Franchise is considered to have an indefinite useful life as based on an analysis of all relevant factors. There is no foreseeable limit to the period over which the asset is expected to generate net cash inflows for the Group. The licence granted by the National Rugby League may be renewed indefinitely at no cost and has been renewed recently until 2012. The Club Agreement signed between the Group and the National Rugby League provides that termination can only take place if the Club becomes insolvent or breaches any provisions of the Club Agreement. Management are confident that these conditions necessary to obtain renewal will continue to be met on an ongoing basis. The Sporting Franchise is subject to annual impairment testing.

(c) Impairment testing of intangibles with indefinite lives The Group’s tangible and intangible assets are all used in the operation and management of the Brisbane Broncos Rugby League Football Team and all revenue streams are dependent and reliant upon theses operations i.e. gate takings, season tickets, corporate sponsorship, signage, corporate sales and National Rugby League grant monies. The only exception is interest income on the receivable on sale of land, which has been excluded from the value in use calculation. It is therefore considered that the cash generating unit to which the Sporting Franchise belongs is the Group and its operations, and as such the future maintainable earnings of the Group, excluding interest income, has been used to support the recoverable amount of the Group’s net assets (excluding the receivable on sale of land) and therefore the Sporting Franchise.

For the purpose of determining whether the carrying amount of the Sporting Franchise is impaired, management has considered the future maintainable earnings of the Group based on financial budgets and forecasts. Factors considered in the calculation of future maintainable earnings were:

- the success of the Brisbane Broncos Rugby League Team since its inception, the long term tenancy at Suncorp Stadium - the level of current sponsorship and signage sales - the growth trend of crowd attendances, gate takings and season memberships - the probability of the Group to renew its rugby league licence - the new television rights deal recently negotiated by the National Rugby League

An annual growth rate of 3% has been used in the future maintainable earnings calculation and a pre-tax discount rate of 12% (2005: 12%) has been applied to the cash flow projections.

Budgets and forecasts have been prepared based on the above factors and trends, and the assumption that there will be no major events or changes in circumstances that will significantly affect the revenue streams or financial performance of the Group on a go forward basis. There is no present indication that these factors will change in the foreseeable future. As a result, management is of the opinion that the future maintainable earnings calculation can be justified based on these assumptions.

2006 annual financial statements and reports Brisbane Broncos Limited and its controlled entities 39

Notes to the financial statements (continued) for the year ended 31 December 2006

16. NON-CURRENT ASSETS - INTANGIBLE ASSETS (continued)

(c) Impairment testing of intangibles with indefinite lives (continued) As at 31 December 2006 the present value of the cash flow projections supported the carrying value of the cash generating unit and there is therefore no impairment.

Consolidated Parent 2006 2005 2006 2005 $ $ $ $

17. CURRENT LIABILITIES - TRADE AND OTHER PAYABLES

Trade payables (a) 299,752 329,584 68,852 125,251 Other payables (b) 956,074 936,097 64,874 96,012 1,255,826 1,265,681 133,726 221,263

(a) Trade payables are non-interest bearing and are normally settled on 30-day terms.

(b) Other payables are non-interest bearing and have an average term of three months.

18. CURRENT LIABILITIES - PROVISIONS

Fringe benefits tax 82,933 79,243 11,552 11,490 Annual leave 214,276 215,339 65,211 70,370 Long service leave 70,669 - 9,267 - 367,878 294,582 86,030 81,860

(a) Movements in provisions - please refer to note 20 for details.

(b) Nature and timing of provisions - please refer to note 20 for details.

19. NON-CURRENT LIABILITIES - TRADE AND OTHER PAYABLES

Related party payables - amounts payable to controlled entities (a) - - 3,859,733 2,434,790

(a) For terms and conditions related to related party payables refer to note 24.

20. NON-CURRENT LIABILITIES – PROVISIONS

Long service leave 91,496 93,456 30,232 17,015

91,496 93,456 30,232 17,015

2006 annual financial statements and reports 40 Brisbane Broncos Limited and its controlled entities

Notes to the financial statements (continued) for the year ended 31 December 2006

Employee Benefits Fringe Total Benefits Tax $ $ $

20. NON-CURRENT LIABILITIES – PROVISIONS (continued) (a) Movements in provisions

CONSOLIDATED At 1 January 2006 308,795 79,243 388,038 Arising during the year 264,232 331,731 595,963 Utilised (196,586) (328,041) (524,627) At 31 December 2006 376,441 82,933 459,374

Current 2006 284,945 82,933 367,878 Non-current 2006 91,496 - 91,496 376,441 82,933 459,374

Current 2005 215,339 79,243 294,582 Non-current 2005 93,456 - 93,456 308,795 79,243 388,038

PARENT At 1 January 2006 87,385 11,490 98,875 Arising during the year 77,341 37,168 114,509 Utilised (60,016) (37,106) (97,122) At 31 December 2006 104,710 11,552 116,262

Current 2006 74,478 11,552 83,060 Non-current 2006 30,232 - 30,232 104,710 11,552 116,262

Current 2005 70,370 11,490 81,860 Non-current 2005 17,015 - 17,015 87,385 11,490 98,875 (b) Nature and timing of provisions Long service leave Refer to note 2(o) and note 4 respectively for the relevant accounting policy and a discussion of the significant estimations and assumptions applied in the measurement of this provision.

Consolidated Parent 2006 2005 2006 2005 $ $ $ $

21. CONTRIBUTED EQUITY

Ordinary shares - issued and fully paid 28,991,500 28,991,500 28,991,500 28,991,500

Number of ordinary shares on issue 98,040,631 98,040,631 98,040,631 98,040,631

Fully paid ordinary shares carry one vote per share and carry the right to dividends.

2006 annual financial statements and reports Brisbane Broncos Limited and its controlled entities 41

Notes to the financial statements (continued) for the year ended 31 December 2006

Consolidated Parent 2006 2005 2006 2005 $ $ $ $

22. RETAINED EARNINGS Balance 1 January (8,997,108) (11,779,043) (23,062,312) (22,938,788) Net profit 1,536,403 2,781,935 (305,338) (123,524) Balance 31 December (7,460,705) (8,997,108) (23,367,650) (23,062,312)

23. CASH FLOW STATEMENT RECONCILIATION Reconciliation of net profit after tax to net cash flows from operations

Net profit/(loss) 1,536,403 2,781,935 (305,338) (123,524)

Adjustments for: Depreciation and amortisation 130,241 121,535 - - Doubtful debts provision - - - - Employee benefits provisions 67,647 27,455 17,325 15,096

Changes in assets and liabilities (Increase)/decrease in inventories (211,048) (13,579) - - (Increase)/decrease in trade and other receivables (431,991) (299,539) (118,670) (88,746) (Increase)/decrease in deferred tax asset 724,651 (460,676) 601,713 (332,995) (Decrease)/increase in creditors and accruals (116,959) 192,948 (84,182) 73,918 (Decrease)/increase in unearned revenue 728,875 (268,309) - - (Decrease)/increase in provisions (3,631) (151,402) 62 (716) Net cash from/(used in) operating activities 2,424,188 1,930,368 110,910 (456,967)

24. RELATED PARTY DISCLOSURE (a) Subsidiaries The consolidated financial statements include the financial statements of Brisbane Broncos Limited and the subsidiaries listed in the following table: Country of % of shares held Name of Controlled Entity Incorporation 2006 2005 Brisbane Broncos Corporations Trust Australia 100 100 Brisbane Broncos Corporation Pty Ltd (Trustee) Australia 100 100 Brisbane Broncos Management Corporation Pty Ltd Australia (i) 100 100 Brisbane Broncos Rugby League Club Ltd Australia (ii) n/a n/a Queensland Entertainment Services Pty Ltd Australia (i) 100 100 Laurelgrove Pty Ltd Australia (i) 100 100 Pacific Sports International Pty Ltd Australia (i) 100 100 Pty Ltd Australia 100 100 Trust Australia 100 100 Pacific Sports Holdings Pty Ltd (Trustee) Australia (i) 100 100 Brisbane Professional Sports Investment Pty Ltd Australia 100 100 Brisbane Broncos (Licencee) Pty Ltd Australia (i) 100 100 Broncos Insurance Agencies Pty Ltd Australia 100 100 AH BR Pty Ltd Australia 100 100

2006 annual financial statements and reports 42 Brisbane Broncos Limited and its controlled entities

Notes to the financial statements (continued) for the year ended 31 December 2006

24. RELATED PARTY DISCLOSURE (continued)

(a) Subsidiaries (continued) The financial years of all controlled entities are the same as that of the parent entity.

All controlled entities were incorporated in Australia, have only issued ordinary share capital, and are controlled either directly or through its subsidiaries by the parent entity.

(i) These companies have entered into a deed of cross guarantee with Brisbane Broncos Limited which provides that all parties to the deed will guarantee to each creditor payment in full of any debt of each Company participating in the deed on winding up of that company. Closed group disclosures are not presented as no company within the closed group is required to avail itself of the relief from preparation of financial statements granted by ASIC Class Order 98/1418.

(ii) Brisbane Broncos Rugby League Club Ltd is a company limited by guarantee, is owned by its members but has been consolidated as a controlled entity under UIG Interpretation 112 Consolidation – Special Purpose Entities.

(b) Key management personnel Details relating to key management personnel, including remuneration paid, are included in note 25.

(c) Transactions with related parties The following table provides the total amount of transactions that were entered into with related parties for the relevant financial year (for information regarding outstanding balances at year-end, refer to note 19).

Sales to related Grants from Purchases from parties related parties related parties $ $ $

CONSOLIDATED Major shareholder News Limited 2006 123,000 - 179,378 2005 125,000 - 125,000 Associate National Rugby League Limited 2006 - 2,833,333 - 2005 - 2,630,667 - The ultimate parent and subsidiaries During the financial year, loans were advanced and repayments received on short-term inter-company accounts between Brisbane Broncos Limited and its subsidiaries.

Major shareholder News Limited owned 68.87% of the Group as at 31 December 2006. News Limited and its related entities provided the Group with sponsorship income during the financial year. Advertising and other services were also provided during the financial year by News Limited and its related entities to the value of $179,378 (2005: $125,000).

Associate The license held by the Group is provided by the National Rugby League Limited which is 50% owned by News Limited. This licence entitles the Group to receive an annual grant from the National Rugby League Limited.

Allowance for impairment loss on trade receivables Sales to and purchases from related parties are made in arms length transactions at both normal market prices and normal commercial terms. Outstanding balances at year-end are unsecured, interest free and settlement occurs in cash.

For the year ended 31 December 2006, the Group has not made any allowance for impairment loss relating to amounts owed by related parties as the payment history is excellent (2005: $nil). An impairment assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates to determine if there is objective evidence that a related party receivable is impaired. When such objective evidence exists, the Group recognises an allowance for the impairment loss.

2006 annual financial statements and reports Brisbane Broncos Limited and its controlled entities 43

Notes to the financial statements (continued) for the year ended 31 December 2006

25. KEY MANAGEMENT PERSONNEL

(a) Details of Key Management Personnel

(i) Directors D C Somerville Chairman (Non-Executive) B P Cullen Managing director (Executive) D S Jackson Director (Non-Executive) P W Jourdain Director (Non-Executive) D M Watt Director (Non-Executive)

(ii) Executives L A Lanigan Company Secretary and General Manager Finance and Administration M A Rowen Marketing Manager

There have been no changes of the managing director or key management personnel after reporting date and the date the financial report was authorised for issue.

(b) Compensation of Key Management Personnel Consolidated Parent 2006 2005 2006 2005 $ $ $ $

Short-term employee benefits 611,000 528,599 497,500 444,400 Post-employment 73,380 48,563 64,650 42,607 684,380 577,162 562,150 487,007

Brisbane Broncos Limited has applied the option under Corporations Amendments Regulation 2006 to transfer key management personnel remuneration disclosures required by AASB 124 Related Party Disclosures paragraphs Aus 25.4 to Aus 25.7.2 to the Remuneration Report section of the Directors’ Report. These transferred disclosures have been audited.

(c) Shareholdings of Key Management Personnel (Consolidated) Shares held in Brisbane Broncos Limited (number):

Balance Granted as On Exercise of Net Change Balance 1 Jan 2006 Remuneration Options Other 31 Dec 2006 Directors B P Cullen - - - - - D C Somerville - - - - - D S Jackson 28,500 - - - 28,500 P W Jourdain - - - - - D M Watt - - - - - Executives L A Lanigan - - - - - M A Rowen - - - - - Total 28,500 - - - 28,500

All equity transactions with key management personnel are entered into under terms and conditions no more favourable than those the Group would have adopted if dealing at arm’s length.

(d) Other transactions and balances with Key Management Personnel Directors of the Group and directors of its related parties, or their director-related entities, conduct transactions with entities within the Group that occur within a normal employee, customer or supplier relationship on terms and conditions no more favourable than those with which it is reasonable to expect the entity would have adopted if dealing with the director or director- related entity at arm’s length in similar circumstances.

P W Jourdain and D M Watt are employees of News Limited which is a related party of the Group. Transactions conducted with News Limited and its related entities are disclosed in note 24 of this report.

2006 annual financial statements and reports 44 Brisbane Broncos Limited and its controlled entities

Notes to the financial statements (continued) for the year ended 31 December 2006

26. FAIR VALUE AND INTEREST RATE RISK

(a) Fair Values All assets and liabilities recognised in the balance sheet, whether they are carried at cost or at fair value, are recognised at amounts that represent a reasonable approximately of fair vale unless otherwise stated in the applicable notes. (b) Interest rate risk The following table sets out the carrying amount, by maturity, of the financial instruments exposed to interest rate risk: Weighted Average >1-<2 Effective Year ended 31 December 2006 < 1 Year Years Interest rate

CONSOLIDATED FINANCIAL ASSETS Floating Rate Cash assets 9,783,044 - 6.0% Weighted average effective interest rate 6.0% -

Weighted Average >1-<2 Effective Year ended 31 December 2006 < 1 Year Years Interest rate

PARENT FINANCIAL ASSETS Floating Rate Cash assets 9,346,032 - 6.0% Weighted average effective interest rate 6.0% -

Weighted Average >1-<2 Effective Year ended 31 December 2005 < 1 Year Years Interest rate

CONSOLIDATED FINANCIAL ASSETS Fixed Rate Non-trade receivable on sale of land 1,200,000 1,200,000 12.5% Weighted average effective interest rate 12.5% 12.5%

Floating Rate Cash assets 5,547,801 - 5.25% Weighted average effective interest rate 5.25% -

Weighted Average >1-<2 Effective Year ended 31 December 2005 < 1 Year Years Interest rate

PARENT FINANCIAL ASSETS Floating Rate Cash assets 5,410,179 - 5.25% Weighted average effective interest rate 5.25% -

Interest on financial instruments classified as floating rate is repriced at intervals of less than one year. Interest on financial instruments classified as fixed rate is fixed until maturity of the instrument. The other financial instruments of the Group and Company that are not included in the above tables are non-interest bearing and are therefore not subject to interest rate risk.

2006 annual financial statements and reports Brisbane Broncos Limited and its controlled entities 45

Notes to the financial statements (continued) for the year ended 31 December 2006

27. COMMITMENTS AND CONTINGENCIES

(a) Commitments

(i) Leasing Commitments Operating lease commitments – Group as lessee

The Group has entered into commercial leases on various items of plant and machinery. These leases have an average life of between two and three years with no renewal option included in the contracts. There are no restrictions placed upon the lessee by entering into these leases.

Future minimum rentals payable under non-cancellable operating leases as at 31 December are as follows:

Consolidated Parent 2006 2005 2006 2005 $ $ $ $

Within one year 67,360 97,872 - 5,755 After one year but not more than five years 211,455 8,595 - - More than five years - - - - Total minimum lease payments 278,815 106,467 - 5,755

(ii) Property, Plant and Equipment The Group has entered into contractual obligations with Hutchinson Builders to the value of $1,661,640 (excluding GST) at balance date to upgrade the football team’s gymnasium and training facilities. As at 31 December 2006, $543,641 (excluding GST) had been incurred. This amount has been included in ‘Additions’ to ‘Leasehold Improvements in note 14. Depreciation charges will not commence in relation to this expenditure until the asset is completed and ready for use which is estimated to be in April 2007.

(iii) Player Contract Commitments Commitments for the payment of player contracts in existence at the reporting date but not recognised as liabilities are:

Consolidated Parent 2006 2005 2006 2005 $ $ $ $

Within one year 4,535,715 4,550,170 - - After one year but not more than five years 3,734,845 5,233,890 - - More than five years - - - - 8,270,560 9,784,060 - -

(iv) Management Remuneration Commitments

Commitments for the payment of salaries and other remuneration under long-term employment contracts in existence at the reporting date but not recognised as liabilities are:

Consolidated Parent 2006 2005 2006 2005 $ $ $ $

Within one year 292,500 292,500 292,500 292,500 After one year but not more than five years 516,875 804,375 516,875 804,375 809,375 1,096,875 809,375 1,096,875

2006 annual financial statements and reports 46 Brisbane Broncos Limited and its controlled entities

Notes to the financial statements (continued) for the year ended 31 December 2006

27. COMMITMENTS AND CONTINGENCIES (continued)

(iv) Management Remuneration Commitments (continued) Amounts disclosed as remuneration commitments include commitments arising from the Managing Director’s employment agreement that expired on 6 January 2006 and was renegotiated until 30 September 2009. The amounts include cash salary, superannuation and the provision of a motor vehicle. The Managing Director is the only employee with which the Group has entered into an employment agreement.

(b) Contingencies Subsequent to year-end, the Delaware North legal action in relation to ANZ Stadium departure was settled with final settlement approximating previous amounts accrued.

28. AUDITORS’ REMUNERATION The auditor of Brisbane Broncos Limited is Ernst & Young.

Consolidated Parent 2006 2005 2006 2005 $ $ $ $

Amounts received, or due and receivable, by Ernst & Young for: • an audit or review of the financial report of the entity and any other entity in the consolidated group 61,650 55,500 55,150 55,500 • AIFRS transition audit 4,000 25,000 4,000 25,000 • other services in relation to the entity and any other entity in the consolidated group − taxation services 4,150 6,760 4,150 6,760 − memorabilia audit 1,000 - - - 70,800 87,260 63,300 87,260

Amounts received, or due and receivable, by non Ernst & Young audit firms for: − taxation services 6,540 7,110 6,540 7,110 − other non-audit services - 1,500 - 1,500 6,540 8,610 6,540 8,610

29. EVENTS AFTER BALANCE DATE There have been no significant events since balance date other than the settlement of the Delaware North legal action in relation to the ANZ Stadium departure which is explained in note 27(b).

2006 annual financial statements and reports Brisbane Broncos Limited and its controlled entities 47

Directors’ Declaration

In accordance with a resolution of the directors of Brisbane Broncos Limited, I state that:

1. In the opinion of the directors:

(a) the financial statements, notes and the additional disclosures included in the directors’ report designated as audited, of the Company and of the consolidated entity are in are in accordance with the Corporations Act 2001, including:

(i) giving a true view of the Company’s and consolidated entity’s financial position as at 31 December 2006 and of their performance for the year ended on that date; and

(ii) complying with Accounting Standards and Corporations Regulations 2001; and

(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

2. This declaration is made after receiving the declarations required to be made to the directors in accordance with sections 295A of the Corporations Act 2001 for the financial period ending 31 December 2006.

On behalf of the Board

Darryl Somerville Brian Cullen Chairman Managing Director Brisbane Brisbane 27 February 2007 27 February 2007

2006 annual financial statements and reports 48 Brisbane Broncos Limited and its controlled entities

Independent Audit Report to the members of Brisbane Broncos Limited Scope The financial report, remuneration disclosures and directors’ responsibility The financial report comprises the balance sheet, income statement, statement of changes in equity, cash flow statement, accompanying notes to the financial statements, and the directors’ declaration for Brisbane Broncos Limited (the company) and the consolidated entity, for the year ended 31 December 2006. The consolidated entity comprises both the company and the entities it controlled during that year.

The company has disclosed information as required by paragraphs Aus 25.4 to Aus 25.7.2 of Accounting Standard AASB 124 Related Party Disclosures (“remuneration disclosures”), under the heading “Remuneration Report (audited)” on pages 13 and 14 of the directors’ report, as permitted by Corporations Regulation 2M.6.04.

The directors of the company are responsible for preparing a financial report that gives a true and fair view of the financial position and performance of the company and the consolidated entity, and that complies with Accounting Standards in Australia, in accordance with the Corporations Act 2001. This includes responsibility for the maintenance of adequate accounting records and internal controls that are designed to prevent and detect fraud and error, and for the accounting policies and accounting estimates inherent in the financial report. The directors are also responsible for the remuneration disclosures contained in the directors’ report.

Audit approach We conducted an independent audit of the financial report in order to express an opinion to the members of the company. Our audit was conducted in accordance with Australian Auditing Standards in order to provide reasonable assurance as to whether the financial report is free of material misstatement and the remuneration disclosures comply with Accounting Standard AASB 124 Related Party Disclosures. The nature of an audit is influenced by factors such as the use of professional judgement, selective testing, the inherent limitations of internal control, and the availability of persuasive rather than conclusive evidence. Therefore, an audit cannot guarantee that all material misstatements have been detected.

We performed procedures to assess whether in all material respects the financial report presents fairly, in accordance with the Corporations Act 2001, including compliance with Accounting Standards in Australia, and other mandatory financial reporting requirements in Australia, a view which is consistent with our understanding of the company’s and the consolidated entity’s financial position, and of their performance as represented by the results of their operations and cash flows and whether the remuneration disclosures comply with Accounting Standard AASB 124Related Party Disclosures.

We formed our audit opinion on the basis of these procedures, which included:

• examining, on a test basis, information to provide evidence supporting the amounts and disclosures in the financial report and the remuneration disclosures; and

• assessing the appropriateness of the accounting policies and disclosures used and the reasonableness of significant accounting estimates made by the directors.

2006 annual financial statements and reports Brisbane Broncos Limited and its controlled entities 49

While we considered the effectiveness of management’s internal controls over financial reporting when determining the nature and extent of our procedures, our audit was not designed to provide assurance on internal controls.

We performed procedures to assess whether the substance of business transactions was accurately reflected in the financial report and the remuneration disclosures. These and our other procedures did not include consideration or judgement of the appropriateness or reasonableness of the business plans or strategies adopted by the directors and management of the company.

Independence We are independent of the company and the consolidated entity and have met the independence requirements of Australian professional ethical pronouncements and the Corporations Act 2001. We have given to the directors of the company a written Auditor’s Independence Declaration a copy of which is included in the directors’ report. In addition to our audit of the financial report and the remuneration disclosures, we were engaged to undertake the services disclosed in the notes to the financial statements. The provision of these services has not impaired our independence.

Audit opinion In our opinion:

1. the financial report of Brisbane Broncos Limited is in accordance with:

(a) the Corporations Act 2001, including:

(i) giving a true and fair view of the financial position of Brisbane Broncos Limited and the consolidated entity at 31 December 2006 and of their performance for the year ended on that date; and

(ii) complying with Accounting Standards in Australia and the Corporations Regulations 2001; and

(b) other mandatory financial reporting requirements in Australia.

2. the remuneration disclosures that are contained on pages 13 and 14 of the directors’ report comply with Accounting Standard AASB 124 Related Party Disclosures.

Ernst & Young

M J Hayward Partner Brisbane 27 February 2007

2006 annual financial statements and reports 50 Brisbane Broncos Limited and its controlled entities

ASX Additional Information

Additional information required by the Australian Stock Exchange Ltd and now shown elsewhere in this report is as follows. This information is current as at 12 February 2007.

(a) Distribution of equity securities

98,040,631 fully paid ordinary shares are held by 575 individual shareholders. All issued shares carry one vote per share and carry the rights to dividends.

The number of shareholders, by size of holding in each class are as follows:

Size of holding Ordinary Ordinary share Shareholders option-holders

1 – 1000 44 - 1001 – 5000 273 - 5001 – 10000 120 - 10001 – 100000 136 - 100001 – OVER 19 - 592 -

Holding less than a marketable parcel 139 -

(b) Substantial shareholders

Ordinary Shareholders Fully Paid Shares Percentage

Nationwide News Pty Ltd 67,521,089 68.87% Ognis Pty Ltd 9,598,685 9.79% Lake Morepeth Pty Ltd 6,600,000 6.73%

83,719,774 85.39%

2006 annual financial statements and reports Brisbane Broncos Limited and its controlled entities 51

ASX Additional Information (continued)

(c) Twenty largest holders of quoted equity securities

Number of Percentage Ordinary shareholders ordinary shares Held

Nationwide News Pty Limited 67,521,089 68.87%

Ognis Pty Ltd 9,598,685 9.79%

Lake Morpeth Pty Ltd 6,600,000 6.73%

Clonakilty Pastoral Company 3,255,925 3.32%

Drenside Pty Ltd 880,000 .90%

Scanlon Group Holdings Pty Ltd 851,041 .87%

Rosedayl Pty Ltd 733,607 .75%

Ogden International Facilities Corporation Pty Ltd 631,666 .64%

Miengrove Pty Ltd 320,536 .33%

Moonton Pty Ltd 301,750 .31%

W F M Motors Pty Ltd 300,000 .31%

Fortis Clearing Nominees Pty Ltd 238,863 .24%

Admirandus Pty Ltd 212,732 .22%

Mr Patrick John Driscoll and Ms Christine Louise Montague 193,000 .20%

Mr Guy Francois Le Clezio (R W Super Fund Account) 170,000 .17%

Ms Joan Ann Mary Enever 110,000 .11%

Mr Raymond John Balkin and Mrs Ethel Moya Balkin 104,627 .11%

Lonestar Pty Ltd 104,000 .11%

George Enever Pty Ltd 100,000 .10%

Mr Ross Johnston 100,000 .10%

92,327,521 94.18%

2006 annual financial statements and reports 52 Brisbane Broncos Limited and its controlled entities

NOTICE OF ANNUAL GENERAL MEETING Registered Office: Broncos Leagues Club, Fulcher Road, Red Hill QLD 4059. NOTICE IS HEREBY GIVEN THAT the Annual General Meeting of Shareholders of BRISBANE BRONCOS LIMITED will be held at the following time and place: Time: 10.30am Date: Wednesday 16 May 2007 Place: Darcey Mitchell Room Broncos Leagues Club Fulcher Road RED HILL QLD 4059 ORDINARY BUSINESS Accounts To receive the Financial Report of the Company and the Consolidated Group for the year ended 31 December 2006 and the related Directors’ Report, Directors’ Declaration and Auditor’s Report. Remuneration Report To consider and, if thought fit, to pass the following resolution as an ordinary resolution: “That the Company’s Remuneration Report for the year ended 31 December 2006 be adopted.” Re-election of Director To consider and, if thought fit, to pass the following resolution as an ordinary resolution: “That Mr Dennis Watt, who retires in accordance with article 12.4.1 of the Company’s Constitution and being eligible offers himself for re-election, be re-elected as a Director of the Company.” Re-election of Director To consider and, if thought fit, to pass the following resolution as an ordinary resolution: “That Mr Darryl Somerville, who retires in accordance with article 12.4.1 of the Company’s Constitution and being eligible offers himself for re-election, be re-elected as a Director of the Company.” By order of the Board of BRISBANE BRONCOS LIMITED

Ms Louise Lanigan Company Secretary 12 April 2007

EXPLANATORY MEMORANDUM Registered Office: Broncos Leagues Club, Fulcher Road, Red Hill QLD 4059. The notes which follow set out more details of the matters to be dealt with at the Meeting. RESOLUTION 1 – REMUNERATION REPORT The remuneration report is available in the Directors Report included in the Annual Report. Shareholders will have the opportunity to ask questions about the Brisbane Broncos Limited Remuneration Report. The vote on the proposed Resolution 1 is advisory only and will not bind the Directors or the Company. The Board however will take the outcome of the vote into consideration when reviewing the remuneration practices of the Company. RESOLUTION 2 – RE-ELECTION OF DIRECTOR Mr Dennis Watt In accordance with the Company’s Constitution, Mr Dennis Watt retires from the Board and, being eligible, offers himself for re- election at the Meeting. The Directors, other than Mr Watt, recommend that shareholders vote in favour of this resolution. Mr Watt, because of his interest, makes no recommendation in relation to this resolution. RESOLUTION 3 – RE-ELECTION OF DIRECTOR Mr Darryl Somerville In accordance with the Company’s Constitution, Mr Darryl Somerville retires from the Board and, being eligible, offers himself for re-election at the Meeting. The Directors, other than Mr Somerville, recommend that shareholders vote in favour of this resolution. Mr Somerville, because of his interest, makes no recommendation in relation to this resolution.

2006 annual financial statements and reports Brisbane Broncos Limited and its controlled entities 53

Proxy Form Brisbane Broncos Limited

A.C.N. 009 570 030

1.

I/WE Name(s) of Individual or Corporate holder(s))

OF (Address of Holder as shown on the register of members) a member of BRISBANE BRONCOS LIMITED Limited hereby appoint

(Name of proxy in block letters) or failing that person, or if no person is named, the chairperson of the meeting as my/our proxy to vote for me/us and on my/our behalf at the Annual General Meeting of the Company to be held at 10.30am on Wednesday 16 May 2007 and at any meeting held subsequent and pursuant to an adjournment of that meeting.

If you wish to appoint two proxies then please photocopy this form and use one form for each proxy indicating the percentage of voting rights each proxy represents below. Alternatively you can ring the Company’s Registered Office on (07) 3858 9111 and ask for a second proxy form to be mailed to you.

The proxy is appointed to exercise ______% of my/our voting rights. (To be completed only if two proxies are being appointed). The proxy is directed to vote in the following manner:

2. Business

Ordinary Business For Against Abstain Resolution 1 Renumeration Report Resolution 2 Re-election of Director - Dennis Watt Resolution 3 Re-election of Director - Darryl Somerville

(A mark should be placed in the appropriate box if the Member wishes to direct the proxy to vote in a specified way in relation to the above resolutions; if the Member wishes to apportion their votes, a specified number of shares should be written in the appropriate boxes - eg 1,000 “For” and 500 (Against).

3. Individuals to Sign 4. Companies to Sign

______Executed in accordance with the Company’s Constitution

______Director

______

Director/Secretary (Delete the title that is not applicable) OR

______Sole Director and Sole Company Secretary

Proxies must be received at our Registered Office no later than 48 hours before the commencement of the Annual General Meeting. Proxies can be delivered to 1st Floor, Broncos Leagues Club, Fulcher Road, Red Hill Qld 4059, mailed to c/- Broncos Leagues Club, Fulcher Road, Red Hill Qld, 4059 or faxed to (07) 3858 9112.

2006 annual financial statements and reports 54 Brisbane Broncos Limited and its controlled entities

Instructions on How to Complete the Proxy Form

1. Insert here the name of the person you wish to appoint as proxy, shareholders cannot appoint themselves. The Chairperson of the meeting will act as your proxy if you do not appoint someone. You can vote your shares even if you plan to attend the meeting.

2. A shareholder is entitled to appoint up to two persons (whether shareholders or not) to attend the meeting and vote. If you wish to appoint two proxies, please enter the second proxy’s name and complete the section indicating the percentage of your voting rights each proxy is to represent. Note the aggregate % total must equal 100%.

3. If you wish to direct your proxy how to vote on any item, place a mark in the appropriate box. If a mark is placed in a box, your total shareholding will be voted in that manner. You may wish, split your voting direction by inserting the number of shares you wish to vote in the appropriate boxes. The vote will be invalid if a mark is made in more than one box for a particular item or if the total shareholding shown in the ‘FOR’, ‘AGAINST’ or ‘ABSTAIN’ boxes is more than your total registered shareholding at the time when entitlements for voting purposes are determined. The ‘snapshot’ time for determining entitlements for voting purposes will be no later than 48 hours before the commencement of the Annual General Meeting.

4. If a joint holding either shareholder may sign. If this form is being signed by a person who is not the registered holder then the relevant authority (eg power of attorney) must either have previously been exhibited to the Company or must be attached to this form.

If only one signatory needs to sign on behalf of a Company and that signatory is not the Sole Director and Sole Company Secretary then a certified copy of the Company’s Constitution must be attached to this form.

2006 annual financial statements and reports Brisbane Broncos Limited and its controlled entities 55

Notes

2006 annual financial statements and reports 56 Brisbane Broncos Limited and its controlled entities

Notes

2006 annual financial statements and reports