Annual and Financial Report 2012-13

Welcome to the Annual and Financial Report for the financial year (FY) 2012/13. This report is broken up into four sections beginning with general company information, followed by a review based on Queensland Rail’s strategic pillars of Safety, Customer, People, Commercial and Community. The organisation’s Governance and Statement of Corporate Intent (SCI) is detailed in the third section moving through to the Financial Report FY2012/13.

This report is also available, along with other useful resources, via the Queensland Rail website: queenslandrail.com.au.

For further information on Queensland Rail: Phone: 13 16 17 Mail: GPO Box 1429, , Queensland, 4001

Registered Office Queensland Rail, Level 14 Rail Centre 1, 305 Edward Street Brisbane, Queensland, 4000

Queensland Rail ABN 68 598 268 528

Queensland Rail Limited ABN 71 132 181 090

Queensland Rail FY2012/13 Annual and Financial Report

Copyright © Queensland Rail Limited 2013.

Disclaimer While all care has been taken in preparing this publication, Queensland Rail accepts no responsibility for decisions or actions taken as a result of any data, information, statement or advice, expressed, implied or contained in this publication. Queensland Rail is committed to minimising our impact on the environment by printing a limited numbers of copies of this report. Electronic versions of this document are available from our website at queenslandrail.com.au. To request a copy of our report, please contact our Manager of External Communications.

Queensland Rail FY2012/13 Annual and Financial Report 3

ABN 68 598 268 528 queenslandrail.com.au

Level 14, Rail Centre 1 305 Edward Street Brisbane Qld 4000

The Honourable Scott Emerson MP Minister for Transport and Main Roads Member for Indooroopilly Level 15, Capital Hill Building 85 George Street Brisbane Qld 4000

The Honourable Tim Nicholls MP Treasurer and Minister for Trade Member for Clayfield Level 9, Executive Building 100 George Street Brisbane Qld 4000

Dear Minister/Treasurer

FY2012/13 Annual and Financial Report for Queensland Rail

I am pleased to present the FY2012/13 Annual and Financial Report for Queensland Rail.

I certify that this Annual Report complies with:

• the prescribed requirements of the Financial Accountability Act 2009 and the Financial and Performance Management Standard 2009 • the detailed requirements set out in the Annual report requirements for Queensland Government agencies • timing consistent with the extension granted by the responsible Ministers to allow the review of accounting treatment to be concluded.

A checklist outlining the annual reporting requirements can be found at pages 221-223 in the FY2012/13 Annual and Financial Report for Queensland Rail.

Yours sincerely

Michael Klug Chairman

Queensland Rail FY2012/13 Annual and Financial Report 4

Contents

Queensland Rail Annual Report FY2012/13 About Us 6 Financial Summary 8 Summary of Non-Financial Measures 10 Chairman’s Outlook 12 Chief Executive Officer’s (CEO) Report 14 Delivering Value 17 Safety 21 Customer 26 People 32 Commercial 35 Community 40 Governance Structure 46 Board 47 Leadership Team 51 Corporate Governance 54 Summary of the FY2012/13 Statement of Corporate Intent 69 Corporate Entertainment and Hospitality 71

Financial Report for Queensland Rail 72 Financial Report for Queensland Rail Limited 141

Compliance Checklist 221 Glossary 224

Queensland Rail FY2012/13 Annual and Financial Report

About Us

Queensland Rail has a proud history of contributing to Queensland’s economic, social and regional development. Throughout our 148 year history, our organisation has adapted to meet the changing needs of the growing State of Queensland.

On 3 May 2013, the organisation The four core functions in City Network evolved again when the Queensland Queensland Rail - Network, Rail The City network is an integrated Government passed a bill Operations, Access and Business passenger and rail access service transferring it from one of Strategy and Customer Service - are that extends from the centre of Queensland’s largest Government supported by the enabling functions Brisbane, south to Beenleigh and Owned Corporations to a Statutory focused on specialist services, Varsity Lakes on the Gold Coast, Authority. This change of status has governance and enterprise north to Ferny Grove, Shorncliffe, sharpened Queensland Rail’s focus frameworks and systems. We offer Doomben, Caboolture and Gympie, to solely delivering passenger services and products that support east to Cleveland and west to services, train operations and Queensland’s four pillar economy Richlands, Ipswich and Rosewood, network management. As built on agriculture, tourism, and soon to Springfield. Queensland Rail, we remain resources and construction. committed to building a better Passenger services are provided What Queensland Rail does and how passenger business, improving through the City network and are we do it is underpinned by five key frontline services and contributing integral to the daily life of our areas - Safety, Customer, People, to Queensland’s growth and customers, whether students, Commercial and Community. development, as we have done for workers, tourists or residents, the last 148 years. Through day-to-day business and moving between suburbs and cities. long-term strategic planning Aside from the rapid expansion in As an integrated rail operator, activities, Queensland Rail is ’s Queensland Rail operates the rail focused on improving its three main population, commuter and long network along with a fleet of trains services: distance passenger trains compete that provide vital public passenger with freight operators for access to transport in South East Queensland • City network paths on the network. Queensland Our long distance trains travel • Regional Access Rail is working with the Queensland between Brisbane and Cairns, Government to tackle the capacity Long Distance Commuter and Rockhampton, Longreach and • challenges through a long term rail Tourist. Charleville and Townsville to Mount network strategy for growth. Isa. We are continuing to implement Queensland Rail’s network consists key initiatives to improve reliability of 6754 kilometres of track, and frequency on the City network, including the Mount Isa, North such as Active Platform Coast, Western, West Moreton, Management, improved terminating South Western and Central Western train procedures and availability of lines. This critical infrastructure network response teams during gives our freight customers from peak periods. the agricultural, mining, manufacturing, retail and tourism industries of Queensland access to supplies and key markets.

Queensland Rail FY2012/13 Annual and Financial Report 6

A key challenge we are faced with We are also developing network We also own and operate specialist is improving patronage growth. We plans to meet customer growth and travel centres in key regional hubs are focused on initiatives to build seamless infrastructure supply offering complete holiday packages enhance patronage growth such as chain outcomes along the Mount Isa to complement our customers’ rail the provision of additional services Corridor with the Port of journey. One key strategy for during peak periods and improving Townsville. Queensland Rail Travel is to open the on-time running of our trains. new market segments. The new By fostering a disciplined safety We have also made enhancements Cairns will help deliver on and compliance culture, we will to our station facilities, improved this strategy by providing a new keep our people, customers and the cleanliness and maintenance of level of train travel in Queensland. property safe as we continue to our trains and we are continuing to meet the needs of our customers as The business is also working to improve the quality of service well as freight, travel and tourist deliver online reservation system information for our customers. rail operators. improvements across the product range and a revised timetable, in

Regional Access order to best meet our customers’ Agreements Long Distance Commuter needs. and Tourist Services Regional access agreements include Queensland Rail Travel provides long distance services throughout the design, delivery and The long distance commuter and regional Queensland. In FY2012/13, management of network paths and tourist service integrates travel and more than 750,000 passengers rail assets across Queensland. regional accessibility for travelled with Queensland Rail commuters and tourists, with a These agreements contributed $218 along the Queensland coast, west comfortable rail experience across million in revenue to Queensland to Charleville, Longreach and the state. This includes services Rail in FY2012/13. Approximately Mount Isa, as well as along the along the north coast, services 28 million tonnes of freight is . connecting the western transported on our network each communities, along with the year. These services continue to provide Kuranda Scenic Railway and a safe and reliable transport option With a focus on improving supply services. for both travelling Queenslanders chain solutions, developing and tourists visiting regions Customers of the Queensland Rail partnerships and creating new throughout the state. We are also Travel network are provided with a business opportunities, we are working closely with regional areas unique rail travel experience in working with supply chain partners throughout Queensland to promote comfort with world-class customer to optimise revenue and contribute tourism growth. service. Improvements to the to Queensland’s economic growth. Queensland Rail Travel network Our West Moreton supply chain is support growth in Queensland being reinvented with a focus on tourism as well as commerce and moving primary producers back to regional development. rail.

Queensland Rail FY2012/13 Annual and Financial Report 7 Financial summary

FY2012/13 FY2011/12 ($M) ($M)

Consolidated income statement for the year ended 30 June 2013

Revenue 1,916.4 1,931.9

Operating Expenses (1,207.9) (1,240.6) Earnings Before Interest, Tax, Depreciation and Amortisation 708.5 691.3

Depreciation and Amortisation Expense (298.2) (296.5)

Earnings Before Interest and Tax 410.3 394.8

Net Finance Costs (209.5) (208.8) Income Tax Expense (56.0) (57.7)

Net Profit 144.8 128.3

The Queensland Rail group’s EBITDA increased by $17.2 million to $708.5 million. This increase was primarily due to a reduction in consumable spend across the group. This reduction was due to the group’s focus on cost control through efficiency measures that resulted in a 2.6% decrease in operating expenses.

A dividend of $115.8 million was declared in respect of the year ended 30 June 2013. This dividend will be paid during FY2013/14.

FY2012/13 FY2012/13 Actual Target

Financial performance measures compared to the Statement of Corporate Intent

Earnings Before Interest and Tax ($M) 410.3 453.0

Net Profit After Tax ($M) 144.8 168.5

Return on Operating Assets (%) 6.4 7.2

Return on Equity (%) 5.3 6.1

Queensland Rail FY2012/13 Annual and Financial Report 8

FY2012/13 2011/12 ($M) ($M)

Consolidated balance sheet as at 30 June 2013

Current Assets 527.1 569.9

Non-current Assets 6,419.7 6,276.7

Total Assets 6,946.8 6,846.6

Current Liabilities 685.0 626.5

Non-current Liabilities 3,493.8 3,482.4 Total Liabilities 4,178.8 4,108.9

Net Assets 2768.0 2,737.7

Contributed Equity 2,602.7 2,602.6

Retained Earnings 165.0 136.1

Reserves 0.3 (1.0)

Total Equity 2768.0 2,737.7

The group’s non-current assets increased by $143 million to $6,419.7 million as a result of Queensland Rail’s significant capital expenditure program.

Total equity for the group increased by 1.1% to $2,768.0 million as a result of the $144.8 million profit for the year. This was offset by the declared dividend of $115.8 million.

FY2012/13 2011/12 ($M) ($M)

Consolidated cash flows for the year ended 30 June 2013

Net cash inflow from operating activities 422.2 556.1

Net cash outflow from investing activities (482.2) (558.8)

Net cash outflow from financing activities (2.8) (161.6) Net increase in cash and cash equivalents (62.8) 158.9

Cash flow from operating activities decreased significantly in FY2012/13 due to the previous year being extraordinarily high in terms of customer payments, with approximately $50 million in outstanding debt paid in full. When comparing FY2012/13 with FY2011/12, there has been an increase in $20 million in customer payments.

During FY2012/13, the group invested $491.7 million in capital expenditure across Queensland Rail operations. The most significant investments were made in passenger network infrastructure and rollingstock as part of the South East Queensland Infrastructure Plan and Program.

Borrowings increased by $99.8 million during FY2012/13. The group’s net position increased by $181.7 million resulting in an increase in the gearing ratio from 52.2% to 53.4%.

Queensland Rail FY2012/13 Annual and Financial Report 9 Summary of non-financial measures

FY2012/13 FY2012/13 SCI Actual Target

Efficiency

Consumable cost reduction ($ million) 66.27 42.60

Growth

Patronage Growth % - City network -4.49 -0.52

On-time running, customer satisfaction, reliability and frequency of service

On-time running – City network (combined peaks) % 96.30 94.53 On-time running – City network (24/7) % 95.04 94.17

On-time running – Travel network on-time departure % 92.88 70.00 On-time running – Travel network on-time arrival % 64.54 60.00

Below Rail Delays per 100 train kilometres – SEQ network 0.93 0.77

Below Rail Delays per 100 train kilometres – Regional network 3.52 3.88 City network rollingstock utilisation % 87.34 90.00

24/7 reliability – City network % 99.86 99.87 Network Gross Tonne Kilometres (billions) 23.91 24.37

Customer satisfaction – City network 72 71 Customer satisfaction – Travel network 82 81

Safety improvement, employee engagement and environmental management

Signals passed at danger (per million train kilometres)1 2.80 1.95 Derailments (per million train kilometres) 0.13 0.11 Lost time injury frequency rate (LTIFR) 6.09 4.25 Medical treatment injury frequency rate 7.61 8.15 Customer assaults per million passenger journeys – City network2 6.05 5.57 3 Customer injuries per million passenger journeys – Queensland Rail 17.22 15.88 Environmental Protection Act 1994 enforceable breaches 0 0

1 Although the SPAD rate is unfavourable against target, results are positive when benchmarked against other Australian rail operators. Analysis is being undertaken to determine SPAD causal factors, with several initiatives under implementation. 2 YTD statistics were unfavourable due to the unusually high number of incidents at Logan stations during December 2012. 3 Although results were above target, the number of injuries steadily declined during FY2012/13. Slips, trips and falls account for the majority of incidents. Strategies are in place to focus on mitigation of this injury type.

Queensland Rail FY2012/13 Annual and Financial Report 10 1team values Queensland Rail and behaviours Be one, proud, focused.

We work together to achieve our objectives and do

Queensland Rail’s Values and Behaviours define how we what we say we are going to do. collaborate and work together. We define values in

Queensland Rail as the core benefits that lie at the heart of our organisation and direct the way in which our reat each other with respect people behave. Behaviours are the way we see values in action. They are tangible, observable and something to Be open, honest, supportive. which everyone can relate.

These values are at the heart of everything we do and We all have a voice and a part to play by sharing they: information, respecting, supporting and trusting

• form the framework that guides all of our decisions each other.

• define our culture and are visible through our behaviour

• are central to effective leadership and good njoy what we do management • enable our team to work together positively and Be positive, involved, enthusiastic. towards shared goals We work together to bring humour and fun to each • underpin our future success.

day and enjoy what we do.

ct safely

Be aware, prepared, accountable. We look out for each other, our customers and

ourselves so that nobody gets hurt.

ake a difference

Be innovative, adaptable, resourceful.

We encourage new ideas and fresh ways of thinking. We make it simple and we treat every situation as a learning opportunity.

team

Queensland Rail FY2012/13 Annual and Financial Report 11 Chairman and Deputy Chairman’s Outlook

The Chairman, Michael Klug, is than $66 million in consumable pleased to jointly provide this expenditure. Outlook with Deputy Chairman, Despite these solid results, there is Geoff Harley. The Board welcomed still room for improvement in many the appointment of Michael Klug as areas of the business. Importantly, Chairman on 1 October 2013. the Queensland Commission of The last 12 months have been Audit Report made punctuated by important changes recommendations that affect in our external environment and Queensland Rail. In particular, the significant internal reforms. report positions Queensland Rail to operate under contestable service While changes of this magnitude delivery arrangements in the can create challenges for the future. organisation and its people, they also present an opportunity for Another change announced was the Queensland Rail to reinvent itself institutional restructure and deliver improved performance transferring Queensland Rail from a across all aspects of the business. Government Owned Corporation to a Statutory Authority. While this During FY2012/13, Queensland Rail does not affect our business continued its reform journey and operations or key priorities, it does focused on getting “back to represent an important step in our basics”. In doing so, we reform journey. demonstrated an ability to consistently perform well in many Based on strategic decisions made different areas. We have the best during the last two years, Australian city on-time running Queensland Rail continued results for our services in South- throughout FY2012/13 to transform East Queensland. On-time arrivals the business into a truly efficient, and departures on our long distance effective and integrated railway travel services have improved. We service. This has placed us in a have enhanced rollingstock strong position to respond to the availability and our network is Queensland Commission of Audit more reliable than ever. Our Report. customer satisfaction remains at all The year ahead will be a year of time high levels and we continue to continuing transformation for focus on safety and security Queensland Rail as we move to a initiatives to reduce injuries to our more competitive business model people and customers. We have focused on maximising value for done this while progressing the money, embracing competition and ongoing organisational reform that benchmarking our performance has resulted in a significant against best practice. As we reduction of the non-operational prepare for contestability, workforce and we have saved more Queensland Rail must focus on providing smarter, more tailored

Queensland Rail FY2012/13 Annual and Financial Report 12

services to our customers while Along with fellow directors, Dawson of public transport in Queensland. I maintaining improvements in safety Petie, Merren McArthur and Julie- am confident we have the right and value for money. Anne Schafer, the Board has been people to deliver our ambitious committed to driving performance program and achieve our potential In FY2013/14, our focus will be on improvements and cultural change as a world-class railway operator. our commitment to: across our business during In becoming a performance based • driving organisational FY2012/13. premier rail operator, we need to performance (specifically I also wish to recognise my shine in all aspects of our business operational, financial and predecessor, Glen Dawe, for his and deliver on our business customer) valuable operational, business and objectives. This will ensure • ensuring value for money and strategic contribution to superior service for our customers affordability Queensland Rail during this period and contribute to Queensland’s • facilitating patronage and of change and would also like to economic growth and development. network tonnage growth pay tribute to outgoing directors That’s the challenge and our • ensuring safety and security Maureen Hayes, Denise McMillan- opportunity for the years ahead. • enhancing service delivery. Hall, Dawson Petie, Merren Finally, I would like to sincerely McArthur, Julie-Anne Schafer and Central to our reform and thank Queensland Rail employees movement to a contestable Dr Leo Keliher, who made for their dedication, hard work and significant contributions to the business model is our Efficiency enthusiasm. It has been a organisation during their time on Improvement Program, which aims challenging year for our staff, but I the Queensland Rail Board. to identify and realise significant am proud of their unwavering savings in labour and non-labour On behalf of the fellow directors, I commitment to the organisation costs throughout our business. This would also like to acknowledge and its customers. Our people are program will enter stage two during Queensland Rail’s management our greatest asset and the key to FY2013/14 and will focus on team, led by former Acting Chief our success in the future. delivering further labour reform, Executive Officer Jim Benstead. cost reductions and progressing The Queensland Rail Board Jim and his team have industry partnering opportunities. understands the future is now and demonstrated leadership in taking will ensure our performance the organisation forward during a I would like to take this opportunity counts. to congratulate and welcome the period of transition. The leadership new members of the Queensland team has my full confidence as it Rail Board appointed in October continues to drive the reform 2013, the Hon. John Mickel and agenda. Glenn Poole. This is an exciting time for our

During FY2012/13, we also organisation, but with it comes the Michael Klug welcomed new directors, David challenge of reform. We are Chairman George and Wendy McMillan. These committed to delivering reliable appointments allow a wealth of and affordable rail services and experience and skills to guide positioning rail as the centrepiece Queensland Rail through this transformation. Geoff Harley Deputy Chairman

Queensland Rail FY2012/13 Annual and Financial Report 13 CEO’s Report

The past financial year was truly a During FY2012/13, we were focused year of challenges, opportunities on our commitment to: and achievements for Queensland Rail. It was also a year that • organisational performance (specifically operational, provided clarity for the financial and customer) organisation, confirming that our strategic direction is aligned with • affordability the Government’s vision for • patronage growth Queensland. • safety and security.

We have been driving performance, The FY2012/13 Queensland Rail efficiency and productivity Statement of Corporate Intent improvements throughout outlined the following business Queensland Rail for the past two objectives: years. During FY2012/13, we stepped up the reforms and • improving operational efficiency produced vastly improved and reducing our cost base to performance, along with a leaner relieve funding burdens and workforce, a significant reduction make rail travel more in spending and efficiency programs affordable for our passengers that have reshaped the business. • getting “back to basics” to improve the safety and The recommendations of the reliability of our services, Queensland Commission of Audit remedy causes of disruptions, Report and the Government’s improve confidence in rail response confirmed the direction travel and increase patronage we have been taking and have growth given us greater impetus to reach • partnering with stakeholders to and exceed our operational and improve project delivery and financial performance goals. We capital performance have implemented all Network SEQ • improving safety, engaging our Audit recommendations. employees and managing the The Government has now set out its environment in which we vision for an effective, efficient operate. and affordable rail solution for all In addition to these objectives, we Queenslanders. Queensland Rail reported against five strategic shares that vision and is preparing pillars – safety performance, to demonstrate its expertise and customer service, commercial capability to deliver quality capability, people development and services as efficiently as any the relationship with the provider in the market. community in which we operate. Our key performance indicators for FY2012/13 place us at the forefront

of rail passenger transport in Australia.

Queensland Rail FY2012/13 Annual and Financial Report 14

Contestability is the inevitable and launched our “Coffins” campaign in Our Travel network also reached ultimate test of efficiency and response to the more than 4,000 milestones with The Sunlander operational performance and we reported incidents of trespass on celebrating 60 years of carrying will continue to drive improvement our rail corridor during the previous Queensland families and tourists and accelerate our reforms to year. The campaign provides a along the coast. More than three ensure we can compete with the dramatic reminder of the million people have travelled on best rail operators in the world. potentially deadly consequences of the iconic train service since it was

trespassing on the rail corridor. launched in June 1953. After six Safety decades in operation, The Safety is the cornerstone of Customer Sunlander is due to be retired from service next year and will be everything we do. Our focus on In FY2012/13, we continued to replaced by new and refurbished safety, looking out for our people, deliver high levels of customer high speed tilt trains currently our customers and the community, service by focusing on reliability, under construction in Maryborough. has ensured we are tracking well in efficiency, on-time running and A farewell tour for the Sunlander terms of our lead safety indicators customer comfort. The measure of has been announced, designed to (medically treated injuries). our success is the fact that drive patronage onto this service However, the harsh reality is that customer satisfaction levels for throughout its final year. too many of our people are still both our City and Travel networks being injured. are at record highs. People We will continue to devote all of One of the most pleasing and In order to improve efficiency and our energy to achieving Zero Harm significant improvements reduce costs, Queensland Rail across the organisation through throughout the year was our reshaped the organisation through implementation of employee safety network reliability. We finished the a Voluntary Redundancy scheme initiatives such as “Work to Live”. year achieving an on-time running and a significant organisational result of 96.30 per cent for our 240 We have seen positive results in restructure that delivered cost City network morning and reducing crime across our network savings, with a reduction in full afternoon peak services. Given that and we acknowledge our strong time equivalents (FTEs) and we have the most stringent on-time partnership with the Queensland contractors. Police Service for enhancing running targets of any rail operator I want to acknowledge the staff security on our services and within in Australia, I am extremely proud members who left the organisation the rail corridor. of this result. through the Voluntary Redundancy We also improved frequency of We continue to invest heavily in program. Some of these employees services on a number of lines, with information and education had been with us for many years new peak services for Gold Coast campaigns to raise safety and I thank each and every one of and Beenleigh Line customers and awareness around our rail network. them for their important the trial of 15-minute off-peak In FY2012/13, there was a 35 per contributions during their time with services for customers on the Ferny cent reduction in near misses at Queensland Rail. level crossings state-wide Grove Line. In 2013/14, we will coinciding with an extensive, introduce further improvements to multimedia campaign on level services. crossing safety called “What Would

You Miss?”. In January 2013, we

Queensland Rail FY2012/13 Annual and Financial Report 15

Commercial We acknowledge and embrace our I would like to acknowledge Queensland Rail’s Responsible In July 2012, Queensland Rail responsibilities to the communities Ministers and thank the Deputy commenced its Efficiency in which we operate and are Chairman and Queensland Rail Improvement Program to identify committed to being a good Board for their steadfast and realise significant savings neighbour. During FY2012/13, we commitment to the organisation throughout the business. This worked with industry to implement throughout its journey of significant program will ultimately improve strategies and undertook steps to reform. I also wish to thank our financial and operating minimise the impact of both noise Queensland Rail employees for performance and ensure we deliver and coal dust from the rail their continued hard work and for value for money services for corridor. remaining dedicated during this Queenslanders. This year alone, we Challenges challenging time. have achieved savings of $83 million in non-labour expenses. Queensland Rail operates in a While the demands in the past changing and challenging business financial year have been This program will continue during environment and we will continue considerable, there is a renewed FY2013/14 and will focus on further to work closely with our partners in vigour across Queensland Rail in labour reform, cost reductions and Government to respond to the task terms of transformation of the industry partnering opportunities. ahead. The challenges are great: organisation. As we move The efficiencies we achieve are Queensland Rail needs to be ready confidently towards contestability, assisting to reduce the government to play an even more significant we will maintain momentum. We funding required to deliver our role in the growth of the State’s will further improve our reliability Transport Service Contracts and four pillar economy. and continue to pursue better and decrease borrowings, which will more affordable ways to deliver rail ultimately deliver greater returns We will work with Government to services. More than ever, we have a to Queenslanders and provide increase capacity, upgrade our clear picture of our future as a investment and growth rollingstock and invest in world-class rail operator. opportunities. maintenance that improves reliability of trains and tracks, Community ensuring customers have access to a safe and reliable rail network Queensland Rail provides that meets their current and future Queensland communities with vital requirements. We will continue to public transport and essential reduce our cost base to realise transport infrastructure - Glen Dawe savings in non-business-critical Chief Executive Officer infrastructure that not only activities. supports the State’s manufacturing, travel and other export industries, but also generates wages, investment and purchasing of goods and services in regional communities.

Queensland Rail FY2012/13 Annual and Financial Report 16 Delivering Value In 2011, Queensland Rail commenced a journey of continuous improvement to transform the business and better position it to deliver safe, reliable and value for money rail transport solutions to its shareholders and customers. The change of government in March 2012 and subsequent Queensland Commission of Audit Report provided greater impetus to drive efficiency and reform across the business.

The program of reform has been Consumable and Non-Labour Cost Organisational Restructure designed to be delivered in two Reduction A significant organisational phases, with the first phase A concentrated effort has been restructure across the business completed at the end of made to reduce consumable costs commenced in July 2012 to enable FY2012/13. across the organisation. efficiencies and cost savings and to Consumable costs include The focus this past financial year refocus Queensland Rail’s core professional services, advertising, has been to improve efficiency and business and enable functions to accommodation and travel effectiveness and ensure concentrate resources in areas that expenses and these costs are a sub- impact directly on operational Queensland Rail is appropriately set of the organisation’s overall sized to deliver the best possible non-labour costs. performance. service at the lowest, sustainable The consumable cost reduction New Work Practices price to customers and the people target of $42.6 million was of Queensland. Queensland Rail has introduced exceeded two months prior to the new work practices, including the As a result, key initiatives were end of the financial year, with a use of flexible start and finish work introduced based on the four total reduction of $66.27 million. locations within Station objectives: affordability, customer This contributed to a reduction of Operations. In addition, the outcome, growth and value. $83 million in total non-labour business has implemented rostered costs for FY2012/13. ordinary hours on weekends and the use of 12-hour rostered Affordability ordinary hour shifts within Network Consumable Cost Reduction SEQ and Regional, where possible. Queensland Rail is committed to 80 reducing the cost of rail to 66.27

60 government and delivering a 40 Customer Outcome contestability framework that $ Million We are delivering customer demonstrates value. Initiatives 20 outcome initiatives focused on built around smart, effective and 0 Jul Apr Oct Jun Jan Feb Mar Aug Sep Nov Dec

May optimising operational safe use of resources that delivers Actual 12/13 Plan 12/13 performance to provide safe, value for money have achieved the reliable and customer-centric rail below results. services, which has achieved positive results.

Queensland Rail FY2012/13 Annual and Financial Report 17

On-Time Running (OTR) Independent Audit – South East Growth Improvement Queensland Queensland Rail has been working with stakeholders, rail operators, An OTR Taskforce was created in In April 2012, the Government end customers (mining companies), August 2012 to drive the commissioned an audit of the development and implementation South-East Queensland network, supply chain partners and industry of initiatives to achieve OTR following a dewirement incident in stakeholders to: targets for the City and Travel February 2012 and a signalling • address capacity issues networks. disruption that occurred in March • facilitate continued economic The OTR Taskforce is operating 2012. growth across all areas of Queensland Rail The audit report entitled • improve cycle times and on- and is analysing performance as Independent Audit into the time performance well as causes of delays, reliability of Queensland Rail’s This work includes the following identifying new initiatives, South-East Queensland network key initiatives. implementing them and ensuring found no immediate safety issues they become business as usual that required the attention of the Patronage Growth practices. The taskforce has helped Rail Safety Regulator or Queensland Rail is partnering with deliver improved reliability with Queensland Rail. All TransLink to develop a tactical fare Queensland Rail exceeding the City recommendations have been strategy to drive patronage growth network OTR target of 94.53 per implemented, with a focus on in the CBD. Patronage numbers cent every month since September improving the management of the have been impacted by the easing 2012. network. in economic activities and The overall result of 96.30 per cent subsequent reduction in workforce for FY2012/13 was the best result numbers as well as the public in 10 years. transport fare increase that

occurred in January 2013.

OTR City network (Combined Peaks) 99% 98% 96.30 97% 96% 95% 94% 93% 92% 91% Jul Oct Apr Jan Jun Feb Mar Aug Sep Nov Dec

May

Actual 12/13 Plan 12/13

Queensland Rail FY2012/13 Annual and Financial Report 18

Regional Freight Growth Strategy Value Supply Chain Forums (Mount Isa, West Moreton and North Coast Queensland Rail is working with the With a proud history of supporting lines) Department of Transport and Main rural communities, Queensland Rail Roads (DTMR) to develop a remains committed to driving This year, Queensland Rail has Regional Freight Growth Strategy economic growth by supporting continued to actively facilitate aimed at attracting further resources, agriculture, tourism and regular supply chain forums to agricultural product railings, construction industries. To achieve engage with stakeholders, supply particularly cotton and grain, from this, Queensland Rail actively chain partners and customers of South-West Queensland. This participates in supply chain forums planning activities and

partnership has resulted in an and works collaboratively with maintenance updates. announcement by the Queensland stakeholders across the network on Queensland Rail is keen for its Government on 16 May 2013 for a a regular basis. supply chain partners to $50 million upgrade for the understand its business by Toowoomba Range rail providing information on capacity infrastructure, which will remove analysis, train control and planning 25,000 trucks, transporting grain to better inform customers on key and cotton, from South-East business drivers. This improved Queensland roads each year. understanding and open The project scope is proposed to communication is creating better include the construction of two comprehension, improved cohesion one-kilometre rail passing loops at and aligned planning, resulting in

Harlaxton and Ballard. This project greater efficiencies. is expected to take two years to The net outcome is increased complete. supply chain optimisation and South-East Queensland Network delivery of ongoing economic Upgrades growth for the state.

In FY2012/13, Queensland Rail successfully completed the $12 million Keperra to Ferny Grove Upgrade, which has enabled increased off-peak services on the Ferny Grove Line and progressed the $475 million Richlands to Springfield Project (Stage Two) ahead of schedule.

Queensland Rail FY2012/13 Annual and Financial Report 19

Priorities for the Year Ahead

The second phase of our change journey will deliver further performance improvement across the business. Central to this reform is the Efficiency Improvement Program, which will drive reductions in the cost base and improvement in productivity. This program will identify and drive significant savings through initiatives such as:

• ongoing workforce reform • consumable cost reductions

• industry partnering program • operational improvement program.

A program of capital works will ensure Queensland Rail is able to meet the growing need for public transport in South East and regional Queensland, as well as the demands of a growing freight network. This program includes the following key capital projects:

• Coomera to Helensvale duplication program • Sunlander 14 rollingstock upgrade • Lawnton to Petrie Third track project • Electric Multiple Unit life extension program • stabling requirements for the New Generation Rollingstock • project signalling and other critical infrastructure enhancement.

Queensland Rail FY2012/13 Annual and Financial Report 20 Safety The safety of our people and customers is the number one priority of Queensland Rail. We are focused on becoming a world-class safety organisation with zero injuries.

The number one priority for SPAD Management • Improvement to training, Queensland Rail is ensuring that its including communicating safety SPADs are a lead indicator for some customers, employees and the critical SPAD information, of our highest safety risks including broader community who use and human error and avoidance collision and derailment. SPAD access its network and techniques, along with performance is a key safety metric infrastructure are able to do so in a programs incorporating for Queensland Rail and a positive safe way. simulated SPAD scenarios and long term trend is paramount in Professional Route This is achieved by eliminating or terms of risk management and Management. minimising safety risks and by public perception. Queensland Rail maintaining effective management implemented a number of SPAD and control of the rail mitigation strategies during Travelling Customer infrastructure, operations and FY2012/13, including: rollingstock. Safety Strategy • Implementation of the new The greatest potential safety risks SPAD Risk Management In FY2012/13, Queensland Rail are train-to-train collisions, Standard that provides a embarked on various initiatives to trespass incidents. In these framework for improved reduce the injuries sustained by scenarios, the difference between selection, training and customers. The Travelling a near miss and a fatality can be a management of rail traffic Customer Safety Strategy was fraction of a second. drivers. developed to target customer behaviour in and around stations In FY2012/13, Queensland Rail • Quarterly regional SPAD forums and onboard trains. This initiative continued to dedicate significant in Townsville and Brisbane is expected to contribute to a resources to eliminating these risks involving third-party operators reduction in slip, trip and fall from its operations. on the Queensland Rail related injuries, which are the network. most common form of incidents

• Hosting of the Rail Co- resulting in customer injury on Operative Research Centre Queensland Rail property.

“SPAD Future Inquiry” workshop involving cross industry representatives. Security Program

• Introduction of a new method Queensland Rail has an extensive of measuring SPAD collision risk program to manage a diverse range to better understand the of security risks, from anti-social context of each SPAD. behaviour to acts of terrorism. Working closely with the

Department of Transport and Main Roads (DTMR), the Queensland Police Service (QPS), Crime

Stoppers and a number of local councils is integral to the program’s success.

Queensland Rail FY2012/13 Annual and Financial Report 21

Response to the Cleveland The primary finding of the working In FY2012/13, the key achievements were: Collision group required Queensland Rail to adopt an holistic approach to • Installing Wi-Fi Internet Queensland Rail suspended services minimising the risk of wheel slide, technology on 64 trains to allow on the Cleveland Line on 31 which includes identifying and security monitoring officers to January 2013, after a train failed removing contaminants from watch live streaming of closed- to stop at the Cleveland Station affected sections of rail and circuit television (CCTV) platform and collided with the engineering solutions for footage. It is anticipated that end-of-line buffer stop, the rollingstock. remote monitoring capability of platform and the station building. The working group recommended a these trains will be achieved in A number of people on the train range of controls and safety FY2013/14. were treated for minor injuries and measures, such as retrofitting the transported to hospital for further • Working in partnership with 160 and 260 Class fleets with examination. Crime Stoppers to visit 81 sanding systems to increase stations and educate more than The Australian Transport Safety adhesion at the wheel/rail 13,000 customers on how to Bureau (ATSB) conducted an interface. report security incidents on the independent investigation into the rail network. collision and concluded that contamination of the rail surface Automatic Train Protection • Enhancing network security by most likely contributed to wheel (ATP) displaying Crime Stoppers slide, which caused the collision. intelligence notices on Queensland Rail continued to work Following the release of the Passenger Information Display with Government stakeholders interim ATSB report, Queensland Screens (PIDS). This has led to a throughout FY2012/13 on the Rail immediately formed a working number of railway offenders development of ATP, an advanced group to investigate a range of being arrested and prosecuted. train protection system, for the potential wheel/rail interface • Signing a new Memorandum of South East Queensland issues, focusing on track Understanding (MOU) with QPS. Metropolitan System. conditions, train crew capabilities As part of this MOU, QPS and rollingstock, particularly the Railway Squad numbers are 160 and 260 class units. These units expected to increase to 70 by make up a third of the Queensland the end of FY2014/15. The Rail fleet. Robina Police Outpost opened in April 2012.

Queensland Rail FY2012/13 Annual and Financial Report 22

• Completing a $3.3 million CCTV • An “after dark” security Level Crossing and camera upgrade across 47 program at 34 stations involving Trespass Campaigns stations, which involved a night time staff presence In 2012, Queensland Rail launched replacing old video records with until the last train on selected the confronting, state-wide digital technology to increase days. “Crosses” campaign with the recording capacity. • Regular patrols by mounted message: “Don’t gamble with your

police targeting corridor life at level crossings”. This Queensland Rail also implemented security issues. campaign urged pedestrians and and/or continued the following motorists to act safely near trains • Regular joint operations security initiatives in FY2012/13: and tracks. between Queensland Rail, QPS • Train and station patrols by 61 and Transit Officers targeting In January 2013, the state-wide Transit Officers and various offences and locations, “Coffin” campaign was introduced. approximately 200 private based on intelligence analysis This was in response to the more security guards. and operational planning. than 4,000 reported incidents of

trespass on the rail network during • Mobile security dog patrol • Core zones on most train 2012. The campaign “Not everyone teams, each team incorporating platforms (indicated by blue makes it across the tracks” has a handler and security dog, and white stripes and featuring provided a dramatic reminder of patrolling train stations, car enhanced lighting, CCTV the potentially fatal consequences parks and other Queensland cameras and an emergency help of trespassing on the rail corridor. Rail property. phone).

Trespassing in the rail corridor and • Guardian Train services • Multiple emergency phones on in stabling yards is the most (carrying private security all City network services. frequent type of security incident guards) on 40 per cent of • An Electronic Recording on the rail network across the timetabled services after 7pm Forensic Unit that undertakes state. from Sunday to Thursday and collection, analysis and 100 per cent of timetabled preparation of CCTV footage for services after 7pm on Friday QPS and Queensland Rail to Level Crossing Innovation and Saturday. support investigations. Queensland Rail and DTMR are • Police outposts at Petrie, working together on a Level Manly, Beenleigh, Redbank, Crossing Innovation Project aimed Robina and Roma Street at investigating new technology to stations.

make level crossings safer. • Police trains, which involve an The Queensland Government has out-of-service unit with police provided $2.1 million to fund three and Transit Officers onboard separate trials of technology to trains responding to issues improve level crossing safety. across the network.

Queensland Rail FY2012/13 Annual and Financial Report 23

A solar-powered system Bridge Strike Prevention Safety Motivated Action incorporating active and passive Queensland Rail has implemented a Resource Teams (SMARTs) sign technology will be trialled in variety of warning systems to alert FY2013/14 near Forest Hill and The SMARTs program encourages drivers to vehicle height Rosewood stations to warn employees to take an active role in restrictions as they approach a low motorists of approaching trains. improving safety in their local level rail bridge. workplace. It draws on employees’ Two different radio break-in These systems include: knowledge, empowering each systems will also be trialled. One individual to contribute to the system is set to be trialled at Malu • advance warning signs as implementation of safety on the Western Line and the other drivers approach a bridge improvements. between Townsville and Charters • sacrificial beams and Towers on the Mount Isa Line. The The SMARTs project was overhanging chimes along technology has the ability to alert successfully transitioned to roadways coming up to bridges business as usual. At the end of motorists to the presence of oncoming trains at level crossings • large and highly visible rubber FY2012/13, there were 81 active and reduce risk of level crossing flap signs over roadways SMARTs in Queensland Rail and 57 collision. SMARTs initiatives approved, which • hazard stripes and warning were directly linked to controlling Railnet Safety Systems, La Trobe signs on bridges risk at worksite level. University and NFA Innovations • laser-activated electronic were awarded the contracts for warning signs with flashing these projects. The contract period lights mounted on bridges. for the trials, including installation, trial, decommissioning The location and frequency of and reporting is expected to run bridge strikes is constantly until closer to the end of 2014. monitored by Queensland Rail. Low The Valet innovation, a wirelessly level bridges over roadways in controlled rail level crossing South East Queensland are warning system, has also been currently being prioritised for the trialled at Bemerside near Ingham installation of various measures, on the North Coast Line. The taking into consideration such initiative improves visibility and aspects as the number of bridge provides advanced warning to strikes, the potential bridge prevent a road user actively or damage and the impacts on the unknowingly circumventing level organisation. crossing control measures. The trial at Halifax-Bemerside Road at

Bemerside in North Queensland has recently concluded, with a report being undertaken on the findings.

Queensland Rail FY2012/13 Annual and Financial Report 24

Centre of Safety Excellence Rail Rover Prototype

The Centre of Safety Excellence The Rail Rover prototype is an addresses key safety and unmanned inspection vehicle used environmental issues facing the when it is not safe for manned organisation, its people and vehicles to complete track customers. Benefits include the inspections. This includes areas enhancement of safety culture and susceptible to extreme weather sharing of innovative safety ideas conditions and high risk across the organisation. environments, such as a bomb threat situation. An unmanned on- The Centre of Safety Excellence track inspection vehicle will have a continues to grow in Queensland significant impact in terms of Rail, with 9% of employees involved eliminating the risk of injury. in Communities of Practice forums. The first trial of the Rail Rover These forums are used to share and prototype was successfully build knowledge and proactively conducted in June 2013, with two solve safety issues. further trials planned for FY2013/14.

Queensland Rail FY2012/13 Annual and Financial Report 25 Customer Queensland Rail aims to exceed customer expectations by embedding customer needs into how we do business and integrating a service culture into all areas of the organisation.

In FY2012/13, Queensland Rail City Network Customers Travel Network Customers continued to place a strong focus On the City network, Queensland On the Travel network, Queensland on customer service by delivering Rail’s objective is to be South East Rail is committed to operating initiatives on frequency, reliability, Queensland’s first choice in public efficient and effective travel and efficiency, on-time running, transport by providing a reliable, commuter services in regional customer comfort, customer timely and cost effective transport Queensland. engagement and supply chain solution. improvements. Our Travel network customers: Our City network customers: One of the greatest challenges • prefer travel by train over faced in delivering on these • exceed 65,000 passengers on other modes because of the priorities has been to meet the services arriving at Central price, convenience and demand for more passenger Station between 6am and 6pm enjoyment of the rail journey services while also delivering each weekday • visit friends and relatives, take adequate trains for our freight • took more than 48.5 million long break/short break customers. Queensland Rail is customer journeys during holidays, travel for business and currently working with the FY2012/13 commute between regional Queensland Government to centres for appointments, investigate future options to • are more likely to drive or be shopping and education expand the network so that driven to the station, compared projected growth demands in the to bus passengers who would • originate from Australia, mostly passenger and freight markets can generally walk to bus stops in Queensland, with the most be met. frequent international • most frequently use the Gold customers being visitors from Coast, Ipswich and Caboolture the United Kingdom, other lines, with the Gold Coast Line parts of Europe and New having the highest patronage Zealand

results during morning peak services. • are typically aged between 35

and 74 years of age, with the

majority of travellers being

over the age of 55 years.

In FY 2012/13, more than 353,000

customers travelled on the Kuranda Scenic Railway, which is an 11 per

cent improvement on results for

the same period last year.

Queensland Rail FY2012/13 Annual and Financial Report 26

Below Rail (Access) International Customer On-Time Running (OTR) Customers Service Standard (ICSS) Taskforce

Customers of Queensland Rail’s Queensland Rail once again An OTR Taskforce was created in below rail business can generally received certification against ICSS August 2012 to drive the be categorised into the following through the annual assessment development and implementation four main groups: process. of initiatives to achieve OTR targets for the City and Travel • Above rail operators – including The results of an assessment in networks. Aurizon, Pacific National, Rail November 2012 showed an increase Corp and Cairns Kuranda Steam. in our score from 6.08 to 6.68, The OTR Taskforce achieved the which is ranked at the integration following significant results during • End users – including Xstrata, (highest) level of the International FY2012/13: Yancoal, Palmer Nickel Customer Service Standard. ICSS is Corporation and BHP Billiton. • ten months’ continuous OTR a continuous improvement results exceeding the • Infrastructure customers – framework for benchmarking contractual City network target Queensland Rail works with standards of customer service of 94.53% infrastructure customers, not excellence. only on access and supply chain • improved positioning of crews The assessment team noted the solutions, but also in the for changeovers, alleviating following themes: design, development and congestion at Bowen Hills and installation of adjoining • the culture of customer service Roma Street stations in peak infrastructure, such as the is well and truly embedded in periods current Cloncurry Multi-User the psyche of Queensland Rail • an increased number of on-time Depot. • a focus at all levels of the services departing Mayne depot

• Other stakeholders – business on improving OTR • improved infrastructure, such Queensland Rail works to build performance as signalling, to reduce close relationships with all • a strong focus on process headway and increase capacity stakeholders in various supply management across the network chains, including ports, industry bodies, regional councils and • moves to integrate social media • targeted investigations and government agencies. This is an into the established programs of works for specific important aspect in reducing communications environment lines (Caboolture) and events

system variability, improving (February and March 2013 • a clear focus on the future, planning and communication where students are returning to driven by the updated Customer and increasing supply chain school and university) Charter and the strategic and system reliability. operational plans.

Queensland Rail FY2012/13 Annual and Financial Report 27

• improved platform management • On 29 January 2013, an In addition, the following minor across the City network with additional morning peak service improvements at more than 50 station employees actively and an additional evening peak stations across the City network assisting customers on service were introduced on the were delivered: platforms and working with Gold Coast Line. There are now • $1.8 million for new fixed Traincrew to ensure services at least four services each hour signage and way-finding depart on-time during the majority of the information at five stations morning and afternoon peak • implementation of daily Travel period. Beenleigh customers • $7.9 million for new digital network reviews, which provide are also benefiting from an CCTV security equipment at 47 a synopsis of the previous day’s additional morning and evening stations delays. express service. • $2.8 million for new TransLink

station fare gates at four New Timetables stations Station Upgrade Program One of the key strategies to • $6.9 million for refurbishment More than $45 million was manage passenger capacity is the of toilets at Central and Roma allocated in the FY2012/13 budget timetable design process. By Street stations, as well as to upgrade the following stations providing a consistent and platform resurfacing at Oxley on the City network: customer focused approach to Station. managing the City network service Actual timetable, Queensland Rail Station Budget Completion Date commits to improving frequency ($M) and responding to load monitoring Narangba 28.8 July 2013 and feedback. Sandgate 19.93 September 2013 In the past year, the following South 11.97 October 2013 timetable changes were Brisbane implemented: Eagle 7.68 May 2013 Junction • In October 2012, a two-year trial of 15-minute service

intervals during the off-peak period was introduced on the

Ferny Grove Line.

Queensland Rail FY2012/13 Annual and Financial Report 28

Keperra to Ferny Grove Rail Richlands to Springfield This new rail line will help reduce congestion on the Centenary Upgrade Project Project (Stage 2) Highway, with up to 2,500 cars The Keperra to Ferny Grove Rail The Richlands to Springfield taken off roads during morning Upgrade Project was completed, Project (Stage 2) commenced in peak periods. marking the final stage of track September 2012 and has delivered More than 3,200 jobs will also be duplication between Bowen Hills a 9.5 kilometre dual track rail line created throughout the life of this and Ferny Grove. from Richlands to Springfield. In project. addition to the dual track, the The $85 million project included project delivers: duplicating 2.6 kilometres of new track between Keperra and Ferny • two new stations – one at Grove stations, an upgrade of the Springfield near Woodcrest

Ferny Grove station, expansion of College and the other at the car park, improved road traffic Springfield Central, near Orion flow and better interchange Shopping Centre, to serve a between trains, buses, bicycles and rapidly growing community vehicles. • two new road underpasses The project was completed on- under the Centenary Highway time and on-budget by Queensland from Springfield Station to the Rail. Orion Shopping Centre

• facilities for cyclists

• upgrades to the Centenary

Highway between Springfield Parkway and Johnson Road (budgeted separately by DTMR).

The project is also delivering 200

Park’n Ride spaces at Springfield Station and 500 Park ‘n Ride spaces

at Springfield Central Station, with construction works due for

completion in March 2014.

Queensland Rail FY2012/13 Annual and Financial Report 29

Traveltrain Renewal Queensland Rail Supported New Generation Rollingstock (NGR) Project Program Projects and Program of The Queensland Government’s NGR Queensland Rail is undertaking a Works project involves procuring new project to deliver a new and Queensland Rail also supports and trains to replace ageing upgraded long distance fleet, with contributes to a number of rollingstock and add to the existing the impending retirement of government-led projects and City network fleet. existing rollingstock, which is more program of works, which than 40 years old. incorporates the following Brisbane Inner Rail Solution The Traveltrain Renewal Program projects. The Queensland Government has plans to fulfil future requirements Moreton Bay Rail Link (MBRL) announced the Brisbane Inner rail by providing comfortable, modern Project Solution, a major program of works and reliable services for customers. and initiatives to address inner city The MBRL Project involves Approximately $92 million was network capacity. constructing a 12.6 kilometre dual allocated in the FY2012/13 budget track rail line between Petrie and The program includes an early to fund part of the Sunlander 14 Kippa-Ring with new stations at network capacity works program to project, which has already Kallangur, Murrumba Downs, Mango deliver value for money, short to delivered a new tilt train and will Hill, Mango Hill East (near Kinsellas medium term solutions and the allow for the refurbishment of the Road East), Rothwell and Kippa- core project existing pair of Cairns Tilt Trains. Ring. Rail Corridor works will between Yeerongpilly and Victoria The new tilt train The Spirit of commence in early 2014, with an Park. Queensland entered service in expected completion in late 2016. October 2013 and includes Lawnton to Petrie Third Track premium economy seating with innovative railbeds and personal in- The Lawnton to Petrie Third Track seat electronic entertainment project is part of the broader MBRL systems to provide a high level of project and delivers a grade comfort for customers. separated interface between the North Coast main line and the new

MBRL spur line.

Queensland Rail FY2012/13 Annual and Financial Report 30

Improving the Onboard Etiquette Campaign Increasingly, customers are using social media to provide feedback, Customer Experience This campaign continues to address compliments and ideas for the top 15 issues identified by We are committed to delivering improvement of our services. customers as anti-social behaviour customer service excellence Another key benefit of using social on the City network. It tackles through working innovatively to media is communication with onboard issues, such as feet on positively influence the overall customers during disruptions and, seats, priority seating, littering, Queensland Rail customer by working with TransLink, noisy behaviour and bags on seats. experience. This includes Queensland Rail aims to ensure implementation of the following customers receive up-to-date and initiatives. timely notice of any delays or Meeting Customers’ service changes. Wi-Fi Internet on Rollingstock Information Needs In June 2012, Queensland Rail was Smart Phone Applications Social Media the first operator in Australia to Queensland Rail is actively offer customers free Wi-Fi access Queensland Rail has a strong focus developing Smart Phone to the Internet while travelling by on social media and recognises that applications for customers to use installing Wi-Fi on 64 City network it is a key channel for for “real-time” train information, trains. communicating a variety of station facilities and information messages in a timely manner to on accessibility, as well as service Quiet Carriages engage customers and community updates. Queensland Rail Travel is Queensland Rail was also the first members. launching a multi-lingual rail operator to introduce quiet Queensland Rail’s social media application for the Kuranda Scenic carriages on every City network profile, which includes sites such Rail service that will provide both service. Customers travelling in as YouTube, Facebook, Flickr and written and audio information these carriages are requested to Twitter, allows for a wide range of highlighting significant points of refrain from loud conversations, information on service disruptions, interest along the customer’s talking on mobile phones and promotion of safety measures, journey. listening to noisy musical devices. campaigns and initiatives to be Almost three in four customers who shared with customers. are aware of these carriages use Queensland Rail has grown its them on some of their journeys. social media presence and now has over 11,000 followers on Twitter and more than 9,800 “likes” on

Facebook.

Queensland Rail FY2012/13 Annual and Financial Report 31 People We want all Queensland Rail employees to be accountable, proud and committed to delivering high performance outcomes. Our challenge is to ensure that during our organisational reform journey, we retain and attract the right capability to be well placed in achieving objectives in line with our owner’s expectations.

Queensland Rail employs a New Service Delivery Model Workforce Reform workforce from a range of A new Human Resources (HR) The transformation of Queensland occupations situated across the service delivery model was Rail requires the workforce to state. As at 30 June 2013, there implemented during FY2012/13 to adapt to new ways of working. Our were 6488.1 full time equivalents, allow for better management and workforce needs to be agile and of which: consistency in responding to flexible in responding to • 90 per cent were employed in workplace issues. This delivery competitive challenges, as well as core functions (Rail Operations, model also enables HR to work with displaying competence in Network, Customer, Access and leaders to better leverage their delivering on stakeholder and Business Strategy) human capital to deliver business customer demands.

outcomes. The new model has • 68 per cent were employed in In October 2012, a Voluntary incorporated several initiatives, operational areas (train driving, Redundancy Scheme was such as the creation of: network control, station and introduced. Following the onboard operations and a • a HR Central Call Centre – a introduction of this scheme, variety of trades) centralised service that significant organisational reform

provides support for all occurred in February 2013 to renew • 23 per cent were employed in the organisation’s focus on its core regional areas employee and manager enquiries and workplace issues business and to enable functions to • 19 percent were women (49 concentrate resources in areas that • Centres of Excellence – these percent in the Enabling directly contribute to operational teams support organisational functions and 17 per cent in performance. core functions) success through the design and governance of HR program s Along with improving efficiency, • two per cent were apprentices, and initiatives. effective performance has been a graduates or trainees key theme throughout FY2012/13, The business model represents with leaders being accountable for • 95 per cent were employed on contemporary HR theory and driving organisational performance a permanent basis. practice and has already proven its and continuing to engage with staff effectiveness during the significant through the changes. organisational restructuring process. HR will continue to embed the new service delivery model in

FY2013/14 and will continue to

sharpen its focus on providing services that effectively impact operational performance.

Queensland Rail FY2012/13 Annual and Financial Report 32

Enterprise Agreements Early preparations have also Talent and successful management commenced with respect to the and knowledge transfer are key Following implementation of seven renegotiation of the remainder of priorities to ensure long term new Enterprise Agreements in May the collective agreements, which success and business continuity. As 2012 that covered all employees, cover the majority of the Queensland Rail undergoes with the exception of Traincrew, workforce. These agreements significant change, the Executive considerable progress was made expired in FY2013/14. Leadership Team has identified the during FY2012/13 in terms of the top talent within the organisation productivity measures negotiated and these individuals have in these agreements. Some of the Talent Management and participated in a structured successfully realised benefits Development interview to determine their career include: and development aspirations. With the average age of • achievement of 106.7 per cent Queensland Rail employees being of the productivity initiative in 43 years and holding a tenure the Administration Services/ averaging 14 years, strategies must Professional/Technical (ASPT) be identified to address the Agreement impending exodus of skills and • enabling the use of flexible knowledge from the organisation.

start and finish work locations Approximately 50 per cent of the within Station Operations Queensland Rail workforce is aged between 40 and 59 years, which is • full implementation of rostered posing a specific challenge in terms ordinary hours on weekends and of replacing skills and knowledge. use of 12 hour rostered ordinary

hour shifts within Network SEQ As part of the process of managing and Regional, where possible. a significant number of staff leaving the organisation, a formal

knowledge transfer process has Preparation also commenced for been developed and is being used the renegotiation of the Traincrew to capture valuable information Agreement, which expired in July and knowledge from exiting staff, 2013. Queensland Rail’s many of whom are long term negotiating framework was employees. approved by the Cabinet Budget

Review Committee in April 2013 and bargaining commenced with the relevant unions.

Queensland Rail FY2012/13 Annual and Financial Report 33

Leadership Development and Accountability

Leaders have played a key role in the transformation of Queensland

Rail during the last year and will continue to drive the organisation to improve its performance.

To ensure all leaders in Queensland Rail possess a sound understanding of their required key attributes and expectations, specific responsibilities have been developed and communicated. These responsibilities will be incorporated into each leader’s performance plan to enable accountability in terms of achieving expected outcomes.

In addition, all managers will have their performance moderated at the end of the financial year, which will enable a more accurate and balanced view of the performance of leaders across the organisation. This will drive consistent standards and performance expectations and will ensure leaders are focused on achieving the vision of Queensland

Rail.

Queensland Rail FY2012/13 Annual and Financial Report 34

Commercial By focusing on continuous improvement, cost management, increased revenue, improved asset management and optimisation of operations, Queensland Rail continues to build a sustainable railway. Our commercial strategy is to efficiently deliver core business and expand areas to support Government objectives for economic growth.

The Regulatory Framework The current Access Undertaking West Moreton Reference Tariff was assigned to Queensland Rail via Reset The Queensland Rail network is an a transfer notice on 1 July 2010 as open access railway, which means The draft Access Undertaking part of the separation of QR that third party operators may seek includes a reference tariff (price) Limited into QR National (now to operate train services on for coal carrying train services on Aurizon) and Queensland Rail, Queensland Rail tracks. the West Moreton System. On 28 expiring 31 December 2013. June 2013, as part of the approval Third party access to the network Draft Access Undertaking process for the draft Access is legislated under the Queensland Undertaking, Queensland Rail Competition Authority Act 1997 Queensland Rail is currently submitted a reference tariff reset administered by the Queensland developing its own Access for FY2013/14 to FY2016/17 to the Competition Authority (QCA). Undertaking and has submitted QCA for its consideration. drafts to the QCA for its Queensland Rail operates under a consideration during FY2012/13. Queensland Rail’s proposed QCA-approved Access Undertaking reference tariff is based on that provides a framework under The Draft Access Undertaking is transparent and repeatable which parties are to seek access to better suited to Queensland Rail’s methodology that can be rolled the Queensland Rail network. This business activities than the current forward to future regulatory includes outlining: undertaking and is based on a light periods. Queensland Rail is handed “negotiate arbitrate currently awaiting feedback from • negotiation process and model”. Queensland rail has the QCA and industry on its timeframes worked closely with industry in submission. • pricing principles developing this draft Access Undertaking, which has also • utilisation of the network’s received several rounds of QCA

capacity public consultation. It is expected

• network performance reporting that the draft will be approved by requirements. the QCA in late 2013.

Queensland Rail FY2012/13 Annual and Financial Report 35

Revenue and Funding Queensland Rail has recently Regional Freight Growth negotiated renewal of the TSCs Strategy Transport Service Contracts with DTMR. These contracts came (TSCs) into effect 1 July 2013 for an initial Queensland Rail is working with Queensland Rail derives term of 12 months, with options to DTMR to develop a Regional Freight approximately 80 per cent of its renew for a further three 12-month Growth Strategy with the key revenue through the following terms. objective to increase Rail’s share three TSCs with the State. These of agricultural products such as Access Revenue contracts each provide funding for grain and cotton. Queensland Rail derives the provision of infrastructure and This partnership has resulted in an approximately 11 per cent of its passenger services that would announcement by the Queensland revenue from third party access otherwise fail to be commercially Government on 16 May 2013 for a charges to the below rail network. viable. These contracts include: $50 million upgrade of the • TSC (City network) – funds the In January 2013, ex-tropical Toowoomba Range rail efficient delivery of above rail Cyclone Oswald affected the infrastructure, which will remove passenger services across the network, flooding parts of the 25,000 trucks transporting grain Brisbane suburban network. North Coast Line and closing the and cotton from South East Toowoomba Range for two and a Queensland roads each year. The • TSC (Travel network) – funds half weeks, with a major land slide project’s scope is proposed to the delivery of regional above occurring between Spring Bluff and include the construction of two rail services along the east Ballard. Despite these significant one-kilometre rail passing loops at coast (Brisbane to Cairns), events and the challenging Harlaxton and Ballard. This project Charleville, Longreach and economic conditions, access is expected to take two years to Mount Isa corridors. revenue totalled $218.8 million in complete.

FY2012/13, which was up from • TSC (Rail Infrastructure) – funds approximately 70 per cent of $217.5 million for FY2011/12.

the below rail network. The Mount Isa Line is the only

system not currently funded.

Government funding for these services is supplemented by fare earnings and access revenue earned by Queensland Rail.

Queensland Rail FY2012/13 Annual and Financial Report 36

Supply Chain Forums Master Plan 2012 Capacity and Reliability

Queensland Rail has continued to Queensland Rail developed and Enhancements actively facilitate regular supply released to industry its Mount Isa Mount Isa Line Asset Replacement chain forums for the Mount Isa Line Rail Infrastructure Master Plan In February 2013, sections of the Line, North Coast Line and West 2012 in September 2012. The Plan Mount Isa Line were upgraded to Moreton System. These open provided clarity on the strategic 60kg on concrete sleepers to forums are aimed at: planning needs for specific growth increase overall system reliability. scenarios to assist customers, • informing supply chain partners regional and local planning bodies The heavier track has improved and stakeholders of planning and other stakeholders in preparing system resilience and delivers a activities and maintenance and developing their own robust structure that is best suited updates strategies. The Plan further to the extreme conditions on the • providing any other relevant presents options to enhance system line, such as the harsh climate and information. capacity to cater for base, medium the black soil formation that and high tonnage growth scenarios. At these forums, Queensland Rail rapidly deteriorates during the wet season. provides information on capacity The projects identified within the analysis, train control and planning Plan are able to be progressed at a System tonnages have also to better inform customers of key time and pace that supports progressively increased well business drivers. This open customer tonnage growth beyond the design performance of communication is creating requirements whilst generating the original track structure. improved understanding and sufficient revenue from access Upgrades have carried out at the cohesion, aligned planning that charges to provide a sustainable following locations: leads to greater efficiencies along commercial outcome for • Hughenden to Julia Creek these critical supply chains. Queensland Rail. The plans have • Mumu to Barabon been targeted at providing a cost • effective and reliable rail-based Barabon to Marathon supply chain solution in support of • Richmond to Moselle • Julia Creek to Quarrells. our customers’ business.

Queensland Rail FY2012/13 Annual and Financial Report 37

Mount Isa Line Capacity City Network Capacity – Non- North Coast Line Capacity Passenger Traffic Bulk minerals are currently the key Queensland Rail is working with product transported on the Mount Queensland Rail is working to industry groups and supply chain Isa Line and sizeable deposits have address network capacity issues partners to identify immediate and been identified that will through a better understanding of long-term strategies to continually potentially add considerable unused capacity for coal freight improve reliability and freight tonnage to the Mount Isa Line. through the City network and delivery on the North Coast Line. These products include phosphate identifying potential enhancements Whilst there are complex rock, copper, lead, zinc and to the rail network. This involves intersections of the North Coast sulphur. working collaboratively with Line, sufficient capacity exists to stakeholders and supply chain Existing opportunities in the accommodate the anticipated partners to: Northern Galilee Basin are also traffic requirements into the emerging with interest developing • identify options to grow the future. in terms of significant coal coal business in an efficient deposits. Coal haulage by rail may manner fundamentally transform • ensure the long term viability operations on the Mount Isa Line of West Moreton coal producers from a base metals supply chain to a coal supply chain. • ensure that the solution identified meets environmental Network capacity enhancements standards will continue to be delivered for future projects provided there are • improve the cycle times and on- sufficient contracted tonnages that time performance of each justify the necessary capital system. investment on commercial terms.

Additional works to increase capacity may include:

• a new passing loop at Kimburra

• two holding roads at Hughenden

• re-arrangement of port infrastructure at Townsville to improve access to unloading

facilities and traffic management.

Queensland Rail FY2012/13 Annual and Financial Report 38

Enterprise Asset • enable improved capabilities to Management System (EAMS) support the achievement of good asset management Over the past 12 months, practice. Queensland Rail has been preparing Design of the system is in its final for the implementation of EAMS, stages, with implementation to which will provide enhanced asset commence during the second information, enable better business quarter of FY2013/14. decisions and build a safer workplace.

The move to implement EAMS was endorsed by DTMR in a July 2012 report into the reliability of the

South East Queensland rail network, with independent auditors stating that such systems

“have greatly assisted decision- making” in other infrastructure organisations.

EAMS is being designed to enable everyone in the asset management chain to “see” an asset and “know” its condition. EAMS will:

• provide a single source of asset truth for information currently

held in more than 260 separate asset management systems and databases

• support whole-of-life asset

management across Queensland

Rail

• promote process efficiencies

Queensland Rail FY2012/13 Annual and Financial Report 39

Community Through community activities, Queensland Rail recognises and embraces responsibilities to the communities in which we operate. Queensland Rail strives to maintain a strong social responsibility ethos by engaging with local communities, customers, employees and the general public.

Queensland Rail delivers In December 2012, the Premier of Veneering of coal wagons by the sustainable public transport to Queensland established a taskforce main coal supplier on the system hundreds of thousands of to investigate and address commenced in May 2013, with all commuters and tourists each year. community concerns around remaining coal suppliers to Our community contributions span potential coal dust emissions commence veneering by December throughout the organisation and associated with rail transport of 2013. across the State of Queensland. We coal in South East Queensland. The are committed to using resources taskforce comprises of Queensland efficiently with business strategies Rail and government Ballast Recycling Program and objectives focused on representatives, as well as industry Queensland Rail has reviewed efficiency improvement, members from the South West opportunities associated with operational reliability and sound System Users Group, consisting of ballast spoil and is implementing a environmental management. representatives of coal producers ballast spoil recycling program, and rail freight operators. which is focused on the screening The South West System Users and characterisation of ballast Noise and Coal Dust Group, of which Queensland Rail is spoil to separate valuable ballast Queensland Rail is committed to a member, has committed to the stone for beneficial re-use. working with industry to manage development of a collaborative and This recycling program is set to the environmental impacts holistic Coal Dust Management Plan reduce costs associated with associated with operations. We for the rail corridor within which sampling, analysing and landfilling. seek to be a good neighbour in the coal is transported in South East Key outcomes expected to be communities in which we operate. Queensland. This plan is currently achieved through this program being finalised, with ongoing In FY2012/13, the focus was on include: implementation. addressing noise and coal dust • the diversion of recovered issues across the network. The Group engaged the ballast stone away from Queensland Rail has been working Department of Science, landfill, resulting in projected closely with government and third Information Technology, Innovation savings of around $8.8 million party operators on noise and the Arts (DSITIA) to design and over the next five years implement an air quality management issues and, where reasonable and practicable, we monitoring program for the rail • re-use of ballast spoil internally implement strategies and corridor. Monitoring commenced in for road or rail construction to undertake steps to minimise noise March 2013 analysis of results is reduce the organisation’s from the rail corridor. Queensland underway. natural resources Rail is currently working with DTMR to review noise management strategies to align with government expectations.

Queensland Rail FY2012/13 Annual and Financial Report 40

• reduced operational costs, Community Reference Accessibility and which would otherwise be Groups Community Engagement associated with the purchase of high quality aggregate material. Our Community Reference Groups Queensland Rail actively engages provide the opportunity to engage with organisations in the disability

The ballast recycling project will with customers and the sector to ensure access to services improve operational management community, share information is equitable, dignified and of the rail corridor, conserve about services and plans and comfortable. gather important information valuable natural resources and Since 2003, Queensland Rail has about their perspectives and positively contribute to the continued to maintain and co- preferences. organisation’s overall ordinate an Accessibility Reference environmental performance. Meetings are held for each City Group, which is comprised of network line on a bi-monthly basis. representatives from various disability groups and organisations, Topics for regular discussion Railsmart and Community such as Vision Australia, Blind include customer service, Citizens Australia, Guide Dogs Queensland Rail proactively operations, facilities, upcoming Queensland, Better Hearing promotes community safety across projects, accessibility and Australia, Deaf Services the rail network. The Railsmart communication. Queensland, Endeavour Community Education Program is a Foundation, Arthritis Queensland, dedicated school and community Queenslanders with Disabilities engagement initiative that has Network and The Multiple Sclerosis been implemented to improve (MS) Society. safety at level crossings and on the rail corridor. The reference group ensures that requirements of customers with Throughout FY2012/13, Community disabilities are considered across a Education officers actively engaged variety of projects and initiatives. 123,534 students by giving rail safety presentations to 391 schools The group has recently provided and early learning centres across advice on the Narangba and Queensland. Sandgate station upgrades,

accessible internal layouts for The team took part in various other trains and station information community engagement activities points for customers with throughout the year, actively disabilities. This engagement participating in events extending facilitates two-way from South East Queensland to communication, information regional areas. sharing and education.

Queensland Rail FY2012/13 Annual and Financial Report 41

Furthermore, Queensland Rail has Disability Discrimination • works closely with transport been working with customers with Act 1992 partners and the State disabilities to: Government to address The Disability Discrimination Act technical challenges unique to • provide tailored information for 1992 (DDA) seeks to eliminate rail and to ensure the use of an specific travelling requirements discrimination, as far as reasonably efficient, consistent and co- possible, against people with • release a suite of information ordinated approach disabilities. Under the legislation, on easy access to services for as a public transport operator, • commits to ongoing community customers using mobility aids Queensland Rail is required to and stakeholder engagement • update the popular Station comply with design specifications • emphasises excellent customer Access Guide for the City for all premises, conveyances and service. network. infrastructure.

The Queensland Rail website Queensland Rail is drafting an information for customers with accessibility action plan for disabilities utilising Travel network FY2013/14. This plan will provide a services is under review. single point of reference detailing Queensland Rail understands how a managed response to issues associated with DDA obligations. vital information is to the success of each customer’s journey. Based on the experience of the organisation over the past five

years, the plan mandates that Queensland Rail:

• will ensure that persons with

special needs have equivalent levels of access to services as those without special needs

• will provide a safe, accessible

and affordable transport logistic solution for all

customers

• utilises a customer driven approach to deliver

accessibility at stations and maintain a health and

constructive relationship with community groups

Queensland Rail FY2012/13 Annual and Financial Report 42

Community Partnerships Graffiti Management and In FY 2012/13, Queensland Rail partnered with the community, Queensland Rail has maintained its Prevention QPS and local councils to prevent commitment to community Every year, more than $5.5 million and remove graffiti. Initiatives and contribution through a Corporate is spent on preventing and activities included: Social Responsibility (CSR) program removing graffiti from Queensland • joint operations with the Police to ensure that its responsibilities to Rail assets and private properties Railway Squad targeting graffiti the community are met. adjoining the rail corridor. vandals across the network Under the CSR program, high-level Graffiti not only costs millions of • a new partnership with partnerships with non-profit dollars each year to remove, but it Brisbane City Council to combat organisations have been also damages Queensland Rail’s graffiti crime through a joint established and supported through reputation, which affects our corridor graffiti removal activities such as fundraising, customers’ perception on safety program partnerships, volunteering and and security. Research indicates • a new MOU with Logan City payroll giving programs. that rail customers can experience Council in 2013, with a joint Queensland Rail forms positive increased fear of crime in areas corridor enhancement program community partnerships that assist where graffiti is a regular underway to address local area issues, occurrence. This research is based • launch of a joint marketing ensuring Queensland Rail maintains on analysis of the annual campaign with Crime Stoppers a positive reputation as a good Queensland Rail Customer Security and Brisbane City Council corporate citizen within the Survey (Colmar Brunton, 2012) targeting graffiti vandals community. results where correlations have through the “Tag them Back” The current top five partners been drawn between customer initiative. chosen by Queensland Rail perception of safety and security As part of the Community employees are: at locations where graffiti crime is present. Queensland Rail employs a Education program, Queensland • Cancer Council Queensland best practice graffiti management Rail employees also visit schools • beyondblue program, which combines and community groups across • Guide Dogs Queensland intelligence collection and Queensland with a focus on • Prince Charles Hospital enforcement, along with state-of- improving student behaviour and Foundation the-art technology and trespass prevention, all of which • Starlight Children’s Foundation. infrastructure design to reduce contribute to a wider graffiti graffiti and enhance community prevention education program. Through the Community Partnering engagement. Program, Queensland Rail also supports small local initiatives (through contributions up to $5000).

Queensland Rail FY2012/13 Annual and Financial Report 43

The program is supported through Queensland Rail is investing $3 Heritage Rollingstock syllabus-based graffiti prevention million in FY2013/14 to maintain Queensland Rail helps preserve modules developed by Queensland and conserve a number of sites on Queensland’s rail heritage by Rail and Griffith University for use the Queensland Heritage Register. maintaining a fleet of heritage by teachers throughout The Queensland Rail Heritage rollingstock. The fleet consists of a Queensland. Committee has recently endorsed a variety of operational and display Heritage Property Strategy to The award winning Positive rollingstock including steam address the future management of pARTnerships program also helps locomotives from different eras, the Heritage Portfolio. reduce graffiti by producing high diesel locomotives, rail motors, quality public artwork in locations In recognition of recent heritage wooden and steel carriages, water attractive to vandals. The program conservation achievements, wagons and coal wagons. works with community groups, Queensland Rail was the recipient The fleet is used to operator tours schools and stakeholders. of the following National Trust of and charter services and a schedule Queensland Awards for Heritage of maintenance has been planned Conservation in October 2012: to ensure maximum usage during National Trust of • a gold award for the South the celebrations for 150 years of Queensland Awards for Brisbane Station Upgrade rail in Queensland in 2015. The Heritage Conservation project versatile rail motors are also used for training employees in essential There are 71 sites on the • a silver award for the Bremer operational roles. Queensland Heritage Register River Bridge repainting comprising of approximately 208 In consultation with The Workshops • a silver award in The operational and non-operational Rail Museum, items of historical Governor’s Heritage Award assets. A further 268 assets are significance have been identified Category for use of interpretive listed on the Queensland Rail for preservation as part of the signage and storyboards that Heritage Register, which State collection. Items that are not depict the history of rail in Queensland Rail self-manages. required for the State collection or local areas. These assets include stations, by Queensland Rail are offered, in goods sheds, bridges and culverts. custodian arrangements, to tourist and heritage rail organisations. Queensland Rail Engages with local communities to identify any re-use options for heritage properties that are surplus to operational requirements. These uses may include tourist information offices, local museums, retail outlets, cafes and community meeting centres.

Queensland Rail FY2012/13 Annual and Financial Report 44

Environmental Management

Queensland Rail continues to apply innovative environmental initiatives across its operations to achieve cost savings, environmental improvements and operational efficiencies.

The design and construction of the new Train Driver Training Facility at Bowen Hills has delivered a facility of high comfort and amenity whilst integrating environmental efficiencies and minimising environmental impacts.

Green Fleet

In April 2013, Queensland Rail’s Executive Leadership Team endorsed a recommendation to progressively replace all Queensland Rail road vehicles with standardised commercial models. This decision virtually eliminates any purchase of petrol driven vehicles and ensures that only small volume diesel vehicles will be purchased as the fleet requires replacement.

Queensland Rail FY2012/13 Annual and Financial Report 45 Governance Structure as at 30 June 2013

State of Queensland – Responsible Ministers

Treasurer and Minister for Trade The Hon. Tim Nicholls MP

Minister for Transport and Main Roads The Hon. Scott Emerson MP

Queensland Rail

Board Members Geoff Harley – Deputy Chair David George Wendy McMillan Dawson Petie Julie-Anne Schafer Merren McArthur

*Chief Executive Officer Glen Dawe

People and Safety Organisational Audit and Risk Committee Performance and Committee Strategy Committee Merren McArthur - Chair Dawson Petie – Chair David George Julie-Ann Schafer - Chair Wendy McMillan Geoff Harley David George Julie-Anne Schafer Wendy McMillan Geoff Harley

Queensland Rail Limited

On Track Insurance Pty Ltd

* Mr Glen Dawe was appointed Chief Executive Officer on 2 August 2013.

Queensland Rail FY2012/13 Annual and Financial Report 46

Board

Michael Klug (Chairman) LLB, FAICD Michael is a well-respected solicitor with more than 40 years’ experience. He recently concluded his third term as Partner in Charge of the Brisbane office of Clayton Utz.

He is a leader in the area of Alternative Dispute resolution and he is one of the original founders of LEADR (Lawyers Engaged in Alternative Dispute Resolution). He was also an original Director of the Australasian Disputes Centre and has served on ADR committees nationwide.

Michael is a nationally recognised practitioner, public speaker and lecturer in negotiation, having taught in Australia and overseas to university students, the business and public sector communities. Michael has extensive Board experience across a diverse range of fields including education, health care and transport. He was recently appointed Chairman of Autism Queensland.

Michael is also a Fellow of the Australian Institute of Company Directors and Vice-President of the Brisbane Club.

Geoff Harley (Deputy Chairman) LLB, FAICD, MAHRI Geoff is a consultant to and former Managing Partner of the Brisbane Office of Clayton Utz.

He was for a number of years an Adjunct Professor at the University of Queensland Law School and a member of the Advisory Council of the Queensland Conservatorium of Music.

Geoff served in the Australian Army Reserve for several decades (Infantry and Legal Corps) and retired with the rank of Major. Geoff also holds the Reserve Force Decoration.

Geoff has previously served as Chair of TransLink Transit Authority and CS Energy and is currently Chair of Queensland Urban Utilities. His board experience covers fields as diverse as electricity generation, communications, information technology, investment attraction, tourism and agribusiness.

Geoff has practised law for more than 40 years, the last 20 specialising in industrial and employment law. His role as a company director and as Chief Executive of Clayton Utz in Queensland for almost ten years has given him invaluable experience in strategy, operational management and governance. He is a Fellow of the Australian Institute of Company Directors and a member of the Australian Human Resources Institute.

Queensland Rail FY2012/13 Annual and Financial Report 47

Wendy McMillan BBus, BA, MAICD, AIM, AMI

Wendy has more than 18 years of commercial experience in transport, infrastructure, resources, trade, property, marketing and investment attraction.

Her previous positions include Director of Infrastructure for QC Resources Investments Pty Ltd, Manager Strategic Projects and Ports O&M, Transport Services, and Strategic Development with the John Holland Group, General Manager, Australia TradeCoast and senior management roles with the Port of Brisbane Corporation, Carter and Spencer International and Gambaro’s Seafood and Exports.

Wendy holds a Bachelor of Business and a Bachelor of Arts. She is the Chairman of the judging panel for the Premier of Queensland’s Export Awards, a Director of St. Aidan’s School Council and a Member of the Australian Institute of Company Directors, Fellow of the Australian Institute of Management and an Associate Fellow and CPM of the Australian Marketing Institute.

David George MA (Hons), FAICD, FCILT

David has more than 35 years’ experience in the rail industry. This includes being Chief Executive of ONTRACK (New Zealand rail network) between 2004 and 2007 and responsibility for Queensland Rail’s coal and freight businesses between 1998 and 2004. Prior to this, he was Director of European Business for British Rail (freight) in the run-up to the opening of the Channel Tunnel.

David is currently Chief Executive Officer of the Co-Operative Research Centre (CRC) for Rail Innovation, a position held since 2007. He is Vice Chair of the International Railway Research Board and Chair of the organising committee of the World Congress on Railway Research (WCRR) being jointly hosted by the CRC and Australasian Rail Association in Sydney in late 2013. David is a Director of TasRail and also a Fellow of both the Australian Institute of Company Directors and the Chartered Institute of Logistics and Transport Australia.

Hon. John Mickel M. Lit St, BA, B Ed. St, Dip T

The Honourable John Mickel entered Queensland Parliament in June 1998 as the Member for Logan and was appointed Minister for State Development, Employment and Industrial Relations from September 2006 to September 2007 and then Minister for Transport, Trade, Employment and Industrial Relations from September 2007 to March 2009. John was the 36th Speaker of the Legislative Assembly of the Queensland Parliament. He was first elevated to the Cabinet as Minister for Environment in February 2004 and appointed Minister for Energy in August 2004 and gained the additional portfolio of Aboriginal and Torres Strait Islander Policy in March 2005. He has represented Australia on the Executive of the Commonwealth Parliamentary Association and represented Queensland businesses on trade missions to Asia, India and the Middle East. He oversaw major reforms to the Queensland energy sector as Minister for Energy, continued the Smart State initiative as Minister for State Development, implemented new technology reforms to the public transport sector as Minister for Transport and is recognised for his diplomatic protocols and public speaking in domestic and international forums.

Before entering the Queensland Parliament, John held a number of senior Government roles including Chief of Staff to the Queensland Premier. He is also a former university lecturer in politics and public policy. Currently John serves on the Queensland Catholic Education Commission Political Advisory Committee, is a Board Member of the Sisters of St Paul de Chartres Aged Care Facility, and undertakes lecturing and public speaking engagements at Griffith University, the QUT and for community organisations. John has established the Vietnamese Orphans and Disability Trust with his wife, is an honorary member of Rotary and has been awarded Honorary Citizenship of Boystown.

Queensland Rail FY2012/13 Annual and Financial Report 48

Glenn Poole BEc, GradDip Bus Admin, FCPA, FCA, FAICD

Glenn is a professional senior executive and Board member with over thirty years' experience in strategic leadership, governance and management across the public and not-for-profit sectors.

He has significant practical experience in corporate governance and financial management through appointments as a director of boards and audit committees in the government and not-for-profit sectors. He is currently a member of the Local Government Association of Queensland Audit and Compliance Committee, the Public Trustee of Queensland Audit and Risk Management Committee, the Board of Governors of the Queensland Community Foundation and the Governance, Nomination and Remuneration Committee of the Queensland Synod of the Uniting Church in Australia. Glenn is also the Chair of the Advisory Board for the Australian Centre for Philanthropy and Nonprofit Studies, QUT.

Glenn has successfully undertaken senior executive positions in the Queensland Treasury Department providing influential policy advice on economic, financial management and corporate governance issues impacting on the public sector and the community and most recently was the Auditor-General of Queensland from 2004 to 2011.

Glenn holds a Bachelor of Economics and is a member of CPA Australia, the Institute of Chartered Accountants of Australia and the Australian Institute of Company Directors.

Merren McArthur BA, LLB, Dip AppFin

Cessation Date: 4 August 2013 Merren was recently appointed Chief Executive Officer of Virgin Australia Regional Airlines following Virgin Australia’s acquisition of Skywest Airlines in Western Australia. Merren joined Virgin Australia (then Virgin Blue) five years ago as General Counsel and Company Secretary and has held various Senior Executive roles, including Group Executive-Alliances, Network and Yield and Group Executive – Corporate Advisory.

Prior to joining Virgin, Merren was Chief Advisor at Rio Tinto Iron Ore, based in Perth. Her previous positions include Deputy State Solicitor for Western Australia and Executive Partner at national law firm Allens Arthur Robinson, based in Melbourne.

Dawson Petie FAICD, FASFA Cessation Date: 2 August 2013 Dawson has more than 30 years’ experience as a company director, including serving on the QR Limited Board for nearly 11 years where he was chair of the Audit and Risk Committee, prior to his appointment to the Queensland Rail Limited Board.

Prior to his retirement from full-time employment, Dawson was a General Manager for QIC Limited.

Queensland Rail FY2012/13 Annual and Financial Report 49

Julie-Anne Schafer LLB (Hons), GAICD, ANZIIF Cessation Date: 30 September 2013 Julie-Anne brought to Queensland Rail strong legal credentials and corporate experience, as well as transport experience in Queensland and at national level. She has been chair of the Royal Automobile Club of Queensland (RACQ) and is a National Transport Commissioner. She is a director of several companies and is a former Queensland Telstra Business Women’s award winner, President of the Queensland Law Society, Chair of the Solicitors’ Board of Queensland, Deputy Chancellor of the Queensland University of Technology and Adjunct Professor at the University of Queensland. Julie-Anne was previously a partner in two Queensland legal professional services firms. She holds a Bachelor of Laws (Honours) degree from the University of Queensland and an AICD Company Directors Diploma. Julie-Anne is a member of the Australian Institute of Company Directors and of the Australian and New Zealand Institute of Insurance and Finance.

Queensland Rail FY2012/13 Annual and Financial Report 50

Leadership team

Glen Dawe – Chief Executive Officer Glen’s father was a Station Master and he is the third generation of his family to work in Queensland Rail. Glen joined Queensland Rail as a Porter and his career progressed from planning and development roles to commercial, business and operations management; including Group General Manager Citytrain, which became Australia’s best performing urban rail passenger business.

He then took on the broader role of Group General Manager Metropolitan and Regional Services which involved managing Queensland Rail’s community service obligation businesses such as Citytrain, Traveltrain and Regional Freight. He then led Queensland Rail’s commercial businesses as Group General Manager Coal and Mainline Freight before moving to NSW to become General Manager Access at the Rail Infrastructure Corporation with responsibility for Access, Freight and Country Infrastructure.

Finally he moved to the Manildra Group, which is one of this country’s largest private rail users, as National Manager Rail Transport before retiring in 2011.

Mark Hope - Chief Financial Officer As Chief Financial Officer, Mark brings over 20 years of financial management experience and expertise to Queensland Rail. In this role Mark directs all financial aspects of the business including accounting practices, budgeting, financial planning, financial analysis and is responsible for monitoring all financial performance.

Mark commenced with Queensland Rail in March 2013, joining the Change Management Office in the role of GM Special Projects (Industry Partner Team Lead). He has a proven track record in delivering outstanding results and organisational change across numerous organisations.

In his previous roles, with the Department of Transport and Main Roads and TransLink, as both General Manager Technology and Commercial and Chief Financial Officer, he successfully liaised with Boards, Government, media, operating partners and suppliers, which played a key component in delivering TransLink’s ticketing reform project and the Gold Coast rapid transit project. Prior to these transport and infrastructure roles, Mark worked for APN News and Media as a Chief Financial Officer in Australia and New Zealand and PwC as an Audit Manager in Australia and England.

Mark has experience working in both chartered and commercial financial roles with significant organisational accomplishments achieved through innovation, skilled commercial acumen and a demonstrated partner-focused approach.

Tim Ripper - Executive General Manager Access and Business Strategy

Tim has been in the rail industry for more than 25 years, working with organisations in Australia and Hong Kong. During this time he has performed a variety of roles in design, construction, maintenance, asset management and, more recently, in business leadership.

In his current role as Executive General Manager Access and Business Strategy, Tim is responsible for the strategic management of the commercial relationship with Government, facilitating third party access to the rail network, organisational reporting and the efficient use of property.

Queensland Rail FY2012/13 Annual and Financial Report 51

Martin Ryan - Executive General Manager Customer Service

Martin is responsible for developing and implementing Queensland Rail’s customer strategy. This means ensuring all aspects of customers’ pre-trip, during trip and post-trip expectations are satisfied.

Martin has more than 25 years’ experience working in communications, marketing events, travel and tourism roles and has extensive knowledge and understanding of the importance of high quality customer service and positive relationships.

Rob Green - Executive General Manager Network

With over 25 years in the rail industry, Rob draws on his years of experience in signalling, telecommunications, overhead traction, track renewals, construction and project delivery of railway infrastructure and stations when managing Queensland Rail’s network. With responsibility for the operational and strategic readiness of the rail network and associated facilities, Rob must deliver fit- for-purpose, safe and reliable business outcomes for Queensland Rail.

His team also provides network services to rail operators on freight systems, including negotiating access to the network, consultation to provide alignment with freight market requirements and regional network control.

Kevin Wright - Executive General Manager Rail Operations

As a veteran of rail operations, safety and customer services, Kevin is responsible for ensuring the quality, movement and delivery of train services. This includes overseeing the areas of rollingstock engineering and maintenance, South East Queensland and Far North Queensland operations, Travel network operations, train service delivery, operations facilities and program co-ordination.

Kevin has twice received recognition for his service to the rail industry, winning the New South Wales Public Service Medal in 2003 and the Australian Public Service Medal in 2008.

Jim Benstead - A/Executive General Manager Commercial and Corporate Services

Jim is responsible for optimising commercial outcomes for Queensland Rail as well as the provision of enterprise services including property, procurement, ICT, Road Fleet and Project Delivery Services.

Jim joined QR Limited in July 2008 to focus on transformational leadership and change management leading to the separation of the company and formation of Queensland Rail. He was the Chief Financial Officer from the commencement of the new Queensland Rail in 2010 and was the Acting

CEO from December 2011 to August 2013.

Before joining QR Limited, Jim held senior management positions in TNT, Carpentaria Transport and

Toll Australia where he held lead roles in finance, shared services, credit management, customer service, business integration, commercial management and procurement. Jim has more than 30 years’ experience in the transport industry specialising in driving business improvement, delivering transformational change and leading outcome focused commercial teams.

Greg Ford - Executive General Manager Safety and Environment

Greg leads the overall safety journey in Queensland Rail in areas such as workplace health and safety, environment, investigation, assurance and emergency management.

Greg has more than 35 years’ experience in safety, performing in quality roles across both the defence and transport industries. Before Queensland Rail, Greg held the position of the Rail Safety Regulator for Queensland Transport for 10 years.

Queensland Rail FY2012/13 Annual and Financial Report 52

Nicholle Duce - General Manager Human Resources

Nicholle is responsible for establishing the vision for human resource management, including the development of a strategic framework, supporting governance and programs that facilitate cultural change and foster a high performing culture.

Nicholle has more than 15 years’ human resources experience in various roles, including strategic and operational positions in major organisations such as Suncorp and Rio Tinto.

Nick Le Mare - General Counsel

Nick leads the legal team at Queensland Rail.

Nick is an experienced lawyer with over 15 years’ experience in the transport and mining industries.

Prior to working at Queensland Rail, Nick held a General Manager’s role at Virgin Australia and before that a Senior Legal Counsel role that saw him play an integral part in the start-up of a long haul international airline. Before that, Nick was in private practice. He acted almost exclusively for clients in the mining industry.

Queensland Rail FY2012/13 Annual and Financial Report 53 Corporate Governance Queensland Rail is committed to ensuring that its systems, procedures and practices reflect the highest standards of corporate governance. Processes have been established to ensure that Queensland Rail’s corporate governance practices are reviewed regularly and are continually refined in accordance with its enterprise governance framework.

Statutory Authority An overview of existing corporate In exercising its functions and governance practices in line with powers, the Board’s key Conversion the above Guidelines is set out responsibilities include: On 3 May 2013, Queensland Rail below. • business strategy and planning was established as a Statutory Principle 1 – Foundations for • delegation of authority to senior Authority in accordance with the management and oversight management Queensland Rail Transit Authority • relations with responsible Act 2013 (QRTA Act). Queensland The roles and responsibilities of the Ministers Rail Limited ceased being a Board and individual Members are • major capital projects and Government Owned Corporation defined in a Board Charter. These expenditure from this date and became a roles and responsibilities are • financial reporting and risk wholly-owned subsidiary of the reviewed by the Board annually and management Statutory Authority. The Directors a copy of the Charter is available of Queensland Rail Limited were on our website. • governance and policy • senior management also appointed as Board Members The Board’s specific functions appointments. (Members ) of the Statutory include: Authority. The Board has delegated • developing the strategies and responsible for the day-to-day the operational, administrative operation of Queensland Rail to the and financial policies of Guidelines CEO including the implementation Queensland Rail and delivery of the Board’s The responsible Ministers have strategic direction. The CEO is requested that while Queensland • ensuring Queensland Rail supported by the senior executive Rail is no longer a Government performs its functions and team with management Owned Corporation, Queensland exercises its powers in a proper, responsibilities clearly defined and Rail will continue to apply the effective and efficient way documented through formal Corporate Governance Guidelines • ensuring that, so far as is position descriptions, performance for Government Owned practicable, Queensland Rail plans and Board approved Corporations (Guidelines). acts under, and achieves the Authorities, Approvals and objects in, the strategic and The Guidelines reference the Accountabilities Policy. Australian Securities Exchange operational plans

(ASX) Corporate Governance • accounting to the responsible Principles and Recommendations Ministers, as required under the and they provide the framework for QRTA Act, for Queensland Rail’s Government Owned Corporations to performance develop, implement, review and report on their corporate • annually reviewing the governance arrangements. performance of the Chief Executive Officer (CEO).

Queensland Rail FY2012/13 Annual and Financial Report 54

Newly appointed Members are Performance evaluations for the The Board considers that all Board taken through a formal induction CEO and senior executives are Members who held office during the process to provide them with an carried out each financial year in year are independent as defined overview of our business accordance with Queensland Rail’s under the ASX Corporate operations, strategies and remuneration framework and the Governance Principles and information in relation to the Board Board approved Performance Recommendations. In assessing the and Committee functions. The Payment Policy: Chief and Senior ongoing independence of each induction process assists the Executives. The performance Member, the Board considers the Members to understand their roles evaluation for the CEO is conducted assessment criteria outlined in the and responsibilities within by the Board and is based on the ASX recommendations. Materiality Queensland Rail and includes an achievement of agreed Key in relation to independence is overview of key corporate Performance Indicators (KPIs), considered on a case-by-case basis expectations, existing governance which are set annually by the Board with reference to each Member’s arrangements and the culture and and link to the strategic and individual circumstances. values of the organisation. operational objectives of Board Members are required to Queensland Rail. The performance The induction process is also keep the Board advised, on an evaluation for senior executives is relevant to new senior executives ongoing basis, of any business carried out in accordance with the to allow them to participate fully interests and other directorship and same process based on the and actively in management employment roles that could achievement of agreed KPIs. The decision making at the earliest potentially conflict with those of evaluation is conducted by the CEO opportunity. Queensland Rail. In circumstances and the Board. where a conflict is believed to Members are issued with a Principle 2 – Structure the Board exist, the Member concerned does comprehensive Board handbook to add value not take part in any decision or that details Queensland Rail and consideration of the issue. In Board operational information, All Members of the board, including addition, the Member will not governance requirements and the Chairman, are non-executive receive copies of the relevant policies. The Board handbook members. Queensland Rail Board papers. Members must notify assists with the induction process Members are appointed by the the Board via the Company and also supports existing Members responsible Ministers in accordance Secretary of changes to business with their ongoing governance with the QRTA Act. As such, the interests and appointments. responsibilities. The handbook is size and composition of the Board reviewed and updated annually. is determined by the responsible Ministers.

Queensland Rail FY2012/13 Annual and Financial Report 55

Details of the current Board Members are encouraged to further The ongoing provision of timely and Member’s experience and expertise their knowledge through relevant information to the Board is are disclosed in the Annual Report participation in industry, of critical importance in enabling as is information on attendance at governance and government forums the Board to effectively discharge Board and Committee meetings. and attend seminars hosted by the their obligations in accordance with Information in relation to Australian Institute of Company the requirements of the QRTA Act. composition of the Board and terms Directors, Chartered Secretaries The structure, format and content of appointment for all Members Australia and other peak of Board agendas presented to who held office during the financial professional bodies. In addition to Members for consideration and year is set out in the FY2012/13 peer review, interaction and decision, along with Board Paper Financial Report. networking with other Directors format, quality and timeliness is and industry leaders, Queensland reviewed on an ongoing basis with a A process is in place whereby Rail Members participate in formal review annually. Members, either collectively or Queensland Rail leadership forums individually, may seek independent The Board reviews its own and actively engage with professional advice where it is performance and that of the Queensland Rail employees and considered necessary to fulfil their Committees of the Board on a visit Queensland Rail operations to duties and responsibilities. This is regular basis to ensure they are gain an understanding of done at Queensland Rail’s expense. working effectively. The Board operational employee A Member wishing to seek such participates in regular in-camera requirements, challenges and advice must first obtain the sessions that provide an issues. approval of the Chairman. opportunity for the Members to review and analyse their current

performance as a Board and discuss

any issues that may exist.

Queensland Rail FY2012/13 Annual and Financial Report 56

A formal Board performance A written advice of the outcome of These expected standards of evaluation is conducted on an the evaluation will be provided to integrity, honesty and annual basis to achieve and responsible Ministers on completion accountability are reflected in our maintain corporate governance of the review. formal Code of Conduct which best practice and continual applies to all Members and Principle 3 – Promote ethical and improvement. An independent employees and is aligned with the responsible decision making consultant is engaged to assist with organisations five key strategic the evaluation every second year, Queensland Rail has well pillars of safety, customer, people, with the latest independent review established policies, procedures commercial and community. The completed during FY2011/12. and practices that seek to promote Code of Conduct is supported by ethical standards of behaviour and other policy related documents in The performance evaluation a culture of compliance that is risk relation to ethics, privacy, dealing process generally includes the aware and embraces good with conflicts of interest, trading in evaluation of the Board as a whole, governance practices in accordance securities and official misconduct. the Chair and the effectiveness of with our corporate, legal and While, as a Statutory Authority, no the Board Committees. The process community obligations. Member or employee holds or is undertaken through a formal trades securities in Queensland questionnaire completed by each Rail, the organisation has Member and members of the senior established standards and executive team. The review procedures that set out the legal considers a range of issues duties that apply to Members and including Board role, strategy, employees in relation to the monitoring performance, risk and potential misuse of information compliance oversight, stakeholder including the insider trading communication, Board structure prohibition under the Corporations and processes. Due to changes to Act. Board composition and the establishment of the Statutory Authority during the year, the formal Board evaluation for FY2012/13 has been deferred until June 2014.

Queensland Rail FY2012/13 Annual and Financial Report 57

Ongoing training in relation to Principle 4 – Safeguard integrity in The CEO and Chief Financial Officer ethical business practices is financial reporting (CFO) certify in writing that the provided by the organisation and Queensland Rail Financial Report The Board has established an Audit the Queensland Rail Code of represents a true and fair view of and Risk Committee that reviews Conduct also forms part of the Queensland Rail’s financial position the integrity of Queensland Rail’s induction process for new and that it has been prepared in financial reporting systems. The employees, consultants and accordance with all relevant Committee is governed by its own contractors. A copy of the Code of accounting standards and Charter, which is approved by the Conduct is available on our legislation. Board and reviewed annually. A website. copy of the Audit and Risk Queensland Rail has a detailed Queensland Rail also has in place Committee Charter is available on internal audit plan that is approved related processes and policy the website. The Committee assists by the Audit and Risk Committee documents setting out the the Board by reviewing and and managed by the Senior requirements of the Public Interest monitoring assurance activities Manager Risk, Internal Audit and Disclosure Act 2010, which over business operations, the Governance, who provides regular facilitates disclosure of public effectiveness of internal controls, reports to the Audit and Risk interest information and provides regulatory reporting, financial Committee. protection for those who make risks, compliance issues and In accordance with the Auditor- public disclosures. enterprise risk management General Act 2009, the external frameworks. The Committee audit function of Queensland Rail is monitors both internal and external performed by the Queensland Audit audit functions. Office. The Audit and Risk The role of the Chair of the Committee monitors the

Committee is not held by the performance of the external Chairman of the Board and all auditors on an annual basis. Committee members are

independent non-executive Members. Membership of the

Committee and details of attendance at meetings is disclosed below in the Board Committees

section.

Queensland Rail FY2012/13 Annual and Financial Report 58

Principle 5 – Make timely and Regular communications are Principle 6 – Respect the rights of balanced disclosure initiated with key stakeholders shareholders including responsible Ministers and Queensland Rail has established Queensland Rail respects the rights government representatives. The communication protocols and of responsible Ministers as the Chairman and CEO meet with standards in relation to the ultimate owners of the business. responsible Ministers and/or their disclosure of public information and The Board and senior executives of representatives on a regular basis. regularly assesses the information Queensland Rail engage with our Queensland Rail management also needs of all stakeholders to ensure responsible Ministers and their meets with representatives of the that they continue to be informed representatives on a regular basis. responsible Ministers after each about our activities in a timely and As at 30 June 2013, Queensland Board meeting to update them on accurate manner. Rail’s responsible Ministers were relevant issues. Information needs the Honourable Scott Emerson MP, In addition, the company has of these stakeholders are also Minister for Transport and Main established a dedicated discussed at these meetings. Roads and the Honourable Tim Government and Stakeholder As required by the QRTA Act, Nicholls MP, Treasurer and Minister Relationships team to assist with detailed quarterly reports are for Trade. management of government and provided to responsible Ministers regulatory relationships and the co- We are committed to ensuring that and their representatives, as well ordination of information and our responsible Ministers and their as individual Ministerial briefings on reporting requests. representatives are provided with specific issues. These reports the information they need to make include information regarding informed assessments of the financial performance, updates on operations, financial and major capital programs, key performance and financial position operational matters, risk of Queensland Rail and its management and governance issues subsidiaries. as well as information required to

be given in accordance with Queensland Rail’s Operational and Strategic Plans.

Queensland Rail FY2012/13 Annual and Financial Report 59

Queensland Rail prepares an Principle 7 – Recognise and • articulate roles, responsibilities Operational Plan and Strategic Plan manage risk and accountabilities for the for our responsible Ministers’ management, oversight and Queensland Rail recognises that approval. The Operational Plan and governance of risk. effective risk management and Strategic Plan are formal compliance frameworks are a key The approach defined within this performance contracts between element of an organisation’s policy is consistent with the Queensland Rail and its responsible corporate governance process. The Australian and New Zealand Ministers detailing proposed Board has approved a Risk standard on change to risk undertakings and target Management Policy and associated management (ISO 31000:2009). performance for the year ahead. framework for identifying, Supporting the policy is a In line with the requirements of the assessing and managing Queensland framework prepared to guide the QRTA Act, responsible Ministers are Rail’s strategic, operational, various business functions in advised in a timely manner of all financial and reputation risks. addressing their particular risks issues likely to have a significant through a structured risk The objectives of the policy are to: financial, operating, employee, management approach. The community or environmental • provide an enterprise-wide framework is designed to ensure impact including those matters that approach to risk management to risks are regularly identified, may prevent or significantly affect ensure it is managed in an assessed, monitored and reported achievement of the performance integrated, systematic and to the Board on a periodic basis, objectives outlined in the practical manner along with appropriate risk

Operational Plan. mitigation and management plans. • facilitate the achievement of Approval of responsible Ministers is Queensland Rail’s corporate The Board evaluates reported risks sought for major investments and objectives and strategies reaching a defined enterprise risk expenditure outlays, as well as tolerance level and actively • define the mechanisms by which Queensland Rail’s entry into monitors these risks and associated the company determines its risk significant supply or customer controls, including any additional appetite and the process for contracts. risk mitigation treatments that are identification and management proposed. Assurance activities are of risk undertaken to ensure that the controls are operating effectively.

Queensland Rail FY2012/13 Annual and Financial Report 60

The Board has charged Queensland Rail has established an Principle 8 – Remunerate fairly management with the responsibility appropriate fraud control and responsibly for managing risk within the framework for the ongoing The Board has established a People organisation and the monitoring and co-ordination of and Safety Committee that, among implementation of mitigation fraud control activities. The other things, reviews Queensland measures, under the direction of framework is supported by the Rail’s remuneration framework. the CEO supported by senior Code of Conduct and associated The Committee is governed by its executives. The group risk governance principles, standards own Charter, which is approved by management function, led by the and procedures that outline the Board and reviewed annually. A Senior Manager Risk, International employee obligations in relation to copy of the People and Safety Audit and Governance, has been ethical behaviour and the process Committee Charter is available on established to facilitate the process for reporting, recording and the website. The Committee assists by providing a centralised role in investigating allegations of fraud. the Board by reviewing and advising the various business A dedicated Ethics Hotline has been providing recommendations on the functions on executing risk established to enable employees to recruitment, retention, management and mitigation report any concerns regarding remuneration and performance strategies, as well as consolidating unethical conduct, breaches of the measurements of the CEO and risk reporting to senior executives law and suspected fraud or official senior executives. and the Board. misconduct. A dedicated Crime and

The CEO and CFO have declared in Misconduct Commission (CMC) writing to the Board that Liaison Officer manages the Queensland Rail’s risk management obligations under the Crime and and control system is operating Misconduct Act 2001 in relation to effectively in all material respects notification of suspected official based on representations by misconduct to the CMC. management.

Queensland Rail FY2012/13 Annual and Financial Report 61

Membership of the Committee and Board Meetings A private session involving only details of attendance at meetings is non-executive Members is held at The Board held 13 meetings during disclosed below in the Board the beginning of each Board the financial year, including an Committees section. Queensland meeting and chaired by the offsite meeting at the Townsville Rail recognises that the Chairman. The CEO, General office. achievement of its corporate Counsel and Company Secretary are objectives is dependent on the Typically, at Board meetings, the also present at all Board meetings. efforts of its people and has agenda will include the following: Members of senior management established remuneration policies, attend Board meetings when an • disclosure of Member interests procedures and framework issue under their area of designed to attract and retain high • minutes of the previous meeting responsibility is being considered or calibre employees and to align and any outstanding issues as otherwise requested by the individual and team efforts to raised by Members at previous Board. agreed KPIs linked to the meetings

Operational and Strategic Plans of • CEO’s report the organisation. • reports on major projects and Our senior executive remuneration current business issues arrangements are subject to approval or endorsement by the • transactions requiring Board Board in accordance with the approval in accordance with the Governance Remuneration Delegations Framework arrangements for Chiefs and Senior • updates from Committee Chairs Executives. Remuneration for on matters considered at Member is established by the Committee meetings responsible Ministers in accordance with the QRTA Act. • the minutes of previous Committee meetings. Details of the nature and amount of payments to each Member of Queensland Rail and specified

Queensland Rail senior executives are set out in the FY2012/13 Financial Report.

Queensland Rail FY2012/13 Annual and Financial Report 62

Member attendance at meetings of Board Committees Audit and Risk Committee the Board* in FY2012/13 are The Board has established The Audit and Risk Committee is a detailed below: Committees to assist with meeting committee of the Board created to its responsibilities. The Audit and assist the Board in the effective Risk Committee, People and Safety discharge of its governance and Committee Attended Eligible Member to Committee and the Organisational oversight responsibilities relating to Attend Performance and Strategy the financial reporting and risk Geoff Harley 1 6 6 Committee are governed by their management of Queensland Rail. (Deputy Chair) own Charters. Glen Dawe 2 11 11 The Committee oversees and (Chair) The membership of each Board monitors the preparation of David George3 6 6 Committee is made up of a financial statements, internal minimum of three Members from control structures, compliance and Stephen Gregg4 1 1 (Chair) the Board. risk management frameworks and the internal and external audit Maureen Hayes5 4 7 The CEO and Senior Executives functions of Queensland Rail. attend meetings at the discretion Leo Keliher6 3 4 of the Committee. The Committee’s key responsibilities include: Merren McArthur 11 13 An annual evaluation of Committee

Wendy McMillan3 6 6 performance forms part of the • the integrity of Queensland Board’s overall performance Rail’s financial reporting and Denise McMillan- 4 4 Hall6 review. disclosure processes

Dawson Petie7 9 10 • review of significant accounting policies and alternative Julie-Anne Schafer 11 13 treatments available

• the effectiveness of Queensland 1 Appointed to the Board 20/12/12, Rail’s systems of accounting and appointed Deputy Chair 21/06/13 2 internal controls Appointed Chair 12/07/12, ceased as Member 18/6/13 • the scope of Queensland Rail’s 3 Appointed to the Board 20/12/12 internal audit and external 4 Ceased as Board Member 12/12/12 audit programs and any 5 Ceased as Board Member 20/12/12 material issues arising from 6 these audits Ceased as Board Member 30/09/12 7 Ceased as Board Member 30/09/12, re- appointed to the Board 20/12/12

Queensland Rail FY2012/13 Annual and Financial Report 63

• the effectiveness of the Mr Dawson Petie chaired the People and Safety Committee Committee. The Committee processes and assurance The People and Safety Committee members and attendance at activities used by management is a committee of the Board meetings in FY2012/13 are detailed to monitor and ensure created to assist the Board in the Queensland Rail’s compliance below: effective discharge of its with laws, regulations, ethical governance and oversight guidelines and obligations for Committee Attended Eligible responsibilities relating to the external reporting of financial Member to human resource and safety information Attend 1 practices of Queensland Rail. Dawson Petie 3 3 • review of risk policies and (Chair) The Committee oversees and associated risk documentation monitors the remuneration and Glen Dawe 2 3 5 adopted by Queensland Rail performance framework for

3 Queensland Rail’s senior executives • the effectiveness of risk Leo Keliher 1 1 management processes and and employees. The Committee 4 frameworks used to support Wendy McMillan 3 3 also provides direction and Denise McMillan- oversight for safety policies, Queensland Rail’s risk 1 1 Hall3 management policies, frameworks and practices. procedures and documentation Julie-Anne Schafer 4 5 The Committee’s key

responsibilities include: • review and monitor key risk 1 exposures, control mitigations Appointed Chair to the Committee • the appointment and 30/01/13 and residual risks of Queensland termination of the CEO and 2 Rail Appointed to the Committee 31/07/12, senior executives (direct reports ceased as Committee Member 18/06/2013 3 to CEO) • the effectiveness of the risk Ceased as Committee member 30/09/12 • the annual remuneration and management and control 4 Appointed to the Committee 30/01/13 structures in place to identify performance review for the CEO

and monitor Queensland Rail’s and senior executives including compliance with applicable the establishment of laws, regulations and appropriate performance

governance obligations. measures and incentive targets

Queensland Rail FY2012/13 Annual and Financial Report 64

• the development and review of • the adequacy and effectiveness Organisational Performance and human resource policies and of Queensland Rail’s compliance Strategy Committee practices including with relevant safety legislation, Established 1 January 2013, the remuneration, learning and regulations, engineering Organisational Performance and development, people • standards and accreditation Strategy Committee is a committee performance framework, code requirements of the Board created to assist the of conduct, ethics and expected Board in the effective discharge of • provide direction and oversight values and behaviours its governance and oversight of safety related risks, controls responsibilities for ensuring • the adequacy and effectiveness and assurance processes. of Queensland Rail’s Queensland Rail operates in an employment, remuneration and Ms Merren McArthur chaired the efficient and cost effective manner industrial relations strategies Committee. The Committee while meeting its performance and and plans members and attendance at strategic expectations. meetings in FY2012/13 are detailed • external stakeholder The Committee’s key below: engagement (including responsibilities include: responsible Ministers,

the development of Queensland government and community) Committee Attended Eligible • and external corporate Member to Attend Rail’s Operational and Strategic

communications strategies and plans (including principal Merren McArthur1 4 4 assumptions and scenarios) plans (Chair)

2 identify objectives, outcomes • development and review of Glen Dawe 2 3 • 3 and KPIs against which the policies, frameworks and David George 2 2 4 performance of the organisation practices relating to the Stephen Gregg 1 1 will be measured security and safety of Geoff Harley3 1 2 Queensland Rail’s network and Maureen Hayes5 2 2 • review and monitor the trains Wendy McMillan3 2 2 operational and financial 6 performance outcomes to • review and monitor frameworks Dawson Petie 1 1 and practices dealing with the ensure alignment with

1 Queensland Rail’s strategic health, safety and welfare of Appointed Chair to the Committee 30/01/13 objectives relating to service Queensland Rail’s customers, 2 Appointed to the Committee 31/07/12, employees and the public ceased as Committee member 18/06/13 quality, efficiency, profitability 3 and growth Appointed to the Committee 30/01/13 4 Ceased to be a member 10/07/12 5 Ceased to be a member 20/12/12 6 Ceased to be a member 30/09/12

Queensland Rail FY2012/13 Annual and Financial Report 65

Notifications by Shareholding Ministers

• monitor and review delivery of Ms Julie-Anne Schafer chaired the capital projects and funding to Committee. The Committee By letter dated 30 January 2013, ensure alignment with members and attendance at pursuant to section 114 of the Queensland Rail’s approved meetings from 1 January 2013 are Government Owned Corporations organisational plans and detailed below. Act 1993 and section 24AA of the strategies Acts Interpretation Act 1954, the Shareholding Ministers revoked the • review and monitor Committee Attended Eligible 1 public sector policies entitled development of strategic Member to Attend Purchasing Carbon offsets for business initiatives to ensure Julie-Anne 3 3 Queensland Government Air Travel, policies, procedures and Schafer (Chair) the QFleet Climate Smart Policy frameworks are consistent with Glen Dawe2 1 2 and the Sport and Recreation the strategic planning and Sponsorship Policy. Consequently, performance objectives of David George 3 3 the Shareholding Ministers advised Queensland Rail Geoff Harley 2 3 that these policies will no longer review and monitor • apply to Queensland Rail, its organisational performance 1 subsidiaries and controlled entities. assessment and operational All Committee members were appointed on safety planning processes to identify 2 Ceased as Committee member on 18/06/13 improvement opportunities for

the future

• monitor changes in the external

environment, which may affect

efficiencies and improvements

criteria

monitor and oversee compliance • with any requests from

responsible Ministers in relation

to performance related

matters.

Queensland Rail FY2012/13 Annual and Financial Report 66

Notifications by Responsible (A) so that all references Ministers to a position in By letter dated 3 May 2013, the Queensland Rail Limited In accordance with a restructure responsible Ministers have are taken to be references direction given by responsible requested that while Queensland to the same or similar Ministers on 3 May 2013 pursuant to Rail is no longer a Government positions in Queensland section 79 of the QRTA Act, the Owned Corporation, Queensland Rail that will now be responsible Ministers directed: Rail and its subsidiaries continue to occupied by Queensland apply, to the greatest extent (a) Queensland Rail Limited: Rail staff; and possible, the following governance i. To do all things necessary, (B) by making all other policies and guidelines: incidental or ancillary to necessary amendments as give legal affect to the the context requires to: • Code of Practice for GOCs’ transfer of the shares in Financial Arrangements (2009) reflect the transfer of Queensland Rail Limited to • Corporate Entertainment and Queensland Rail Limited’s Queensland Rail, as Hospitality Guidelines (2008). employees to Queensland provided for under Section Rail under the Queensland • Investment Guidelines for GOCs 67 of the Act. Rail Transit Authority Act (2009). ii. To enter into the Managed 2013 and to facilitate the • Corporate Governance Services Agreement. operation of the Managed Guidelines for GOCs (2009) iii. As the sole member of On Services Agreement. • Cost of Capital Principles – GOCs Track Insurance Pty Ltd, to (b) The Board of Queensland Rail (2006). pass a special resolution to Limited to do all things necessary • GOCs Bargaining Guidelines repeal the current to ensure that Queensland Rail (2010). Constitution of On Track Limited complies with this • GOCs Governance Arrangements Insurance Pty Ltd and Restructure Direction; and for Chief and Senior Executives replace it with the New On (c) Queensland Rail Limited and the (2009) Track Constitution. Board that where there is • GOCs Release of Information iv. To continue in force all ambiguity or doubt about the Arrangements (2009) Existing Queensland Rail meeting or intent of this • Local Industry Policy: A Fair Go Limited Policies, subject Restructure Direction to follow the for Local Industry (2008) to appropriateness and any interpretation of the Under • Minimum Disclosure modifications necessary, Treasurer or Chief Executive of Requirements for Directors and as the context requires. DTMR about the matter as advised Chief and Senior Executives of to it in a clarifying statement. v. To amend the Existing GOCs (2009) Queensland Rail Limited • Queensland Code of Practice for Delegations: the Building and Construction Industry (2009)

• State Procurement Policy (2008).

Queensland Rail FY2012/13 Annual and Financial Report 67

By letter dated 28 May 2013, the Treasurer and Minister for Trade has advised that pursuant to section 62 of the QRTA Act, Queensland Rail and its subsidiaries are to be listed as National Tax Equivalents entities of the National Tax Equivalent Regime (NTER) and are required to follow the Manual for the NTER and thereby comply with the relevant taxation laws.

In accordance with a ministerial direction given by the responsible

Ministers on 1 August 2013 pursuant to section 12 of the QRTA Act, the responsible Ministers directed the

Board of Queensland Rail to appoint as from 2 August 2013, Mr Glen Dawe to the position of Chief Executive Officer of Queensland Rail for a term of three years.

Queensland Rail FY2012/13 Annual and Financial Report 68 Statement of Corporate Intent The Statement of Corporate Intent is the formal statement of Queensland Rail’s strategic direction, including objectives, strategies and performance outcomes for FY2012/13. It represents the performance agreement between the Board of Queensland Rail and its responsible Ministers. The SCI is consistent with Queensland Rail’s five-year Corporate Plan and reflects the strategy activity in year one of this planning horizon.

The Annual Report provides a Performance Monitoring Examples of non-financial summary of Queensland Rail’s SCI indicators included in the The SCI contains a framework for performance outcomes relating to FY2012/13 SCI are: performance monitoring that the delivery of strategic and ensures the Queensland Rail Board City network OTR operational objectives. Queensland • is accountable to our shareholding Rail’s SCI is prepared each financial • rollingstock utilisation Ministers for Queensland Rail’s year in accordance with the • customer satisfaction performance. This framework requirements year in accordance enables Queensland Rail to report • Signals Passed at Danger per with the requirements of Part 8 of on a number of mandatory financial million train kilometres the Government Owned and non-financial performance • LTIFR Corporations Act 1993 (GOC Act). indicators to present a balanced The SCI is tabled in the Queensland • Queensland Rail operator perspective on Queensland Rail’s Parliament with Queensland Rail’s derailments overall performance. Queensland Annual Report. • Greenhouse Gas Emissions. Rail reports to its shareholding Queensland Rail measures Ministers against these indicators performance against objectives to on a quarterly basis via quarterly Government Revenues focus efforts achieving strategy. reports and yearly via the Annual Key performance indicator Report. and Funding measures and related targets were Examples of financial indicators The SCI outlines the funding of the identified within the SCI to track included in the FY2012/13 SCI are: following services, which are the success of strategies during purchased by Government through FY2012/13. • earnings before interest and tax TSCs with Queensland Rail: Other key components of the SCI • net profit after tax • City network are summarised as follows. • return on operating assets • Travel network, with the

• return on equity. exception of Kuranda Scenic Rail Network Infrastructure (for • agreed rail infrastructure network standards and capacity).

Queensland Rail FY2012/13 Annual and Financial Report 69

Employment and Industrial Relations Plan

The SCI includes an Employment and Industrial Relations Plan, which guides Queensland Rail in developing and maintaining conditions of employment for employees, including labour market based remuneration.

Modifications to Statement of Corporate Intent

It is required under Section 120 (1) (d) of the GOC Act that each annual report of a GOC includes particulars of any modifications made to the SCI during the financial year. Queensland Rail did not modify its

SCI during FY2012/13.

Queensland Rail FY2012/13 Annual and Financial Report 70 Corporate Entertainment and Hospitality

Queensland Rail did not undertake any corporate entertainment and hospitality activities throughout FY2012/13 that involved costs greater than $5,000.

Queensland Rail FY2012/13 Annual and Financial Report 71

Queensland Rail ABN 68 598 268 528 Financial report for the period 3 May to 30 June 2013

Queensland Rail Financial Report FY2012/13 72 Queensland Rail ABN 68 598 268 528 Financial report - 30 June 2013

Contents Page Financial statements Income statement 1 Statement of comprehensive income 2 Balance sheet 3 Statement of changes in equity 4 Statement of cash flows 5 Notes to the financial statements 6 Management certificate 65 INDEPENDENT AUDITOR'S REPORT 66

These financial statements cover Queensland Rail and its controlled entities. Queensland Rail is an unincorporated statutory body established under the Queensland Rail Transit Authority Act 2013. The statutory body is controlled by the State of Queensland which is the ultimate parent. The head office and principal place of business of the statutory body is: Level 14, Rail Centre 1, 305 Edward Street Brisbane Qld 4000 A description of the nature of the statutory body's operations and its principal activities is included in the notes to the financial statements.

Queensland Rail Financial Report FY2012/13 73 Queensland Rail Income statement For the period 3 May to 30 June 2013

Consolidated Parent 2013 2013 Notes $'000 $'000

Revenue from continuing operations 5 328,653 259,096

Other income 6 487 - Consumables (75,602) - Employee benefits expense (113,403) (120,486) Depreciation and amortisation expense 7 (51,419) - Other expenses 7 (2,126) - Finance costs 7 (38,371) - Profit before income tax 48,219 138,610

Income tax expense 8 (10,504) - Profit for the period 37,715 138,610

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

Queensland Rail Financial Report FY2012/13 74 Queensland Rail Statement of comprehensive income For the period 3 May to 30 June 2013

Consolidated Parent 2013 2013 Notes $'000 $'000

Profit for the period 37,715 138,610

Other comprehensive income* Changes in the fair value of cash flow hedges 28 497 - Income tax relating to components of other comprehensive income 8, 28 (149) - Other comprehensive income for the period, net of tax 348 -

Total comprehensive income for the period 38,063 138,610

* Other comprehensive income comprises amounts that are expected to be reclassified to profit or loss in subsequent periods when specific conditions are met. The above statement of comprehensive income should be read in conjunction with the accompanying notes.

Queensland Rail Financial Report FY2012/13 75 Queensland Rail Balance sheet As at 30 June 2013

Consolidated Parent 2013 2013 Notes $'000 $'000

ASSETS Current assets Cash and cash equivalents 9 276,468 - Trade and other receivables 10 182,025 675,625 Inventories 11 61,237 - Derivative financial instruments 12 475 - Other current assets 13 6,862 - Total current assets 527,067 675,625

Non-current assets Receivables 14 3,843 31,375 Inventories 15 22,533 - Property, plant and equipment 16 6,239,870 - Intangible assets 17 46,988 - Deferred tax assets 18 101,659 73,419 Other financial assets 19 - 2,845,324 Other non-current assets 20 4,834 - Total non-current assets 6,419,727 2,950,118

Total assets 6,946,794 3,625,743

LIABILITIES Current liabilities Bank overdraft 9 13,908 - Trade and other payables 21 309,829 501,552 Provisions 22 236,728 217,071 Borrowings 24 99,817 - Current tax liabilities - 1,154 Other current liabilities 23 24,758 67 Total current liabilities 685,040 719,844

Non-current liabilities Provisions 22 52,024 37,808 Borrowings 24 3,000,000 - Deferred tax liabilities 25 411,894 - Other non-current liabilities 26 29,845 - Total non-current liabilities 3,493,763 37,808

Total liabilities 4,178,803 757,652

Net assets 2,767,991 2,868,091

EQUITY Contributed equity 27 2,602,628 2,845,324 Reserves 28 314 - Retained earnings 28 165,049 22,767

Total equity 2,767,991 2,868,091

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

Queensland Rail Financial Report FY2012/13 76 Queensland Rail Statement of changes in equity For the period 3 May to 30 June 2013

Contributed Retained Total equity Reserves earnings equity Consolidated Notes $'000 $'000 $'000 $'000

Balance at 3 May 2013 - - - -

Profit for the period - - 37,715 37,715 Other comprehensive income - 348 - 348 Total comprehensive income for the period - 348 37,715 38,063

Transactions with owners in their capacity as owners: Acquisition of subsidiaries , 2827 2,602,628 (34) 243,177 2,845,771 Dividends provided 29 - - (115,843) (115,843) 2,602,628 (34) 127,334 2,729,928

Balance at 30 June 2013 2,602,628 314 165,049 2,767,991

Contributed Retained Total equity Reserves earnings equity Parent Notes $'000 $'000 $'000 $'000

Balance at 3 May 2013 - - - -

Profit for the period - - 138,610 138,610 Other comprehensive income - - - - Total comprehensive income for the period - - 138,610 138,610

Transactions with owners in their capacity as owners: Acquisition of subsidiaries , 2827 2,845,324 - - 2,845,324 Dividends provided 29 - - (115,843) (115,843) 2,845,324 - (115,843) 2,729,481

Balance at 30 June 2013 2,845,324 - 22,767 2,868,091

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

Queensland Rail Financial Report FY2012/13 77 Queensland Rail Statement of cash flows For the period 3 May to 30 June 2013

Consolidated Parent 2013 2013 Notes $'000 $'000

Cash flows from operating activities Receipts from customers* 86,106 132,536 Receipts from Government* 254,272 - Interest received 1,705 - Payments to suppliers and employees* (239,548) (113,079) Interest and other costs of finance paid (31,421) - Net GST paid (19,562) (6,453) Other (31) 1 Net cash inflow from operating activities 36 51,521 13,005

Cash flows from investing activities Loans to related parties - (13,005) Proceeds from the disposal of assets 1,075 - Payments for fixed assets (93,990) - Net cash (outflow) from investing activities (92,915) (13,005)

Cash flows from financing activities Proceeds from borrowings 28,240 - Net cash inflow from financing activities 28,240 -

Net (decrease) in cash and cash equivalents (13,154) - Cash and cash equivalents acquired from subsidiaries 275,716 - Cash and cash equivalents at end of period** 9 262,562 -

* Inclusive of goods and services tax (GST). ** Net of bank overdraft and monies held in trust. The above statement of cash flows should be read in conjunction with the accompanying notes.

Queensland Rail Financial Report FY2012/13 78 Queensland Rail Notes to the financial statements 30 June 2013

Contents of the notes to the financial statements

Page 1 Summary of significant accounting policies 7 2 Financial risk management 21 3 Critical accounting estimates and judgements 28 4 Correction of error and revision of estimates 29 5 Revenue from continuing operations 30 6 Other income 30 7 Expenses 31 8 Income tax expense 32 9 Current assets - Cash and cash equivalents 33 10 Current assets - Trade and other receivables 33 11 Current assets - Inventories 35 12 Derivative financial instruments 36 13 Current assets - Other current assets 36 14 Non-current assets - Receivables 37 15 Non-current assets - Inventories 37 16 Non-current assets - Property, plant and equipment 38 17 Non-current assets - Intangible assets 40 18 Non-current assets - Deferred tax assets 42 19 Non-current assets - Other financial assets 43 20 Non-current assets - Other non-current assets 43 21 Current liabilities - Trade and other payables 43 22 Liabilities - Provisions 44 23 Current liabilities - Other current liabilities 47 24 Liabilities - Borrowings 47 25 Non-current liabilities - Deferred tax liabilities 49 26 Non-current liabilities - Other non-current liabilities 50 27 Contributed equity 50 28 Reserves and retained earnings 51 29 Dividends 52 30 Key management personnel disclosures 53 31 Contingencies 60 32 Commitments 60 33 Related party transactions 61 34 Subsidiaries 63 35 Remuneration of auditors 64 36 Reconciliation of profit after income tax to net cash inflow from operating activities 64 37 Events occurring after the reporting period 64

Queensland Rail Financial Report FY2012/13 79 Queensland Rail Notes to the financial statements 30 June 2013 (continued)

1 Summary of significant accounting policies

The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated. The financial statements are for the consolidated entity consisting of Queensland Rail and its subsidiaries, Queensland Rail Limited and On Track Insurance Pty Ltd. On 3 May 2013, the shares in Queensland Rail Limited were transferred to the Queensland Rail Transit Authority. The Queensland Rail Transit Authority was established under the Queensland Rail Transit Authority Act 2013 (QRTA Act). In accordance with the QRTA Act, the name of the Queensland Rail Transit Authority was changed to Queensland Rail on 2 June 2013. The financial statements for Queensland Rail, previously approved by the Board on 28 August 2013, have been amended subsequent to receiving an unqualified audit opinion from the Auditor-General of Queensland on 30 August 2013. The Board of Queensland Rail resolved to transfer costs from capital work in progress to consumables expense as those costs no longer represent future economic value. This decision was made subsequent to considering the accounting implication of a significant de-scope in its Sunlander 14 capital program. The recognition of the transfer of costs from capital work in progress to consumables expense relates to an event that occurred prior to the establishment of the Queensland Rail Transit Authority. This transaction is not reflected in the financial statements for the reporting period 3 May 2013 to 30 June 2013. The consolidated balance sheet does, however, reflect the impact of this event at 30 June 2013. Queensland Rail is an unincorporated statutory body domiciled in Australia and owned by the Queensland State Government. Queensland Rail is a for-profit entity. These financial statements are denominated in Australian dollars. Queensland Rail is referred to in this financial report as the "company" or the "parent". Queensland Rail together with its subsidiaries, Queensland Rail Limited and On Track Insurance Pty Ltd, are collectively referred to as the "group". The group’s objectives for the financial period comprises: (a) Efficiency improvement and revenue creation; (b) On time running, reliability, frequency of service and patronage growth; (c) Capital performance and project delivery; and (d) Safety improvement, employee engagement and environment management. The principal activities of the group consists of: (a) Passenger services throughout Queensland; (b) Network access services throughout Queensland; (c) Design and construction of rail infrastructure; and (d) Associated maintenance of both the above and below rail operations. In accordance with the QRTA Act, all employees and their associated leave entitlements belonging to Queensland Rail Limited were transferred to Queensland Rail on 3 May 2013. All expenses incurred by Queensland Rail relating to these employees have been recharged to Queensland Rail Limited in accordance with a Managed Services Agreement. These financial statements were approved for issue by the members on 16 December 2013.

Queensland Rail Financial Report FY2012/13 80 Queensland Rail Notes to the financial statements 30 June 2013 (continued)

1 Summary of significant accounting policies (continued)

(a) Basis of preparation (i) Statement of compliance

These financial statements are general purpose financial statements which have been prepared in accordance with: • applicable Australian Accounting Standards (AASBs) (including Australian Interpretations) adopted by the Australian Accounting Standards Board (AASB); • the Financial and Performance Management Standard 2009; • Queensland Treasury and Trade’s Financial Reporting Requirements for Queensland Government Agencies to the extent relevant; and • other authoritative pronouncements. (ii) New and amended standards adopted by the group

None of the new standards and amendments to standards that are mandatory for the first time for the financial year beginning 1 July 2012 were early adopted. Their adoption has not affected any of the amounts recognised in the current period or any prior period and is not likely to affect future periods. However, amendments made to AASB 101 Presentation of Financial Statements, effective 1 July 2012, now require the statement of comprehensive income to show the items of comprehensive income grouped into those that are not permitted to be reclassified to profit or loss in a future period and those that may have to be reclassified if certain conditions are met. (iii) Early adoption of standards

The following standards and amendments to standards are available for early adoption for the financial year beginning 1 July 2012: AASB 9 Financial Instruments AASB 2009-11 Amendments to Australian Accounting Standards arising from AASB 9 Financial Instruments AASB 2010-7 Amendments to Australian Accounting Standards arising from AASB 9 Financial Instruments AASB 2012-6 Amendments to Australian Accounting Standards - Mandatory Effective Date of AASB 9 and Transition Disclosures AASB 10 Consolidated Financial Statements AASB 11 Joint Arrangements AASB 12 Disclosure of Interests in Other Entities AASB 127 Separate Financial Statements (2011) AASB 128 Investments in Associates and Joint Ventures (2011) AASB 2011-7 Amendments to Australian Accounting Standards arising from the Consolidation and Joint Arrangements Standards AASB 2012-10 Amendments to Australian Accounting Standards - Transition Guidance and other amendments AASB 113 Fair Value Measurement AASB 2011-8 Amendments to Australian Accounting Standards arising from AASB 113 Fair Value Measurement AASB 119 Employee Benefits (September 2011) AASB 2012-5 Amendments to Australian Accounting Standards arising from AASB 119 Employee Benefits (September 2011) AASB 2012-2 Amendments to Australian Accounting Standards - Disclosures - Offsetting Financial Assets and Liabilities (June 2012) AASB 2012-3 Amendments to Australian Accounting Standards - Offsetting Financial Assets and Liabilities AASB 2012-5 Amendments to Australian Accounting Standards arising from the Annual Improvements 2009-2011 Cycle AASB 1053 Application of Tiers of Australian Accounting Standards AASB 2010-2 Amendments to Australian Accounting Standards arising from Reduced Disclosure Requirements

Queensland Rail Financial Report FY2012/13 81 Queensland Rail Notes to the financial statements 30 June 2013 (continued)

1 Summary of significant accounting policies (continued)

The application of these standards and amendments in future periods is not expected to have a material impact on the accounts of the group. The group has not elected to early adopt any pronouncements for the current annual reporting period. There are no other standards that are not yet effective and that are expected to have a material impact on the group in the current or future reporting periods and on foreseeable future transactions. (iv) Historical cost convention

These financial statements have been prepared under the historical cost convention, except for certain assets which, as stated, are at fair value. (v) Critical accounting estimates

The preparation of financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 3. (vi) Going Concern

The financial report for the group is prepared on a going concern basis despite current liabilities exceeding current assets at reporting date. The shortfall is partly due to vested employee benefits being classified as current. Funding through Transport Service Contracts, adequate interest coverage and a low gearing ratio provides adequate assurance of the group's status as a going concern. The parent is a going concern as all costs incurred in providing employees to its subsidiary, Queensland Rail Limited, is recharged by the parent under a Managed Services Agreement with Queensland Rail . AllLimited funding for operating activities of the parent are sourced from the Queensland Rail Limited banking facilities. (b) Principles of consolidation (i) Subsidiaries

The consolidated financial statements incorporate the assets and liabilities of the subsidiaries of Queensland Rail as at reporting date and the results of the subsidiaries for the period then ended. A subsidiary is an entity (including a special purpose entity) over which the group has the power to govern the financial and operating policies so as to obtain benefits from their activities, generally accompanying a shareholding of more than one-half of the voting rights. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are de-consolidated from the date that control ceases. Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Non-current inter-company loans may not be demanded by the other entity and do not become payable other than through settlement of obligations associated with the loans or one of the entities exits the wholly-owned group. Accounting policies have been adopted consistently across the group. Investment in the subsidiary is accounted for at cost in the financial records of the parent entity.

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1 Summary of significant accounting policies (continued)

(c) Foreign currency translation (i) Functional and presentation currency

Items included in the financial statements of each of the group's entities are measured using the currency of the primary economic environment in which the entity operates (i.e. the functional currency). The consolidated financial statements are presented in Australian dollars, which is the group's functional and presentation currency. (ii) Transactions and balances

Foreign currency transactions are initially translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss, except when they are deferred in equity as qualifying cash flow hedges and qualifying net investment hedges. (d) Rounding of amounts / Comparative restatements

The financial statements are presented in Australian dollars, which is the group’s functional currency. Amounts included in the financial statements have been rounded to the nearest thousand dollars unless disclosure of the full amount is specifically required. Comparative information has been restated where necessary to be consistent with disclosures in the current reporting period. (e) Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of associated GST, except where the amount of GST incurred is not recoverable from the Australian Taxation Office (ATO). In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or as part of the expense. Trade receivables and trade payables in the balance sheet are shown inclusive of GST. The net amount of GST recoverable from, or payable to, the ATO is included with other receivables or payables in the balance sheet. Cash flows are presented in the cash flow statement on a gross basis, except for the GST component of investing or financing activities, which are disclosed as operating cash flow. From 3 May 2013 Queensland Rail, Queensland Rail Limited and On Track Insurance Pty Ltd are individual entities recognised as separate taxpayers for the purposes of GST. Transactions between these entities and externally to third parties are subject to GST. (f) Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable after taking into account any discounts allowed. Amounts disclosed as revenue are net of indirect taxes. The group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and specific criteria have been met for each of the group's activities as described below. Exchanges of goods and services of the same nature and value without any cash consideration are not recognised as revenues. Revenue is recognised for the major business activities as follows: (i) Services revenue

Services revenue comprises revenue earned from Transport Service Contracts, the provision of passenger transport and track access. In addition to revenue receivable from non-related parties, the company receives revenue from Transport Service Contracts with the Department of Transport and Main Roads as well as amounts from various State Government departments as direct reimbursement for concessions provided to senior citizens, pensioners and students.

Queensland Rail Financial Report FY2012/13 83 Queensland Rail Notes to the financial statements 30 June 2013 (continued)

1 Summary of significant accounting policies (continued)

Transport Service Contracts

Transport Service Contract revenue is accounted for as follows: • Transport Service Contract (Rail Infrastructure) (TSC(RI)) This contract is a multi-tiered arrangement which provides the company with funding to cover capital and operating costs for the Regional and South East Queensland networks. Under the contract, a stream of annuity-based funding is provided for operating and capital costs which have been previously incurred as well as the capital costs for enhancements to these existing systems. This annuity (which is paid in monthly instalments) is calculated on a seven year forecast of capital and operating costs for the respective systems under the TSC(RI). Capital costs are based on depreciating assets over a 30 year period. • Transport Service Contract - South East Queensland Infrastructure Plan and Program (TSC - SEQIPP) Under the South East Queensland Infrastructure Plan and Program, the company is contracted to construct infrastructure at various locations throughout the South East Queensland network. The infrastructure constructed forms part of the group's property, plant and equipment which will generate revenue through the TSC (RI) contract. TSC - SEQIPP revenue is recognised on a systematic basis in accordance with the agreed rate of return of the SEQIPP assets. • SEQIPP - Third party work Revenue is recognised based on the actual costs incurred for the work performed. The revenue is recognised when the work is complete and the costs incurred are taken to the income statement in the same financial period. • Citytrain and Traveltrain Transport Service Contracts The company receives payments under the Transport Service Contract which defines passenger services to be provided by the group. Revenue is recognised on a straight-line basis based on the annual Transport Service Contract amount or periodic adjustments thereto. Passenger Transport

Other train passenger service revenue comprises ticket and travel related sales and is recognised as revenue once the service has been rendered. Government concession revenue is recognised in the period in which the service is provided based on a predetermined formula as agreed with the local authority. Track Access

Revenue generated from rail network access is recognised as the services are provided and is calculated based on a number of operating parameters (such as tonnage hauled) applied to either regulator approved tariffs or negotiated access agreements. (ii) Other revenue

Other revenue comprises revenue earned from the sale of goods and services. Revenue for sale of goods is recognised when the significant risks and rewards are passed to the buyer and the costs incurred, or to be incurred in respect of the transaction can be measured reliably. Risks and rewards are considered passed to the buyer at the time of delivery. (iii) Interest income

Interest income is recognised using the effective interest method.

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1 Summary of significant accounting policies (continued)

(g) Other Income (i) Government grants

Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the group will comply with all attached conditions. Government grants relating to costs are deferred and recognised in income statement over the period necessary to match them with the costs that they are intended to compensate. Government grants relating to the purchase of property, plant and equipment are included in the cost base of those assets and amortised to the income statement on a straight-line basis over the expected lives of the assets. (ii) Disposal of assets

The gain or loss on disposal of an asset is recognised at the date when the significant risks and rewards of ownership of the asset pass to the buyer, usually when the purchaser takes delivery of the asset. The gain or loss on disposal is calculated as the difference between the carrying amount of the asset at the time of disposal and the net proceeds on disposal and is recognised as other income or expenses in the income statement. (h) Defined benefit superannuation obligations

The group makes contributions to the State Public Sector Superannuation Scheme (QSuper) on behalf of its employees concerning superannuation. QSuper is an employer-sponsored fund, with the major employer being the State of Queensland. There are a number of membership categories in QSuper, which are either accumulation or defined benefits in nature. The Treasurer has ultimate responsibility for funding payments to defined benefit members. The State has in place funding arrangements designed to meet the defined benefit obligations for its members. The Treasurer has the ability to require employers to pay any amounts needed to meet these benefits. Generally, this is handled through the regular standard fortnightly contribution paid by every employer, which has been determined on the advice of the State Actuary. No directions varying this contribution have been received by the group to reporting date. The State Actuary makes a recommendation to the Treasurer on the standard employer contribution rate required to fund the normal range of benefits at the conclusion of each triennial actuarial investigation. The most recent actuarial investigation was completed in 2010 and the actuary’s recommendation to leave the employer contribution rate unchanged was approved by the Treasurer. This investigation is undertaken on QSuper as a whole and is not segregated into different employers or occupations. (i) Income tax

The income tax expense or benefit for the period is the tax payable / receivable on the current period's taxable income based on the national income tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements and by unused tax losses. Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates that are enacted. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. Deferred tax assets are recognised for deductible temporary differences, unused tax losses and tax credits, only if it is probable that future taxable amounts will be available to utilise those temporary differences, losses and credits.

Queensland Rail Financial Report FY2012/13 85 Queensland Rail Notes to the financial statements 30 June 2013 (continued)

1 Summary of significant accounting policies (continued)

Deferred tax liabilities and assets are not recognised for the temporary differences between the carrying amount and tax bases of investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future. Current and deferred tax is recognised as an expense or income in the income statement, except when it relates to items credited or debited directly to equity, in which case the deferred tax is also recognised directly in equity. (i) Tax consolidation legislation

The group has not elected to form a tax consolidated group. The group measures current and deferred tax amounts for Queensland Rail and its controlled entities, Queensland Rail Limited and On Track Insurance Pty Ltd, as individual stand-alone taxpayers and aggregates the balances for disclosure. (ii) Income tax equivalents

The group is required to make income tax equivalent payments to the Queensland Government, based upon the value of benefits derived and rulings set out in the National Tax Equivalent Regime (NTER) which is administered by Australian Taxation Office (ATO). These payments are made pursuant to the Queensland Rail Transit Authority Act 2013 and instruction from the Treasurer. The NTER gives rise to obligations which reflect in all material respects those obligations for taxation which would be imposed by the Income Tax Assessment Act 1936, the Income Tax Assessment Act 1997 and associated legislation, as well as Rulings and other pronouncements by the ATO to determine the tax payable by the group. (j) Cash and cash equivalents

For statement of cash flows and balance sheet presentation purposes, cash and cash equivalents include cash on hand, deposits held at call with financial institutions and other short-term highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. (k) Trade receivables Trade receivables

Trade receivables are initially recorded at fair value less any allowance for uncollectible amounts. Trade receivables generally have credit terms ranging from 7 to 31 days. Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. An allowance for impairment of trade receivables is established when there is objective evidence that the group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation and default or delinquency in payments (more than 90 days overdue) are considered indicators that the trade receivable is impaired. The amount of the impairment loss is recognised in the income statement within other expenses. When a trade receivable for which an impairment allowance had been recognised becomes uncollectible in a subsequent period, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against other expenses in the income statement. Other receivables

Other receivables include accruals, contractual receivables and GST receivable. Collectability is reviewed on an ongoing basis.

Queensland Rail Financial Report FY2012/13 86 Queensland Rail Notes to the financial statements 30 June 2013 (continued)

1 Summary of significant accounting policies (continued)

(l) Inventories

The value of inventories reported includes items held in centralised stores, workshops and infrastructure and rollingstock depots. Cost comprises cost of purchase, cost of conversion and other costs incurred in bringing the inventory to its present location and condition. Inventories are valued at the lower of cost or net realisable value. Cost is determined predominantly on an average cost basis. Items expected to be consumed after more than one year are classified as non-current. The allowance for inventory obsolescence is based on assessments by management of particular inventory classes and relates specifically to infrastructure and rollingstock maintenance items. The amount of the allowance is based on a proportion of the value of damaged stock, slow moving stock and stock that has become obsolete during the reporting period. The group has an agreement in place with Aurizon Operations Limited (formerly QR Limited) regarding inventory held in the Aurizon Operations Limited workshops on behalf of the group. The agreement includes both "call option" and "put option" clauses and expires on 30 June 2015. The group may exercise a call option upon expiry or termination of the agreement to acquire all or part of the dedicated inventory held by Aurizon Operations Limited at the expiry or termination date. Aurizon Operations Limited, may in turn, exercise a put option to require the group to acquire all or any part of the dedicated inventory held on behalf of the company at the expiry or termination date. (m) Investments and other financial assets

The group classifies its non-derivative financial assets based on the purpose for which the investments were acquired. Management determines the classification of its investments at initial recognition. At reporting date, the group has only one type of non-derivative financial asset: loans and receivables. (i) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for those with maturities greater than 12 months after the reporting date which are classified as non-current assets. Loans and receivables are included in current trade and other receivables (note 10) and non-current receivables (note 14) in the balance sheet. (ii) Recognition and derecognition

Regular purchases and sales of financial assets are recognised on trade-date which is the date on which the group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the group has transferred substantially all the risks and rewards of ownership. (iii) Subsequent measurement

Loans and receivables are carried at amortised cost using the effective interest method. Details on the determination of the fair value of financial instruments are disclosed in note 2. (iv) Impairment

The group assesses at each reporting date whether there is objective evidence that a financial asset or group of financial assets are impaired. If there is evidence of impairment for any of the group’s financial assets carried at amortised cost, the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows, excluding future credit losses that have not been incurred. The cash flows are discounted at the financial asset’s original effective interest rate. The loss is recognised in the income statement.

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1 Summary of significant accounting policies (continued)

(n) Derivatives and hedging activities

The group enters into derivative contracts to hedge exposures to foreign exchange rates and commodity prices as described in note 2. Derivative balances are disclosed in note 12. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument and, if so, the nature of the item being hedged. The group designates certain derivatives as hedges of the cash flows of recognised assets and liabilities and highly probable forecast transactions (cash flow hedges). At inception, the group documents the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions have been and will continue to be, highly effective in offsetting future cash flows of hedged items. The full fair value of a hedging derivative is classified as a non-current asset or liability when the remaining maturity of the hedged item is more than 12 months; it is classified as a current asset or liability when the remaining maturity of the hedged item is less than 12 months. (i) Cash flow hedge

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in other comprehensive income. The gain or loss relating to the ineffective portion is recognised immediately in the income statement. Amounts accumulated in equity are recycled in the income statement in the periods when the hedged item will affect profit or loss. However, when the forecast transaction that is hedged results in the recognition of a non-financial asset, the gains and losses previously deferred in equity are transferred from equity and included in the measurement of the initial cost or carrying amount of the asset. When a hedging instrument expires or is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time is recognised when the forecast transaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement. (ii) Derivatives that do not qualify for hedge accounting

Certain derivative instruments do not qualify for hedge accounting. Changes in fair value of any derivative instrument that does not qualify for hedge accounting are recognised immediately in the income statement. (iii) Embedded derivatives

Through the group's purchase and sale contracts, it is possible that embedded derivatives have been entered into. An embedded derivative will cause some or all of the cash flows of the purchase or sale contract (i.e. the host contract) to be modified by reference to a variable such as a foreign exchange rate or a commodity price if that variable is not closely related to the host contract. Embedded derivatives are separated from the host contract and accounted for as a stand alone derivative if the economic characteristics and risks of the embedded derivatives are not closely related to those of the host contract. At reporting date, there were no embedded derivatives not closely related to the host contract.

Queensland Rail Financial Report FY2012/13 88 Queensland Rail Notes to the financial statements 30 June 2013 (continued)

1 Summary of significant accounting policies (continued)

(o) Property, plant and equipment Methodology for valuation of fixed assets

Property, plant and equipment is measured at cost less accumulated depreciation. Cost is the amount of cash or cash equivalents paid or the fair value of the other consideration given to acquire an asset at the time of its acquisition or construction. Cost may also include transfers from other comprehensive income of any gain or loss on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment. The cost of fixed assets constructed by the group includes the cost of all materials used in construction, direct labour, site preparation, interest and foreign currency gains and losses incurred where applicable and an appropriate proportion of variable and fixed overheads. Gifted and Donated Assets

Assets acquired from government at no cost are measured at fair value as government grants. Fair value means the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction. Assets acquired from customers at no cost are recorded at fair value. Land

Land is carried at cost. The Transport Infrastructure Act 1994 stipulates that the group only retains ownership of its non-corridor land. As such, only non-corridor land is recorded in these accounts. Ownership of corridor land remains with the Department of Natural Resources and Mines on behalf of the State. This land is leased to the Department of Transport and Main Roads and subsequently sub-leased to the group for no cost. The sub-lease term is for an initial term of 100 years with a renewal option for an additional 100 years. Owned building, plant and equipment and major plant and equipment

Owned building, plant and equipment and major plant and equipment are carried at cost less accumulated depreciation. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. Owned infrastructure

Owned infrastructure assets are carried at cost and represent capitalised expenditures that are directly related to capital projects and may include materials, labour and equipment, in addition to an allocable portion of indirect costs that clearly relate to a particular project that will provide future economic benefits and remain within the control of the group. Subsequent and maintenance costs

Costs related to repairs and maintenance activities are expensed when such repairs are performed. Subsequent costs are only capitalised when it is probable that future economic benefits associated with the item which flow to the group and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. Leased property, plant and equipment

Capitalised fit out of leased properties is disclosed under buildings. The group does not have any finance leases. Work in progress

The cost of fixed assets constructed by the group includes the cost of all materials used in construction, direct labour, site preparation, interest and foreign currency gains and losses incurred where applicable and an appropriate proportion of variable and fixed overheads.

Queensland Rail Financial Report FY2012/13 89 Queensland Rail Notes to the financial statements 30 June 2013 (continued)

1 Summary of significant accounting policies (continued)

Depreciation and Amortisation

Buildings, plant and equipment, major plant and equipment and infrastructure are depreciated on a straight-line basis over the useful life net of the residual value. Motor vehicles are depreciated using the diminishing value basis (percentages range from 13.64% to 35.00%), with land and work in progress not depreciated. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements. Assets are depreciated or amortised from the date of acquisition, or, in respect of internally constructed or manufactured assets, from the time an asset is completed and held ready for use. Major spares purchased specifically for particular assets are capitalised and depreciated in line with standard default asset class lives. Where assets have separately identifiable components that are subject to regular replacement, these components are assigned useful lives distinct from the asset to which they relate. Any expenditure that increases the originally assessed capacity or service potential of an asset is capitalised and the new depreciable amount is depreciated over the remaining life of the asset. The depreciation and amortisation rates used during the period were based on the following range of useful lives: - Buildings 10 - 50 years - Major plant and equipment 8 - 40 years - Plant and equipment 3 - 25 years - Infrastructure* 5 - 100 years The depreciation and amortisation rates are reviewed annually and adjusted if appropriate. An asset’s carrying amount is written down to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (note 1(r)). * Longer life infrastructure includes bridges, tunnels and other long lived civil works. Shorter life infrastructure includes telecommunications and security and surveillance equipment. (p) Intangible assets (i) IT development and software

Costs incurred in developing products or systems and costs incurred in acquiring software and licenses that will contribute to future period financial benefits are capitalised to software and systems. Costs capitalised include external direct costs of materials and service and direct payroll and payroll related costs of employees' time spent on the project. Amortisation is calculated using the straight-line method over their useful life which varies from 3 to 7 years. IT development costs include only those costs directly attributable to the development phase and are only recognised following completion of technical feasibility and where the company has an intention and ability to use the asset. (q) Classification of expenditure

Items of expenditure in excess of $2,000 which are expected to provide future economic benefits are capitalised, with the exception of the purchase of office equipment and other items of a similar nature that provide limited quantifiable benefits. The threshold applies to all asset classes except capital spares and intangibles. Capital spares have a threshold of $20,000. If capital spares are under $20,000, the item is recorded in inventory. Expenditure not capitalised is treated as an operating expense in the period in which the expenditure is incurred. Intangibles have a threshold of $50,000. If intangibles are under $50,000, expenditure is not capitalised and is treated as an operating expense in the period in which the expenditure is incurred.

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1 Summary of significant accounting policies (continued)

(r) Impairment of assets

Assets are reviewed for impairment annually to determine if there are indications that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash generating units). Non-financial assets that have suffered impairment are reviewed for possible reversal of the impairment at each reporting date. (s) Trade and other payables

These amounts represent liabilities for goods and services provided to the group prior to the end of financial period which are unpaid. The amounts are unsecured and are usually paid within the terms set by the supplier. (t) Borrowings and borrowing costs

Debt is drawn from facilities with the Queensland Treasury Corporation (QTC) incorporating fixed and floating debt and is initially recognised at fair value, plus transaction costs incurred. Borrowings are subsequently measured at amortised cost, using the effective interest rate method. Interest is accrued and paid monthly. Interest costs are calculated and advised by QTC in accordance with an agreed book rate methodology, which equates with amortised cost using the effective interest rate method. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument. Borrowing costs, which includes interest calculated using the effective interest method and administration fees, are expensed in the period in which they arise. Borrowing costs which are directly attributable to the construction of material qualifying assets are capitalised. Qualifying assets are assets not funded from other sources with a cost of more than $1.0 million and which take a substantial period of time to prepare for intended use or sale. The rate used to determine the amount of borrowing cost to be capitalised is the QTC interest rate applicable to the entity’s outstanding borrowings during the period, in this case 7.48%. During the period, interest costs of $(0.6) million were capitalised. Borrowings are classified as current liabilities unless the group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date. (u) Provisions

Provisions are recognised when the group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. Provisions are not recognised for future operating losses. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at reporting date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows. The discount rate used to determine the present value is a pre tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. (v) Employee benefits (i) Wages and salaries, annual leave and leave loading

Liabilities for wages and salaries, including non-monetary benefits, annual leave and leave loading are recognised as current liabilities. These liabilities are in respect of employees' services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled plus related on-costs.

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1 Summary of significant accounting policies (continued)

(ii) Other long-term employee benefit obligations

Liabilities for long service leave where employees have completed the required period of service, or are entitled to pro-rata payments are recognised as current liabilities at nominal values. The remaining unvested liabilities are included as non-current liabilities. The liability for long service leave is measured using the expected future payments to be made in respect of services provided by employees up to the reporting date. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future non-current payments are discounted using market yields at the reporting date on Commonwealth government bonds with terms to maturity that match, as closely as possible, the estimated future cash outflows. (iii) Retirement allowance

Retirement allowance is payable to employees that retire or are paid according to Voluntary Employee Redundancy Scheme (VERS) or Medical Separation who: • are not members of a QSuper contributory or defined benefit superannuation fund; • were employed prior to 1 February 1995; • have 10 or more years of continuous service; and • have reached the retirement attainment age of 55. Liabilities for retirement allowance where employees fulfil all of the above requirements are recognised as current liabilities at nominal values. The remaining unvested liabilities are included as non-current liabilities. The liability for retirement allowance is measured using the expected future payments to be made in respect of services provided by employees up to the reporting date. Consideration is given to the history of employee departures, expected future wage and salary levels as well as expected age of retirement. Expected future non-current payments are discounted using market yields at the reporting date on Commonwealth government bonds with terms to maturity that match, as closely as possible, the estimated future cash outflows. These conditions continue to apply to employees who have transferred, or will transfer, from Aurizon Operations Limited and Aurizon Network Pty Ltd (formerly QR Network Pty Ltd) to Queensland Rail. (iv) Sick leave

Sick leave is not provided for on the grounds that it is non-vesting and on average, no more than the annual entitlement is taken each year. (v) Superannuation

Contributions are expensed as they are made. The group pays an employer subsidy to the Government Superannuation Office in respect of employees who are contributors to either the Public Sector Superannuation (QSuper) scheme or State Service Superannuation. Employer contributions to the Super Defined Benefit Fund are determined by the State Actuary. No liability is recognised for accruing superannuation benefits as this liability is held on a Whole-of-Government basis and reported in the Whole-of-Government financial statements. The group also makes superannuation guarantee payments into the QSuper Accumulation Fund (RailSuper) and QSuper Accumulation Fund (Contributory) administered by the Government Superannuation Office. No liability / asset is recognised for the group's share of any potential deficit of the Super Defined Benefit Fund of QSuper. Refer to note 1(h) for further information on defined benefit liabilities.

Queensland Rail Financial Report FY2012/13 92 Queensland Rail Notes to the financial statements 30 June 2013 (continued)

1 Summary of significant accounting policies (continued)

(w) Contributed equity

Ordinary shares are classified as equity. Equity injections are treated as an increase in the value of issued shares. (x) Dividends

Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the group, on or before the end of the financial period but not distributed at reporting date. (y) Leases (i) Leases on property, plant and equipment

Leases in which a significant portion of the risks and rewards of ownership are not transferred to the group as lessee are classified as operating leases (note 32). Operating lease rental (net any incentive received from the lessor) is expensed on a straight-line basis over the lease term and is charged to the income statement. Leases of property, plant and equipment where the group, as lessee, assumes substantially all the risks and benefits of ownership are classified as finance leases. The group did not have any finance leases at reporting date. Expected rental revenue from operating leases where the group is a lessor is recognised as income on a straight-line basis over the lease term (note 32). (z) Insurance

The group insures against risks which are largely uncontrollable, have significant or catastrophic consequences for assets and / or revenue and the aggregate costs of which would exceed the limit of exposure the organisation is prepared to accept. Insurance cover has accordingly been effected for a variety of such risks. Other areas of risk exposure are self-insured, including workers' compensation. Until 30 June 2010, self-insurance and other underwriting activities were performed by Queensland Rail's wholly-owned subsidiary, On Track Insurance Pty Ltd. On Track Insurance Pty Ltd was transferred from Aurizon Operations Limited on 6 October 2010 and will continue to provide cover for claims relating to events up until 30 June 2010 for both Queensland Rail and the Aurizon Operations Limited group. (aa) Environmental regulation

The group is subject to a variety of laws and regulations in the jurisdiction in which it operates or maintains land. Where remediation measures are probable and can be reliably measured, such costs incurred in complying with relevant laws and regulations are accounted for in accordance with the policy in note 1(u). Although the group is not required to purchase carbon permits under the Clean Energy Act 2011, it does purchase electricity and other inputs whose prices have increased as a result of the legislation. The group has assessed the impact of these increases and determined that they are not material to its operations. (ab) Authorisation for issue

The financial statements are authorised for issue by the Chairman at the date of signing the management certificate.

Queensland Rail Financial Report FY2012/13 93 Queensland Rail Notes to the financial statements 30 June 2013 (continued)

2 Financial risk management

The group's activities expose it to a variety of financial risks including market risk, credit risk and liquidity risk. The group's overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the group. The group uses derivative financial instruments such as foreign exchange contracts and commodity swap contracts to hedge significant risk exposures. Trading for profit is strictly prohibited. Financial risk management is being carried out by a central treasury unit within the group under policies approved by the Members of the Board (the Board). The treasury unit identifies, evaluates and hedges financial risks in close co-operation with the group's operating units. The Board approves the Finance Policy for overall risk management, as well as principles covering specific areas, such as mitigating foreign exchange, commodity price, interest rate and credit risks, use of derivative financial instruments and investing excess liquidity. Any breaches of policy are reported to the Board. Sensitivity analysis has been used to help assess the financial risk of the group. In determining this sensitivity, the average of the 50 day historical volatility of the closing daily spot rate for three years, was used to adjust the forward curve. A three year period was chosen in line with the group's current hedging framework. For foreign currency the adjustment was applied to the US Dollar, the Euro and the Japanese Yen. For commodity price risk, the adjustment was applied to the Singapore Gasoil curves. (a) Market risk (i) Foreign exchange risk

Foreign exchange risk arises from capital expenditures that are denominated in a currency that is not the entity's functional currency. The group is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US Dollar (USD), the Euro (EUR) and the Japanese Yen (JPY). The risk is measured using cash flow at risk. The group has a Treasury Principle in place to manage foreign exchange risk. All foreign exchange risk is centrally managed by the treasury unit using approved derivative instruments. The group's foreign exchange risk management policy dictates the level of hedging to be undertaken within the Board approved limits. At reporting date, the Board approved trading range for the foreign exchange risk hedging is: 0 - 1 year: 80% - 100% 1 - 2 years: 60% - 100% 2 - 3 years: 40% - 100% The group designates forward foreign currency derivatives for hedging foreign exchange forecast transactions which are highly probable. At reporting date, 100% of foreign exchange hedges were designated for hedge accounting purposes. At reporting date, contracts recognised directly in equity were net gains of $0.4 million. During the period ended 30 June 2013, gains of $0.01 million were removed from equity and included in the acquisition cost of capital.

Queensland Rail Financial Report FY2012/13 94 Queensland Rail Notes to the financial statements 30 June 2013 (continued)

2 Financial risk management (continued)

The group's exposure to foreign currency risk at reporting date was as follows: 30 June 2013 USD EUR JPY Consolidated $'000 €'000 ¥'000

Cash and cash equivalents 28 125 1 Forward exchange contracts - capital expenditure foreign currency (qualifying for hedge accounting) 577 2,525 - Net exposure 605 2,650 1

30 June 2013 USD EUR JPY Parent $'000 €'000 ¥'000

Cash and cash equivalents --- Forward exchange contracts - capital expenditure foreign currency (qualifying for hedge accounting) - - - Net exposure - - -

Sensitivity

At reporting date, had the Australian dollar weakened / strengthened by 10% against the USD / EUR / JPY with all other variables held constant, the group’s post tax profit would have been nil higher / $0.006 million lower. (ii) Commodity price risk

Commodity price risk arises when future commercial supply agreements are subject to fluctuations in price movements. Commodity swap contracts, transacted by the treasury unit, are used to manage commodity price risk. The group has a Treasury Principle in place to manage commodity price risk. All commodity price risk is centrally managed by Group Treasury using approved derivative instruments. The group uses the commodity Singapore Gasoil 0.001% due to environmental efficiencies. The group has chosen Singapore Gasoil 0.05% to hedge exposures as these are the most liquid markets available. The group's commodity price risk management policy dictates the level of hedging to be undertaken within Board approved limits. At reporting date, the Board approved trading range for the commodity price hedging is: 0 - 1 year: 0% - 100% 1 - 2 years: 0% - 100% 2 - 3 years: 0% - 100% The group designates forward commodity derivatives for hedging commodity forecast transactions which are highly probable. At reporting date, no commodity hedges were designated for hedge accounting purposes. At reporting date, contracts recognised directly in equity were nil. During the period ended 30 June 2013, losses of $0.1 million were removed from equity and included in the cost of diesel fuel. Sensitivity

At reporting date, had the Singapore Gasoil price decreased / increased with all other variables held constant, the group's post tax profit would not have been effected as there were no commodity hedges in place.

Queensland Rail Financial Report FY2012/13 95 Queensland Rail Notes to the financial statements 30 June 2013 (continued)

2 Financial risk management (continued)

(iii) Cash flow and fair value interest rate risk

The group's main interest rate risk arises from long-term borrowings. Borrowings issued at variable rates expose the group to cash flow interest rate risk. Borrowings issued at fixed rates expose the group to fair value interest rate risk. The QTC has been authorised to manage the interest rate risk of the group within limits in accordance with the risk profile approved by the Board. This is achieved by varying the proportion of the floating and fixed rate funding. The performance of this risk management is assessed against the benchmark duration of the debt portfolio. At reporting date the group had the following exposure to variable rate borrowings: 30 June 2013 Weighted average interest rate Balance Consolidated % $'000

Bank overdrafts and bank loans 7.3 3,099,817 Net exposure to cash flow interest rate risk 3,099,817

30 June 2013 Weighted average interest rate Balance Parent % $'000

Bank overdrafts and bank loans - - Net exposure to cash flow interest rate risk -

The following table summarises the sensitivity of the group’s debt with QTC to interest rate risk:

Interest rate risk -1% +1% Carrying Consolidated amount Profit Equity Profit Equity 30 June 2013 $'000 $'000 $'000 $'000 $'000

Client Specific Debt Pool 3,000,000 1,711 1,711 (1,577) (1,577) Total increase / (decrease) 1,711 1,711 (1,577) (1,577)

Interest rate risk -1% +1% Carrying Parent amount Profit Equity Profit Equity 30 June 2013 $'000 $'000 $'000 $'000 $'000

Client Specific Debt Pool - - - - - Total increase / (decrease) - - - -

Queensland Rail Financial Report FY2012/13 96 Queensland Rail Notes to the financial statements 30 June 2013 (continued)

2 Financial risk management (continued)

(b) Credit risk

The maximum exposure to credit risk, excluding the value of any collateral or other security, at reporting date to recognised financial assets, is the carrying amount, net of any allowances for impairment of those assets, as disclosed in the balance sheet and notes to the consolidated financial statements. The group does not have any material credit risk exposure to any single receivable or group of receivables under financial instruments entered into by the group, other than amounts owing by the State of Queensland. For some trade receivables the group may also obtain security in the form of guarantees, deeds of undertaking or letters of credit which can be called upon if the counterparty is in default under the terms of the agreement. Policies are in place to ensure that sales of products and services are only made to customers with an appropriate credit history. Derivative counterparties and cash transactions are limited to high credit quality financial institutions and are approved by the Board. The group has policies that limit the amount of credit exposure to any one financial institution. At reporting date the group had the following credit exposure risk: Consolidated Parent 2013 2013 $'000 $'000

Cash at bank and short-term bank deposits AA+ 276,339 - 276,339 -

Derivative financial assets AA 475 - 475 -

Queensland Rail Financial Report FY2012/13 97 Queensland Rail Notes to the financial statements 30 June 2013 (continued)

2 Financial risk management (continued)

(c) Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. Liquidity risk management within the group ensures sufficient cash to meet short-term and long-term financial commitments. The group has policies in place to manage liquidity risk, including the establishment of an annual approved borrowing program and the availability of appropriate working capital facilities. The group manages liquidity risk by monitoring forecast cash flows and ensuring that adequate cash flow is maintained. Financing arrangements

The short-term borrowing arrangements with QTC are interest bearing, refer to note 2(a)(iii). The borrowing arrangements are subject to annual review. The amount of undrawn short-term borrowing facilities with QTC available at reporting date is shown below: Consolidated Parent 2013 2013 $'000 $'000

QTC short-term facilities Used at reporting date 99,817 - Unused at reporting date 350,183 - Total facilities 450,000 -

Long-term borrowings are sourced from the Queensland Rail Client Specific Pool subject to annual approval of the Queensland State Treasurer. The group may draw up to the amount of the approved borrowing program. Borrowings are not secured.

Queensland Rail Financial Report FY2012/13 98 Queensland Rail Notes to the financial statements 30 June 2013 (continued)

2 Financial risk management (continued)

Maturity Analysis

The tables below analyse the group's financial liabilities and net and gross settled derivative financial instruments into relevant maturity groupings based on the remaining period at the reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

Total Less than Between Over contractual Consolidated 1 year 1 and 5 years 5 years cash flows 30 June 2013 $'000 $'000 $'000 $'000

Non-derivatives Non-interest bearing 168,475 - - 168,475 Variable rate 125,328 - - 125,328 Fixed rate 219,113 877,056 2,962,320 4,058,489 Total non-derivatives 512,916 877,056 2,962,320 4,352,292

Derivatives

Gross settled (foreign exchange hedges) Assets - (inflow) (4,294) - - (4,294) - outflow 3,811 - - 3,811 Total derivatives (483) - - (483)

Total Less than Between Over contractual Parent 1 year 1 and 5 years 5 years cash flows 30 June 2013 $'000 $'000 $'000 $'000

Non-derivatives Non-interest bearing 385,709 - - 385,709 Variable rate - - - - Fixed rate - - - - Total non-derivatives 385,709 - - 385,709

Derivatives

Gross settled (foreign exchange hedges) Assets - (inflow) - - - - - outflow - - - - Total derivatives - - - -

Queensland Rail Financial Report FY2012/13 99 Queensland Rail Notes to the financial statements 30 June 2013 (continued)

2 Financial risk management (continued)

(d) Fair value measurements

The fair value of financial assets and financial liabilities must be estimated for recognition and for disclosure purposes. AASB 7 Financial Instruments: Disclosures requires disclosure of fair value measurements by level of the following fair value measurement hierarchy: (Level 1) quoted prices (unadjusted) in active markets for identical assets or liabilities; (Level 2) inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices); and (Level 3) inputs for the asset or liability that are not based on observable market data (unobservable inputs). The following table presents the group's assets and liabilities measured and recognised at fair value at 30 June 2013: Consolidated Level 1 Level 2 Level 3 Total 30 June 2013 $'000 $'000 $'000 $'000

Assets Derivatives used for hedging Forward exchange contracts - 475 - 475 Total assets - 475 - 475

Parent Level 1 Level 2 Level 3 Total 30 June 2013 $'000 $'000 $'000 $'000

Assets Derivatives used for hedging Forward exchange contracts - - - - Total assets - - - -

The fair value of financial instruments traded in active markets (such as foreign exchange and commodity derivatives) is based on observable market prices at reporting date. The observable market price used for financial assets and liabilities held by the group for effective hedges is the average (i.e. mid) forward rate at close of business on reporting date. The fair value of financial instruments that are not traded in an active market (for example, over the counter derivatives) is determined using generally accepted valuation techniques. The group uses a variety of methods and makes assumptions that are based on market conditions existing at the end of each reporting period. Observable market prices or dealer estimates for similar instruments are used to estimate fair value for long-term debt for disclosure purposes. Other techniques, such as estimated discounted cash flows, are used to determine fair value for the remaining financial instruments. The fair value of forward exchange contracts and commodity swap contracts is determined using forward market rates at the end of the reporting period. These instruments are included in level 2 and comprise derivative financial instruments. In the circumstances where a valuation technique for these instruments is based on significant unobservable inputs, such instruments are included in level 3. The carrying amounts of trade receivables and payables are assumed to approximate their fair values due to their short-term nature. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the group for similar financial instruments. The carrying amount of current borrowings approximates the fair value, as the impact of discounting is not significant.

Queensland Rail Financial Report FY2012/13 100 Queensland Rail Notes to the financial statements 30 June 2013 (continued)

3 Critical accounting estimates and judgements

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under the circumstances. (a) Critical accounting estimates and assumptions

The group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial period are discussed below. (i) Estimated impairment of property, plant and equipment

The group tests annually whether property, plant and equipment has suffered any impairment, in accordance with the accounting policy stated in note 1(r). The recoverable amounts of cash generating units have been determined based on value in use calculations or fair value less costs to sell. Value in use calculations require the use of assumptions. (ii) Provisions for insurance claims

The subsidiary company, On Track Insurance Pty Ltd, managed the self-insurance activities of the Aurizon Operations Limited group to which both Queensland Rail Limited and On Track Insurance Pty Ltd belonged until 30 June 2010 and 6 October 2010 respectively. Actuarial assessments are undertaken annually to assess the value of the provision for any outstanding claims. Refer to note 1(z) for further information. Accrued insurance liabilities (includes Workers' Compensation) is based on a combination of management estimates and independent actuarial assessments performed as at period end. Refer to note 22 for more information. (iii) Provision for land rehabilitation

There is uncertainty as to the amount that will ultimately be required to be expensed to remediate contaminated land. Refer to note 22 for more information. (iv) Workers compensation self-insurance provision

Independent actuarial valuations are used to estimate the provisions required for self-insured workers compensation. The determination of the provisions required is dependent on a number of assumptions including the total future cost to finalise existing open claims, wage increases that will impact existing claims, inflation and the amount of claims that have been incurred but not yet reported. Refer to note 22 for more information. (v) Long service leave provision

The determination of the provisions required is dependent on a number of assumptions including expected wage increases, length of employee service and bond rates. Refer to note 22 for more information.

Queensland Rail Financial Report FY2012/13 101 Queensland Rail Notes to the financial statements 30 June 2013 (continued)

3 Critical accounting estimates and judgements (continued)

(vi) Taxation

The group's accounting policy for taxation requires management's judgement as to the types of arrangements considered to be subject to a tax. Judgement is also required in assessing whether deferred tax assets and certain deferred tax liabilities are recognised on the balance sheet. Deferred tax assets, including those arising from unrecouped tax losses, capital losses and temporary differences, are recognised only when it is considered probable that they will be recovered. Recoverability is dependent on the generation of sufficient future taxable profits. Refer to notes 25and18 for carrying amounts of deferred tax assets and deferred tax liabilities. (vii) Depreciation

Management estimates the useful lives and residual values of property, plant and equipment based on the expected period of time over which economic benefits from use of the asset will be derived. Management reviews useful life assumptions on an annual basis having given consideration to variables including historical and forecast usage rates, technological advancements and changes in legal and economic conditions. Refer to note 1(o) for details of current depreciation rates used. (viii) Hedge accounting

Management's judgement is necessary when determining whether a derivative financial instrument qualifies for hedge accounting, such as whether forecast transactions are highly probable as required by AASB 139 Financial Instruments: Recognition and Measurement. The assessment of whether forecast transactions are highly probable is judgmental and is subject to changes to the timing and magnitude of underlying purchases.

4 Correction of error and revision of estimates

There have been no corrections of error in the current reporting period. There were no material revisions of estimates during the current reporting period.

Queensland Rail Financial Report FY2012/13 102 Queensland Rail Notes to the financial statements 30 June 2013 (continued)

5 Revenue from continuing operations

Consolidated Parent 2013 2013 $'000 $'000

Transport service contract revenue 246,264 - Services revenue - 120,486 Passenger transport revenue 11,577 - Network access revenue 43,174 - Other revenue* 25,916 - Interest revenue 1,722 - Inter-company dividend revenue - 138,610 328,653 259,096

* Other revenue includes Insurance claims revenue $8.9 million, External construction works revenue $5.9 million, Workshop revenue $3.9 million, Airtrain revenue $2.0 million, Telecommunication revenue $1.7 million and Leasing revenue $1.7 million

6 Other income

Consolidated Parent 2013 2013 $'000 $'000

Net foreign exchange gains 19 - Rebates 468 - 487 -

Queensland Rail Financial Report FY2012/13 103 Queensland Rail Notes to the financial statements 30 June 2013 (continued)

7 Expenses

Consolidated Parent 2013 2013 $'000 $'000

Profit before income tax includes the following specific expenses: Depreciation and amortisation Depreciation Buildings 3,252 - Plant and equipment 3,844 - Infrastructure 22,631 - Major plant and equipment 18,328 - Total depreciation 48,055 - Amortisation Lease fit out 489 - Software (note 17) 2,875 - Total amortisation 3,364 -

Total depreciation and amortisation 51,419 -

Finance costs Interest and finance charges paid / payable 38,371 - Total finance costs 38,371 -

Other expenses Rental expenses relating to leases 9 - Allowance for inventory obsolescence 215 - Research and development costs 75 - Settlement of litigation expenses 83 - Impairment losses Trade receivables (20) - Net losses on commodity hedge ineffectiveness 3 - Net loss on disposal of property, plant and equipment 1,190 - Other expenses 571 - Total other expenses 2,126 -

Superannuation expenses* Defined benefit superannuation expense 3,487 2,783 Defined contribution superannuation expense 6,802 6,893 Total superannuation expenses 10,289 9,676

* Forms part of employee benefits expense.

Queensland Rail Financial Report FY2012/13 104 Queensland Rail Notes to the financial statements 30 June 2013 (continued)

8 Income tax expense

(a) Income tax expense Consolidated Parent 2013 2013 $'000 $'000

Current tax 5,574 1,154 Deferred tax 4,930 (1,154) 10,504 -

Deferred income tax expense / (benefit) included in income tax expense comprises: (Increase) / decrease in deferred tax assets (note 18) (948) (1,154) Increase / (decrease) in deferred tax liabilities (note 25) 5,878 - 4,930 (1,154)

(b) Numerical reconciliation of income tax expense to prima facie tax payable Consolidated Parent 2013 2013 $'000 $'000

Profit from continuing operations before income tax expense 48,219 138,610 Tax at the Australian tax rate of 30% (2012: 30%) 14,466 41,583 Tax effect of amounts which are not deductible / (taxable) in calculating taxable income: Research and development (381) - Inter-company eliminations (3,587) - Dividends received from subsidiaries - (41,583) Other 8 - Non-assessable income (2) - (3,962) (41,583)

Total income tax expense 10,504 -

(c) Amounts recognised directly in equity Consolidated Parent 2013 2013 $'000 $'000

Aggregate current and deferred tax arising in the reporting period and not recognised in net profit or loss but directly debited or credited to equity: Net deferred tax - debited / (credited) directly to equity (notes and18 25) 149 - 149 -

Queensland Rail Financial Report FY2012/13 105 Queensland Rail Notes to the financial statements 30 June 2013 (continued)

9 Current assets - Cash and cash equivalents

Consolidated Parent 2013 2013 $'000 $'000

Cash on hand 129 - Short-term investments 276,339 - Total cash and cash equivalents 276,468 -

Less: bank overdraft (13,908) - Less: trust monies 2 - (13,906) -

Balance as per statement of cash flows 262,562 -

(a) Interest rate risk exposure

The group’s exposure to interest rate risk is discussed in note 2.

10 Current assets - Trade and other receivables

Consolidated Parent 2013 2013 $'000 $'000

Trade receivables 65,704 - Allowance for impairment of receivables (a) (253) - Net trade receivables 65,451 -

Inter-company receivables - 537,015 Inter-company dividend receivables - 138,610 - 675,625

Transport service contracts 90,437 - Receivables - SEQIPP works 7,345 - Other receivables 18,792 - 116,574 -

Total trade and other receivables 182,025 675,625

Due to the short-term nature of these receivables, their carrying amount is assumed to approximate their fair value.

Queensland Rail Financial Report FY2012/13 106 Queensland Rail Notes to the financial statements 30 June 2013 (continued)

10 Current assets - Trade and other receivables (continued)

(a) Impaired trade receivables

At reporting date, it was assessed that a portion of the impaired receivables is expected to be recovered. The nominal values and ageing of the impaired trade receivables is as follows: Consolidated Parent 2013 2013 $'000 $'000

1 to 3 months 6 - 3 to 6 months 82 - Over 6 months 252 - 340 -

Movements in the allowance for impairment of receivables are as follows: Consolidated Parent 2013 2013 $'000 $'000

Opening balance - - Acquisition of subsidiaries 273 - Unused amounts reversed (20) - 253 -

The creation and release of the allowance for impaired receivables has been included in the income statement. Amounts charged to the allowance account are generally written off when there is no expectation of recovering additional cash. (b) Past due but not impaired

At reporting date, some of the group’s trade receivables were past due but not impaired. These relate to a number of independent customers for whom there is no recent history of default. The ageing analysis of these trade receivables is as follows: Consolidated Parent 2013 2013 $'000 $'000

3 to 6 months 315 - Over 6 months 1,991 - 2,306 -

Queensland Rail Financial Report FY2012/13 107 Queensland Rail Notes to the financial statements 30 June 2013 (continued)

11 Current assets - Inventories

Consolidated Parent 2013 2013 $'000 $'000

Raw materials and stores (b) 62,314 - Work in progress 125 - Less: allowance for inventory obsolescence (1,202) - Inventory at lower of cost or net realisable value 61,237 -

(a) Inventory expense

Inventory recognised as expense during the period ended 30 June 2013 amounted to $19.639 million. Write-downs of inventories to net realisable value recognised as an expense during the period ended 30 June 2013 amounted to $0.004 million. (b) Raw materials and stores

The amount of raw materials and stores includes surplus materials held to support the existing rollingstock assets of the group. An independent external valuer performed a stock take and assessed the value of the surplus materials in connection with the carriages that were de-scoped from the Sunlander 14 capital program to be $5.0 million. This amount was transferred to inventory from capital work in progress in the current reporting period. Queensland Rail engaged an independent external valuer to assess and value materials procured in relation to the portions of the Sunlander 14 capital program that were de-scoped. Key estimates and assumptions were made by the valuer in determining the value of the materials that could be used by Queensland Rail to support existing rollingstock. These include: • All materials were considered to be new at reporting date and no aging allowances were included in the values determined. • All materials transferred to inventory only included those items that are replaceable units which support the rendering of services to Queensland Rail. • The value of procured materials represented the cost paid by Queensland Rail to the supplier where it was identifiable. Otherwise, the value represented the likely price that Queensland Rail could expect to pay for each item. • The materials valued were components created and purchased in order to assemble a narrow gauge tilt train. Accordingly, it was held that there was no opportunity to dispose of surplus materials in accordance with its best and highest use to another rail operator. Physical inspections were included up to and including those on 19 November 2013 and were undertaken by inspecting a representative sample with a focus on high value sub system components first. The inspections and valuations have been based upon the information provided to the valuer.

Queensland Rail Financial Report FY2012/13 108 Queensland Rail Notes to the financial statements 30 June 2013 (continued)

12 Derivative financial instruments

Consolidated Parent 2013 2013 $'000 $'000

Current assets Forward exchange contracts - cash flow hedges 475 - Total current derivative financial instrument assets 475 -

Total derivative financial instrument assets 475 -

(a) Instruments used by the group

The group holds derivative financial instruments to hedge (including economically hedge) its foreign currency and commodity price risk exposures in accordance with the group’s financial risk management policy (note 2).

13 Current assets - Other current assets

Consolidated Parent 2013 2013 $'000 $'000

Prepayments 6,439 - Prepaid income tax* 423 - 6,862 -

* The group has made Pay As You Go quarterly income tax instalments for the 2012/13 period which have exceeded the income tax liability for the same period.

Queensland Rail Financial Report FY2012/13 109 Queensland Rail Notes to the financial statements 30 June 2013 (continued)

14 Non-current assets - Receivables

Consolidated Parent 2013 2013 $'000 $'000

Loan receivable* 3,843 - Inter-company receivables - 31,375 3,843 31,375

* Loan receivable represents the outstanding balance of the loan between the subsidiary company, On Track Insurance Pty Ltd and its former parent company, Aurizon Operations Limited. This loan is non-interest bearing and is not repayable on demand. The loan balance is reduced as On Track Insurance Pty Ltd settles outstanding insurance claims by Aurizon Operations Limited and its subsidiaries. (a) Impaired receivables and receivables past due

None of the non-current receivables are impaired or past due but not impaired. (b) Fair values

The carrying value of non-current receivables represents the best approximation of fair value.

15 Non-current assets - Inventories

Consolidated Parent 2013 2013 $'000 $'000

Raw materials and stores 22,533 - 22,533 -

Queensland Rail Financial Report FY2012/13 110 Queensland Rail Notes to the financial statements 30 June 2013 (continued)

16 Non-current assets - Property, plant and equipment

Major plant Work in Plant and and progress Land Buildings equipment equipment Infrastructure Total Consolidated $'000 $'000 $'000 $'000 $'000 $'000 $'000

At 3 May 2013 Cost ------Accumulated depreciation / amortisation and impairment losses ------Net book amount ------

Period ended 30 June 2013 Opening net book amount ------Acquisition of subsidiaries 539,096 127,152 409,544 122,829 1,338,346 3,652,751 6,189,718 Additions 111,744 - - 42 - - 111,786 Transfers between asset classes (76,353) 65 4,001 512 17,288 43,660 (10,827) Disposals - (4) (60) (1,816) (65) (318) (2,263) Depreciation / amortisation expense - - (3,741) (3,844) (18,328) (22,631) (48,544) Closing net book amount 574,487 127,213 409,744 117,723 1,337,241 3,673,462 6,239,870

At 30 June 2013 Cost 574,487 129,002 540,597 233,999 1,907,339 4,320,286 7,705,710 Accumulated depreciation / amortisation and impairment losses - (1,789) (130,853) (116,276) (570,098) (646,824) (1,465,840) Net book amount 574,487 127,213 409,744 117,723 1,337,241 3,673,462 6,239,870

Queensland Rail Financial Report FY2012/13 111 Queensland Rail Notes to the financial statements 30 June 2013 (continued)

16 Non-current assets - Property, plant and equipment (continued)

Major plant Work in Leased Plant and and progress Land property Buildings equipment equipment Infrastructure Total Parent $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

At 3 May 2013 Cost ------Accumulated depreciation / amortisation and impairment losses ------Net book amount ------

Period ended 30 June 2013 Opening net book amount ------Acquisition of subsidiaries ------Additions ------Transfers between asset classes ------Disposals ------Depreciation / amortisation expense ------Closing net book amount ------

At 30 June 2013 Cost ------Accumulated depreciation / amortisation and impairment losses ------Net book amount ------

(a) Non-current assets pledged as security No assets have been pledged as security by the company. (b) Impairment An impairment assessment was undertaken prior to reporting date. No impairment was recognised in the current or prior reporting periods.

Queensland Rail Financial Report FY2012/13 112 Queensland Rail Notes to the financial statements 30 June 2013 (continued)

16 Non-current assets - Property, plant and equipment (continued)

(c) Acquisition of subsidiaries for work in progress The acquisitions of subsidiaries section of work in progress reflect the transfer of costs to consumables expense and the transfer to inventory relating to the de-scope of the Sunlander 14 capital program. The acquisitions of subsidiaries for work in progress have been reduced by $48.2 million representing the transfer of costs to consumables expense and $5.0 million representing the transfer to inventory. The transfer of estimated costs to consumables expense represent materials, project management and engineering design costs relating to the de-scoped portions of the capital program. These costs were incurred to build carriages which were unique to a narrow gauge tilt train. Accordingly, it was held that these costs did not represent a future economic benefit and there was no opportunity to dispose of the surplus materials in accordance with its best and highest use to another rail operator.

17 Non-current assets - Intangible assets

Computer software* Total Consolidated $'000 $'000

At 3 May 2013 Cost - - Accumulated amortisation and impairment - - Net book amount - -

Period ended 30 June 2013 Opening net book amount - - Acquisition of subsidiaries 39,036 39,036 Transfers 10,827 10,827 Amortisation expense (2,875) (2,875) Closing net book amount 46,988 46,988

At 30 June 2013 Cost 74,456 74,456 Accumulated amortisation and impairment (27,468) (27,468) Net book amount 46,988 46,988

* Software includes capitalised development costs being an internally generated intangible asset.

Queensland Rail Financial Report FY2012/13 113 Queensland Rail Notes to the financial statements 30 June 2013 (continued)

17 Non-current assets - Intangible assets (continued)

Computer software* Total Parent $'000 $'000

At 3 May 2013 Cost - - Accumulated amortisation and impairment - - Net book amount - -

Period ended 30 June 2013 Opening net book amount - - Acquisition of subsidiaries - - Transfers - - Amortisation expense - - Closing net book amount - -

At 30 June 2013 Cost - - Accumulated amortisation and impairment - - Net book amount - -

* Software includes capitalised development costs being an internally generated intangible asset.

An impairment assessment was undertaken prior to reporting date. No impairment was recognised in the current or prior reporting periods.

Queensland Rail Financial Report FY2012/13 114 Queensland Rail Notes to the financial statements 30 June 2013 (continued)

18 Non-current assets - Deferred tax assets

Consolidated Parent 2013 2013 $'000 $'000

The balance comprises temporary differences attributable to: Tax losses 2,011 - Accrued expenses 10,230 4,524 Capital losses 3,211 - Provisions 81,683 68,903 Superannuation contributions 706 (8) Unearned revenue 3,818 - Total deferred tax assets 101,659 73,419

Consolidated Parent 2013 2013 $'000 $'000

Movements: Opening balance - - Acquisition of subsidiaries 98,734 - Transfer from subsidiaries - 72,265 Credited to the consolidated income statement (note 8) 948 1,154 Cash flow hedges (14) - Increase in carried forward tax losses 1,991 - Closing balance at 30 June 101,659 73,419

Consolidated Parent 2013 2013 $'000 $'000

Deferred tax assets expected to be recovered within 12 months - - Deferred tax assets expected to be recovered after more than 12 months 101,659 73,419

Queensland Rail Financial Report FY2012/13 115 Queensland Rail Notes to the financial statements 30 June 2013 (continued)

19 Non-current assets - Other financial assets

Consolidated Parent 2013 2013 $'000 $'000

Shares in subsidiaries - 2,845,324 - 2,845,324

20 Non-current assets - Other non-current assets

Consolidated Parent 2013 2013 $'000 $'000

Prepayments 4,834 - 4,834 -

21 Current liabilities - Trade and other payables

Consolidated Parent 2013 2013 $'000 $'000

Trade payables 166,086 17,167 Inter-company payables - 355,736 Dividend payable 115,843 115,843 Other payables 27,900 12,806 309,829 501,552

Queensland Rail Financial Report FY2012/13 116 Queensland Rail Notes to the financial statements 30 June 2013 (continued)

22 Liabilities - Provisions

2013 Current Non-current Total Consolidated $'000 $'000 $'000

Employee benefits (a) 210,401 19,273 229,674 Provision for insurance claims (b) 13,296 - 13,296 Litigation and workers' compensation provision (c) 7,149 19,024 26,173 Land rehabilitation provision (d) - 10,967 10,967 Make good provision (e) - 2,760 2,760 Other provisions (f) 5,882 - 5,882 236,728 52,024 288,752

2013 Current Non-current Total Parent $'000 $'000 $'000

Employee benefits (a) 210,401 19,273 229,674 Provision for insurance claims (b) - - - Litigation and workers' compensation provision (c) 6,670 18,535 25,205 Land rehabilitation provision (d) - - - Make good provision (e) - - - Other provisions (f) - - - 217,071 37,808 254,879

(a) Employee benefits Consolidated Parent 2013 2013 $'000 $'000

Annual leave and leave loading 60,490 60,490 Long service leave 150,661 150,661 Other 18,523 18,523 229,674 229,674

The current provision for long service leave covers all unconditional entitlements where employees have completed the required period of service and also those where employees are entitled to pro-rata payments in certain circumstances. This portion of the provision is presented as current, since the group does not have an unconditional right to defer settlement for any of these obligations. However, based on past experience, the group does not expect all employees to take the full amount of accrued leave or require payment within the next 12 months. The non-current provision for long service leave covers all conditional entitlements where employees have not completed the required period of service and are not entitled to pro-rata payments. This portion of the provision is presented as non-current, since the group does not have an obligation to settle the provision within the next 12 months. Other employee benefits includes payroll tax and retirement allowances. Employees and their entitlements were transferred from Queensland Rail Limited to Queensland Rail on 3 May 2013 in accordance with the Queensland Rail Transit Authority Act 2013. This resulted in the transfer of the entire balance of the employee benefits on the same day.

Queensland Rail Financial Report FY2012/13 117 Queensland Rail Notes to the financial statements 30 June 2013 (continued)

22 Liabilities - Provisions (continued)

(b) Provision for Insurance Claims

The provision for insurance claims is raised for insurance claims external to the group as recorded by On Track Insurance Pty , theLtd group's internal captive insurance provider for claims up until 30 June 2010. The provision represents the estimated requirement to settle all third party claims against the group as determined by an actuarial assessment. (c) Litigation and workers' compensation

Provision is made for the estimated liability for workers' compensation and litigation claims. Claims are assessed separately for common law, statutory and asbestos claims. The outstanding liability is determined after factoring future claims inflation and discounting future claim payments. Estimates are made based on the average number of claims and average claim payments over a specified period time. Claims Incurred But Not Reported (IBNR) are also included in the estimate. Claims are expected to be paid over a period exceeding more than one year. Subsequent to the enactment of the Queensland Rail Transit Authority Act 2013, the Queensland State Government issued a Transfer Notice resulting in the transfer of the workers' compensation liability from Queensland Rail Limited to Queensland Rail. (d) Land rehabilitation provision

This provision recognises the estimated costs to remediate contaminated land in accordance with the group's constructive obligations per the environmental sustainability policy. These estimated costs have arisen as a result of past events. The provision for land rehabilitation is the present value of management's best estimate of the expenditure required to settle the land rehabilitation present obligation at the reporting date. The provision has been calculated based on advice from external consultants and management's best estimate of likely remediation costs. (e) Make good provision

This provision represents the anticipated costs of the future restoration of leased office premises. Make good requirements vary for different properties. The provision includes future cost estimates associated with the restoration of office fixtures and fittings to original condition; removal of all property and equipment to return the premises to a vacant shell and making good any damage caused by their removal; removing any alterations to return to its original layout; and repairing and making good any damage which may be caused to land adjoining the premises as a result of carrying out structural work or other improvements. The provision has been calculated based on management's best estimate of make good costs. (f) Other provisions

Other provisions comprise an outstanding commitment at reporting date to compensate a supplier for materials and project administration and engineering costs associated with the carriages that were de-scoped from the Sunlander 14 capital program for the amount of $5.9 million as disclosed in note 1. In accordance with the accounting standards, this commitment is recognised as a provision in the current reporting period as the group has a present contractual obligation, relating to an event that has occurred, which is expected to be settled in the next reporting period.

Queensland Rail Financial Report FY2012/13 118 Queensland Rail Notes to the financial statements 30 June 2013 (continued)

22 Liabilities - Provisions (continued)

(g) Movements in provisions

Movements in each class of provision during the financial period, other than employee benefits, are set out below: Litigation and Provision for workers' Land insurance compensation rehabilitation Make good Other Consolidated claims provision provision provision provisions Total 2013 $'000 $'000 $'000 $'000 $'000 $'000

Current and non-current Carrying amount at start of period ------Acquisition of subsidiaries 28,616 986 10,882 3,809 - 44,293 Transfer from subsidiaries - 31,032 - - - 31,032 Charged / (credited) to profit or loss - additional provisions recognised - 2,125 26 - 5,882 8,033 - unused amounts released (5,351) (7,134) - (982) - (13,467) - unwind discount - - 59 31 - 90 Amounts used during the period (9,969) (836) - (98) - (10,903) Carrying amount at end of period 13,296 26,173 10,967 2,760 5,882 59,078 Litigation and Provision for workers' Land insurance compensation rehabilitation Make good Other Parent claims provision provision provision provisions Total 2013 $'000 $'000 $'000 $'000 $'000 $'000

Current and non-current Carrying amount at start of period ------Acquisition of subsidiaries ------Transfer from subsidiaries - 31,032 - - - 31,032 Charged / (credited) to profit or loss - additional provisions recognised - 2,078 - - - 2,078 - unused amounts released - (7,134) - - - (7,134) - unwind discount ------Amounts used during the period - (771) - - - (771) Carrying amount at end of period - 25,205 - - - 25,205

Queensland Rail Financial Report FY2012/13 119 Queensland Rail Notes to the financial statements 30 June 2013 (continued)

23 Current liabilities - Other current liabilities

Consolidated Parent 2013 2013 $'000 $'000

Income in advance (a) 21,592 - Other current liabilities 3,166 67 24,758 67

(a) Income in advance

Income in advance predominantly represents amounts received as prepayment for the development of rail infrastructure and lease payments and/or incentives received in advance. Infrastructure prepayments are deferred and earned over the term of their respective agreements while lease incentives are amortised to the income statement over the life of the related lease.

24 Liabilities - Borrowings

2013 Current Non-Current Total Consolidated $'000 $'000 $'000

Queensland Treasury Corporation borrowings* 99,817 3,000,000 3,099,817 Total borrowings 99,817 3,000,000 3,099,817

2013 Current Non-Current Total Parent $'000 $'000 $'000

Queensland Treasury Corporation borrowings* - - - Total borrowings - - -

* Unsecured (a) Financing arrangements

For details of the group's financing arrangements please refer to note 2(c).

Queensland Rail Financial Report FY2012/13 120 Queensland Rail Notes to the financial statements 30 June 2013 (continued)

24 Liabilities - Borrowings (continued)

(b) Fair value

The carrying amounts and fair values of current and non-current borrowings and off-balance sheet guarantees at reporting date are: 2013 Carrying amount Fair value Consolidated $'000 $'000

On-balance sheet (i) Non-traded financial liabilities Current borrowings 99,817 99,817 Non-current borrowings 3,000,000 3,225,974 3,099,817 3,325,791

Off-balance sheet (ii) Unrecognised financial assets Third party guarantees - 293,018 Bank guarantees - 93,387 Insurance company guarantees - 24,857 Unrecognised financial liabilities Third party guarantees - (2,000) Bank guarantees - (36,015) - 373,247

2013 Carrying amount Fair value Parent $'000 $'000

On-balance sheet (i) Non-traded financial liabilities Current borrowings - - Non-current borrowings - - - -

Off-balance sheet Unrecognised financial assets Third party guarantees - - Bank guarantees - - Insurance company guarantees - - Unrecognised financial liabilities Third party guarantees - - Bank guarantees - - - -

(i) On-balance sheet

The fair value of borrowings is determined by reference to pricing models and valuation techniques as advised by QTC.

Queensland Rail Financial Report FY2012/13 121 Queensland Rail Notes to the financial statements 30 June 2013 (continued)

24 Liabilities - Borrowings (continued)

(ii) Off-balance sheet

The off-balance sheet items comprise guarantees either held or issued by the group and contingent assets and liabilities not qualifying for recognition at reporting date. A majority of the guarantees held relate to performance guarantees on construction contracts provided by third parties. (c) Risk exposures

Information about the entity's exposure to interest rate and foreign currency fluctuations is provided in note 2.

25 Non-current liabilities - Deferred tax liabilities

Consolidated Parent 2013 2013 $'000 $'000

The balance comprises temporary differences attributable to: Accrued income 1,789 - Consumables and spare parts 6,923 - Property, plant and equipment 401,488 - Prepayments 115 - Cash flow hedges 135 - Foreign exchange gains 1,444 - Total deferred tax liabilities 411,894 -

Consolidated Parent 2013 2013 $'000 $'000

Movements: Opening balance - - Acquisition of subsidiaries 405,881 - Charged to the consolidated income statement (note 8) 5,878 - Cash flow hedges 135 - Closing balance at 30 June 411,894 -

Consolidated Parent 2013 2013 $'000 $'000

Deferred tax liabilities expected to be settled within 12 months - - Deferred tax liabilities expected to be settled after more than 12 months 411,894 -

Queensland Rail Financial Report FY2012/13 122 Queensland Rail Notes to the financial statements 30 June 2013 (continued)

26 Non-current liabilities - Other non-current liabilities

Consolidated Parent 2013 2013 $'000 $'000

Income in advance (a) 29,845 - 29,845 -

(a) Income in advance

Income in advance predominantly represents amounts received as prepayment for the development of rail infrastructure and lease incentives received in advance. Infrastructure prepayments are deferred and earned over the term of their respective agreements while lease incentives are amortised to the income statement over the life of the related lease.

27 Contributed equity

(a) Share capital Consolidated Parent 2013 2013 $'000 $'000

Ordinary shares Shares acquired 2,602,628 2,845,324 Total contributed equity 2,602,628 2,845,324

(b) Movements in ordinary share capital Consolidated Date Details Number of $'000 shares 3 May 2013 Opening balance - - Shares acquired 100 2,602,628 30 June 2013 Balance 100 2,602,628

(c) Ordinary shares

Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the company in proportion to the number of and amounts paid on the shares held. (d) Capital risk management

The group's objectives when managing capital are to safeguard its ability to continue as a going concern so that it can continue to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. The responsible Ministers advise the appropriate methodology in determining the dividend payable annually.

Queensland Rail Financial Report FY2012/13 123 Queensland Rail Notes to the financial statements 30 June 2013 (continued)

27 Contributed equity (continued)

The group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including 'borrowings' and ‘trade and other payables' as shown in the balance sheet) less cash and cash equivalents (including bank overdraft). Total capital is calculated as ‘equity’ as shown in the balance sheet plus net debt. The group's gearing ratios are as follows: Consolidated Parent 2013 2013 $'000 $'000

Total borrowings 3,409,646 145,816 Less: cash and cash equivalents (including bank overdraft) (262,560) - Net debt 3,147,086 145,816 Total equity 2,767,991 2,868,091 Total capital 5,915,077 3,013,907

Consolidated Parent Gearing ratio 53% N/A

The group is also required by QTC to maintain an Earnings Before Interest and Tax (EBIT) Interest Coverage of greater than 1.25:1, except where the total debt to capital is greater than 70%, in which case the EBIT Interest Coverage must be at least 2:1. The group has complied with this requirement for both the current and prior reporting periods.

28 Reserves and retained earnings

(a) Reserves Consolidated Parent 2013 2013 $'000 $'000

Hedging reserve - cash flow hedges 314 - 314 -

Consolidated Parent 2013 2013 $'000 $'000

Movements: Hedging reserve - cash flow hedges Opening balance - - Acquisition of subsidiaries (34) - Fair value gains taken to equity 407 - Deferred tax (122) - Fair value losses matured and included in components cost 101 - Deferred tax (30) - Fair value (gains) matured and capitalised (11) - Deferred tax 3 - Balance 30 June 314 -

Queensland Rail Financial Report FY2012/13 124 Queensland Rail Notes to the financial statements 30 June 2013 (continued)

28 Reserves and retained earnings (continued)

(b) Retained earnings

Movements in retained earnings were as follows: Consolidated Parent 2013 2013 $'000 $'000

Opening balance - - Acquisition of subsidiaries 243,177 - Profit for the period 37,715 138,610 Dividends provided (115,843) (115,843) Balance 30 June 165,049 22,767

29 Dividends

Ordinary shares Consolidated Parent 2013 2013 $'000 $'000

Dividend of 1,158,433 dollars per share was declared by the Board for the group for the period ended 30 June 2013: Dividend declared* 115,843 115,843

* All dividends declared / paid were unfranked.

Queensland Rail Financial Report FY2012/13 125 Queensland Rail Notes to the financial statements 30 June 2013 (continued)

30 Key management personnel disclosures

(a) Members, directors and specified executives

Compensation and other terms of employment for the specified executives are formalised in service agreements. Details of members' and directors' terms of appointment and compensation details together with the major provisions of the service agreements for specified executives, as at reporting date, relating to compensation are as follows: (i) Members and directors Queensland Rail Members Position Appointment term Expiry date

G Harley Deputy Chairman 2 years 9 months 30 September 2015 D George Member 2 years 9 months 30 September 2015 M McArthur1 Member 3 years 3 months 30 September 2013 W McMillan Member 2 years 9 months 30 September 2015 D Petie2 Member 2 years 9 months 30 September 2015 J Schafer3 Member 3 years 3 months 30 September 2013 1 Ceased as a Member on 4 August 2013. 2 Ceased as a Member on 2 August 2013. 3 Ceased as a Member on 30 September 2013. M Klug was appointed to the Board as Chairman on 1 October 2013. J Mickel was appointed to the Board as a Member on 1 October 2013. G Poole was appointed to the Board as a Member on 30 October 2013. On 3 May 2013, the directors of Queensland Rail Limited were appointed as Members of the Board of Queensland Rail in accordance with section 94 of the Queensland Rail Transit Authority Act 2013.

Queensland Rail Limited Directors Position Appointment term Expiry date

G Harley Deputy Chairman 2 years 9 months 30 September 2015 D George Director 2 years 9 months 30 September 2015 M McArthur1 Director 3 years 3 months 30 September 2013 W McMillan Director 2 years 9 months 30 September 2015 D Petie2 Director 2 years 9 months 30 September 2015 J Schafer3 Director 3 years 3 months 30 September 2013 1 Ceased as a Director on 4 August 2013. 2 Ceased as a Director on 2 August 2013. 3 Ceased as a Director on 30 September 2013. M Klug was appointed to the Board as Chairman on 1 October 2013. J Mickel was appointed to the Board as a Director on 1 October 2013. G Poole was appointed to the Board as a Director on 30 October 2013.

Queensland Rail Financial Report FY2012/13 126 Queensland Rail Notes to the financial statements 30 June 2013 (continued)

30 Key management personnel disclosures (continued)

On Track Insurance Pty Ltd Directors Position Appointment term Expiry date

D Petie1 Chairman No set appointment term No expiry date J Benstead Managing Director No set appointment term No expiry date G Pringle Director 3 years 28 February 2014 1 Ceased as a Director on 2 August 2013.

(ii) Specified executives Queensland Rail Specified executives Position Appointment term Expiry date

J Benstead1 Acting Chief Executive Officer 3 years + 2 years 30 June 2015 extension N Duce General Manager Human Resources Tenured No expiry date G Ford Executive General Manager Safety and 3 years + 2 years 30 June 2015 Environment extension R Green Executive General Manager Network 3 years 16 December 2015 B Moller2 Acting Chief Financial Officer 3 years + 2 years 31 August 2013 extension T Ripper Executive General Manager Access and 3 years 9 December 2015 Business Strategy M Ryan Executive General Manager Customer 3 years 11 November 2015 Service K Wright Executive General Manager Rail Operations 3 years 26 February 2015

1 Details provided are for this officer’s substantive role. 2 Details provided are for this officer's contract term. On 3 May 2013, the senior executives of Queensland Rail Limited were transferred to Queensland Rail and appointed as the senior executives of Queensland Rail in accordance with section 95 of the Queensland Rail Transit Authority Act 2013. G Dawe was appointed as Chief Executive Officer of Queensland Rail on 2 August 2013 in accordance with a Ministerial Direction by responsible Ministers under section 12 of the Queensland Rail Transit Authority Act 2013.

Queensland Rail Financial Report FY2012/13 127 Queensland Rail Notes to the financial statements 30 June 2013 (continued)

30 Key management personnel disclosures (continued)

Queensland Rail Limited Specified executives Position Appointment term Expiry date

J Benstead1 Acting Chief Executive Officer 3 years + 2 years 30 June 2015 extension N Duce General Manager Human Resources Tenured No expiry date G Ford Executive General Manager Safety and 3 years + 2 years 30 June 2015 Environment extension R Green Executive General Manager Network 3 years 16 December 2015 B Moller2 Acting Chief Financial Officer 3 years + 2 years 31 August 2013 extension T Ripper Executive General Manager Access and 3 years 9 December 2015 Business Strategy M Ryan Executive General Manager Customer 3 years 11 November 2015 Service K Wright Executive General Manager Rail Operations 3 years 26 February 2015

1 Details provided are for this officer’s substantive role. 2 Details provided are for this officer's contract term.

The above are the key executives representing the group. These executives provide advice in relation to strategy and future direction of the group under the business model adopted. On Track Insurance Pty Ltd does not have any senior executives who are involved in setting strategy or future direction for the entity and no On Track Insurance Pty Ltd executives are disclosed above for this reason. Termination of an executive can be made by the group to the specified executive either with notice, without notice or due to the incapacity of the specified executive. Termination by notice can be made by the specified executive or the group at any time by either party giving to the other 3 months written notice of termination. The specified executive is entitled to 12 weeks salary where termination occurs on the agreed termination date. When the termination occurs prior to the termination date (assuming no gross misconduct), the group will pay the specified executive the following: • a service payment equal to the greater of 4 weeks salary or 2 weeks salary per year of continuous service with the group up to a maximum 52 weeks salary; and • a separation payment equal to 20% of the salary that the specified executive would have earned had the employment continued from the day after the notice period ceased until the termination date. Specified executives that are tenured are entitled to a service payment equal to the greater of 13 weeks salary or 2 weeks salary per year of continuous service with the group up to a maximum 52 weeks salary.

Queensland Rail Financial Report FY2012/13 128 Queensland Rail Notes to the financial statements 30 June 2013 (continued)

30 Key management personnel disclosures (continued)

(b) Key management personnel compensation

Directors' remuneration and terms of appointment were set by the Governor in Council at the time of a director's appointment. Following the establishment of the Queensland Rail Transit Authority Act 2013, members' and directors' remuneration and terms of appointment are set by responsible Ministers. Members' and directors' remuneration is subsequently reviewed annually by responsible Ministers. Members and directors are not entitled to termination payments on termination of their period of service. Queensland Rail Chief and Senior Executive Officers are compensated in accordance with the Government Owned Corporations - Governance Arrangements for Chief and Senior Executives v3.0 publication. The Queensland Rail Board has also implemented the Performance Payment Policy - Chief and Senior Executive which reflects the expectations of the Queensland State Government as outlined in the stated policy. The Performance Payment Policy - Chief and Senior Executive provides for a performance pay process that is administered on a 12 month (financial year) cycle and aligns the executives with Queensland Rail wide and Individual Key Performance Indicators (KPIs). Performance Payment pays up to a maximum payment of 15% per annum of a Chief or Senior Executive’s total fixed remuneration on the achievement of stretch targets. The Queensland Rail KPIs are set by the Board at the beginning of the financial year in alignment with the Statement of Strategic Expectations issued by the State Government, the Queensland Rail Statement of Corporate Intent and the delivery of our organisational performance outcomes including safety, reliability, customer outcomes and financial performance. The performance agreement components are weighted as follows: • Queensland Rail 70% The Queensland Rail KPIs are aligned to the organisational performance outcomes as follows: Reliability • On Time Running City network combined peak periods • Below rail delays City network Financial • Consumable cost reduction • Earnings before interest and tax Customer • Customer satisfaction City network Safety • Lost Time Injury Frequency Rate • Signals Passed at Danger • Individual 30% The Individual KPIs are set by the Chief Executive Officer on the recommendation of the relevant executive member. Individual KPIs are reflective of Queensland Rail and Functional KPIs for which the executive has direct accountability and / or reflective of strategic business plans, budgets and capital / infrastructure projects. Eligible executives must also meet minimum expectations for the consistent demonstration of the Queensland Rail Values and Behaviours. The Chief and Senior Executives participate in the Queensland Rail performance management process with quarterly and annual performance reviews. Annual performance results of the Executives are assessed and calibrated by the Chief Executive Officer and General Manager Human Resources. The Board is responsible for the assessment of the Chief Executive Officer’s performance. The Queensland Rail Board approve the calculation and payment of the Chief and Senior Executive Performance Payments and provide written advice to the responsible Ministers in accordance with the Government Arrangements.

Queensland Rail Financial Report FY2012/13 129 Queensland Rail Notes to the financial statements 30 June 2013 (continued)

30 Key management personnel disclosures (continued)

Details of the compensation of each specified member, director and executive are as follows: 2013 $'000

Short-term benefits 512 Post-employment benefits 54 566

Short-term benefits includes cash salary, at risk performance incentives (for specified executives only), fees and non-monetary benefits. Non-monetary benefits represent the value of Exempt and Reportable Fringe Benefits for the respective Fringe Benefits Tax year. (i) Members and directors of Queensland Rail and subsidiaries 2013 Short-term benefits Post-employment benefits Non- Member monetary Super- Retirement Members fees benefits annuation benefits Total $'000 $'000 $'000 $'000 $'000

G Harley Deputy 6 - 1 - 7 (appointed as Deputy Chairman Chairman on 21 June 2013) Blank G Dawe Chairman 18 - 2 - 20 (ceased 18 June 2013) Blank D George Member 6 - 1 - 7 Blank M McArthur Member 6 - 1 - 7 Blank W McMillan Member 7 - 1 - 8 Blank D Petie Member 7 - 1 - 8 Blank J Schafer Member 6 - 1 - 7 Blank Blank Total 56 - 8 - 64

All the members listed above are members of the Queensland Rail Board and directors of the Queensland Rail Limited Board, except for D Petie who is also Chairman of the On Track Insurance Pty Ltd Board. As an executive of Aurizon Operations Limited, former parent company, G Pringle did not receive additional remuneration in his capacity as director of On Track Insurance Pty Ltd. As an executive of Queensland Rail, J Benstead did not receive additional remuneration in his capacity as director of On Track Insurance Pty Ltd. These amounts are not in addition to the amounts disclosed in the Key Management Personnel note of the Queensland Rail Limited financial statements as they were recharged by the company in accordance with the Managed Services Agreement from 3 May 2013.

Queensland Rail Financial Report FY2012/13 130 Queensland Rail Notes to the financial statements 30 June 2013 (continued)

30 Key management personnel disclosures (continued)

(ii) Specified executives of the group 2013 Short-term benefits Post-employment Long-term benefits benefits Cash Non- Long salary Cash monetary Super- Retirement service Specified executives and fees bonuses benefits annuation benefits leave Total $'000 $'000 $'000 $'000 $'000 $'000 $'000

J Benstead 73 - 1 7 - - 81 Acting Chief Executive Officer Blank N Duce 43 - 1 4 - - 48 General Manager Human Resources Blank G Ford 48 - 2 6 - - 56 Executive General Manager Safety and Environment Blank R Green 60 - 2 6 - - 68 Executive General Manager Network Blank B Moller 42 - 2 4 - - 48 Acting Chief Financial Officer Blank T Ripper 54 - 1 6 - - 61 Executive General Manager Access and Business Strategy Blank M Ryan 53 - 3 7 - - 63 Executive General Manager Customer Service Blank K Wright 69 - 2 6 - - 77 Executive General Manager Rail Operations Blank Total 442 - 14 46 - - 502

These amounts are not in addition to the amounts disclosed in the Key Management Personnel note of the Queensland Rail Limited financial statements as they were recharged by the company in accordance with the Managed Services Agreement from 3 May 2013.

Queensland Rail Financial Report FY2012/13 131 Queensland Rail Notes to the financial statements 30 June 2013 (continued)

30 Key management personnel disclosures (continued)

2013 $'000

Aggregate performance bonus compensation

Aggregate performance bonus compensation accrued for current period* (956) Aggregate compensation (including performance bonus compensation) to employees eligible for performance bonus compensation 18,351

2013

Number of employees eligible for performance bonus compensation 979

* Bonus was overaccrued when employee benefits liability was transferred from Queensland Rail Limited. This was reversed on 30 June 2013. The performance bonus compensation disclosed above is for the period 3 May 2013 to 30 June 2013. For full 12 months performance payment, refer to note 30 of Queensland Rail Limited 2012/13 financial statements. The following categories of employees are eligible for performance based at risk incentive bonus compensation: • specified executives; • other executives; • salaried employees; and • award employees. Performance bonus compensation paid to specified executives is granted upon approval by the Queensland Rail Board. Performance bonus compensation paid to other employees is granted upon approval by the Chief Executive Officer or in accordance with a subsidiary agreement. The amount of the compensation is determined by performance against key performance indicators set at the start of the year for employees or conditions of a subsidiary agreement for work units. (c) Transactions with members, directors and key management personnel

During the reporting period, G Harley, Deputy Chairman of Queensland Rail and Queensland Rail Limited, was the Chairman of Queensland Urban Utilities that provided utilities to Queensland Rail Limited. During the reporting period, D George, Member of Queensland Rail and Director of Queensland Rail Limited, was the Chief Executive Officer of Rail CRC Limited that provided key innovation services to Queensland Rail Limited. Queensland Rail Limited provided rental accommodation to Rail CRC Limited. All figures displayed below are exclusive of GST. Consolidated 2013 $'000

Utilities - Queensland Urban Utilities 15 Professional services - Rail CRC Limited 42 Rental revenue - Rail CRC Limited (27) 30

Queensland Rail Financial Report FY2012/13 132 Queensland Rail Notes to the financial statements 30 June 2013 (continued)

31 Contingencies

The group had contingencies at reporting date in respect of: (a) Contingent liabilities

Issues relating to common law claims and product warranties are dealt with as they arise. There were no material contingent liabilities requiring disclosures in the financial statements other than as set out below. Litigation

A number of common law claims are pending against the group. Provisions are taken up for some of these exposures based on the Board's determination and are included as such in note 22. Guarantees and letters of credit

For information about guarantees and letters of credit given by the group, refer to note 24(b). Deed of Cross Guarantee

Neither the company nor its subsidiary were a party to a deed of cross guarantee at reporting date. (b) Contingent assets

For information about guarantees given to the group, refer to note 24(b).

32 Commitments

The future commitments of the group (including GST) at reporting date were as follows: (a) Capital commitments

Capital expenditure contracted for at reporting date but not recognised as liabilities is payable as follows: Consolidated Parent 2013 2013 $'000 $'000

Within one year 187,156 - Later than one year but not later than five years 28,923 - Later than five years - - 216,079 -

(b) Lease commitments

Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows: Consolidated Parent 2013 2013 $'000 $'000

Within one year 11,145 - Later than one year but not later than five years 43,549 - Later than five years 28,059 - 82,753 -

Queensland Rail Financial Report FY2012/13 133 Queensland Rail Notes to the financial statements 30 June 2013 (continued)

32 Commitments (continued)

The above commitments flow primarily from operating leases of property. These leases, with terms mostly ranging from one to ten years, generally provide the group with a right of renewal at which times the lease terms are renegotiated. The lease payments comprise a base amount, while some property leases also contain a contingent rental, which is based on either the movements in the Consumer Price Index or another fixed percentage as agreed between the parties. (c) Lease commitments receivable: where the company is the lessor

Minimum lease payments receivable but not recognised in the financial statements are receivable as follows: Consolidated Parent 2013 2013 $'000 $'000

Within one year 3,522 - Later than one year but not later than five years 9,882 - Later than five years 83,318 - 96,722 -

33 Related party transactions

(a) Subsidiaries

Interests in subsidiaries are set out in note 34. (b) Key management personnel

Disclosures relating to key management personnel are set out in note 30. (c) Transactions with related parties

The following transactions occurred with related parties: Consolidated Parent 2013 2013 $'000 $'000

Sale of goods and services to subsidiaries - 120,486 Dividend revenue from subsidiaries - 138,610 Blank Dividend receivable from subsidiaries - 138,610 Receivables from subsidiaries - current - 537,015 Receivables from subsidiaries - non-current - 31,375 Payables to subsidiaries - current - 355,736 Blank Shares in subsidiaries - 2,845,324 Blank The current and non-current receivables transferred from subsidiaries on 3 May 2013 include the initial transfer of employee related liabilities from the subsidiary in accordance with the Queensland Rail Transit Authority Act 2013 amounting to $271.9 million. Deferred tax assets amounting to $72.3 million associated with these employee entitlements were also transferred on the same date.

Queensland Rail Financial Report FY2012/13 134 Queensland Rail Notes to the financial statements 30 June 2013 (continued)

33 Related party transactions (continued)

(d) Transactions and outstanding balances with State of Queensland controlled entities

The company is limited by shares with all shares held by the responsible Ministers on behalf of the State of Queensland. The company transacted with other State of Queensland controlled entities during the period as set out below: Consolidated Notes 2013 Nature of transaction $'000

Cash and cash equivalents 9 276,339 QTC short-term investments

Trade and other receivables , 1410 114,144 Transport services contracts and other accounts receivable

Current tax liabilities - Current tax payable

Other current assets 13 423 Prepaid income tax

Borrowings 24 3,099,817 Unsecured loan facility (QTC)

Trade and other payables 21 141,483 Interest payable, accounts payable and dividend payable

Other current liabilities 23 3,067 Clearing accounts

Revenue 5 252,756 Sales, community service obligation, government concessions and interest revenue

Interest expense 7 38,281 QTC loan interest (includes financing cost)

Other expenses 7 17,972 Payroll tax, income tax, audit fees, licences and permits and consumables

Dividends declared 29 115,843 Dividend declared

Queensland Rail Financial Report FY2012/13 135 Queensland Rail Notes to the financial statements 30 June 2013 (continued)

33 Related party transactions (continued)

Parent Notes 2013 Nature of transaction $'000

Cash and cash equivalents 9 - QTC short-term investments

Trade and other receivables , 1410 - Transport services contracts and other accounts receivable

Current tax liabilities 1,154 Current tax payable

Other current assets 13 - Prepaid income tax

Borrowings 24 - Unsecured loan facility (QTC)

Trade and other payables 21 115,843 Interest payable, accounts payable and dividend payable

Other current liabilities 23 - Clearing accounts

Revenue 5 - Sales, community service obligation, government concessions and interest revenue

Interest expense 7 - QTC loan interest (includes financing cost)

Other expenses 7 5,138 Payroll tax, income tax, audit fees, licences and permits and consumables

Dividends declared 29 115,843 Dividend declared

34 Subsidiaries

The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiary in accordance with the accounting policy described in note 1(b). Country of Equity Name of entity incorporation Class of shares holding 2013 %

Queensland Rail Limited Australia Ordinary 100 On Track Insurance Pty Ltd Australia Ordinary 100

The principal activities of Queensland Rail Limited are to carry out the key objectives of its parent, Queensland Rail, in accordance with the QRTA Act. Queensland Rail Limited retains title of all non-employee related assets, liabilities and contracts. The management of its assets are effected through the provision of employee services from Queensland Rail under a Managed Services Agreement. The principal activities of On Track Insurance Pty Ltd are the provision of insurance coverage for all claims relating to events for both Aurizon Operations Limited (former parent) and Queensland Rail Limited up until 30 June 2010.

Queensland Rail Financial Report FY2012/13 136 Queensland Rail Notes to the financial statements 30 June 2013 (continued)

34 Subsidiaries (continued)

The Auditor-General of Queensland is the authorised auditor of Queensland Rail Limited and On Track Insurance Pty Ltd.

35 Remuneration of auditors

During the period the following fees were paid or payable for services provided by the auditor of the group: (a) Audit services Consolidated Parent 2013 2013 $'000 $'000

Auditor-General of Queensland Audit and review of financial reports 510 19 Total auditors' remuneration 510 19

36 Reconciliation of profit after income tax to net cash inflow from operating activities

Consolidated Parent 2013 2013 $'000 $'000

Profit for the period 37,715 138,610 Depreciation and amortisation 51,419 - Amortisation of prepaid access facilitation charges (263) - Losses on sale of non-current assets 1,190 - Unreaslied loss on derivatives 3 - Impairment of trade receivables (20) - Inventory obsolescence 215 - Change in operating assets and liabilities: (Increase) / decrease in trade debtors (34,636) (138,610) (Increase) / decrease in inventories (1,233) - (Increase) / decrease in other operating assets (885) (1,154) Increase / (decrease) in trade creditors (2,804) 19,965 Increase / (decrease) in other liabilities 18,267 1,221 Increase / (decrease) in other provisions (17,447) (7,027) Net cash inflow from operating activities 51,521 13,005

37 Events occurring after the reporting period

No matters or circumstances have arisen since the end of the financial period which significantly affected, or may significantly affect the operations of the group, the results of those operations, or the state of affairs of the group in future financial years.

Queensland Rail Financial Report FY2012/13 137 Queensland Rail Management certificate 30 June 2013

These general purpose financial statements have been prepared pursuant to section 62(1) of the Financial Accountability Act 2009 (the Act), relevant sections of the Financial and Performance Management Standard 2009 and other prescribed requirements. In accordance with section 62(1)(b) of the Act we certify that in our opinion: (a) the prescribed requirements for establishing and keeping the accounts have been complied with in all material aspects; and (b) the statements have been drawn up to present a true and fair view, in accordance with prescribed accounting standards, of the transactions of Queensland Rail and its controlled entities for the financial period ended 30 June 2013 and of the financial position at the end of that period.

M Klug Chairman

Brisbane, Qld 16 December 2013

Queensland Rail Financial Report FY2012/13 138 Queensland Rail 30 June 2013

INDEPENDENT AUDITOR'S REPORT

To the Board of Queensland Rail

Report on the Financial Report

I have audited the accompanying financial report of Queensland Rail, which comprises the balance sheets as at 30 June 2013, income statements, statements of comprehensive income, statements of changes in equity and statements of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information, and certificates given by the Chairman of the entity and the consolidated entity comprising the entity and the entities it controlled at the year’s end or from time to time during the financial period 3 May to 30 June 2013. The Board’s Responsibility for the Financial Report

The Board is responsible for the preparation of the financial report that gives a true and fair view in accordance with prescribed accounting requirements identified in the Financial Accountability Act 2009 and the Financial and Performance Management Standard 2009, including compliance with Australian Accounting Standards. The Board’s responsibility also includes such internal control as the Board determines is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. Auditor’s Responsibility

My responsibility is to express an opinion on the financial report based on the audit. The audit was conducted in accordance with the Auditor-General of Queensland Auditing Standards, which incorporate the Australian Auditing Standards. Those standards require compliance with relevant ethical requirements relating to audit engagements and that the audit is planned and performed to obtain reasonable assurance about whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of the financial report that gives a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control, other than in expressing an opinion on compliance with prescribed requirements. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Board, as well as evaluating the overall presentation of the financial report including any mandatory financial reporting requirements approved by the Treasurer for application in Queensland. I believe that the audit evidence obtained is sufficient and appropriate to provide a basis for my audit opinion. Independence

The Auditor-General Act 2009 promotes the independence of the Auditor-General and all authorised auditors. The Auditor-General is the auditor of all Queensland public sector entities and can be removed only by Parliament. The Auditor-General may conduct an audit in any way considered appropriate and is not subject to direction by any person about the way in which audit powers are to be exercised. The Auditor-General has for the purposes of conducting an audit, access to all documents and property and can report to Parliament matters which in the Auditor-General’s opinion are significant.

Queensland Rail Financial Report FY2012/13 139 Queensland Rail 30 June 2013

INDEPENDENT AUDITOR'S REPORT (continued) Opinion

In accordance with s.40 of the Auditor-General Act 2009 - (a) I have received all the information and explanations which I have required; and (b) in my opinion - (i) the prescribed requirements in relation to the establishment and keeping of accounts have been complied with in all material respects; and (ii) the financial report presents a true and fair view, in accordance with the prescribed accounting standards, of the transactions of Queensland Rail and the consolidated entity for the financial period 3 May 2013 to 30 June 2013 and of the financial position as at the end of that year. Other Matters - Electronic Presentation of the Audited Financial Report

Those viewing an electronic presentation of these financial statements should note that audit does not provide assurance on the integrity of the information presented electronically and does not provide an opinion on any information which may be hyperlinked to or from the financial statements. If users of the financial statements are concerned with the inherent risks arising from electronic presentation of information, they are advised to refer to the printed copy of the audited financial statements to confirm the accuracy of this electronically presented information.

A M GREAVES FCA FCPA Queensland Audit Office Auditor-General of Queensland Brisbane

Queensland Rail Financial Report FY2012/13 140

Queensland Rail Limited ABN 71 132 181 090 Financial report for the year ended 30 June 2013

Queensland Rail Limited Financial Report FY2012/13 141 Queensland Rail Limited ABN 71 132 181 090 Financial report - 30 June 2013

Contents Page Directors' report 1 Financial statements Consolidated income statement 10 Consolidated statement of comprehensive income 11 Consolidated balance sheet 12 Consolidated statement of changes in equity 13 Consolidated statement of cash flows 14 Notes to the consolidated financial statements 1 Summary of significant accounting policies 15 2 Financial risk management 29 3 Critical accounting estimates and judgements 35 4 Correction of error and revision of estimates 36 5 Revenue from continuing operations 37 6 Other income 37 7 Expenses 38 8 Income tax expense 39 9 Current assets - Cash and cash equivalents 40 10 Current assets - Trade and other receivables 40 11 Current assets - Inventories 42 12 Derivative financial instruments 43 13 Current assets - Other current assets 43 14 Non-current assets - Receivables 44 15 Non-current assets - Inventories 44 16 Non-current assets - Property, plant and equipment 45 17 Non-current assets - Intangible assets 48 18 Non-current assets - Deferred tax assets 49 19 Non-current assets - Other non-current assets 49 20 Current liabilities - Trade and other payables 50 21 Liabilities - Provisions 50 22 Current liabilities - Other current liabilities 52 23 Liabilities - Borrowings 53 24 Non-current liabilities - Trade and other payables 54 25 Non-current liabilities - Deferred tax liabilities 54 26 Non-current liabilities - Other non-current liabilities 54 27 Contributed equity 55 28 Reserves and retained earnings 56 29 Dividends 57 30 Key management personnel disclosures 58 31 Contingencies 70 32 Commitments 71 33 Related party transactions 72 34 Subsidiaries 74 35 Remuneration of auditors 74 36 Reconciliation of profit after income tax to net cash inflow from operating activities 74 37 Parent entity financial information 75 38 Events occurring after the reporting period 75 Directors' declaration 76 INDEPENDENT AUDITOR'S REPORT 77

Queensland Rail Limited Financial Report FY2012/13 142 Queensland Rail Limited Directors' report 30 June 2013

Directors' report

Your directors present their report on the consolidated entity (referred to hereafter as the group) consisting of Queensland Rail Limited and the entity it controlled at the end of, or during, the year ended 30 June 2013. Directors

M Klug - Chairman (appointed 1 October 2013) G Harley - Deputy Chairman (appointed 20 December 2012, appointed Deputy Chairman 21 June 2013) G Dawe - Chairman (appointed 12 July 2012, ceased 18 June 2013) S Gregg - Chairman (ceased 12 July 2012) D George (appointed 20 December 2012) M Hayes (ceased 20 December 2012) Dr L Keliher AO (ceased 30 September 2012) M McArthur (ceased 4 August 2013) W McMillan (appointed 20 December 2012) D McMillan-Hall (ceased 30 September 2012) J Mickel (appointed 1 October 2013) D Petie (ceased 30 September 2012, reappointed 20 December 2012, ceased 2 August 2013) G Poole (appointed 30 October 2013) J Schafer (ceased 30 September 2013) Directors have been in office since the start of the financial year to the date of this report unless otherwise stated. Information relating to directors' remuneration is contained in note 30 of the Financial Report. Principal activities

During the year the principal activities of the group consisted of: (a) Passenger services throughout Queensland; (b) Network access services throughout Queensland; (c) Design and construction of rail infrastructure; and (d) Associated maintenance of both the above and below rail operations. Review of operations

The profit of the group for the financial year amounted to $144.8 million (2012: $128.3 million). During the financial year the group stepped up its reforms and produced vastly improved performance, along with a much leaner workforce, a significant reduction in spending and efficiency programs that have reshaped the business. The group focused its commitment on: • organisational performance (specifically operational, financial and customer); • affordability; • patronage growth; and • safety and security. The group continued to deliver high levels of customer service by focusing on reliability, efficiency, on-time running and customer comfort. Customer satisfaction levels for both our City and Travel networks are at record highs. In July 2012, Queensland Rail Limited commenced its Efficiency Improvement Program to identify and realise significant savings throughout the business. This program improved financial and operating performance resulting in significant savings in non-labour expenses. Dividends

In respect of the financial year ended 30 June 2013, a dividend of $138.6 million was declared to the holders of fully paid ordinary shares (2012: $102.6 million). This dividend will be paid in December 2013.

Queensland Rail Limited Financial Report FY2012/13 143 Queensland Rail Limited Directors' report 30 June 2013 (continued)

Significant changes in the state of affairs

On 3 May 2013, the shares in Queensland Rail Limited were transferred to Queensland Rail (referred to hereafter as the Authority). The Authority is an unincorporated statutory body and was established under the Queensland Rail Transit Authority Act 2013. The group is a wholly-owned subsidiary of the Authority from this date. All employees and their associated leave entitlements payable by the group were also transferred to the Authority. All expenses incurred by the Authority relating to these employees have been recharged to the group in accordance with a Managed Services Agreement. The changes associated with the enactment of Queensland Rail Transit Authority Act 2013 and the Managed Services Agreement has not impacted the operations of the business. The group has and will continue to undertake the principal activities identified in this Directors' Report. No other significant changes in the state of affairs of the group occurred during the financial year. Matters subsequent to the end of the financial year

No matters or circumstances have arisen since the end of the financial year which significantly affected, or may significantly affect, the operations of the group, the results of those operations, or the state of affairs of the group in future financial years. Likely developments and expected results of operations

The group will continue its transformation to a more competitive business model focusing on maximising value for money, embracing competition and benchmarking its performance against best practice. As it prepares for contestability, the group will focus on providing smarter, more tailored services to its customers while maintaining improvements in safety and value for money. Over the next 12 months the group will maintain its commitment on: • driving organisational performance (specifically operational, financial and customer); • ensuring value for money and affordability; • facilitating patronage and network tonnage growth; • ensuring safety and security; and • enhancing service delivery. Environmental regulation

The group is required to comply with relevant environmental legislation. Exposure in this area is primarily related to air, land and water pollution, management of flora and fauna, environmental impacts associated with development, consumption of energy, greenhouse gas emissions and waste disposal. Due to their nature it is not possible to provide an estimate of the future expenditure in these areas. Primary legislation and regulations to which the group is subject are as follows: • Environmental Protection Act 1994 (Qld) • Energy Efficiency Opportunities Act 2006 (Commonwealth) • Environmental Protection and Biodiversity Conservation Act 1999 (Commonwealth) • Ozone Protection and Synthetic Greenhouse Gas Management Act 1989 (Commonwealth) • National Greenhouse and Energy Reporting Act 2007 (Commonwealth) • Fisheries Act 1994 (Qld) • Sustainable Planning Act 2009 (Qld) • Land Protection (Pest and Stock Route Management) Act 2002 (Qld) • Nature Conservation Act 1992 (Qld) • Plant Protection Act 1989 (Qld) • Vegetation Management Act 1999 (Qld) • Waste Reduction and Recycling Act 2011 (Qld) • Water Act 2000 (Qld) • Wet Tropics World Heritage Protection and Management Act 1993 (Qld)

Queensland Rail Limited Financial Report FY2012/13 144 Queensland Rail Limited Directors' report 30 June 2013 (continued)

Greenhouse gas and energy data reporting requirements

The group is subject to the assessment and reporting requirements of the National Greenhouse and Energy Reporting Act 2007 and the Energy Efficiency Opportunities Act 2006. The National Greenhouse and Energy Reporting Act 2007 requires the group to report annually its greenhouse gas emissions, energy consumption and energy production. Queensland Rail Limited is registered as a controlling corporation and will be preparing an annual report to cover the activities of the group for the 2012/13 year for submission in October 2013. The Energy Efficiency Opportunities Act 2006 requires the group to assess its energy usage, including the identification, investigation and evaluation of energy saving opportunities, and subsequently submit a report to the Commonwealth Government and the public on the assessments undertaken; including what action the group intends to take as a result. In accordance with the Act, Queensland Rail Limited submitted an Assessment Plan in December 2012 to the Federal Department of Resources, Energy & Tourism (DRET). Following feedback received from DRET in April 2013, a revised Assessment Plan was submitted in June 2013. Energy assessments have commenced and the first public report will be released by December 2013.

Queensland Rail Limited Financial Report FY2012/13 145 Queensland Rail Limited Directors' report 30 June 2013 (continued)

Information on directors and officers

M Klug LLB, FAICD Chairman Mr Klug was appointed as a non-executive director and chairman on 1 October 2013. Mr Klug is a well respected solicitor with more than 40 years experience. He recently concluded his third term as Partner in Charge of the Brisbane office of Clayton Utz. He is a leader in the area of Alternative Dispute Resolution and he is one of the original founders of LEADR (Lawyers Engaged in Alternative Dispute Resolution). He was also an original Director of the Australasian Disputes Centre and has served on ADR committees nationwide. Mr Klug is a nationally recognised practitioner, public speaker and lecturer in negotiation, having taught in Australia and overseas to university students, the business and public sector communities. Mr Klug has extensive board experience across a diverse range of fields including education, health care and transport. He was recently appointed Chairman of Autism Queensland. Mr Klug is a Fellow of the Australian Institute of Company Directors and the Vice-President of the Brisbane Club. G Harley LLB, FAICD, MAHRI Deputy Chairman Mr Harley was appointed as a non-executive director on 20 December 2012 and appointed Deputy Chairman on 21 June 2013. Mr Harley is a consultant to and former Managing Partner of the Brisbane Office of Clayton Utz. He was for a number of years an Adjunct Professor at the University of Queensland Law School and a member of the Advisory Council of the Queensland Conservatorium of Music. Mr Harley served in the Australian Army Reserve for several decades (Infantry and Legal Corps) and retired with the rank of Major. He also holds the Reserve Force Decoration. Mr Harley has previously served as Chair of Translink Transit Authority and CS Energy and is currently Chair of Queensland Urban Utilities. His board experience covers fields as diverse as electricity generation, communications, information technology, investment attraction, tourism and agribusiness. Mr Harley has practised law for more than 40 years, the last 20 specialising in industrial and employment law. His role as a company director and as Chief Executive of Clayton Utz in Queensland for almost ten years has given him invaluable experience in strategy, operational management and governance. He is a Fellow of the Australian Institute of Company Directors and a member of the Australian Human Resources Institute. G Dawe BA (Econ), MAICD, FCILT, MIRO Chairman Mr Dawe was appointed as a non-executive director and Chairman on 12 July 2012. His father was a Station Master and he is the third generation of his family to work in Queensland Rail Limited, originally joining as a Porter. His career progressed from planning and development roles to commercial, business and operations management; including Group General Manager Citytrain, which became Australia’s best performing urban rail passenger business. He then took on the broader role of Group General Manager Metropolitan and Regional Services which involved managing Queensland Rail Limited’s community service obligation businesses such as Citytrain, Traveltrain and Regional Freight. He then led Queensland Rail Limited’s commercial businesses as Group General Manager Coal and Mainline Freight before moving to NSW to become General Manager Access at the Rail Infrastructure Corporation with responsibility for Access, Freight and Country Infrastructure. Finally he moved to the Manildra Group, which is one of this country’s largest private rail users, as National Manager Rail Transport before retiring in 2011. Mr Dawe ceased to be a director and Chairman of Queensland Rail Limited on 18 June 2013. S Gregg MBA, FAICD Chairman Mr Gregg was appointed as a non-executive director and Chairman on 1 July 2010. He has extensive experience in the Queensland tourism industry. He was previously CEO of North Queensland Airport Limited, where he oversaw the integration of the newly-privatised Cairns and Mackay airports and developed long-term growth strategies for both businesses. Earlier roles included CEO of Dreamworld and WhiteWater World theme parks and CEO of Tourism Queensland. In addition, Mr Gregg is Chairman of the Queensland Tourism Industry Council (QTIC) and a director of the Queensland Events Corporation. He holds a Master of Business Administration (MBA) from Griffith University. His experience in customer oriented roles and his significant regional focus has enabled him to make a valuable contribution to the Board. Mr Gregg ceased to be a director and Chairman of Queensland Rail Limited on 12 July 2012.

Queensland Rail Limited Financial Report FY2012/13 146 Queensland Rail Limited Directors' report 30 June 2013 (continued)

Information on directors and officers (continued)

D George MA (Hons), FAICD, FCILT Director Mr George was appointed as a non-executive director on 20 December 2012. Mr George has more than 35 years experience in the rail industry. This includes being Chief Executive of ONTRACK (New Zealand rail network) between 2004 and 2007 and responsibility for Queensland Rail Limited’s coal and freight businesses between 1998 and 2004. Prior to this he was Director of European Business for British Rail (freight) in the run-up to the opening of the Channel Tunnel. Mr George is currently Chief Executive Officer of the Cooperative Research Centre (CRC) for Rail Innovation, a position held since 2007. He is Vice Chair of the International Railway Research Board and Chair of the organising committee of the World Congress on Railway Research (WCRR) being jointly hosted by the CRC and Australasian Rail Association in Sydney in late 2013. Mr George is a Director of TasRail and also a Fellow of both the Australian Institute of Company Directors and the Chartered Institute of Logistics and Transport Australia. M Hayes BA, DipEd Director Ms Hayes was appointed as a non-executive director on 1 July 2010. She served in the Brisbane City Council from 1991 to 2008. She was Deputy Mayor during that time but her main role was as Chairperson of Transport, Traffic and Major Projects. Some achievements during that time included overseeing the building of the Inner City Bypass, the Eleanor Schonell Bridge, the introduction of CityCat ferries and the establishment of TransLink in partnership with the State Government. Ms Hayes is a passionate advocate of public transport. Ms Hayes ceased to be a director of Queensland Rail Limited on 20 December 2012. Dr L Keliher AO BEcon (1st Class Hons), MA, PhD Director Dr Keliher was appointed as a non-executive director on 1 July 2010. He has extensive experience in both the Queensland and New South Wales public service, with roles that include Chairman of the former Service Delivery and Performance Commission and Director-General of the Department of the Premier and Cabinet. He was appointed as a director of QR Limited in 2008, and brings his public service experience to his position on the Queensland Rail Limited Board. Dr Keliher ceased to be a director of Queensland Rail Limited on 30 September 2012. M McArthur BA, LLB, DipAppFin Director Ms McArthur was appointed as a non-executive on 1 July 2010. She was recently appointed Chief Executive Officer of Virgin Australia Regional Airlines following Virgin Australia's acquisition of Skywest Airlines in Western Australia. Ms McArthur joined Virgin Australia (then Virgin Blue) 5 years ago as General Counsel and Company Secretary and has held various Senior Executive roles including Group Executive-Alliances, Network & Yield and Group Executive - Corporate Advisory. Prior to joining Virgin, Ms McArthur was Chief Advisor at Rio Tinto Iron Ore, based in Perth. Her previous positions include Deputy State Solicitor for Western Australia and Executive Partner at national law firm Allens Arthur Robinson, based in Melbourne. Ms McArthur ceased to be a director of Queensland Rail Limited on 4 August 2013. W McMillan BBus, BA, MAICD, AIM, AMI Director Ms McMillan was appointed as a non-executive director on 20 December 2012. Ms McMillan has more than 18 years of commercial experience in transport, infrastructure, resources, trade, property, marketing and investment attraction. Her previous positions include Director of Infrastructure for QC Resources Investments Pty Ltd, Manager Strategic Projects and Ports O&M, Transport Services and Strategic Development with the John Holland Group, General Manager with the Australia TradeCoast and senior management roles with the Port of Brisbane Corporation, Carter and Spencer International and Gambaro’s Seafood’s and Exports. Ms McMillan holds a Bachelor of Business and a Bachelor of Arts. She is the Chairman of the judging panel for the Premier of Queensland’s Export Awards, a Director of St. Aidan’s School Council, a Member of the Australian Institute of Company Directors, a Fellow of the Australian Institute of Management and an Associate Fellow and CPM of the Australian Marketing Institute.

Queensland Rail Limited Financial Report FY2012/13 147 Queensland Rail Limited Directors' report 30 June 2013 (continued)

Information on directors and officers (continued)

D McMillan-Hall BSc (Hons), DipInd (UK), MBA Director Ms McMillan-Hall was appointed as a non-executive director on 1 July 2010. She has extensive rail industry experience, working at the Australian Rail Track Corporation (ARTC) for over 10 years, holding the positions of Strategic Business Manager, General Manager Operations and Customer Service, and General Manager Hunter Valley. More recently, she was Head of Business Development for the Asia Pacific region of Ansaldo STS, a transport solutions company. Holding a BSc in Finance and an MBA, Ms McMillan-Hall has a background in finance, including roles with Westpac and financial markets in London. Ms McMillan-Hall ceased to be a director of Queensland Rail Limited on 30 September 2012. J Mickel M. Lit St, BA, B Ed. St, Dip T Director The Honourable John Mickel was appointed as a non-executive director on 1 October 2013. Mr Mickel entered Queensland Parliament in June 1998 as the Member for Logan and was appointed Minister for State Development, Employment and Industrial Relations from September 2006 to September 2007 and then Minister for Transport, Trade, Employment and Industrial Relations from September 2007 to March 2009. Mr Mickel was also the 36th Speaker of the Legislative Assembly of the Queensland Parliament. Mr Mickel was first elevated to the Cabinet as Minister for Environment in February 2004 and appointed Minister for Energy in August 2004. He gained the additional portfolio of Aboriginal and Torres Strait Islander Policy in March 2005. He has represented Australia on the Executive of the Commonwealth Parliamentary Association and represented Queensland businesses on trade missions to Asia, India and the Middle East. He oversaw major reforms to the Queensland energy sector as Minister for Energy, continued the Smart State initiative as Minister for State Development, implemented new technology reforms to the public transport sector as Minister for Transport and is recognised for his skills in diplomatic protocols and public speaking in domestic and international forums. Before entering the Queensland Parliament, Mr Mickel held a number of senior Government roles including Chief of Staff to the Queensland Premier. He is also a former university lecturer in politics and public policy. Currently Mr Mickel serves on the Queensland Catholic Education Commission Political Advisory Committee, is a Board Member of the Sisters of St Paul de Chartres Aged Care Facility, and undertakes lecturing and public speaking engagements at Griffith University, the QUT and for community organisations. Mr Mickel has established the Vietnamese Orphans and Disability Trust with his wife, is an honorary member of Rotary and has been awarded Honorary Citizenship of Boystown. D Petie FAICD, FASFA Director Mr Petie was appointed as a non-executive director on 1 July 2010. Mr Petie ceased to be a director on 30 September 2012 and was reappointed as a non-executive director on 20 December 2012. He has more than 30 years experience as a company director, including nearly 11 years serving on the board of the group's former parent entity, QR Limited, where he was chair of the Audit and Risk Committee. Before his retirement from full-time employment, Mr Petie was a General Manager for QIC Limited. Mr Petie ceased to be a director of Queensland Rail Limited on 2 August 2013. G Poole BEc, GradDip Bus Admin, FCPA, FCA, FAICD Director Mr Poole was appointed as a non-executive director on 30 October 2013. Mr Poole is a professional senior executive and Board member with over thirty years experience in strategic leadership, governance and management across the public and not-for-profit sectors. He has significant practical experience in corporate governance and financial management through appointments as a director of boards and audit committees in the government and not-for-profit sectors. He is currently a member of the Local Government Association of Queensland Audit and Compliance Committee, the Public Trustee of Queensland Audit and Risk Management Committee, the Board of Governors of the Queensland Community Foundation and the Governance, Nomination and Remuneration Committee of the Queensland Synod of the Uniting Church in Australia. Mr Poole is also the Chair of the Advisory Board for the Australian Centre for Philanthropy and Nonprofit Studies, QUT. Mr Poole has successfully undertaken senior executive positions in the Queensland Treasury Department providing influential policy advice on economic, financial management and corporate governance issues impacting on the public sector and the community and most recently was the Auditor-General of Queensland from 2004 to 2011. Mr Poole holds a Bachelor of Economics and is a member of CPA Australia, the Institute of Chartered Accountants Australia and the Australian Institute of Company Directors.

Queensland Rail Limited Financial Report FY2012/13 148 Queensland Rail Limited Directors' report 30 June 2013 (continued)

Information on directors and officers (continued)

J Schafer LLB (Hons), GAICD, ANZIIF Director Ms Schafer was appointed as a non-executive director on 1 July 2010. She brings to Queensland Rail Limited strong legal credentials and corporate experience, as well as transport experience in Queensland and at national level. She has been chair of RACQ and is a National Transport Commissioner. She is a former Queensland Telstra Business Women’s award winner, President of the Queensland Law Society, Chair of the Solicitors’ Board of Queensland, Deputy Chancellor of the Queensland University of Technology and Adjunct Professor at the University of Queensland. Ms Schafer was previously a partner in two Queensland legal professional services firms. Ms Schafer holds a Bachelor of Laws (Honours) degree from the University of Queensland and an AICD Company Directors Diploma. She is a member of the Australian Institute of Company Directors and of the Australian and New Zealand Institute of Insurance and Finance. Ms Schafer ceased to be a director of Queensland Rail Limited on 30 September 2013. P McNamara BCom Company Secretary Mr McNamara was appointed as a Company Secretary on 29 August 2011. He holds a Bachelor of Commerce and has more than 15 years experience in managerial and senior governance roles with ASX listed entities operating in the property and financial services industries. Meetings of directors

The number of meetings the company's Board of Directors and each board committee held during the year ended 30 June 2013*, and the number of meetings attended by each director were:

Board Audit & Risk People & Organisational Meetings Committee Safety Performance & Committee Strategy Committee A B A B A B A B G Harley - Deputy Chairman1 6 6 - - 1 2 2 3 G Dawe - Chairman2 11 11 3 5 2 3 1 2 S Gregg - Chairman3 1 1 - - 1 1 - - D George4 6 6 - - 2 2 3 3 M Hayes5 4 7 - - 2 2 - - Dr L Keliher AO6 3 4 1 1 - - - - M McArthur 11 13 - - 4 4 - - W McMillan4 6 6 3 3 2 2 - - D McMillan-Hall6 4 4 1 1 - - - - D Petie7 9 10 3 3 1 1 - - J Schafer8 11 13 4 5 - - 3 3

A = Number of meetings attended B = Number of meetings held during the time the director held office or was a member of the committee during the year * Queensland Rail Limited became a wholly-owned subsidiary of Queensland Rail effective 3 May 2013 in accordance with the Queensland Rail Transit Authority Act 2013. 1Appointed as a Director on 20 December 2012, appointed as Deputy Chairman on 21 June 2013 2Appointed as a Director and Chairman on 12 July 2012, ceased as a Director on 18 June 2013 3Ceased as a Director and Chairman on 12 July 2012 4Appointed as a Director on 20 December 2012 5Ceased as a Director on 20 December 2012 6Ceased as a Director on 30 September 2012 7Ceased as a Director on 30 September 2012, reappointed as a Director on 20 December 2012 8Ceased as a Director on 30 September 2013

Queensland Rail Limited Financial Report FY2012/13 149 Queensland Rail Limited Directors' report 30 June 2013 (continued)

Insurance of officers

During the financial year, Queensland Rail Limited paid a premium in respect of an insurance contract to indemnify officers against liabilities that may have arisen from their position as officers of the parent and its controlled entity. Officers indemnified include the company secretary, directors and all executive officers participating in the management of the group. Further disclosure required under section 300 of the Corporations Act 2001 is prohibited under the terms of the contract. Proceedings on behalf of the company

No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the group, or to intervene in any proceedings to which the group is a party, for the purpose of taking responsibility, on behalf of the group, for all or part of those proceedings. No proceedings have been brought or intervened in on behalf of the group with leave of the Court under section 237 of the Corporations Act 2001. Auditor's independence declaration

The auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 9. Rounding of amounts

The company is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments Commission, relating to the "rounding off" of amounts in the directors' report. Amounts in the directors' report have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, to the nearest dollar. Auditor

The Auditor-General of Queensland continues in office in accordance with section 327 of the Corporations Act 2001, the Auditor-General is appointed in accordance with the Auditor-General Act 2009. This report is made in accordance with a resolution of directors.

M Klug Chairman

Brisbane, Qld 16 December 2013

Queensland Rail Limited Financial Report FY2012/13 150 Queensland Rail Limited Directors' report 30 June 2013 (continued)

AUDITOR’S INDEPENDENCE DECLARATION

To the Directors of Queensland Rail Limited

This auditor’s independence declaration has been provided pursuant to s.307C of the Corporations Act 2001.

Independence Declaration

As lead auditor for the audit of Queensland Rail Limited for the year ended 30 June 2013, I declare that, to the best of my knowledge and belief, there have been - (a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (b) no contraventions of any applicable code of professional conduct in relation to the audit.

This declaration is in respect of Queensland Rail Limited and the entity it controlled during the period.

A M GREAVES FCA FCPA Queensland Audit Office Auditor-General of Queensland Brisbane

Queensland Rail Limited Financial Report FY2012/13 151 Queensland Rail Limited Consolidated income statement For the year ended 30 June 2013

2013 2012 Notes $'000 $'000

Revenue from continuing operations 5 1,927,457 1,943,275

Other income 6 3,202 2,782 Consumables (477,750) (500,072) Employee benefits expense (726,013) (733,477) Depreciation and amortisation expense 7 (298,240) (296,548) Other expenses 7 (4,182) (7,020) Finance costs 7 (223,638) (222,927) Profit before income tax 200,836 186,013

Income tax expense 8 (56,032) (57,726) Profit for the year 144,804 128,287

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

Queensland Rail Limited Financial Report FY2012/13 152 Queensland Rail Limited Consolidated statement of comprehensive income For the year ended 30 June 2013

2013 2012 Notes $'000 $'000

Profit for the year 144,804 128,287

Other comprehensive income* Changes in the fair value of cash flow hedges 28 1,924 112 Income tax relating to components of other comprehensive income 8, 28 (577) (34) Other comprehensive income for the year, net of tax 1,347 78

Total comprehensive income for the year 146,151 128,365

* Other comprehensive income comprises amounts that are expected to be reclassified to profit or loss in subsequent periods when specific conditions are met. The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.

Queensland Rail Limited Financial Report FY2012/13 153 Queensland Rail Limited Consolidated balance sheet As at 30 June 2013

2013 2012 Notes $'000 $'000

ASSETS Current assets Cash and cash equivalents 9 276,468 325,370 Trade and other receivables 10 537,761 182,040 Inventories 11 61,237 56,313 Derivative financial instruments 12 475 - Other current assets 13 8,015 6,192 Total current assets 883,956 569,915

Non-current assets Receivables 14 3,843 57,091 Inventories 15 22,533 15,240 Property, plant and equipment 16 6,239,870 6,046,377 Intangible assets 17 46,988 46,481 Deferred tax assets 18 28,240 106,432 Other non-current assets 19 4,834 5,049 Total non-current assets 6,346,308 6,276,670

Total assets 7,230,264 6,846,585

LIABILITIES Current liabilities Bank overdraft 9 13,908 - Trade and other payables 20 839,636 321,019 Derivative financial instruments 12 - 1,783 Provisions 21 19,658 274,981 Borrowings 23 99,817 - Current tax liabilities - 528 Other current liabilities 22 24,691 28,195 Total current liabilities 997,710 626,506

Non-current liabilities Trade and other payables 24 31,375 - Derivative financial instruments 12 - 31 Provisions 21 14,216 50,840 Borrowings 23 3,000,000 3,000,000 Deferred tax liabilities 25 411,894 400,378 Other non-current liabilities 26 29,845 31,147 Total non-current liabilities 3,487,330 3,482,396

Total liabilities 4,485,040 4,108,902

Net assets 2,745,224 2,737,683

EQUITY Contributed equity 27 2,602,628 2,602,628 Reserves 28 314 (1,033) Retained earnings 28 142,282 136,088

Total equity 2,745,224 2,737,683

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

Queensland Rail Limited Financial Report FY2012/13 154 Queensland Rail Limited Consolidated statement of changes in equity For the year ended 30 June 2013

Contributed Retained Total equity Reserves earnings equity Notes $'000 $'000 $'000 $'000

Balance at 1 July 2011 2,363,172 (1,111) 110,430 2,472,491

Profit for the year - - 128,287 128,287 Other comprehensive income - 78 - 78 Total comprehensive income for the year - 78 128,287 128,365

Transactions with owners in their capacity as owners: Contributions of equity 27 246,011 - - 246,011 Distributions of equity 27 (6,555) - - (6,555) Dividends provided 29 - - (102,629) (102,629) 239,456 - (102,629) 136,827

Balance at 30 June 2012 2,602,628 (1,033) 136,088 2,737,683

Balance at 1 July 2012 2,602,628 (1,033) 136,088 2,737,683

Profit for the year - - 144,804 144,804 Other comprehensive income - 1,347 - 1,347 Total comprehensive income for the year - 1,347 144,804 146,151

Transactions with owners in their capacity as owners: Dividends provided 29 - - (138,610) (138,610) - - (138,610) (138,610)

Balance at 30 June 2013 2,602,628 314 142,282 2,745,224

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

Queensland Rail Limited Financial Report FY2012/13 155 Queensland Rail Limited Consolidated statement of cash flows For the year ended 30 June 2013

2013 2012 Notes $'000 $'000

Cash flows from operating activities Receipts from customers* 411,622 491,800 Receipts from Government* 1,749,972 1,749,838 Interest received 17,458 11,000 Payments to suppliers and employees* (1,397,621) (1,362,361) Interest and other costs of finance paid (223,598) (222,618) Net GST paid (107,402) (96,724) Income taxes paid (41,271) (14,848) Net cash inflow from operating activities 36 409,160 556,087

Cash flows from investing activities Proceeds from the disposal of assets 9,541 7,716 Payments for fixed assets (491,701) (566,542) Net cash (outflow) from investing activities (482,160) (558,826)

Cash flows from financing activities Contributions of equity 27 - 246,011 Proceeds from borrowings 99,817 - Loans from related parties 13,005 - Dividends paid 29 (102,629) (84,429) Net cash inflow from financing activities 10,193 161,582

Net (decrease) / increase in cash and cash equivalents (62,807) 158,843 Cash and cash equivalents at the beginning of the financial year 325,369 166,526 Cash and cash equivalents at end of year** 9 262,562 325,369

* Inclusive of goods and services tax (GST). ** Net of bank overdraft and monies held in trust. The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.

Queensland Rail Limited Financial Report FY2012/13 156 Queensland Rail Limited Notes to the consolidated financial statements 30 June 2013

1 Summary of significant accounting policies

The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. The financial statements are for the consolidated entity consisting of Queensland Rail Limited and its subsidiary, On Track Insurance Pty Ltd. The financial statements for Queensland Rail Limited, previously approved by the Board on 28 August 2013, have been amended subsequent to receiving an unqualified audit opinion from the Auditor-General of Queensland on 30 August 2013. The Board of Queensland Rail resolved to transfer costs from assets under construction to consumables expense as those costs no longer represent future economic value. This decision was made subsequent to considering the accounting implication of a significant de-scope in its Sunlander 14 capital program. Queensland Rail Limited is a corporation limited by shares, incorporated and domiciled in Australia and owned by Queensland Rail. Queensland Rail Limited is a for-profit entity. These financial statements are denominated in Australian dollars. Queensland Rail Limited is referred to in this financial report as the "company" or the "parent". Queensland Rail Limited together with its subsidiary, On Track Insurance Pty Ltd, are collectively referred to as the "group". On 3 May 2013, the shares in Queensland Rail Limited were transferred to Queensland Rail (referred to hereafter as the Authority). The Authority is an unincorporated statutory body and was established under the Queensland Rail Transit Authority Act 2013. The group is a wholly-owned subsidiary of the Authority from this date. These financial statements were approved for issue by the directors on 16 December 2013. (a) Basis of preparation

These general purpose financial statements have been prepared in accordance with Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board, and the Corporations Act 2001. (i) Compliance with International Financial Reporting Standards (IFRS)

The consolidated financial statements of the group comply with IFRS as issued by the International Accounting Standards Board (IASB). (ii) New and amended standards adopted by the group

None of the new standards and amendments to standards that are mandatory for the first time for the financial year beginning 1 July 2012 were early adopted. Their adoption has not affected any of the amounts recognised in the current period or any prior period and is not likely to affect future periods. However, amendments made to AASB 101 Presentation of Financial Statements, effective 1 July 2012, now require the statement of comprehensive income to show the items of comprehensive income grouped into those that are not permitted to be reclassified to profit or loss in a future period and those that may have to be reclassified if certain conditions are met.

Queensland Rail Limited Financial Report FY2012/13 157 Queensland Rail Limited Notes to the consolidated financial statements 30 June 2013 (continued)

1 Summary of significant accounting policies (continued)

(iii) Early adoption of standards

The following standards and amendments to standards are available for early adoption for the financial year beginning 1 July 2012: AASB 9 Financial Instruments AASB 2009-11 Amendments to Australian Accounting Standards arising from AASB 9 Financial Instruments AASB 2010-7 Amendments to Australian Accounting Standards arising from AASB 9 Financial Instruments AASB 2012-6 Amendments to Australian Accounting Standards - Mandatory Effective Date of AASB 9 and Transition Disclosures AASB 10 Consolidated Financial Statements AASB 11 Joint Arrangements AASB 12 Disclosure of Interests in Other Entities AASB 127 Separate Financial Statements (2011) AASB 128 Investments in Associates and Joint Ventures (2011) AASB 2011-7 Amendments to Australian Accounting Standards arising from the Consolidation and Joint Arrangements Standards AASB 2012-10 Amendments to Australian Accounting Standards - Transition Guidance and other amendments AASB 113 Fair Value Measurement AASB 2011-8 Amendments to Australian Accounting Standards arising from AASB 113 Fair Value Measurement AASB 119 Employee Benefits (September 2011) AASB 2012-5 Amendments to Australian Accounting Standards arising from AASB 119 Employee Benefits (September 2011) AASB 2012-2 Amendments to Australian Accounting Standards - Disclosures - Offsetting Financial Assets and Liabilities (June 2012) AASB 2012-3 Amendments to Australian Accounting Standards - Offsetting Financial Assets and Liabilities AASB 2012-5 Amendments to Australian Accounting Standards arising from the Annual Improvements 2009-2011 Cycle AASB 1053 Application of Tiers of Australian Accounting Standards AASB 2010-2 Amendments to Australian Accounting Standards arising from Reduced Disclosure Requirements

The application of these standards and amendments in future periods is not expected to have a material impact on the accounts of the group. The group has not elected to early adopt any pronouncements for the current annual reporting period. There are no other standards that are not yet effective and that are expected to have a material impact on the group in the current or future reporting periods and on foreseeable future transactions. (iv) Historical cost convention

These financial statements have been prepared under the historical cost convention, except for certain assets which, as stated, are at fair value. (v) Critical accounting estimates

The preparation of financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 3.

Queensland Rail Limited Financial Report FY2012/13 158 Queensland Rail Limited Notes to the consolidated financial statements 30 June 2013 (continued)

1 Summary of significant accounting policies (continued)

(vi) Going Concern

The financial report is prepared on a going concern basis despite current liabilities exceeding current assets at reporting date. The shortfall is partly due to the current intercompany loan with the Authority concerning employee benefits. Funding through Transport Service Contracts, adequate interest coverage and a low gearing ratio provides adequate assurance of the group's status as a going concern. (b) Principles of consolidation (i) Subsidiaries

The consolidated financial statements incorporate the assets and liabilities of the subsidiary of Queensland Rail Limited as at reporting date and the results of the subsidiary for the year then ended. A subsidiary is an entity (including a special purpose entity) over which the group has the power to govern the financial and operating policies so as to obtain benefits from their activities, generally accompanying a shareholding of more than one-half of the voting rights. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are de-consolidated from the date that control ceases. Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Non-current inter-company loans may not be demanded by the other entity and do not become payable other than through settlement of obligations associated with the loans or one of the entities exits the wholly-owned group. Accounting policies have been adopted consistently across the group. Investment in the subsidiary is accounted for at cost in the financial records of the parent entity. (c) Foreign currency translation (i) Functional and presentation currency

Items included in the financial statements of each of the group's entities are measured using the currency of the primary economic environment in which the entity operates (i.e. the functional currency). The consolidated financial statements are presented in Australian dollars, which is the group's functional and presentation currency. (ii) Transactions and balances

Foreign currency transactions are initially translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss, except when they are deferred in equity as qualifying cash flow hedges and qualifying net investment hedges. (d) Rounding of amounts / Comparative restatements

The company is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments Commission, relating to the "rounding off" of amounts in the financial report. Amounts in the financial report have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, the nearest dollar. Comparative information has been restated where necessary to be consistent with disclosures in the current reporting period.

Queensland Rail Limited Financial Report FY2012/13 159 Queensland Rail Limited Notes to the consolidated financial statements 30 June 2013 (continued)

1 Summary of significant accounting policies (continued)

(e) Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of associated GST, except where the amount of GST incurred is not recoverable from the Australian Taxation Office (ATO). In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or as part of the expense. Trade receivables and trade payables in the balance sheet are shown inclusive of GST. The net amount of GST recoverable from, or payable to, the ATO is included with other receivables or payables in the balance sheet. Cash flows are presented in the cash flow statement on a gross basis, except for the GST component of investing or financing activities, which are disclosed as operating cash flow. Queensland Rail Limited and On Track Insurance Pty Ltd were part of the Aurizon Operations Limited (formerly QR Limited) GST group until 30 September 2010. Any transactions with the Aurizon Operations Limited group to that date did not attract GST. From 1 October 2010 Queensland Rail Limited and On Track Insurance Pty Ltd are individual entities recognised as separate taxpayers for the purposes of GST. Transactions between these entities and externally to third parties are subject to GST. (f) Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable after taking into account any discounts allowed. Amounts disclosed as revenue are net of indirect taxes. The group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and specific criteria have been met for each of the group's activities as described below. Exchanges of goods and services of the same nature and value without any cash consideration are not recognised as revenues. Revenue is recognised for the major business activities as follows: (i) Services revenue

Services revenue comprises revenue earned from Transport Service Contracts, the provision of passenger transport and track access. In addition to revenue receivable from non-related parties, the company receives revenue from Transport Service Contracts with the Department of Transport and Main Roads as well as amounts from various State Government departments as direct reimbursement for concessions provided to senior citizens, pensioners and students. Transport Service Contracts

Transport Service Contract revenue is accounted for as follows: • Transport Service Contract (Rail Infrastructure) (TSC(RI)) This contract is a multi-tiered arrangement which provides the company with funding to cover capital and operating costs for the Regional and South East Queensland networks. Under the contract, a stream of annuity-based funding is provided for operating and capital costs which have been previously incurred as well as the capital costs for enhancements to these existing systems. This annuity (which is paid in monthly instalments) is calculated on a seven year forecast of capital and operating costs for the respective systems under the TSC(RI). Capital costs are based on depreciating assets over a 30 year period. • Transport Service Contract - South East Queensland Infrastructure Plan and Program (TSC - SEQIPP) Under the South East Queensland Infrastructure Plan and Program, the company is contracted to construct infrastructure at various locations throughout the South East Queensland network. The infrastructure constructed forms part of the group's property, plant and equipment which will generate revenue through the TSC (RI) contract. TSC - SEQIPP revenue is recognised on a systematic basis in accordance with the agreed rate of return of the SEQIPP assets.

Queensland Rail Limited Financial Report FY2012/13 160 Queensland Rail Limited Notes to the consolidated financial statements 30 June 2013 (continued)

1 Summary of significant accounting policies (continued)

• SEQIPP - Third party work Revenue is recognised based on the actual costs incurred for the work performed. The revenue is recognised when the work is complete and the costs incurred are taken to the income statement in the same financial period. • Citytrain and Traveltrain Transport Service Contracts The company receives payments under the Transport Service Contract which defines passenger services to be provided by the group. Revenue is recognised on a straight-line basis based on the annual Transport Service Contract amount or periodic adjustments thereto. Passenger Transport

Other train passenger service revenue comprises ticket and travel related sales and is recognised as revenue once the service has been rendered. Government concession revenue is recognised in the period in which the service is provided based on a predetermined formula as agreed with the local authority. Track Access

Revenue generated from rail network access is recognised as the services are provided and is calculated based on a number of operating parameters (such as tonnage hauled) applied to either regulator approved tariffs or negotiated access agreements. (ii) Other revenue

Other revenue comprises revenue earned from the sale of goods and services. Revenue for sale of goods is recognised when the significant risks and rewards are passed to the buyer and the costs incurred, or to be incurred in respect of the transaction can be measured reliably. Risks and rewards are considered passed to the buyer at the time of delivery. (iii) Interest income

Interest income is recognised using the effective interest method. (g) Other Income (i) Government grants

Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the group will comply with all attached conditions. Government grants relating to costs are deferred and recognised in income statement over the period necessary to match them with the costs that they are intended to compensate. Government grants relating to the purchase of property, plant and equipment are included in the cost base of those assets and amortised to the income statement on a straight-line basis over the expected lives of the assets. (ii) Disposal of assets

The gain or loss on disposal of an asset is recognised at the date when the significant risks and rewards of ownership of the asset pass to the buyer, usually when the purchaser takes delivery of the asset. The gain or loss on disposal is calculated as the difference between the carrying amount of the asset at the time of disposal and the net proceeds on disposal and is recognised as other income or expenses in the income statement.

Queensland Rail Limited Financial Report FY2012/13 161 Queensland Rail Limited Notes to the consolidated financial statements 30 June 2013 (continued)

1 Summary of significant accounting policies (continued)

(h) Defined benefit superannuation obligations

The group makes contributions to the State Public Sector Superannuation Scheme (QSuper) on behalf of its employees concerning superannuation. QSuper is an employer-sponsored fund, with the major employer being the State of Queensland. There are a number of membership categories in QSuper, which are either accumulation or defined benefits in nature. The Treasurer has ultimate responsibility for funding payments to defined benefit members. The State has in place funding arrangements designed to meet the defined benefit obligations for its members. The Treasurer has the ability to require employers to pay any amounts needed to meet these benefits. Generally, this is handled through the regular standard fortnightly contribution paid by every employer, which has been determined on the advice of the State Actuary. No directions varying this contribution have been received by the group to reporting date. The State Actuary makes a recommendation to the Treasurer on the standard employer contribution rate required to fund the normal range of benefits at the conclusion of each triennial actuarial investigation. The most recent actuarial investigation was completed in 2010 and the actuary’s recommendation to leave the employer contribution rate unchanged was approved by the Treasurer. This investigation is undertaken on QSuper as a whole and is not segregated into different employers or occupations. (i) Income tax

The income tax expense or benefit for the period is the tax payable / receivable on the current period's taxable income based on the national income tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements and by unused tax losses. Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates that are enacted. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. Deferred tax assets are recognised for deductible temporary differences, unused tax losses and tax credits, only if it is probable that future taxable amounts will be available to utilise those temporary differences, losses and credits. Deferred tax liabilities and assets are not recognised for the temporary differences between the carrying amount and tax bases of investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future. Current and deferred tax is recognised as an expense or income in the income statement, except when it relates to items credited or debited directly to equity, in which case the deferred tax is also recognised directly in equity. (i) Tax consolidation legislation

The group has not elected to form a tax consolidated group. The group measures current and deferred tax amounts for Queensland Rail Limited and its controlled entity On Track Insurance Pty Ltd as individual stand-alone taxpayers and aggregates the balances for disclosure. (ii) Income tax equivalents

The group is required to make income tax equivalent payments to the Queensland Government, based upon the value of benefits derived and rulings set out in the National Tax Equivalent Regime (NTER) which is administered by Australian Taxation Office (ATO).

Queensland Rail Limited Financial Report FY2012/13 162 Queensland Rail Limited Notes to the consolidated financial statements 30 June 2013 (continued)

1 Summary of significant accounting policies (continued)

These payments are made pursuant to the Queensland Rail Transit Authority Act 2013 and instruction from the Treasurer. The NTER gives rise to obligations which reflect in all material respects those obligations for taxation which would be imposed by the Income Tax Assessment Act 1936, the Income Tax Assessment Act 1997 and associated legislation, as well as Rulings and other pronouncements by the ATO to determine the tax payable by the group. (j) Cash and cash equivalents

For cash flow statement and presentation purposes, cash and cash equivalents include cash on hand, deposits held at call with financial institutions and other short-term highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. (k) Trade receivables Trade receivables

Trade receivables are initially recorded at fair value less any allowance for uncollectible amounts. Trade receivables generally have credit terms ranging from 7 to 31 days. Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. An allowance for impairment of trade receivables is established when there is objective evidence that the group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation and default or delinquency in payments (more than 90 days overdue) are considered indicators that the trade receivable is impaired. The amount of the impairment loss is recognised in the income statement within other expenses. When a trade receivable for which an impairment allowance had been recognised becomes uncollectible in a subsequent period, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against other expenses in the income statement. Other receivables

Other receivables include accruals, contractual receivables and GST receivable. Collectability is reviewed on an ongoing basis. (l) Inventories

The value of inventories reported includes items held in centralised stores, workshops and infrastructure and rollingstock depots. Cost comprises cost of purchase, cost of conversion and other costs incurred in bringing the inventory to its present location and condition. Inventories are valued at the lower of cost or net realisable value. Cost is determined predominantly on an average cost basis. Items expected to be consumed after more than one year are classified as non-current. The allowance for inventory obsolescence is based on assessments by management of particular inventory classes and relates specifically to infrastructure and rollingstock maintenance items. The amount of the allowance is based on a proportion of the value of damaged stock, slow moving stock and stock that has become obsolete during the reporting period. The group has an agreement in place with Aurizon Operations Limited regarding inventory held in the Aurizon Operations Limited workshops on behalf of the group. The agreement includes both "call option" and "put option" clauses and expires on 30 June 2015. The group may exercise a call option upon expiry or termination of the agreement to acquire all or part of the dedicated inventory held by Aurizon Operations Limited at the expiry or termination date. Aurizon Operations Limited, may in turn, exercise a put option to require the group to acquire all or any part of the dedicated inventory held on behalf of the company at the expiry or termination date.

Queensland Rail Limited Financial Report FY2012/13 163 Queensland Rail Limited Notes to the consolidated financial statements 30 June 2013 (continued)

1 Summary of significant accounting policies (continued)

(m) Investments and other financial assets

The group classifies its non-derivative financial assets based on the purpose for which the investments were acquired. Management determines the classification of its investments at initial recognition. At reporting date, the group has only one type of non-derivative financial asset: loans and receivables. (i) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for those with maturities greater than 12 months after the reporting date which are classified as non-current assets. Loans and receivables are included in current trade and other receivables (note 10) and non-current receivables (note 14) in the balance sheet. (ii) Recognition and derecognition

Regular purchases and sales of financial assets are recognised on trade-date which is the date on which the group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the group has transferred substantially all the risks and rewards of ownership. (iii) Subsequent measurement

Loans and receivables are carried at amortised cost using the effective interest method. Details on the determination of the fair value of financial instruments are disclosed in note 2. (iv) Impairment

The group assesses at each reporting date whether there is objective evidence that a financial asset or group of financial assets are impaired. If there is evidence of impairment for any of the group’s financial assets carried at amortised cost, the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows, excluding future credit losses that have not been incurred. The cash flows are discounted at the financial asset’s original effective interest rate. The loss is recognised in the income statement. (n) Derivatives and hedging activities

The group enters into derivative contracts to hedge exposures to foreign exchange rates and commodity prices as described in note 2. Derivative balances are disclosed in note 12. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument and, if so, the nature of the item being hedged. The group designates certain derivatives as hedges of the cash flows of recognised assets and liabilities and highly probable forecast transactions (cash flow hedges). At inception, the group documents the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions have been and will continue to be, highly effective in offsetting future cash flows of hedged items. The full fair value of a hedging derivative is classified as a non-current asset or liability when the remaining maturity of the hedged item is more than 12 months; it is classified as a current asset or liability when the remaining maturity of the hedged item is less than 12 months.

Queensland Rail Limited Financial Report FY2012/13 164 Queensland Rail Limited Notes to the consolidated financial statements 30 June 2013 (continued)

1 Summary of significant accounting policies (continued)

(i) Cash flow hedge

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in other comprehensive income. The gain or loss relating to the ineffective portion is recognised immediately in the income statement. Amounts accumulated in equity are recycled in the income statement in the periods when the hedged item will affect profit or loss. However, when the forecast transaction that is hedged results in the recognition of a non-financial asset, the gains and losses previously deferred in equity are transferred from equity and included in the measurement of the initial cost or carrying amount of the asset. When a hedging instrument expires or is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time is recognised when the forecast transaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement. (ii) Derivatives that do not qualify for hedge accounting

Certain derivative instruments do not qualify for hedge accounting. Changes in fair value of any derivative instrument that does not qualify for hedge accounting are recognised immediately in the income statement. (iii) Embedded derivatives

Through the group's purchase and sale contracts, it is possible that embedded derivatives have been entered into. An embedded derivative will cause some or all of the cash flows of the purchase or sale contract (i.e. the host contract) to be modified by reference to a variable such as a foreign exchange rate or a commodity price if that variable is not closely related to the host contract. Embedded derivatives are separated from the host contract and accounted for as a stand alone derivative if the economic characteristics and risks of the embedded derivatives are not closely related to those of the host contract. At reporting date, there were no embedded derivatives not closely related to the host contract. (o) Property, plant and equipment Methodology for valuation of fixed assets

Property, plant and equipment is measured at cost less accumulated depreciation. Cost is the amount of cash or cash equivalents paid or the fair value of the other consideration given to acquire an asset at the time of its acquisition or construction. Cost may also include transfers from other comprehensive income of any gain or loss on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment. The cost of fixed assets constructed by the group includes the cost of all materials used in construction, direct labour, site preparation, interest and foreign currency gains and losses incurred where applicable and an appropriate proportion of variable and fixed overheads. Gifted and Donated Assets

Assets acquired from government at no cost are measured at fair value as government grants. Fair value means the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction. Assets acquired from customers at no cost are recorded at fair value.

Queensland Rail Limited Financial Report FY2012/13 165 Queensland Rail Limited Notes to the consolidated financial statements 30 June 2013 (continued)

1 Summary of significant accounting policies (continued)

Land

Land is carried at cost. The Transport Infrastructure Act 1994 stipulates that the group only retains ownership of its non-corridor land. As such, only non-corridor land is recorded in these accounts. Ownership of corridor land remains with the Department of Natural Resources and Mines on behalf of the State. This land is leased to the Department of Transport and Main Roads and subsequently sub-leased to the group for no cost. The sub-lease term is for an initial term of 100 years with a renewal option for an additional 100 years. Owned building, plant and equipment and rollingstock

Owned building, plant and equipment and rollingstock are carried at cost less accumulated depreciation. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. Owned infrastructure

Infrastructure assets are carried at cost and represent capitalised expenditures that are directly related to capital projects and may include materials, labour and equipment, in addition to an allocable portion of indirect costs that clearly relate to a particular project that will provide future economic benefits and remain within the control of the group. Subsequent and maintenance costs

Costs related to repairs and maintenance activities are expensed when such repairs are performed. Subsequent costs are only capitalised when it is probable that future economic benefits associated with the item which flow to the group and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. Leased property, plant and equipment

Capitalised fit out of leased properties is disclosed under leased property. The group does not have any finance leases. Assets under construction

The cost of fixed assets constructed by the group includes the cost of all materials used in construction, direct labour, site preparation, interest and foreign currency gains and losses incurred where applicable and an appropriate proportion of variable and fixed overheads. Depreciation and Amortisation

Buildings, plant and equipment, rollingstock and infrastructure are depreciated on a straight-line basis over the useful life net of the residual value. Motor vehicles are depreciated using the diminishing value basis (percentages range from 13.64% to 35.00%), with land and assets under construction not depreciated. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements. Assets are depreciated or amortised from the date of acquisition, or, in respect of internally constructed or manufactured assets, from the time an asset is completed and held ready for use. Major spares purchased specifically for particular assets are capitalised and depreciated in line with standard default asset class lives. Where assets have separately identifiable components that are subject to regular replacement, these components are assigned useful lives distinct from the asset to which they relate. Any expenditure that increases the originally assessed capacity or service potential of an asset is capitalised and the new depreciable amount is depreciated over the remaining life of the asset.

Queensland Rail Limited Financial Report FY2012/13 166 Queensland Rail Limited Notes to the consolidated financial statements 30 June 2013 (continued)

1 Summary of significant accounting policies (continued)

The depreciation and amortisation rates used during the year were based on the following range of useful lives: - Buildings 10 - 50 years - Rollingstock 8 - 40 years - Plant and equipment 3 - 25 years - Infrastructure* 5 - 100 years The depreciation and amortisation rates are reviewed annually and adjusted if appropriate. An asset’s carrying amount is written down to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (note 1(r)). * Longer life infrastructure includes bridges, tunnels and other long lived civil works. Shorter life infrastructure includes telecommunications and security and surveillance equipment. (p) Intangible assets (i) IT development and software

Costs incurred in developing products or systems and costs incurred in acquiring software and licenses that will contribute to future period financial benefits are capitalised to software and systems. Costs capitalised include external direct costs of materials and service and direct payroll and payroll related costs of employees' time spent on the project. Amortisation is calculated using the straight-line method over their useful life which varies from 3 to 7 years. IT development costs include only those costs directly attributable to the development phase and are only recognised following completion of technical feasibility and where the company has an intention and ability to use the asset. (q) Classification of expenditure

Items of expenditure in excess of $2,000 which are expected to provide future economic benefits are capitalised, with the exception of the purchase of office equipment and other items of a similar nature that provide limited quantifiable benefits. The threshold applies to all asset classes except capital spares and intangibles. Capital spares have a threshold of $20,000. If capital spares are under $20,000, the item is recorded in inventory. Expenditure not capitalised is treated as an operating expense in the period in which the expenditure is incurred. Intangibles have a threshold of $50,000. If intangibles are under $50,000, expenditure is not capitalised and is treated as an operating expense in the period in which the expenditure is incurred. (r) Impairment of assets

Assets are reviewed for impairment annually to determine if there are indications that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash generating units). Non-financial assets that have suffered impairment are reviewed for possible reversal of the impairment at each reporting date. (s) Trade and other payables

These amounts represent liabilities for goods and services provided to the group prior to the end of financial year which are unpaid. The amounts are unsecured and are usually paid within the terms set by the supplier.

Queensland Rail Limited Financial Report FY2012/13 167 Queensland Rail Limited Notes to the consolidated financial statements 30 June 2013 (continued)

1 Summary of significant accounting policies (continued)

(t) Borrowings and borrowing costs

Debt is drawn from facilities with the Queensland Treasury Corporation (QTC) incorporating fixed and floating debt and is initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost, using the effective interest rate method. Interest is accrued and paid monthly. Interest costs are calculated and advised by QTC in accordance with an agreed book rate methodology, which equates with amortised cost using the effective interest rate method. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument. Borrowing costs, which includes interest calculated using the effective interest method and administration fees, are expensed in the period in which they arise. Borrowing costs which are directly attributable to the construction of material qualifying assets are capitalised. Qualifying assets are assets not funded from other sources with a cost of more than $1.0 million and which take a substantial period of time to prepare for intended use or sale. The rate used to determine the amount of borrowing cost to be capitalised is the QTC interest rate applicable to the entity’s outstanding borrowings during the year, in this case 7.48% (2012: 7.49%). During the year, interest costs of $2.2 million were capitalised (2012: $4.1 million). Borrowings are classified as current liabilities unless the group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date. (u) Provisions

Provisions are recognised when the group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. Provisions are not recognised for future operating losses. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at reporting date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows. The discount rate used to determine the present value is a pre tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. (v) Employee benefits (i) Wages and salaries, annual leave and leave loading

Liabilities for wages and salaries, including non-monetary benefits, annual leave and leave loading are recognised as current liabilities. These liabilities are in respect of employees' services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled plus related on-costs. Employee benefits disclosed as liabilities and also as employee benefits expense in the consolidated income statement include amounts recharged by Queensland Rail from 3 May 2013 in accordance with the Managed Services Agreement. (ii) Other long-term employee benefit obligations

Liabilities for long service leave where employees have completed the required period of service, or are entitled to pro-rata payments are recognised as current liabilities at nominal values. The remaining unvested liabilities are included as non-current liabilities. The liability for long service leave is measured using the expected future payments to be made in respect of services provided by employees up to the reporting date. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future non-current payments are discounted using market yields at the reporting date on Commonwealth government bonds with terms to maturity that match, as closely as possible, the estimated future cash outflows.

Queensland Rail Limited Financial Report FY2012/13 168 Queensland Rail Limited Notes to the consolidated financial statements 30 June 2013 (continued)

1 Summary of significant accounting policies (continued)

(iii) Retirement allowance

Retirement allowance is payable to employees that retire or are paid according to Voluntary Employee Redundancy Scheme (VERS) or Medical Separation who: • are not members of a QSuper contributory or defined benefit superannuation fund; • were employed prior to 1 February 1995; • have 10 or more years of continuous service; and • have reached the retirement attainment age of 55. Liabilities for retirement allowance where employees fulfil all of the above requirements are recognised as current liabilities at nominal values. The remaining unvested liabilities are included as non-current liabilities. The liability for retirement allowance is measured using the expected future payments to be made in respect of services provided by employees up to the reporting date. Consideration is given to the history of employee departures, expected future wage and salary levels as well as expected age of retirement. Expected future non-current payments are discounted using market yields at the reporting date on Commonwealth government bonds with terms to maturity that match, as closely as possible, the estimated future cash outflows. These conditions continue to apply to employees who have transferred, or will transfer, from Aurizon Operations Limited and Aurizon Network Pty Ltd (formerly QR Network Pty Ltd) to Queensland Rail Limited. (iv) Sick leave

Sick leave is not provided for on the grounds that it is non-vesting and on average, no more than the annual entitlement is taken each year. (v) Superannuation

Contributions are expensed as they are made. The group pays an employer subsidy to the Government Superannuation Office in respect of employees who are contributors to either the Public Sector Superannuation (QSuper) scheme or State Service Superannuation. Employer contributions to the Super Defined Benefit Fund are determined by the State Actuary. No liability is recognised for accruing superannuation benefits as this liability is held on a Whole of Government basis and reported in the Whole of Government financial statements. The group also makes superannuation guarantee payments into the QSuper Accumulation Fund (RailSuper) and QSuper Accumulation Fund (Contributory) administered by the Government Superannuation Office. No liability / asset is recognised for the group's share of any potential deficit of the Super Defined Benefit Fund of QSuper. Refer to note 1(h) for further information on defined benefit liabilities. (w) Contributed equity

Ordinary shares are classified as equity. Equity injections are treated as an increase in the value of issued shares. (x) Dividends

Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the group, on or before the end of the financial year but not distributed at reporting date.

Queensland Rail Limited Financial Report FY2012/13 169 Queensland Rail Limited Notes to the consolidated financial statements 30 June 2013 (continued)

1 Summary of significant accounting policies (continued)

(y) Leases (i) Leases on property, plant and equipment

Leases in which a significant portion of the risks and rewards of ownership are not transferred to the group as lessee are classified as operating leases (note 32). Operating lease rental (net any incentive received from the lessor) is expensed on a straight-line basis over the lease term and is charged to the income statement. Leases of property, plant and equipment where the group, as lessee, assumes substantially all the risks and benefits of ownership are classified as finance leases. The group did not have any finance leases at reporting date. Expected rental revenue from operating leases where the group is a lessor is recognised as income on a straight-line basis over the lease term (note 32). (z) Insurance

The group insures against risks which are largely uncontrollable, have significant or catastrophic consequences for assets and / or revenue and the aggregate costs of which would exceed the limit of exposure the organisation is prepared to accept. Insurance cover has accordingly been effected for a variety of such risks. Other areas of risk exposure are self-insured. Other areas of risk exposure include workers' compensation and is self-insured by the Authority. Until 30 June 2010, self-insurance and other underwriting activities were performed by Queensland Rail Limited's wholly-owned subsidiary, On Track Insurance Pty Ltd. On Track Insurance Pty Ltd was transferred from Aurizon Operations Limited on 6 October 2010 and will continue to provide cover for claims relating to events up until 30 June 2010 for both Queensland Rail Limited and the Aurizon Operations Limited group. (aa) Environmental regulation

The group is subject to a variety of laws and regulations in the jurisdiction in which it operates or maintains land. Where remediation measures are probable and can be reliably measured, such costs incurred in complying with relevant laws and regulations are accounted for in accordance with the policy in note 1(u). Although the group is not required to purchase carbon permits under the Clean Energy Act 2011, it does purchase electricity and other inputs whose prices have increased as a result of the legislation. The group has assessed the impact of these increases and determined that they are not material to its operations. (ab) Authorisation for issue

The financial statements are authorised for issue by the Chairman at the date of signing the directors' declaration. (ac) Parent entity financial information

The financial information for the parent entity, Queensland Rail Limited, disclosed in note 37 has been prepared on the same basis as the consolidated financial statements, except as set out below: (i) Investments in subsidiaries

Investments in subsidiaries are accounted for at cost in the financial statements of Queensland Rail Limited. (ii) Tax consolidation legislation

For information regarding tax consolidation legislation, please refer to note 1(i)(i).

Queensland Rail Limited Financial Report FY2012/13 170 Queensland Rail Limited Notes to the consolidated financial statements 30 June 2013 (continued)

2 Financial risk management

The group's activities expose it to a variety of financial risks including market risk, credit risk and liquidity risk. The group's overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the group. The group uses derivative financial instruments such as foreign exchange contracts and commodity swap contracts to hedge significant risk exposures. Trading for profit is strictly prohibited. Financial risk management is being carried out by a central treasury unit within the group under policies approved by the Board of Directors (the Board). The treasury unit identifies, evaluates and hedges financial risks in close co-operation with the group's operating units. The Board approves the Finance Policy for overall risk management, as well as principles covering specific areas, such as mitigating foreign exchange, commodity price, interest rate and credit risks, use of derivative financial instruments and investing excess liquidity. Any breaches of policy are reported to the Board. Sensitivity analysis has been used to help assess the financial risk of the group. In determining this sensitivity, the average of the 50 day historical volatility of the closing daily spot rate for three years, was used to adjust the forward curve. A three year period was chosen in line with the group's current hedging framework. For foreign currency the adjustment was applied to the US Dollar, the Euro and the Japanese Yen. For commodity price risk, the adjustment was applied to the Singapore Gasoil curves. (a) Market risk (i) Foreign exchange risk

Foreign exchange risk arises from capital expenditures that are denominated in a currency that is not the entity's functional currency. The group is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US Dollar (USD), the Euro (EUR) and the Japanese Yen (JPY). The risk is measured using cash flow at risk. The group has a Treasury Principle in place to manage foreign exchange risk. All foreign exchange risk is centrally managed by the treasury unit using approved derivative instruments. The group's foreign exchange risk management policy dictates the level of hedging to be undertaken within the Board approved limits. At reporting date, the Board approved trading range for the foreign exchange risk hedging is: 0 - 1 year: 80% - 100% 1 - 2 years: 60% - 100% 2 - 3 years: 40% - 100% The group designates forward foreign currency derivatives for hedging foreign exchange forecast transactions which are highly probable. At reporting date, 100% (2012: 89%) of foreign exchange hedges were designated for hedge accounting purposes. At reporting date, contracts recognised directly in equity were net gains of $0.4 million (2012: net losses of $0.6 million). During the year ended 30 June 2013, losses of $0.7 million (2012: $1.2 million) were removed from equity and included in the acquisition cost of capital.

Queensland Rail Limited Financial Report FY2012/13 171 Queensland Rail Limited Notes to the consolidated financial statements 30 June 2013 (continued)

2 Financial risk management (continued)

The group's exposure to foreign currency risk at reporting date was as follows: 30 June 2013 30 June 2012 USD EUR JPY USD EUR JPY $'000 €'000 ¥'000 $'000 €'000 ¥'000

Cash and cash equivalents 28 125 1 87 28 86 Forward exchange contracts - capital expenditure foreign currency (not qualifying for hedge accounting) --- 850 100 - - capital expenditure foreign currency (qualifying for hedge accounting) 577 2,525 - 1,473 4,325 94,461 Net exposure 605 2,650 1 2,410 4,453 94,547

Sensitivity

At reporting date, had the Australian dollar weakened / strengthened by 10% against the USD / EUR / JPY with all other variables held constant, the group’s post tax profit would have been nil higher / $0.006 million lower (2012: 13%, $0.3 million higher / $0.2 million lower). (ii) Commodity price risk

Commodity price risk arises when future commercial supply agreements are subject to fluctuations in price movements. Commodity swap contracts, transacted by the treasury unit, are used to manage commodity price risk. The group has a Treasury Principle in place to manage commodity price risk. All commodity price risk is centrally managed by Group Treasury using approved derivative instruments. The group uses the commodity Singapore Gasoil 0.001% due to environmental efficiencies. The group has chosen Singapore Gasoil 0.5% to hedge exposures until December 2012 and Singapore Gasoil 0.05% to hedge exposures from January 2013 onwards as these are the most liquid markets available. The group's commodity price risk management policy dictates the level of hedging to be undertaken within Board approved limits. At reporting date, the Board approved trading range for the commodity price hedging is: 0 - 1 year: 0% - 100% 1 - 2 years: 0% - 100% 2 - 3 years: 0% - 100% The group designates forward commodity derivatives for hedging commodity forecast transactions which are highly probable. At reporting date, no commodity hedges were designated for hedge accounting purposes (2012: 100%). At reporting date, contracts recognised directly in equity were nil (2012: net losses of $0.9 million). During the year ended 30 June 2013, losses of $0.23 million (2012: $0.03 million) were removed from equity and included in the cost of diesel fuel. Sensitivity

At reporting date, had the Singapore Gasoil price decreased / increased with all other variables held constant, the group's post tax profit would not have been effected as there were no commodity hedges in place (2012: 25%, nil higher / nil lower).

Queensland Rail Limited Financial Report FY2012/13 172 Queensland Rail Limited Notes to the consolidated financial statements 30 June 2013 (continued)

2 Financial risk management (continued)

(iii) Cash flow and fair value interest rate risk

The group's main interest rate risk arises from long-term borrowings. Borrowings issued at variable rates expose the group to cash flow interest rate risk. Borrowings issued at fixed rates expose the group to fair value interest rate risk. The QTC has been authorised to manage the interest rate risk of the group within limits in accordance with the risk profile approved by the Board. This is achieved by varying the proportion of the floating and fixed rate funding. The performance of this risk management is assessed against the benchmark duration of the debt portfolio. At reporting date the group had the following exposure to variable rate borrowings: 30 June 2013 30 June 2012 Weighted Weighted average average interest rate Balance interest rate Balance % $'000 % $'000

Bank overdrafts and bank loans 7.3 3,099,817 7.5 3,000,000 Net exposure to cash flow interest rate risk 3,099,817 3,000,000

The following table summarises the sensitivity of the group’s debt with QTC to interest rate risk:

Interest rate risk -1% +1% Carrying amount Profit Equity Profit Equity 30 June 2013 $'000 $'000 $'000 $'000 $'000

Client Specific Debt Pool 3,000,000 1,711 1,711 (1,577) (1,577) Total increase / (decrease) 1,711 1,711 (1,577) (1,577)

Interest rate risk -1% +1% Carrying amount Profit Equity Profit Equity 30 June 2012 $'000 $'000 $'000 $'000 $'000

Client Specific Debt Pool 3,000,000 2,309 2,309 (2,199) (2,199) Total increase / (decrease) 2,309 2,309 (2,199) (2,199)

(b) Credit risk

The maximum exposure to credit risk, excluding the value of any collateral or other security, at reporting date to recognised financial assets, is the carrying amount, net of any allowances for impairment of those assets, as disclosed in the balance sheet and notes to the consolidated financial statements. The group does not have any material credit risk exposure to any single receivable or group of receivables under financial instruments entered into by the group, other than amounts owing by the State of Queensland. For some trade receivables the group may also obtain security in the form of guarantees, deeds of undertaking or letters of credit which can be called upon if the counterparty is in default under the terms of the agreement. Policies are in place to ensure that sales of products and services are only made to customers with an appropriate credit history.

Queensland Rail Limited Financial Report FY2012/13 173 Queensland Rail Limited Notes to the consolidated financial statements 30 June 2013 (continued)

2 Financial risk management (continued)

Derivative counterparties and cash transactions are limited to high credit quality financial institutions and are approved by the Board. The group has policies that limit the amount of credit exposure to any one financial institution. At reporting date the group had the following credit exposure risk: 2013 2012 $'000 $'000

Cash at bank and short-term bank deposits AA+ 276,339 119,036 AA - 206,175 276,339 325,211

Derivative financial assets AA 475 - 475 -

(c) Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. Liquidity risk management within the group ensures sufficient cash to meet short-term and long-term financial commitments. The group has policies in place to manage liquidity risk, including the establishment of an annual approved borrowing program and the availability of appropriate working capital facilities. The group manages liquidity risk by monitoring forecast cash flows and ensuring that adequate cash flow is maintained. Financing arrangements

The short-term borrowing arrangements with QTC are interest bearing, refer to note 2(a)(iii). The borrowing arrangements are subject to annual review. The amount of undrawn short-term borrowing facilities with QTC available at reporting date is shown below: 2013 2012 $'000 $'000

QTC short-term facilities Used at reporting date 99,817 - Unused at reporting date 350,183 450,000 Total facilities 450,000 450,000

Long-term borrowings are sourced from the Queensland Rail Limited Client Specific Pool subject to annual approval of the Queensland State Treasurer. The group may draw up to the amount of the approved borrowing program. Borrowings are not secured. The group had a credit standby arrangement with the Commonwealth Bank of Australia in the form of a bank overdraft totalling $2.0 million which the group cancelled during the previous financial year.

Queensland Rail Limited Financial Report FY2012/13 174 Queensland Rail Limited Notes to the consolidated financial statements 30 June 2013 (continued)

2 Financial risk management (continued)

Maturity Analysis The tables below analyse the group's financial liabilities and net and gross settled derivative financial instruments into relevant maturity groupings based on the remaining period at the reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. Total Less than Between Over contractual 1 year 1 and 5 years 5 years cash flows 30 June 2013 $'000 $'000 $'000 $'000

Non-derivatives Non-interest bearing 675,517 31,375 - 706,892 Variable rate 125,326 - - 125,326 Fixed rate 219,113 877,056 2,962,320 4,058,489 Total non-derivatives 1,019,956 908,431 2,962,320 4,890,707

Derivatives Net settled (forward commodity hedges) - - - -

Gross settled (foreign exchange hedges) Assets - (inflow) (4,294) (1,436) - (5,730) - outflow 3,811 1,428 - 5,239 Liabilities - (inflow) - - - - - outflow - - - - Total derivatives (483) (8) - (491)

Total Less than Between Over contractual 1 year 1 and 5 years 5 years cash flows 30 June 2012 $'000 $'000 $'000 $'000

Non-derivatives Non-interest bearing 192,921 - - 192,921 Variable rate 25,469 - - 25,469 Fixed rate 224,204 897,432 3,024,290 4,145,926 Total non-derivatives 442,594 897,432 3,024,290 4,364,316

Derivatives Net settled (forward commodity hedges) Liabilities 859 - - 859

Gross settled (foreign exchange hedges) Assets - (inflow) - - - - - outflow - - - - Liabilities - (inflow) (8,778) (280) - (9,058) - outflow 9,723 313 - 10,036 Total derivatives 1,804 33 - 1,837

Queensland Rail Limited Financial Report FY2012/13 175 Queensland Rail Limited Notes to the consolidated financial statements 30 June 2013 (continued)

2 Financial risk management (continued)

(d) Fair value measurements

The fair value of financial assets and financial liabilities must be estimated for recognition and for disclosure purposes. AASB 7 Financial Instruments: Disclosures requires disclosure of fair value measurements by level of the following fair value measurement hierarchy: (Level 1) quoted prices (unadjusted) in active markets for identical assets or liabilities; (Level 2) inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices); and (Level 3) inputs for the asset or liability that are not based on observable market data (unobservable inputs). The following table presents the group's assets and liabilities measured and recognised at fair value at 30 June and2013 30 June 2012: Level 1 Level 2 Level 3 Total 30 June 2013 $'000 $'000 $'000 $'000

Assets Derivatives used for hedging Forward exchange contracts - 475 - 475 Total assets - 475 - 475

Liabilities Financial liabilities at fair value through profit or loss Forward exchange contracts - - - - Derivatives used for hedging Forward exchange contracts - - - - Commodity swaps - - - - Total liabilities - - - -

Level 1 Level 2 Level 3 Total 30 June 2012 $'000 $'000 $'000 $'000

Assets Derivatives used for hedging Forward exchange contracts - - - - Total assets - - - -

Liabilities Financial liabilities at fair value through profit or loss Forward exchange contracts - 8 - 8 Derivatives used for hedging Forward exchange contracts - 947 - 947 Commodity swaps - 859 - 859 Total liabilities - 1,814 - 1,814

The fair value of financial instruments traded in active markets (such as foreign exchange and commodity derivatives) is based on observable market prices at reporting date. The observable market price used for financial assets and liabilities held by the group for effective hedges is the average (i.e. mid) forward rate at close of business on reporting date.

Queensland Rail Limited Financial Report FY2012/13 176 Queensland Rail Limited Notes to the consolidated financial statements 30 June 2013 (continued)

2 Financial risk management (continued)

The fair value of financial instruments that are not traded in an active market (for example, over the counter derivatives) is determined using generally accepted valuation techniques. The group uses a variety of methods and makes assumptions that are based on market conditions existing at the end of each reporting period. Observable market prices or dealer estimates for similar instruments are used to estimate fair value for long-term debt for disclosure purposes. Other techniques, such as estimated discounted cash flows, are used to determine fair value for the remaining financial instruments. The fair value of forward exchange contracts and commodity swap contracts is determined using forward market rates at the end of the reporting period. These instruments are included in level 2 and comprise derivative financial instruments. In the circumstances where a valuation technique for these instruments is based on significant unobservable inputs, such instruments are included in level 3. The carrying amounts of trade receivables and payables are assumed to approximate their fair values due to their short-term nature. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the group for similar financial instruments. The carrying amount of current borrowings approximates the fair value, as the impact of discounting is not significant.

3 Critical accounting estimates and judgements

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under the circumstances. (a) Critical accounting estimates and assumptions

The group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. (i) Estimated impairment of property, plant and equipment

The group tests annually whether property, plant and equipment has suffered any impairment, in accordance with the accounting policy stated in note 1(r). The recoverable amounts of cash generating units have been determined based on value in use calculations or fair value less costs to sell. Value in use calculations require the use of assumptions. (ii) Provisions for insurance claims

The subsidiary company, On Track Insurance Pty Ltd, managed the self-insurance activities of the Aurizon Operations Limited group to which both Queensland Rail Limited and On Track Insurance Pty Ltd belonged until 30 June 2010 and 6 October 2010 respectively. Actuarial assessments are undertaken annually to assess the value of the provision for any outstanding claims. Refer to note 1(z) for further information. Accrued insurance liabilities (includes Workers' Compensation) is based on a combination of management estimates and independent actuarial assessments performed as at year end. Refer to note 21 for more information. (iii) Provision for land rehabilitation

There is uncertainty as to the amount that will ultimately be required to be expensed to remediate contaminated land. Refer to note 21 for more information. (iv) Workers compensation self-insurance provision

Independent actuarial valuations are used to estimate the provisions required for self-insured workers compensation.

Queensland Rail Limited Financial Report FY2012/13 177 Queensland Rail Limited Notes to the consolidated financial statements 30 June 2013 (continued)

3 Critical accounting estimates and judgements (continued)

The determination of the provisions required is dependent on a number of assumptions including the total future cost to finalise existing open claims, wage increases that will impact existing claims, inflation and the amount of claims that have been incurred but not yet reported. Refer to note 21 for more information. (v) Long service leave provision

The determination of the provisions required is dependent on a number of assumptions including expected wage increases, length of employee service and bond rates. Refer to note 21 for more information. (vi) Taxation

The group's accounting policy for taxation requires management's judgement as to the types of arrangements considered to be subject to a tax. Judgement is also required in assessing whether deferred tax assets and certain deferred tax liabilities are recognised on the balance sheet. Deferred tax assets, including those arising from unrecouped tax losses, capital losses and temporary differences, are recognised only when it is considered probable that they will be recovered. Recoverability is dependent on the generation of sufficient future taxable profits. Refer to notes 25and18 for carrying amounts of deferred tax assets and deferred tax liabilities. (vii) Depreciation

Management estimates the useful lives and residual values of property, plant and equipment based on the expected period of time over which economic benefits from use of the asset will be derived. Management reviews useful life assumptions on an annual basis having given consideration to variables including historical and forecast usage rates, technological advancements and changes in legal and economic conditions. Refer to note 1(o) for details of current depreciation rates used and note 4 for details on a change in the useful lives in the current reporting period. (viii) Hedge accounting

Management's judgement is necessary when determining whether a derivative financial instrument qualifies for hedge accounting, such as whether forecast transactions are highly probable as required by AASB 139 Financial Instruments: Recognition and Measurement. The assessment of whether forecast transactions are highly probable is judgmental and is subject to changes to the timing and magnitude of underlying purchases. (ix) Sunlander 14 capital program

Management estimated the cost associated with the de-scoped carriages from the Sunlander 14 capital program. Refer to note 16(d) for details.

4 Correction of error and revision of estimates

There have been no corrections of error in the current reporting period. During the reporting period management undertook a review of the useful lives of the group’s assets. The review took into account useful lives adopted by rail managers in Australia and New Zealand as well as the group’s asset maintenance and replacement history. As a result of the review, the useful lives of a number of asset classes were amended. The changes were adopted prospectively from 1 July 2012 and resulted in a reduction in depreciation expense for the reporting period of approximately $19.1 million. There were no other material revisions of estimates during the current reporting period.

Queensland Rail Limited Financial Report FY2012/13 178 Queensland Rail Limited Notes to the consolidated financial statements 30 June 2013 (continued)

5 Revenue from continuing operations

2013 2012 $'000 $'000

Transport service contract revenue 1,526,614 1,530,327 Passenger transport revenue 67,831 71,836 Network access revenue 218,833 217,463 Other revenue* 99,938 109,483 Interest revenue 14,241 14,166 1,927,457 1,943,275

* Other revenue includes Workshop revenue $20.5 million (2012: $25.0 million), External construction works revenue $19.2 million (2012: $21.5 million), Leasing revenue $12.9 million (2012: $13.9 million), Telecommunication revenue $12.5 million (2012: $13.0 million), Airtrain revenue $11.2 million (2012: $10.4 million), Insurance claims revenue $9.1 million (2012: $0.2 million) and Natural disaster funding $3.7 million (2012: $14.3 million).

6 Other income

2013 2012 $'000 $'000

Net gain on disposal of property, plant and equipment 1,138 - Net gains on non-hedge currency derivatives and hedge ineffectiveness 33 - Net foreign exchange gains - 36 Rebates 2,031 2,746 3,202 2,782

Queensland Rail Limited Financial Report FY2012/13 179 Queensland Rail Limited Notes to the consolidated financial statements 30 June 2013 (continued)

7 Expenses

2013 2012 $'000 $'000

Profit before income tax includes the following specific expenses: Depreciation and amortisation Depreciation Buildings 19,001 18,445 Plant and equipment 21,810 20,958 Infrastructure 132,115 139,304 Rollingstock 108,243 103,274 Total depreciation 281,169 281,981 Amortisation Lease fit out 3,182 2,619 Software (note 17) 13,889 11,948 Total amortisation 17,071 14,567

Total depreciation and amortisation 298,240 296,548

Finance costs Interest and finance charges paid / payable 223,638 222,927 Total finance costs 223,638 222,927

Other expenses Rental expenses relating to leases 55 55 Allowance for inventory obsolescence 571 1,540 Research and development costs 100 100 Settlement of litigation expenses 303 521 Impairment losses Trade receivables 226 35 Net losses on non-hedge currency derivatives and hedge ineffectiveness - 920 Net foreign exchange losses 12 - Net loss on disposal of property, plant and equipment - 2,125 Other expenses 2,915 1,724 Total other expenses 4,182 7,020

Superannuation expenses* Defined benefit superannuation expense 20,366 20,744 Defined contribution superannuation expense 43,662 44,481 Total superannuation expenses 64,028 65,225

* Forms part of employee benefits expense.

Queensland Rail Limited Financial Report FY2012/13 180 Queensland Rail Limited Notes to the consolidated financial statements 30 June 2013 (continued)

8 Income tax expense

(a) Income tax expense

2013 2012 $'000 $'000

Current tax 37,157 32,115 Deferred tax 19,476 26,215 Adjustments for current tax of prior periods (601) (604) 56,032 57,726

Deferred income tax expense included in income tax expense comprises: (Increase) / decrease in deferred tax assets (note 18) 8,095 (2,221) Increase / (decrease) in deferred tax liabilities (note 25) 11,381 28,436 19,476 26,215

(b) Numerical reconciliation of income tax expense to prima facie tax payable

2013 2012 $'000 $'000

Profit from continuing operations before income tax expense 200,836 186,013 Tax at the Australian tax rate of 30% (2012: 30%) 60,251 55,804 Tax effect of amounts which are not deductible / (taxable) in calculating taxable income: Entertainment 2 14 Research and development (381) (739) Inter-company eliminations (3,266) 3,242 Other 36 18 Non-assessable income (9) (9) Adjustments for current tax of prior periods (601) (604) (4,219) 1,922

Total income tax expense 56,032 57,726

(c) Amounts recognised directly in equity

2013 2012 $'000 $'000

Aggregate current and deferred tax arising in the reporting period and not recognised in net profit or loss but directly debited or credited to equity: Net deferred tax - debited / (credited) directly to equity (note and18 25) 577 34 577 34

Queensland Rail Limited Financial Report FY2012/13 181 Queensland Rail Limited Notes to the consolidated financial statements 30 June 2013 (continued)

9 Current assets - Cash and cash equivalents

2013 2012 $'000 $'000

Cash on hand 129 158 Bank balances - 2,727 Short-term investments 276,339 322,484 Trust monies - 1 Total cash and cash equivalents 276,468 325,370

Less: bank overdraft (13,908) - Less: trust monies 2 (1) (13,906) (1)

Balance as per statement of cash flows 262,562 325,369

(a) Interest rate risk exposure

The group’s exposure to interest rate risk is discussed in note 2.

10 Current assets - Trade and other receivables

2013 2012 $'000 $'000

Trade receivables 65,704 59,308 Allowance for impairment of receivables (a) (253) (119) Net trade receivables 65,451 59,189

Inter-company receivables 355,736 - 355,736 -

Transport service contracts 90,437 106,885 Receivables - SEQIPP works 7,345 5,870 Other receivables 18,792 10,096 116,574 122,851

Total trade and other receivables 537,761 182,040

Due to the short-term nature of these receivables, their carrying amount is assumed to approximate their fair value.

Queensland Rail Limited Financial Report FY2012/13 182 Queensland Rail Limited Notes to the consolidated financial statements 30 June 2013 (continued)

10 Current assets - Trade and other receivables (continued)

(a) Impaired trade receivables

At reporting date, it was assessed that a portion of the impaired receivables is expected to be recovered. The nominal values and ageing of the impaired trade receivables is as follows: 2013 2012 $'000 $'000

1 to 3 months 6 - 3 to 6 months 82 1 Over 6 months 252 105 340 106

Movements in the allowance for impairment of receivables are as follows: 2013 2012 $'000 $'000

Opening balance 119 99 Allowance for impairment recognised during the year 226 35 Receivables written off during the year as uncollectable (92) (15) 253 119

The creation and release of the allowance for impaired receivables has been included in the income statement. Amounts charged to the allowance account are generally written off when there is no expectation of recovering additional cash. (b) Past due but not impaired

At reporting date, some of the group’s trade receivables were past due but not impaired. These relate to a number of independent customers for whom there is no recent history of default. The ageing analysis of these trade receivables is as follows: 2013 2012 $'000 $'000

3 to 6 months 315 1,545 Over 6 months 1,991 3,805 2,306 5,350

Queensland Rail Limited Financial Report FY2012/13 183 Queensland Rail Limited Notes to the consolidated financial statements 30 June 2013 (continued)

11 Current assets - Inventories

2013 2012 $'000 $'000

Raw materials and stores (b) 62,314 56,907 Work in progress 125 431 Less: allowance for inventory obsolescence (1,202) (1,025) Inventory at lower of cost or net realisable value 61,237 56,313

(a) Inventory expense

Inventory recognised as expense during the year ended 30 June 2013 amounted to $102.1 million (2012: $109.0 million). Write-downs of inventories to net realisable value recognised as an expense during the year ended 30 June 2013 amounted to $0.3 million (2012: $0.3 million).

(b) Raw material and stores

The amount of raw materials and stores includes surplus materials held to support the existing rollingstock assets of the group. An independent external valuer performed a stock take and assessed the value of the surplus materials in connection with the carriages that were de-scoped from the Sunlander 14 capital program to be $5.0 million. This amount was transferred to inventory from assets under construction in the current reporting period. Queensland Rail engaged an independent external valuer to assess and value materials procured in relation to the portions of the Sunlander 14 capital program that were de-scoped. Key estimates and assumptions were made by the valuer in determining the value of the materials that could be used by Queensland Rail to support existing rollingstock. These include: • All materials were considered to be new at reporting date and no aging allowances were included in the values determined. • All materials transferred to inventory only included those items that are replaceable units which support the rendering of services to Queensland Rail. • The value of procured materials represented the cost paid by Queensland Rail to the supplier where it was identifiable. Otherwise, the value represented the likely price that Queensland Rail could expect to pay for each item. • The materials valued were components created and purchased in order to assemble a narrow gauge tilt train. Accordingly, it was held that there was no opportunity to dispose of surplus materials in accordance with its best and highest use to another rail operator.

Physical inspections were included up to and including those on 19 November 2013 and were undertaken by inspecting a representative sample with a focus on high value sub system components first. The inspections and valuations have been based upon the information provided to the valuer.

Queensland Rail Limited Financial Report FY2012/13 184 Queensland Rail Limited Notes to the consolidated financial statements 30 June 2013 (continued)

12 Derivative financial instruments

2013 2012 $'000 $'000

Current assets Forward exchange contracts - cash flow hedges 475 - Total current derivative financial instrument assets 475 -

Total derivative financial instrument assets 475 -

Current liabilities Forward exchange contracts - cash flow hedges - 916 Forward exchange contracts - at fair value through profit and loss - 8 Commodity contracts - cash flow hedges - 859 Total current derivative financial instrument liabilities - 1,783

Non-current liabilities Forward exchange contracts - cash flow hedges - 31 Total non-current derivative financial instrument liabilities - 31

Total derivative financial instrument liabilities - 1,814

(a) Instruments used by the group

The group holds derivative financial instruments to hedge (including economically hedge) its foreign currency and commodity price risk exposures in accordance with the group’s financial risk management policy (note 2).

13 Current assets - Other current assets

2013 2012 $'000 $'000

Prepayments 6,439 6,192 Prepaid Income Tax* 1,576 - 8,015 6,192

* The group has made Pay As You Go quarterly income tax instalments for the 2012/13 period which have exceeded the income tax liability for the same period.

Queensland Rail Limited Financial Report FY2012/13 185 Queensland Rail Limited Notes to the consolidated financial statements 30 June 2013 (continued)

14 Non-current assets - Receivables

2013 2012 $'000 $'000

Transport service contracts - 39,907 Loan receivable* 3,843 17,184 3,843 57,091

* Loan receivable represents the outstanding balance of the loan between the subsidiary company and its former parent company, Aurizon Operations Limited. This loan is non-interest bearing and is not repayable on demand. The loan balance is reduced as the subsidiary settles outstanding insurance claims by Aurizon Operations Limited and its subsidiaries. (a) Impaired receivables and receivables past due

None of the non-current receivables are impaired or past due but not impaired. (b) Fair values

The carrying value of non-current receivables represents the best approximation of fair value.

15 Non-current assets - Inventories

2013 2012 $'000 $'000

Raw materials and stores 22,533 15,240 22,533 15,240

Queensland Rail Limited Financial Report FY2012/13 186 Queensland Rail Limited Notes to the consolidated financial statements 30 June 2013 (continued)

16 Non-current assets - Property, plant and equipment

Assets under Leased Plant and construction Land property Buildings equipment Rollingstock Infrastructure Total $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

At 1 July 2011 Cost 339,570 139,806 21,052 453,194 180,041 1,685,058 3,983,123 6,801,844 Accumulated depreciation / amortisation and impairment losses - (1,812) (1,613) (86,510) (85,391) (420,138) (380,341) (975,805) Net book amount 339,570 137,994 19,439 366,684 94,650 1,264,920 3,602,782 5,826,039

Year ended 30 June 2012 Opening net book amount 339,570 137,994 19,439 366,684 94,650 1,264,920 3,602,782 5,826,039 Additions 558,273 - 1,518 - 5,681 - - 565,472 Transfers between asset classes (445,026) 603 2,847 27,707 36,024 179,802 153,904 (44,139) Disposals - (9,315) - (860) (1,459) (273) (4,488) (16,395) Depreciation / amortisation expense - - (2,619) (18,445) (20,958) (103,274) (139,304) (284,600) Closing net book amount 452,817 129,282 21,185 375,086 113,938 1,341,175 3,612,894 6,046,377

At 30 June 2012 Cost 452,817 131,084 25,416 479,730 215,131 1,830,739 4,129,319 7,264,236 Accumulated depreciation / amortisation and impairment losses - (1,802) (4,231) (104,644) (101,193) (489,564) (516,425) (1,217,859) Net book amount 452,817 129,282 21,185 375,086 113,938 1,341,175 3,612,894 6,046,377

Queensland Rail Limited Financial 187 Report FY2012/13 Queensland Rail Limited Notes to the consolidated financial statements 30 June 2013 (continued)

16 Non-current assets - Property, plant and equipment (continued)

Assets under Leased Plant and construction Land property Buildings equipment Rollingstock Infrastructure Total $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

Year ended 30 June 2013 Opening net book amount 452,817 129,282 21,185 375,086 113,938 1,341,175 3,612,894 6,046,377 Additions 552,651 - 461 - 121 - 561 553,794 Transfers between asset classes (377,830) 205 151 35,205 29,274 104,612 193,987 (14,396) Transfers to inventory (c) (5,000) ------(5,000) Transfers to consumables (d) (48,151) ------(48,151) Disposals - (2,274) - (161) (3,800) (303) (1,865) (8,403) Depreciation / amortisation expense - - (3,182) (19,001) (21,810) (108,243) (132,115) (284,351) Closing net book amount 574,487 127,213 18,615 391,129 117,723 1,337,241 3,673,462 6,239,870

At 30 June 2013 Cost 574,487 129,002 26,028 514,569 233,999 1,907,339 4,320,286 7,705,710 Accumulated depreciation / amortisation and impairment losses - (1,789) (7,413) (123,440) (116,276) (570,098) (646,824) (1,465,840) Net book amount 574,487 127,213 18,615 391,129 117,723 1,337,241 3,673,462 6,239,870

(a) Non-current assets pledged as security

No assets have been pledged as security by the company. (b) Impairment

An impairment assessment was undertaken prior to reporting date. No impairment was recognised in the current or prior reporting periods.

Queensland Rail Limited Financial 188 Report FY2012/13 Queensland Rail Limited Notes to the consolidated financial statements 30 June 2013 (continued)

16 Non-current assets - Property, plant and equipment (continued)

(c) Transfers to inventory

The transfers to inventory for assets under construction reflect inventory relating to the de-scope of the Sunlander 14 capital program. The value of the inventory transferred was determined by an independent external valuer. Key assumptions made by the valuer include: • All materials transferred to inventory only included those items that are replaceable units which support the rendering of services to Queensland Rail. • The value of procured materials represented the cost paid by Queensland Rail to the supplier where it was identifiable. Otherwise, the value represented the likely price that Queensland Rail could expect to pay for each item. (d) Transfers to consumables

The transfer of estimated costs from assets under construction to consumables expense represents the costs relating to the de-scope of the Sunlander 14 capital program. These costs represent materials, project management and engineering design costs relating to the de-scoped portions of the capital program. These costs were incurred to build carriages which were unique to a narrow gauge tilt train. Accordingly, it was held that these costs did not represent a future economic benefit and that there was no opportunity to dispose of the surplus materials in accordance with its best and highest use to another rail operator.

Queensland Rail Limited Financial 189 Report FY2012/13 Queensland Rail Limited Notes to the consolidated financial statements 30 June 2013 (continued)

17 Non-current assets - Intangible assets

Computer software* Total $'000 $'000

At 1 July 2011 Cost 15,921 15,921 Accumulated amortisation and impairment (1,631) (1,631) Net book amount 14,290 14,290

Year ended 30 June 2012 Opening net book amount 14,290 14,290 Transfers 44,139 44,139 Amortisation expense (11,948) (11,948) Closing net book amount 46,481 46,481

At 30 June 2012 Cost 60,060 60,060 Accumulated amortisation and impairment (13,579) (13,579) Net book amount 46,481 46,481

Year ended 30 June 2013 Opening net book amount 46,481 46,481 Transfers 14,396 14,396 Amortisation expense (13,889) (13,889) Closing net book amount 46,988 46,988

At 30 June 2013 Cost 74,456 74,456 Accumulated amortisation and impairment (27,468) (27,468) Net book amount 46,988 46,988

* Software includes capitalised development costs being an internally generated intangible asset.

An impairment assessment was undertaken prior to reporting date. No impairment was recognised in the current or prior reporting periods.

Queensland Rail Limited Financial Report FY2012/13 190 Queensland Rail Limited Notes to the consolidated financial statements 30 June 2013 (continued)

18 Non-current assets - Deferred tax assets

2013 2012 $'000 $'000

The balance comprises temporary differences attributable to: Accrued expenses 5,705 11,213 Revenue losses 2,011 - Capital losses 3,211 2,613 Provisions 12,781 86,315 Superannuation contributions 714 728 Unearned revenue 3,818 4,983 Cash flow hedges - 443 Various adjustments - temporary differences - 137 Total deferred tax assets 28,240 106,432

2013 2012 $'000 $'000

Movements: Opening balance 106,432 103,817 Credited / (charged) to the consolidated income statement (note 8) (8,095) 2,221 Cash flow hedge (442) (34) Transfer of provision to Queensland Rail (72,265) - Increase in carried forward tax losses 2,011 - Increase in capital losses 599 428 Closing balance at 30 June 28,240 106,432

2013 2012 $'000 $'000

Deferred tax assets expected to be recovered within 12 months - - Deferred tax assets expected to be recovered after more than 12 months 28,240 106,432

19 Non-current assets - Other non-current assets

2013 2012 $'000 $'000

Prepayments 4,834 5,049 4,834 5,049

Queensland Rail Limited Financial Report FY2012/13 191 Queensland Rail Limited Notes to the consolidated financial statements 30 June 2013 (continued)

20 Current liabilities - Trade and other payables

2013 2012 $'000 $'000

Trade payables 148,917 200,338 Trade payables - intercompany 537,015 - Dividend payable 138,610 102,629 Other payables 15,094 18,052 839,636 321,019

21 Liabilities - Provisions

2013 2012 Current Non-current Total Current Non-current Total $'000 $'000 $'000 $'000 $'000 $'000

Employee benefits (a) - - - 233,786 16,749 250,535 Provision for insurance claims (b) 13,296 - 13,296 32,196 - 32,196 Litigation and workers' compensation provision (c) 479 489 968 8,999 19,850 28,849 Land rehabilitation provision (d) - 10,967 10,967 - 10,585 10,585 Make good provision (e) - 2,760 2,760 - 3,656 3,656 Other provisions (f) 5,883 - 5,883 - - - 19,658 14,216 33,874 274,981 50,840 325,821

(a) Employee benefits

2013 2012 $'000 $'000

Annual leave and leave loading - 66,938 Long service leave - 158,278 Other - 25,319 - 250,535

The current provision for long service leave covers all unconditional entitlements where employees have completed the required period of service and also those where employees are entitled to pro-rata payments in certain circumstances. This portion of the provision is presented as current, since the group does not have an unconditional right to defer settlement for any of these obligations. However, based on past experience, the group does not expect all employees to take the full amount of accrued leave or require payment within the next 12 months. The non-current provision for long service leave covers all conditional entitlements where employees have not completed the required period of service and are not entitled to pro-rata payments. This portion of the provision is presented as non-current, since the group does not have an obligation to settle the provision within the next 12 months. Other employee benefits includes payroll tax and retirement allowances. Employee benefits were previously disclosed under Other current liabilities and Other non-current liabilities.

Queensland Rail Limited Financial Report FY2012/13 192 Queensland Rail Limited Notes to the consolidated financial statements 30 June 2013 (continued)

21 Liabilities - Provisions (continued)

Employees and their entitlements were transferred to the Authority on 3 May 2013 in accordance with the Queensland Rail Transit Authority Act 2013. This resulted in the transfer of the entire balance of the employee benefits on the same day. (b) Provision for Insurance Claims

The provision for insurance claims is raised for insurance claims external to the group as recorded by On Track Insurance Pty , theLtd group's internal captive insurance provider for claims up until 30 June 2010. The provision represents the estimated requirement to settle all third party claims against the group as determined by an actuarial assessment. (c) Litigation and workers' compensation

Provision is made for the estimated liability for workers' compensation and litigation claims. Claims are assessed separately for common law, statutory and asbestos claims. The outstanding liability is determined after factoring future claims inflation and discounting future claim payments. Estimates are made based on the average number of claims and average claim payments over a specified period time. Claims Incurred But Not Reported (IBNR) are also included in the estimate. Claims are expected to be paid over a period exceeding more than one year. Subsequent to the enactment of the Queensland Rail Transit Authority Act 2013, the Queensland State Government issued a Transfer Notice resulting in the transfer of the workers' compensation liability to the Authority. (d) Land rehabilitation provision

This provision recognises the estimated costs to remediate contaminated land in accordance with the group's constructive obligations per the environmental sustainability policy. These estimated costs have arisen as a result of past events. The provision for land rehabilitation is the present value of management's best estimate of the expenditure required to settle the land rehabilitation present obligation at the reporting date. The provision has been calculated based on advice from external consultants and management's best estimate of likely remediation costs. (e) Make good provision

This provision represents the anticipated costs of the future restoration of leased office premises. Make good requirements vary for different properties. The provision includes future cost estimates associated with the restoration of office fixtures and fittings to original condition; removal of all property and equipment to return the premises to a vacant shell and making good any damage caused by their removal; removing any alterations to return to its original layout; and repairing and making good any damage which may be caused to land adjoining the premises as a result of carrying out structural work or other improvements. The provision has been calculated based on management's best estimate of make good costs. (f) Other provisions

Other provisions comprise an outstanding commitment at reporting date to compensate a supplier for materials and project administration and engineering costs associated with the carriages that were de-scoped from the Sunlander 14 capital program for the amount of $5.9 million as disclosed in Note 1. In accordance with the accounting standards, this commitment is recognised as a provision in the current reporting period as the group has a present contractual obligation, relating to an event that has occurred, which is expected to be settled in the next reporting period.

Queensland Rail Limited Financial Report FY2012/13 193 Queensland Rail Limited Notes to the consolidated financial statements 30 June 2013 (continued)

21 Liabilities - Provisions (continued)

(g) Movements in provisions

Movements in each class of provision during the financial year, other than employee benefits, are set out below: Litigation and Provision for workers' Land insurance compensation rehabilitation Make good claims provision provision provision Other Total 2013 $'000 $'000 $'000 $'000 $'000 $'000

Current and non-current Carrying amount at start of year 32,196 28,849 10,585 3,656 - 75,286 Charged / (credited) to profit or loss - additional provisions recognised - 10,821 26 - 5,883 16,730 - unused amounts released (5,351) (435) - (982) - (6,768) - unwind discount - - 356 184 - 540 Transfer to Queensland Rail - (31,032) - -- (31,032) Amounts used during the year (13,549) (7,235) - (98) - (20,882) Carrying amount at end of year 13,296 968 10,967 2,760 5,883 33,874

22 Current liabilities - Other current liabilities

2013 2012 $'000 $'000

Income in advance (a) 21,592 24,958 Other current liabilities 3,099 3,237 24,691 28,195

(a) Income in advance

Income in advance predominantly represents amounts received as prepayment for the development of rail infrastructure and lease payments and / or incentives received in advance. Infrastructure prepayments are deferred and earned over the term of their respective agreements while lease incentives are amortised to the income statement over the life of the related lease.

Queensland Rail Limited Financial Report FY2012/13 194 Queensland Rail Limited Notes to the consolidated financial statements 30 June 2013 (continued)

23 Liabilities - Borrowings

2013 2012 Current Non-Current Total Current Non-current Total $'000 $'000 $'000 $'000 $'000 $'000

Queensland Treasury Corporation borrowings* 99,817 3,000,000 3,099,817 - 3,000,000 3,000,000 Total borrowings 99,817 3,000,000 3,099,817 - 3,000,000 3,000,000

* Unsecured (a) Financing arrangements

For details of the group's financing arrangements please refer to note 2(c). (b) Fair value

The carrying amounts and fair values of current and non-current borrowings and off-balance sheet guarantees at reporting date are: 2013 2012 Carrying Carrying amount Fair value amount Fair value $'000 $'000 $'000 $'000

On-balance sheet (i) Non-traded financial liabilities Current borrowings 99,817 99,817 - - Non-current borrowings 3,000,000 3,225,974 3,000,000 3,284,595 3,099,817 3,325,791 3,000,000 3,284,595

Off-balance sheet Unrecognised financial assets Third party guarantees - 293,018 - 302,555 Bank guarantees - 93,387 - 108,246 Insurance company guarantees - 24,857 - 28,269 Unrecognised financial liabilities Third party guarantees - (2,000) - (2,000) Bank guarantees - (36,015) - (35,904) - 373,247 - 401,166

(i) On-balance sheet

The fair value of borrowings is determined by reference to pricing models and valuation techniques as advised by QTC. (ii) Off-balance sheet

The off-balance sheet items comprise guarantees either held or issued by the group and contingent assets and liabilities not qualifying for recognition at reporting date. A majority of the guarantees held relate to performance guarantees on construction contracts provided by third parties. (c) Risk exposures

Information about the entity's exposure to interest rate and foreign currency fluctuations is provided in note 2.

Queensland Rail Limited Financial Report FY2012/13 195 Queensland Rail Limited Notes to the consolidated financial statements 30 June 2013 (continued)

24 Non-current liabilities - Trade and other payables

2013 2012 $'000 $'000

Trade payables - intercompany 31,375 - 31,375 -

25 Non-current liabilities - Deferred tax liabilities

2013 2012 $'000 $'000

The balance comprises temporary differences attributable to: Accrued income 1,788 2,019 Consumables and spare parts 6,924 6,298 Cash flow hedges 135 - Property, plant and equipment 401,488 390,579 Prepayments 115 199 Foreign exchange gains 1,444 1,283 Total deferred tax liabilities 411,894 400,378

Movements: Opening balance 400,378 371,942 Charged / (credited) to the consolidated income statement (note 8) 11,381 28,436 Cash flow hedges 135 - Closing balance at 30 June 411,894 400,378

2013 2012 $'000 $'000

Deferred tax liabilities expected to be settled within 12 months - - Deferred tax liabilities expected to be settled after more than 12 months 411,894 400,378

26 Non-current liabilities - Other non-current liabilities

2013 2012 $'000 $'000

Income in advance (a) 29,845 31,147 29,845 31,147

(a) Income in advance

Income in advance predominantly represents amounts received as prepayment for the development of rail infrastructure and lease incentives received in advance. Infrastructure prepayments are deferred and earned over the term of their respective agreements while lease incentives are amortised to the income statement over the life of the related lease.

Queensland Rail Limited Financial Report FY2012/13 196 Queensland Rail Limited Notes to the consolidated financial statements 30 June 2013 (continued)

27 Contributed equity

(a) Share capital

2013 2012 $'000 $'000

Ordinary shares Fully paid at the beginning of the year 2,602,628 2,363,172 Distributions of equity - (6,555) Equity injections - 246,011 Total contributed equity 2,602,628 2,602,628

(b) Movements in ordinary share capital Date Details Number of $'000 shares 1 July 2011 Opening balance 100 2,363,172 Capital distributions - (6,555) Equity injections - 246,011 30 June 2012 Balance 100 2,602,628

1 July 2012 Opening balance 100 2,602,628 30 June 2013 Balance 100 2,602,628

(c) Ordinary shares

Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the company in proportion to the number of and amounts paid on the shares held. (d) Capital risk management

The group's objectives when managing capital are to safeguard its ability to continue as a going concern so that it can continue to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. The responsible Ministers advise the appropriate methodology in determining the dividend payable annually. The group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including 'borrowings' and external ‘trade and other payables' as shown in the balance sheet) less cash and cash equivalents (including bank overdraft). Total capital is calculated as ‘equity’ as shown in the balance sheet plus net debt.

Queensland Rail Limited Financial Report FY2012/13 197 Queensland Rail Limited Notes to the consolidated financial statements 30 June 2013 (continued)

27 Contributed equity (continued)

The group's gearing ratios are as follows: 2013 2012 $'000 $'000

Total borrowings 3,263,827 3,321,019 Less: cash and cash equivalents (including bank overdraft) (262,560) (325,370) Net debt 3,001,267 2,995,649 Total equity 2,745,224 2,737,683 Total capital 5,746,491 5,733,332

Gearing ratio 52% 52%

The group is also required by QTC to maintain an Earnings Before Interest and Tax (EBIT) Interest Coverage of greater than 1.25:1, except where the total debt to capital is greater than 70%, in which case the EBIT Interest Coverage must be at least 2:1. The group has complied with this requirement for both the current and prior reporting periods.

28 Reserves and retained earnings

(a) Reserves

2013 2012 $'000 $'000

Hedging reserve - cash flow hedges 314 (1,033) 314 (1,033)

2013 2012 $'000 $'000

Movements: Hedging reserve - cash flow hedges Opening balance (1,033) (1,111) Fair value gains / (losses) taken to equity 1,021 (1,093) Deferred tax (306) 328 Fair value losses matured and included in components cost 237 29 Deferred tax (71) (9) Fair value losses matured and capitalised 666 1,176 Deferred tax (200) (353) Balance 30 June 314 (1,033)

Queensland Rail Limited Financial Report FY2012/13 198 Queensland Rail Limited Notes to the consolidated financial statements 30 June 2013 (continued)

28 Reserves and retained earnings (continued)

(b) Retained earnings

Movements in retained earnings were as follows: 2013 2012 $'000 $'000

Opening balance 136,088 110,430 Profit for the year 144,804 128,287 Dividends provided (138,610) (102,629) Balance 30 June 142,282 136,088

29 Dividends

Ordinary shares

2013 2012 $'000 $'000

Dividend of 1,386,103 dollars per share (2012: 1,026,290) was declared by the Board for the year ended 30 June 2013: Dividend declared* 138,610 102,629 Dividend paid* 102,629 84,429

* All dividends declared / paid were unfranked.

Queensland Rail Limited Financial Report FY2012/13 199 Queensland Rail Limited Notes to the consolidated financial statements 30 June 2013 (continued)

30 Key management personnel disclosures

(a) Directors and specified executives

Compensation and other terms of employment for the specified executives are formalised in service agreements. Details of directors' terms of appointment and compensation details together with the major provisions of the service agreements for specified executives, as at reporting date, relating to compensation are as follows: (i) Directors Queensland Rail Limited Directors Position Appointment term Expiry date

G Harley Deputy Chairman 2 years 9 months 30 September 2015 D George Director 2 years 9 months 30 September 2015 M McArthur1 Director 3 years 3 months 30 September 2013 W McMillan Director 2 years 9 months 30 September 2015 D Petie2 Director 2 years 9 months 30 September 2015 J Schafer3 Director 3 years 3 months 30 September 2013 1Ceased as a Director on 4 August 2013. 2Ceased as a Director on 2 August 2013. 3Ceased as a Director on 30 September 2013. M Klug was appointed to the Board as Chairman on 1 October 2013. J Mickel was appointed to the Board as a Director on 1 October 2013. G Poole was appointed to the Board as a Director on 30 October 2013.

On Track Insurance Pty Ltd Directors Position Appointment term Expiry date

D Petie1 Chairman No set appointment term No expiry date J Benstead Managing Director No set appointment term No expiry date G Pringle Director 3 years 28 February 2014 1Ceased as Chairman on 2 August 2013.

Queensland Rail Limited Financial Report FY2012/13 200 Queensland Rail Limited Notes to the consolidated financial statements 30 June 2013 (continued)

30 Key management personnel disclosures (continued)

(ii) Specified executives Queensland Rail Limited Specified executives Position Appointment term Expiry date

J Benstead1 Acting Chief Executive Officer 3 years + 2 years 30 June 2015 extension N Duce General Manager Human Resources Tenured No expiry date G Ford Executive General Manager Safety and 3 years + 2 years 30 June 2015 Environment extension R Green Executive General Manager Network 3 years 16 December 2015 B Moller2 Acting Chief Financial Officer 3 years + 2 years 31 August 2013 extension T Ripper Executive General Manager Access and 3 years 9 December 2015 Business Strategy M Ryan Executive General Manager Customer 3 years 11 November 2015 Service K Wright Executive General Manager Rail Operations 3 years 26 February 2015

1Details provided are for this officer’s substantive role. 2Details provided are for this officer's contract term. The above are the key executives representing the group. These executives provide advice in relation to strategy and future direction of the group under the business model adopted. The subsidiary entity does not have any senior executives who are involved in setting strategy or future direction for the entity and no subsidiary executives are disclosed above for this reason. Termination of an executive can be made by the group to the specified executive either with notice, without notice or due to the incapacity of the specified executive. Termination by notice can be made by the specified executive or the group at any time by either party giving to the other 3 months written notice of termination. The specified executive is entitled to 12 weeks salary where termination occurs on the agreed termination date. When the termination occurs prior to the termination date (assuming no gross misconduct), the group will pay the specified executive the following: • a service payment equal to the greater of 4 weeks salary or 2 weeks salary per year of continuous service with the group up to a maximum 52 weeks salary; and • a separation payment equal to 20% of the salary that the specified executive would have earned had the employment continued from the day after the notice period ceased until the termination date. Specified executives that are tenured are entitled to a service payment equal to the greater of 13 weeks salary or 2 weeks salary per year of continuous service with the group up to a maximum 52 weeks salary.

Queensland Rail Limited Financial Report FY2012/13 201 Queensland Rail Limited Notes to the consolidated financial statements 30 June 2013 (continued)

30 Key management personnel disclosures (continued)

(b) Key management personnel compensation

Directors' remuneration and terms of appointment were set by the Governor in Council at the time of a director's appointment. Following the establishment of the Queensland Rail Transit Authority Act 2013, directors' remuneration and terms of appointment are set by responsible Ministers. Directors' remuneration is subsequently reviewed annually by responsible Ministers. Directors are not entitled to termination payments on termination of their period of service. Queensland Rail Limited Chief and Senior Executive Officers are compensated in accordance with the Government Owned Corporations - Governance Arrangements for Chief and Senior Executives v3.0 publication. The Queensland Rail Limited Board has also implemented the Performance Payment Policy - Chief and Senior Executive which reflects the expectations of the Queensland State Government as outlined in the stated policy. The Performance Payment Policy - Chief and Senior Executive provides for a performance pay process that is administered on a 12 month (financial year) cycle and aligns the executives with Queensland Rail Limited wide and Individual Key Performance Indicators (KPIs). Performance Payment pays up to a maximum payment of 15% per annum of a Chief or Senior Executive’s total fixed remuneration on the achievement of stretch targets. The Queensland Rail Limited KPIs are set by the Board at the beginning of the financial year in alignment with the Statement of Strategic Expectations issued by the State Government, the Queensland Rail Limited Statement of Corporate Intent and the delivery of our organisational performance outcomes including safety, reliability, customer outcomes and financial performance. The performance agreement components are weighted as follows: • Queensland Rail Limited 70% The Queensland Rail Limited KPIs are aligned to the organisational performance outcomes as follows: Reliability • On Time Running City network combined peak periods • Below rail delays City network Financial • Consumable cost reduction • Earnings before interest and tax Customer • Customer satisfaction City network Safety • Lost Time Injury Frequency Rate • Signals Passed at Danger • Individual 30% The Individual KPIs are set by the Chief Executive Officer on the recommendation of the relevant executive member. Individual KPIs are reflective of Queensland Rail Limited and Functional KPIs for which the executive has direct accountability and / or reflective of strategic business plans, budgets and capital / infrastructure projects. Eligible executives must also meet minimum expectations for the consistent demonstration of the Queensland Rail Limited Values and Behaviours. The Chief and Senior Executives participate in the Queensland Rail Limited performance management process with quarterly and annual performance reviews. Annual performance results of the Executives are assessed and calibrated by the Chief Executive Officer and General Manager Human Resources. The Board is responsible for the assessment of the Chief Executive Officer’s performance. The Queensland Rail Limited Board approve the calculation and payment of the Chief and Senior Executive Performance Payments and provide written advice to the responsible Ministers in accordance with the Government Arrangements.

Queensland Rail Limited Financial Report FY2012/13 202 Queensland Rail Limited Notes to the consolidated financial statements 30 June 2013 (continued)

30 Key management personnel disclosures (continued)

Details of the compensation of each specified director and executive are as follows: 2013 2012 $'000 $'000

Short-term benefits 3,858 5,058 Post-employment benefits 368 474 Long-term benefits 331 - Termination benefits 1,808 - 6,365 5,532

Short-term benefits includes cash salary, at risk performance incentives (for specified executives only), fees and non-monetary benefits. Non-monetary benefits represent the value of Exempt and Reportable Fringe Benefits for the respective Fringe Benefits Tax year ending 31 March.

Queensland Rail Limited Financial Report FY2012/13 203 Queensland Rail Limited Notes to the consolidated financial statements 30 June 2013 (continued)

30 Key management personnel disclosures (continued)

(i) Directors of Queensland Rail Limited and On Track Insurance Pty Ltd 2013 Short-term benefits Post-employment benefits Director Non- fees and monetary Super- Retirement Directors allowances benefits annuation benefits Total $'000 $'000 $'000 $'000 $'000

G Harley Deputy 19 - 2 - 21 (appointed as Deputy Chairman on Chairman 21 June 2013) (appointed as Director on 20 December 2012) G Dawe Chairman 133 - 11 - 144 (appointed 12 July 2012) (ceased 18 June 2013) S Gregg Chairman 10 - -- 10 (ceased 12 July 2012) D George Director 19 - 2 - 21 (appointed 20 December 2012) M Hayes Director 20 - 2 - 22 (ceased 20 December 2012) Dr L Keliher AO Director 11 - 1 - 12 (ceased 30 September 2012) M McArthur Director 40 - 4 - 44 W McMillan Director 21 - 2 - 23 (appointed 20 December 2012) D McMillan-Hall Director 12 - 1 - 13 (ceased 30 September 2012) D Petie* Director 37 - 3 - 40 (ceased 30 September 2012) (reappointed 20 December 2012) J Schafer Director 40 - 4 - 44 R Ashton Director 4 - - - 4 (ceased 4 November 2012) Blank Total 366 - 32 - 398

* D Petie is a director of the Queensland Rail Limited Board and Chairman of the On Track Insurance Pty Ltd Board. The above directors' fees include amounts recharged from Queensland Rail from 3 May 2013 in accordance with the Managed Services Agreement. The amounts for this period were incurred by Queensland Rail on behalf of the company and are also disclosed in the Key Management Personnel note of the Queensland Rail financial statements. As an executive of Aurizon Operations Limited, former parent company, G Pringle did not receive additional remuneration in his capacity as director of On Track Insurance Pty Ltd. As an executive of Queensland Rail Limited, J Benstead did not receive additional remuneration in his capacity as director of On Track Insurance Pty Ltd.

Queensland Rail Limited Financial Report FY2012/13 204 Queensland Rail Limited Notes to the consolidated financial statements 30 June 2013 (continued)

30 Key management personnel disclosures (continued)

2012 Short-term benefits Post-employment benefits Director Non- fees and monetary Super- Retirement Directors allowances benefits annuation benefits Total $'000 $'000 $'000 $'000 $'000

S Gregg Chairman 129 - 12 - 141 Blank M Hayes Director 39 - 4 - 43 Blank Dr L Keliher AO Director 39 - 4 - 43 Blank M McArthur Director 39 - 4 - 43 Blank D McMillan-Hall Director 40 - 4 - 44 Blank D Petie* Director 46 - 4 - 50 Blank J Schafer Director 39 - 4 - 43 Blank R Ashton Director 4 - - - 4 Blank Total 375 - 36 - 411

* D Petie is a director of the Queensland Rail Limited Board and Chairman of the On Track Insurance Pty Ltd Board. As an executive of Aurizon Operations Limited, former parent company, G Pringle did not receive additional remuneration in his capacity as director of On Track Insurance Pty Ltd. As an executive of Queensland Rail Limited, J Benstead did not receive additional remuneration in his capacity as director of On Track Insurance Pty Ltd.

Queensland Rail Limited Financial Report FY2012/13 205 Queensland Rail Limited Notes to the consolidated financial statements 30 June 2013 (continued)

30 Key management personnel disclosures (continued)

(ii) Specified executives of the company Short-term benefits Post- Long- Term- 2013 employment term ination benefits benefits benefits Cash Non- Long Term- salary Cash monetary Super- service ination Specified executives and fees bonuses benefits annuation leave benefits Total $'000 $'000 $'000 $'000 $'000 $'000 $'000

J Benstead 475 - 6 48 -- 529 Acting Chief Executive Officer Blank S Campbell 139 - 2 16 - 196 353 Company Secretary, Corporate Governance and Legal (from 11 September 2012 until position abolished 23 November 2012) General Counsel / Company Secretary (until 11 September 2012) Blank P Coleman 10 - - 1 - - 11 Acting Chief Project Delivery Officer (from 31 August 2012 until position abolished 11 September 2012) Blank N Duce 206 - 5 21 -- 232 General Manager Human Resources (from 11 September 2012) Blank M Eisentrager 98 - 1 8 - - 107 Acting Chief Financial Officer (from 11 September 2012 until 29 January 2013) Blank G Ford 311 - 10 34 -- 355 Executive General Manager Safety and Environment (from 11 September 2012) Chief Safety and Environment Officer (until 11 September 2012) Blank R Franklin* ------Acting Chief Human Resources Officer (until 11 September 2012) Blank

Queensland Rail Limited Financial Report FY2012/13 206 Queensland Rail Limited Notes to the consolidated financial statements 30 June 2013 (continued)

30 Key management personnel disclosures (continued)

Short-term benefits Post- Long- Term- 2013 employment term ination benefits benefits benefits Cash Non- Long Term- salary Cash monetary Super- service ination Specified executives and fees bonuses benefits annuation leave benefits Total $'000 $'000 $'000 $'000 $'000 $'000 $'000

R Green 313 - 6 32 -- 351 Executive General Manager Network (from 11 September 2012) Acting Chief Network Officer (from 31 August 2012 until 11 September 2012) Blank C Heffernan 188 - 3 15 203 546 955 Executive General Manager Customer Service (from 11 September 2012 until ceased on 19 October 2012) Chief Customer Officer (until 11 September 2012) Blank L Lefcourt 82 - 7 8 - - 97 Acting Chief Financial Officer (until 10 September 2012) Blank B Moller 108 - 5 10 -- 123 Acting Chief Financial Officer (from 29 January 2013) Blank C Petersen 135 - 8 12 - 186 341 Chief Strategy and Corporate Services Officer (position abolished 24 September 2012) Blank J Pistak 111 - 1 10 128 505 755 Chief Network Officer (ceased 31 August 2012) Blank T Ripper 212 - 4 23 -- 239 Executive General Manager Access and Business Strategy (from 16 November 2012) Blank M Ryan 334 - 19 41 -- 394 Executive General Manager Customer Service (from 27 August 2012) Chief Communications Officer (until 26 August 2012) Blank

Queensland Rail Limited Financial Report FY2012/13 207 Queensland Rail Limited Notes to the consolidated financial statements 30 June 2013 (continued)

30 Key management personnel disclosures (continued)

Short-term benefits Post- Long- Term- 2013 employment term ination benefits benefits benefits Cash Non- Long Term- salary Cash monetary Super- service ination Specified executives and fees bonuses benefits annuation leave benefits Total $'000 $'000 $'000 $'000 $'000 $'000 $'000

T Taifalos 104 - 3 10 -- 117 Chief Operating Officer (position abolished 11 September 2012) Blank M Williams 126 - 1 7 - 375 509 Chief Rail Operations Manager (ceased 31 August 2012) Blank K Wright 447 - 12 40 -- 499 Executive General Manager Rail Operations (from 31 August 2012) Chief Project Delivery Officer (until 31 August 2012) Blank Total 3,399 - 93 336 331 1,808 5,967

* This officer did not receive monetary benefits directly. Payments made to the company in which this officer is a Principal is disclosed in note 30(c). The above executives' remuneration include amounts recharged from Queensland Rail from 3 May 2013 in accordance with the Managed Services Agreement. The amounts for this period were incurred by Queensland Rail on behalf of the company and are also disclosed in the Key Management Personnel note of the Queensland Rail financial statements.

Queensland Rail Limited Financial Report FY2012/13 208 Queensland Rail Limited Notes to the consolidated financial statements 30 June 2013 (continued)

30 Key management personnel disclosures (continued)

Short-term benefits Post- Long- Term- 2012 employment term ination benefits benefits benefits Cash Non- Long salary Cash monetary Super- service Termination Specified executives and fees bonus benefits annuation leave benefits Total $'000 $'000 $'000 $'000 $'000 $'000 $'000

J Benstead 420 52 5 47 - - 524 Acting Chief Executive Officer (from 5 December 2011) Chief Financial Officer (until 4 December 2011) Blank P Scurrah 365 76 4 24 - - 469 Chief Executive Officer (resigned 2 December 2011) Blank S Campbell 174 - 2 22 - - 198 General Counsel / Company Secretary (from 14 November 2011) Test G Ford 304 41 8 39 - - 392 Chief Safety & Environment Officer Blank R Franklin* ------Acting Chief Human Resources Officer (from 1 September 2011) Acting General Counsel / Company Secretary (until 31 August 2011) Blank C Heffernan 332 41 7 37 - - 417 Chief Customer Officer (from 1 September 2011) Chief Human Resources Officer (until 31 August 2011) Blank L Lefcourt 133 - 8 14 - - 155 Acting Chief Financial Officer (from 8 January 2012) Blank C Petersen 357 49 11 46 - - 463 Chief Strategy & Corporate Services Officer Blank J Pistak 398 56 22 51 - - 527 Chief Network Officer Blank

Queensland Rail Limited Financial Report FY2012/13 209 Queensland Rail Limited Notes to the consolidated financial statements 30 June 2013 (continued)

30 Key management personnel disclosures (continued)

Short-term benefits Post- Long- Term- 2012 employment term ination benefits benefits benefits Cash Non- Long salary Cash monetary Super- service Termination Specified executives and fees bonus benefits annuation leave benefits Total $'000 $'000 $'000 $'000 $'000 $'000 $'000

M Ryan 290 40 15 37 - - 382 Chief Communications Officer Blank T Taifalos 434 52 8 45 - - 539 Chief Operating Officer (from 1 September 2011) Chief Customer Officer (until 31 August 2011) Blank M Williams 390 60 25 36 - - 511 Chief Rail Operations Officer (from 1 September 2011) Deputy Chief Operations Officer (until position abolished on 31 August 2011) Blank K Wright 437 57 10 40 - - 544 Chief Project Delivery Officer (from 1 September 2011) Chief Operations Officer (until position abolished on 31 August 2011) Blank Total 4,034 524 125 438 - - 5,121

* This officer did not receive monetary benefits directly. Payments made to the company in which this officer is a Principal is disclosed in note 30(c).

Queensland Rail Limited Financial Report FY2012/13 210 Queensland Rail Limited Notes to the consolidated financial statements 30 June 2013 (continued)

30 Key management personnel disclosures (continued)

2013 2012 $'000 $'000

Aggregate performance bonus compensation

Aggregate performance bonus compensation paid 19 9,226 Aggregate performance bonus compensation accrued for the current period 10,508 11,586 Aggregate compensation (including performance bonus compensation) to employees eligible for performance bonus compensation for current period 124,281 180,519

2013 2012

Number of employees eligible for performance bonus compensation 1,050 1,490 The 2012 bonus accrued in the prior period was reversed in full in the current period as the group did not meet all of its performance targets.

The following categories of employees are eligible for performance based at risk incentive bonus compensation: • specified executives; • other executives; • salaried employees; and • award employees. Performance bonus compensation paid to specified executives is granted upon approval by the Queensland Rail Limited Board. Performance bonus compensation paid to other employees is granted upon approval by the Chief Executive Officer or in accordance with a subsidiary agreement. The amount of the compensation is determined by performance against key performance indicators set at the start of the year for employees or conditions of a subsidiary agreement for work units. (c) Transactions with directors and key management personnel

During the reporting period, G Harley, Deputy Chairman of Queensland Rail Limited, was the Chairman of Queensland Urban Utilities that provided utilities to Queensland Rail Limited. During the reporting period, D George, Director of Queensland Rail Limited from December 2012, was the Chief Executive Officer of Rail CRC Limited that provided key innovation services to Queensland Rail Limited. Queensland Rail Limited provided rental accommodation to Rail CRC Limited. During the reporting period, R Franklin, specified executive of Queensland Rail Limited, until the 11 September 2012, was a principal of the corporation Franklin Athanasellis Cullen Pty Ltd that had provided key management personnel and consultancy services to Queensland Rail Limited. The specified executive has the individual capacity to control or significantly influence the financial and operating policies of another corporation but not Queensland Rail Limited. During the reporting period, R Ashton, Director of On Track Insurance Pty Ltd until cessation on 4 November 2012, was compensated for legal advice provided to the same company.

Queensland Rail Limited Financial Report FY2012/13 211 Queensland Rail Limited Notes to the consolidated financial statements 30 June 2013 (continued)

30 Key management personnel disclosures (continued)

All figures displayed below are exclusive of GST. 2013 2012 $'000 $'000

Utilities - Queensland Urban Utilities 230 - Professional Services - Rail CRC Limited 239 - Rental Revenue - Rail CRC Limited (93) - Legal fees - R Ashton 2 - Consultancy fees - Franklin Athanasellis Cullen Pty Ltd 252 922 630 922

31 Contingencies

The group had contingencies at reporting date in respect of: (a) Contingent liabilities

Issues relating to common law claims and product warranties are dealt with as they arise. There were no material contingent liabilities requiring disclosures in the financial statements other than as set out below. Litigation

A number of common law claims are pending against the group. Provisions are taken up for some of these exposures based on the Board's determination and are included as such in note 21. Guarantees and letters of credit

For information about guarantees and letters of credit given by the group, refer to note 23(b). Deed of Cross Guarantee

Neither the company nor its subsidiary were a party to a deed of cross guarantee at reporting date. (b) Contingent assets

For information about guarantees given to the group, refer to note 23(b).

Queensland Rail Limited Financial Report FY2012/13 212 Queensland Rail Limited Notes to the consolidated financial statements 30 June 2013 (continued)

32 Commitments

The future commitments of the group (excluding GST) at reporting date were as follows: (a) Capital commitments

Capital expenditure contracted for at reporting date but not recognised as liabilities is payable as follows: 2013 2012 $'000 $'000

Property, plant and equipment 196,435 343,393 196,435 343,393

(b) Lease commitments

Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows: 2013 2012 $'000 $'000

Within one year 10,132 14,071 Later than one year but not later than five years 39,590 36,373 Later than five years 25,508 31,827 75,230 82,271

The above commitments flow primarily from operating leases of property. These leases, with terms mostly ranging from one to ten years, generally provide Queensland Rail Limited with a right of renewal at which times the lease terms are renegotiated. The lease payments comprise a base amount, while some property leases also contain a contingent rental, which is based on either the movements in the Consumer Price Index or another fixed percentage as agreed between the parties. (c) Lease commitments receivable: where the company is the lessor

Minimum lease payments receivable but not recognised in the financial statements are receivable as follows: 2013 2012 $'000 $'000

Within one year 3,202 12,232 Later than one year but not later than five years 8,984 10,948 Later than five years 75,744 62,754 87,930 85,934

Queensland Rail Limited Financial Report FY2012/13 213 Queensland Rail Limited Notes to the consolidated financial statements 30 June 2013 (continued)

33 Related party transactions

(a) Subsidiaries

Interests in subsidiaries are set out in note 34. (b) Key management personnel

Disclosures relating to key management personnel are set out in note 30. (c) Transactions with related parties

The following transactions occurred with related parties: 2013 2012 $'000 $'000

Purchase of goods and services from Queensland Rail 120,486 - blank Receivables from Queensland Rail - current 355,736 - Dividend payable to Queensland Rail 138,610 - Payables to Queensland Rail - current 537,015 - Payables to Queensland Rail - non-current 31,375 -

The current and non-current payables transferred to Queensland Rail on 3 May 2013 include the initial transfer of employee related liabilities from the company in accordance with the Queensland Rail Transit Authority Act 2013 amounting to $271.9 million. Deferred tax assets amounting to $72.3 million associated with these employee entitlements were also transferred on the same date.

Queensland Rail Limited Financial Report FY2012/13 214 Queensland Rail Limited Notes to the consolidated financial statements 30 June 2013 (continued)

33 Related party transactions (continued)

(d) Transactions and outstanding balances with State of Queensland controlled entities

The company is limited by shares with all shares held by the responsible Ministers on behalf of the State of Queensland. The company transacted with other State of Queensland controlled entities during the year as set out below: Notes 2013 2012 Nature of transaction $'000 $'000

Cash and cash equivalents 9 276,339 119,036 QTC short-term investments

Trade and other receivables , 1410 114,144 165,143 Transport services contracts and other accounts receivable

Other current assets 13 1,576 - Prepaid income tax

Current tax liabilities - 528 Current tax payable

Borrowings 23 3,099,817 3,000,000 Unsecured loan facility (QTC)

Trade and other payables 20 164,250 128,257 Interest payable, accounts payable and dividend payable

Other current liabilities 22 3,067 3,453 Clearing accounts

Contributed equity 27 - 239,456 Equity contributions and capital distributions

Revenue 5 1,568,747 1,576,921 Sales, community service obligation, government concessions and interest revenue

Interest expense 7 223,083 221,961 QTC loan interest (includes financing cost)

Other expenses 7 103,491 112,578 Payroll tax, income tax, audit fees, licences and permits and consumables

Dividends declared 29 - 102,629 Dividend declared

Queensland Rail Limited Financial Report FY2012/13 215 Queensland Rail Limited Notes to the consolidated financial statements 30 June 2013 (continued)

34 Subsidiaries

The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiary in accordance with the accounting policy described in note 1(b). Country of Name of entity incorporation Class of shares Equity holding 2013 2012 % %

On Track Insurance Pty Ltd Australia Ordinary 100 100

The principal activities of On Track Insurance Pty Ltd are the provision of insurance coverage for all claims relating to events for both Aurizon Operations Limited (former parent) and Queensland Rail Limited up until 30 June 2010. The Auditor-General of Queensland is the authorised auditor of On Track Insurance Pty Ltd.

35 Remuneration of auditors

During the year the following fees were paid or payable for services provided by the auditor of the group: (a) Audit services

2013 2012 $'000 $'000

Auditor-General of Queensland Audit and review of financial reports 491 560 Total auditors' remuneration 491 560

36 Reconciliation of profit after income tax to net cash inflow from operating activities

2013 2012 $'000 $'000

Profit for the year 144,804 128,287 Depreciation and amortisation 298,240 296,548 Amortisation of prepaid access facilitation charges (1,577) (1,577) (Gains) / losses on sale of non-current assets (1,138) 2,125 Unrealised gain on derivatives - (686) Impairment of trade receivables 226 35 Inventory obsolescence 571 1,540 Change in operating assets and liabilities: (Increase) / decrease in trade debtors 53,040 132,285 (Increase) / decrease in inventories (12,787) (10,877) (Increase) / decrease in other operating assets (4,969) 38,198 Increase / (decrease) in trade creditors (54,930) (44,361) Increase / (decrease) in other liabilities 17,720 1,571 Increase / (decrease) in other provisions (30,040) 12,999 Net cash inflow from operating activities 409,160 556,087

Queensland Rail Limited Financial Report FY2012/13 216 Queensland Rail Limited Notes to the consolidated financial statements 30 June 2013 (continued)

37 Parent entity financial information

(a) Summary financial information

The individual financial statements for the parent entity show the following aggregate amounts: 2013 2012 $'000 $'000

Balance sheet

Current assets 883,943 569,890 Non-current assets 6,349,671 6,266,585 Total assets 7,233,614 6,836,475

Current liabilities 984,376 592,162 Non-current liabilities 3,511,769 3,508,192 Total liabilities 4,496,145 4,100,354

Net assets 2,737,469 2,736,121 (8,212,407) (8,208,363) Contributed equity 2,596,824 2,596,824 Hedging reserves 314 (1,033) Retained earnings 140,331 140,330 Total equity 2,737,469 2,736,121

Profit for the year 138,610 134,160

Total comprehensive income 139,957 134,238

(b) Guarantees entered into by the parent entity

The parent entity has not provided financial guarantees in respect of bank overdrafts and loans of subsidiaries. In addition, there is no cross guarantee given by Queensland Rail Limited to On Track Insurance Pty Ltd. (c) Contingent liabilities of the parent entity

Issues relating to common law claims and product warranties are dealt with as they arise. There were no material contingent liabilities requiring disclosures in the financial statements except as outlined in note 31. All provisions except provision for insurance claims relate to the parent entity. (d) Contractual commitments for the acquisition of property, plant or equipment

At reporting date, the parent entity had contractual commitments. For information about these commitments please see note 32. All commitments outlined in this note relate to the parent entity.

38 Events occurring after the reporting period

No matters or circumstances have arisen since the end of the financial year which significantly affected, or may significantly affect the operations of the group, the results of those operations, or the state of affairs of the group in future financial years.

Queensland Rail Limited Financial Report FY2012/13 217 Queensland Rail Limited Directors' declaration 30 June 2013

In the directors' opinion: (a) the financial statements and notes set out on pages 10 to 75 are in accordance with the Corporations Act 2001, including: (i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements, and (ii) giving a true and fair view of the consolidated entity's financial position as at 30 June 2013 and of its performance for the year ended on that date, and (b) there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable. (c) note 1(a) confirms that the financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board.

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

M Klug Chairman

Brisbane, Qld 16 December 2013

Queensland Rail Limited Financial Report FY2012/13 218 Queensland Rail Limited 30 June 2013

INDEPENDENT AUDITOR'S REPORT

To the Members of Queensland Rail Limited

Report on the Financial Report

I have audited the accompanying financial report of Queensland Rail Limited which comprises the consolidated balance sheet as at 30 June 2013, consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration of the consolidated entity comprising the company and the entities it controlled at the year’s end or from time to time during the financial year. Directors’ Responsibility for the Financial Report

The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001, and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In Note 1(a)(i) the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements comply with International Financial Reporting Standards. Auditor’s Responsibility

My responsibility is to express an opinion on the financial report based on the audit. The audit was conducted in accordance with the Auditor-General of Queensland Auditing Standards, which incorporate the Australian Auditing Standards. Those standards require compliance with relevant ethical requirements relating to audit engagements and that the audit is planned and performed to obtain reasonable assurance about whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the company’s preparation of the financial report that gives a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. I believe that the audit evidence obtained is sufficient and appropriate to provide a basis for my audit opinion. Independence

The Auditor-General Act 2009 promotes the independence of the Auditor-General and all authorised auditors. The Auditor-General is the auditor of all Queensland public sector entities and can be removed only by Parliament. The Auditor-General may conduct an audit in any way considered appropriate and is not subject to direction by any person about the way in which audit powers are to be exercised. The Auditor-General has for the purposes of conducting an audit, access to all documents and property and can report to Parliament matters which in the Auditor-General’s opinion are significant. In conducting the audit, the independence requirements of the Corporations Act 2001 have been complied with. I confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of Queensland Rail Limited, would be in the same terms if given to the directors as at the time of this auditor’s report.

Queensland Rail Limited Financial Report FY2012/13 219 Queensland Rail Limited 30 June 2013

INDEPENDENT AUDITOR'S REPORT (continued) Opinion

In my opinion - (a) the financial report of Queensland Rail Limited is in accordance with the Corporations Act 2001, including - (i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2013 and of their performance for the year ended on that date; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001 (b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 1(a)(i). Other Matters - Electronic Presentation of the Audited Financial Report

Those viewing an electronic presentation of these financial statements should note that audit does not provide assurance on the integrity of the information presented electronically and does not provide an opinion on any information which may be hyperlinked to or from the financial statements. If users of the financial statements are concerned with the inherent risks arising from electronic presentation of information, they are advised to refer to the printed copy of the audited financial statements to confirm the accuracy of this electronically presented information.

A M GREAVES FCA FCPA Queensland Audit Office Auditor-General of Queensland Brisbane

Queensland Rail Limited Financial Report FY2012/13 220 Compliance Checklist

Summary of Requirement Basis for requirement Annual report reference

Letter of Compliance • A letter of compliance from the ARRS – Section 8 Page 4 accountable officer or statutory body to the relevant Minister.

Accessibility • Table of contents ARRS – Section 10.1 Page 5 • Glossary

• Public availability ARRS – Section 10.2 Page 2

• Interpreter service statement Queensland Government Page 2 Language Services Policy

ARRS – Section 10.3

• Copyright notice Copyright Act 1968 N/A ARRS – Section 10.4

• Information licensing Queensland Government N/A Enterprise Architecture – Information Licensing

ARRS – Section 10.5

General Information • Introductory information ARRS – Section 11.1 Page 3

• Agency role and main functions ARRS – Section 11.2 Page 6

• Operating environment ARRS – Section 11.3 Pages 21-45

• Machinery of government changes ARRS – Section 11.4 Page 14

Non-financial • Government objectives for the ARRS – Section 12.1 Page 40 Performance community

Queensland Rail FY2012/13 Annual and Financial Report 221

• Other whole-of-government plans / ARRs – Section 12.2 Page 54 specific initiatives

• Agency objectives and performance ARRS – Section 12.3 Page 54 indicators

• Agency services areas, service ARRS – Section 12.4 Page 54 standards and other measures

Financial Performance • Summary of financial performances ARRS – Section 13.1 Page 8-9

• Chief Finance Officer statement ARRS – Section 13.2 As per Submission by Chief Finance Officer

Governance – • Organisational structure ARRS – Section 14.1 Page 46 Management and Structure • Executive management ARRS – Section 14.2 Page 51

• Related entities ARRS – Section 14.3 Page 47-50

• Boards and committees ARRS – Section 14.4 Page 47-50

• Public Sector Ethics (PSE) Act 1994 PSE Act 1994 (Section 23 and Pages 54-68 Schedule) ARRS – Section 14.5

Governance – Risk • Risk Management ARRS – Section 15.1 Pages 54-68 Management and Accountability • External Scrutiny ARRS – Section 15.2 Pages 54-68

• Audit Committee ARRS – Section 15.3 Pages 54-68

• Internal Audit ARRS – Section 15.4 Pages 54-68

• Public Sector Renewal Program ARRS – Section 15.5 Pages 54-68

• Information systems and record- ARRS – Section 15.7 Pages 54-68 keeping

Queensland Rail FY2012/13 Annual and Financial Report 222

Governance – Human • Workforce planning, attraction and ARRS – Section 16.1 Pages 54-68 Resources retention and performance

• Early retirement, redundancy and Directive No. 11/12 Early Page 32 retrenchment Retirement, Redundancy and Page 92 Retrenchment Page 169

• Voluntary Separation Program ARRS – Section 16.3 Page 32 Page 92 Page 128

Open Data • Open Data ARRS – Section 17 Pages 2-3

Financial Statements • Certification of Financial Statements FAA – Section 62 As per Submission by FPMS – Sections 42, 43 and 50 Chief Finance Officer

• Independent Auditors Report FAA – Section 62 Pages 139-140 FPMS – Section 50 Pages 219-220 ARRS – Section 18.2

• Remuneration Disclosures Financial Reporting Pages 54-68 Requirements for Queensland Government Agencies ARRS – Section 18.3

FAA Financial Accountability Act 2009

FPMS Financial and Performance Management Standard 2009

ARRs Annual Report requirements for Queensland Government Agencies

Queensland Rail FY2012/13 Annual and Financial Report 223

Glossary

AASB

Australian Accounting Standards DTMR Board Department of Transport and Main KSR AICD Roads Kuranda Scenic Railway Australian Institute of Company EAMS Directors LTIFR Enterprise Asset Management ASX System A measure of the number of lost time injuries per million hours Australian Securities Exchange EBIT worked, used by Queensland Rail to monitor and report employee ATO Earnings Before Interest and Tax health and safety

Australian Taxation Office EBITDA MOU

ATSB Earnings Before Interest, Tax, Memorandum of Understanding Depreciation and Amortisation Australian Transport Safety Bureau MP EGP CCTV Member of Parliament Enterprise Governance Program – Closed Circuit Television established to create a robust Network governance framework for CEO Queensland Rail Queensland’s rail system, including all main railway lines, marshalling Chief Executive Officer FTE yards, bulk freight loading and unloading points and customer CFO Full-time equivalent (employee) stations

Chief Finance Officer General Freight NGR

City network Freight that is not transported in a New Generation Rollingstock – a bulk train and does not include project for the purchase of new A collective term for the tracks, intermodal and industrial products rollingstock for the City network stations, trains and infrastructure providing train services in South GOC NPAT East Queensland bounded by the Gold Coast in the south, Rosewood Government-owned Corporation Net Profit After Tax – defined as in the west and the Sunshine Coast net profit after allowance for tax in the north GOC Act expense

CMC Government Owned Corporations OGOC Act 1993 Crime and Misconduct Commission Office of Government-owned ICSS Corporations Corporations Act International Customer Service Positive pARTnerships Corporations Act 2011 Standard – the global standard for customer service excellence A Queensland Rail program that CSIA involves working with community ICT groups, local schools and Customer Service Institute of stakeholders to collaborate and Australia – Australia’s premier Information and Communication produce high quality public artwork customer service resource Technology, the information projects that transform rail stations organisation technology and telecommunications across South East Queensland management division of Queensland DDA Rail

Disability Discrimination Act 1992 KPIs

Key Performance Indicators

Queensland Rail FY2012/13 Annual and Financial Report 224

QR Limited

A GOC that ceased to exist on 30 June 2010, following creation of two companies – Queensland Rail Limited and QR National Limited (now Aurizon) (private)

QR National (now Aurizon)

QR National was re-branded as Aurizon in December 2012 – one of the largest publicly listed rail freight haulage companies in Australia

QTC

Queensland Treasury Corporation

Quiet Carriage

The second and fifth carriage of every six-car and the middle of every three-car City network train – a designated quiet area where customers are asked to refrain from having loud conversations, talking on their mobile phone or listening to loud musical devices

Rail Operator

A party (Queensland Rail and/or non-Queensland Rail) that operates rollingstock on a railway

ROA

Return on Assets – defined as EBIT less income from investments, divided by average operating assets

ROE

Return on Equity – defined as operating profit after tax divided by average equity

Rollingstock

Rail locomotives and wagons

SCI

Statement of Corporate Intent – the document in which a GOC sets out its corporate targets and objectives for each financial year

SEQIPP

South East Queensland Infrastructure Plan and Program

Queensland Rail FY2012/13 Annual and Financial Report 225