Financial Report 2002 Essendon Football Club

Contents

C h a i r m a n ’ s R e p o r t 4

C h i e f E x e c u t i v e O f f i c e r ’ s R e p o r t 6

F i n a n c e D i r e c t o r ’ s R e p o r t 8

D i r e c t o r s ’ R e p o r t 9

S t a t e m e n t o f F i n a n c i a l P e r f o r m a n c e 11

S t a t e m e n t o f F i n a n c i a l P o s i t i o n

S t a t e m e n t o f C a s h F l o w s

N o t e s t o a n d f o r m i n g 12

P a r t o f t h e A c c o u n t s

3 | ESSENDON F O OTBALL CLUB DEAR FELLOW MEMBERS Club. There will continue to be approximately 11 games It is with pleasure, on behalf of the Board of the Essendon played in Melbourne and two of these will be at Windy Football Club, that I present my Chairman’s report for sea- Hill. There will continue to be plenty of opportunity for us

T son 2002. all to watch our players in the VFL. R As a result of the decision to join with Bendigo, Terry O FOOTBALL Daniher has taken the decision to accept an offer to join P Our playing season ended as it began, plagued by injury to Collingwood as an Assistant Coach, and whilst disappoint- E key team members. The serious injury suffered by Dean ed at his departure we wish him well with his future career. R Solomon before the season even began seemed to set the He will always be welcome at Essendon. S

’ tone for year 2002. One after another senior player, inte- To all the coaches and players who have worked so hard

N gral to our team, were lost to us through serious injury. At again this year I offer our great thanks. No doubt they will

A the end of the season we ranked third worst for games lost all be anxious to improve on their 2002 performance in the through injury in the AFL. year ahead. I particularly would like to congratulate those M Nevertheless our year was disappointing. The board and who achieved personal milestones during the year and say R

I management truly believed at the beginning of the year that collectively well done.

A our list of players was strong enough to play in, and hope- The club in October completed its list review and partic-

H fully win, another Grand Final. It just was not to be and I ipated in the infamous trade week. As all members will know

C am sure all Essendon people ended the year disappointed. a number of senior players have left our club as a result. The commitment of our coaches, staff and players was I would like to emphasise that our management has not at fault and we can continue to be very proud of the operated under an instruction from the board that under effort of all concerned during the year. There is no doubt no circumstances was the Essendon Football Club to our younger players tired as the year progressed, particu- exceed its allowed Total Player Payments. We must never larly in view of the added burden they were required to allow the club to be penalised as it was in 1996 and 1997 carry arising from the injuries to senior players. However, for breaking the AFL salary cap. all clubs suffer injuries and we should not use injuries as an We all regret very much the need to shed quality people excuse. Rather we must ensure our full list of players is from Essendon. However we will not sanction any breach strong enough to cover injury as it arises, as difficult as that of the AFL rules in this regard. All clubs are affected by the might be. rules as they should be. The sour note for us at Essendon is On behalf of the board and members of the club I that several AFL clubs are being given unfair concessions. thank all of the players, who, as always, were fully commit- (see article in the 2002 Yearbook). To the players who have ted to achieving success in 2002. We should recognise that left Essendon, I thank them for their individual contribu- Essendon has participated in the AFL final series for the tions to our on-field success in recent years and wish them fifth successive year and that our team has provided to us a good luck in their future careers whether on the ground or great deal of pleasure and excitement. off. You are all welcome at Essendon any time. On the VFL front we failed to reach the final series. As you read this we will have added a new group of Terry Daniher and his players tried very hard but just youngsters to our playing list and we will welcome them all missed out. The injury problems of our senior team had a in an official way at the Annual General Meeting. If they direct bearing on our VFL season and on more than one did not have ability we would not have drafted them. It is occasion we were only able to field less than ten Essendon now in their hands to grasp the opportunity presented to listed players in our VFL team, having to rely on “top up” them and carve out a career in the elite AFL competition. players from outside the club to make up the numbers. We obviously hope they are successful. However the VFL team exists to develop young players at Essendon and in that regard it achieved its aim. We con- OFF FIELD gratulate Terry and all of the players for their efforts dur- The 2002 season has proven to be a difficult one financial- ing the season. ly for the Essendon Football Club, as it has for the great At season end the board and management reviewed the majority of clubs in the AFL with many declaring signifi- earlier decision to play as a stand alone club in the VFL cant losses for the year. We believe in our case the draw, competition. During 2002, Carlton and Geelong were the which included many night games, played a part in causing only other Victorian AFL clubs to do so, all others having our difficulties. In our case it is both pleasing and gratify- entered into some form of cooperative agreement with pre- ing to be able to announce a profit of $1,007 million for viously existing VFL clubs. For a range of reasons, the least the year ended 31st October 2002, including the special of which was not cost, the board has recently announced it receipt of $300,000 as a part of Essendon’s share of the will next season not compete in the VFL as Essendon. Our Waverley Park sale proceeds. Furthermore our cash reserves club will enter into an arrangement with the Bendigo at year end stand at a healthy $4.15 million after complet- Diggers VFL team and play in next year’s competition as ing the major redevelopment of our club headquarters. the Bendigo Bombers, wearing the traditional Essendon I believe members can be well satisfied that our club has playing uniform. a secure future. However it is necessary to advise members Whilst there will no doubt be some members and sup- that the great majority of our profit this year has been gen- porters who will be disappointed with this decision, the erated from what can be described as non football business board and management including our coaching staff activities. The board and management are very conscious of believe it to be in the best interest of Essendon Football this position and are working hard to ensure our football

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r P i o u F e u H g o o l o n a r o o p n e u a i n e

v l n l e a i i e e a o h r i h i h h i a y 5 w P C O o t t f A m v n r t m V A W t r a a t s a c T S n n t w t b C r K t f r e c y F C s h l s o SEASON 2002 proved to be the very challenging year I sider to be the best going around. Put simply, he isn’t paid expected it to be – both on and off the field. On the field, the amount that some in the media have suggested. we remained a hunted side and this combined with injuries The challenge in 2003 lies in the fact that in 2001, the

T conspired to see us miss a top-four finish – a goal we had year after the record 2000 season, Essendon did not have R set ourselves at the start of the season. Off the field we had one player paid in the top 10 of the AFL. Our 10th best- O many challenges – none greater than the post-season man- paid player, an All Australian in 2000, was the 147th best P agement of our salary cap. I had warned members that this paid player in the AFL. The 2001 Crichton Medallist and E challenging time would come and it was not easy for any of All Australian Jason Johnson, was the 208th best paid R the involved parties. player in the competition. S

’ In presenting this report I would like to reflect on some In 2002, players were still paid well below their market

R things I said in my 2001 C.E.O. report. Firstly, in the mat- value. Once again, Jason Johnson, who could have exer-

E ter of salary cap and player contract management, which cised a right to re-negotiate his contract based on his

C th

I has occupied much of our thoughts in recent times, I stat- Crichton Medal in 2001, remained only the 227 best

F ed in 2001 the following: paid player in the AFL. He finished second in the Crichton

F Medal in 2002.

O “ I have been at pains to point out to our supporters over This trend could not continue beyond the end of 2002

E the past two seasons that it was going to be difficult to without the club facing the risk of losing its very best play-

V maintain our high quality playing list. Salary cap pres- ers to other clubs with greater salary cap freedom. The I sures and significant offers put to our players by other need to pay players their market rate is what made 2003 a T clubs, make it difficult to keep this group together. crunch year, and senior players needed to be traded. We did U There is only so much we can do under the rules of the get something in exchange for them – two exciting young C

E competition to keep our playing list together. players in Adam McPhee and Damian Cupido and we went

X Based on advice provided by the AFL, we expected into the National Draft with four selections in the top 30.

E that the Total Player Payments cap would increase 10- The reality of AFL football these days is that players

F 12% p.a. in 2002/2003 – we were disappointed this must perform to earn the large money they are paid. In the

E did not eventuate. The fact it will only increase by 6- year 2002, when the club faced major on-field challenges I 7% p.a. over those years means a difference of through serious long term injuries to key players, some H $200,000 each year – the equivalent of one senior other players did not perform as well as the club had hoped, C Premiership player for those two years. and their value to the team was re-assessed accordingly. It is frustrating that we commenced salary negoti- To appreciate a measure of the challenge that has faced ations in good faith expecting a 10-12% p.a. increase EFC, look to Brisbane, a club with about an extra and were then notified of a much smaller increase was $600,000 in the salary cap, and a similar on-field perfor- agreed. Hence there need to be changes in the player mance to Essendon, that is struggling to fit players in their list over and above what we may have hoped for earli- salary cap. er in the year.” It is disappointing to lose people of the calibre of Justin Blumfield, Blake Caracella, Chris Heffernan and Steve At the time of writing this, we do not know what the Alessio. They have been valuable contributors to the club salary cap will be in 2004. This, together with my comments on and off the field, they are excellent people and I want to above, shows members just how difficult it has been to plan assure you that this club has taken absolutely no joy out of player contracts. No matter what that result, the 2003 sea- having to part company with these players. I wish them and son was always going to be the crunch year for EFC with its Daniel McAlister all the best in the future. I would also like salary cap challenges. Despite suggestions to the contrary in to thank Paul Salmon for his efforts this season. It was fan- the media, we do not blame the AFL and its failure to tastic to have him back and he now retires as he should - a change the Veterans Rule for our need to trade players. What champion of this football club. we said firstly was that we thought it was going to change, I said also in my 2001 report that economic conditions as did many clubs, and secondly, that if it had changed, it for 2002 were expected to be more difficult than in 2001. would have made our challenge in 2003 a lot easier. The Economic circumstances and the expected re-development AFL is an independent body charged with the responsibility of the MCG Northern Stand would put pressure on rev- to govern the game. As such, they decide the rules. enue on 2002. The fact that 2003 was to be the crunch year arose Although the MCG re-development was delayed, we because, through effective management and support from nonetheless experienced substantial pressure on revenues. the players, we have managed to stall the inevitable for MCG crowds were well down due to the night games and some 2-3 years. The fact that we did stall it, I suspect, the poor performance of Carlton and Richmond that lulled people into a false sense of security that this recent affected us greatly. Overall, MCG gate receipts were over difficult period was not coming. $260,000 down on the 2001 figure. The challenge for us is not with players like our captain, Further, the high number of night home games (9) James Hird. James Hird has made a substantial contribu- adversely affected membership revenues, particularly in tion to keeping the team together in recent years, and has family and junior categories. I stated early in the year the done so again in 2003. I can tell you James Hird was the loss of revenue was about $400,000. We are very pleased 15th best paid player in the competition in 2001 and that the AFL has taken on board our comments and reduced the includes his marketing contract - a player who many con- number of home night games in 2003 to only five.

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r e e a s c a e c g e a n o h c u o i i i i u h s o y o 0 f f o n p a l a t e d e d x l r o l o o e e e e h h h h h a i a o n n t 7 B e o s f w m a p s c C S t R m c E t w e i i p e t y M C t c m t T o r o c w f 2 r t d t C i p v o c On behalf of the Board I am pleased to present the Finan- During the year a rigorous program of cost review and cial Report of the Club for the year ended 31 October 2002. reduction was implemented, which has greatly assisted in keep- ing us profitable.

T TRADING RESULT

R Members will have noted from their financial reports that the FINANCIAL POSITION

O Club earned a profit this year of $1,007,857 compared to last At balance date, cash balances amounted to $3,686,903 plus

P year $1,249,081. We are delighted to report a profit of this the Club had investments in managed funds with a market

E magnitude, particularly as it is approximately double our bud- value at balance date of $459,360.

R geted profit. However, several significant unbudgeted income These cash balances are after spending $2,013,088 on cap- items mask the true position. ital expenditure, mainly the new building works at Napier St S

’ Firstly, we received late in the financial year, an unexpected and the upgrading of the players’ gymnasium and changing

R $300,000 distribution from the AFL on account of proceeds rooms, together with other equipment particularly comput-

O from the sale of Waverley Park. ers.

T Secondly, last year we raised a provision for doubtful debts

C for $130,000 for the non-recoverability of amounts owing by LOOKING AHEAD

E a sponsor. As it turned out, we were able to recover this debt, It is becoming increasingly difficult for Victorian based AFL

R plus some additional amounts, totalling $225,513. clubs to be profitable. Whilst we are budgeting for a profit for I Thirdly, one of our sponsors decided not to continue their the year ahead, any reductions in income streams such as from D

sponsorship with us and settled their future obligations for an match takings, sponsorship, corporate hospitality, member-

E amount of $275,000. ship, and merchandise, would put our profitability at risk.

C These three unbudgeted income items totalling approxi- In this environment, the substantial costs of fielding a stand- mately $800,000 mask what has in fact been a tough trading alone side in the VFL could not be justified. N year. In particular, match receipts were $240,000 less than Nevertheless, we believe that we have sufficient financial A last year, mainly we believe as a result of the high number of resources to ensure that our on-field performance is in no way N

I night games. Also, general sponsorship, particularly corpo- compromised by financial constraints.

F rate hospitality, was well down and contributed $281,000 less than last year. Added to these declines in revenues were Tim Jonas increases in football costs of $612,000, arising from increases Finance Director in the total player payment contracts, plus general increases associated with the costs of coaching and supporting an elite football team.

ESSENDON F O OTBALL CLUB | 8 A.B.N. 22 004 286 373 | ESSENDON F O OTBALL CLUB DIRECTORS’ REPORT

Your directors submit their report on the company for the finan- 9. DIRECTORS BENEFITS cial year ended 31 October 2002. Other than as outlined in the notes to and forming part of the financial statements, no director has received or 1. DIRECTORS become entitled to receive, during or since the financial The names of the directors in office at any time during or year, a benefit because of a contract made by the compa- since the end of the year are: ny or a related body corporate with a director, a firm of which a director is a member or an entity in which a direc- K. Egan B.Dunn tor has a substantial financial interest. N. Gay A.Epis B. Knight T. Jonas 10. MEETINGS OF DIRECTORS N. McKissock P. Leggett The number of director’s meetings (including meetings of B. Teal G. McMahon committees of directors) and number of meetings attend- ed by each of the directors during the financial year are: Directors have been in office since the start of the financial year to the date of this report unless otherwise stated. DIRECTOR’S MEETINGS AUDIT COMMITTEE 2. PRINCIPAL ACTIVITY Number eligible Number Number eligible Number to attend Attended to attend Attended The principal activity of the company during the course of the financial year was to conduct the Essendon Football B. Dunn 13 13 1 1 Club and manage its affairs and to promote the Australian K. Egan 13 13 - - game of football, and there was no significant change in A. Epis 13 12 - - the nature of that activity during the financial year. N. Gay 13 11 - - T. Jonas 13 13 1 1 3. OPERATING RESULT B. Knight 13 11 - - For the year ended 31 October 2002 the company had an P. Leggett 13 13 1 1 overall profit of $1,007,857 (2001: $1,249,081). N. McKissock 13 13 - - G. McMahon 13 13 - - 4. REVIEW OF OPERATIONS B. Teal 13 12 - - A detailed review of various aspects of operations is con- tained elsewhere in this Annual Report. Information on Current Directors

5. SIGNIFICANT CHANGES IN STATE OF AFFAIRS G. McMahon Chairman 1997-02 Chairman Board of Directors There were no significant changes in the state of affairs of Chairman EFCSC the company during the financial year. President Melton Country Club Inc. Chairman Hall of Fame Trustees 6. MATTERS SUBSEQUENT TO YEAR END B. Dunn Board 1999-02 Member Audit Committee No matters or circumstances have arisen between the end of the financial year and the date of this report which have, K. Egan Life Member Chairman of Selectors or may significantly affect the operations of the company Senior Player 1963-69 or the state of affairs of the company in subsequent finan- Board 1996-02 cial years. A. Epis Life Member Senior Player 1958-68 7. LIKELY DEVELOPMENTS Board 1998-02 Future developments in operations have been referred to N. Gay Life Member in the Chairman’s and Chief Executive Officer’s Reports. Committee 1971-75 Treasurer 1976-77 8. DIRECTORS AND AUDITORS INDEMNIFICATION Vice President 1978-97 The company has not, during or since the financial year, in Board 1998-02 respect of any person who is or has been an officer or auditor of the company or a related body corporate: T. Jonas Board 1997-02 Finance Director ■ indemnified or made any relevant agreement for Finance Director EFCSC indemnifying against a liability incurred as an officer, Treasurer Melton Country Club Inc. including costs and expenses in successfully defend- Chairman Audit Committee ing legal proceedings other than as referred to in Note B. Knight Board 1994-02 Committee EFCSC 23(b) to the accounts; or Vice President Melton ■ paid or agreed to pay a premium in respect of a con- Country Club Inc. tract insuring against a liability incurred as an officer for Trustee Hall of Fame the costs or expenses to defend legal proceedings with P. Leggett Board 1999-02 Committee EFCSC the exception of the following matters. During the finan- Member Audit Committee cial year the company paid a premium to insure each N. McKissock Board 1997-02 Deputy Chairman of the company’s directors against liabilities for costs Deputy Chairman EFCSC and expenses incurred by them in defending any legal Committee Melton Country Club Inc. proceedings arising out of their conduct while acting in the capacity of director of the company, other than con- B. Teal Board 1999-02 Committee Melton Country Club Inc. duct involving a wilful breach of duty in relation to the company.

9 | ESSENDON F O OTBALL CLUB ESSENDON F O OTBALL CLUB | A.B.N. 22 004 286 373 DIRECTORS’ REPORT

12. AUDIT COMMITTEE Signed in accordance with a resolution of the Board of Directors. At the date of this report the Essendon Football Club had an audit committee consisting of the following directors: T. Jonas (Chairman) P. Leggett B. Dunn

G. McMahon T. Jonas The external auditors, the Chief Executive Officer and the Director Director Finance Manager are invited to Audit Committee meetings at the discretion of the Committee. The Chairman attends Signed this 13th day of November, 2002. Audit Committee meetings ex officio at his discretion. DIRECTORS DECLARATION The responsibilities of the Audit Committee include: The directors of the company declare that : (1) the financial statements and notes, as set out on pages 11 ■ reviewing financial statements and other information to 15, are in accordance with the Corporations Act 2001: distributed externally; (i) comply with Accounting Standards and the ■ reviewing external audit reports to ensure that any Corporations Regulations 2001; and issues relative to controls or procedures are properly (ii) give a true and fair view of the financial position as at considered and when appropriate prompt remedial 31 October 2002 and of the performance for the year action is taken by management; ended on that date of the company. ■ liaising with the external auditors and ensuring that the (2) in the director’s opinion there are reasonable grounds to annual statutory audit is conducted in an effective man- believe that the company will be able to pay its debts as ner; and when they become due and payable. ■ monitoring the establishment of an appropriate internal control framework and considering enhancements; This declaration is made in accordance with a resolution of the ■ monitoring the procedures in place to ensure compli- Board of Directors. ance with the Corporations Act 2001 and any matters outstanding with auditors, Australian Taxation Office, Australian Securities Commission and financial institu- tions; and ■ maintaining a quality accounting and audit function. G. McMahon T. Jonas Director Director The Audit Committee reviews the performance of the external auditors on an annual basis and meets with them Signed this 13th day of November, 2002. during the year to co-ordinate the audit process.

INDEPENDENT AUDIT REPORT Audit Opinion To the Members of ESSENDON FOOTBALL CLUB LIMITED In our opinion, the financial report of Essendon Football Club is in A.B.N. 22 004 286 373 accordance with: Scope We have audited the financial report of the Essendon Football (a) the Corporations Act 2001, including: Club for the financial year ended 31 October 2002, being the (i) giving a true and fair view of the company’s financial Director’s Declaration, Profit and Loss Account, Balance Sheet, position as at 31 October 2002 and of its performance Statement of Cash Flows and notes to and forming part of the for the year ended on that date; and financial report. The company’s directors are responsible for the (ii) complying with Accounting Standards in Australia and financial report. We have conducted an independent audit of the the Corporations Regulations 2001; and financial report in order to express an opinion on it to the mem- bers of the company. (b) other mandatory professional reporting requirements in Australia. Our audit has been conducted in accordance with Australian Auditing Standards to provide reasonable assurance whether the financial report is free of material misstatement. Our procedures included examination, on a test basis, of evidence supporting the amounts and other disclosures in the financial report, and the evaluation of accounting policies and significant accounting estimates. These procedures have been undertaken to form an William Buck D.A. Ashmore Chartered Accountants Partner opinion whether, in all material respects, the financial report is presented fairly in accordance with Accounting Standards and other mandatory professional reporting requirements in Australia Dated this 13th day of November, 2002 and the Corporations Act 2001 so as to present a view which is Melbourne consistent with our understanding of the company’s financial position, and performance as represented by the results of its operations and its cash flows.

The audit opinion expressed in this report has been formed on the above basis.

ESSENDON F O OTBALL CLUB | 10 A.B.N. 22 004 286 373 | ESSENDON F O OTBALL CLUB

Statement of Financial Performance Statement of Cash Flows FOR THE YEAR ENDED 31 OCTOBER 2002 FOR THE YEAR ENDED 31 OCTOBER 2002

NOTE 2002 2001 NOTE 2002 2001 $ $ $ $

Revenues from ordinary activities 3(a) 22,608,514 22,660,527 CASH FLOWS FROM OPERATING ACTIVITIES Expenses from ordinary activities 3(b) 21,600,657 21,411,446 ______Receipts from Members, Sponsors, Supporters and Other Operations 26,317,016 22,517,672 Net profit from ordinary activities 3(c),(d) 1,007,857 1,249,081 Payments to Suppliers, Net increase in asset Employees and Players (23,367,815) (23,509,880) revaluation reserve 16 75,000 - Interest Received 205,199 226,546 ______NET CASH PROVIDED BY (USED IN) ______Total changes in equity 1,082,857 1,249,081 OPERATING ACTIVITIES 18 (b) 3,154,400 (765,662) ______

Statement of Financial Position CASH FLOWS FROM INVESTING ACTIVITIES AS AT 31 OCTOBER 2002 Redemption of Investments 429,706 - Payment for Investments - (1,000,000) Proceeds from sale of property, CURRENT ASSETS plant and equipment 2,719 - Cash assets 18(a) 3,686,903 1,933,166 Purchase of property, plant Receivables 5 1,368,049 3,413,027 and equipment (2,013,088) (940,461) Inventories 6 117,436 282,459 NET CASH PROVIDED BY (USED IN) ______Other 7 420,300 782,167 INVESTING ACTIVITIES (1,580,663) (1,940,461) ______TOTAL CURRENT ASSETS 5,592,688 6,410,819 ______CASH FLOWS FROM FINANCING ACTIVITIES NON-CURRENT ASSETS Net proceeds from related party borrowings: Receivables 8 450,885 630,885 Essendon Football and Investments 9 459,510 955,330 Community Sporting Club 180,000 165,000 Property, Plant and Equipment 10 4,686,307 2,970,545 ______NET CASH PROVIDED BY (USED IN) ______FINANCING ACTIVITIES 180,000 165,000 TOTAL NON-CURRENT ASSETS __5_,_5_9_6_,7_0_2_ __4_,_5_5_6_,7_6_0______TOTAL ASSETS _1_1_,_1_8_9_,3_9_0_ _1_0_,_9_6_7_,5_7_9_ NET INCREASE (DECREASE) IN CASH HELD 1,753,737 (2,541,123) CURRENT LIABILITIES CASH AT BEGINNING OF THE FINANCIAL YEAR 1,933,166 4,474,289 Payables 11 1,750,648 2,592,624 Provisions 12 341,286 580,415 CASH AT END OF THE ______Other 13 111,974 94,606 FINANCIAL YEAR 18 (a) 3,686,903 1,933,166 ______TOTAL CURRENT LIABILITIES 2,203,908 3,267,645 ______

NON-CURRENT LIABILITIES Provisions 14 298,531 58,340 Other 15 - 37,500 ______TOTAL NON-CURRENT LIABILITIES ____2_9_8_,5_3_1______9_5_,8_4_0_ TOTAL LIABILITIES __2_,_5_0_2_,4_3_9_ __3_,_3_6_3_,4_8_5_ NET ASSETS 8,686,951 7,604,094 ______

MEMBERS FUNDS

Accumulated Funds 17 8,371,951 7,364,094 Asset Revaluation Reserve 16 315,000 240,000 ______

TOTAL MEMBERS FUNDS 8,686,951 7,604,094 ______The accompanying notes form part of these financial statements.

11 | ESSENDON F O OTBALL CLUB ESSENDON F O OTBALL CLUB | A.B.N. 22 004 286 373 NOTES TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED 31 OCTOBER 2002

1. ESSENDON FOOTBALL CLUB LIMITED (h) Revenue Revenue from the rendering of a service is recognised upon the Essendon Football Club Limited (“Club”) is a public company limited by delivery of the service to the customers. guarantee. The liability of each member of the company is limited to $6. (i) Goods and Services Tax (GST) 2. STATEMENT OF SIGNIFICANT Revenues, expenses and assets are recognised net of the amount ACCOUNTING POLICIES of GST, except where the amount of GST incurred is not recover- able from the Australian Taxation Office. In these circumstances the The financial report is a general purpose financial report that has been GST is recognised as part of the cost of acquisition of the asset or prepared in accordance with applicable Accounting Standards, Urgent as part of an item of the expense. Receivables and payables in the Issues Group Consensus Views, other authoritative pronouncements of Statement of Financial Position are shown inclusive of GST. Cash the Australian Accounting Standards Board and the Corporations Act flows are included in the Statement of Cash Flows on a gross basis 2001. The financial report has been prepared on an accruals basis and is and the GST component of cash flows arising from investing and based on historical costs and does not take into account changing financing activities, which is recoverable from, or payable to, the money values or, except where stated, current valuations of non-current taxation authority are classified as operating cashflows. assets. Cost is based on the fair value of the consideration given in (j) Comparatives exchange for assets. The accounting policies have been consistently Where necessary, comparative figures have been reclassified to applied, unless otherwise stated. match current year presentation and to comply with current best The following is a summary of the material accounting policies adopted accounting practices. by the company in the preparation of the financial report. (a) Inventories 3. OPERATING PROFIT FROM Inventories are measured at the lower of cost and net ORDINARY ACTIVITIES realisable value. 2002 2001 (b) Investments $ $ Non-current investments are measured at the lower of cost and (a) Revenue from Ordinary Activities recoverable amount. The carrying amount of non-current invest- (i) Operating revenue ments is reviewed annually by directors to ensure it is not in excess AFL annual distribution 3,832,000 3,157,000 of the recoverable amount of these investments. The recoverable Marketing revenues 14,304,685 14,769,411 amount is assessed from the quoted market value for listed invest- Sale of goods 1,953,137 1,798,108 ments or the underlying net assets for other non-listed investments. Other 1,691,194 2,110,037 (c) Property, Plant and Equipment ______Property, plant and equipment are brought to account at cost or at Total operating revenue 21,781,016 21,834,556 independent or director’s valuation, less, where applicable, any ______accumulated depreciation or amortisation. The carrying amount of (ii) Non-operating revenue property, plant and equipment is reviewed annually by directors to Interest received 236,266 226,546 ensure it is not in excess of the recoverable amounts from these Other 591,232 599,425 assets. ______The depreciable amount of all fixed assets including leasehold Total non-operating revenue _____8_27_,_4_9_8 _____8_25_,_9_7_1 improvements, but excluding freehold land, is depreciated on a straight line basis over their useful lives to the company commenc- TOTAL REVENUE FROM ORDINARY ACTIVITIES __2_2_,_60_8_,_5_1_4 __2_2_,_6_60_,_5_2_7 ing from the time the asset is held ready for use. The depreciation rates used for each class of depreciable assets (b) Expenses from Ordinary Activities are : Marketing expenses 7,605,929 7,822,173 Class of Fixed Assets Depreciation Rate Cost of sales 1,047,596 1,053,993 Leasehold Improvements 2.5% - 10% Football expenses 10,709,084 10,096,869 Plant & Equipment 15% - 33.3% Administration and site expenses 2,022,617 2,100,531 Motor Vehicles 22.5% Write-off of leasehold improvements (d) Employee Entitlements (Refer Note 3d) - 164,268 Provision is made for the company’s liability for employee entitle- Other expenses 215,431 173,612 ments to annual leave and long service leave from services ______rendered by employees to balance date. Long service leave is __2_1_,_60_0_,_6_5_7 __2_1_,_4_11_,_4_4_6 provided for employees with five or more years’ service for (c) Profit from ordinary activities has been determined after: amounts which approximate the present value of future payments (i) Charging as Expenses (Revenue): to be made to employees. Depreciation of: Contributions are made by the company to employee superannua- - Plant and Equipment 218,192 247,773 tion funds and are charged as expenses when incurred. - Motor Vehicles 7,157 7,158 (e) Income Received in Advance Amortisation of: Income is brought to account in the period in which it relates. - Leasehold Improvements 138,268 118,249 Income received prior to 31 October 2002, which relates to future Provision for Employee Entitlements 1,062 191,952 periods, has been recorded as income received in advance. Provision for Doubtful Debts (130,000) 130,000 (f) Income Tax Loss on disposal of property, 5,990 292 Income Tax has not been provided for in the accounts of the com- plant & equipment pany, as the company is an exempt sporting organisation in Loss on disposal and write-down accordance with Section 50-45 of the Income Tax Assessment Act. of non-current investments to (g) Player Acquisition Costs recoverable amount 66,114 44,820 Player acquisition costs are written off in the year they are incurred Write-down of inventories to as uncertainty exists as to the term over which the benefit will be net realisable value 34,443 26,989 received.

ESSENDON F O OTBALL CLUB | 12 A.B.N. 22 004 286 373 | ESSENDON F O OTBALL CLUB NOTES TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED 31 OCTOBER 2002

2002 2001 2002 2001 $ $ $ $

3. OPERATING PROFIT FROM 10. PROPERTY, PLANT AND EQUIPMENT ORDINARY ACTIVITIES (Cont) Land – at fair value 35,000 - (d) Significant Items Land – at fair value _____4_00_,_0_0_0 _____3_25_,_0_0_0 The following significant revenue and expense items 435,000 325,000 are relevant in explaining the financial performance: Plant and Equipment – at cost 1,391,681 1,085,085 Revenue Provision for Depreciation __(_1_,0_0_1_,9_4_6_) ___(_7_9_1_,3_5_9_) Sponsor contract settlement 275,000 - 389,735 293,726 AFL distribution from sale of Waverly P_a_rk___3_00_,_0_0_0 ______- Motor Vehicles – at cost 31,814 31,814 Provision for Depreciation (23,860) (16,703) _____57_5_,_0_0_0 ______- ______Expense 7,954 15,111 Write-off of leasehold improvements Leasehold Improvements – at cost 4,508,754 2,853,065 Provision for Amortisation (655,136) (516,357) resulting from redevelopment project. ______- _____16_4_,_2_6_8 ______3,853,618 2,336,708 4. AUDITORS’ REMUNERATION ______Remuneration of the auditor for: TOTAL PROPERTY, PLANT AND EQUIPMENT ___4_,_68_6_,_3_0_7 ___2_,_97_0_,_5_4_5 - auditing the annual financial report 17,500 15,500 - other 8,000 8,000 An independent valuation of freehold land in Napier Street, Essendon, was ______undertaken on 7 November 2002 by P.W. Stokes FAPI FREI. The valuation 25,500 23,500 ______was based on the current market value of the land and improvements. The auditors received no other benefits. The valuation revealed a current market value of $400,000. During the financial year, Essendon Football Club paid $35,000 for freehold 5. RECEIVABLES (CURRENT) land at Napier Street, Essendon. The Directors consider that the amount Trade and Sundry Debtors 1,023,898 3,216,662 paid for the land represents its fair value at 31 October 2002. Reconciliations of the carrying amounts of property, plant and equip- Less Provision for Doubtful Debts ____(_1_5_,0_0_0_) ___(_1_4_5_,0_0_0_) ment at the beginning and end of the current financial year. 1,008,898 3,071,662 See table at bottom of page. Trading amounts receivable from associated entities (Refer Note 21a) 179,151 161,365 11. PAYABLES (CURRENT) Loans receivable from Trade Creditors 117,443 657,998 associated entities (Refer Note 21b) _____1_80_,_0_0_0 _____1_80_,_0_0_0 Accruals ___1_,_6_33_,_2_0_5 ___1_,_93_4_,_6_2_6 1,368,049 3,413,027 ______1_,_75_0_,_6_4_8 ___2_,_59_2_,_6_2_4 12. PROVISIONS (CURRENT) 6. INVENTORIES Annual Leave 274,634 320,239 Merchandise - at cost 129,436 294,459 Long Service Leave ______66_,_6_5_2 _____2_60_,_1_7_6 Less Provision for obsolete stock ____(_1_2_,0_0_0_) ____(_1_2_,0_0_0_) _____34_1_,_2_8_6 _____58_0_,_4_1_5 _____11_7_,_4_3_6 _____28_2_,_4_5_9 13. OTHER LIABILITIES (CURRENT) 7. OTHER ASSETS Income Received in Advance _____1_11_,_9_7_4 ______94_,_6_0_6 Prepaid expenses _____4_20_,_3_0_0 _____7_82_,_1_6_7 14. PROVISIONS (NON-CURRENT) 8. RECEIVABLES (NON-CURRENT) Long Service Leave _____2_98_,_5_3_1 ______58_,_3_4_0 Loans receivable from associated 15. OTHER LIABILITIES (NON-CURRENT) entities (Refer Note 21b) _____4_50_,_8_8_5 _____6_30_,_8_8_5 Income Received in Advance ______- ______37_,_5_0_0 9. INVESTMENTS (NON-CURRENT) 16. ASSET REVALUATION RESERVE Shares – at cost 150 150 Balance at the beginning of the financial year 240,000 240,000 Units in managed funds – at market value 459,360 955,180 ______Revaluation increment _____45_9_,_5_1_0 _____95_5_,_3_3_0 on freehold land (Refer Note 10) _____7_5_,_0_0_0 ______- Balance at the end of the financial year _____3_15_,_0_0_0 _____2_40_,_0_0_0

Note 10 continued 2002 Land Plant & Equipment Motor Vehicles Leasehold Improvements Total $ $ $ $ $ Beginning of financial year 325,000 293,726 15,111 2,336,708 2,970,545 Additions 35,000 320,243 - 1,657,845 2,013,088 Disposals - (6,042) - (2,667) (8,709) Revaluations 75,000 - - - 75,000 Depreciation expense ______- _(_2_1_8_,_1_9_2_) __(_7_,_1_5_7_) _(_1_3_8_,_2_6_8_) __(_3_6_3_,_6_1_7_) End of financial year 435,000 389,735 7,954 3,853,618 4,686,307 ______

13 | ESSENDON F O OTBALL CLUB ESSENDON F O OTBALL CLUB | A.B.N. 22 004 286 373 NOTES TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED 31 OCTOBER 2002

2002 2001 2002 2001 $ $ $ $ The names of directors who have held office during the financial year are: 17. ACCUMULATED FUNDS B.Dunn B. Knight K. Egan P. Leggett Balance at the beginning of the financial year 7,364,094 6,115,013 A. Epis N. McKissock N. Gay G. McMahon Net profit for the year 1,007,857 1,249,081 T. Jonas B. Teal ______Balance at the end of the financial year ___8_,_3_71_,_9_5_1 ___7_,_3_64_,_0_9_4 21. RELATED PARTIES (a) Related Party Trading Balances 18. NOTES TO THE STATEMENT OF CASH FLOWS Trading amounts receivable from associated entities: Current (a) Reconciliation of Cash EFC Hall of Fame Trust 8,410 5,923 For the purposes of the statement of cash flows, the entity consid- Essendon Football and Community ers cash to include cash on hand, cash in banks and short term Sporting Club 92,104 68,723 investments, net of outstanding bank overdrafts. Cash at the end Melton Country Club Inc. 78,637 86,719 of the reporting period as shown in the statement of cashflows is ______reconciled to the Statement of Financial Position as follows: _____17_9_,_1_5_1 _____16_1_,_3_6_5 (b) Related Party Loans Cash on Hand 3,300 3,050 Loans receivable from associated entities: Cash at Bank 221,363 371,578 Current Short Term Deposits ___3_,_4_62_,_2_4_0 ___1_,_5_58_,_5_3_8 Essendon Football and Community Sporting Club (refer (i) below) 180,000 180,000 ___3_,_68_6_,_9_0_3 ___1_,_93_3_,_1_6_6 ______Non-current (b) Reconciliation of net cash from operating activities Essendon Football and Community to net profit from ordinary activities: Sporting Club (refer (i) below) _____45_0_,_8_8_5 _____63_0_,_8_8_5

Operating profit/(loss) from (i) The balance receivable from Essendon Football and Commu- ordinary activities 1,007,857 1,249,081 nity Sporting Club is subject to a formal loan agreement and is (Profit)/Loss from Sale of Fixed Assets 5,990 292 secured by a first ranking fixed and floating charge over their Increase/(Decrease) in Provision assets. Interest is currently charged at a commercial rate. for Doubtful Debts (130,000) 130,000 (c) Related Party Transactions Depreciation and Amortisation 363,617 373,180 Transactions between related parties are on normal commercial (Increase)/Decrease in Receivables terms and conditions no more favourable than those available to and Other Assets 2,536,845 (2,398,854) other parties unless otherwise stated. (Increase)/Decrease in Inventory 165,023 (38,115) (i) Associated Entities Increase/(Decrease) in Payables Rental income received or receivable from: and Income in Advance (862,108) (482,286) Essendon Football and Increase/(Decrease) in Provision Community Sporting Club 40,000 40,000 for Employee Entitlements 1,062 191,952 Melton Country Club Inc. _____3_79_,_1_4_9 _____3_43_,_2_8_1 Change in value of Investments 66,114 44,820 419,149 383,281 Write off of Leasehold Improvements - 164,268 Net Cash Provided by (used in) ______Sponsorship income received or receivable from: Essendon Football and Operating Activities ___3_,_1_54_,_4_0_0 ___(_7_6_5_,6_6_2_) ______Community Sporting Club 245,264 255,686 19. CAPITAL AND LEASING COMMITMENTS Interest received or receivable from: Football and (a) Operating Lease Commitments Community Sporting Club 45,374 56,621 Non-cancellable Operating Leases contracted for but Melton Country Club Inc. 2,489 - not capitalised in the accounts. ______47,863 56,621 Payable: - not later than one year - 25,470 Management fees received or receivable from: - later than one year but not later than _2_ y_e_a_rs_____- ______- Essendon Football and Community Sporting Club 64,423 60,970 - 25,470 ______Melton Country Club Inc. 44,578 41,570 ______(b) Capital Expenditure Commitments 109,001 102,540 Payable: Loan guarantee fee received or - not later than one year 103,400 560,201 ______receivable from the Melton Country Club Inc. - 817

20. REMUNERATION OF DIRECTORS (ii) Directors and Director Related Entities Courier fees paid or payable to No remuneration, bonuses, commissions or salaries were received or Couriers Express Services of which are due and receivable by any director from the company or a related Mr Patrick Leggett is a director. 19,028 20,259 party nor has any payment been made in respect of superannuation Consulting fees paid or payable to payments or provisions for the retirement of any director. Pitcher Partners of which Mr Tim Jonas is a partner. 9,500 -

ESSENDON F O OTBALL CLUB | 14 A.B.N. 22 004 286 373 | ESSENDON F O OTBALL CLUB NOTES TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED 31 OCTOBER 2002

22. FINANCIAL INSTRUMENTS (a) Interest Rate Risk The company’s exposure to interest rate risk, which is the risk that a financial instrument’s value will fluctuate as a result of changes in marketing interest rates and the effective weighted average interest rates on classes of financial assets and financial liabilities, is as follows : 2002 Fixed interest maturing in: Weighted Floating 1 year or 1 to Non interest average Note Interest rate less 5 years bearing Total Interest rate $ $ $ $ $ % Financial Assets Cash 18(a) 221,363 3,462,240 3,683,603 3.44 Receivables - Trade debtors 5 1,188,049 1,188,049 Nil Loans 21(b) 630,885 630,885 6.5 Investments 9 __4_5_9_,_36_0______4_5_9_,_3_6_0__ 5.4 __1_,3_1_1_,6_0_8______- ______-______1,_1_8_8_,0_4_9______5_,9_6_1_,8_9_7__ Financial Liabilities Payables 11 ______1,_7_5_0_,6_4_8______1_,7_5_0_,6_4_8__ Nil _____-______- ______-______1,_7_5_0_,6_4_8______1_,7_5_0_,6_4_8__ Net financial Assets/(liabilities) __1_,3_1_1_,6_0_8______3_,_4_6_2,_2_4_0______-______(5_6_2_,5_9_9_)______4_,2_1_1_,2_4_9__ 2001 Fixed interest maturing in: Weighted Floating 1 year or 1 to Non interest average Note Interest rate less 5 years bearing Total Interest rate $ $ $ $ $ % Financial Assets Cash 18(a) 371,578 1,558,538 1,930,116 4.4 Investments 9 955,180 955,180 4.2 Receivables - Trade debtors 5 3,233,027 3,233,027 Nil Loans 21(b) __8_1_0_,_88_5______8_1_0_,_8_8_5__ 6.5 __2_,1_3_7_,6_4_3______1_,_5_5_8,_5_3_8______-______3,_2_3_3_,0_2_7______6_,9_2_9_,2_0_8__ Financial Liabilities Payables 11 ______2,_5_9_2_,6_2_4______2_,5_9_2_,6_2_4__ Nil _____-______- ______-______2,_5_9_2_,6_2_4______2_,5_9_2_,6_2_4__ Net financial Assets/(liabilities) __2_,1_3_7_,6_4_3______1_,_5_5_8,_5_3_8______-______6_4_0_,4_0_3______4_,3_3_6_,5_8_4__ (b) Credit Risk company. Trade accounts payable are normally settled within The maximum exposure to credit risk, excluding the value of any 30 days. Liabilities for player payments are settled on various collateral or other security, at balance date to recognised financial terms as negotiated with individual players. assets is the carrying amount, net of any provisions for doubtful debts of those assets, as disclosed in the Statement of Financial (d) Net Fair Values of Financial Assets and Liabilities Position and notes to the financial statements. No unrecognised The company’s financial assets and liabilities are carried in the financial assets exist at balance date. Statement of Financial Position at amounts that approximate their The company does not have any material credit risk exposure to net fair value. any single debtor or group of debtors under financial instruments entered into by the company. 23. CONTINGENT LIABILITY (a) Long Service Leave (c) Terms, Conditions and Accounting Policies At balance date, an issue remains in relation to the long service The company’s accounting policies, including terms and condi- leave entitlements for players which is not clearly covered by the tions of each class of financial assets and financial liability, Standard Contract and the AFL & AFLPA Collective Bargaining recognised at balance date, are set out below. There are no Agreement. Substantial progress has been made in relation to this unrecognised financial assets or liabilities. matter since last balance date with an agreement being executed (i) Financial Assets by the Essendon Football Club and its players. However similar Trade Debtors agreements need to be executed by all sixteen clubs and then cer- Trade debtors are carried at amounts due less any provision for tified by the Australian Industrial Relations Commission before the doubtful debts. A provision for doubtful debts is recognised Essendon Football Club agreement can be put into operation. when collection of the full amount is no longer probable. Trade Should this not happen, a liability for long service leave may arise receivables are generally settled within 30 days from the date of in the future which is unable to be quantified at the present time. invoice/statement. (ii) Financial Liabilities (b) Legal Matter Trade creditors and other accruals A claim for defamation has been bought against the club and an Liabilities are recognised for amounts to be paid in the future employee of the club. Any liability is unable to be quantified at the for goods or services received, whether or not billed to the present time. The action is being vigorously defended.

15 | ESSENDON F O OTBALL CLUB