Annual Report 2011-12 Project Team Trevor Rowe, Violeta Zammit Design Mac ‘n’ Me Graphics Print Barney’s Print Management

At V/Line we work to reduce our footprint where we can. In the interests of sustainability, this report has been printed using waterless technology on Australian-made recycled paper. To help reduce paper usage, this report may be viewed online at vline.com.au

Cover: Southern Cross Station. Contents

About us 2

V/Line’s strategic agenda 2

Letter to the Ministers 3

Passenger network map 4

Chairperson’s report 5

CEO’s report 6

Key results 8

Facts and figures 9

Safety and security 10

Our customers 12

Patronage 14

Sustainability and environment 15

Our people 18

Operations 20

Fleet 21

Infrastructure 22

Victorian rail network map 23

Financial summary 24

Corporate governance 25

Financial statements 31

Independent auditor’s report 58

V/Line’s Statement of Corporate Intent 60

Disclosure index 61

CONTENTS V/LINE ANNUAL REPORT 2011-12 1 About us

V/Line is Australia’s largest regional public transport About this annual report operator. In 2011-12 it served a record 15.5 million train This is the annual report of V/Line Corporation – formerly and coach passengers. known as V/Line Passenger Corporation (VLC) – and its Each week there are more than 1,400 train services that wholly owned subsidiary V/Line Pty Ltd (V/Line) formerly run between Melbourne and: known as V/Line Passenger Pty Ltd. • Geelong (including South Geelong and Marshall) V/Line Corporation is a not-for-profit corporation under and Warrnambool the State-Owned Enterprises Act 1992. • Bacchus Marsh (including Melton), Ballarat, Ararat As a franchisee, V/Line must fulfil its contractual and Maryborough obligations under the franchise agreement. The franchise • Sunbury, Kyneton and Bendigo; Swan Hill and Echuca agreement was with the Director of Public Transport until • Seymour, Albury/Wodonga and Shepparton 2 April 2012 then transferred to Public Transport Victoria • Traralgon, Sale and Bairnsdale from that date. There are also almost 600 coach services each week V/Line is responsible to the Victorian Minister for Public that connect with the rail network and serve regional Transport and the Victorian Treasurer. Victorian communities where trains do not operate. Some This report provides a summary of V/Line’s key activities coach services also travel through to South Australia, and financial performance for the period 1 July 2011 to New South Wales and the Australian Capital Territory. 30 June 2012. Private sector buses, under contract from Public Transport Victoria, provide the majority of V/Line bus services. Vision In addition to being a passenger service operator, we also To be recognised by our community as the leading provide access to and maintain 3,420 km of broad gauge Victorian public transport provider. rail track used by the passenger and freight rail services. V/Line is a major employer with a workforce of 1,460, Mission many of whom live in regional areas of Victoria. To provide value for our customers and community by delivering safe, reliable, accessible and sustainable passenger and rail freight transport services as part of an integrated transport system.

V/Line’s strategic agenda

V/LINE’S OBJECTIVES SAFETY AND SECURITY Continuously improve safety and security in all aspects of our operations and business RETAIN AND GROW REPUTATION Advance and represent the interests and prosperity of regional and outer suburban Victoria SHAREHOLDER SATISFACTION AND FINANCIAL Demonstrate strong governance, efficient operations and RESPONSIBILITY financial responsibility GROW THE BUSINESS Grow and advocate for future investment to ensure sustainable patronage and freight volumes year on year ‘ON-TIME’ AND ‘IN-FULL’ SERVICE DELIVERY Improve reliability and service delivery year on year CUSTOMER SATISFACTION Strive for excellence in customer service and engagement EMPLOYEE SATISFACTION AND WELLBEING Be recognised as the employer of choice in the Australian rail industry, with a positively motivated, engaged and skilled workforce COMMUNITY AND ENVIRONMENTAL RESPONSIBILITY Be a trusted participant in regional communities and drive sustainable outcomes

2 V/LINE ANNUAL REPORT 2011-12 ABOUT US/STRATEGIC AGENDA Letter to the Ministers

16 August 2012

The Hon Terry Mulder MP Minister for Public Transport Level 16, 121 Exhibition Street Melbourne VIC 3000

The Hon Kim Wells Treasurer Level 4, 1 Treasury Place East Melbourne VIC 3002

Dear Ministers I have much pleasure in presenting the Annual Report for V/Line Corporation and V/Line Pty Ltd (V/Line) for the period 1 July 2011 to 30 June 2012. Yours faithfully

Hector McKenzie Chairperson

LETTER TO THE MINISTERS V/LINE ANNUAL REPORT 2011-12 3 Passenger network map

Mildura

Robinvale

Griffith Ouyen Piangil Manangatang Pinnaroo Sea Lake Swan Hill Finley To Sydney To Adelaide Deniliquin Barham Tocumwal Mulwala Corowa To Canberra Hopetoun Albury Kerang Rutherglen Birchip Cobram Cohuna Yarrawonga Wodonga Barmah Pyramid Moama Nathalia Numurkah Echuca Springhurst Nhill Warracknabeal Rochester Kyabram Shepparton Dimboola Donald Wedderburn Stanhope Wangaratta Beechworth To Adelaide Elmore St Arnaud Benalla Murchison Horsham Murtoa Rupanyup East Mt Beauty Dunolly Bendigo Bright Heathcote Mansfield Maryborough Seymour Stawell Castlemaine Mt Buller To Narooma & Avoca Talbot Wallan Batemans Bay Halls Gap (open 2013) Daylesford Kyneton Yea Ararat Clunes Lancefield To Canberra Woodend Whittlesea Glenthompson Creswick Sunbury Wendouree Cann River Ballarat Melton Skipton Hamilton Bacchus Ringwood Maffra Bairnsdale Orbost Casterton Marsh Werribee Derrinallum Warragul Mortlake Lara Melbourne Dandenong (see inset) Lakes Entrance Mt Gambier Heywood Geelong Camperdown Lang Lang Sale Traralgon Koroit Terang Korumburra Colac Anglesea Portland Leongatha TO BENDIGO TO SEYMOUR Warrnambool Cowes Anderson Port Fairy Lorne Yarram TO BALLARAT Wonthaggi Sunbury

Cape Inverloch Watergardens Apollo Bay Melton Broadmeadows Port Paterson Rockbank Campbell Essendon MELBOURNE Sunshine North Melbourne METRO Footscray Flinders Street Richmond Newport Southern Werribee Cross Station Caulfield Geelong Line Train Service (Spencer Street) Clayton Ballarat Line Train Service TO GEELONG Dandenong Berwick Pakenham Bendigo Line Train Service

TO GIPPSLAND Seymour Line Train Service

Gippsland Line Train Service

Coach Service

4 V/LINE ANNUAL REPORT 2011-12 PASSENGER NETWORK MAP Chairperson’s report

V/line is a very strong brand and is highly regarded by its We are also contributing to major government planning regional and city users. This position is the result of the studies that are looking to the rail network of the future. delivery of very high quality services over many years. These include a study into the return of passenger trains Since 2003 this was achieved under the chairmanship between Geelong, Ballarat and Bendigo as well as an of Mr Frank Tait who retired as Chair at the end of the investigation into a rail link between the Melbourne- 2011-12 financial year. There is probably no better Geelong line and Avalon airport. acknowledgement of Frank’s contribution than the My fellow board members Jack Diamond, Susan Oliver Minister’s letter of thanks to Frank. This read: and Moana Weir, who have served diligently since 2010, “V/Line continued to perform to a high standard along with John Wilson, who, with me, joined the board during your term as Chairperson and delivered strong in April this year and Dr Josh Wilson SC who joined in July government transport outcomes, including social, 2012 will actively support these and other Government economic and environmental benefits to the State.” projects and studies which have the potential to deliver very significant additional services and benefits to our and customers in years to come. “Your personal commitment, advice and professionalism We look forward to working with Chief Executive Officer as Chairperson of the Board has been greatly valued and Rob Barnett and his management team to deliver the appreciated.” service outcomes demanded and expected by passengers I wish to add my own thanks to the Minister’s for the work and shareholders. We also thank Rob, his management done by Frank and his Board. team and all staff for their contribution in making V/Line the successful rail organisation that it is today. The Board is looking forward to working with management to continue to deliver excellent country passenger and freight infrastructure services this year. We also look forward to working with our partners in the wider transport portfolio to deliver a number of important new projects that will change the face of regional Hector McKenzie passenger services. Chairperson The most significant of these is the multi billion dollar Regional Rail Link (RRL). The RRL will enable trains from Geelong, Ballarat and Bendigo to travel to and from Melbourne on dedicated regional tracks, freeing V/Line from the operational disruptions that arise entering and leaving the congested metropolitan system. The new trains announced in this year’s budget, changes to the scheduling and rostering tools available to V/Line and even the introduction of myki into the interurban region will all create opportunities for V/Line to improve its efficiency and service offering.

CHAIRPERSON’S REPORT V/LINE ANNUAL REPORT 2011-12 5 CEO’s report

V/Line’s VLocity trains have been a symbol of the • Successfully returned trains to Clunes for the first renaissance of regional passenger rail in Victoria since the time in 18 years on 4 December 2011 with the official first carriages were introduced in 2005. opening of the new Clunes station. Six years on, with the fleet grown to 134 carriages • Achieved Enterprise Registered Training Organisation following the introduction to service this year of the (RTO) accreditation enabling us to deliver Certificate IV final two three-car units in the current order, the VLocity in Rail Operations courses for trainee drivers. remains a vivid icon of V/Line’s amazing and continuing • Further developed the V/Line safety risk management patronage growth. With almost an additional million system in 2011-12, building on the United Kingdom’s passengers travelling on our rail and coach services in Rail Safety Standards Board safety risk model. 2011-12, V/Line remains the fastest growing rail business in Australia. • Developed and successfully trialled a new automated refuelling monitoring system. Research tells us that more and more people are recognising the benefits of travelling with V/Line and we • Successfully managed a near 50 per cent increase can expect patronage to continue to grow. Our challenge in traffic on freight lines triggered by bumper grain is to ensure we continue to have the capacity – in our harvests. This included the introduction of a new fleet, our people and everything we do – to not only meet freight operator, Southern Spur Rail, which carried rice the increasing demand but to provide the quality and crops from the Deniliquin district. range of services expected of a modern rail operator. In 2011-12, there have been times when our resources Financial performance have been stretched as we have tried to do more with less. However, thanks to the dedication of the V/Line V/Line reported a $1.7 million surplus before income tax. workforce at all levels, we have delivered the services that Our total income grew by $31 million over 2010-2011 on most occasions have been at a level our customers including a farebox increase of 10 per cent driven by expect and deserve. When we have fallen short, we have continued patronage growth of 6.2 per cent and a fare worked hard to keep people informed and get them to increase of 8 per cent introduced in the calendar year of their destinations. 2012. Freight volumes on the network continued their growth from 2010-2011 with access revenues increasing Now, with the promise of more new trains and further from $4.2 million to $6.2 million on the back of strong work to upgrade the regional rail network, we can look grain harvests. forward with optimism to V/Line playing an even more important role in the communities that we strive to serve. Improved workplace safety Key achievements An increased focus on employee safety resulting from the development of detailed departmental safety plans In this challenging environment, V/Line recorded a led to our best result in five years with a reduction in number of major achievements in 2011-12 which will the incidence of lost time injuries. These plans not only make ongoing contributions to the operation of a more addressed local safety issues but raised overall employee efficient regional rail network. Achievements were: awareness of the importance of working safely. • Successfully completed a major infrastructure Work also began on the development of more detailed improvement project when the Seymour line between safety action plans to address the ongoing incidence Craigieburn and Seymour was effectively rebuilt during of customer slips and trips on platforms and walkways. a three week shutdown in April this year. The $9 million While these incidents have remained at a relatively low project involved the replacement and renewal of 10 level in recent years, actions plans are being developed bridges, and a range of track and platform renewal which we believe can lead to improvements in this area. works. It is pleasing to report there were no level crossing • Built a $16.5 million maintenance facility at Ballarat incidents involving road vehicles that resulted in loss East that will contribute to improved VLocity reliability. of life during 2011-12 on the V/Line network. The facility was officially handed over to maintenance contractor Bombardier in February 2012. Online in real time • Reintroduced full daily return services to Wodonga One of the most significant areas of change and and Albury following completion of the ARTC’s $612 improvement in the past year has been the way that million upgrade of the north east line. The first service V/Line communicates and engages with its customers returned in June 2011, followed by a second in October and communities. and the third service in April 2012. Embracing the online world of instant communication, we now offer a suite of information tools that enables

6 V/LINE ANNUAL REPORT 2011-12 CEO’S REPORT CEO’s report us to reach our customers in real time, all the time. their own dedicated tracks through the metropolitan Complementing our well-established and significantly system. The project also includes two new stations – enhanced website, we now have a mobile website that at Wyndham Vale and Tarneit. provides targeted information specific to each of our rail Designed to remove bottlenecks from the public transport lines. Customer visits to these My Line pages have grown system by separating regional and metropolitan trains, dramatically since their introduction in October 2011. Regional Rail Link is scheduled for completion in 2016. Similarly, V/Line’s entry to the social media scene via The final major package of works contract was awarded Facebook and Twitter has been welcomed by customers in June 2012. seeking the very latest information on their services. During the year, V/Line personnel became embedded Recognising the importance that our customers attach to in a number of project teams and we began to manage being kept well-informed, we plan to continue to build our line shutdowns required to enable construction works to online capability. Customer consultation via the web is an proceed utilising replacement bus services. These will example of how we will make our senior managers more continue over the next four years. accessible to address issues and concerns. We also developed a much deeper understanding of Board/Minister acknowledgement customer travel habits and drivers during the year I wish to acknowledge and thank the State Government, through some of the most comprehensive research and especially Minister for Public Transport ever undertaken. Mr Terry Mulder, for their support during 2011-12. The establishment during the year of the new transport Investing for the future authority Public Transport Victoria has been an important development for our industry. The importance of continuing to strengthen Victoria’s regional rail operations was recognised in the State I would also like to thank our board members for the Government budget in May with the allocation of strategic guidance and direction they provide for our significant funds for a number of major projects. business. In particular, I express my appreciation to retiring Chairman Frank Tait, who has led the V/Line Board Critical for V/Line’s passenger rail operations is a since its inception in 2003. Frank has played a pivotal role commitment of hundreds of millions of dollars for the in the growth and development of V/Line over the past delivery of at least 30 new carriages. With patronage at nine years, a period during which our patronage has more an all-time high and our fleet close to capacity during than doubled. His term of office has seen the rebuilding peak services, this is a welcome investment in our of a large part of the passenger rail network through the future operations. Regional Fast Rail Project, the introduction of 134 VLocity The budget also allocated funds for a number of regional train carriages, the return of trains to Ararat, Bairnsdale rail projects, including nearly $172 million for regional and Maryborough, as well as a start on the multi-billion rail maintenance to help improve reliability of passenger dollar Regional Rail Link project. I wish to extend my services. A further $10.7 million has been budgeted for personal thanks to Frank for his guidance and leadership an upgrade of Warragul Station and $8.4 million for the through what has been a most exciting and challenging development of Grovedale Station. Up to $2.5 million has period in Victorian passenger rail. been allocated for works to enable the return of trains to To V/Line staff right across the state, thank you for the Talbot on the Ballarat-Maryborough line in 2013. commitment you have again displayed throughout the In conjunction with Public Transport Victoria, we also year to deliver services to our ever-increasing numbers of developed a 20 year outlook for the Victorian regional customers. Your contribution is vital in enabling V/Line rail network which will serve as a guide for annual to successfully perform an increasingly important role in operational planning. servicing the travel needs of Victorian communities.

Regional Rail Link V/Line continued to work closely with the Regional Rail Link Authority and its construction partners during the year as Australia’s biggest transport infrastructure project Rob Barnett moved from design to full scale construction. Chief Executive Officer Regional Rail Link will provide rail line capacity for extra train services for up to 9,000 passengers across the network in peak periods. A new line from West Werribee to Deer Park and along the existing rail corridor through Sunshine and Footscray to Southern Cross Station will for the first time give Geelong, Ballarat and Bendigo trains

CEO’S REPORT V/LINE ANNUAL REPORT 2011-12 7 Key results

Change 2011-12 2010-11 Total customer trips (rail & coach) 6.2% 15,554,638 14,653,354 • Rail passenger trips 3.7% 13,996,634 13,494,142 • Coach passenger trips 34.4% 1,558,004 1,159,248 Tickets sold 2.1% 5,880,300 5,760,955 Farebox revenue 10.8% $85.9 million $77.5 million Farebox (% breakdown) 5.5% 69% full fare 73% full fare 14.8% 31% concession 27% concession Subsidy per passenger 0.5% $18.27 $18.36 Short-distance train services 4.3% 60,509† 63,195 Long-distance train services 8.9% 11,758 10,793*

Fleet • VLocity carriages 4.7% 134 128 • Locomotives – 41 41 • Loco-hauled carriages – 133 133 • Sprinters (single unit) – 21 21 Stations 1.2% 85 84 Employees (total head count) 0.8% 1,460 1,448 *No Albury services included. †The decrease in short-distance services was a result of track works and the return of full long-distance services on the Albury/Wodonga line.

8 V/LINE ANNUAL REPORT 2011-12 KEY RESULTS Facts and figures

Customers change 2011-12 2010-11 Customer satisfaction index (PTV target 68) – trains 3.1% 71.1 73.4 Customer satisfaction index – coaches 4.5% 73 76.4 No. of customer information enquiries 5% 751,122 715,427 No. of customer feedback cases* 16.2% 19,794 17,033 No. of on-train consultation sessions with customer 9% 12 11 Compensation paid to customers for V/Line not meeting on-time targets (complimentary ticket value) 21.7% $150,218 $191,814 *Includes free travel

Employees Full-time equivalent staff 0.8% 1,387.4 1,376.2 Total head count 0.8% 1,460 1,448

Finance Total income 6.1% $545.353 million $514.091 million Total expenses 9.6% $543.630 million $496.136 million Income tax expenses 81.6% $96 thousand $5.22 million Net result 85.7% $1.819 million $12.733 million

Safety All of V/Line lost-time injury (LTI) rate per million hours worked (within V/Line’s control) 47.7% 9.2 17.6 Customer incidents within V/Line’s control per million passengers – requiring medical assistance 5.6% 0.57 0.54 Signals passed at danger (SPADs per million km) – human factor 108.3% 0.75 0.36

Operations Reliability overall (short & long-distance services, average monthly performance) 1% 97.8 98.9 Reliability – short distance 1% 97.6 98.7 Reliability – long distance 0.7% 99.4 98.7 Punctuality overall outside metro network (short & long distance services on time to 5 and 10 minutes respectively, average monthly performance) 1.5% 96 94.6* Punctuality – short distance on time to 5 minutes 3.6% 87.3 84.3 Punctuality – long distance on time to 10 minutes 4.5% 81.1 84.9 No. of services run – short distance 4.3% 60,509 63,195 No of services run – long distance 8.9% 11,758 10,793* *No Albury services included.

FACTS AND FIGURES V/LINE ANNUAL REPORT 2011-12 9 Safety and security

The safety of employees and customers is V/Line’s Managing safety risks number one priority at all times. Its safety performance is measured via four key indicators: Ongoing development and refinement of V/Line’s safety risk management system continued in 2011-12. Building • signals passed at danger by trains (SPAD) on the United Kingdom’s Rail Safety Standards Board • lost time injury frequency rate (LTIFR) for staff safety risk model, V/Line this year focused on modelling hard data rather than qualitative information. • the number and severity of health and safety incidents involving customers This process helped to identify risk gaps which will lead to the development of a more efficient and robust system. • number of level crossing incidents (excluding trespasser incidents) involving road vehicles with/ An executive risk register has been produced covering without loss of life a broad cross-section of rail safety risks which will help to improve the efficiency and effectiveness of risk The Safety, Security and Environment group implements management across the organisation. a range of programs to raise safety awareness and promote safe working practices, as well as identifying and Level crossing upgrades managing risk across V/Line. The ongoing upgrade of level crossings across Victoria In 2011-12, V/Line recorded an improved and continued during 2011-12 as part of the Victorian encouraging LTIFR result of 9.2 incidents per million hours Government’s $47 million Fix Country Crossings program worked (17.6 million hours worked in 2010-11). designed to improve safety at 75 country level crossings. A key initiative contributing to this improved result was the development of comprehensive safety plans for each Upgrade works including a range of safety improvements V/Line department, targeting specific safety issues in were undertaken at 38 level crossings on the Bendigo, each area. These plans not only addressed safety issues Echuca, Gippsland, Warrnambool and Maryborough lines. but were successful in raising overall safety awareness. One of the biggest projects was a $2 million upgrade The incidence of customer occupational, health and safety of the Lardners Track road and level crossing between incidents that required medical assistance was similar to Warragul and Drouin on the Gippsland line, which had the previous year, at 0.57 incidents per million passenger been identified as country Victoria’s number one level journeys (0.54 in 2010-11). The most common injuries crossing black spot. Works, which included installation of were slips, trips and falls on platforms or walkways and boom gates and installation of traffic lights and advanced when boarding/exiting trains. A customer-focused safety automatic warning signs, was completed in July 2012. action plan has been developed to address some of these V/Line also participated in a trial during 2011-12 of systemic incidents. dedicated short range communication radio technology The SPAD measurement of 0.75 per million km travelled designed to improve safety at level crossings. The was an increase on 2010-11 (0.36). However, the majority technology involves fitting a radio system and display unit of these human error SPAD incidents represented very to motor vehicles that detects and warns of approaching minor breaches where a driver passed a signal by a very trains. The trial will continue and be evaluated in the small margin. While V/Line’s SPAD result continues to coming year. represent industry leading performance (with the national A public awareness campaign conducted in conjunction average rate of 2.3), initiatives are in place to address the with Rail Safety Week in August 2011 was designed to increase recorded this year. help address a 22 per cent increase in the number of There were no level crossing incidents involving road trespassers onto rail reserves in the previous 12 months. vehicles that resulted in loss of life during 2011-12. V/Line also teamed with the Victoria Police Transit Safety Division for a rail level crossing safety awareness campaign in June 2012. Police and V/Line staff distributed safety information brochures to pedestrians and drivers at the state’s top 20 “hot-spot” level crossings. The brochures provided safety tips as well as information on the implications and consequences of not obeying road rules.

10 V/LINE ANNUAL REPORT 2011-12 SAFETY AND SECURITY Safety and security

Incident response planning Preparing for Regional Rail Link Preparation and training to ensure V/Line is well- As the multi-billion dollar Regional Rail Link project equipped to respond to major incidents is a key function moved from design to its large scale construction phase, of the safety and security team. Training involves not only V/Line increased its involvement on a range of safety and V/Line personnel but all key contractors. security issues. V/Line also works closely with both professional and A key activity has been to work closely with volunteer emergency service organisations – Police, Transport Safety Victoria, the Regional Rail Link Metropolitan Fire Brigade, Country Fire Authority, State Authority and its construction partners to ensure Emergency Services, Transit Police – to ensure they have that all building standards for the new rail link are a broad understanding of V/Line’s operations. comprehensively documented. Each quarter new representatives from each organisation V/Line’s involvement in project safety and security issues attend a familiarisation session covering V/Line’s will increase as the construction program ramps up to crisis response procedures, operations management meet the 2016 project completion target. and engineering information such as rolling stock Safety and security personnel are also playing key roles fuel loads and lifting points. This year’s sessions also during scheduled line shutdowns required to enable featured visits to the workshops of V/Line maintenance construction to proceed. contractor Bombardier. Participation in a simulated crisis exercise conducted to ensure compliance with the Terrorism Community Protection Act was successfully expanded this year to involve alternate emergency response representatives from all areas of V/Line.

SAFETY AND SECURITY V/LINE ANNUAL REPORT 2011-12 11 Our customers

There was another record-breaking chapter in the ­­V/Line Growth in all regions patronage success story in 2011-12, with more than 15 million passenger trips and an annual increase of Train patronage grew by 3.7 per cent, or approximately 6.2 per cent. 900,000 trips (7.4 per cent in 2010-11) while coach patronage grew by 34.4 per cent, or more than nearly It is an unparalleled story of sustained growth that began 400,000 trips (N.B. This significant increase in recorded in 2005 and has continued unabated for the past seven coach patronage reflects more accurate reporting years, adding on average around one million passenger following the establishment of new contracts with coach trips a year. operators.) But it is a story that is about much more than just All train lines experienced patronage increases: Geelong numbers. It’s about understanding customer needs and 130,000 additional trips, Bendigo 90,000, Ballarat expectations; it’s ensuring we continue to review and 110,000, Gippsland 90,000 and Seymour 80,000. refine the customer services and experiences that we Farebox revenue grew by 10.8 per cent to $85.9 million offer; and, as we near full capacity on our trains, it’s how ($77.5 million in 2010-11). Full fare revenue represented we communicate effectively with the thousands of people 69 per cent of this total (73 per cent in 2009-2010) and who travel with V/Line every day. 31 per cent represents concession revenue (27 per cent And it is in this crucial area of customer communication in 2010-11). The subsidy per passenger again decreased that we have continued to make great strides in 2011-12. from $18.36 in 2010-11 to $18.27 this year.

Building on the success of recent years of our online Understanding our customers’ needs communication via the V/Line website, we have now taken a lead in the use of new media as a means of Gaining a clear understanding of their market is a key providing real-time and readily accessible information requirement of all businesses. Following the biggest ever to customers. survey of its customers, V/Line is now well-equipped to plan and develop services that meet their needs. Whether it’s advice on the current status of services to and from regional destinations, promoting new or special More than 11,000 people across Victoria responded to the services, or providing immediate access to our executive survey which provided valuable insights into the reasons team via online customer consultation, V/Line is now very they use public transport, not all of them expected. much part of the new media scene. While the clear number one reason for people using V/Line to travel to Melbourne was work, it was also a very Our website averages around 85,000 visits a week. The significant reason for people travelling from Melbourne to mobile website, launched in October 2011, has averaged regional centres. 12,000 views a week and has been as high as 17,000. The survey showed that the key reasons people use To ensure customers can readily access the information V/Line to travel to Melbourne are: that is important to them, the website now features My Line, with information divided into five sections for our • work – 5.03 million trips, (43 per cent) five corridors. Launched in October 2011, visits to My Line • visit friends and family – 1.5 million trips (13 per cent) pages have grown from about 1,000 per week to 5,500 for each line. • leisure and tourism – 1.9 million trips (17 per cent); A similar targeted approach has been a feature of • education and appointments (including medical) – V/Line’s entry to the social media scene, with customers 1 million trips each (9 per cent). able to register as followers of Twitter messages on The main reasons people travel on V/Line from Melbourne service information for each of the five corridors. This to regional Victoria included: communication medium has proven especially valuable at times of service disruption. More than 5,000 customers • visit family and friends 740,000 trips (39 per cent) are now registered. • work 570,000 trips (30 per cent) V/Line’s Facebook page, which carries marketing and • leisure and tourism 335,000 trips (18 per cent) promotional messages, as well as providing a forum for feedback, has also proven popular, with more than 2,600 • education 100,000 trips (5 per cent). ‘likes’ at year’s end.

12 V/LINE ANNUAL REPORT 2011-12 OUR CUSTOMERS Our customers

Promoting regional travel Customer consultation and feedback Customer research also provided the foundation for a V/Line’s ongoing program of customer consultation and major V/Line travel promotion starting in June 2012. feedback took a step into the online world this year with A new “Guilt Trip” marketing campaign was based on the introduction of online forums with the Chief Executive. University of Ballarat research that found there was Utilising the V/Line website, customers are able to ask enormous potential for V/Line to tap into Victorians questions directly and receive an immediate response. visiting family and friends across the state. This online consultation opportunity complemented The potential for growing outbound tourism was also the well-established monthly on-train consultations, clearly demonstrated in 2011-12 when V/Line partnered when V/Line’s senior management team travels on peak with Bendigo Art Gallery and Bendigo Tourism to promote services to receive direct feedback from customers. two major exhibitions. The V/Line call centre received 751,122 calls during the More than 15,000 people travelled with V/Line to the year, an increase of five per cent on 2010-11, mainly as a White Wedding Dress exhibition in the second half of result of a significant service disruption on the Geelong 2011, while more than 25,000 people boarded the train line in April. for the Grace Kelly: Style Icon exhibition in the first half Customers affected when operational performance of 2012. targets are not met are eligible for compensation in the The popularity of V/Line AFL footy trains continued to form of complimentary tickets. This compensation this grow, with nearly 250,000 trips during the 2011 season, year was valued at $150,218, compared with $191,814 an increase of 4.8 per cent on the previous year. in 2010-11. Despite a slight reduction in customer satisfaction as measured by Public Transport Victoria surveys, V/Line again achieved the highest rating of any Victorian transport operator in 2011-12, with train services scoring 71.1 per cent and coach services 73 per cent.

OUR CUSTOMERS V/LINE ANNUAL REPORT 2011-12 13 Patronage

V/Line train and coach passenger trips over seven years

04-05: 7.25 million

05-06: 7.64 million 5%

06-07: 9.72 million 27%

07-08: 11.96 million 23%

08-09: 13.17 million 10%

09-10: 13.71 million 4%

10-11: 14.65 million 6.9%

11-12: 15.55 million 6.2%

Train patronage by line Geelong Bendigo Ballarat Gippsland Seymour 52% over 5 years 57% over 5 years 71% over 5 years 94% over 5 years 22% over 5 years

06-07: 2.57 million 06-07: 2.20 million 06-07: 1.88 million 06-07: 1.05 million 06-07: 1.15 million

07-08: 3.08 million 07-08: 2.78 million 07-08: 2.39 million 07-08: 1.54 million 07-08: 1.21 million

08-09: 3.38 million 08-09: 3.06 million 08-09: 2.68 million 08-09: 1.77 million 08-09: 1.17 million

09-10: 3.47 million 09-10: 3.15 million 09-10: 2.82 million 09-10: 1.91 million 09-10: 1.22 million

10-11: 3.77 million 10-11: 3.36 million 10-11: 3.10 million 10-11: 1.95 million 10-11: 1.32 million

11-12: 3.90 million 3.4% 11-12: 3.45 million 2.7% 11-12: 3.21 million 3.5% 11-12: 2.04 million 4.6% 11-12: 1.40 million 6.1%

14 V/LINE ANNUAL REPORT 2011-12 PATRONAGE Sustainability and environment

V/Line has in place a range of policies and procedures Indicator 2011-12 2010-11 designed to ensure we manage our activities so that Total electricity use (kWh) 319,919 313,218 their impact on the environment is minimised. We are committed to preserving and improving the environment Percentage of electricity 14% 15% along railway lines and at operational facilities such purchased as Green Power as stations and depots. Pollution and biodiversity Greenhouse gas emissions 328 336 management are our priorities. associated with energy use A key focus of V/Line’s environment team in 2011-12 (tCO2–e) has been the management of risks associated with Electricity use/employee 1,565 1,995 the handling of fuels and other potential pollutants, (kWh/employee) particularly at fuelling sites. This is a particularly % change in electricity 21.55% important issue at the South Dynon fuel point, where use/employee decrease ageing infrastructure, land settlement and proximity to Moonee Ponds Creek increases risks. Initiatives undertaken In addition to works performed under an Environment V/Line reduced energy consumption within its head office Protection Authority (EPA) pollution abatement notice by encouraging staff to adopt energy saving behaviours, (PAN) issued in July 2011, V/Line this year has completed such as turning off lights and computers. Lighting a number of other important works at South Dynon: sensors have also been installed on two of the three head • the base of the standard gauge fuel point has been office floors. sealed In 2012-13 V/Line will focus on organisation-wide • stormwater and trade waste drainage at the site has energy use instead of setting a specific target for head been mapped, inspected and repaired office energy use. The goal for 2012–13 is to maintain • approximately 20 metres of below ground pipework energy use per passenger kilometre at or below the has been upgraded to above ground 2011‑12 level. • several disused tanks have been decommissioned. Comments on data quality In addition to pollution control programs, V/Line also • The data is based on billing information provided by works hard to minimise the impact of its maintenance the electricity retailer. activities on protected flora and fauna in rail reserves. • Electricity use was estimated by extrapolating data During 2011-12, the environment team has continued to from available invoices. map the location of these important biodiversity features. • 2010–11 figure for electricity use per FTE has been The team has also worked closely with infrastructure adjusted from last year’s report due to the availability personnel to manage environmental impacts associated of more comprehensive data. with hazardous tree removal, level crossing upgrades and line of sight clearance. Waste Environmental performance General kitchen waste and office waste are produced within V/Line’s head office. Four audits of waste V/Line’s environmental performance is guided by an generation within head office completed during 2011–12 ISO14001 certified Environmental Management System, estimated that employees disposed of 26 tonnes of which has led to the development of objectives, targets waste, or approximately 124 kg/head office employee for and an action plan. In line with Financial Reporting the year, a significant improvement on the previous year. Directive 24C issued by the Department of Treasury and Finance, V/Line monitors and records its consumption of energy, water, paper and transport, as well as its output of waste and greenhouse gas emissions at its office-based Waste to landfill 58% operations. The results for 2011/12 are as follows: Recycling Energy 36%

Within head office, V/Line uses electricity for lighting Organic waste and running office equipment. Energy used for heating 6% and cooling is not included in the information recorded here as it is provided as part of the building tenancy and V/Line-specific data is unavailable. During the year, energy saving initiatives resulted in energy consumption It is estimated that approximately 17 tonnes of decreasing by nearly 22 per cent per full time head greenhouse gas emissions (tCO2–e) are released from the office employee. disposal of head office waste to landfill each year.

SUSTAINABILITY AND ENVIRONMENT V/LINE ANNUAL REPORT 2011-12 15 Sustainability and environment

Initiatives undertaken Comments on data quality To reduce the amount of waste it sends to landfill from its • Paper consumption is reported as A4 reams head office, V/Line has: (e.g. one A3 ream equals two A4 reams). • placed recycling bins on all floors • 2010–11 figures for paper use have been adjusted from last year’s report due to the availability of more • placed organic waste bins on one floor comprehensive data. • encouraged staff to reduce the amount of waste produced and use correct recycling practices. This has Water included the communication of waste audit results, Water is used at V/Line’s head offices for bathroom and and content on waste reduction and recycling in kitchen purposes, but as V/Line is a tenant in these large toolbox talks office buildings, data on V/Line’s water consumption is • ensured toner recycling is in place throughout not available, as individual floors are not metered. the office. The taps in V/Line’s head offices are fitted with flow restrictors or aerators and toilets are dual flush. Staff are Comments on data quality encouraged to use the dishwashers available and report • The weight of disposed waste was estimated water leaks. using Sustainability Victoria’s volume to waste V/Line has an objective to improve water efficiency at all conversions tool. V/Line-controlled operations. • Greenhouse gas emissions were estimated for waste to landfill only using Federal Government Transport emission factors. As a state-wide transport operator, V/Line requires its staff to travel throughout Victoria. Staff are directed Paper where possible to use V/Line’s train services to attend V/Line recognises that paper use is an important regional meetings, but a small car fleet is available environmental issue. Consumption of paper in head office to support head office and regionally-based staff. In in 2011-12 per FTE decreased by 19 per cent compared particular, track maintenance staff require vehicles to with the previous year. This decrease resulted mainly from undertake their work. changed employee paper use and printing practices. The following information on energy used by vehicles Indicator 2011-12 2010-11 covers all V/Line operations, not just head office. (Although V/Line has no available data on how staff Total paper use (reams) 4,070 3,885 commute to work, it is estimated that the vast majority of Paper use / FTE (reams/ 20 25 head office staff travel to work using public transport, or employee) by cycling or walking.) % change in paper use/ 19% employee decrease Indicator 2011-12 2010-11 Percentage of paper 97% 95% Energy Use (GJ) purchased with a recycled Petrol 6,645 6,541 content above 50% Diesel 74,336 54,391 LPG 215 36 Initiatives undertaken Total 81,227 60,968 To reduce the environmental impacts associated with Greenhouse gas emissions 5,674 4,259 paper use V/Line has: from vehicle fleet (tCO2–e) • required all white A4 office paper purchased to have a Energy use (GJ)/FTE 55.63 61.52 recycled content of 50 per cent or above • encouraged staff to reduce printing (through the use of email and document sharing) and to print double sided • reduced on-train seat drops • where possible switched from faxing to email.

16 V/LINE ANNUAL REPORT 2011-12 SUSTAINABILITY AND ENVIRONMENT Sustainability and environment

Initiatives undertaken Community outreach V/Line encourages the use of public transport where V/Line continued its important partnerships and possible for staff travel to minimise use of the vehicle sponsorships in 2011-12. Together, Travellers Aid and fleet. There are also three hybrid vehicles within our V/Line aim to ensure the vision ‘every journey counts’ fleet and plans are in place to include more low emission is achieved. Travellers Aid offers support, advice and vehicles as replacements are required. assistance to all travellers, including people in emergency situations and those with special needs. Travellers Aid Comments on data quality is committed to passenger safety and comfort. Our • 2010–11 figures for fuel use have been adjusted partnership allows them to support to travellers at the from last year’s report due to the availability of more point of need by offering access to services which are comprehensive data. relevant and provide solutions with dignity. • 2011-12 figures for fuel use have been extrapolated The V/Line Life Training program focuses on life skills from ten months of records. that are important for positive development such as goal setting, identifying support networks and understanding Greenhouse gas emissions the true impact and consequences of the choices made Greenhouse gas emissions associated with V/Line’s in life. Through the Life Training program, young people head office operations have been reported in the energy, are given the tools and knowledge to help them, make waste and transport sections above. More comprehensive informed decisions when confronted by common societal information on V/Line’s energy use is available in the issues such as depression, low self-esteem and body Energy Efficiency Opportunities Program report (to be image, bullying and alcohol & drug abuse. made available on V/Line’s website). During 2011-12, 23 sessions, reached more than 1880 In 2012-13, V/Line will continue to trial a computer-based participants. In the past six years the program has visited program to assist train drivers to operate trains with more than 70 towns throughout country Victoria with greater emphasis on fuel efficiency. more than 12,000 people having participated. Sessions feature a presentation from one of our partners Environmental issues and incidents (clinical experts from Orygen Youth Health, the Butterfly There were no new significant environmental incidents Foundation, Odyssey House and the Australian Drug during 2011/12. Past environmental incidents which Foundation). The program’s Ambassadors – ex AFL player required ongoing management included: Nathan Thompson and Melbourne Vixen and Australian Diamond netballer, Madison Browne – tell stories about • a PAN remains in place at V/Line’s South Dynon Fuel their own experiences growing up in regional Victoria and Point after a fuel spill in September 2010. Actions how they achieved their goals. completed as part of the PAN include sealing the standard gauge fuel, installing alarms and upgrading The program was recognised in October, winning with fuel equipment. Actions outstanding include repairs to Australian Marketing Institute Award for Corporate Social a fuel tank bund and covering oil pits on site Responsibility, and has been included in a new text book ‘Good Works! Marketing and Corporate Initiatives • groundwater extraction and monitoring is ongoing that build a better world and the bottom line’ by Kottler, in the Stonyford area after a train derailment in 2009 Hessekiel and Lee published in June. This publication resulted in a fuel spill showcases how business performance can be enhanced • ongoing soil, groundwater and stormwater monitoring by doing good and includes case studies from many at V/Line’s temporary fuel point in Traralgon where multinational corporations including Nike, Subway an EPA PAN remains in place after a stormwater and Microsoft. contamination incident in 2008. V/Line is currently Partnerships with the Victorian Country Football League, working on designs for a permanent fuel facility at this Netball Victoria and the Fun4Kids Festival continued location to reduce contamination risks with strong community and patronage outcomes. Our • contamination testing in the Ararat area to aid partnership with Keep Australia Beautiful and the the clean-up of the rail reserve where a previous Stationeers program saw the number of active Stationeers neighbouring land use has resulted in contamination groups increase by 150 per cent during 2011-12. These to the rail reserve. An EPA clean up notice remains for volunteering groups will assist in keeping stations tidy this site. and ensuring gardens and public areas are maintained and presentable.

SUSTAINABILITY AND ENVIRONMENT V/LINE ANNUAL REPORT 2011-12 17 Our people

Registered Training Organisation DOXA Youth Foundation accreditation For more than 25 years, V/Line has been an active V/Line achieved a major training and development supporter of DOXA Youth Foundation, a not-for-profit milestone in 2011-12 when it gained accreditation as an organisation that supports disadvantaged children and Enterprise Registered Training Organisation (RTO) to deliver young people by providing education related programs Certificate IV in Rail Operations for trainee drivers. that help them achieve their potential and participate meaningfully in the community. Over that period V/Line Accreditation from the Victorian Registration and has provided free travel for under-privileged school Qualifications Authority followed an intensive period of children attending the DOXA camps in Malmsbury preparation to establish the governance model, systems and Melbourne. and processes needed to support our role as an RTO. This year, we extended our support by sponsoring two The first group of trainee drivers began their training in July. young engineering cadets in our Infrastructure division. The DOXA cadetship program aims to assist talented Developing our people young people from socially and financially disadvantaged backgrounds who aspire to tertiary education. V/Line’s V/Line’s commitment to training and developing support of two students from regional areas is also its people right across the organisation was clearly designed to provide an introduction to the rail industry. demonstrated again this year with a total of 67,000 hours of training delivered. This represents 45.76 training hours Employee survey per employee. Formal training hours recorded in the Employee opinion surveys have become an important future will reflect a move to more on-the-job training and component of V/Line’s overall employee engagement e-learning activities. activities since the first survey was conducted in 2005. To ensure we have the people to support this significant The surveys provide an opportunity for people across training activity, a total of 23 employees completed the the business to express their views on a wide range of Certificate IV in training and assessment. workplace and employment issues. Development of training programs in the Infrastructure The third survey, conducted in March 2012, was again division was a focus this year, with the introduction of a well-supported, with 510 employees participating. track inspector course and planning for the development The survey measured employees’ perception of the of the remaining Certificate II infrastructure modules. organisation’s overall performance and its engagement A successful application to the Workplace English with the workforce. Overall performance perception was measured at 66.3 per cent (compared with 48.7 per cent in Language and Literacy Program (WELL) provided 2008 and 48.4 per cent in 2005). This places V/Line at “best $150,000 to support supervisor computer and report practice” levels when compared with international data. writing skills. V/Line’s employee engagement score of 74.8 per cent was Following a review of V/Line’s management development slightly higher than the 2008 score of 74.6 per cent. program – conducted in partnership with Swinburne University for the past five years – participants are now The survey revealed that employees see V/Line’s top three offered two qualification options: the Certificate IV organisational strengths as its committed staff, service Frontline Management and the Diploma of Management. and reliability and the V/Line brand, organisational name This revised program will enable employees who and reputation. aspire to supervisor/manager positions to gain a Employee focus groups scheduled for July and August formal qualification. were designed to explore key issues raised in this year’s survey and develop action plans for further Improving systems workplace improvements. V/Line continued to improve and upgrade the systems Enterprise Agreement available to support its human resources programs in 2011-12. This included a new people development system With the 2009-12 Enterprise Agreement drawing to a that has modules for online performance goal-setting, as close, there has been excellent progress in implementing 85 initiatives that were identified as productivity off-sets. well as compensation and succession planning. All but one of these initiatives have been completed or are In addition, a new compliance and competency module currently being implemented. is being introduced that will enable managers to carry- At 30 June 2012, planning and preparation for the out online assessments as well as monitor employees’ 2012‑15 Enterprise Agreement was well advanced, with progress in completing training needed to meet legislative a number of initiatives identified as having the potential and other requirements. to deliver the productivity off-sets required for any increase above the Government-approved 2.5 per cent per annum.

18 V/LINE ANNUAL REPORT 2011-12 OUR PEOPLE Our people

Employee snapshot V/Line’s staff complement increased by 12 during the year. At 30 June 2012, the total staff headcount was 1,460 (1,448 in 2010-11), with a total FTE of 1,434.7 (1,429.6 in 2010-11).

Headcount 30 June 2012 30 June 2011 Headcount 30 June 2012 30 June 2011

V/Line Skill Group Ongoing employees

Executive 10 10 Employees (headcount) 1,408 1,391

Operations 62 59 Full-time (headcount) 1,354 1,349

Station staff 255 253 Part-time (headcount) 54 42

Conductors 216 213 FTE 1,387.4 1,376.2

Train drivers 342* 343* Fixed term and casual employees Authorised officers 11 11 Headcount 52 57 Infrastructure 181 189 maintenance FTE 47.3 53.4 Signals and 58 55 Ongoing, Ongoing, communications fixed-term fixed-term Train controllers 50 51 and casual and casual Employee Employee Network services 64 62 (headcount) (headcount) Other staff 211 202 Gender

Total 1,460 1,448 Male 1,254 1,249

*included 10 *included 19 Female 206 199 internal trainee internal trainee drivers drivers Age Under 25 42 44

25-34 202 212

35-44 292 288

45-54 551 537

55-64 332 333

Over 64 41 37

OUR PEOPLE V/LINE ANNUAL REPORT 2011-12 19 Operations

Additional train services, a new station and improved The line will see further improvement in the coming year punctuality highlighted V/Line’s operational performance following the Government’s allocation of $2.5 million to in 2011-12. upgrade Talbot Station. V/Line operated a total of 72,267 services this year – A $2 million program to improve another 10 V/Line 60,509 short distance and 11,758 long distance. There stations was completed late in the financial year. was a decrease in short-distance services as a result of A range of works, including improvements to toilets track works and a return of full long-distance services on and platforms, were undertaken at Ararat, Castlemaine, the Albury/Wodonga line. Benalla, Wangaratta, Drouin, Tynong, Ballarat, Malmsbury, Dingee and Gisborne. The popularity and success of one of V/Line’s newest stations was clearly demonstrated this year when weekly services to and from Wendouree Station near Ballarat Performance more than doubled to meet growing demand from the Despite the operating pressures created by continued surrounding areas. Patronage has increased steadily from record patronage growth – increasing a further 6.2 per the time the station opened in June 2009 with 63 weekly cent in 2011-12 – V/Line’s on time operating performance services, mainly during peak times. improved on most services during the year. Additional station staff and extended ticket office hours Punctuality overall outside the metropolitan network (to enabled the addition of 85 Wendouree services each five minutes for short distance services, to 10 minutes for week, mainly in the middle of the day, late at night and at long distance) improved to 96 per cent (94.6 per cent the weekends to meet the significant patronage growth of the previous year). station’s first three years of operation. Significantly, punctuality of short distance services Full services returned to the border towns of Albury and (commuter services) within and outside the metropolitan Wodonga during the year following the completion of the network improved to 87.3 per cent (84.3 per cent ARTC’s $612 million upgrade of the north east line. in 2010‑11). Services resumed in June 2011 with one daily return The on-time performance of long distance services service. A second daily service was re-introduced in decreased slightly (from 84.9 per cent to 81.1 per cent), October 2011, with the third daily train back in service mainly as a result of continuing speed restrictions on the from April 2012, providing 1,110 seats each day for north east line. Punctuality on lines other than north east services to and from Melbourne. was 87.5 per cent. ARTC continued its track work on the north east line Major issues affecting on-time performance were delays during the year, which impacted on V/Line travel times. associated with metropolitan services, mechanical faults, However, the popularity of train travel to the border towns infrastructure works, as well as a range of other issues was clearly demonstrated during 2011-12, with 213,000 outside V/Line’s control, including police operations. passenger trips between Melbourne and Albury. One of the most significant service disruptions occurred New Clunes Station on the Geelong line on 10 April 2012 when a major high voltage power interruption fault halted all services. A fleet Passenger trains returned to Clunes for the first time in of more than 80 buses transported Geelong commuters 18 years on 4 December 2011 when Minister for Public into Melbourne the following morning while work on the Transport, Mr Terry Mulder officially opened the new fault continued. Clunes railway station.

The $7 million Clunes project included construction of a new platform and shelter, car park works and associated bus and taxi bays, as well as an upgrade of an adjacent level crossing from stop signs to boom barriers. A $1.3 million program of heritage restoration works at Maryborough Station was also completed during the year. Since passenger trains returned to the Maryborough line in July 2010, there has been a steady increase in patronage in both directions. Upgrades to level crossings along the line in the past year have helped reduce travel time between Ballarat and Maryborough by nine minutes.

20 V/LINE ANNUAL REPORT 2011-12 OPERATIONS Fleet

The reliability of the V/Line passenger train fleet A number of programs progressed during 2011-12 are improved significantly in 2011-12 following the designed to continue to improve the performance of the progressive introduction of a range of enhanced V/Line fleet. maintenance procedures. The fitting of low fuel warning systems to the VLocity fleet The VLocity units travelled an average of 120,390 km began in April this year and a trial of a similar system for between faults, compared with 106,066 km the previous the Sprinter fleet began in May. year and 94,423 in 2009-10. The availability of these A joint investigation by V/Line and Bombardier into units decreased slightly on previous years as their first the possible introduction of selective door opening major maintenance overhauls began to fall due. Average technology on longer VLocity trains achieved a significant availability for 2011-12 was 88.9 per cent compared milestone with the successful completion of platform with 90.7 per cent the previous year and 89 per cent sensor trials. A business case for the introduction of this in 2009-11. technology – designed to ensure that passengers cannot V/Line has 134 VLocity carriages in service following open a door unless it is safely at a platform – is being the delivery of two three-car units in August and developed to support a funding application. September 2011. The start of a third daily service to Albury in April 2012 A concerted preventative maintenance program on the following completion of the North East Rail Revitalisation Sprinter fleet improved reliability to 28,913 km between Project required the introduction of a third standard faults, compared with 23,638 in 2010-11. The increased gauge carriage set and the conversion of a P Class maintenance program contributed to a reduction in locomotive for shunting operations. Sprinter availability to 85.4 per cent, compared with 87.9 per cent the previous year. Reliability of the locomotive fleet also improved during the year as a result of improved maintenance practices and progress on a number of modifications. Locomotives travelled an average 28,278 km between faults, compared with 25,537 km in 2010-11. The availability of locomotives also improved during the year (up from 81 per cent to 84.69 per cent) as a result of the standard gauge locomotives being fully committed to service. Continuing work on carriage air-conditioning and door opening systems contributed to significant improvements in the reliability of the locomotive-hauled fleet. Average reliability was 156,924 km between faults, compared with 131,368 the previous year and 91,918 in 2009-10. V/Line is expecting even better fleet performance in coming years following the construction of a $16.5 million VLocity maintenance facility at Ballarat East that was handed over to maintenance contractor Bombardier from February 2012. The facility features two pit roads and one flat road that enable examination and minor repairs on three VLocity units per day. An associated benefit has been the increased availability of the West Melbourne depot and resulting improved maintenance of the Sprinter and locomotive-hauled carriage fleets.

FLEET V/LINE ANNUAL REPORT 2011-12 21 Infrastructure

V/Line’s infrastructure division completed one of its Fourteen passenger line level crossings were upgraded biggest projects when it effectively rebuilt the Seymour in 2011-12, including eight between Geelong and line between Craigieburn and Seymour during a three Warrnambool, five between Bendigo and Swan Hill week shutdown in April this year. and one at Rosedale. The $9 million project involved the replacement and Other major Infrastructure work completed during the renewal of 10 bridges, a range of track renewal works year included: on four major bridges, repair of mud holes, installation • widening and stabilisation of cuttings, and erosion of a new bridge between Wallan and Kilmore East and protection works at Bacchus Marsh and Bank Box on platform works at Wallan, Bradford and Donnybrook the Ballarat line stations. The platform works included the replacement of the east platforms at Wallan and Bradford and extension • track renewal works at Swan Hill Station yard of the west platforms at Donnybrook and Wallan to enable • replacement of five kilometres of worn rail between passengers to exit safely at any train door. Platform Ballarat and Ararat access and surfaces were also improved in accordance with disability discrimination standards. • stabilising of four bridge abutments between Traralgon and Sale The project also involved the replacement of more than 35 000 timber sleepers with concrete sleepers, improving • major repairs to four bridges on the Warrnambool line, track quality significantly. including the replacement of a bridge at Camperdown and strengthening of three ARMCO pipe bridges Significant improvement works were also undertaken on at Colac the Warrnambool line during the year, with around 45,000 sleepers replaced, along with ballast improvement works • renewal of a transom bridge on each of the Bairnsdale, and resurfacing. Swan Hill and Warrnambool lines Another major infrastructure project was completed • major repairs to flood damaged infrastructure, in February with the re-opening 66 kilometres of the including the underpinning of one pier on the Thomson Yaapeet freight line between Dimboola and Rainbow. River Bridge at Sale, and reconstruction of bridges at Works included repair of flood-damaged track formation, Arnold and Cope Cope. renewal of 33,000 sleepers, rationalisation and repairs to sidings, renewal of three sealed level crossings, as well as sighting and signage improvements to all level crossings.

22 V/LINE ANNUAL REPORT 2011-12 INFRASTRUCTURE Victorian rail network map

MELBOURNE METRO AREA

Craigieburn

Bendigo Hurstbridge Epping Sydenham Up eld

Broadmeadows St Albans Jacana Glenroy Fawkner Reservoir Oak Park

Strathmore Rosanna Lilydale Ballarat Al b io n Tottenham Yard Flemington Jewell Merri Racecourse Deer Park Clifton Hill Sunshine d Ardeer Newmarket Victoria Park o North ll rn o ie e u d rr Melbourne n e rw b ngw n o nf ck Ri Brooklyn Port m e be la no n h l B Melbourne no c G am t Ri C Spotswood Dy s e rth Dy e o ros tr uth C Kooyong y Bayswater Newport N o S e S rs S. Yarra rl ern e e th d v u in ley o Fl Wa S t ver Boronia un a Darling Alamein o W M len Seaholme Williamstown Pier G Caul eld Geelong Elsternwick

Huntingdale Belgrave Bentleigh Yelta Brighton Beach Westall Yard

Sandringham Mildura Cheltenham

Dandenong Red Cli s Mordialloc

Robinvale Lyndhurst Traralgon

Hattah Cranbourne

Stony Point Manangatang Moulamein Ouyen Piangil Mittyack Nyah West Panitya Linga Swan Hill Oaklands Ultima Sea Lake Wakool Deniliquin

Woomelang Hopetoun Kerang Yaapeet Tocumwal Yard South Kerang

Strathmerton Birchip Albury Wycheproof Pyramid Jeparit Echuca Wodonga Bandiana Warracknabeal Dookie Springhurst Diapur Kyabram Korong Vale Dingee Rochester Shepparton Wangaratta Dimboola Adelaide Serviceton Glenrowan Inglewood Toolamba Benalla Murtoa St Arnaud Murchison East Eaglehawk Huntly Horsham Marong Euroa Bendigo Nagambie Dunolly Glenorchy Mangalore Maryborough Seymour Castlemaine Stawell Moolort Tallarook Malmsbur y Kyneton Broadford Ararat Clunes Woodend Beaufort Maroona Yard Wallan

Tatyoon Ballan Sunbury Craigieburn Glenthompson Ballarat Diggers Rest Somerton Westmere Hamilton Bacchus Marsh Melton Werribee Bairnsdale Branxholme Berrybank Little River Nar Nar Goon Gheringhap Lara Longwarry North Warragul Heywood Camperdown Inverleigh Pakenham Moe Traralgon Sale Geelong Geelong Drouin Rosedale Trafalgar Dennington Terang Winchelsea Morwell Portland Colac Warrnambool

LEGEND

Passenger and freight services (V/Line broad gauge)

Passenger and freight services (ARTC standard gauge)

Freight only (V/Line broad gauge)

Freight only (V/Line standard gauge)

ARTC (standard gauge) including dual gauge North Geelong – Gheringhap and Geelong grain loop

Metro Trains Melbourne (broad gauge)

Victorian Rail Track Corporation (VicTrack)

VICTORIAN RAIL NETWORK MAP V/LINE ANNUAL REPORT 2011-12 23 Financial summary

V/Line reported a $1.7 million surplus before income tax The reintroduction of services in our north east corridor for the year ended 30 June 2012, although down on the also added to our operational costs increases year on previous year it was in line with forecasts as noted in the year but it was pleasing to be able to bring these services 2010-2011 Annual Report. back to regional Victoria. Total income grew by $31 million over 2010-2011 Infrastructure maintenance costs increased due to similar including a farebox increase of 10 per cent driven by issues related to age of the assets and this continues continued patronage growth of 6 per cent and a fare to remain a challenge for the business. The damage increase of 8 per cent introduced in the calendar year to the network from floods also added to the costs of of 2012. maintaining the network but much of these costs were insurable. However future increases in premium costs are The average subsidy per passenger fell for the fifth anticipated as a result of these claims. consecutive year despite increasing cost pressures across all areas of the business. The year on year fall from Project costs increased this year on the back of higher $18.36 down to $18.27 although smaller than previous activity levels but have no impact on the financial years was still a positive outcome for the business. performance of the business as all costs associated with these activities are fully recoverable. Freight volumes on the network continued their growth from 2010-2011 with access revenues increasing Cost control along with service delivery continue to be the from $4.2 million to $6.2 million on the back of strong focus for the business going forward and our outlook is grain harvests. to deliver similar financial outcomes going forward while continuing to improve service delivery. The first full year of our increased VLocity fleet, combined with the continued high demands on our ageing locomotive-hauled and Sprinter fleets lead to an increase in maintenance costs as was anticipated in last year’s report. With the demand on our fleet continuing for the foreseeable future, costs in this area will continue to climb.

Details of Consultants over $10,000 Consultants Purpose of Consultancy $’000 Corrs Chambers Westgarth Legal Advice 1,226 Coffey Rail Pty Ltd Designed Drawing, Review and Drafting Services 587 Barrington Centre Pty Ltd Employee Assistance Program and Training 272 Human Risk Solutions Pty Ltd Risks Assessment 141 Value Edge Consulting Recruitment Testing, Assessment and Development 140 Mercer Australia Job Evaluations and Remuneration Advices 78 Lismeen Pty Ltd V/line Board Consulting 50 Robert J. Re & Associates Pty Ltd Prepare and Conduct Employee Opinion Survey 40 Wes Gordon Consulting WAP Training 25 Rail Advisory Services V/line Board Consulting 13 TOTAL 2,573

Below $10K 1 Consultancy 2

24 V/LINE ANNUAL REPORT 2011-12 FINANCIAL SUMMARY Corporate governance

Board of Directors as at 30 June 2012

FRANK TAIT – Chairperson SUSAN OLIVER – Director Mr Tait was chair of the boards of both V/Line Corporation Ms Oliver was appointed a director of VLC and V/Line in (VLC) and V/Line Pty Ltd (V/Line) from October 2003 to October 2010. 30 June 2012. His career spans government as well as the Ms Oliver is an experienced company director of 16 years. rail transport and defence industries. Frank has held She has extensive executive and advisory experience in senior executive positions in the rail transport, defence information technology, project management, strategy and government industries and is a private company and scenario planning. Her current board appointments director. He has a consulting business advising are with Coffey International Limited, CNPR Limited and companies on business strategy, organisational Programmed Maintenance Services Limited. She is a development and recruitment. governor of The Smith Family, a director of Melbourne Chamber Orchestra and council member of the AICD JACK DIAMOND – Acting Deputy Chairperson in Victoria. She also manages her own consulting and Mr Diamond was appointed a director of VLC and V/Line advisory practice and information technology company, in October 2010. and currently serves on the Victorian government advisory panel for small technologies. Mr Diamond is Managing Director of Diamond Consulting (Vic) Pty. Ltd. He was worked in the funds management MOANA WEIR – Director and the finance industry for over 22 years and has deep experience in banking, funds management, stakeholder Ms Weir was appointed a director of VLC and V/Line in relationship, strategic management and marketing. October 2010. Mr Diamond is a director of Industry Funds Services Pty Ms Weir has 10 years executive experience in online listed Ltd and related companies and chairman of Industry companies – currently with SEEK Ltd, and previously with Fund Service Insurance Broking Pty Ltd. He has just REA Group Ltd and Melbourne IT Ltd. She has Australian retired as a director of Victorian Funds Management and international executive business experience in Corporation. He has previously held directorships in the areas of: legal, governance, company secretarial, banking, superannuation funds, including four Ansett corporate affairs and sustainability, risk management and Airlines Super Funds in their wind down and an ASX corporate operations. In addition, Ms Weir has specialist listed company and not-for-profit charities. Mr Diamond legal expertise in the areas of IP/IT and M&A and 18 years is a Fellow of the Australian Institute of Company of legal practice. She holds an independent board Directors (FAICD). position with a not-for-profit organisation. HECTOR MCKENZIE – Director (part-year) JOHN WILSON – Director (part-year) Mr McKenzie was appointed a director of VLC and V/Line Mr Wilson was appointed a director of VLC and V/Line in April 2012. in April 2012. Mr Wilson owns a consultant business Mr McKenzie has extensive experience in the transport and is an experienced Company Director. His career has industry in both the Government and private sector included roles as Managing Director and Chief Executive including rolling stock procurement, privatization of Officer of large private and government owned public the rail and tram systems, transport arrangements for transport companies (bus/coach and rail). Along with his the 2006 Commonwealth Games and development of role on the V/Line boards, Mr Wilson is also a director Victoria’s Action Plan for people with disabilities. Prior to of the Transport Ticketing Authority and a member of its joining V/Line he was the Director of Public Transport, a Audit & Risk Committee. Mr Wilson’s consulting business statutory office responsible for the provision of all public concentrates largely on transport (operations, fleet & transport and taxi regulation in Victoria. He currently infrastructure procurement & maintenance and logistics), manages his own advisory company. project management, business due diligence, audit, risk, governance and merger & acquisitions. Mr Wilson is a Fellow of the Australian Institute of Company Directors (FAICD) and a Fellow of CPA Australia.

CORPORATE GOVERNANCE V/LINE ANNUAL REPORT 2011-12 25 Corporate governance

V/Line Executive

ROB BARNETT CEO Executive team leader and member of the government’s Victorian Railway Steering Committee on Level Crossings.

GEOFF ARTHUR TONY HENWOOD GRAHAM PERRY ROSS PEDLEY General Manager General Manager General Manager General Manager Operations Network Services Engineering Corporate and Finance Delivery, planning Provision of access to Rolling stock Corporate and and development of freight and passenger engineering services, financial management our train and coach train operators. including maintenance services, including services. of the current fleet IT, contracts and and development of procurement. new trains.

ANDREW LAST JENNY KELMAN LAURIE FOLEY PAUL MATTHEWS REBECCA General Manager General Manager General Manager General Manager NORTHEAST Infrastructure Human Resources Safety, Security & Marketing & Company Environment Stakeholder (Corporation) Maintenance and Recruitment, training Relations Secretary and Legal upgrade of rail, and HR services, Incident Coordinator signalling and other industrial relations management and Customer relations, infrastructure. and organisational safe-working, marketing Legal services, development. security, risk and and business company/ safety improvement development, corporation programs, communications administration. OH&S, DDA and and media and environment. community relations.

26 V/LINE ANNUAL REPORT 2011-12 CORPORATE GOVERNANCE Corporate governance

V/Line Corporation and V/Line Pty Ltd Board Role V/Line Corporation (VLC), formerly named V/Line The boards have overall responsibility for the corporate Passenger Corporation, was established on 15 July 2003 governance of VLC and V/Line, respectively. Each board as a statutory rail corporation under the Rail Corporations has established protocols and procedures to ensure that Act 1996 and continues under the Transport Integration corporate governance is maintained at the highest levels Act 2010. On 14 October 2008 VLC was declared a state and that the strategic direction and overall performance business corporation pursuant to the State Owned of the respective business entities can be developed and Enterprises Act 1992 and therefore VLC reports to both monitored diligently. the Minister for Public Transport and the Treasurer. The roles and responsibilities of the V/Line board are VLC is governed by the Transport Integration Act 2010, set out in a formal board charter. In accordance with this which sets out its object and functions. The Transport charter the board of V/Line conducts a regular review of Integration Act creates a framework for the provision of its performance and to identify areas of improvement. an integrated and sustainable transport system, and all Victorian transport agencies, including VLC, are required Board Committees to work together towards this common vision. The board of V/Line has established three board VLC was established on 1 October 2003 to acquire from committees: Audit and Commercial Risk Committee; the National Express Group, National Express Group the Remuneration Committee; and Safety, Security and Australia (V/Line Passenger) Pty Ltd, which is now Environment Committee. Each committee has a charter named V/Line Pty Ltd (V/Line). VLC is therefore the sole that sets out its roles and responsibilities. shareholder of the main operating entity, V/Line. Audit and Commercial Risk Committee: In 2003 V/Line entered into a franchise agreement with the Director of Public Transport (the Director), Assists the board to oversee the financial and commercial representing the State Government of Victoria, to operate risk management framework, including reviewing and regional rail throughout Victoria. On 2 April 2012 the monitoring accounting policies and practices, and franchise agreement was transferred from the Director evaluating and developing financial and commercial risk to the Public Transport Development Authority (PTV), management systems. a statutory authority established under the Transport Members at 30 June 2012 were Michael Tilley, consultant Integration Act, which assumed in April 2012 many (Chair), Jack Diamond, Susan Oliver, Moana Weir and functions formerly performed by the Director. The current John Wilson. franchise agreement will expire on 31 December 2012 with PTV having a further 12 month option. Number of meetings held during the year: Four In July 2004 the Director directed V/Line to facilitate the Remuneration Committee: operation of heritage rail (i.e. steam) services on behalf of Assists the board in the appointment, review and identified rail heritage groups. succession of the Chief Executive Officer and reviewing In April 2007 the Director directed V/Line to operate the the remuneration policy of staff. regional below-rail business following the state’s buyback Members as at 30 June 2012: Moana Weir (Chair), Frank of the infrastructure from Pacific National, to facilitate Tait and Hector McKenzie. track access for the operation of both passenger and freight rail services from 5 May 2007. Number of meetings held during the year: Two

Board Composition Safety, Security and Environment Committee: Assists the board in discharging its obligations in relation The independent boards of VLC and V/Line consist of the to V/Line’s health, safety, security and environment same non-executive directors. The directors of the parent practices and in providing an overview mechanism entity, VLC, are appointed by the Governor-in-Council on for examining the management of operational risk recommendation of the Minister for Public Transport, management in V/Line. made after consultation with the Treasurer. The directors as at 30 June 2012 were Frank Tait (Chair), Jack Diamond Members as at 30 June 2012 were Jack Diamond (Chair), (Acting Deputy Chair), Hector McKenzie, Susan Oliver, Hector McKenzie, Frank Tait, John Wilson and Moana Weir and John Wilson. Simon Lane (consultant). Number of meetings held during the year: Four

CORPORATE GOVERNANCE V/LINE ANNUAL REPORT 2011-12 27 Corporate governance

Board and committee meeting attendance The boards of VLC and V/Line generally hold bi-monthly meetings and additional meetings as required.

V/Line Corporation

Director Eligible to attend Number attended

Frank Tait 6 6

Jack Diamond 6 6

Hector McKenzie 2 2

Susan Oliver 6 4

Moana Weir 6 6

John Wilson 2 2

V/Line Pty Ltd

Board meetings Special purpose board meetings

Director Eligible to attend Number attended Eligible to attend Number attended

Frank Tait 6 6 1 1

Jack Diamond 6 6 1 1

Hector McKenzie 2 2 n/a n/a

Susan Oliver 6 5 1 1

Moana Weir 6 6 1 1

John Wilson 2 2 n/a n/a

Committees

Safety, Security Remuneration Audit & Commercial Risk & Environment Eligible to Number Eligible to Number Eligible to Number Director attend attended attend attended attend attended Frank Tait 2 2 4 4 n/a n/a

Jack Diamond n/a n/a 4 4 4 3

Hector McKenzie n/a n/a 1 0 n/a n/a

Susan Oliver n/a n/a n/a n/a 4 4

Moana Weir 2 2 n/a n/a 4 4

John Wilson n/a n/a 1 1 1 1

Michael Tilley* n/a n/a n/a n/a 4 4

Simon Lane* n/a n/a 2 2 n/a n/a *Consultants

28 V/LINE ANNUAL REPORT 2011-12 CORPORATE GOVERNANCE Corporate governance

Access to information Risk management Directors of VLC and V/Line are allowed full access A process is in place for V/Line and VLC to meet their to information required in order to discharge their obligations under the Victorian Managed Insurance responsibilities. Directors of both entities may obtain Authority Act 1996. The board of V/Line, as the significant independent professional advice on matters arising in the operating entity, considers risk management issues course of board duties. The board of VLC receives written regularly as part of its bi-monthly board meetings, reports from the CEO of VLC at each board meeting on through the activities of both the Safety, Security and compliance by V/Line of its ongoing obligations under Environment Committee and the Audit and Commercial ministerial directions. Directors also have access to Risk Committee, as well as through a robust internal senior managers and/or officers of the entity on whose audit process known as the enterprise wide risk board they serve and, on request, to documents held by management system. V/Line also has in place other the entity. policies and management systems to ensure that operational and compliance matters are efficiently and Indemnification of Officers effectively addressed. V/Line has a Management System Manual, which provides a comprehensive overview of VLC and V/Line have entered separately into deeds of these policies and management systems, including the indemnity and access with each current and former enterprise wide risk management system, legislative director and the company (corporation) secretary. Before compliance policies, an environment management its deregistration on 4 February 2008, Victorian Rail system, and an audit framework for safety, security and Heritage Operations Pty Limited (VRHO) entered into environmental matters. a deed of indemnity and access with its sole director, Mr Rob Barnett. These deeds of VLC, V/Line and VRHO provide for indemnification against liabilities arising from the conduct of the business or from the discharge Victorian Government Risk Management of directors’ and officers’ duties (other than any liability Framework Attestation relating to a wilful breach of duty or trust) and the maintenance of directors’ and officers’ insurance. I, Frank Tait, certify that V/Line Corporation through its wholly owned subsidiary and operating During the financial year, V/Line insured all directors company, V/Line Pty Ltd, has risk management and officers of VLC and V/Line against certain liabilities processes in place consistent with the Australian/ incurred by them in that capacity. In accordance with New Zealand Risk Management Standard AS/NZS normal commercial practices, the terms of the insurance ISO 31000-2009 and an internal control system is contract prohibit disclosure of details of the nature of the liabilities covered by the insurance contract and the in place that enables the executive to understand, amount of the premium paid under the contract. manage and satisfactorily control risk exposures. The Board verifies this assurance and the risk Corporate plan profiles of V/Line Corporation and V/Line Pty Ltd have been critically reviewed within the last In accordance with the Transport Integration Act 2010, 12 months. VLC prepared its corporate plan, including its statement of corporate intent for Ministerial approval. The corporate plan is prepared annually and covers a three year period starting from the current financial year. Frank Tait Chairperson Ministerial directions Date: 26 June 2012 VLC received no ministerial directions for the period ending 30 June 2012.

CORPORATE GOVERNANCE V/LINE ANNUAL REPORT 2011-12 29 Corporate governance

Freedom of Information Any disclosure of improper conduct by V/Line or its employees may be made to: The Freedom of Information Act 1982 allows the public a right of access to documents held by VLC. For the year Protected Disclosure Coordinator ended 30 June 2012, VLC received two applications. V/Line Both applications, which were from the media, were GPO Box 5343 acceded to. As a result, no decisions proceeded to Melbourne VIC 3001 internal review nor progressed to appeal at the Victorian Phone: 03 9619 5065 Civil and Administrative Tribunal. or to the Victorian Ombudsman. Requests for documents in the possession of VLC should In the past year no disclosures have been received or be made in writing, identify as clearly as possible which investigations made, nor have any disclosures been documents are being requested, be accompanied by the referred to the Ombudsman, nor has the Ombudsman statutory fee and addressed to: referred any disclosures, undertaken investigations or made any recommendation to VLC or V/Line. Freedom of Information Officer V/Line Implementation of the Victorian Industry GPO Box 5343 Melbourne VIC 3001 Participation Policy (VIPP) Access charges (e.g. photocopying and search and In October 2003, the Victorian Parliament passed the retrieval charges) may also apply once documents have Victorian Industry Participation Policy Act 2003 which been processed and a decision on access is made. requires public bodies and departments to report on the implementation of VIPP. Departments and public Further information regarding Freedom of Information can bodies are required to apply VIPP in all tenders that be found at www.foi.vic.gov.au are more than $3 million in metropolitan Melbourne and $1 million in regional Victoria. V/Line’s standard Compliance with the Building Act 1993 tendering procedures include compliance with VIPP as and when required. It is V/Line policy to ensure that new buildings and works to existing buildings carried out for and on its behalf V/Line entered into four contracts for the year ended comply with the Building Act 1993. 30 June 2012 to which VIPP thresholds applied and VIPP compliance was undertaken. National Competition Policy Under the National Competition Policy, the guiding Availability of Additional Information principle is that legislation, including future legislative V/Line’s publications and statements are principally found proposals, should not restrict competition, unless it can at vline.com.au. The Standing Directions of the Minister be demonstrated that the benefits of the restriction to for Finance, pursuant to the Financial Management Act the community as a whole outweigh the costs and that 1994, require a range of information to be prepared in the objectives of the legislation can only be achieved by relation to the financial year. The material is retained by restricting competition. V/Line and can be made available to Ministers, Members of Parliament and the public on request, subject to the VLC continues to comply with the requirements of the Freedom of Information Act 1982. National Competition Policy.

Whistleblowers Protection Act The Whistleblowers Protection Act 2001(Vic) encourages and assists people in making disclosures of improper conduct by public bodies or officers. V/Line is committed to the aims and objectives of the Whistleblowers Protection Act and has procedures in place for managing any disclosures about V/Line or any of its officers. These procedures, which are available upon request, provide for the appropriate receipt, assessment and investigation of disclosures and the appropriate action to be taken after investigation. They also allow for managing the welfare of the whistleblower and the person against whom a disclosure has been made. The current procedures established by the public body under Part 6 are available upon request.

30 V/LINE ANNUAL REPORT 2011-12 CORPORATE GOVERNANCE Financial statements

Contents

Consolidated Comprehensive Operating Statement 33

Consolidated Balance Sheet 34

Consolidated Statement of Changes in Equity 35

Consolidated Cash Flow Statement 35

Notes to the Financial Statements 36

Independent auditor’s report 58

Disclosure index 61

FINANCIAL STATEMENTS V/LINE ANNUAL REPORT 2011-12 31 Statutory statement We certify that the attached financial statements for V/Line Corporation and its subsidiary have been prepared in accordance with Standing Direction 4.2 of the Financial Management Act 1994, applicable financial reporting directions, Australian Accounting Standards including interpretations and other mandatory professional reporting requirements. We further state that, in our opinion, the information set out in the Consolidated Comprehensive Operating Statement, Consolidated Balance Sheet, Consolidated Statement of Changes in Equity, Consolidated Cash Flow Statement and Notes to the Financial Statements, presents fairly the financial transactions during the year ended 30 June 2012 and the financial position of the consolidated entity at this date. At the time of signing, we are not aware of any circumstance which would render any particulars included in the financial statements to be misleading or inaccurate. We authorise the attached financial statements for issue on 16 August 2012.

Hector McKenzie Chairperson

Rob Barnett Chief Executive Officer

Ross Pedley General Manager – Corporate & Finance

32 V/LINE ANNUAL REPORT 2011-12 FINANCIAL STATEMENTS Consolidated Comprehensive Operating Statement for the financial year ended 30 June 2012

Notes 2012 2011 $’000 $’000

CONTINUING OPERATIONS

INCOME FROM TRANSACTIONS Revenue 2(a) 426,064 410,994 Other income 2(b) 119,289 103,097 Total income from transactions 545,353 514,091

EXPENSES FROM TRANSACTIONS Operational expenses 3(a) 290,194 267,974 Depreciation 3(b) 16,309 13,281 Administrative expenses 64,222 60,188 Selling expenses 2,182 2,224 Marketing and communication 3,766 3,667 Customer service expenses 3,416 3,179 Project expenses 69,329 51,993 Infrastructure maintenance 61,164 54,874 Trains provided free of charge – operating expenditure 1(h) 33,048 38,756 Total expenses from transactions 543,630 496,136

Net Result before income tax expense 1,723 17,955 Income tax (expense) benefit 4(a) 96 (5,222) NET RESULT FOR THE PERIOD 13 1,819 12,733

OTHER ECONOMIC FLOWS – OTHER NON-OWNER CHANGES IN EQUITY Movement in asset revaluation reserve – – Total other economic flows – Other non-owner changes in equity – –

COMPREHENSIVE RESULT FOR THE PERIOD 1,819 12,733

The above Consolidated Comprehensive Operating Statement should be read in conjunction with the accompanying notes.

FINANCIAL STATEMENTS V/LINE ANNUAL REPORT 2011-12 33 Consolidated Balance Sheet as at 30 June 2012

Notes 2012 2011 $’000 $’000

ASSETS Financial assets Cash and cash equivalents 5 15,872 18,460 Receivables 6 41,267 21,449 Total financial assets 57,139 39,909 Non-financial assets Inventories 7 6,725 6,764 Property, plant and equipment 8 160,939 162,714 Other non-financial assets 9 933 675 Total non-financial assets 168,597 170,153 Total assets 225,736 210,062

LIABILITIES Payables 1(p), 11 51,473 42,041 Short-term provisions 1(q), 12 60,687 57,643 Long-term provisions 1(q), 12 7,279 5,354 Deferred tax liabilities 4(b) 7,535 7,631 Total liabilities 126,524 112,669 Net assets 99,212 97,393

EQUITY Accumulated losses 13 (15,473) (17,292) Asset Revaluation Reserve 13 114,685 114,685 Total equity 99,212 97,393

Commitments for expenditure 21 – –

Contingent assets and liabilities 23 – –

The above Consolidated Balance Sheet should be read in conjunction with the accompanying notes.

34 V/LINE ANNUAL REPORT 2011-12 FINANCIAL STATEMENTS Consolidated Statement of Changes in Equity for the financial year ended 30 June 2012

Notes Equity at Total Equity at 1 July 2011 comprehensive 30 June 2012 result $’000 $’000 $’000 2012 Accumulated (losses) (17,292) 1,819 (15,473) Asset revaluation reserve 114,685 – 114,685 Total equity at end of the financial year 97,393 1,819 99,212

Notes Equity at Total Equity at 1 July 2010 comprehensive 30 June 2011 result $’000 $’000 $’000 2011 Accumulated (losses) (30,025) 12,733 (17,292) Asset revaluation reserve 114,685 – 114,685 Total equity at end of the financial year 84,660 12,733 97,393

The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.

Consolidated Cash Flow Statement for the financial year ended 30 June 2012

Notes 2012 2011 $’000 $’000

CASH FLOWS FROM OPERATING ACTIVITIES Receipts from government (GST inclusive) 447,960 416,250 Receipts from other entities (GST inclusive) 94,809 115,767 Payments to suppliers and employees (GST inclusive) (518,519) (490,043) GST payments to the Australian Taxation Office (14,116) (12,601) Interest received 1,812 1,407 Net cash flows from (used in) operating activities 15 11,946 30,780

CASH FLOWS FROM INVESTING ACTIVITIES Payment for plant and equipment (14,534) (21,457) Net cash flows from (used in) investing activities (14,534) (21,457) Net increase/(decrease) in cash and cash equivalents (2,588) 9,323 Cash and cash equivalents at the beginning of the financial year 18,460 9,137 Cash and cash equivalents at the end of the financial year 5 15,872 18,460

The above Consolidated Cash Flow Statement should be read in conjunction with the accompanying notes.

FINANCIAL STATEMENTS V/LINE ANNUAL REPORT 2011-12 35 Notes to the Financial Statements

Note 1 Summary of significant accounting policies NOTE 1 SUMMARY OF SIGNIFICANT Note 2 Income ACCOUNTING POLICIES Note 3 Operational expenses and depreciation These annual financial statements represent the general purpose financial statements for V/Line Corporation Note 4 Income tax and its controlled entity. The Corporation is a Victorian Note 5 Cash and cash equivalents statutory corporation established in Australia under the Note 6 Receivables Rail Corporations Act 1996. Note 7 Inventories Its principal address is; Note 8 Property, Plant and Equipment V/Line Corporation Note 9 Other non-financial assets Level 23, 570 Bourke Street Melbourne VIC 3000 Note 10 Investments Note 11 Payables (a) Statement of compliance Note 12 Provisions The financial statements have been prepared in Note 13 Equity accordance with the Financial Management Act 1994 and applicable Australian Accounting Standards, Note 14 Financial instruments including interpretations (AASs), issued by the Australian Note 15 Cash flow information Accounting Standards Board (AASB). Note 16 Responsible persons The annual financial statements were authorised Note 17 Remuneration of Directors and Accountable for issue by the Board of Directors (“The Board”) on Officer 16 August 2012. Note 18 Remuneration of executives Accounting policies are selected and applied in a manner which ensures that the resulting financial information Note 19 Remuneration of auditors satisfies the concepts of relevance and reliability, Note 20 Related party disclosures thereby ensuring that the substance of the underlying Note 21 Operating leases and expenditure transactions or other events is reported. commitments (b) Basis of accounting preparation and measurement Note 22 Employee benefits and superannuation commitments The accrual basis of accounting has been applied in the preparation of these financial statements whereby assets, Note 23 Contingent assets and liabilities liabilities, equity, income and expenses are recognised in Note 24 Subsequent events the reporting period to which they relate, regardless of Note 25 Economic dependency when cash is received or paid. Note 26 Dividends The financial statements have been prepared in accordance with the historical cost convention except for certain non-current physical assets which, subsequent to acquisition, are measured at a revalued amount being their fair value at the date of the revaluation less any subsequent accumulated depreciation and subsequent impairment losses. Revaluations are conducted with sufficient regularity to ensure that carrying amounts do not materially differ from fair value. Historical cost is based on the fair values of the consideration given in exchange for assets. The accounting policies set out below have been applied in preparing the financial statements for the year ended 30 June 2012 and the comparative information presented for the year ended 30 June 2011. This financial report is presented in Australian Dollars and all values are rounded to the nearest thousand dollars ($’000) unless otherwise stated.

36 V/LINE ANNUAL REPORT 2011-12 FINANCIAL STATEMENTS Notes to the Financial Statements

(c) Principles of consolidation of controlled entities The financial report comprises the consolidated financial statements of V/Line Corporation and its subsidiary V/Line Pty Ltd. The effects of all transactions between entities in the consolidated entity are eliminated in full. Where control of an entity is obtained during a financial year, its results are included in the Consolidated Comprehensive Operating Statement from the date on which control commences. Where control of an entity ceases during a financial year its results are included for that part of the year during which control exists. V/Line Corporation is represented by: Investment in subsidiary $1 Contributed equity $1 The Corporation has no other assets or liabilities. Given the immaterial nature of the investment by the parent entity it has not been reported separately. The controlled entities consolidated within the V/Line Corporation group are: Name Country of incorporation Equity interest 2012 2011 $’000 $’000 V/Line Pty Ltd Australia 100% – –

(d) Not for profit sufficient for it to comply with the solvency requirements under the Corporations Act 2001. The board is of the view that the consolidated entity qualifies as a not-for-profit entity since the primary Public Transport Victoria has also agreed that, while obligation of the Corporation is the delivery of subsidised the consolidated entity is under state ownership, that public transportation services to regional Victoria which it will meet all of the consolidated entity’s employee is consistent with FRD 108A. The Corporation has signed entitlements as and when those amounts fall due during a Franchise Agreement with Public Transport Victoria the 2012/13 financial year in the event the consolidated formerly the Department of Transport from 2 April 2012 entity is not able to meet these financial obligations. which determines the services that the Corporation The financial report does not include any adjustments provides and the payments received for those services. relating to the recoverability and classification of recorded Hence, the Corporation’s funding is based on achieving asset amounts, nor to the amounts and classification of a small loss before interest, depreciation and tax and liabilities that may be necessary should the consolidated neither the mission nor corporate strategies of the entity not continue as a going concern. Corporation reflect achieving profit. The Corporation has been deemed to have a not-for-profit status and Refer to note 25 for further details of the consolidated accordingly complies with accounting standards entity’s economic dependency on the State Government applicable to not‑for‑profit entities. of Victoria.

(e) Going concern (f) National Tax Equivalent Regime (NTER) Notwithstanding the deficiency in net current assets By direction of the Treasurer of Victoria, under the State of $46.9 million (2011: $52.3 million) this financial Owned Enterprise Act 1992, the consolidated entity report has been prepared on a going concern basis. The entered into the NTER on 1 October 2003. Any NTER consolidated entity is subsidised by its ultimate parent expense payable is calculated on operating profit or loss entity, the State Government of Victoria, pursuant to a adjusted for temporary differences between NTER income Franchise Agreement with Public Transport Victoria. and accounting income. The funding requirements for the year ended 30 June Deferred tax is accounted for using the balance sheet 2013 have been agreed with Public Transport Victoria liability method in respect of temporary differences under an approved budget allocation pursuant to the arising between the tax bases of assets and liabilities Franchise Agreement. The Franchise Agreement contains and their carrying amounts in the financial statements. provisions for the Corporation’s funding requirements to No deferred income tax will be recognised from the initial be met by the State Government of Victoria throughout recognition of an asset or liability, excluding a business the franchise period. combination, where there is no effect on accounting or taxable profit or loss. Public Transport Victoria acknowledges and agrees that, for the benefit of the directors of the consolidated entity and without limiting the level of financial support, to provide the consolidated entity with funding to a level

FINANCIAL STATEMENTS V/LINE ANNUAL REPORT 2011-12 37 Notes to the Financial Statements

Deferred tax is calculated at the tax rates that are Ticket sales expected to apply to the period when the asset is Fare-box revenue is recognised when the passenger realised or liability is settled. Deferred tax is credited services are provided. Revenue from tickets that relate to in the Comprehensive Operating Statement except passenger trips to be taken after the reporting date are where it relates to items that may be credited directly to deferred and recognised as a liability. equity, in which case the deferred tax is adjusted directly against equity. Contributions Deferred income tax assets are recognised to the extent The State Government of Victoria provides subsidies that it is probable that future tax profits will be available that are recognised as revenue when they are controlled against which deductible temporary differences can by the Corporation, which is generally upon receipt of be utilised. the subsidy. The amount of benefits brought to account or which may Value in kind be realised in the future is based on the assumption that no adverse change will occur in income taxation Use of VLocity, diesel multiple unit trains which are legislation and the anticipation that the Corporation will leased or owned by Rolling Stock Holdings Pty Ltd and derive sufficient future assessable income to enable the received free of charge (“Value in Kind”; “VIK”). The VIK benefit to be realised and comply with the conditions of measurement is based on the value of the lease payments deductibility imposed by the law. or the notional lease value based on the capital cost per unit of rolling stock purchased outright. Under existing arrangements with the Administrator of the National Tax Equivalent Regime, V/Line Pty Ltd and (i) Cash and cash equivalents its holding company V/Line Corporation are treated as Cash and cash equivalents comprise cash on hand separate entities for the purposes of their income tax and cash at bank, deposits at call and highly liquid compliance obligations. Each entity accounts for tax on a investments with an original maturity of three months or stand-alone basis not on a consolidated income tax basis. less, which are held for the purpose of meeting short term (g) Goods and Services Tax cash commitments rather than for investment purposes, and which are readily convertible to known amounts of Income, expenses and assets are recognised net of the cash and are subject to an insignificant risk of changes amount of associated GST unless the GST incurred is not in value. recoverable from the taxation authority in which case it is recognised as part of the cost of acquisition of the asset (j) Trade and other receivables or as part of the expense. Trade and other receivables representing passenger, inter- Receivables and payables are stated inclusive of the operator and other revenues receivable are carried at amount of GST receivable or payable. The net amount nominal amounts due less any allowance for impairment. of GST recoverable from, or payable to, the taxation A provision for impairment is recognised when collection authority is included with other receivables or payables in of the full amount is no longer probable ( 90 days). For the Consolidated Balance Sheet. > trade receivables, normal terms are 30 days and 7 days Cash flows are presented on a gross basis. The GST for agency accounts. components of cash flows arising from investing or Receivables from related parties consist predominantly financing activities which are recoverable from, or payable of amounts owing from Public Transport Victoria and are to the taxation authority, are presented as operating carried at nominal value due to their short term nature. cash flows. There is no interest charged on related party receivables. (h) Revenue (k) Inventories Revenue is recognised and measured at the fair value of Inventory is stated at the lower of cost and net realisable the consideration received or receivable to the extent it value. V/Line has a contract with a supplier for the supply is probable that the economic benefits will flow to the of spare parts which are to be made available upon Corporation and that it can be reliably measured. request. This practice is considered by industry to be best practice as it has the lowest storage costs. These spare parts are valued using the weighted average cost formula. Stock of fuel is also measured using the weighted average cost formula.

38 V/LINE ANNUAL REPORT 2011-12 FINANCIAL STATEMENTS Notes to the Financial Statements

(l) Investment in Subsidiaries (ii) Depreciation of property, plant and equipment Investments in subsidiaries are carried at cost. Depreciation is calculated on a straight-line basis over the estimated useful life of the assets, including (m) Property, Plant and Equipment rolling stock and leasehold improvements. The rolling stock fleet comprises diesel electric locomotives, All non-financial physical assets are measured initially carriages, diesel multiple units (known as sprinters) at cost and subsequently revalued at fair value less and vans. accumulated depreciation and impairment losses. The cost of constructed assets includes the costs of all Repairs and maintenance work on rolling stock is materials used in construction and direct labour costs of scheduled in accordance with V/Line Pty Ltd’s rolling the project. stock management plan and rail safety management (i) Valuation of rolling stock and rotables standards. Scheduled maintenance examinations on rolling stock are determined at set intervals Non-financial physical assets are measured at fair depending on the type of rolling stock. value in accordance with FRD 103D issued by the Minister for Finance. A full revaluation occurs every The refurbishment program included in the rolling 5 years, based on the asset’s government purpose stock management plan includes major examinations classification but may occur more frequently if fair and overhauls of rolling stock. The consolidated value assessments indicate material changes in value. entity treats these examinations as significant V/Line Pty Ltd undertook an independent revaluation upgrades, which extend the useful life of the rolling of its rolling stock as at 30 June 2010. The 2010 stock. Included in the refurbishment program is valuation was performed by rolling stock specialists the replacement of major units such as traction and reviewed by Valuer General Victoria. Due to the and locomotive motors, generators, wheel sets and specialised nature of the assets, V/Line has adopted bogies. These items are capitalised and depreciated depreciated replacement cost as the valuation basis over their useful life. All other maintenance for its rolling stock. This approach is in accordance examinations and minor work are treated as repairs with the requirements of AASB 116 and FRD 103D, and maintenance and expensed when incurred. which states that the net recoverable test does (iii) Estimated useful lives of property, plant and not apply to a not-for-profit entity since there is no equipment dependence on its assets abilities to generate net The estimated useful lives for the different asset cash inflows. classes for both current and prior years are set Revaluation increments or decrements are accounted out below; for as follows; Plant and equipment 3 to 10 years – Net revaluation increments net of tax effect are credited directly against the asset revaluation Rolling stock 4 to 17 years reserve, except where the net increment reverses a Leasehold improvements 3 to 10 years net revaluation decrement previously recognised as an expense in net profit or loss/result in that same Rolling stock – capitalised improvements 4 to 17 years class of assets. Where the exception applies, the The assets’ residual values, useful lives and revaluation increment is recognised as revenue in depreciation methods are reviewed, and adjusted if net profit or loss/result; appropriate, at each financial year end. – Net revaluation decrements are recognised as an expense in net profit or loss/result, except where (iv) Leasehold improvements a credit balance exists in the asset revaluation The cost of improvements to leasehold properties reserve in respect of the same class of assets. is amortised over the unexpired period of the lease Where the exception applies the net revaluation or the estimated useful life of the improvement, decrement grossed up for any related recognised whichever is the shorter. current tax and deferred tax is debited directly to the asset revaluation reserve. Revaluation increments and revaluation decrements relating to individual assets within an asset class are offset against one another within that asset class and are not offset in respect of assets in different classes.

FINANCIAL STATEMENTS V/LINE ANNUAL REPORT 2011-12 39 Notes to the Financial Statements

(n) Leased assets (q) Employee benefits (i) Operating leases Provisions are made for employee benefits accumulated Lease payments for operating leases, where as a result of employees rendering services up to the substantially all the risks and benefits of ownership reporting date. remain with the lessor, are recognised as an expense Liabilities arising in respect of wages and salaries, in the Consolidated Comprehensive Operating annual leave, and any other employee benefits expected Statement on a straight-line basis over the term of to be settled within 12 months of the reporting date the lease, unless another systematic basis is more are measured at their nominal amounts based on representative of the pattern of the benefits derived remuneration rates which are expected to be paid when from the use of the leased assets. the liability is settled, including related on-costs. (ii) Lease incentives Long service leave liabilities are assessed at balance In the event that lease incentives are received to enter date having regard to expected employees remuneration into operating leases, such incentives are recognised rates on settlement including related on-costs, expected as a liability. The aggregate benefits of incentives accumulated years of employment on settlement and are recognised as a reduction of rental expense on a past experience. straight-line basis, except where another systematic basis is more representative of the time pattern Provisions made for unconditional long service leave are in which economic benefits from the leased asset classified as a current liability even when the liability are consumed. is not expected to be settled within 12 months, as the Corporation does not have an unconditional right to defer (o) Impairment of assets the settlement. The component of leave expected to be settled within 12 months is measured at nominal value At each reporting date, the Corporation reviews the and the component expected to be settled beyond 12 carrying amounts of its tangible assets to determine months is measured at present value. In determining the whether there is any indication that those assets have present value of future cash outflows, the interest rates suffered an impairment loss. If any such indication exists, relating to government guaranteed securities are used, the recoverable amount of the asset, being the higher of which have terms to maturity approximating the terms of the asset’s fair value less costs to sell and depreciated the related liability. replacement cost, is compared to the asset’s carrying amount. Any excess of the asset’s carrying amount over Provisions made for conditional long service leave its recoverable amount is recognised as an expense in are classified as a non-current liability as there is an the Consolidated Comprehensive Operating Statement, unconditional right to defer the settlement of the unless the relevant asset is carried at fair value, in which entitlement until the employee has completed seven case the impairment loss is accounted for by reducing the years of continuous service. Conditional long service asset revaluation reserve. leave is measured at present value.

(p) Payables Employee benefit expenses arising in respect of salaries and wages, annual leave, long service leave, other leave Payables consist predominantly of trade creditors and benefits and other employee benefits are charged against other sundry liabilities. the Consolidated Comprehensive Operating Statement. Trade creditors represent liabilities for goods and services The contributions made to superannuation funds by the provided to the consolidated entity prior to the end of the consolidated entity are charged against the Consolidated financial year and which are unpaid. These amounts are Comprehensive Operating Statement when due. brought to account when the obligation to make future payments in respect of the purchase of the goods and (r) Commitments services arises. Commitments are disclosed at their nominal value and Other liabilities included in payables mainly consist of inclusive of the goods and services tax (GST) payable. unearned/prepaid income, goods and services tax and payroll related payables. (s) Contingent assets and contingent liabilities All payables are recognised at amortised cost and are not Contingent assets and contingent liabilities are not discounted due to their short term nature. recognised in the Consolidated Balance Sheet, but are disclosed by way of a note and, if quantifiable, are measured at nominal value. Contingent assets and contingent liabilities are presented inclusive of GST receivable or payable respectively.

40 V/LINE ANNUAL REPORT 2011-12 FINANCIAL STATEMENTS Notes to the Financial Statements

(t) Significant accounting estimates and judgments (ii) Allowance for impairment loss on trade receivables Management evaluate estimates and judgments There has been a $63,851 increase in the provision incorporated into the financial report based on historical for doubtful debts in 2011/2012 based on a detailed knowledge and best available current information. analysis of the recoverability of individual accounts. Estimates assume a reasonable expectation of (iii) Useful lives of property, plant & equipment future events and are based on current trends and The useful lives of property, plant & equipment economic data, obtained both externally and within the are reviewed on an annual basis to ensure their consolidated entity. contribution is realistically based on their useful Outlined below are the critical estimates and judgements economic life. made by management in the process of applying the (iv) Recovery of deferred tax asset consolidated entity’s accounting policies, and that have the most significant effect on the amounts recognised in Deferred tax assets are recognised for deductible the financial statements. temporary differences as management considers that it is probable that future taxable profits will be (i) Impairment available to utilise these temporary differences. The Consolidated entity assesses impairment at each reporting date by evaluating conditions specific to the (u) New accounting standards and interpretations consolidated entity that may lead to an impairment Certain new accounting standards and interpretations of assets. Where an impairment trigger exists, the have been published that are not mandatory for the recoverable amount of the asset is determined. reporting period ended 30 June 2012. As at 30 June 2012, Depreciated replacement cost calculations performed the following standards and interpretations had been in assessing recoverable amounts incorporate a issued but were not mandatory for the financial year number of key estimates. ended 30 June 2012. V/Line has not, and does not intend to adopt these standards early.

Standard/Interpretation Summary Applicable for Impact on financial annual reporting statements periods beginning on or after AASB 9 Financial This Standard simplifies Beginning 1 Jan Detail of impact is still being Instruments. requirements for the 2013. assessed. classification and measurement of financial assets resulting from Phase 1 of the IASB’s project to replace IAS 39 Financial Instruments: Recognition and Measurement (AASB 139 Financial Instruments: Recognition and Measurement). AASB 13 Fair Value This Standard outlines the Beginning 1 Jan This Standard may increase Measurement. requirements for measuring 2013. the disclosure for fair the fair value of assets and value measurements as liabilities and replaces the V/Line has assets that are existing fair value definition measured using depreciated and guidance in other AASs. replacement cost. AASB 13 includes a ‘fair value hierarchy’ which ranks the valuation technique inputs into three levels using unadjusted quoted prices in active markets for identical assets or liabilities; other observable inputs; and unobservable inputs.

FINANCIAL STATEMENTS V/LINE ANNUAL REPORT 2011-12 41 Notes to the Financial Statements

Standard/Interpretation Summary Applicable for Impact on financial annual reporting statements periods beginning on or after AASB 1053 Application of This Standard establishes a Beginning The Victorian Government Tiers of Australian Accounting differential financial reporting 1 Jul 2013. is currently considering Standards. framework consisting of two the impacts of Reduced tiers of reporting requirements Disclosure Requirements for preparing general purpose (RDRs) for certain public financial statements. sector entities and has not decided if RDRs will be implemented in the Victorian Public Sector. AASB 2009-11 Amendments This Standard gives effect to Beginning No significant impact to Australian Accounting consequential changes arising 1 Jan 2013. is expected from these Standards arising from AASB from the issuance of AASB 9. amendments on entity 9 [AASB 1, 3, 4, 5, 7, 101, reporting. 102, 108, 112, 118, 121, 127, 128, 131, 132, 136, 139, 1023 and 1038 and Interpretations 10 and 12]. AASB 2010-2 Amendments This Standard makes Beginning The Victorian Government to Australian Accounting amendments to many 1 Jul 2013. is currently considering Standards arising from Australian Accounting the impacts of Reduced Reduced Disclosure Standards, including Disclosure Requirements Requirements. Interpretations, to (RDRs) and has not decided if introduce reduced RDRs will be implemented in disclosure requirements the Victorian Public Sector. to the pronouncements for application by certain types of entities. AASB 2010-7 Amendments These amendments are in Beginning No significant impact to Australian Accounting relation to the introduction of 1 Jan 2013. is expected from these Standards arising from AASB AASB 9. amendments on entity 9 (December 2010) [AASB 1, reporting. 3, 4, 5, 7, 101, 102, 108, 112, 118, 120, 121, 127, 128, 131, 132, 136, 137, 139, 1023 & 1038 and Interpretations 2, 5, 10, 12, 19 & 127]. AASB 2010-10 Further The amendments ultimately Beginning No significant impact Amendments to Australian affect AASB 1 First-time 1 Jan 2013. is expected from these Accounting Standards – Adoption of Australian amendments on entity Removal of Fixed Dates for Accounting Standards and reporting. First-time Adopters [AASB provide relief for first-time 2009-11 & AASB 2010-7]. adopters of Australian Accounting Standards from having to reconstruct transactions that occurred before their date of transition to Australian Accounting Standards.

42 V/LINE ANNUAL REPORT 2011-12 FINANCIAL STATEMENTS Notes to the Financial Statements

Standard/Interpretation Summary Applicable for Impact on financial annual reporting statements periods beginning on or after AASB 2011-2 Amendments The objective of this Beginning The Victorian Government to Australian Accounting amendment is to include some 1 Jul 2013. is currently considering Standards arising from the additional disclosure from the the impacts of Reduced Trans-Tasman Convergence Trans-Tasman Convergence Disclosure Requirements Project – Reduced Disclosure Project and to reduce (RDRs) and has not decided if Requirements [AASB 101 & disclosure requirements for RDRs will be implemented in AASB 1054]. entities preparing general the Victorian Public Sector. purpose financial statements under Australian Accounting Standards – Reduced Disclosure Requirements. AASB 2011-4 Amendments This Standard amends AASB Beginning No significant impact to Australian Accounting 124 Related Party Disclosures 1 Jul 2013. is expected from these Standards to remove by removing the disclosure amendments on entity Individual Key Management requirements in AASB 124 reporting. Personnel Disclosure in relation to individual key Requirements [AASB 124]. management personnel (KMP). AASB 2011-8 Amendments This Standard makes Beginning This Standard may increase to Australian Accounting consequential changes to 1 Jan 2013. the disclosure for fair Standards arising from AASB a range of Standards and value measurements as 13 [AASB 1, 2, 3, 4, 5, 7, 9, Interpretations arising from V/Line has assets that are 2009-11, 2010-7, 101, 102, the issuance of AASB 13. measured using depreciated 108, 110, 116, 117, 118, In particular, this Standard replacement cost. 119, 120, 121, 128, 131, 132, replaces the existing 133, 134, 136, 138, 139, 140, definition and guidance of 141, 1004, 1023 & 1038 and fair value measurements in Interpretations 2, 4, 12, 13, other Australian Accounting 14, 17, 19, 131 & 132]. Standards and Interpretations. AASB 2011-9 Amendments The main change resulting Beginning This Standard could change to Australian Accounting from this Standard is the 1 Jul 2012. the current presentation Standards – Presentation requirement for entities to of ‘Other economic flows – of Items of Other group items presented in other other movements in equity’ Comprehensive Income comprehensive income (OCI) depending on whether [AASB 1, 5, 7, 101, 112, 120, on the basis on whether they the items are potentially 121, 132, 133, 134, 1039 & are potentially reclassifiable reclassifiable to profit or loss 1049]. to profit or loss subsequently subsequently. (reclassification adjustments).

FINANCIAL STATEMENTS V/LINE ANNUAL REPORT 2011-12 43 Notes to the Financial Statements

2012 2011 $’000 $’000

NOTE 2 INCOME (a) Revenue Fare-box revenue 85,896 77,493 Inter-operator income 1,150 1,058 Franchise subsidy 271,724 257,000 State subsidy 12,400 12,000 Access charges 6,178 4,199 Other income 15,668 20,488 Trains received free of charge 33,048 38,756 426,064 410,994 (b) Other income Interest – other persons/corporation 1,812 1,407 Government project reimbursement revenue 117,477 101,690 119,289 103,097 Total income 545,353 514,091

NOTE 3(a) OPERATIONAL EXPENSES Franchise performance penalty 2,559 2,482 Other direct costs 11,806 5,845 Fleet maintenance 74,069 67,232 Fuel costs 28,425 24,136 Road coach services 10,090 6,277 Access charges 19,428 16,589 Repairs & maintenance 4,988 9,418 151,365 131,979 Direct labour costs Salaries and wages 114,513 110,947 Superannuation 12,398 11,971 Annual leave and long service leave expense 4,969 5,435 Other on-costs (payroll tax and work cover levy) 6,949 7,642 138,829 135,995 Total operational expenses 290,194 267,974

NOTE 3(b) DEPRECIATION OF NON-CURRENT ASSETS Depreciation of non-current assets Plant and equipment 1,280 1,236 Leasehold improvements 475 392 Rolling stock 9,846 9,846 Rolling stock – capitalised improvements 4,708 1,807 16,309 13,281

44 V/LINE ANNUAL REPORT 2011-12 FINANCIAL STATEMENTS Notes to the Financial Statements

2012 2011 $’000 $’000

NOTE 4 INCOME TAX (a) Income tax expense/(benefit) Accounting profit/(loss) before income tax 1,723 17,955 Prima facie tax payable on profit from ordinary activities before income tax at 30% (2011: 30%) 517 5,387 Tax expense relating to non-temporary differences – 1 517 5,388 Deferred tax expense relating to reversal of temporary differences (613) (166) Income tax expense/(benefit) (96) 5,222 The component of tax expense (benefit) comprises: Current tax – – Deferred tax (96) 5,222 (96) 5,222 Weighted average tax rate 5.57% 29.08% (b) Deferred tax liability Gross deferred tax assets – temporary differences Carry forward tax losses 12,046 18,387 Accruals 1,268 679 Provision for employee entitlements 19,144 17,455 Other provisions 1,505 1,792 Total deferred tax assets 33,963 38,313 Deferred tax liability Accelerated depreciation for taxation purposes 41,458 45,620 Other 40 324 Total deferred tax liability 41,498 45,944 Net deferred tax liability 7,535 7,631 Movement in deferred tax liability: Opening balance 7,631 2,409 Equity – tax effect of asset revaluation – – Income tax (benefit) expense (96) 5,222 Aggregate deferred tax liability 7,535 7,631

FINANCIAL STATEMENTS V/LINE ANNUAL REPORT 2011-12 45 Notes to the Financial Statements

2012 2011 $’000 $’000

NOTE 5 CASH AND CASH EQUIVALENTS Cash at bank 15,765 18,333 Cash on hand 107 127 15,872 18,460

NOTE 6 RECEIVABLES Trade receivables 40,449 19,680 Less: provision for impairment (478) (413) 39,971 19,267 Fuel rebate receivables 1,167 1,188 Other receivables 129 994 41,267 21,449 Related party receivables Trade receivables include the following receivables from related parties: Public Transport Victoria 34,209 14,493 Other related parties 19 42 34,228 14,535

Terms and conditions relating to the above financial instruments: Credit Sales are on 30 day terms. Details of the terms and conditions of related parties’ receivables are set out in Note 20. (a) Ageing analysis of contractual receivables Please refer to Note 14 for the ageing analysis of contractual receivables. (b) Nature and extent of risk arising from contractual receivables Please refer to Note 14 for the nature and extent of risks arising from contractual receivables.

46 V/LINE ANNUAL REPORT 2011-12 FINANCIAL STATEMENTS Notes to the Financial Statements

2012 2011 $’000 $’000

NOTE 7 INVENTORIES Spares and materials at cost 6,725 6,764

NOTE 8 PROPERTY, PLANT AND EQUIPMENT Plant and equipment At fair value 31,399 30,484 Accumulated depreciation (27,686) (26,526) 3,713 3,958 Rolling stock At fair value 136,017 136,017 Accumulated depreciation (19,692) (9,846) 116,325 126,171 Leasehold improvements At fair value 5,955 5,278 Accumulated amortisation (2,710) (2,235) 3,245 3,043 Rolling stock – capitalised improvements At fair value 24,120 15,068 Accumulated depreciation (6,515) (1,807) 17,605 13,261 Capital works in progress 20,051 16,281 Total property, plant and equipment 160,939 162,714

Valuation of Rolling Stock An independent valuation of all rolling stock was conducted by rolling stock specialists with an effective date of 30 June 2010, in accordance with the requirements of FRD 103D. As the market for the rolling stock lacks sufficient depth due to the specialised nature of the assets and the small population and volume traded, other indirect methods have been used. The depreciated replacement cost method has been used as the primary method of valuation and has provided a fair value for the V/Line Pty Ltd rolling stock fleet as at 30 June 2010 of $136 million.

FINANCIAL STATEMENTS V/LINE ANNUAL REPORT 2011-12 47 Notes to the Financial Statements

NOTE 8 PROPERTY, PLANT AND EQUIPMENT (continued)

Movement in carrying amounts The movement in the carrying amounts for each class of property, plant and equipment between the beginning and the end of the year is as follows: 2012 2011 $’000 $’000 Plant and equipment Carrying amount at beginning of year 3,958 4,681 Additions 131 207 Transfers from works in progress 957 319 Disposals (53) (13) Depreciation expense (1,280) (1,236) Carrying amount at end of year 3,713 3,958

Rolling stock at fair value Carrying amount at beginning of year 126,171 136,017 Additions – – Impairment – – Disposals – – Depreciation expense (9,846) (9,846) Carrying amount at end of year 116,325 126,171

Leasehold improvements Carrying amount at beginning of year 3,043 3,355 Additions 300 80 Transfers from works in progress 377 – Depreciation expense (475) (392) Carrying amount at end of year 3,245 3,043

Rolling stock at cost – capitalised improvements Carrying amount at beginning of year 13,261 – Additions 7,664 12,929 Transfer from works in progress 1,388 2,139 Disposals – – Depreciation expense (4,708) (1,807) Carrying amount at end of year 17,605 13,261

Capital works in progress Carrying amount at beginning of year 16,281 10,485 Additions 6,492 8,254 Transfers to fixed assets (2,722) (2,458) Carrying amount at end of year 20,051 16,281

48 V/LINE ANNUAL REPORT 2011-12 FINANCIAL STATEMENTS Notes to the Financial Statements

2012 2011 $’000 $’000 Total property, plant and equipment Carrying amount at beginning of year 162,714 154,538 Additions 14,587 21,470 Transfers from works in progress 2,722 2,458 Disposals (53) (13) Depreciation expense (16,309) (13,281) Transfers to fixed assets (2,722) (2,458) Impairment – – Carrying amount at end of year 160,939 162,714

NOTE 9 OTHER NON-FINANCIAL ASSETS Prepayments 933 675

NOTE 10 INVESTMENTS V/Line Corporation does not own any investments with the exception of the controlled entity V/Line Pty Ltd as detailed in note 1(c).

NOTE 11 PAYABLES Unsecured Trade payables 27,123 13,324 Accruals 13,077 19,828 Deferred income 933 858 Other payables 9,890 8,031 Total Payables 51,023 42,041 Amounts payable to related parties are as follows: Other related parties 1,521 1,793 1,521 1,793

NOTE 12 PROVISIONS Short-term provisions Employee benefits 56,535 52,828 Other provisions (employee related) 4,152 4,815 60,687 57,643 Movement in other provisions: Opening balance 4,815 1,130 Additional provisions raised during the year – 5,326 Amounts used (663) (1,641) Closing balance 4,152 4,815

Long-term provisions Employee benefits 7,279 5,354 7,279 5,354

FINANCIAL STATEMENTS V/LINE ANNUAL REPORT 2011-12 49 Notes to the Financial Statements

2012 2011 $’000 $’000

NOTE 13 EQUITY Accumulated Losses Balance at the beginning of the year (17,292) (30,025) Net profit/(loss) 1,819 12,733 Balance at the end of the year (15,473) (17,292)

Asset revaluation reserve Balance at the beginning of the year 114,685 114,685 Balance at the end of the year 114,685 114,685

NOTE 14 FINANCIAL INSTRUMENTS (a) Financial risk management, objectives and policies The Corporation’s financial instruments consist of deposits with banks, accounts receivable and accounts payable. The main purpose of non–derivative financial instruments is to prudentially manage the consolidated entity’s financial risks within the Government’s policy parameters. The group does not have any derivative instruments as at 30 June 2012. A finance committee consisting of senior executives of the Corporation meet on a regular basis to consider currency and interest rate exposure and to evaluate treasury management strategies in the context of the most recent economic conditions and forecasts. The main risks the Corporation is exposed to through its financial instruments are interest rate risk, liquidity risk and credit risk. Categorisation of financial instruments Contractual financial assets Contractual financial liabilities 2012 – loans and receivables at amortised cost Contractual financial assets Cash and cash equivalents 15,872 – Trade and other receivables 41,267 – 57,139 – Contractual financial liabilities Trade and other payables – (51,023) – (51,023) Net gain/(loss) on financial instruments by category Interest income 1,812 – 1,812 –

2011 Contractual financial assets Cash and cash equivalents 18,460 – Trade and other receivables 21,449 – 39,909 – Contractual financial liabilities Trade and other payables – (42,041) – (42,041) Net gain/(loss) on financial instruments by category Interest income 1,407 – 1,407 –

50 V/LINE ANNUAL REPORT 2011-12 FINANCIAL STATEMENTS Notes to the Financial Statements

Interest Rate Risk As at 30 June 2012 the Corporation had no debt. The exposure to interest rate risk and the effective weighted average interest rates for financial assets at balance dates are as follows: Floating Non-interest 2012 Total interest rate bearing Financial assets Cash and cash equivalents 15,872 – 15,872 Trade and other receivables – 41,267 41,267 15,872 41,267 57,139 3.42% n/a Financial liabilities Trade and other payables – 51,023 51,023 – 51,023 51,023

2011 Financial assets Cash and cash equivalents 18,460 – 18,460 Trade and other receivables – 21,449 21,449 18,460 21,449 39,909 4.65% n/a Financial liabilities Trade and other payables – 42,041 42,041 – 42,041 42,041

Liquidity risk Liquidity risk is the risk that the Corporation would be unable to meet its financial obligations as and when they fall due. The Corporation manages liquidity risk by closely monitoring forecast cash flows to ensure that adequate funding is maintained at all times. Please also refer note 1(e) and 25 for additional commentary. Public Transport Victoria has agreed to provide the consolidated entity funding to a level sufficient for it to comply with the solvency requirements under the Corporations Act 2001.

Credit risk The Corporation’s exposure to credit risk arises from the potential default of a counter party on their contractual obligations resulting in financial loss to the Corporation. Credit risk associated with the Corporation’s financial assets is minimal as the main debtor is the Victorian Government. For debtors other than Government, the Corporation’s policy is to transact with entities that have high credit ratings and to obtain sufficient collateral or credit enhancements where appropriate. In addition, the Corporation does not engage in hedging for its contractual financial assets and mainly obtains contractual financial assets that are on fixed interest, except for cash assets, which are mainly cash at bank. As with the Corporation’s policy for debtors, it only deals with banks with high credit ratings. Provision of impairment for contractual financial assets is calculated based on objective experience that the debtors may not pay. Credit risk in trade receivables is also managed by enforcing disclosed payment terms and ensuring that debt collection policies and procedures are followed at all times. There are no material financial assets which are individually determined to be impaired.

FINANCIAL STATEMENTS V/LINE ANNUAL REPORT 2011-12 51 Notes to the Financial Statements

Credit quality of contractual financial assets that are either past due or impaired AAA Credit 2012 Other Total Rating Contractual financial assets Cash and cash equivalents 15,872 – 15,872 Trade and other receivables – 41,267 41,267 15,872 41,267 57,139

2011 Contractual financial assets Cash and cash equivalents 18,460 – 18,460 Trade and other receivables – 21,449 21,449 18,460 21,449 39,909

(b) Net fair values The carrying amount of financial assets recorded in the Consolidated Balance Sheet, net of any allowances for losses, represents the Corporation’s maximum exposure to credit risk without taking into account the value of any collateral, or other security obtained. The carrying amounts of financial assets and financial liabilities approximate their fair values and are shown below; 2012 2011 $’000 $’000 Financial assets Cash and cash equivalents 15,872 18,460 Trade and other receivables 41,267 21,449 57,139 39,909 Financial Liabilities Trade and other payables (51,023) (42,041) Net financial assets 6,116 (2,132)

(c) Ageing Analysis of contractual financial assets

Past due but not impaired Impaired 2012 Carrying Not past Less than 1 to 3 3 months 1 to 5 financial Amount due and not 1 month months to 1 year years assets impaired (i) Receivables: Trade receivables 40,449 27,747 4,052 3,360 4,812 – 478 Total 40,449 27,747 4,052 3,360 4,812 – 478

2011 (i) Receivables: Trade receivables 19,680 15,386 3,359 488 34 – 413 Total 19,680 15,386 3,359 488 34 – 413

52 V/LINE ANNUAL REPORT 2011-12 FINANCIAL STATEMENTS Notes to the Financial Statements

Price risk The Corporation is not exposed to any material commodity price risk.

Market risk The Corporation’s exposure to market risk sensitivities at balance date is not considered to be material.

Foreign currency risk The Corporation is not exposed to fluctuations in foreign currencies. 2012 2011 $’000 $’000

NOTE 15 CASH FLOW INFORMATION (a) Reconciliation of operating profit/(loss) after tax to net cash flows from operations Operating profit/(loss) after tax 1,819 12,733 Non-cash flows in profit/(loss): Depreciation 16,309 13,281 Tax expense/(benefit) (96) 5,222 Change in operating assets and liabilities: (Increase)/decrease in trade and other receivables (19,818) 4,132 (Increase)/decrease in inventories 39 282 (Increase)/decrease in prepayments (258) 199 (Decrease)/increase in trade and other payables 8,982 (10,504) (Decrease)/increase in employee benefits 4,969 5,435 Net cash from/(used in) operating activities 11,946 30,780

(b) Reconciliation of cash Cash balance comprises: – Cash at bank 15,765 18,333 – Cash on hand 107 127 15,872 18,460

NOTE 16 RESPONSIBLE PERSONS In accordance with the Ministerial Directions issued by the Minister for Finance under the Financial Management Act 1994, the following disclosures are made regarding responsible persons for the reporting period. The names of persons who were responsible persons at any time during the financial year were: Responsible Ministers: Minister for Public Transport & Roads The Hon. Terry Mulder MP 1 Jul 2011 to 30 Jun 2012 Treasurer The Hon. Kim Wells MP 1 Jul 2011 to 30 Jun 2012 Accountable Officer: The person who held the position of Accountable Officer during the year ended 30 June 2012 was; Chief Executive Officer Mr R J Barnett 1 Jul 2011 to 30 Jun 2012 Directors of the Board: The Directors of the parent entity during the year ended 30 June 2012 were; Mr Frank A. Tait Ms Moana Weir Mr Jack Diamond Ms Susan Oliver Mr John Wilson Mr Hector McKenzie All Directors listed above were as at 30 June 2012 Directors of V/Line Pty Ltd which forms part of the consolidated entity. Mr Frank A. Tait ceased to be a Director of V/Line Corporation from 1 July 2012 and also resigned as a Director of V/Line Pty Ltd on 1 July 2012. Mr Hector McKenzie became Chairperson of V/Line Corporation effective 1 July 2012.

FINANCIAL STATEMENTS V/LINE ANNUAL REPORT 2011-12 53 Notes to the Financial Statements

2012 2011 $’000 $’000

NOTE 17 REMUNERATION OF DIRECTORS AND ACCOUNTABLE OFFICER Income paid or payable, or otherwise made available, in respect of the financial year, to all Directors and the Accountable Officer, directly or indirectly, from the entity or any related party. 599 598 The number of Directors and the Accountable Officer whose income (including superannuation contribution) falls within the following bands: $20,000 – $29,999 1 5 $30,000 – $39,999 2 1 $60,000 – $69,999 1 1 $380,000 – $389,999 – 1 $430,000 – $439,999 1 – 5 8 Amounts relating to the Ministers are reported in the financial statements of the Department of Premier and Cabinet. During the year, there were no related party transactions with the directors.

NOTE 18 REMUNERATION OF EXECUTIVES The number of Executive Officers, other than the Accountable Officer and Directors and their total remuneration during the reporting period is shown in the table below in their relevant income bands. Base remuneration is exclusive of bonus payments, long service leave payments, redundancy payments and retirement benefits. Income Band Total Remuneration Base Remuneration 2012 2011 2012 2011 No. No. No. No. $100,000 – $109,999 – – – – $110,000 – $119,999 – – – – $120,000 – $129,999 – – 1 1 $130,000 – $139,999 – – – – $140,000 – $149,999 – – – 1 $150,000 – $159,999 – 1 – – $160,000 – $169,999 1 – 2 1 $170,000 – $179,999 – 1 1 1 $180,000 – $189,999 – – 1 2 $190,000 – $199,999 1 1 – 1 $200,000 – $209,999 – – 1 – $210,000 – $219,999 2 1 1 – $220,000 – $229,999 – 1 – – $230,000 – $239,999 – – – 1 $240,000 – $249,999 – 2 1 – $250,000 – $259,999 3 – – – $260,000 – $269,999 – – – – $270,000 – $279,999 – – – – $280,000 – $289,999 – 1 – – $290,000 – $299,999 1 – – – Total Number of executives 8 8 8 8 Total annualised employee equivalent (AEE) (a) 8 8 8 8 Total Amount $1,846,332 $1,748,257 $1,481,087 $1,404,694 (a) Annualised employee equivalent is based on working 38 ordinary hours per week over the reporting period.

54 V/LINE ANNUAL REPORT 2011-12 FINANCIAL STATEMENTS Notes to the Financial Statements

2012 2011 $’000 $’000

NOTE 19 REMUNERATION OF AUDITORS Amounts received or due and receivable by the auditors for auditing the Group: – audit of the financial statements – Victorian Auditor General’s Office 85 72 85 72

NOTE 20 RELATED PARTY DISCLOSURES

Related party Nature of transaction Terms and conditions 2012 2011 $ $ Payments to related parties Public Transport Victoria Provision of network marketing In accordance with the 2,858,442 2,746,350 (DOT) and customer information services Franchise Agreement. including operation of a call centre. Victorian Rail Track Provision of communication Normal commercial 10,761,153 11,046,983 services. terms and conditions. Public Transport Victoria Miscellaneous payments made In accordance with the 2,559,202 2,482,171 (DOT) under the Operating Performance Franchise Agreement. Regime. Transport Ticketing Reimbursement of Accounts In accordance with 178,506 183,087 Authority Receivable staff salary and wages. agreement between the parties.

Receipts from related parties Public Transport Victoria Provides funding to In accordance with the 284,124,000 269,000,000 (DOT) the Corporation. Franchise Agreement. Public Transport Victoria Reimbursement of project In accordance with 105,440,953 110,470,418 (DOT) expenditure and other agreement between miscellaneous expenses. the parties. Victorian Rail Track Management fee for In accordance with 5,875 25,516 rent collection. agreement. Victorian Rail Track Network Access In accordance with 38,980 258,121 charges. agreement. The parent company did not have any related party transactions within the wholly-owned group. Please note all amounts paid to related parties and received from related parties stated above have been calculated on a cash basis.

FINANCIAL STATEMENTS V/LINE ANNUAL REPORT 2011-12 55 Notes to the Financial Statements

NOTE 21 OPERATING LEASES AND EXPENDITURE COMMITMENTS

Operating lease commitments Operating lease commitments primarily relate to the lease of tool of trade vehicles. There are also commercial lease agreements in relation to tenancy at 570 Bourke Street and 628 Bourke Street, Melbourne. The leases expire in 2014 and 2015 respectively which include fixed rate increases of between 3 per cent and 5 per cent or market rent reviews at dates specified in the agreements. Commitments for minimum contractual payments in relation to non-cancellable operating leases are payable as follows: 2012 2011 $’000 $’000 Within one year 4,559 6,048 Later than one year but not later than 5 years 3,571 9,402 Later than 5 years – 8,130 15,450

Expenditure commitments Expenditure commitments primarily relate to the maintenance of all rolling stock and access charges associated with the metropolitan and regional network. Commitments in relation to operating expenditure are shown below: 2012 2011 $’000 $’000 Within one year 72,115 147,501 Later than one year but not later than 5 years – 76,373 Later than 5 years – – 72,115 223,874

NOTE 22 EMPLOYEE BENEFITS AND SUPERANNUATION COMMITMENTS (a) Superannuation Prior to the original Franchise Agreement, the majority of the consolidated entity’s staff were members of Emergency Services & State Super (ESSS) (formally Government Superannuation Office) funds. The State organised funds include the Revised Scheme, New Scheme and the Transport Superannuation Fund, which are all defined benefits schemes. These schemes are ‘master funds’ comprising a large number of participating members, therefore, are not controlled by the consolidated entity. With effect from 29 August 1999, employees were given the opportunity to remain in the ESSS funds or to change to either V/Line’s default superannuation fund (VicSuper) or a superannuation fund of the employee’s choice under the Choice of Fund legislation. These funds are accumulation funds. The consolidated entity has not recognised any unfunded superannuation liabilities as the State Government has guaranteed to undertake this liability from the commencement of the original franchise in 1999. Any unfunded liabilities that may arise subsequent to the new franchise are calculated annually by ESSS and paid by V/Line at the end of the financial year.

(b) Superannuation schemes contributions and liabilities

Contribution Contribution Contribution Contribution for the year for the year outstanding outstanding at year end at year end 2012 2011 2012 2011 ($’000) ($’000) ($’000) ($’000) Total Superannuation Contributions 14,414 13,922 2,295 1,077

56 V/LINE ANNUAL REPORT 2011-12 FINANCIAL STATEMENTS Notes to the Financial Statements

NOTE 23 CONTINGENT ASSETS AND CONTINGENT LIABILITIES Prior to 30 June 2012, there had been a number of incidents and events on the network such as the floods on the freight network in Central to Northern Victoria that caused significant damage to the rail infrastructure. Under the Franchise Agreement and the Regional Infrastructure Lease, V/Line in consultation with Public Transport Victoria is required to repair the damage sustained. V/Line’s maximum exposure is generally limited by the excess stated in the insurance policy that is held with the Victorian Managed Insurance Authority in the names of Public Transport Victoria and V/Line. Any proceeds of insurance received by V/Line are applied towards the cost of re-instatement with any differential in payments between the insurance payments and actual repair costs for works undertaken being funded by Public Transport Victoria. On 28 May 2008, the EPA issued V/Line with a Clean Up Notice in relation to contamination on railway land in Ararat that is adjacent to a former gasworks site which is being remediated. A Clean Up Plan has been finalised for the site with costs estimated to be less than $1 million. However, a piece of land (not in the main contamination area) is zoned as residential and further testing has been required to be performed on this part of the site. As the land is still on V/Line’s infrastructure lease for rail operations the option of rezoning is currently being pursued. If this is not achieved, some additional clean up costs will be incurred. V/Line as the occupier of the land and the recipient of the Notice is managing the remediation. However, as the contamination pre-dates V/Line’s lease, V/Line expects to recover these expenses from Public Transport Victoria under the terms of its Regional Infrastructure Lease. On 18 November 2008 the EPA issued V/Line with a Pollution Abatement Notice in relation to discharge into a stormwater drain from the refuelling of trains at Traralgon. V/Line identified a fuelling defect in some of its rolling stock. A modification program has been undertaken to rectify the defect. V/Line has recovered some costs from the manufacturer. As a result of an independent environmental audit, V/Line is required to undertake a soil, surface water and ground water monitoring program for at least the next year at a cost of approximately $36,000. The construction of a permanent fuel point at Traralgon will also assist in responding to the notice. The EPA is currently reviewing the Pollution Abatement Notice and the requirements may change in the future.

NOTE 24 SUBSEQUENT EVENTS Subsequent to year end, the Franchise period under the Franchise agreement with PTV was extended by a further 12 months to 31 December 2013. There was not any other matter or circumstance not otherwise dealt with in the financial statements, which has the potential to significantly affect the operations of V/Line, the results of those operations or the state of affairs of the consolidated entity in subsequent financial years.

NOTE 25 ECONOMIC DEPENDENCY The consolidated entity provides public transport services to rural and regional Victoria and is also responsible for the management and maintenance of the rail network. The provision of these services is subsidised by the State Government of Victoria. Without the provision of that subsidy the consolidated entity could not continue as a going concern. The subsidy requirements for the year ending 30 June 2013 have been approved by the State. NOTE 26 DIVIDENDS No dividends were paid, declared or recommended during the year, or subsequent to the year end.

FINANCIAL STATEMENTS V/LINE ANNUAL REPORT 2011-12 57 Independent auditor’s report

58 V/LINE ANNUAL REPORT 2011-12 INDEPENDENT AUDITOR’S REPORT INDEPENDENT AUDITOR’S REPORT V/LINE ANNUAL REPORT 2011-12 59 V/Line’s Statement of Corporate Intent

V/Line Mission V/Line Vision V/Line Values To provide value for our To be recognised by • put our customers first, customers and community our community as • be honest, by delivering safe, reliable, the leading Victorian • take responsibility, accessible and sustainable public transport passenger and rail freight provider. • strive for excellence, and services as part of an integrated • treat people and the environment with respect transport system. with SAFETY being paramount in all we do.

V/Line operates Victoria’s regional passenger rail services V/Line’s business objectives and strategic agenda are to: on lines to: • improve safety and security in all aspects of its operations • Geelong and Warrnambool and business • Melton and Bacchus Marsh, Ballarat, Ararat and • advance and represent the interest and prosperity of Maryborough regional and outer suburban Victoria • Sunbury, Kyneton, Bendigo, Swan Hill and Echuca • demonstrate strong governance, efficient operations and • Seymour, Albury and Shepparton financial responsibility • grow and advocate for future investment to ensure • The Latrobe Valley, Sale and Bairnsdale. sustainable patronage and freight volumes year on year V/Line manages the interface with V/Line branded regional • improve reliability and service delivery year on year coach services. • strive for excellence in customer service and engagement It leases and maintains the regional rail network and • be recognised as an employer of choice in the Australian provides access to rail freight operators. rail industry, with a positively motivated, engaged and skilled workforce, and • be a trusted participant in regional communities and drive sustainable outcomes.

V/Line’s key performance indicators and measures are set out below: Strategic agenda and corporate KPIs Safety and security Freight trains • Signals passed at danger (SPADs) • Punctuality – percentage on time to 10 minutes • Incidents to customers Network • Lost time injury frequency rate (LTIFR) • Temporary speed restrictions • Days lost due to lost time injury – Passenger network • Number of controllable train derailments – Freight network Retain and grow reputation Customer satisfaction • Stakeholder satisfaction index • V/Line customer (passenger) satisfaction index • Media index • Complaints/compliments index Shareholder satisfaction and financial responsibility • Load standards • Subsidy per passenger trip Employee satisfaction and wellbeing • Gross farebox per passenger trip • Employee satisfaction index • Passenger trips per employee • Staff turnover • Expenditure per passenger trip • Absenteeism Grow the business Community and environmental responsibility • Passenger trips (millions) – rail and coach • Environmental • Freight traffic – gross tonne kilometres (GTKs) – Greenhouse emissions per passenger km ‘On time’ and ‘in full’ service delivery – Water usage per passenger km Passenger trains • Social responsibility index • Punctuality – percentage on time (to 5 and 10 minutes) • Reliability – percentage scheduled services delivered

V/Line has developed a suite of corporate initiatives to support its strategic agenda and continue to deliver excellence in customer service in light of on-going patronage growth. Key initiatives relate to improving performance efficiently and effectively in key business areas through both internally and PTV generated initiatives. V/Line will also work to ensure the successful implementation of Government initiatives including the implementation of myki, Rail Operations Management System (ROMS), Sunbury Electrification and Regional Rail Link (RRL). V/Line prepares its accounts in accordance with generally accepted accounting principles incorporating the Australian Accounting Standards, the Financial Management Act 1994 and the requirements of the Public Transport Victoria (PTV). In accordance with the requirements of V/Line’s Franchise Agreement, regular reports covering all areas of V/Line’s business are provided to PTV. As a State Owned Entity, V/Line also provides performance reports to the Department of Treasury and Finance.

60 V/LINE ANNUAL REPORT 2011-12 V/LINE’S STATEMENT OF CORPORATE INTENT Disclosure index

The annual report of V/Line is prepared in accordance with all relevant Victorian legislation. This index has been prepared to identify compliance with statutory disclosure requirements. Report of Operations FRD 30A Requirements for the design and print of annual reports Throughout

Charter and purpose FRD 22C Manner of establishment and the relevant Ministers 2, 3, 27, 53 FRD 22C Objectives, functions, powers and duties 2, 8-10, 27 FRD 22C Nature and range of services provided 2-9

Management and structure FRD 22C Organisational structure 26

Financial and other information FRD 29 Workforce data disclosures 18-19 FRD 22C Occupational health and safety 9-11 FRD 15B Executive officer disclosures 26, 54 FRD 21B Responsible person and executive officer disclosures in the Financial Report 53-54 FRD 22C Summary of the financial results for the year 9, 24 FRD 22C Significant changes in financial position during the year 24 FRD 22C Major changes or factors affecting performance 5-7 FRD 22C Subsequent events 57 FRD 22C Application and operation of the Freedom of Information Act 1982 30 FRD 22C Compliance with building and maintenance provisions of the Building Act 1993 30 FRD 25A Victorian Industry Participation Policy disclosures 30 FRD 22C Statement on National Competition Policy 30 FRD 22C Application and operation of the Whistleblowers Protection Act 2001 30 FRD 22C Details of consultancies over $10,000 24 FRD 22C Details of consultancies under $10,000 24 FRD 12A Disclosure of major contracts n/a FRD 24C Reporting of office-based environmental impacts 15-17 FRD 22C Statement of availability of other information 30 FRD 10 Disclosure index 61 FRD 22C Summary of environmental performance 15-17

FINANCIAL STATEMENTS Financial statements required under Part 7 of the FMA SD 4.2(f) Financial report 31-57 SD 4.2(b) Operating statement 33 SD 4.2(b) Balance sheet 34 SD 4.2(a) Statement of changes in equity 35 SD 4.2(b) Cash flow statement 35 SD 4.2(c) Accountable officer’s declaration 32 SD 4.2(c) Compliance with Australian accounting standards and other authoritative pronouncements 36 SD 4.2(c) Compliance with Ministerial directions 32 SD 4.2(d) Rounding of amounts 36 SD 4.5.5 Risk management compliance attestation 29 LEGISLATION Freedom of Information Act 1982 30 Whistleblowers Protection Act 2001 30 Victorian Industry Participation Policy Act 2003 30 Building Act 1993 30 Financial Management Act 1994 32, 58-59 Audit Act 1994 58-59

Statement of corporate intent 60

DISCLOSURE INDEX V/LINE ANNUAL REPORT 2011-12 61 V/Line Pty Ltd ABN 29 087 425 269 GPO Box 5343 Melbourne VIC 3001

Head Office/Administration Level 23, 570 Bourke Street Melbourne VIC 3000 Telephone (03) 9619 5900 Facsimile (03) 9619 5000 vline.com.au

Customer information, reservations, sales & feedback Freecall 1800 800 007

All information correct at time of printing, September 2012