Australian Water Technologies Pty Ltd - Parliament …...Financial Statements Sydney Water Annual Report 2005 1 of 1 Australian Water Technologies Pty Ltd These Financial Statements

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Australian Water Technologies Pty Ltd

These Financial Statements form part of a suite of documents that support the Sydney Water Annual Report 2005. Other documents in the suite include: • ESD Indicators and Environment Plan Report • Environmental Indicators Compliance Report • Annual Drinking Water Quality Report. These documents, along with the Sydney Water Annual Report 2005, are available to view and download at www.sydneywater.com.au

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Contents

Statements of Financial Performance

Statements of Financial Position

Statements of Cash Flows

Notes to and forming part of the Financial Statements

1. Statement of Significant Accounting Policies

2. Profit from Ordinary Activities before Income Tax Expense

3. Taxation

4. Cash Assets

5. Receivables

6. Inventories

7. Other Assets

8. Other Financial Assets

9. Payables

10. Interest-bearing liabilities

11. Provisions

12. Contributed Equity

13. Reserves

14. Retained Profits

15. Outside Equity Interests

16. Total Equity Reconciliation

17. Notes to the Statements of Cash Flows

18. Commitments

19. Employee Benefits

20. Consultants

21. Particulars in Relation to Controlled Entities

22. Auditors’ Remuneration

23. Directors’ Remuneration

24. Related Party Transactions

25. Additional Financial Instruments Disclosure

26. Amounts Payable/Receivable in Foreign Currencies

27. Segment Reporting

28. Economic Dependency

29. Contingent Liabilities and Contingent Assets

30. Impact of Adopting Australian Equivalents to International Financial Reporting Standards

31. Events Subsequent to Balance Date

Directors’ Declaration

Independent Audit Report

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Start of Audited Financial Statements

AUSTRALIAN WATER TECHNOLOGIES PTY LTD AND ITS CONTROLLED ENTITIES ABN 81 003 848 860

STATEMENTS OF FINANCIAL PERFORMANCE

FOR THE YEAR ENDED 30 JUNE 2005

___________________________________________________________________________________________________________ Consolidated The Company Note 2005 2004 2005 2004 $’000 $’000 $’000 $’000 ___________________________________________________________________________________________________________

Revenues from ordinary activities 2(a) 11,099 22,844 10,991 22,694

Expenses from ordinary activities, excluding borrowing costs expense 2(b) (9,620) (20,735) (9,645) (20,433)

Borrowing costs expense 2(b) – – – (8)

____________________________________________________ Profit from ordinary activities before income tax expense 1,479 2,109 1,346 2,253

Income tax benefit (expense) relating to ordinary activities 3(a) (22) (26) (3) 4

____________________________________________________ Profit from ordinary activities after related income tax expense 1,457 2,083 1,343 2,257 ____________________________________________________ Net profit 1,457 2,083 1,343 2,257

Net profit attributable to outside equity interests (9) – – –

____________________________________________________ Net profit attributable to members of the parent entity 1,448 2,083 1,343 2,257 ____________________________________________________

Net exchange difference on translation of financial statements of self-sustaining foreign operations 13 (100) 26 – 14

____________________________________________________ Total revenues, expenses and valuation adjustments attributable to members of the parent entity and recognised directly in equity (100) 26 – 14 ____________________________________________________

Total changes in equity other than those resulting from transactions with owners as owners 16 1,348 2,109 1,343 2,271 ____________________________________________________

The Statements of Financial Performance are to be read in conjunction with the Notes to and forming part of the Financial Statements set out on the following pages.

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STATEMENTS OF FINANCIAL POSITION

AS AT 30 JUNE 2005


CURRENT ASSETS Cash assets 4 6,576 5,595 6,163 5,107 Receivables 5 2,883 5,779 2,847 5,831 Inventories 6 – 64 – 64 Other 7 4 2 4 2 ____________________________________________________ TOTAL CURRENT ASSETS 9,463 11,440 9,014 11,004 ____________________________________________________ NON-CURRENT ASSETS Receivables 5 69 77 69 77 Other financial assets 8 – – 286 309 ____________________________________________________ TOTAL NON-CURRENT ASSETS 69 77 355 386 ____________________________________________________ TOTAL ASSETS 9,532 11,517 9,369 11,390 ____________________________________________________ CURRENT LIABILITIES Payables 9 1,367 4,665 1,357 4,643 Interest-bearing liabilities 10 – – 165 183 Current tax liabilities 3(b) 18 5 – 3 Provisions 11 – 57 – 57 ____________________________________________________ TOTAL CURRENT LIABILITIES 1,385 4,727 1,522 4,886 ____________________________________________________ TOTAL LIABILITIES 1,385 4,727 1,522 4,886 ____________________________________________________ NET ASSETS 8,147 6,790 7,847 6,504 ____________________________________________________ EQUITY Contributed equity 12 500 500 500 500 Reserves 13 (89) 11 (1) (1) Retained profits 14 7,629 6,181 7,348 6,005 ____________________________________________________ Total parent entity interest 8,040 6,692 7,847 6,504 Outside equity interests 15 107 98 – – ____________________________________________________ TOTAL EQUITY 16 8,147 6,790 7,847 6,504 ____________________________________________________ The Statements of Financial Position are to be read in conjunction with the Notes to and forming part of the Financial Statements set out on the following pages.

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STATEMENTS OF CASH FLOWS


___________________________________________________________________________________________________________ Consolidated The Company Note 2005 2004 2005 2004 $’000 $’000 $’000 $’000 ___________________________________________________________________________________________________________ CASH FLOWS FROM OPERATING ACTIVITIES Inflows Cash receipts in the course of operations 14,695 22,532 14,676 22,201 Interest received 273 176 273 157 Income tax received – 44 – 44 ____________________________________________________ 14,968 22,752 14,949 22,402 ____________________________________________________ Outflows Cash payments in the course of operations 13,929 18,931 13,889 18,808 Income tax paid 6 106 4 23 ____________________________________________________ 13,935 19,037 13,893 18,831 ____________________________________________________ ____________________________________________________ Net cash provided by (used in) operating activities 17(b) 1,033 3,715 1,056 3,571 ____________________________________________________ CASH FLOWS FROM INVESTING ACTIVITIES Inflows Proceeds on disposal of foreign operation (net of cash disposed) 21(c) – 6 – 6 ____________________________________________________ – 6 – 6 ____________________________________________________ Outflows Payments for property, plant and equipment – 46 – 46 ____________________________________________________ – 46 – 46 ____________________________________________________ ____________________________________________________ Net cash from (used in) investing activities – (40) – (40) ____________________________________________________ CASH FLOWS FROM FINANCING ACTIVITIES Outflows Borrowing costs paid – – – 9 ____________________________________________________ – – – 9 ____________________________________________________ ____________________________________________________ Net cash used in financing activities – – – (9) ____________________________________________________ Net increase (decrease) in cash held 1,033 3,675 1,056 3,522 Cash at the beginning of the financial year 5,595 1,902 5,107 1,581 Effects of exchange rate fluctuations on the balances of cash held in foreign currencies (52) 18 – 4 ____________________________________________________ CASH AT THE END OF THE FINANCIAL YEAR 17(a) 6,576 5,595 6,163 5,107 ____________________________________________________ The Statements of Cash Flows are to be read in conjunction with the Notes to and forming part of the Financial Statements set out on the following pages.

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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS


1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

Australian Water Technologies Pty. Ltd. (ABN 81 003 848 860) will be referred to in this financial report as “the Company”. The Company has two controlled entities. (Refer Note 21). The economic entity comprising the Company and its controlled entities will be collectively referred to as “the consolidated entity”. The Company’s parent entity, Sydney Water Corporation, will be referred to as “the parent”.

The financial report covers the financial performance of the Company and its controlled entities for the period 1 July 2004 to 30 June 2005

and the financial position as at 30 June 2005. The comparative figures cover the financial performance of the Company for the period 1 July 2003 to 30 June 2004 and the financial position as at 30 June 2004. Where applicable, comparative figures have been reclassified to ensure comparability and consistency with the current reporting period. Except where otherwise indicated, amounts are rounded to the nearest $’000.

The significant policies that have been adopted in the preparation of the financial report are as follows:

(a) BASIS OF PREPARATION The financial report is a general purpose financial report that has been prepared in accordance with applicable Australian Accounting

Standards, Urgent Issues Group Consensus Views and other mandatory and statutory reporting requirements including the Corporations Act 2001, Part 3 of the Public Finance and Audit Act 1983 and the associated requirements of the Public Finance and Audit Regulation 2005.

In respect of Part 3 of the Public Finance and Audit Act 1983, the NSW Treasurer has granted an exemption from preparing manufacturing

and trading statements to allow disclosure in accordance with that required for reporting entities under Australian Accounting Standards and other mandatory professional reporting requirements.

The financial report has been prepared in accordance with the historical cost convention, except for certain non-current assets that are

recorded at valuation. The accounting policies have been consistently applied by the entities in the consolidated entity and are consistent with those adopted for

the previous financial year. (b) PRINCIPLES OF CONSOLIDATION The financial report of the consolidated entity includes the financial report of the Company, being the parent entity, and its controlled

entities. Where an entity either begins or ceases to be controlled during the financial year, the results are included only from the date control commences or up to the date control ceases. The balances and effects of transactions between entities in the consolidated entity have been eliminated. Outside interests in the equity and the results of an entity that is controlled by the Company is shown as Outside Equity Interests in the consolidated Financial Statements.

(c) RECEIVABLES Trade and other receivables are recognised in the Statements of Financial Position at amounts due. (Refer Note 5). Where necessary, an

allowance for doubtful debts is recognised in respect of the closing balance of any trade debtors in order to reflect the recoverability that is expected in respect of those debtors existing as at balance date. Any allowance recognised is established after due consideration of factors such as past recoverability experience and prevailing economic conditions. Any known bad debts are written off against the allowance recognised as and when determined. (Refer Note 2(b)).

(d) INVESTMENTS Investments with a maturity date within the ensuing 12 months are recorded within Cash Assets under Current Assets in the Statements of

Financial Position while those with a maturity date beyond 12 months are recorded within Other Financial Assets under Non-Current Assets.

• FINANCIAL ASSETS

Current Investments are recognised at cost. (Refer Note 4).

• CONTROLLED ENTITIES

Investments in controlled entities are recognised in the Company’s Statement of Financial Position at the lower of cost and recoverable amount. Where the controlled entity is a parent entity itself, recoverable amount is normally determined as the value of the net assets of the consolidated entity in which the controlled entity is the parent entity. Where the controlled entity is not a parent

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entity, recoverable amount is normally determined as the net assets of the controlled entity itself. However, where there is an agreed consideration value for the disposal of a controlled entity, then that value is the recoverable amount.

Where recoverable amount exceeds cost, the Company’s investment is recognised at cost. Where recoverable amount is below cost,

an allowance for the loss on investment is recognised in the Company’s Statement of Financial Performance and Statement of Financial Position. Where the agreed consideration value for the disposal of a controlled entity is lower than its net assets, the difference is recognised as a loss on realisable value in the consolidated entity’s Statement of Financial Performance. (Refer Note 2(b)).

(e) INVENTORIES Inventories include work in progress held as inventory for external construction and consulting contracts. (Refer Note 6). Where the consolidated entity has entered into consulting contracts with external clients, costs incurred where the related revenues remain

unrecognised are recognised as work in progress held as inventory. Where the consolidated entity has entered into construction contracts with external clients, work in progress held as inventory is

recognised at cost plus attributable profit to date based on the value of work completed, less progress billings and provision for foreseeable losses. Where applicable, such losses are provided for as soon as they are identified. Cost includes all costs directly related to specific contracts and an allocation of appropriate overhead expenses.

Where the outcome of a contract cannot be reliably estimated, contract costs are expensed as incurred. Where it is probable that the costs will be recovered, revenue is only recognised to the extent of costs incurred.

Profit is recognised on an individual construction contract basis using the percentage of completion method when the stage of contract

completion can be reliably determined, costs to date can be clearly identified and reliable estimates can be made for total contract revenues to be received and costs to complete. Profit recognition does not normally commence until a contract is at least 30% complete and where the value of work undertaken exceeds $1,000.

The stage of completion is measured by reference to an assessment of costs incurred to date as a percentage of estimated total costs for each contract.

(f) PROPERTY, PLANT AND EQUIPMENT

During the financial year, the Company or its controlled entities did not own any property, plant and equipment. In the previous financial year, all property, plant and equipment owned by the Company was sold in the management buy-out of the Company’s New Zealand branch. (Refer Note 21 (c)).

• ACQUISITIONS AND CAPITALISATION All items of property, plant and equipment acquired by the consolidated entity were recorded initially at the cost of acquisition. Cost

was determined as the fair value of the assets given up at the date of acquisition plus costs incidental to the acquisition. Items costing $5,000 or more individually and having a minimum expected working life of three years were capitalised.

• LEASED ASSETS Leases of property, plant and equipment where the Company or its controlled entities assume substantially all the risks and benefits

of ownership are classified as finance leases. Other leases are classified as operating leases. Where property, plant and equipment is acquired by means of finance leases, the present value of the minimum lease payments is

recognised as an asset at the beginning of the lease term and amortised on a straight line basis over the term of the lease or, where it is likely the consolidated entity will retain ownership of the asset, the expected useful life of the leased asset. A corresponding liability is also established and each lease payment is allocated between the liability and interest expense.

Payments made under operating leases are representative of the pattern of benefits derived from the leased assets and accordingly

they are charged to the Statements of Financial Performance in the periods in which they are incurred.

• DEPRECIATION Items of property, plant and equipment were depreciated on a straight-line basis over their estimated useful lives, making allowance

where appropriate for residual values. The lives were reviewed from time to time, taking into account commercial and technical obsolescence and expected normal wear and tear. The normal life expectancies of asset categories were as follows:

Number of Years Plant and equipment 5-12 Computer equipment 3-5 (g) PAYABLES Liabilities are recognised in the Statements of Financial Position for amounts to be paid in the future for goods or services received by the

consolidated entity or the Company, whether or not billed. These liabilities are recognised when the goods or services have been received and an obligation to make future payments arises. (Refer Note 9).

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(h) LOANS AND ADVANCES Loans and advances are recorded at their face value. Interest and other borrowing costs on loans and advances are recognised in the

Statements of Financial Performance when incurred. (i) PROVISIONS

Provisions are liabilities that are recognised when there is a legal, equitable or constructive obligation as a result of a past event and it is probable that a future sacrifice of economic benefits will be required to settle the obligation, the timing or amount of which is uncertain. If the effect is material, a provision is determined by discounting the expected future cash flows (adjusted for expected future risks) required to settle the obligation at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability, being risk free rates on government bonds most closely matching the expected future payments, except where noted below. The unwinding of the discount is treated as part of the expense related to the particular provision. When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the recovery receivable is recognised as an asset when it is probable that the recovery will be received and is measured on a basis consistent with the measurement of the related provision. In the Statements of Financial Performance, the expense recognised in respect of a provision is presented net of the recovery. • EMPLOYEE BENEFITS

The Company or its controlled entities did not have any employees during the financial year. In the previous financial year, all employees were transferred in the management buy-out of the Company’s New Zealand branch. (Refer Note 21(c)). All liabilities for employee benefits (including on-costs) that the consolidated entity expected to pay for services provided by employees were fully provided for in the Statements of Financial Position. (Refer Note 11).

Wages, Salaries, Annual Leave and Sick Leave

Liabilities for wages and salaries, annual leave, non-vesting sick leave (where future takings were expected to exceed future entitlements) and other employee benefits expected to be settled within 12 months of balance date were calculated at nominal amounts based on remuneration rates that the consolidated entity expected to pay at balance date. Liabilities for wages and salaries were recognised as part of creditors and accrued charges within Payables while liabilities for annual leave and non-vesting sick leave, where applicable, were included within the provision for employee benefits in the Statements of Financial Position. (Refer Notes 9 and 11). Employee benefits only relate to the Company’s New Zealand operations in the previous financial year.

• DIVIDENDS

A provision for dividends payable is recognised for the entire undistributed amount in the reporting period in which the dividends are declared.

(j) INSURANCE

The Company’s parent holds a group self-insurer’s licence for workers’ compensation that applies to the parent and its wholly-owned subsidiaries based in NSW. The liability for workers' compensation is recorded in the parent entity’s Statement of Financial Position, is actuarially assessed and includes an estimate for incurred but not reported losses. The liability for the insurance policy excesses in respect of both public liability and industrial special risk insurance exposures is internally assessed by the parent on the basis of actual claims existing as at balance date and is also in the parent’s Statement of Financial Position. Premiums charged by the parent to the consolidated entity, if any, are expensed as incurred.

Other entities in the consolidated entity that are based outside of NSW obtain their own insurance cover for workers’ compensation. (k) TAXATION

• INCOME TAX

The Company and its controlled entities in Australia are subject to notional taxation in accordance with the State Owned Corporations Act 1989. An 'equivalent' or 'notional income tax' is payable to the NSW Government through the Office of State Revenue. Taxation liability is assessed according to the National Tax Equivalent Regime (“NTER”) that replaced the former State Tax Equivalent Regime of the NSW Treasury from 1 July 2001. The NTER closely mirrors the Commonwealth Income Tax Assessment Act 1936 (as amended) and is administered by the Australian Taxation Office. The consolidated entity adopts the liability method of tax-effect accounting under the current Australian Accounting Standard AASB 1020 “Accounting for Income Tax (Tax-Effect Accounting)”. Tax-effect accounting is also used to recognise tax liabilities or assets arising in overseas tax jurisdictions through the consolidated entity’s overseas operations.

The parent and its controlled entities have implemented the new tax consolidation legislation effective from 1 July 2002. Accordingly,

the parent and its controlled entities have consolidated as a single entity for tax purposes. As a consequence, the parent, as the head entity in the tax-consolidated group, recognises current and deferred tax amounts relating to transactions, events and balances of the Company as if those transactions, events and balances were its own, in addition to the current and deferred tax amounts arising in relation to its own transactions, events and balances. The parent is now the only taxpayer in the tax-consolidated group for the purposes of the NTER. The only income tax that the Company and the consolidated entity are liable to pay in respect of the financial year is in overseas jurisdictions through its overseas operations. The tax-consolidated group does not have a tax sharing agreement.

In respect of the overseas tax obligations, income tax expense is calculated on the profit from ordinary activities adjusted for

permanent differences between taxable income and accounting profit. The tax effect of timing differences, which arise from items

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being recognised in different periods for income tax and accounting purposes, is carried forward in the Statements of Financial Position as a deferred tax asset (future income tax benefit) or a deferred tax liability (provision for deferred income tax). Future income tax benefits relating to timing differences are not recognised unless realisation of the asset is assured beyond reasonable doubt. Future income tax benefits relating to entities in the consolidated entity with tax losses are only recognised when their realisation is virtually certain. (Refer Note 3).

• GOODS AND SERVICES TAX

In relation to the Goods and Services Tax (“GST”), revenues, expenses and assets are recognised net of the amount of GST except where the amount of GST incurred by the Company as a purchaser is not recoverable from the Australian Taxation Office. In such cases, the GST incurred is recognised as part of the cost of acquisition of an asset or as part of an item of expense. Receivables and payables are stated with the amount of GST included. Cash flows are included in the Statements of Cash Flows on a gross basis and classified as operating activities. The Company’s GST obligations (amounts receivable) are remitted to (received from) the parent and are included in the parent’s monthly consolidated Business Activity Statement submitted to the Australian Taxation Office.

(l) REVENUE RECOGNITION

• SALES REVENUE

Sales revenue comprises revenue earned (net of returns, discounts and allowances) from the provision of products or services by the Company and its controlled entities. Sales revenue is recognised when the goods or services are provided. Revenue recognition policies for construction work in progress are described above in Accounting Policy Note 1(e).

• INVESTMENT REVENUE

Interest revenue is recognised in the Statements of Financial Performance when receivable. The profit or loss on disposal of investments is calculated as the difference between the carrying amount of the investment at the time of the disposal and the proceeds on disposal and is recorded in the Statements of Financial Performance in the period of disposal.

• DIVIDEND REVENUE

Dividend revenue is recognised in the Company’s Statement of Financial Performance when the dividend is declared by the controlled entity.

• PROPERTY, PLANT AND EQUIPMENT DISPOSALS

The profit or loss on disposal of property, plant and equipment was calculated as the difference between the carrying amount of the asset at the time of disposal and the proceeds on disposal and was recognised in the Statements of Financial Performance in the period of disposal.

(m) FOREIGN CURRENCY

• TRANSACTIONS

Foreign currency transactions are translated to Australian currency at the rates of exchange ruling at the dates of the transactions. Amounts receivable and payable in foreign currencies at balance date are translated at the rates of exchange ruling on that date. Exchange differences relating to amounts payable and receivable in foreign currencies are recognised in the Statements of Financial Performance in the financial year in which the exchange rates change.

• TRANSLATION OF CONTROLLED FOREIGN ENTITIES

The assets and liabilities of foreign operations that are integrated are translated using the temporal method. Monetary assets and liabilities are translated at the rates of exchange ruling at balance date, while non-monetary items are translated at exchange rates current when transactions occurred. Revenue and expense items of those foreign operations are translated at a weighted average rate for the financial year. Exchange differences arising on translation are recognised in the Statement of Financial Performance.

The assets and liabilities of foreign operations that are self-sustaining are translated at the rates of exchange ruling at balance date. Equity items are translated at historical rates. The Statements of Financial Performance of those foreign operations are translated at a weighted average rate for the financial year. Exchange differences arising on translation are taken directly to the Foreign Currency Translation Reserve. Upon disposal, the Foreign Currency Translation Reserve of that foreign operation is transferred to Retained Profits. (Refer Notes 13 and 14).

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2. PROFIT FROM ORDINARY ACTIVITIES BEFORE INCOME TAX EXPENSE

Profit from ordinary activities before income tax expense has been arrived at after including the following revenue and expense items: (a) REVENUES FROM ORDINARY ACTIVITIES Revenues from core operating activities: Sales revenue from rendering of services 10,738 22,527 10,631 22,398 Revenues from other than core operating activities: Interest revenue from investments: Parent 229 73 229 73 Other parties 81 107 81 107 Sundry revenue 51 137 50 116 ____________________________________________________ Total Revenues from ordinary activities 11,099 22,844 10,991 22,694 ____________________________________________________ (b) EXPENSES FROM ORDINARY ACTIVITIES Employee-related expenses * (13) 1,422 (13) 1,422 Contractor services expenses 24(b), 28 3,316 12,113 3,305 12,102 Transport expenses 6,094 5,728 6,095 5,727 Depreciation and amortisation expenses 17(b) - 61 - 61 Other expenses from ordinary activities 223 1,411 258 1,121 ____________________________________________________ 9,620 20,735 9,645 20,433 Borrowing costs expense: Controlled entities - - - 8 ____________________________________________________ Total Expenses from ordinary activities 9,620 20,735 9,645 20,441 ____________________________________________________

* The Company or its controlled entities did not have any employees during the financial year. The credit balance in the current financial year is due to the write-back of the remaining portion of the previous year’s provision for redundancy expense, which was no longer required. The write-back amounted to $0.053 million.

Additional disclosures for specific items are as follows: Depreciation of: Plant and equipment - 29 - 29 Computer equipment - 32 - 32 ____________________________________________________ Total depreciation - 61 - 61 ____________________________________________________

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Operating lease rental expenses: Minimum lease payments 17 121 17 120 ____________________________________________________ Loss on disposal of property, plant and equipment - 2 - 2 ____________________________________________________ Loss on disposal of foreign operation 21(c) - 37 - 37 ____________________________________________________ Bad and doubtful debts expense (write-back) (50) 216 (22) (33) ____________________________________________________ Amounts set aside to provide for: Employee benefits and on-costs - 162 - 162 ____________________________________________________ Net foreign exchange loss (gain) 33 37 27 13 ____________________________________________________

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___________________________________________________________________________________________________________ Consolidated The Company Note 2005 2004 2005 2004 $’000 $’000 $’000 $’000 ___________________________________________________________________________________________________________ 3. TAXATION (a) INCOME TAX EXPENSE Prima facie income tax expense calculated at 30% (2004: 30%) on the profit from ordinary activities before income tax 444 633 404 676 Add (less) tax effect of permanent differences: Non-allowable expenses 36 218 36 145 Realised loss (gain) on foreign exchange - (1) - - Unrealised loss (gain) on foreign exchange - - - (1) Group entities’ results not recognised for tax purposes 28 - 28 - Under (Over)-provided in previous financial year 3 - 3 - Future income tax benefit adjustment - (12) - (12) Differential in overseas tax rates - 9 - 9 Tax losses not previously recognised - 28 - 24 Transfer of balances to ultimate parent due to Australian tax consolidation (475) (965) (475) (965) Allowance for write-down of investments - 87 7 96 Other (14) 29 - 24 ____________________________________________________ Income tax expense (benefit) relating to ordinary activities 17(b) 22 26 3 (4)

____________________________________________________ Total income tax expense relating to ordinary activities is made up of: Current income tax payable 19 14 - (16) Provision for deferred income tax - (5) - (5) Future income tax benefit - 17 - 17 Withholding tax claimed by parent 3 - 3 - ____________________________________________________ 22 26 3 (4) ____________________________________________________ (b) CURRENT TAX LIABILITIES Current Income Tax Payable Movements during the financial year were as follows: Balance at beginning of the financial year 5 71 3 18 Over-provided in previous financial year - (25) - (27) Income tax received - 44 - 44 Income tax paid (6) (106) (4) (22) Current year’s income tax payable on operating profit 19 40 - 9 Transfer to (from) Current tax asset - net - (19) - (19) Foreign exchange movement - - 1 - ____________________________________________________ 18 5 - 3 ____________________________________________________

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___________________________________________________________________________________________________________ Consolidated The Company Note 2005 2004 2005 2004 $’000 $’000 $’000 $’000 ___________________________________________________________________________________________________________ 4. CASH ASSETS CURRENT Cash 17(a) 564 3,193 151 2,705 Current investments 17(a) 6,012 2,402 6,012 2,402 ____________________________________________________ 6,576 5,595 6,163 5,107 ____________________________________________________ Current investments comprise the following: Government and other public sector securities: At cost: Deposits at call 17(a) 6,012 2,402 6,012 2,402 ____________________________________________________ Total Current investments 6,012 2,402 6,012 2,402 ____________________________________________________ SIGNIFICANT TERMS AND CONDITIONS None of the above investments are quoted on a stock exchange. Deposits at call are interest-bearing investments held in the name of the

parent. 5. RECEIVABLES CURRENT Trade debtors: Controlled entities - - - 80 Other parties 768 3,360 546 3,111 ____________________________________________________ 768 3,360 546 3,191 Less: Allowance for doubtful debts Other parties 245 294 23 45 ____________________________________________________ 523 3,066 523 3,146 ____________________________________________________ Other debtors and accrued revenue: Parent 61 9 61 9 Other parties 2,299 2,704 2,263 2,676 ____________________________________________________ 2,360 2,713 2,324 2,685 ____________________________________________________ Total: Parent 61 9 61 9 Controlled entities - - - 80 Other parties 2,822 5,770 2,786 5,742 ____________________________________________________ 2,883 5,779 2,847 5,831 ____________________________________________________

NON-CURRENT Loan provided to outside equity interests in controlled entity 69 77 69 77 ____________________________________________________

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___________________________________________________________________________________________________________ Consolidated The Company Note 2005 2004 2005 2004 $’000 $’000 $’000 $’000 ___________________________________________________________________________________________________________ SIGNIFICANT TERMS AND CONDITIONS Trade debtors are required to be settled within 30 days. Accrued investment income is receivable within a maximum period of six months. The non-current loan is between the Company and the outside equity interests of its controlled entity in Thailand, AWT International

(Thailand) Limited. The loan was originally provided to those outside equity interests in order for them to acquire the shares in the controlled entity. Under Thailand law, a foreign company cannot own more than 49% of the shares in a Thailand company. There is no defined period for the settlement of the loan. The process of settlement by the outside equity interests can be by way of repayment of the loan in cash or returning all of their shares to the Company. The loan is interest-bearing at the rate of 10% per annum. The actual interest receivable each financial year is dependent on whether the Thailand controlled entity can pay a dividend to the outside equity interests to the value of 10% of their total shareholding. If the dividend payable to outside equity interests for each financial year by the Thailand controlled entity is less than 10% of their total shareholding, the difference between the dividend payable by the Thailand controlled entity to its outside equity interests and the 10% interest receivable by the Company on the loan is waived.

6. INVENTORIES CURRENT Construction work in progress: Contract costs incurred to date - 208 - 208 Profit recognised to date - 86 - 86 ___________________________________________________ - 294 - 294 Less: Progress billings - 230 - 230 ____________________________________________________ Net construction work in progress - 64 - 64 ____________________________________________________ Total Inventories - 64 - 64 ____________________________________________________ Net construction work in progress comprises: Amounts due from customers - 64 - 64 ____________________________________________________ 7. OTHER ASSETS CURRENT Prepayments 4 2 4 2 ____________________________________________________ Total Other assets 4 2 4 2 ____________________________________________________

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___________________________________________________________________________________________________________ Consolidated The Company Note 2005 2004 2005 2004 $’000 $’000 $’000 $’000 ___________________________________________________________________________________________________________ 8. OTHER FINANCIAL ASSETS NON-CURRENT Non-current investments - - 286 309 ____________________________________________________ Non-current investments comprise the following: Government and other public sector securities: At cost: Investment in AWT Philippines, Inc. 21(a) - - 264 264 Less: Allowance for loss on investment - - 52 29 ____________________________________________________ - - 212 235 Investment in AWT International (Thailand) Limited 21(a) - - 74 74 ____________________________________________________ Total Non-current investments - - 286 309 ____________________________________________________ 9. PAYABLES CURRENT Trade creditors: Parent 11 1,707 11 1,707

Controlled entities - - 2 2 Other parties 545 525 545 525 Other creditors and accrued charges: Parent 325 1,876 325 1,876 Controlled entities - - 4 6 Other parties 486 557 470 527 ____________________________________________________ 1,367 4,665 1,357 4,643 ____________________________________________________ Total Payables: Parent 336 3,583 336 3,583 Controlled entities - - 6 8 Other parties 1,031 1,082 1,015 1,052 ____________________________________________________ 1,367 4,665 1,357 4,643 ____________________________________________________ SIGNIFICANT TERMS AND CONDITIONS Trade accounts payable are normally settled within 30 days.

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___________________________________________________________________________________________________________ Consolidated The Company Note 2005 2004 2005 2004 $’000 $’000 $’000 $’000 ___________________________________________________________________________________________________________ 10. INTEREST-BEARING LIABILITIES CURRENT Loan from AWT Philippines, Inc. - - 165 183 ____________________________________________________

The loan was part of the net assets acquired by the Company from its then wholly owned controlled entity, AWT International Pty Ltd (“AWTI”) when it ceased operations. The loan will be settled as part of the transfer of assets and liabilities upon dissolution of the controlled entity, AWT Philippines, Inc. (Refer Note 21(e)). Interest payable on the loan is at arm’s length and on commercial terms and conditions.

11. PROVISIONS CURRENT Employee benefits, including on-costs - 57 - 57 ____________________________________________________ - 57 - 57 ____________________________________________________ 12. CONTRIBUTED EQUITY ISSUED AND FULLY PAID UP SHARE CAPITAL 500,000 (2004: 500,000) $1 ordinary shares fully paid 500 500 500 500 ____________________________________________________

The Company is wholly owned by its parent, Sydney Water Corporation. There are no restrictions to dividends payable to the parent. Under the NTER, the Company is not required to maintain a dividend franking account.

13. RESERVES Foreign currency translation (89) 11 (1) (1) ____________________________________________________ (89) 11 (1) (1) ____________________________________________________

MOVEMENTS DURING THE FINANCIAL YEAR • FOREIGN CURRENCY TRANSLATION Balance at beginning of financial year 11 (25) (1) (25) Translation adjustment on controlled foreign entities’ Financial Statements (100) 26 - 14 Transfer to retained profits on management buy-out of New Zealand branch 14 - 10 - 10 ____________________________________________________ Balance at end of financial year (89) 11 (1) (1) ____________________________________________________

The foreign currency translation reserve records the foreign currency differences arising from the translation of self-sustaining foreign operations. (Refer Note 1(m)).

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14. RETAINED PROFITS Balance at beginning of financial year 6,181 4,108 6,005 3,758 Net profit attributable to members of the parent entity 1,448 2,083 1,343 2,257 Transfer from foreign currency translation reserve 13 - (10) - (10) ____________________________________________________ Balance at end of financial year 7,629 6,181 7,348 6,005 ____________________________________________________ 15. OUTSIDE EQUITY INTERESTS Outside equity interests in controlled entity comprises: Interest in retained profits at the beginning of financial year 9 9 - - Interest in profit from ordinary activities after income tax 9 - - - ____________________________________________________ Interest in retained profits at end of financial year 18 9 - - Interest in share capital 89 89 - - ____________________________________________________ Total outside equity interests 107 98 - - ____________________________________________________ 16. TOTAL EQUITY RECONCILIATION Balance at beginning of financial year 6,790 4,681 6,504 4,233 Total changes in parent entity interest in equity recognised in the Statements of Financial Performance 1,348 2,109 1,343 2,271 Total changes in outside equity interests 15 9 - - -

____________________________________________________ Balance at end of financial year 8,147 6,790 7,847 6,504 ____________________________________________________ 17. NOTES TO THE STATEMENTS OF CASH FLOWS (a) RECONCILIATION OF CASH For the purposes of the Statements of Cash Flows, cash includes cash on hand, in banks (net of bank overdraft) and any short-term

investments in money market instruments, which are classified under Current Assets. Cash as at the end of the financial year as shown in the Statements of Cash Flows is reconciled to the related items in the Statements of Financial Position as follows:

Cash 4 564 3,193 151 2,705 Current investments 4 6,012 2,402 6,012 2,402 ____________________________________________________ 6,576 5,595 6,163 5,107 ____________________________________________________

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___________________________________________________________________________________________________________ Consolidated The Company Note 2005 2004 2005 2004 $’000 $’000 $’000 $’000 ___________________________________________________________________________________________________________ (b) RECONCILIATION OF NET PROFIT TO NET CASH PROVIDED BY OPERATING ACTIVITIES Net profit 1,457 2,083 1,343 2,257 Add (less) items classified as investing or financing activities: Borrowing costs expense - - - 8 Add (less) non-cash items: Bad and doubtful debts expense (write-back) 2(b) (50) 216 (22) (33) Amounts set aside to provisions 2(b) (53) 162 (53) 162 Depreciation and amortisation 2(b) - 61 - 61 Loss on disposal of property, plant and equipment2(b) - 2 - 2 Loss on disposal of foreign operation 2(b) - 37 - 37 Loss on investment in controlled entities - - 22 29 Income tax expense relating to ordinary activities 3(a) 22 26 3 (4) Add (less) net movement applicable to operating activities for: Inventories 64 319 64 319 Debtors and prepayments 2,896 (1,458) 3,013 (1,635) Creditors (3,293) 2,442 (3,306) 2,459 Receipt for tax assets - 44 - 44 Payments for tax liabilities (6) (106) (4) (22) Payments made from provisions (4) (113) (4) (113) ____________________________________________________ Net cash provided by (used in) operating activities 1,033 3,715 1,056 3,571 ____________________________________________________ (c) STANDBY CREDIT ARRANGEMENTS The Company has available to it a $10.400 million drawdown facility provided by the parent (2004: $10.400 million). In addition, the

Company has a $2.000 million (2004: $2.000 million) Performance Bond/Guarantee facility and a $0.250 million (2004: $0.250 million) bank overdraft facility from the Commonwealth Bank of Australia. The parent’s drawdown facility and the bank overdraft facility were not used as at balance date. The position of these facilities at balance date was as follows:

Facility utilised 54 133 54 133 Facility not utilised 12,596 12,517 12,596 12,517 ____________________________________________________ Total facility 12,650 12,650 12,650 12,650 ____________________________________________________

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___________________________________________________________________________________________________________ Consolidated The Company Note 2005 2004 2005 2004 $’000 $’000 $’000 $’000 ___________________________________________________________________________________________________________ 18. COMMITMENTS The following commitments do not include estimates of the Goods and Services Tax. OPERATING LEASE COMMITMENTS Future operating lease rentals not provided for in the Financial Statements and payable: Not longer than one year - 3 - 3 ____________________________________________________ - 3 - 3 ____________________________________________________ Representing: Cancellable operating leases - - - - Non-cancellable operating leases - 3 - 3 ____________________________________________________ - 3 - 3 ____________________________________________________ Non-cancellable operating lease rentals are payable as follows: Not later than one year - 3 - 3 ____________________________________________________ - 3 - 3 ____________________________________________________

The Company leased property under operating leases expiring from one to three years. Leases generally provided the Company with a right of renewal at which time all terms were negotiated.

19. EMPLOYEE BENEFITS Aggregate employee benefits liabilities, including on-costs: Current Employee benefits provisions 11 - 57 - 57 ____________________________________________________

- 57 - 57 ____________________________________________________ 20. CONSULTANTS

The total amount paid or payable to consultants engaged by the Company during the financial year was $0.001 million (2004: $0.005 million).

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21. PARTICULARS IN RELATION TO CONTROLLED ENTITIES (a) Ownership interest and establishment ___________________________________________________________________________________________________________ Name Ownership Interest Held 2005 2004 Class of Share % % ___________________________________________________________________________________________________________ Parent Entity: Australian Water Technologies Pty. Ltd.

• Directly controlled by Australian Water Technologies Pty. Ltd.

AWT Philippines, Inc. Ordinary 100 100 AWT International (Thailand) Limited Ordinary 49 49

AWT Philippines, Inc. was incorporated in the Philippines. AWT International (Thailand) Limited was incorporated in Thailand.

(b) Key figures for Australian Water Technologies Pty. Ltd. and its controlled entities ___________________________________________________________________________________________________________ Total Revenue from Profit (Loss) from ordinary activities Total Assets ordinary activities before income tax expense as at 30 June 2005 2004 2005 2004 2005 2004 $’000 $’000 $’000 $’000 $’000 $’000 ___________________________________________________________________________________________________________ Australian Water Technologies Pty. Ltd. 10,991 22,694 1,346 2,253 9,369 11,390 AWT Philippines, Inc. - 13 - (9) 212 234 AWT International (Thailand) Limited 108 161 110 (163) 409 472 ___________________________________________________________________________________________________________ (c) Closure of Overseas branch operations

(i) New Zealand branch In the previous financial year, the Company’s New Zealand branch operations was subject to a management buy-out. The New Zealand branch markets the parent’s expertise in water and water-related services to customers in New Zealand. Approval for the management buy-out occurred in May 2004 and was effective from 1 June 2004. Under the buy-out agreement, branch assets, liabilities, employees and some contracts were transferred to the management buy-out entity. For those contracts that were not transferred, the customers wanted continuity and completion of all work on these contracts under the existing arrangements. Accordingly, these contracts were sub-contracted by the branch to the management buy-out entity. Under the sub-contracting arrangement, the management buy-out entity (as sub-contractor) invoices the branch for all work completed with the customer endorsing the invoices. The branch then issues the invoices to the customers for payment. When payment is received from the customers, the branch then pays the management buy-out entity. The branch accounts for all the transactions for the contracts that have not been transferred. The branch will not enter into any new contracts. It is expected that the contractual obligations for these contracts will be completed in the next financial year and the branch will then be discontinued and de-registered.

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_______________________________________________________________________________________________________________________ Consolidated The Company Note 2005 2004 2005 2004 $’000 $’000 $’000 $’000 ___________________________________________________________________________________________________________

Details of the management buy-out were as follows:

Consideration received and receivable (cash) Cash received - 212 - 212 Consideration receivable (received on 2 July 2004) - 250 - 250

____________________________________________________ - 462 - 462

____________________________________________________ Net assets of New Zealand branch disposed of:

Cash assets - 206 - 206 Receivables and Prepayments - 264 - 264 Property, plant and equipment - 186 - 186 Payables - (92) - (92) Provisions - (44) - (44) Foreign currency adjustment - (21) - (21)

____________________________________________________

Net assets - 499 - 499 ____________________________________________________

Loss on disposal - 37 - 37 ____________________________________________________

The New Zealand branch did not transact with any of the other controlled entities in the consolidated entity. Accordingly, the financial information disclosed below in respect of the branch, as a discontinuing operation, is applicable to both the Company and the consolidated entity.

___________________________ New Zealand Branch 2005 2004 $’000 $’000 ___________________________

Financial Performance for the year ended 30 June:

Revenue from ordinary activities 2,218 2,719 Expenses from ordinary activities (2,246) (2,671)

___________________________

Profit (loss) from ordinary activities before income tax (28) 48 Income tax expense relating to ordinary activities - -

___________________________

Profit (loss) from ordinary activities after income tax (28) 48 ___________________________

Financial Position as at 30 June:

The carrying amount of total assets and liabilities were as follows:

Total assets 297 379 Total liabilities 352 405

___________________________ Net assets (liabilities) (55) (26) __________________________

Cash Flows for the year ended 30 June:

The net cash flows were as follows:

Operating (3) (281) Investing - (46)

___________________________ Net cash inflows (outflows) (3) (327) __________________________

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(ii) Singapore branch

The current contractual obligations for Singapore branch will cease in the next financial year and the Singapore operations will be discontinued. The branch will not enter into any new contracts. The Singapore branch did not transact with any of the other controlled entities in the consolidated entity. Accordingly, the financial information disclosed below in respect of the branch, as a discontinuing operation, is applicable to both the Company and the consolidated entity.

___________________________ Singapore Branch 2005 2004 $’000 $’000 ___________________________


Revenue from ordinary activities 193 398 Expenses from ordinary activities 255 511

___________________________

Profit (loss) from ordinary activities before income tax (62) (113) Income tax expense relating to ordinary activities - -

___________________________

Profit (loss) from ordinary activities after income tax (62) (113) ___________________________




___________________________ Net assets (liabilities) (175) (113) ___________________________

(iii) Fiji branch

The Fiji branch did not trade during the financial year and the branch will not carry out any further work in Fiji. The branch will be discontinued and deregistered in the next financial year. The financial information disclosed below in respect of the branch, as a discontinuing operation, is applicable to both the Company and the consolidated entity.

___________________________ Fiji Branch 2005 2004 $’000 $’000 ___________________________


Revenue from ordinary activities - 99 Expenses from ordinary activities 4 73

___________________________

Profit (loss) from ordinary activities before income tax (4) 26 Income tax expense relating to ordinary activities - 8

___________________________

Profit (loss) from ordinary activities after income tax (4) 18 ___________________________

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___________________________ Fiji Branch 2005 2004 $’000 $’000 ___________________________




___________________________ Net assets (liabilities) 51 54 ___________________________ (d) Closure of overseas controlled entity

In the previous financial year, approval was obtained from the parent’s Voting Shareholders to dissolve the Company’s overseas controlled entity, AWT Philippines, Inc., which has been dormant since 31 March 1999. The controlled entity will be dissolved when approval is obtained from the Securities Exchange Commission, the companies regulator in the Philippines. When that approval is obtained, all of this controlled entity’s net assets will be transferred to, and acquired by, the Company for equivalent cash consideration. In addition, a final share capital repayment will be made to clear the controlled entity’s Statement of Financial Position to Nil. The controlled entity does not transact with any other controlled entity in the consolidated entity. Accordingly, financial information for this discontinuing operation, which is applicable to the consolidated entity only, is as follows:

___________________________ AWT Philippines, Inc. 2005 2004 $’000 $’000 ___________________________


Revenue from ordinary activities - 13 Expenses from ordinary activities - (22)

___________________________

Profit (loss) before income tax (expense) revenue - (9) Income tax expense relating to ordinary activities - -

___________________________

Profit (loss) from ordinary activities after income tax - (9) ___________________________



Total assets 212 234 Total liabilities - -

___________________________ Net assets 212 234 ___________________________

Cash Flows for the year ended 30 June:

The net cash flows were as follows:

Operating - 3 ___________________________

Net cash inflows - 3 ___________________________

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___________________________________________________________________________________________________________ Consolidated The Company Note 2005 2004 2005 2004 $’000 $’000 $’000 $’000 ___________________________________________________________________________________________________________ 22. AUDITORS' REMUNERATION Audit services Remuneration for audit or review of the financial reports of the Company or any entity in the consolidated entity: Auditors of the Company: - The Company 30 34 30 34 - Controlled entities 3 5 3 5 Other auditors of branches of the Company and controlled entities 22 23 19 17 ____________________________________________________ 55 62 52 56 ____________________________________________________ Other services Auditors of overseas controlled entity - taxation services - 4 - -

____________________________________________________ 23. DIRECTORS' REMUNERATION

Directors’ remuneration includes salaries for executive Directors and any other benefits paid or payable to both executive and non-executive Directors of both the Company and any of its controlled entities in the consolidated entity. Details of Directors’ remuneration during the financial year are as follows:

Directors of the Company • Remuneration from the Company Directors’ remuneration paid or payable to the Company’s non-executive Directors by the Company for the financial year amounted to $0.011 million (2004: $0.049 million). No remuneration was paid or payable by the Company to its executive Directors. • Remuneration from the Parent Directors’ remuneration paid or payable to the Company’s Directors by the parent, Sydney Water Corporation, for the financial year amounted to $0.680 million (2004: $1.152 million). This included an amount of $0.199 million (2004: $0.523 million) to non-executive Directors and $0.481 million (2004: $0.629 million) to executive Directors.

Other Directors of Controlled Entities • Remuneration from the Company During the financial year, the Company paid $Nil (2004: $0.003 million) to the overseas Filipino Directors of the Company’s controlled entity, AWT Philippines, Inc. The Company paid no other remuneration to overseas Directors of its controlled entities (2004: $Nil). • Remuneration from the Parent During the financial year, the parent, Sydney Water Corporation, paid $0.124 million to a senior executive of the parent who was a Director of the Company’s controlled entity, AWT International (Thailand) Limited. In the previous financial year, the parent paid $0.185 million to a senior executive of the parent who was a Director of the Company’s controlled entities, AWT Philippines, Inc. and AWT International (Thailand) Limited. • Remuneration from Controlled Entities During the financial year, the Company’s controlled entity, AWT International (Thailand) Limited, paid $0.004 million (2004: $0.004 million) to its overseas Thailand Director. No remuneration was paid by the Company’s controlled entities to their Australian Directors (2004: $Nil).

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___________________________________________________________________________________________________________ Consolidated The Company 2005 2004 2005 2004 ___________________________________________________________________________________________________________ Summary of Directors’ Remuneration

An analysis of Directors’ remuneration paid to both Directors of the Company and Directors of all entities in the consolidated entity, by the respective entities, is shown below: The number of Directors of the Company whose income from the Company or any related party falls within the following bands:

$60,000 - $69,999 - 2 $70,000 - $79,999 1 3 $80,000 - $89,999 - 1 $130,000 - $139,999 1 2 $480,000 - $489,999 1 - $490,000 - $499,999 - 1 $'000 $’000 $'000 $’000 Total income paid or payable, or otherwise made available, to all Directors of the Company or each entity in the consolidated entity from the Company or any related party: - by the parent 804 1,337 680 1,152

- by the Company 11 52 11 52 - by controlled entities 4 4 - - ____________________________________________________ 819 1,393 691 1,204 ____________________________________________________ 24. RELATED PARTY TRANSACTIONS (a) DIRECTORS The names of each person holding the position of Director of Australian Water Technologies Pty Ltd at any time during the financial year

were: G. Kibble (Chairman) W. D. Evans J. D. Priest Details of Directors’ remuneration are disclosed in Note 23. All transactions by the Company with Director-related entities are conducted on

an arm’s length basis in the normal course of business and on commercial terms and conditions. (b) WHOLLY-OWNED GROUP

The Company’s immediate parent entity and the ultimate parent entity is Sydney Water Corporation. Details of interests in controlled

entities are provided in Note 21. Details of dealings with entities within the Sydney Water Group are set out below. Transactions with Parent and Controlled Entities

During the financial year, the Company did not enter into any transactions with its controlled entities, AWT International (Thailand) Limited and AWT Philippines, Inc. In the previous financial year, the Company entered into transactions with AWT International (Thailand) Limited for the provision of water and water-related services. The Company’s controlled entity, AWT Philippines, Inc., is in the process of being dissolved (Refer Note 21(d)). In the previous financial year, the Company incurred interest of $0.008 million to AWT Philippines, Inc. in respect of an interest-bearing loan payable to this controlled entity. (Refer Note 10). Transactions between the Company and its controlled entities were conducted on an arm’s length basis in the normal course of business and on commercial terms and conditions.

The Company markets the parent’s expertise in water and water-related services in the Water industry to external customers, both domestically and overseas. The parent provided the Company with all of the resources and services necessary for the Company to fulfil its contractual obligations for external work. In providing its resources to the Company under the current trading arrangements, the parent charged for its services based upon an assessment of direct costs and a factor to cover local and corporate overheads.

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Balances with Entities within the Wholly-Owned Group

The aggregate amounts receivable from, and payable to, entities within the wholly-owned group by the Company at balance date are as follows:

___________________________ The Company 2005 2004 $’000 $’000 ___________________________ Receivables Current Other debtors Parent 61 9 ___________________________ 61 9 Investments with parent 6,012 2,403 ___________________________ 6,073 2,412 ___________________________ There is no allowance for doubtful debts in respect of receivables from the parent or the Company’s controlled entities. Creditors and other liabilities Current Trade Creditors Parent 11 1,707 Controlled entities 2 - Other Creditors Parent 325 1,876 Controlled entities 4 6 ___________________________ 342 3,589 ___________________________ Loans payable Controlled entity 165 183 ___________________________ (c) OTHER RELATED PARTIES

The aggregate amounts receivable from, and payable to, the Company’s partly-owned controlled entity, AWT International (Thailand) Limited were as follows:

Receivables Current Trade debtors Controlled entity - 80 ___________________________ Creditors and other liabilities Current Trade creditors Controlled entity - 2 ___________________________ - 2 ___________________________

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25. ADDITIONAL FINANCIAL INSTRUMENTS DISCLOSURE (a) INTEREST RATE RISK

The consolidated entity’s exposure to interest rate risk and the effective weighted average interest rate for classes of financial assets and financial liabilities, both recognised and unrecognised in the Statement of Financial Position as at balance date, are set out below: ___________________________________________________________________________________________________________ Weighted Fixed Interest Rate Maturing in: Average Floating Non Interest Interest Less than More than Interest Total Note Rate Rate 1 Year 1 to 5 Years 5 years Bearing % $’000 $’000 $’000 $’000 $’000 $’000 ___________________________________________________________________________________________________________ 2005 Financial Assets • Recognised: Cash 4 4.80 150 - - - 414 564 Deposits at call 4 5.58 - 6,012 - - - 6,012 Trade receivables 5 - - - - - 523 523 Other receivables 5 10.00 - - - 69 2,360 2,429 _____________________________________________________________________________ 150 6,012 - 69 3,297 9,528 _____________________________________________________________________________ Financial Liabilities • Recognised: Trade creditors 9 - - - - - 556 556 Other payables 9 - - - - - 811 811 _____________________________________________________________________________ - - - - 1,367 1,367 _____________________________________________________________________________ 2004 Financial Assets • Recognised: Cash 4 3.94 2,699 - - - 494 3,193 Deposits at call 4 5.45 - 2,402 - - - 2,402 Trade receivables 5 - - - - - 3,066 3,066 Other receivables 5 10.00 - - - 77 2,713 2,790 _____________________________________________________________________________ 2,699 2,402 - 77 6,273 11,451 _____________________________________________________________________________ Financial Liabilities • Recognised: Trade creditors 9 - - - - - 2,232 2,232 Other payables 9 - - - - - 2,433 2,433 _____________________________________________________________________________ - - - - 4,665 4,665 _____________________________________________________________________________ (b) CREDIT RISK

Credit risk refers to the risk that counterparties will default on their contractual obligations resulting in financial loss to the consolidated entity. The consolidated entity deals with creditworthy counterparties as a means of mitigating the risk of financial losses from defaults. The consolidated entity does not have any material credit risk exposure to any single counterparty or group of counterparties under financial instruments entered into by the consolidated entity.

• Financial Instruments recognised in the Statement of Financial Position

The credit risk on financial assets of the consolidated entity that have been recognised in the Statement of Financial Position is the

carrying amount, net of any allowance for doubtful debts. (Refer Note 25(a)).

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(c) NET FAIR VALUES OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES

Net fair values of financial assets and financial liabilities are determined by the consolidated entity on the following bases:

• Financial Instruments recognised in the Statement of Financial Position

The net fair values of financial assets recorded as Current investments are determined on the basis of discounted cash flows using valuation rates supplied by independent market sources and take into account accrued interest and transaction costs that would be incurred to realise the financial assets. Deposits at call are held in the name of the parent.

All other financial assets and liabilities in the Statement of Financial Position, other than deposits at call, are not readily traded on organised markets and it is therefore considered that their carrying value approximates net fair value.

• Financial Instruments not recognised in the Statement of Financial Position

The net fair values of any derivative financial instruments are determined on the basis of valuation rates and valuations supplied by independent market sources and take into account transaction costs that would be incurred to realise or settle the financial instruments. Any such instruments are held in the name of the parent and are readily traded on organised markets.

The following table details the carrying amounts and net market values of the consolidated entity’s financial assets and financial liabilities at balance date:

___________________________________________________________________________________________________________ Carrying Amount Net Fair Value Note 2005 2004 2005 2004 $’000 $’000 $’000 $’000 ___________________________________________________________________________________________________________

FINANCIAL ASSETS

Traded on Organised Markets

• Recognised: Deposits at call 4 6,012 2,402 6,012 2,402 ____________________________________________________ 6,012 2,402 6,012 2,402 ____________________________________________________ Not Readily Traded on Organised Markets

• Recognised: Cash 4 556 3,193 556 3,193 Trade receivables 5 523 3,066 523 3,066 Other receivables 5 2,429 2,790 2,429 2,790 ____________________________________________________ 3,508 9,049 3,508 9,049 ____________________________________________________ Total Financial Assets 9,520 11,451 9,520 11,451 ____________________________________________________ FINANCIAL LIABILITIES Not Readily Traded on Organised Markets

• Recognised: Trade creditors 9 556 2,232 556 2,232 Other payables 9 811 2,433 811 2,433 ____________________________________________________ Total Financial Liabilities 1,367 4,665 1,367 4,665 ____________________________________________________

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26. AMOUNTS PAYABLE/RECEIVABLE IN FOREIGN CURRENCIES

The Australian dollar equivalents of unhedged amounts payable or receivable in foreign currencies, calculated at year-end exchange rates, are as follows:

___________________________________________________________________________________________________________ Consolidated The Company Note 2005 2004 2005 2004 $’000 $’000 $’000 $’000 ___________________________________________________________________________________________________________ NEW ZEALAND DOLLARS Amounts payable: Current 352 405 352 405 ____________________________________________________ Amounts receivable: Current 339 374 339 374 ____________________________________________________ SINGAPORE DOLLARS Amounts payable: Current 9 16 9 16 ____________________________________________________ Amounts receivable: Current 163 229 163 229 ____________________________________________________ FIJIAN DOLLARS Amounts payable: Current 4 8 4 8 ____________________________________________________ Amounts receivable: Current 44 47 44 47 ____________________________________________________ UNITED STATES DOLLARS Amounts payable: Current - - 165 183 ____________________________________________________ PHILIPPINE PESOS Amounts receivable: Current 6 7 - - ____________________________________________________ THAILAND BAHT Amounts payable: Current 34 112 - - ____________________________________________________ Amounts receivable: Current 36 29 - - Non-current 69 77 69 77 ____________________________________________________ 105 106 69 77 ____________________________________________________

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27. SEGMENT REPORTING

The Company and its controlled entities operate in one business segment, water and water-related services, being the primary segment. The consolidated entity markets the parent’s expertise for these services in the Water industry to external customers, both in Australia and overseas. The consolidated entity operates predominantly in Australia with operations currently through branches in New Zealand, Singapore, Fiji and a controlled entity in Thailand. Operations in the Philippines have been dormant since 31 March 1999 and are in the process of being closed down by dissolution of the Company’s controlled entity, AWT Philippines, Inc. (Refer Note 21(d)). Operations in New Zealand, Singapore and Fiji are also in the process of winding down in the next financial year. (Refer Note 31). The Australian and New Zealand operations were very similar during the financial year in that they exhibited similar economic and political conditions and close proximity and relationship between operations. The operations also had similar exchange control regulations and currency risks. Accordingly, these were regarded as one single geographical segment.

28. ECONOMIC DEPENDENCY

The Company markets the parent’s expertise in water and water-related services to external customers, both domestically and overseas. The Company’s operations focuses predominantly on the remaining domestic and international contracts. In providing its services, the Company contracts with the parent to obtain the necessary resources to fulfil its contracts with its external customers. Any new domestic contracts will now be directly undertaken by the parent as the Company’s Board has resolved that the Company should move to a position to enable it to be voluntarily deregistered. (Refer Note 31).

29. CONTINGENT LIABILITIES

Details of contingent liabilities by class are set out below. These are matters in which provisions are not required as it is not probable that a future sacrifice of economic benefits will be required or the amount is not capable of reliable measurement.


Performance Guarantees

The Company has in place a Performance Guarantee facility with the Commonwealth Bank of Australia. (Refer Note 18(c)). The Performance Guarantee is a condition of performing work in accordance with contractual arrangements with particular external customers. The total Performance Guarantees in place with customers at balance date amounted to: 54 133 54 133

____________________________________________________ Total contingent liabilities 54 133 54 133 ____________________________________________________ 30. IMPACT OF ADOPTING AUSTRALIAN EQUIVALENTS TO INTERNATIONAL FINANCIAL REPORTING STANDARDS

Applicability For reporting periods beginning on or after 1 January 2005, the Company and the consolidated entity will be required to comply with the accounting policies and financial reporting requirements of Australian equivalents to International Financial Reporting Standards (AEIFRS) as issued by the Australian Accounting Standards Board (AASB). This means that the first fully AEIFRS compliant financial report for the Company and the consolidated entity will be for the year ended 30 June 2006. Transition management In order to manage the transition to AEIFRS from the current Australian Accounting Standards and other financial reporting requirements that are applicable for the year ended 30 June 2005, a project team made up of internal resources from the parent’s Finance Division was established in late 2003. The project team has been responsible for the main technical analysis of each new AEIFRS Accounting Standard and to identify the actions necessary to implement the required changes to accounting policies, financial systems and reporting requirements. The project team meets on a regular basis to monitor progress of the project and to make strategic decisions as necessary. Status updates on the project have been provided throughout the financial year to the parent’s Board and Audit Committee as developments have occurred. As part of this process, the project team has kept abreast of developments in respect of both International Accounting Standards Board (IASB) and the AASB. The main deliverables of the project team are as follows: • Undertake the technical analysis of each new Accounting Standard; • Identify differences in accounting policies; • Identify changes required to financial systems and reporting requirements; • Identify the adjustments necessary to establish an opening AEIFRS Balance Sheet as at 1 July 2004; • Ensure that comparative AEIFRS data for 2004/05 is captured in parallel with the 2004/05 data required under AGAAP; and • Ensure AEIFRS readiness for the year ended 30 June 2006.

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To date, work has progressed satisfactorily in each of the areas described above. All of the key milestones to date have been achieved and the Company and the consolidated entity will be in a position to fully comply with the requirements of AEIFRS for the year ended 30 June 2006. Impact of transition to AEIFRS The Company and the consolidated entity have determined the key areas where changes in accounting policies are likely to impact the financial report. Some of these impacts arise because AEIFRS requirements are different from existing AGAAP. Other impacts are likely to arise because of options that are available under AEIFRS. To ensure consistency at the whole of Government level, NSW Treasury has advised agencies of the options it is likely to mandate for the NSW Public Sector. These mandates are only indicative at this stage and are still subject to change. The estimated impacts of the transition to AEIFRS set out in this Note have been prepared on the basis of the AEIFRS Standards and NSW Treasury indicative mandates that are in place as at the date of preparation of this financial report. However, the actual effects of the transition may differ from the estimated amounts in this Note because of pending changes to the AEIFRS, including Urgent Issues Group Interpretations and/or emerging accepted practice in their interpretation and application, and any possible further changes to NSW Treasury’s indicative mandates that may occur before they are finalised. Set out below are the key areas where accounting policies are expected to change on adoption of AEIFRS and management’s best estimates, as at the date of preparing this financial report, of the quantitative impact of the changes on the Company’s and consolidated entity’s Total Equity as at the date of transition to AEIFRS (1 July 2004) and as at 30 June 2005, and on Net Profit for the year ended 30 June 2005. There is no expected impact of AEIFRS on the Company’s or consolidated entity’s cash flows as presented under current AGAAP. RECONCILIATION OF EQUITY AS PRESENTED UNDER AGAAP TO EQUITY UNDER AEIFRS

___________________________________________________________________________________________________________ Consolidated The Company 30 June 1 July 30 June 1 July Note 2005 ** 2004 * 2005 ** 2004 * $’000 $’000 $’000 $’000 ___________________________________________________________________________________________________________

Total Equity under AGAAP 8,147 6,790 7,847 6,504 Adjustments to Retained Profits: Effect of resetting Foreign Currency Translation Reserve to nil (a) 11 11 (1) (1) Foreign exchange translation adjustments of integrated foreign operations taken to equity instead of profit and loss (a) 19 - 19 - Effect of recognition of deferred tax assets and liabilities under tax consolidation (b) 51 63 51 63 Effect of retrospective recognition of assumption by parent of Company’s current tax liabilities under tax consolidation (c) (1,398) (936) (1,398) (936) ____________________________________________________ (1,317) (862) (1,329) (874) Adjustments to Reserves: Effect of resetting Foreign Currency Translation Reserve to nil (a) (11) (11) 1 1 Foreign exchange translation adjustments of integrated foreign operations taken to equity instead of profit and loss (a) (19) - (19) - ____________________________________________________ (30) (11) (18) 1 Adjustments to Other Contributed Equity: Effect of retrospective recognition of assumption by parent of Company’s current tax liabilities under tax consolidation (c) 1,398 937 1,398 937

____________________________________________________ 1,398 937 1,398 937 ____________________________________________________ Total Equity under AEIFRS 8,198 6,854 7,898 6,568

____________________________________________________ * This column represents adjustments as at the date of transition to AEIFRS. ** This column represents the cumulative adjustments as at the date of transition to AEIFRS and those for the year ended 30 June 2005.

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RECONCILIATION OF NET PROFIT AS PRESENTED UNDER AGAAP TO NET PROFIT UNDER AEIFRS ___________________________________________________________________________________________________________ Consolidated The Company Year ended 30 June 2005 Note 2005 2005 $’000 $’000 ___________________________________________________________________________________________________________

Net Profit under AGAAP 1,456 1,343

Adjustments: Foreign exchange translation adjustments of integrated foreign operations taken to Equity instead of profit or loss (a) 19 19 Effect on income tax expense of recognition of tax assets and liabilities under tax consolidation (b) (475) (475)

____________________________________________________ Net Profit under AEIFRS 1,000 887

____________________________________________________ Notes to above tables (a) Under AASB 1 “First Time Adoption of Australian Equivalents to International Financial Reporting Standards”, an exemption is

available to reset the Foreign Currency Translation Reserve to nil at the date of transition to AEIFRS. This exemption is one of NSW Treasury’s indicative mandates and accordingly the financial effect is to reduce the Company’s and the consolidated entity’s Foreign Currency Translation Reserve to nil with a corresponding adjustment to Retained Profits as at the date of transition to AEIFRS and as at 30 June 2005. For 2004/05, all foreign exchange differences are taken directly to the Foreign Currency Translation Reserve in accordance with AASB 121 “The Effects of Changes in Foreign Exchange Rates”. This Standard eliminates the concepts of integrated and self-sustaining foreign operations and introduces new concepts of “functional” and “presentation” currencies. Whereas under current AGAAP the foreign exchange translation differences of integrated foreign operations were charged to the profit and loss, these must now be recognised directly against the Foreign Currency Translation Reserve under AEIFRS. The financial effect for 2004/05 is to reduce expenses and reduce the Foreign Currency Translation Reserve for the Company and the consolidated entity by $0.019 million.

(b) Under UIG Interpretation 1052 “Tax Consolidation Accounting”, wholly owned subsidiaries within a tax-consolidated group are

required to recognise their own tax balances directly. Under current AGAAP, the head entity recognises the wholly owned subsidiary’s tax balances in its own Financial Statements as if they were its own. The financial effect of this change is that deferred tax assets of $0.088 million and deferred tax liabilities of $0.025 million would be derecognised by the parent and would instead be recognised by the Company and the consolidated entity as at the date of transition to AEIFRS, with a corresponding adjustment to Retained Profits. Similarly, at 30 June 2005, deferred tax assets of $0.052 million and deferred tax liabilities of $0.001 million would be derecognised by the parent and recognised by the Company and the consolidated entity by taking the 2004/05 movements in these balances through income tax expense.

(c) Under UIG Interpretation 1052 “Tax Consolidation Accounting”, any current tax liabilities assumed by the head entity in the tax-

consolidated group are required to be recognised as an equity contribution or distribution where there is no tax funding agreement between the entities in the tax-consolidated group. Under current AGAAP, the head entity recognises the current tax liability of the wholly owned subsidiary through income tax expense. The financial effect of this change is that the Company and consolidated entity would now recognise these changes as an increase in Other Contributed Equity, with a corresponding decrease in Retained Profits.

31. EVENTS SUBSEQUENT TO REPORTING DATE Voluntary deregistration of the Company On 14 December 2004, the Company’s Board resolved that the Company should move to a position to enable it to be voluntarily deregistered. The Company’s domestic operations will cease in the next financial year. The Company will not enter into any new contracts and any future domestic unregulated work will be conducted directly by the parent. Effective 1 July 2005, the local Wastesafe operations was transferred to the parent. It is envisaged that all of the Company’s overseas branch operations will cease during the next financial year and the respective branches will be deregistered (Refer Note 21(c)). The Company’s controlled entity, AWT Philippines, Inc. is expected to be dissolved in the next financial year. (Refer Note 21(d)). The strategic direction of the Company’s investment in its controlled entity, AWT International (Thailand) Limited, is yet to be determined. Accordingly, it is not yet known at this stage when the Company will be able to be voluntarily deregistered. End of Audited Financial Statements

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Documents

Australian Water Technologies Pty Ltd - Parliament …...Financial Statements Sydney Water Annual Report 2005 1 of 1 Australian Water Technologies Pty Ltd These Financial Statements