FPQ Final Annual Report 2009-10 · I am pleased to present the annual report of FPQ for 2009-10, including matters consequential to the sale of its business operations on 30 June

Forestry Plantations Queensland Forestry Plantations Queensland Office

Final Annual Reports2009-10

Profitable sustainable

plantation forests

About these annual reportsForestry Plantations Queensland (FPQ) was wound up on 30 November 2010 and the Forestry Plantations Queensland Act 2006, under which FPQ was established to manage Queensland’s state-owned softwood and hardwood forest plantations, repealed.

The Forestry Plantations Queensland Office (FPQO), a public service office under section 21 of the Public Service Act 2008, was also wound up on 30 November 2010.

At the time of winding up both entities reported to the same two Queensland Government Ministers. These Ministers are titled “responsible Ministers” in the case of FPQ and “administering Ministers” for FPQO. At 30 November 2010, these Ministers were Queensland Treasurer and Minister for Employment & Economic Development, the Hon. Andrew Fraser MP; and Minister for Primary Industries, Fisheries and Rural & Regional Queensland, the Hon. Tim Mulherin MP.

This document reports on the period from 1 July 2009 up until the winding up of FPQ and FPQO, and outlines performance and achievements against FPQ’s Operational Plan for the 2009-10 financial year and activities undertaken in winding up the organisations. The Operational Plan is an annual performance contract with FPQ’s responsible Ministers as required under the Forestry Plantations Queensland Act 2006. The FPQ and FPQO annual reports comply with Queensland’s Financial Accountability Act 2009 and Financial and Performance Management Standard 2009 and, for FPQ, the Forestry Plantations Queensland Act 2006 as well. They also comply with the Queensland Government’s Annual Report Requirements for Queensland Government Agencies.

This report covers the period including the 2009-10 financial year and subsequent months leading up to the winding up of FPQ. Operational performance outcomes have been quoted on a 12 month basis to 30 June 2010, where possible. This is to reflect that FPQ sold its main business at 30 June 2010, and undertook only those administrative activities associated with the wind up of the corporation after that time. It also better allows operational performance to be compared to previous year performance, and to the planned performance for the 2009-10 financial year.

Photographs: Front and back cover: Exotic Pine, Toolara Nursery

Inside cover: Danbulla State Plantation Forest

Page 1: Top photos, Toolara Nursery; bottom, hoop pine seedlings

Page 3: Danbulla State Plantation Forest

Page 8: View from Kelly fire tower, Toolara State Plantation Forest

Page 10: Beerburrum State Plantation Forest

Page 13: Toolara State Plantation Forest

FPQ Final Annual Report 2009-10

FPQ Annual Report 2009-102FPQ Annual Report 2009-102

Letter of compliance

FPQ Annual Report 2009-102

The Hon Andrew Fraser MPQueensland Treasurer and Minister for Employment & Economic DevelopmentGPO Box 611 BRISBANE QLD 4001

The Hon Tim Mulherin MPMinister for Primary Industries, Fisheries and Rural & Regional Queensland GPO Box 46BRISBANE QLD 4001

Dear Ministers

I am pleased to present the 2009-10 Annual Reports for Forestry Plantations Queensland and Forestry Plantations Queensland Office.

I certify that these Annual Reports comply with:

• the prescribed requirements of the Financial Accountability Act 2009 and the Financial and Performance Management Standard 2009, and

• the detailed requirements set out in the Annual Report Requirements for Queensland Government Agencies, except where these relate to forward planning of operations, of which none are intended for FPQ or FPQO.

Yours sincerely

Dr Warren Hoey Former Chief Plantation Forestry Officer - Forestry Plantations QueenslandFormer Chief Executive - Forestry Plantations Queensland Office

ContentsContentsContents

4 About FPQ5 Advisory Board Chair’s message6 Performance summary7 Chief Executive’s report8 FPQ in profile10 Corporate Governance13 Business performance14 Corporation performance15 Scientific names and glossary17 FPQ financial statements


FPQ Annual Report 2009-104FPQ Annual Report 2009-104

About FPQ

FPQ’s core business was the commercial management of Queensland’s state-owned plantation assets, including:

• Exotic pine plantation forests.• Hoop pine plantation forests.• Hardwood plantation forests.

During 2009-10 the FPQ subsidiary, Forestry Plantations Queensland Pty Ltd (FPQ Pty Ltd) was created. A licence to manage the plantation assets, in addition to other parts of FPQ’s business, were transferred to FPQ Pty Ltd. FPQ Pty Ltd was sold to Hancock Queensland Plantations Pty Ltd on 30 June 2010. Since 30 June 2010 FPQ’s activities have been dedicated to the finalisation of its affairs in preparation for its winding up.

FPQ’s business objectives

FPQ’s business objective was to operate as a responsible commercial plantation forest manager and maximise the market value of its assets consistent with:

• Best practice principles for sustainable plantation forest management.

• The directions of its responsible Ministers.• The operation and financial parameters of its

Operational Plan.• The Queensland Government’s commitments for

hardwood plantations.

FPQ’s core values

FPQ sought to deliver commercial, social and community outcomes consistent with being a good corporate citizen. In so doing, the Corporation was guided by core values, including:

• Sustainable Growth: Growing through business synergies and commercial partnerships.

• Professionalism and Responsibility: Acting with integrity in dealings with stakeholders.

• Delivering Value: Setting high standards for financial performance and delivering value to customers and stakeholders.

• Leadership, Learning and Innovations: Creating positive change, building business expertise and embracing challenges and opportunities.

• Relationships: Building trust, teamwork and effective communication.



I am pleased to present the annual report of FPQ for 2009-10, including matters consequential to the sale of its business operations on 30 June 2010.

This is the final annual report of FPQ as a government owned enterprise. It marks another page in the proud history of an organisation that began in 1900 as a branch of the Department of Public Lands. Since then, Forestry (as it was

known) has been given a range of objectives by government – from ensuring supplies of an essential war material, to providing jobs for post-war immigrants, to managing Queensland’s national parks, and, more recently, to operate as a commercial business.

Forestry’s success in meeting it’s commercial objectives is evident, as is it’s contribution to the development of a commercially viable, plantation based, timber processing industry in Queensland. FPQ also returned a higher than expected sale price to the Queensland Government, despite the downturn in domestic building activity that followed the Global Financial Crisis.

On behalf of the Board, I would like to thank all those in FPQ – especially Warren Hoey, Garry Hannigan, Tony Costantini, David West, David Sayer, Steve Worley, Leigh Kleinschmidt and Stuart Sanderson - who put in long hours to achieve a successful year of operations, while also supporting the sale process and helping to ensure its successful outcome. As well, we acknowledge the on-going support given to FPQ by its responsible Ministers, the Hon. Andrew Fraser MP, Treasurer and Minister for Employment & Economic Development, and the Hon. Tim Mulherin MP, Minister for Primary Industries, Fisheries and Rural & Regional Queensland.

For my own part, I recognise the contributions of my fellow Board members in the task of applying a corporate governance regime to a government owned enterprise. Their collective business, legal, community and environmental expertise provided the platform for the transformation and eventual sale of FPQ as a commercial business.

I am confident that the business will continue to grow under its new ownership, and wish the staff well for the future.

Bob SheadChair, FPQ Advisory Board

Chair’s message


Perf

orm

ance

sum

mar

y09-106 08-09 07-08

Financial measures

Operating surplus / (deficit) after income tax equivalents1 ($597.4M) $3.5M $85.5M

Trading surplus (after interest and before tax and revaluation, treating sales as income)2

$21.8M $11.2M $29.6M

Proceeds from plantation timber removals (excluding miscellaneous forest products)

$94.8M $72.4M $93.8M

Dividend payable from the year’s trading3 N/A $3.3M $13.4M*

Product measures

Softwood plantation establishment 6,015 ha 6,110 ha 5,646 ha

Hardwood plantation establishment 1,230 ha 1,664 ha 1,503 ha

Plantation timber sales 1.88M m3 1.55M m3 2.06M m3

Environmental measures

Sound Practice Indicator (SPI) passes4 95% 96% 95%

Sustainable Forest Management System external audit non-compliance5

6 3 6

Community measure

Visitor permits issued 172 176 176

Staff measures

Lost time injuries per million work hours 20.75 19.78 26.20

Employee safety – average days lost due to injury 14.3 8.79 14.9

1 Includes the increment in net market value of growing timber in plantation (mostly unrealised) in accordance with Australian Accounting Standard (AASB) 141 Agriculture. Includes a $906M write down to fair value for plantation timber assets immediately prior to transfer to the department of Environment and Resource Management.

2 Represents the surplus from trading operations during the year before tax, treating plantation timber sales as revenue and excluding increment/decrement in the value of standing plantation assets, and excluding one off costs of $18.7M.

3 Dividends are normally paid to the Queensland Government in the year following the trading year for which they are declared. *The 2008-09 dividend included a $2.8M adjustment to the 2007-08 dividend. No dividend was paid on 2009-10 performance as all remaining funds in FPQ were returned to the Queensland Government prior to winding up of the corporation.

4 To check compliance with set environmental and other procedures and outcomes, FPQ uses a Sound Practice Indicator (SPI) and checklist system covering plantation forestry field operations from plantation tending to harvest management.

5 Of the six non-compliances reported, four relate to administrative systems (upkeep of registers and document control systems) and two related to a single soil disturbance event within FPQ’s central Queensland Plantations.

6 Financial results represent a 17 month reporting period ending 30 November 2010



09-106 08-09 07-08

Financial measures

Operating surplus / (deficit) after income tax equivalents1 ($597.4M) $3.5M $85.5M

Trading surplus (after interest and before tax and revaluation, treating sales as income)2

$21.8M $11.2M $29.6M

Proceeds from plantation timber removals (excluding miscellaneous forest products)

$94.8M $72.4M $93.8M

Dividend payable from the year’s trading3 N/A $3.3M $13.4M*

Product measures

Softwood plantation establishment 6,015 ha 6,110 ha 5,646 ha

Hardwood plantation establishment 1,230 ha 1,664 ha 1,503 ha

Plantation timber sales 1.88M m3 1.55M m3 2.06M m3

Environmental measures

Sound Practice Indicator (SPI) passes4 95% 96% 95%

Sustainable Forest Management System external audit non-compliance5

6 3 6

Community measure


Staff measures

Lost time injuries per million work hours 20.75 19.78 26.20

Employee safety – average days lost due to injury 14.3 8.79 14.9

1 Includes the increment in net market value of growing timber in plantation (mostly unrealised) in accordance with Australian Accounting Standard (AASB) 141 Agriculture. Includes a $906M write down to fair value for plantation timber assets immediately prior to transfer to the department of Environment and Resource Management.

2 Represents the surplus from trading operations during the year before tax, treating plantation timber sales as revenue and excluding increment/decrement in the value of standing plantation assets, and excluding one off costs of $18.7M.

3 Dividends are normally paid to the Queensland Government in the year following the trading year for which they are declared. *The 2008-09 dividend included a $2.8M adjustment to the 2007-08 dividend. No dividend was paid on 2009-10 performance as all remaining funds in FPQ were returned to the Queensland Government prior to winding up of the corporation.

4 To check compliance with set environmental and other procedures and outcomes, FPQ uses a Sound Practice Indicator (SPI) and checklist system covering plantation forestry field operations from plantation tending to harvest management.

5 Of the six non-compliances reported, four relate to administrative systems (upkeep of registers and document control systems) and two related to a single soil disturbance event within FPQ’s central Queensland Plantations.

6 Financial results represent a 17 month reporting period ending 30 November 2010

The reporting period notably included the activities leading up to the sale, and subsequent wind up, of the corporation. I would like to congratulate all team members of FPQ for their efforts in effecting business change and undertaking the considerable effort involved in the sale preparations throughout the year.

While the sale of FPQ has occupied much of our attention, we maintained a focus on our core business and achieved outstanding results, such as:

• A 31% improvement in the value of log timber sales, and a $10.6 million increase in trading surplus to $21.8 million; and

• Exceeding planting targets to establish the next rotation of our sustainable business.

The manner in which FPQ’s staff continued to ‘get on with the job’ of managing the plantations in a period of such change is testament to their commitment and professionalism. I also extend my appreciation to the FPQ management team for their cohesion and diligent application during a very busy year.

I must also recognise that successes and progress of FPQ since its formation has owed much to our partnership with the Corporation’s Advisory Board and to the leadership and support of the Board’s Chairs, both the Honourable Con Sciacca AO who resigned his position during the year and Bob Shead, who so ably committed himself to the role during the year. The outstanding commitment of the Advisory Board was key to meeting the various challenges of the year and providing the Corporation with a strong basis for its new life in the private sector.

It is also with some sadness that I farewell my friends and colleagues in FPQ, however I do so anticipating every future success for FPQ’s Plantation business and those who work in it.

I wish you all the best in the future.

Dr Warren HoeyChief Plantation Forestry Officer

Chief Executive’s report


FPQ’s core business has been the commercial management of exotic pine, hoop pine and hardwood sawlog plantation assets.

FPQ’s plantations give rise to a range of landscape and environmental benefits and additional carbon sequestration, grazing, beekeeping and recreation opportunities.

In addition to providing these benefits, the plantations managed by FPQ underpin a significant plantation timber industry, supplying around three-quarters of log timber used each year by Queensland’s plantation timber industry.

The plantations supply an established customer base that purchases and processes plantation product in Queensland, mostly for the Queensland domestic market. It is estimated that the plantations directly and indirectly support some 6,000 jobs throughout the state, comprising 2,500 jobs in the plantation growing and timber processing sectors; 1,500 jobs in secondary processing and support services; and a further 2,000 jobs that are dependent upon consumption expenditure in the sector. In addition, these industries record direct turnover (essentially a measure of the industry’s total sales) in the order of $1 billion and add some $0.5-0.7 billion in value to timber products produced in the state.

At 30 June 2010, FPQ managed more than 212,000 hectares of plantation lands1. Ninety-five per cent of these plantations were established with softwoods with the remainder being allocated hardwood plantation production.

1 Includes areas of fallow plantation lands acquired as at 30 June 2010 and as yet unplanted; and plantation not included for asset valuation purposes.

FPQ operated from a corporate office in South Brisbane and regionally located centres along Queensland’s eastern seaboard as follows:

• Hardwood plantations - Aggregations of plantations around Kingaroy and

Wondai, near Gayndah and Mundubbera, and smaller areas between Beerburrum and Gympie.

• Hoop pine - Mary Valley FMA at Imbil, Brooyar (near Kilkivan),

Jimna and Gallangowan - Burnett FMA – Yarraman and Kalpowar (near

Monto). • Exotic pine - Capricorn FMA at Byfield (near Yeppoon) - Ingham FMA at Ingham and Atherton. - Beerburrum Forest Management Area (FMA) at

Beerburrum, Passchendaele (near Stanthorpe) and Pechey (near Crows Nest)

- Fraser Coast FMA at Toolara (near Gympie), Tuan (near Maryborough) and Elliott River (near Bundaberg)

FPQ operated major plantation nurseries at Beerburrum and Toolara, providing seedlings for the majority of the Corporation’s planting needs.

Forestry Plantations Queensland in profile


FPQ in profile

Ingham

Capricorn

Burnett

Beerburrum

Mary Valley

CATHU

GAYNDAH

YEPPOON

KINGAROY

PROSERPINE

MUNDUBBERA

CROWS NEST

TOWNSVILLE

ROCKHAMPTON

MONTO

WONDAI

INGHAM

PECHEY

BYFIELD

YARRAMAN

ATHERTON

CARDWELL

PASSCHENDAELE

KALPOWAR

Exotic Forest Management Area

Hoop Forest Management Area

0 100 200 300 400 50050

Kilometres

Fraser Coast

BRISBANE

KILKIVAN

BUNDABERG

STANTHORPE

PALEN CREEK

TUAN

JIMNAGYMPIE

BEERBURRUM

MARYBOROUGH

Forest Management Areas


Corporate structure

FPQ’s Chief Executive (the holder of the Statutory position referred to in the Forestry Plantation Queensland Act 2006 as the Chief Plantation Forestry Officer) was Dr Warren Hoey. The Chief Executive, along with the Executive Team, oversaw the effective implementation of FPQ’s Operational Plan and responded to emergent challenges and opportunities in the sector.

Prior to 30 June 2010, FPQ’s senior management team comprised:

Chief Executive – Warren Hoey. Deputy Chief Executive – Garry Hannigan. General Manager Business Services – Tony Costantini. General Manager Technical Services – David West. General Manager Exotics – David Sayer.General Manager Hoop – Steve Worley.General Manager Hardwood – Leigh Kleinschmidt.

FPQ’s corporate structure up to 30 June 2010 is detailed in the following table:

Business Services Technical Services Exotic Pine Directorate Hoop Pine Directorate Hardwoods Directorate

• Legal• Business Support• Planning and

Strategy• Business

Development• Human Resources• Finance• Information and

Communications Technology

• Plantation Mapping and Resources

• Sustainability• Carbon• Engineering,

Fleet and Communications

• Visitor Management

• Risk Management• Plantation

Development and Innovation

• Beerburrum FMA• Fraser Coast FMA• Capricorn FMA• Ingham FMA• Nurseries

• Mary Valley FMA

• Burnett FMA

• Workshops

• Operations• Plantation

Development

Corporate governance


Sale of FPQ

On 2 June 2009, the Queensland Government announced its intention to undertake a significant asset sale program. The Infrastructure Investment (Asset Restructuring and Disposal) Act 2009 was passed by State Parliament to facilitate the restructure and disposal of particular businesses, assets and liabilities of government entities. The Act grants powers to the Minister (in this case, the Treasurer) to direct the restructuring, disposal or other processes necessary for the sale program with respect to “declared projects”. Under section 5(1)(f) of the Act the disposal of all or part of the businesses, assets and liabilities of FPQ was a “declared project”. The sales process was managed by a sales team within Queensland Treasury.

The sale of FPQ Pty Ltd included the sale of standing plantation timber and infrastructure related to its management. It did not include State Plantation Forest land, which remains in state ownership, but which FPQ Pty Ltd may occupy under a license for the purpose of growing plantation timber. A further condition of sale is that public access to State Plantation Forests will continue. The Government’s Western Hardwoods Plan will also be honoured.

FPQ Advisory Board

The Advisory Board provided strategic guidance on key FPQ business and issues and oversee the Corporation’s commercial activities. Seven Advisory Board meetings were held during the reporting period.

Consistent with the Forestry Plantations Queensland Act 2006 and the terms of the responsible Ministers’ appointment of the Advisory Board, the Board was delegated the strategic, leadership, risk management and accountability responsibilities needed to shape the commercial management of the Corporation.

Advisory Board member profiles

The FPQ Advisory Board had five members at 30 June 2010 being:

• Mr Bob Shead FCPA FAICD (Chair - from 1/10/2009) - providing specific expertise in corporate governance and financial management.

• The Hon Con Sciacca AO (Chair - resigned 06/08/2009) – providing specific expertise in business, legal, government and community

• Adjunct Professor Joan Sheldon AM – providing specific expertise in business, government, management and community

• Mr Warwick Marler – providing specific expertise in business, legal and commercial

• Mr Bill Brett (resigned 24/08/2009) – providing specific expertise in business, timber industry, housing and development industry and commercial

• Professor Ian Lowe AO – providing specific expertise in academia, environment, government and community.

The FPQ Advisory board was dissolved upon abolition of FPQ on 30 November 2010.

Advisory Board governance

The FPQ Advisory Board had a Board Charter and Code of Ethics to guide members’ activities and corporate governance practices.

The Advisory Board had two subcommittees:

• An Audit and Risk Management Subcommittee. • A Business Strategy Subcommittee. Two Audit and Risk Management Subcommittee meetings and two Business Strategy Subcommittee meetings were held during the 2009-10 financial year. The Audit and Risk management committee met on further occasions prior to the abolition of FPQ.

Advisory Board costs

Remuneration for the Advisory Board Chair is $41,080 per annum. The remaining four Advisory Board members each receive $19,760 remuneration per annum plus a supplement of $4,146 for participation on subcommittees, or $5,720 if they chair a subcommittee. Remuneration for Advisory Board members, including their participation on subcommittees, is detailed at Note 20 in FPQ’s financial statements. Total Advisory Board costs (remuneration plus travel and meeting expenses) from 1 July 2009 to 30 September 2010 were $145,907.

Committee costs

The Advisory Board’s subcommittees incurred no costs during the reporting period, save for remuneration to Advisory Board members as detailed.



FPQ Audit and Risk Management Committee

FPQ’s Audit and Risk Management Committee reported directly to the Chief Executive, and had the necessary powers to:

• Monitor and advise on - audits and associated plans - the effectiveness of internal control systems and

procedures - the operation of FPQ’s internal audit functions - statutory financial statement completeness and

compliance - the prevention and control of fraudulent activity - other matters as specified by the committee’s

terms of reference.• Ensure FPQ risks and their sources are successfully

managed.• Ensure the Corporation’s risk management program

is implemented and maintained.

The Audit and Risk Management Committee comprised six members, four of which were independent of FPQ management. The remaining positions were held by FPQ executive members. Representatives of FPQ’s internal audit team and Queensland Audit Office (QAO) were invited to each meeting. In addition to providing the Chief Executive with advice on audit, risk management and other governance issues, the committee provides assurance to the FPQ Chief Executive regarding the certification of the Corporation’s annual financial statements. Identified audit issues are resolved internally, or through consultation and negotiation with Queensland Treasury, QAO or other relevant experts as necessary. A number of complex accounting issues relating to the sale of the business arose during the reporting period. These were resolved to the satisfaction of QAO with the assistance of the Queensland Treasury. FPQ regulatory compliance

The Corporation maintained systems, documented procedures and undertook staff awareness training, to ensure that FPQ met it’s recordkeeping responsibilities under the Public Records Act 2002.

FPQ’s Policies and Procedural Framework also incorporate revised and new business standards that met the Corporation’s compliance with the Queensland Government’s Information Standard IS 40 – Recordkeeping. The Business also employed its Queensland State Archivist-approved Disposal Authority for FPQ Functional Records.

Travel

FPQ expended $502,604 on domestic travel during 2009-10, including payments for airfares, accommodation, meals, taxis and private vehicle mileage, but excluding vehicle hire. This amount included domestic airfare expenditure of $62,101

No overseas travel was undertaken by FPQ or FPQO in 2009-10. Official overseas travel for FPQO staff, working for FPQ under a Work Performance Agreement, is required to be included in FPQ’s Operational Plan for the approval of FPQ’s responsible Ministers.

Corporate entertainment and hospitality

FPQ is required to report on corporate entertainment and hospitality over $5,000 undertaken during the year in review. For FPQ, there were no corporate entertainment and hospitality events costing more than $5,000 during 2009-10.

Consultancies

Consultancy services paid by FPQ during 2009-10 totalled $20,000 (excluding GST), as detailed below:

Consultancy expenditure

Expenditure DescriptionNo. of

ConsultanciesTotal for 2009-10

ManagementCarbon

Accounting1 $20,000

Total $20,000



Financial

✓ $94.8 million in timber sales (2008-09: $72.4 million; 2007-08: $93.8 million).

✓ $21.8 million trading surplus (2008-09: $11.2 2007-08: $29.6 million).

FPQ achieved an increase in the value of timber sales of 31 per cent on the previous financial year. FPQ’s trading surplus (before income tax equivalents), or the surplus of timber sales plus non-timber income over expenses, was a significant increase on the previous financial year. This reflected a recovery in harvest volumes and income which were suppressed in the previous year due to the global economic downturn.

Plantation establishment

✓ 6.0 million trees planted (2008-09: 6.4 million trees, 2007-08: 5.8 million trees).

FPQ planted a total of 7,245 hectares of plantations in 2009-10. Of the 2009-10 total:• 5,102 hectares of exotic pine were planted on new

lands and recently harvested lands (2008-09 total: 5,338 hectares).

• 913 hectares of hoop pine were planted on new lands and recently harvested lands (2008-09 total: 772 hectares).

• 1,230 hectares of hardwoods were planted on newly acquired lands (2008-09 total: 1,664 hectares).

Research and development

✓ $2.0 million invested in development and innovation (2008-09: $2.2 million, 2007-08: $2.5 million).

During 2009-10, FPQ invested $2.0 million on plantation development and innovation and associated technical services to improve its commercial plantation performance and sustainability. This investment is focused on the Corporation’s plantation products: exotic pine, hoop pine and hardwood plantations. FPQ’s development and innovation activities supported the Corporation’s sustainable plantation management systems, specifically in areas of “low input” plantation silviculture, fire protection, water quality, chemical use and pest and disease protection.

Removals

✓ 1.88 million cubic metres of plantation timber removals (2008-09: 1.55 million cubic metres, 2007-08: 2.06 million cubic metres).

During 2009-10, 1.88 million cubic metres of plantation timber were harvested from FPQ’s plantation forests, an increase of 21 per cent on 2008-09’s total of 1.55 million cubic metres.

Total 2009-10 Plantation Timber Removals Compared with 2008-09 total

2009-10 2008-09

Exotic pine sawlog 1.19M m3 0.96M m3

Exotic pine pulp wood 0.24M m3 0.20M m3

Hoop pine sawlog 0.41M m3 0.36M m3

Hoop pine pulp wood. 0.03M m3 0.03M m3

Our people and Community

✓ Independent audit in May 2010 confirming FPQ’s ongoing certification to the Australian Forestry Standard.

✓ 172 State Plantation Forest visitor permits issued (2008-09: 176, 2007-08: 176 visitor permits).

✓ FPQO Health Assessment Scheme accessed by 70 per cent of staff (2008-09: 64%, 2007-08: 63%) with significant improvements in individual health assessments.

Land acquisition

✓ 2,807 hectares of additional land secured for exotic pine and hardwood plantations (2008-09: 6,613 hectares, 2007-08: 7,003 hectares).

The Business acquired 2,807 hectares of new plantation lands for a total investment of $9.45 million.

Business performance



Corporation performanceTrading Performance Indicators(nominal dollars)

2009-10 Actual($000s)

2009-10 Target ($000s)

2008-09Actual

Sales1 105,681 99,153 84,345

Expenses from Operations 75,791 72,427 68,046

Interest Expense 8,069 5,200 5,131

Operating Surplus 21,800 21,526 11,168

Financial Performance Indicators

Net Cash flow from Operating Activities 6,456 26,557 19,248

Earnings Before Interest and Tax -735,710 26,726 10,089

Profit (loss) after Tax and Interest -597,414 21,526 3,477

Value of Business

Balance Sheet Value of Assets 0 1,485,973 1,370,063

Return on Assets (EBIT/Balance sheet value) N/A 1.8% 0.74%

Balance Sheet Equity 0 1,157,993 1,140,824

Physical Performance Indicators2009-10 Actual(,000)

2009-10 Target(,000)

2008-09Actual

Volume harvested (m3)

Exotic Final Crop 1254 1080 912

Exotic Thinning 171 198 253

Hoop Final Crop 367 336 325

Hoop Thinning 75 77 59

Area Planted (hectares)

Hoop Pine 913 830 772

Exotic Pine 5102 5063 5338

Hardwoods 1230 1500 1664

Social and Environmental Performance Indicators2009-10 Actual(,000)

2009-10 Target(,000)

2008-09Actual

Environmental

Sound Performance Indicator2 pass rate 95% 100% 96%

Sustainable Forest Management (external Audit non-conformities, environmental aspects)

2 0 1

SocialSustainable Forest Management (external Audit non-conformities, social aspects)

0 0 0


Stakeholders and Staff

Lost time injuries per million work hours 20.75 <19 19.78

Average days lost per injury 14.3 < 8.5 8.79Timely compliance with statutory reporting timeframes and data submission and reporting requirements

100% 100% 100%

1 Sales are represented as the value of timber revenue realised via the sale of product from the plantation asset and all revenues other than those derived from the plantation asset.

2 Sound Performance Indicators identified as having relevant environmental aspect.


Scie

ntifi

c na

mes

and

glo

ssar

y Scientific names

Scientific names of commercial tree species mentioned in the FPQ annual report are:

Native pine

Hoop pine Araucaria cunninghamii

Exotic pines

Caribbean pine Pinus caribaea var. hondurensis

Hybrid pine Pinus elliotti var. elliotti x Pinus caribaea var. hondurensis

Loblolly pine Pinus taeda

Radiata pine Pinus radiata

Slash pine Pinus elliotti var. elliotti

Hardwoods

Spotted gum Corymbia citriodora subsp. variegata and subsp. henryii

Western white gum Eucalyptus argophloia

Glossary

Carbon sequestration The long-term storage of carbon in trees or other natural elements.

Carbon sinks Something that “soaks” up carbon, in this context a growing plantation absorbs carbon from the atmosphere and stores it in growing timber and timber products.

Chain of Custody The ability to audit the progression of timber along the production line to its source, in this context to FPQ’s AFS-certified plantation forests.

Fallow Areas of land previously under trees or crops that are cleared and waiting replanting.

Silviculture The science and practice of growing and tending trees.

Thinning Removing selected trees from young plantations to allow healthier trees to mature with less competition for sunlight and nutrients. The removed “thinnings” are sold to specialised timber processors that can mill the material into a range of products.


2009

-10

FPQ

fina

ncia

l per

form

ance

ove

rvie

w The comparative financial statements in the following section report on FPQ’s operations for the 17 month period beginning 1 July 2009 with comparative figures provided for 2008-09.

Trading Performance 2009-10

The Australian Accounting Standard AASB 141 Agriculture requires that changes in the value of biological assets (the plantations) be recognised as Revenues in the Corporation’s Income Statement. Changes in biological assets during a year can result from “biological transformations” and movements in expected future costs of producing logs, log values and discount rates. Biological transformations include both realised asset movements (harvest of logs) and non-realised asset movements (plantation growth, new plantings and natural degeneration). The movements due to influences other than from the biological transformations are inherently volatile and, as a result, FPQ’s reported Operating Surplus/Deficit can vary significantly from year to year in a manner that is not correlated with the Corporation’s realised asset movements (log harvests).For this reason, FPQ uses the concept of “trading results” to monitor and measure trading performance and to base recommendations for dividend distributions. The definition of trading surplus/deficit adopted by FPQ excludes unrealised biological asset movements and recognises realised biological asset movements (log harvest) as revenue:

2009-10 ($ million)

2008-09 ($ million)

Operating result from discontinued operations before costs and write downs associated with sale of assets and transfer of operations

Exclude – gain in revaluation of biological assetsRecognise – gain realised through timber sales

181.1

-254.0

+94.8

5.0

-66.0

+72.2

Trading surplus 21.8 11.2

For the 2009-10 financial year, FPQ’s trading surplus was $21.8 million, representing a significant improvement over the previous year. This increase was driven primarily by increased plantation sales as adverse economic impacts upon the building industry abated. As well, close management of costs contributed to the improvement in financial performance. For the whole reporting period, additional adjustments were made to represent the fair market value of the plantations and other activities up until dissolution impact upon the declared profit.



FPQ - FINANCIAL STATEMENTS

Page 1 of 32

FORESTRY PLANTATIONS QUEENSLAND FINAL FINANCIAL STATEMENTS for the period 1 July 2009 to 30 November 2010 CONTENTS PAGE STATEMENT OF COMPREHENSIVE INCOME 18 STATEMENT OF FINANCIAL POSITION 19 STATEMENT OF CHANGES IN EQUITY 20 STATEMENT OF CASH FLOWS 21 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS 22

OBJECTIVES AND PRINCIPAL ACTIVITIES 22 1. CORPORATE INFORMATION 22 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 23 3. GAIN/(LOSS) ON REVALUATION OF BIOLOGICAL ASSETS INCLUDING IMPACTS ON UNREALISED REVENUE RESERVE 32 4. INDICATIVE PHYSICAL QUANTITIES OF BIOLOGICAL ASSETS AND NET VALUATION INCREMENT /(DECREMENT) 32 5. DEPRECIATION AND AMORTISATION 32 6. BORROWING COSTS 33 7. OTHER OPERATING EXPENSES 33 8. INCOME TAX EQUIVALENTS 34 9. CASH AND CASH EQUIVALENTS 34 10. RECEIVABLES 35 11. INVENTORIES 35 12. PROPERTY , PLANT AND EQUIPMENT 35 13. INTANGIBLE ASSETS 37 14. OTHER FINANCIAL ASSETS 37 15. BIOLOGICAL ASSETS 38 16. PAYABLES 38 17. DIVIDEND 38 18. OTHER FINANCIAL LIABILITIES 39 19. ASSET REVALUATION SURPLUS BY CLASS 39 20. BOARD REMUNERATION 39 21. RECONCILIATION OF NET OPERATING RESULT TO NET CASH PROVIDED BY/(USED IN) OPERATING ACTIVITIES 40 22. RESTRUCTURING OF ADMINISTRATIVE ARRANGEMENTS 40 23. INTEREST IN JOINT VENTURES 41 24. CONTROLLED ENTITIES 41 25. CONTINGENT LIABILITIES – LITIGATION IN PROGRESS 42 26. COMMITMENTS FOR EXPENDITURE 42 27. DEPOSITS HELD IN TRUST 43 28. FINANCIAL INSTRUMENTS 43 29. RELATED PARTY DISCLOSURES 46

CERTIFICATE OF FORESTRY PLANTATIONS QUEENSLAND 47 INDEPENDENT AUDITOR’S REPORT 48



Page 2 of 32

STATEMENT OF COMPREHENSIVE INCOME

for the period 1 July 2009 to 30 November 2010

Note $'000 $'000

Income from discontinued operations

Revenue

Forest product sales - non-plantation timber 3(b) 281 218Specialised forest industry services 155 390

Other revenue 3(c) 10,473 11,163

Gains

Gain on revaluation of biological assets 2.7,3(a) 254,035 65,984

Total income from discontinued operations 264,944 77,755

Expenses from discontinued operationsWrite down to fair value for plantation timber assets immediately prior to

transfer 15(i) 906,111 -

Net loss on disposal of property, plant and equipment 4,095 219Work performance arrangement fee and associated costs 33,565 29,679

Contracted forestry, professional, technical and other services 17,991 17,824Hire of plant and equipment 1,267 1,417Motor vehicle expenses 2,630 3,190

Occupancy costs 1,990 1,784Forest maintenance expenses 2,257 3,536

Materials 1,288 802Depreciation and amortisation 5 5,493 4,943

Finance/borrowing costs 6 8,069 5,131

Other operating expenses 7 23,946 4,273

Total expenses from discontinued operations 1,008,702 72,798

Loss from discontinued operations before income tax equivalents (743,758) 4,957

Income tax equivalents 8 146,344 (1,481)

Loss from discontinued operations after income tax equivalents (597,414) 3,476

Other comprehensive income

Increase/(Decrease) in asset revaluation surplus 19 1,618 6,662

Total other comprehensive income 1,618 6,662

Total comprehensive income (595,796) 10,138

17 months to

30 Nov 2010

12 months to

30 June 2009

This Statement of Comprehensive Income is to be read in conjunction with the notes to the financial statements.



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STATEMENT OF FINANCIAL POSITION

as at 30 November 2010

Note $'000 $'000

Current AssetsCash and cash equivalents 9 - 39,653Receivables 10 - 13,923Inventories 11 - 2,326

Total Current Assets - 55,902

Non Current AssetsProperty, plant and equipment 12 - 145,204Intangible assets 13 - 1,530Other financial assets 14 - -

Total Non Current assets - 146,734

Biological Assets

Plantation growing timber 15(i) - 1,167,427

Total Biological Assets - 1,167,427

Total Assets - 1,370,063

Current LiabilitiesPayables 16 - 6,742

Total Current Liabilities - 6,742

Non Current Liabilities

Other financial liabilities 18 - 76,153Deferred tax liabili ty 8 - 146,344

Total Non Current Liabilities - 222,497

Total Liabilities - 229,239

Net Assets - 1,140,824

EquityCapital - 1,084,181Accumulated surplus - 37,187Reserves - Asset revaluation surplus 19 - 19,456

Total Equity - 1,140,824

30 Nov 2010 30 June 2009

This Statement of Financial Position is to be read in conjunction with the notes to the financial statements.



Page 4 of 32

STATEMENT OF CHANGES IN EQUITY


Note $'000 $'000

Capital

Balance at beginning of financial period 1,084,181 1,084,181

Administrative restructure - assets/liabili ties transferred 22 (427,722) -

Net leave liabilities transferred / assumed to / from other departments 29 -

Equity withdrawal (656,488) -

Balance at end of financial period - 1,084,181

Accumulated Surplus

Balance at beginning of financial period 37,187 36,964Profit/(loss) from discontinued operations (597,414) 3,476

Dividend payable 17 - (3,261)

Transfer from asset revaluation surplus 21,074 8

Equity withdrawal 539,153

Balance at end of financial period - 37,187

Asset Revaluation Surplus

Balance at beginning of financial period 19,456 12,802

Total other comprehensive incomeDeferred tax 19 - (2,855)Transfer to accumulated surplus on disposal of assets:

Increment / (decrement) on revaluation of:

Land 19 - 6,230

Infrastructure 19 1,712 1,930Buildings 19 (94) 1,357

Transfer to accumulated surplus (21,074) (8)


Total Equity - 1,140,824

Total equity at beginning of financial period 1,140,824 1,133,947

Profit/(loss) from discontinued operations (597,414) 3,476

Total other comprehensive income:

Asset revaluation net increment 19 1,618 9,517Deferred tax 8 - (2,855)

Transactions with owners as owners:

Non-reciprocal transfer of assets and liabilities (545,028) -

Dividends 17 - (3,261)

Total equity at end of financial period - 1,140,824

17 months to

30 Nov 2010

12 months to

30 June 2009

This Statement of Changes in Equity is to be read in conjunction with the notes to the financial statements.



Page 5 of 32

STATEMENT OF CASH FLOWS


Note $'000 $'000

Cash flows from operating activities

Inflows:Receipts from customers 90,946 78,358Interest received 2,362 3,114Grants and subsidies received 6,882 6,620GST collected on sales 9,769 7,588GST input tax credits received from ATO 9,688 6,722

Outflows:Payments to suppliers and employees (84,195) (63,526)Borrowing costs (9,635) (5,129)GST paid to suppliers (8,775) (6,715)GST remitted to ATO (10,503) (7,735)Grants and subsidies paid (83) (49)

Net cash provided by/(used in) operating activities 21 6,456 19,248

Cash flows from investing activities

Inflows:Proceeds from sale of property, plant and equipment 1,506 1,608Proceeds from sale of Forestry Plantations Qld Pty Ltd 163,754 -

Outflows:Payment for property, plant and equipment (14,620) (22,000)

Net cash provided by/(used in) investing activities 150,640 (20,392)

Cash flows from financing activities

Outflows:

Return of capital (117,335) - Dividends paid 17 (3,261) (13,356)Borrowing redemptions (76,153) -

Net cash provided by/(used in) financing activities (196,749) (13,356)

Net increase/(decrease) in cash and cash equivalents held (39,653) (14,500)

Cash and cash equivalents at the beginning of the financial period 39,653 54,153

Cash and cash equivalents at the end of the financial period 9 - 39,653

17 months to

30 Nov 2010

12 months to

30 June 2009

This Statement of Cash Flows is to be read in conjunction with the notes to the financial statements.


FPQ - NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS


Page 6 of 32

Notes to and forming part of the financial statements

Objectives and principal activities

Forestry Plantations Queensland’s strategic business objective was to undertake commercial management of Queensland’s state-owned plantation forests, and maximise the market value of its assets consistent with best practice for sustainable forest management.

Its principal activities were the commercial management of Queensland’s state-owned plantation forestry assets.

1. Corporate Information

These are the final financial statements for Forestry Plantations Queensland (FPQ). FPQ was a corporation sole established on 1 May 2006 by the Forestry Plantations Queensland Act 2006 pursuant to the Queensland State Government’s structural reform of its commercial plantation forestry business. FPQ had two responsible Ministers, namely the Honourable Andrew Fraser MP, Treasurer and Minister for Employment and Economic Development and the Honourable Tim Mulherin MP, Minister for Primary Industries, Fisheries and Rural and Regional Queensland, who exercised their powers under the Forestry Plantations Queensland Act 2006 as the State of Queensland. The head office and principal place of business of FPQ was Level 2, 104 Melbourne Street, South Brisbane.

At the time of the Queensland Government’s 1 May 2006 structural reform of commercial plantation forestry, the State also established Forestry Plantations Queensland Office (FPQO) as a Queensland public service office pursuant to the Public Service Act 2008. FPQO’s primary functions were to provide forest management resources and expertise to FPQ under a Work Performance Agreement pursuant to Section 34 of the Forestry Plantations Queensland Act 2006 and to assume responsibility for State Forests, the Crown Lands that are reserved as State Forest and allocated for plantation production. Other than FPQO staff engaged by FPQ pursuant to the Work Performance Agreement, FPQ only directly employed four staff.

On 2 June 2009, the State Government nominated the business and assets of FPQ for sale. The formal process of restructuring the State’s plantation businesses to facilitate the sale commenced on 26 November 2009. This included the establishment of Forestry Plantations Queensland Pty Ltd (FPQ PL) as a fully owned subsidiary of FPQ on 8 March 2010. On 26 March 2010, the majority of FPQO and FPQ employees were transferred to Forestry Plantations Queensland Pty Ltd by transfer notice pursuant to the Infrastructure Investment (Asset Restructuring and Disposal) Act 2009 and delegations were put in place to permit Forestry Plantations Queensland Pty Ltd to provide the forest management resources required to support FPQ’s business.

On 18 May 2010, the State of Queensland, FPQ and Hancock Queensland Plantations Pty Ltd entered into a share sale agreement for Hancock Queensland Plantations Pty Ltd to acquire the shares in Forestry Plantations Queensland Pty Ltd and for the granting of a Plantation Licence to Forestry Plantations Queensland Pty Ltd, allowing it to manage, use and sell the timber on State Plantation Forests for 99 years.

On 11.59 pm, 29 June 2010 by virtue of a series of Transfer Notices and Project Directions issued pursuant to the Infrastructure Investment (Asset Restructuring and Disposal) Act 2009, the State transferred a substantial portion of the assets and liabilities of FPQ, which were to be sold, to Forestry Plantations Queensland Pty Ltd; and transferred a number of FPQ’s residual assets and liabilities to the Department of Environment and Resource Management. The remaining assets have been returned to the state via equity withdrawal.

The Share Sale Agreement settled on 30 June 2010 with an initial payment to FPQ of $153.9M. The final contract price was agreed on 15 September 2010 with a final payment of $9.8M being paid on 21 September 2010. The financial effects of these transactions are reflected throughout these statements. In exchange for these payments the State of Queensland transferred the shares in Forestry Plantations Queensland Pty Ltd to Hancock Queensland Plantations Pty Ltd. The State also granted Forestry Plantations Queensland Pty Ltd a Plantation Licence in exchange for a plantation licence fee.

The granting of the Plantation Licence to Forestry Plantations Queensland Pty Ltd on 30 June 2010 triggered commencement of amendments to the Forestry Act 1959, which vested administrative responsibility for State Plantation Forest with the Department of Environment and Resource Management (effectively removing control of State Plantation Forests from FPQO).

The values of the assets transferred both to Forestry Plantations Queensland Pty Ltd and the Department of Environment and Resource Management and liabilities assumed are disclosed in note 22.


FPQ - NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTD.)


Page 7 of 32

After the sale of Forestry Plantations Queensland Pty Ltd, FPQ continued to operate in order to finalise the share sale completion process, undertake financial and annual reporting and facilitate the abolition of the Corporation. Pursuant to Section 45(5) of the Financial and Performance Management Standard 2009, the Treasurer approved that FPQ’s financial statements be submitted for audit by 30 November 2010.

On 25 November 2010 all remaining equity in FPQ was withdrawn by the State Government through the return of all available funds to Queensland Treasury. The equity withdrawal was affected by a Project direction pursuant to the Infrastructure Investment (Asset Restructuring and Disposal) Act 2009.

The abolition of FPQ was effected on 30 November 2010, pursuant to the Natural Resources and Other Legislation Amendment Act 2010.

2. Summary of significant accounting policies

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

2.1 Basis of accounting

The financial statements are general purpose financial statements and have been prepared in accordance with applicable Australian Accounting Standards, minimum reporting requirements included in the Financial Reporting Requirements for Queensland Government Agencies, and other authoritative pronouncements.

The accounts have been prepared on an accrual basis and except where stated otherwise, in accordance with the historical cost convention.

At reporting date FPQ was not considered a going concern on the basis that all of its assets and liabilities had been transferred to Queensland Treasury to effect termination of the entity. Therefore, for the purposes of this report, the going concern basis has not been applied. Transactions for the period and the balances at 30 June 2009 are presented in accordance with the following accounting policies.

2.2 Cash and cash equivalents

For the purposes of the Statement of Financial Position and the Statement of Cash Flows, cash assets include all cash and cheques receipted but not banked at balance date, as well as deposits at call with financial institutions.

2.3 Grants and Subsidies

Under AASB 120 Accounting for Government Grants and Disclosure of Government Assistance, a government grant is not recognised until there is reasonable assurance that the entity will comply with the conditions attaching to it, and that the grant will be received. There are no unfulfilled conditions or other contingencies attaching to these grants.

2.4 Trade and other receivables

Trade debtors are recognised at the amounts due at the time of sale or service delivery. Settlement on trade debtors is within 30 days from the end of the month in which the sale is invoiced. All trade debtors are secured by cash deposit or other financial guarantee.

Other receivables generally arise from transactions outside the usual operating activities of FPQ and are recognised at their assessed values. Terms are net 30 days.

The collectability of receivables is assessed periodically with provision being made for impairment where necessary. All known bad debts were written off at balance date.

2.5 Inventories

Finished goods

Inventories in this category are valued at lower of cost and net realisable value.




Page 8 of 32

Raw materials and stores

Raw materials and stores are valued at the lower of cost and net realisable value. Cost is assigned on a weighted average basis and includes expenditure incurred in acquiring the inventories and bringing them to their existing condition.

Net realisable value is determined on the basis of FPQ's normal selling pattern. Expenses associated with marketing, selling and distribution are deducted to determine net realisable value.

2.6 Biological assets

Under AASB 141 Agriculture, a biological asset is defined as ‘a living animal or plant’.

FPQ assets falling into this category consisted mainly of plantation growing timber.

FPQ reported its biological assets at Fair Value. Fair Value is the amount for which an asset could be exchanged or a liability settled, between knowledgeable, willing parties in an arms length transaction (AASB 141).

Prior to the sale of the business there was no observable active and liquid market for FPQ’s forest assets. FPQ had previously, in accordance with the provisions of AASB 141, adopted the Net Present Value (NPV) methodology as the most appropriate alternative for estimating the fair value of its plantations. At 30 June 2010 the fair value was based on the observed sale price of the asset as identified in the sale process.

Wollemi pine

There has been no observable active market for FPQ’s Wollemi pine plants due to there being no stable supply/demand interaction or a stable market price. Consequently, cost has been adopted as the only reliable value that could be used as an analogue for the fair value.

Plantation growing timber

FPQ’s plantation growing timber resources were comprised principally of exotic and native pine species distributed along the eastern seaboard of Queensland with the majority located in South East Queensland.

All stands of plantation growing timber at balance date were included in the valuations with the exception of:

• Plantings of minor species, small and fragmented plantation areas and areas subject to experimental treatments which experience suggests are non-productive; and

• Hardwood plantations of merchantable and unmerchantable age which are immaterial to the valuation.

Other biological assets

The biological assets represented by tree seed orchards, tree hedges and nursery seedlings have been assessed and, on the basis that these assets are not material in the context of financial reporting by FPQ, they have not been recognised.

Valuation of plantation biological assets

The NPV methodology

NPV is calculated as the net of the future cash inflows and outflows associated with forest production activities discounted back to current values at the specified Weighted Average Cost of Capital (WACC).

Under the NPV methodology, valuation changes arise mainly from:

• Changes in timber volume associated with growth and also changes to the overall estate as a result of annual planting and harvesting activity;

• Changes in timber prices;

• Changes in forest production costs; and

• Changes in the WACC rate used in the discounted cash flow calculation.




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Assumptions underpinning the NPV calculation are:

• Forest valuations are based on the expected volumes of merchantable timber that will be realised from existing stands, given current management strategies and stand recovery rates.

• Only the current crop is valued. The cash flow analysis is based on the anticipated timing of the harvest of existing stands, which has been derived from harvest plans developed for the entire estate.

• Volume increments are determined both by periodic re-measurement of samples of plantations and by modelling growth from the date of the most recent measurement to the date of harvest.

• Prices used in the NPV calculation are based on current selling prices at balance date unless market intelligence indicates that such prices are not indicative of future trends.

• The estimated cost of growing the existing stand until maturity is taken to account in determining the net cash flows.

• Costs used in the NPV analysis are three year rolling averages of actual costs for individual plantation operations, inflation adjusted to the current period. Three year averages eliminate significant annual variations caused by things such as variable climatic, topographic and/or silvicultural factors (for example high rainfall years increase the weed spectrums to be controlled). It is also assumed that current (3 year rolling average) costs are the best indicator of future costs.

• Notional costs, particularly imputed land usage charges relating to State owned plantation land which FPQ currently accesses at no charge (refer Note 2.11), have not been included in the calculation.

• All costs incurred in developing and managing the trees in forests are recognised as cash outflows in the NPV calculation except for capital items (e.g. buildings, major roads, heavy plant) which are deemed to have a life independent of the plantation. Usage of these assets is recognised through the application of an annual capital usage charge which is treated as a cash outflow for the purposes of the plantation valuation.

• The discount rate used is based on the Weighted Average Cost of Capital formula in conjunction with the Capital Asset Pricing Model. The discount rate is expressed in real terms, before income tax, and has been set with reference to benchmarked forestry industry risk margins relative to overall market risk margins. The use of ‘real’ discount rates effectively assumes that both prices and costs will rise over time in line with inflation and allows for all prices and costs to be expressed in current dollar terms.

Source of valuation of biological assets

The fair value (based on NPV) of the plantation growing timber has been determined by appropriately qualified staff employed by FPQ using advanced modelling techniques/methods. The net present value calculations utilised for the forest valuation are underpinned by a computerised plantation decision support system.

The modelling component of the system used for plantation valuation is reviewed every five years by an independent expert with the latest review performed in June 2007 by Dr. Jerry Leech, Dip For., M.Sc., Ph.D. The report found the system including the growth and yield modelling components to be ‘robust, complete, coherent and consistent, and in line with best practice’. Results derived from the system are extensively tested on an on-going basis by appropriately qualified FPQ personnel.

2.7 Income recognition for biological assets

FPQ primarily sold biological assets (i.e. trees) ‘at stump’ rather than selling the non-living produce of such assets (i.e. logs). While the recognition of ‘gains on revaluation’ during the reporting period is the same under both scenarios, an entity marketing log produce would further record sales of logs as revenue with an approximately equal offset for ‘deemed cost of sales’.

In FPQ’s case all income relating to plantation forests is recognised as ‘gains on revaluation’ each year as the forests grow in value. This treatment is in accordance with the requirements of AASB 141 Agriculture. Accordingly the sale of the tree at maturity does not constitute income as it has already been recognised over the life of the tree through the annual revaluation process. Sales represent the disposal of an asset.

2.8 Reserving policy for unrealised gains/losses

FPQ revalued its plantation growing timber annually and recognised the change in net present value as a gain or a loss in the Statement of Comprehensive Income in accordance with the treatment required in AASB 141 Agriculture. A reserve account was created to isolate unrealised gains within the equity account. Unrealised gains on revaluation were transferred to the




Page 10 of 32

Biological Assets Unrealised Revenue Reserve. Gains previously brought to account and subsequently realised on disposal (sale of timber) are transferred out of the reserve and become available for distribution. The reserve was adjusted annually for the net movement in unrealised gains and the realisation of prior periods’ gains through current year sales. Transfers in any year were determined by Management after considering the position of the accumulated surplus account.

2.9 Acquisition of assets

Actual cost is used for the initial recording of all non-current physical and intangible asset acquisitions. Cost is determined as the value given as consideration plus costs incidental to the acquisition, including all other costs incurred in getting the assets ready for use, including architects' fees and engineering design fees. However, any training costs are expensed as incurred.

Where assets are received free of charge from another Queensland government entity, (whether as a result of machinery-of-government changes, or other involuntary transfer), the acquisition cost is recognised as the gross carrying amount in the books of the transferor immediately prior to the transfer, together with any accumulated depreciation.

Assets acquired at no cost or for nominal consideration, other than from an involuntary transfer from another Queensland government entity, are recognised at a Nil or nominal value in accordance with AASB 116 Property, Plant and Equipment. If the asset is land, buildings or infrastructure, then the asset is revalued to fair value after initial recognition.

2.10 Property, plant and equipment

Except for intangible assets, all items of property, plant and equipment with a cost or other value equal to or in excess of $1,000 are recognised in the financial statements in the year of acquisition. Items with a lesser value are expensed in the year of acquisition.

2.11 Land

Only freehold land and specific Crown land (excluding State Plantation Forest), which is controlled by FPQ has been recognised as an asset in the Statement of Financial Position.

FPQ carried out its forestry establishment, management and marketing operations principally on State Plantation Forest, which is State Forest reserve Crown land allocated for plantation production purposes. Prior to 30 June 2010, control of this land vested with FPQO, and FPQ was granted full and exclusive access to State Plantation Forests under a deed of profit a prendre to carry out its operations in accordance with the Forestry Act 1959. In consideration of the grant of this right FPQ paid one dollar.

The granting of the Plantation Licence to Forestry Plantations Queensland Pty Ltd on 30 June 2010 triggered commencement of amendments to the Forestry Act 1959, which vested administrative responsibility for State Plantation Forest with the Department of Environment and Resource Management (effectively removing control of State Plantation Forests from FPQO). FPQ’s freehold lands were transferred to Forestry Plantations Queensland Pty Ltd.

2.12 Revaluations of non-current physical assets

Land, buildings and infrastructure are measured at fair value in accordance with AASB 116 Property, Plant and Equipment, and Queensland Treasury's Non-Current Asset Policies for the Queensland Public Sector. All other non-current assets, principally plant and equipment and intangibles, are measured at cost.

Non-current physical assets measured at fair value are comprehensively revalued at least once every five years with interim valuations, using appropriate indices, being otherwise performed on an annual basis, where there has been a material variance in the index. Only those assets, the total values of which are material, compared to the value of the class of assets to which they belong, are comprehensively revalued.

Any revaluation increment arising on the revaluation of an asset is credited to the asset revaluation surplus of the appropriate class, except to the extent it reverses a revaluation decrement for that same asset previously recognised as an expense, in which case the increase is recognised in profit or loss. A revaluation decrement is charged as an expense, except to the extent that it reverses a previous increment for that same asset and a positive balance exists in the revaluation surplus for that asset.

On revaluation, accumulated depreciation is restated proportionately with the change in the carrying amount of the asset and any change in the estimate of the remaining useful life.




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Separately identified components of assets are measured on the same basis as the assets to which they relate.

2.13 Intangible assets

Intangible assets with a cost or other value greater than $50,000 are recognised in the financial statements, items with a lesser value being expensed. Each intangible asset is amortised over its estimated useful life to FPQ, less any anticipated residual value. However, the residual value is zero for all internally-developed intangible assets not held for sale.

It has been determined that there is not an active market for any of FPQ’s intangible assets. As such, these assets are recognised and carried at cost less accumulated amortisation and accumulated impairment losses.

Expenditure on research activities relating to internally-generated intangible assets is recognised as an expense in the period in which it is incurred.

Costs associated with the development of computer software have been capitalised and are amortised on a straight-line basis over the period of expected benefit to FPQ.

2.14 Amortisation and depreciation of intangible assets and property, plant and equipment

Land is not depreciated as it has an unlimited useful life.

Property, plant and equipment is depreciated on a straight-line basis so as to allocate the net cost or revalued amount of each asset, less its estimated residual value, progressively over its estimated useful life to FPQ. Assets under construction (work-in-progress) are not depreciated until they reach service delivery capacity.

Where assets have separately identifiable components that are subject to regular replacement, these components are assigned useful lives distinct from the asset to which they relate and are depreciated accordingly. Any expenditure that increases the originally assessed capacity or service potential of an asset is capitalised and the new depreciable amount is depreciated over the remaining useful life of the asset to FPQ.

The depreciable amount of improvements to or on leasehold property is allocated progressively over the estimated useful lives of the improvements or the un-expired period of the lease, whichever is shorter. The unexpired period of leases includes any option period where exercise of the option is probable.

Plant and equipment acquired under a finance lease is amortised on a straight line basis over the term of the lease, or where it is likely that FPQ will obtain ownership of the asset, the expected useful life of the asset to FPQ.

For each class of depreciable asset the following average estimated useful lives were used:

Asset class: Asset sub-class Estimated useful life (years) Buildings Land improvements 27.5 Buildings 30.9 Infrastructure Access Roads 28.4 Plant and equipment Plant and equipment 7.3 Leasehold improvements 7.5

Intangible Software 5.8

2.15 Impairment of non-current assets

All non-current physical and intangible assets are assessed for indicators of impairment on an annual basis. If an indicator of possible impairment exists, FPQ determines the asset’s recoverable amount. Any amount by which the asset’s carrying amount exceeds the recoverable amount is recorded as an impairment loss.

The asset’s recoverable amount is determined as the higher of the asset’s fair value, less costs to sell, and value-in-use. In assessing value-in-use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

An impairment loss is recognised immediately in the Statement of Comprehensive Income, unless the asset is carried at a revalued amount. When the asset is measured at a revalued amount, the impairment loss is offset against the asset revaluation surplus of the relevant class to the extent available.




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Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised as income, unless the asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

2.16 Leases

A distinction is made in the financial statements between finance leases that effectively transfer from the lessor to the lessee substantially all the risks and benefits incidental to ownership, and operating leases under which the lessor retains substantially all risks and benefits.

Where a non-current physical asset is acquired by means of a finance lease, the asset is recognised at the lower of the fair value of the leased property and the present value of the minimum lease payments. The lease liability is recognised at the same amount. Lease payments are allocated between the principal component of the lease liability and the interest expense.

Operating lease payments are representative of the pattern of benefits derived from the leased assets and are expensed in the periods in which they are incurred.

2.17 Payables

Trade Creditors are recognised upon receipt of the goods or services ordered and are measured at the agreed purchase/contract price gross of applicable trade and other discounts. Amounts owing are generally settled on 7, 14 or 30-day terms.

2.18 Financial Instruments

Recognition Financial assets and financial liabilities are recognised in the Statement of Financial Position when FPQ becomes party to the contractual provisions of the financial instrument.

Classification Financial instruments are classified and measured as follows:

• Cash and cash equivalents – held at fair value through profit and loss • Receivables – held at amortised cost • Payables – held at amortised cost • Borrowings – held at amortised cost • Available for sale shares – held at cost

Borrowings are held at amortised cost using the effective interest method. FPQ did not enter into transactions for speculative purposes, nor for hedging. Apart from cash and cash equivalents, FPQ held no financial assets classified at fair value through profit and loss. All other disclosures relating to the measurement and financial risk management of financial instruments held by FPQ are included in note 28.

2.19 Dividend payable

Dividend payable is recognised when declared by the Responsible Ministers on or before reporting date. The dividend is payable to the Queensland Government.

The dividend payable is based on a percentage of the estimated profit (currently 50%) after adjusting out non-cash amounts related to deferred tax and movements in unrealised gains/losses for the year which affect distributable profit.

2.20 Interest-bearing liabilities

Borrowings are recognised at amortised cost with interest being expensed as it accrues. Borrowings are also disclosed at their fair market value in Note 28.




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2.21 Taxation

As a for-profit corporation sole, FPQ was subject to the payment of income tax equivalents in accordance with the requirements of the National Tax Equivalents Regime. In addition, FPQ was subject to Commonwealth taxation laws in relation to Fringe Benefits Tax (FBT) and Goods and Services Tax (GST).

Income tax equivalents

Income tax equivalents on the Statement of Comprehensive Income is comprised of current and deferred tax. Income tax equivalents are recognised in the Statement of Comprehensive Income except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at reporting date, and any adjustments to tax payable in respect of previous years.

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.

The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantially enacted at reporting date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Deferred tax assets and deferred tax liabilities are offset when there is a legally enforceable right to offset current tax assets and current tax liabilities, and when the deferred tax balances relate to the same taxation authority.

Goods and services tax

Revenues, expenses and assets are recognised net of the amount of goods and services tax, except:

• where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as part of the cost of acquisition of an asset or as part of an item of expense; or

• for receivables and payables which are recognised inclusive of GST.

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

The GST component of all cash flows which is recoverable from, or payable to, the Australian Taxation Office is separately classified and reported within operating cash flows.

2.22 Employee Benefits

Employer superannuation contributions and long service leave levies are regarded as employee benefits.

Payroll tax and workers’ compensation insurance are a consequence of employing employees, but are not counted in an employee’s total remuneration package. They are not employee benefits and are recognised separately as employee related expenses.

Wages, salaries, recreation leave and sick leave

Wages, salaries and recreation leave due but unpaid at reporting date are recognised in the Statement of Financial Position at the current salary rates.

All accrued recreation leave is disclosed as a current liability in the financial statements as past trends indicate that leave accrued approximates to leave taken, on an annual basis.

Prior history indicates that on average, sick leave taken each reporting period is less than the entitlement accrued. This is expected to continue in future periods. Accordingly, it is unlikely that existing accumulated entitlements will be used by employees and no liability for unused sick leave entitlements is recognised.




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As sick leave is non-vesting, an expense is recognised for this leave as it is taken.

Long service leave

Under the Queensland Government’s long service leave scheme, a levy is made on FPQ to cover the cost of employees’ long service leave. The levies are expensed in the period in which they are payable. Amounts paid to employees for long service leave are claimed from the scheme quarterly in arrears.

No provision for long service leave is recognised in the financial statements, the liability being held on a whole-of–Government basis and reported in the financial statements prepared pursuant to AASB 1049 Whole of Government & General Government Sector Financial Reporting.

Superannuation

Employer superannuation contributions are paid to QSuper, the superannuation plan for Queensland Government employees, at rates determined by the State Actuary. Contributions are expensed in the period in which they are paid or payable. FPQ’s obligation is limited to its contribution to QSuper.

No liability is recognised for accruing superannuation benefits in these financial statements, the liability being held on a whole-of-Government basis and reported in the financial statements prepared pursuant to AASB 1049 Whole of Government & General Government Sector Financial Reporting.

2.23 Insurance

FPQ’s non-current physical assets and other risks were insured through the Queensland Government Insurance Fund, premiums being paid on a risk assessment basis. In addition, FPQ paid premiums to WorkCover Queensland in respect of its obligations for employee compensation.

2.24 Interests in joint ventures

FPQ had a financial interest in a number of joint ventures involving the production of biological assets.

Contributions by FPQ towards the biological assets are expensed as incurred in line with FPQ’s biological assets accounting policy (refer Note 2.6). The assets embodied in FPQ’s share of the joint venture outputs have been assessed and, on the basis that these assets are not material, have not been recognised in the Statement of Financial Position. This position will be re-assessed annually. Details of the expenses incurred by FPQ in the current financial period in regard to these joint ventures are disclosed at Note 23.

2.25 Financial reporting by segments

FPQ operated principally in the forestry industry within Queensland.

2.26 Non-reciprocal transfers of assets and liabilities

Non-reciprocal transfers of assets and liabilities between wholly-owned Queensland Public Sector entities are accounted for as adjustments to capital in accordance with Interpretation 1038 Contributions by Owners Made to Wholly Owned Public Sector Entities.

2.27 Deposits held in trust

Security, tender and other deposits administered by FPQ in a trust capacity are not recognised in the financial statements but are disclosed for information purposes in Note 27.

2.28 Borrowing costs

Borrowing costs are recognised as expenses in the period in which they are incurred.

Borrowing costs include:

• Interest on short-term and long-term borrowings;

• Ancillary administration charges; and




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• Loan guarantee charges.

2.29 Issuance of financial statements

The financial statements are authorised for issue by the Former Chief Plantation Forestry Officer and the Former Responsible Officer for Financial Administration at the date of signing the Management Certificate.

2.30 Rounding and comparatives

Amounts included in the financial statements are in Australian dollars and have been rounded to the nearest $1,000 or, where that amount is $500 or less, to zero. Sub-totals and totals may not add up due to rounding, but the overall discrepancy is no greater than two.

Comparative information has been restated when necessary to be consistent with disclosures in the current reporting period.

2.31 Judgements

The preparation of financial statements requires the determination and use of certain critical accounting estimates, assumptions, and management judgements that have the potential to cause a material adjustment to the carrying amounts of assets and liabilities within the next financial year. Such estimates, judgements and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in future periods as relevant.

Estimates and assumptions that have a potential significant effect are outlined in the following financial statement notes:

Valuation of Biological Assets – note 2.6 Valuation of Property, Plant and Equipment – note 12

2.32 New and revised accounting standards

FPQ did not voluntarily change any of its accounting policies during 2009-10. FPQ complied with the revised AASB 101 Presentation of Financial Statements applicable from 2009-10. This revised standard does not have any measurement or recognition implications. In accordance with the amended AASB 101, the Balance Sheet has been re-named the Statement of Financial Position, and the Cash Flow Statement has now been re-named the Statement of Cash Flows. The former Income Statement has been replaced by a Statement of Comprehensive Income which now includes certain transactions that were previously detailed in the Statement of Changes in Equity (refer to the items under the sub-heading “Other Comprehensive Income”). The Statement of Changes in Equity includes details of transactions with owners in their capacity as owners, in addition to the total comprehensive income for the relevant components of equity.

FPQ was not permitted to early adopt a new or amended accounting standard ahead of the specified commencement date unless approval is obtained from the Treasury Department. Consequently, FPQ has not applied any Australian accounting standards and interpretations that have been issued but are not yet effective.

Any new or amended Australian accounting standards with future commencement dates will not have an impact on FPQ due to it being a terminating entity.




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3. Gain/(loss) on revaluation of biological assets including impacts on unrealised revenue reserve

2010 2009

Note $'000 $'000

Native pine 82,669 25,875Exotic pine 171,366 40,294Wollemi pine - (185)

Total 2.7 254,035 65,984

3(a)(ii) Gain/(loss) realised on disposal of biological assetsNative pine 25,819 22,473

Exotic pine 68,953 49,906

Wollemi pine - (185)

Total 94,772 72,194

3(a)(iii) Movement in unrealised gainsNet gain/(loss) transferred to unrealised revenue reserve (1) - (6,210)

3(a)(i) Gain/(loss) in valuation of biological assets

(1) At 30 September 2010 the reserve was discontinued as a consequence of the sale process and termination of the entity. At 30 June 2009 there were insufficient balances within the Retained Surplus Account to enable the transfer and quarantining of unrealised gains in

total to the Unrealised Revenue Reserve. Accordingly no reserving of unrealised gains was effected for 2008-09.

3(b) Forest product sales - non-plantation timberSeeds and seedlings 281 218

Total 281 218

3(c) Other revenueWorkshop charges 86 158Fees and permits 399 294Interest 2,241 2,863Plant hire 228 234Grants and subsidies 6,882 6,620Other sundry revenue 637 994

Total 10,473 11,163

4. Indicative physical quantities of biological assets and net valuation increment /(decrement)

2010 2010 2010 2009 2009 2009 ' 000 ' 000 $'000 ' 000 ' 000 $'000

Quantity Volume Increment Quantity Volume Increment

Plantation timber Hectares / Plants M³ (Decrement) Hectares / Plants M³ (Decrement)

Native pine - - - 43 ha 21,841 25,875

Exotic pine - - - 136 ha 54,047 40,294

Wollemi pine - - - - - (185)

5. Depreciation and amortisation

2010 2009

$'000 $'000

Depreciation and amortisation Infrastructure 1,570 1,251Buildings 958 917Plant and equipment 2,433 2,450Intangibles 532 325

Total 5,493 4,943




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6. Borrowing costs

2010 2009

$'000 $'000

Finance/borrowing costsInterest expense - QTC loan 7,608 4,670Administration charges - QTC Loan 80 80Loan guarantee fee - QTC loan 381 381

Total 8,069 5,131

7. Other operating expenses

2010 2009

Note $'000 $'000

Other expenses

Sale costs 29 18,731 - Travel expenses 502 516Bad and impaired debts 60 104Impairment - Buildings - 611Impairment - Shares - 40Audit fees (1) 230 131Insurance premiums - Qld Government Insurance Fund 2.23 25 32

Employee expenses (2) 1,134 690

Computer expenses 1,267 830Minor equipment 411 395Other 1,586 924

Total 23,946 4,273

(1) Total external audit fees relating to the reporting period are estimated to be $166,000 (2009: $127,000). There are no non-audit services included

in this amount. The audit fee disclosed in the above table includes fees paid on behalf of FPQO and FPQ PL during the reporting period. (2) Refer to note 2.22 for information relating to the components of employee benefits and employee related expenses. The number of employees

including both full-time employees and part-time employees measured on a full-time equivalent basis is Nil (2009: 3). The majority of FPQ employees were transferred to Forestry Plantations Queensland Pty Ltd under a transfer notice effective 26 March 2010 pursuant to the Infrastructure Investment (Asset Restructuring and Disposal) Act 2009. One employee was not included in the transfer notice but has since left the organisation.




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8. Income tax equivalents 2010 2009

$'000 $'000

Income Tax ExpenseCurrent tax (105) (4,775)Deferred tax (146,239) 6,256

(146,344) 1,481Deferred expense comprises:

Deferred tax asset (DTA) 96,839 399Deferred tax liability (DTL) (243,078) 5,857

(146,239) 6,256

Reconciliation of income tax expense to prima facie tax payable

Profit from ordinary activities (743,758) 4,957

Tax at the Australian tax rate of 30 % (2008: 30%) (223,127) 1,487Tax effect of:

Non-deductible/(Non-assessable) items - Balance 6,045 (6)

Derecognition of DTA on tax losses 96,728 - Tax neutrality cost base adjustments (25,990) - Income tax expense (146,344) 1,481

Amounts recognised directly in equityDeferred tax - debited (credited) directly to equity - 2,855

- 2,855

Deferred tax liablilty

Comprises:Biological assets - standing timber - 233,422Property, plant and equipment - 9,012Inventory - 579

Interest receivable - 36Other - 29

- 243,078Reduced by DTA comprising:

Tax losses - (96,622)Doubtful debts - (31)Other - (81)

- 146,344

Movement for the year:Opening balance 146,344 142,008

Charge to Statement of Comprehensive Income (146,344) 1,481Charged direct to equity (ARR) - 2,855

Closing balance - 146,344

A deferred tax asset has not been recognised for revenue tax losses amounting to $322,425,253, based on the management expectation that it is not considered probable that there will be taxable income in future periods against which the tax losses could be utilised. No deferred tax asset has been recognised for deductible temporary differences amounting to $66,075 at balance date.

9. Cash and cash equivalents 2010 2009

$'000 $'000

Cash on hand - 11

Cash at bank (1) - 39,642

Total - 39,653

(1) Interest is earned on cash balances at floating rates of interest ranging between 2.25% and 4.75% (2009: 0.65% and 2.90%).




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10. Receivables 2010 2009

$'000 $'000

CurrentTrade debtors - 13,624

- 13,624Less - Provision for impairment - (103)

- 13,521

Interest receivable - 121Other debtors - 281

Total - 13,923

11. Inventories 2010 2009

$'000 $'000

Finished goodsSeeds and seedlings - at cost - 359

Raw materials and storesMiscellaneous - at cost - 1,967

Total - 2,326

12. Property, plant and equipment 2010 2009

$'000 $'000

LandAt fair value (1) - 91,934

Buildings

At fair value (1) - 29,374Accumulated depreciation - (11,385)Accumulated impairment - (2,075)

- 15,914

Access roads

At fair value (1) - 38,232Accumulated depreciation - (21,587)

- 16,645

Plant and equipmentAt cost - 31,644Accumulated depreciation - (14,198)

- 17,446

Capital works in progressAt cost - 3,265

Property, plant and equipmentAt cost - 34,909

At fair value (1) - 159,540Accumulated depreciation - (47,170)Accumulated impairment - (2,075)

Total - 145,204

(1) All land, buildings and infrastructure are carried at fair value, while all other asset classes are carried at cost in accordance with Queensland

Treasury's Non-Current Asset Policies for the Queensland Public Sector. Land, buildings and infrastructure were revalued using ‘fair value’ principles as at 30 June 2006, by the following independent expert valuers: Australian Valuation Office, J.A. Forson, AAPI.




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12.1 Disclosure of revalued property, plant and equipment carrying amounts at cost

If land, buildings and infrastructure were measured using the cost model the carrying amounts would be as follows:

Land Buildings Infrastructure Land Buildings Infrastructure2010 2010 2010 2009 2009 2009

$'000 $'000 $'000 $'000 $'000 $'000

Cost - - - 71,533 18,916 9,071

Accumulated depreciation - - - - (7,982) (3,881)Net book value - - - 71,533 10,934 5,190

12.2 Fully depreciated assets

The strategic management of fully depreciated assets fell within FPQ’s Strategic Capital Investment and Asset Management Plan 2008-2012. The disposal and replacement of these items was managed under the arrangements for disposal and replacement of assets per the Strategic Capital Investment and Asset Management Plan 2008-2012.

2010 2009$'000 $'000

Significant asset classes

Buildings - 1,049

Infrastructure - 613

Plant and equipment - 4,314Software - 639

Total significant asset classes - 6,615

12.3 Property, plant and equipment movement reconciliation

Land Buildings Infrastructure

Plant and

equipment

Capital

works in

progress Total

2010 2010 2010 2010 2010 2010

$000 $000 $000 $000 $000 $000

Carrying amount at start of period 91,934 15,914 16,645 17,446 3,265 145,204

Acquisitions 6,954 126 - 969 4,731 12,780

Disposals (101,398) (15,134) (16,826) (18,945) - (152,303)

Transfer between classes 2,510 145 39 2,963 (7,996) (2,339)

Revaluation Increments/(decrements) - (93) 1,712 - - 1,619

Impairment losses - - - - - -

Depreciation/Amortisation - (958) (1,570) (2,433) - (4,961)

Carrying amount at end of period - - - - - -




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Land Buildings Infrastructure

Plant and

equipment

Capital

works in

progress Total

2009 2009 2009 2009 2009 2009

$000 $000 $000 $000 $000 $000

Carrying amount at 1 July 2008 70,345 16,044 15,456 18,675 1,935 122,455

Acquisitions 15,360 45 - 654 5,920 21,979

Disposals - (216) - (1,606) - (1,822)

Transfer between classes - 211 510 2,174 (4,590) (1,695)

Revaluation Increments/(decrements) 6,229 1,357 1,930 - - 9,516

Impairment losses - (611) - - - (611)

Depreciation/Amortisation - (916) (1,251) (2,451) - (4,618)

Carrying amount at 30 June 2009 91,934 15,914 16,645 17,446 3,265 145,204

13. Intangible assets 2010 2009

$'000 $'000

Internal use softwareAt cost - 2,495Accumulated amortisation - (965)

Total - 1,530

Intangibles reconciliationSoftware Software

Carrying amount at start of period 1,530 138Acquisitions 2,469 1,717Disposals (3,467) - Amortisation (532) (325)

Carrying amount at end of period - 1,530

14. Other financial assets 2010 2009

$'000 $'000

Other financial assetsShares - Wollemi Australia Pty Ltd - 40Less Impairment - Shares - (40)

Total - -




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15. Biological assets 2010 2009

$'000 $'000(i) Plantation growing timber

Carrying amount at the start of the period 1,167,427 1,173,637Decrease from disposals / sales 3a(ii) (94,772) (72,379)Gain / (loss) from changes in fair values 3a(i) 254,035 66,169Decrement to reflect fair value on sale (906,111)Disposal - Transfer to DERM (1) (420,579)

Carrying amount at the end of the period - 1,167,427

(ii) Wollemi pineCarrying amount at the start of the period - 261Decrease from disposals / sales - (76)Gain / (loss) from changes in fair values - (185)

Carrying amount at the end of the period - -

(1) This represents the fair value of plantation assets transferred to DERM. The value is based on the observed sale price of the asset by the State government.

15.1 Sensitivity of Fair Valuation of Plantations to changes in significant assumptions used in the valuation modelling process

2010 2009

Change $'000 $'000

Discount Rate (Weighted Average Cost of Capital) +1% - (124,290)

-1% - 150,224

Expected future sales values +5% - 72,148

-5% - (72,148)

Expected future costs +5% - (13,776)-5% - 13,776

16. Payables 2010 2009

$'000 $'000

Current Trade creditors - 1,041Work Performance arrangement fee payable - 250Accrued interest, loan guarantee fee and other costs of finance - 1,566Tax payable - Fringe benefits - 42 - GST payable - 733 - Less GST receivable - (912)Accrued expenses - 742Prepaid royalties, grants and other revenue received in advance - 19Dividend payable - 3,261

Total - 6,742

17. Dividend 2010 2009

$'000 $'000

Movement in dividend payableBalance at the beginning of the financial period 3,261 13,356Payable recognised for the period - 3,261Reduction in payable as a result of payments (3,261) (13,356)

Total 2.19 - 3,261

The Responsible Ministers determined that no dividend be declared and paid on the 2009-10 financial results.




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18. Other financial liabilities 2010 2009

$'000 $'000

Non-currentQueensland Treasury Corporation borrowings (1) - 76,153

Total - 76,153

(1) The loan is in an $A denominated amount and recognised at book value, interest being expensed as it accrues. No interest has been capitalised

during the current or comparative reporting period. The book interest rate is 6.37%. The market value of the loan at balance date, as notified by the Queensland Treasury Corporation, was $Nil (2009: $79,281,740). FPQ repaid its QTC borrowings in full on 5 July 2010. Refer Note 6 for information relating to borrowing costs associated with this loan.

19. Asset revaluation surplus by class

Land Buildings Infrastructure Total2010 2010 2010 2010

$000 $000 $000 $000

Balance at start of period 9,522 3,456 6,478 19,456

Revaluation increments - (94) 1,712 1,618

Impairment losses through equity - - - -

Tax effect on ARR - - - -

Transfer to accumulated surplus (9,522) (3,362) (8,190) (21,074)Balance at end of period - - - -

The asset revaluation surplus represents the net effect of upwards and downwards revaluations of assets to fair value.

20. Board Remuneration

Remuneration received, or due and receivable by Board Members from FPQ in connectionwith the management of FPQ was as follows (in whole $):

2010 2009

Fees and expenses

The Honourable Con Sciacca (Chair) (resigned 06/08/2009) 6,847 41,080 Mr Robert Shead (Chair) (Appointed 01/10/2009) 41,080 -

Adjunct Professor Joan Sheldon AM 31,983 25,580

Mr Warwick Marler 31,850 25,480

Mr Bill Brett (resigned 24/08/2009) 4,247 25,480 Professor Ian Lowe AO 29,900 23,920

Total 145,907 141,540




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21. Reconciliation of net operating result to net cash provided by/(used in) operating activities 2010 2009

Note $'000 $'000

Profit from ordinary activities after income tax equivalents (597,414) 3,476

Non-cash items:Unrealised biological assets (increment)/decrement (159,263) 6,210Depreciation and amortisation 5,493 4,943Asset write-downs and decrements (reversals) 906,111 651

(Gain)/loss on disposal of non-current assets 4,095 214Income tax equivalents (146,344) 1,481

Changes in assets and liabilit ies:(Increase)/decrease in inventories 2,326 125(Increase)/decrease in biological assets (Wollemi) - 261(Increase)/decrease in receivables (5,412) 3,949(Increase)/decrease in prepayments 264 (11)(Increase)/decrease in GST input tax credits receivable 912 7Increase/(decrease) in employee benefits (62) 6Increase/(decrease) in other liabi lities (19) 19Increase/(decrease) in GST payable (733) (147)Increase/(decrease) in payables (3,498) (1,936)

Net cash provided by operating activities 6,456 19,248

Reconciliation of cash For the purpose of the Statement of Cash Flows, cash includes cash on hand and deposits at call which are readily convertible to cash and which

are used in the day-to-day cash management function of FPQ. Cash at the end of the reporting period as shown in the Statement of Cash Flows is reconciled to the related items in the Statement of Financial Position as detailed in Note 9.

22. Restructuring of administrative arrangements

As a result of transfer notices, project directions, and amendments to the Forestry Act 1959 enacted throughout the reporting period, as outlined in note 1, the following assets transferred and liabilities assumed.

Transferred

to FPQO on

29 June 2010

Transferred

to DERM on

29 June 2010

Transferred

to FPQ PL on

29 June 2010

$'000 $'000 $'000Current assets

Cash assets - - 10Receivables - 66 18,082Inventories - - 1,970

Total current assets - 66 20,062Non current assets

Property, plant and equipment - 7,077 141,070Intangibles - - 3,468

Total non current assets - 7,077 144,538Biological assets

Plantation growing timber 420,579 - - Total biological assets 420,579 - - Total assets 420,579 7,143 164,600Current liabilities

Payables - - 2,022Total current liabilities - - 2,022Non current liabilities

Other financial liabil ities - - 10Total non current liabilities - - 10Total liabilities - - 2,032Net assets 420,579 7,143 162,568

Transfers to FPQO and DERM were effected through equity transfers under State government project direction. Refer to the Capital section of the Statement of Changes in Equity. The transfer of net assets to FPQ PL was recognised as a capital investment in the wholly owned subsidiary. This investment was liquidated by the proceeds of sale at the time the company was sold to Hancock Queensland Plantations Pty Ltd.




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23. Interest in joint ventures

FPQ held an interest in a number of joint ventures. These were all in the category of jointly controlled operations. Inputs to these joint ventures were recorded and accumulated over the life of the venture with the outputs being shared in proportion to the investment or as otherwise agreed in the Joint Venture Deed. Investments in these ventures were classified by the output as follows:

Private Forestry Plantations Ventures:

These are designed to establish commercially viable timber plantations on privately owned, and Crown lands. Prior to 30 June 2010 FPQ had a share in 103 of these ventures. Contributions to these joint ventures for the current reporting period totalled $164,751 (2009: $235,940).

Seed Orchard Venture:

This venture was designed to produce and sell improved tree seed from an orchard established for the purpose. Contributions to this joint venture for 2009-10 totalled $Nil (2009: Nil).

No commercial output was derived from these joint venture operations during the year.

All joint ventures have been transferred to Forestry Plantations Queensland Pty Ltd as part of the asset divestment process.

24. Controlled entities

Wollemi Australia Pty Ltd

Wollemi Australia Pty Ltd (WA) was established on 28 May 2001 as a joint venture company to manage the propagation and worldwide marketing of the Wollemi Pine under license from the Royal Botanic Gardens in Sydney. On 31 May 2007 FPQ acquired the only other ordinary share in this company and assumed full control of the business. This action qualified the company as a controlled ‘public sector entity’.

Because the amount of the investment and the transactions of WA are not considered material, the entity is not consolidated with FPQ’s financial statements.

On 27 April 2010 BDO was appointed as liquidator of Wollemi Australia Pty Ltd following a members resolution that the company be voluntarily wound up. The liquidators are awaiting income tax clearance from the Australian Taxation Office to finalise proceedings.

Forestry Plantations Queensland Pty Ltd

On 8 March 2010 the Queensland State government established Forestry Plantations Queensland Pty Ltd as a wholly owned subsidiary of Forestry Plantations Queensland. This company was formed as a ‘sale vehicle’ enabling the State to divest its interests in plantation forest management.

Prior to 30 June 2010, the company provided forest management services to FPQ to support its business.

On 30 June 2010, FPQ (on behalf of the Government) sold its shares in Forestry Plantations Queensland Pty Ltd to Hancock Queensland Plantations Pty Ltd.

Further information in relation to the operation of Forestry Plantations Queensland Pty Ltd is contained in note 1 to these accounts.

As the transactions of the controlled entity are not considered material, and due to the investment being sold during the reporting period, the entity is not consolidated with the FPQ financial statements. Financial information for Forestry Plantations Queensland Pty Ltd for the period 8 March 2010 to 30 June 2010 is outlined in the table below.

The Queensland Auditor-General was the auditor of the company up until its sale. Total external audit fees for the current reporting period are estimated to be $41,600 (2009: Nil). There are no non-audit services included in this amount.




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Forestry Plantations Queensland Pty Ltd 2010 2009For the period 8 March 2010 to 30 June 2010 $'000 $'000Revenue

WPA revenue 7,103 - Employee entitlement transfer 8,615 -

Expenses (15,718) - Net Surplus/(deficit) - -

Assets - -

Liabilitites - - Net assets - -

25. Contingent liabilities – Litigation in progress

Litigation in progress relates to commercial disputes and/or damages claims. The jurisdiction of all contingent liability matters as at balance date is as follows:

2010 2009

Supreme Court 0 1 District Court 0 0 Other 0 1

On 29 June 2010 all litigation in progress was transferred to DERM. At that time FPQ had 1 Supreme Court case and 2 other matters in progress.

FPQ’s legal advisers and management believe that it would be misleading to estimate the final amounts payable, if any, in respect of the litigation filed in the courts. FPQ has insurance cover with Queensland Government Insurance Fund. The costs of any successful claims against FPQ may, depending on the circumstances, be met by the insurer.

26. Commitments for expenditure

Non-cancellable operating lease commitments

Commitments under operating leases at reporting date are inclusive of anticipated GST and are payable as follows: 2010 2009

$'000 $'000Not later than one year - 1,797Later than one year and not later than five years - 2,493Later than five years - -

Total - 4,290

Capital expenditure

Plant and equipment payable within 1 year ($‘000): $Nil (2009: $2,028).

Recurrent expenditure - land rental commitments

Commitments for payment of land rentals in respect of hardwood plantation agreements in place as at the reporting date are payable as follows:

2010 2009$'000 $'000

Not later than one year - 493Later than one year and not later than five years - 1,972Later than five years - 7,826

Total - 10,291

(1) Land rentals payable by FPQ are disclosed at nominal amounts. While the agreements provide that land rentals payable by FPQ are to be adjusted

by CPI annually, rental commitments have been disclosed at nominal amounts due to the difficulty in estimating future changes in CPI over an extended period.




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27. Deposits held in trust

Security, tender and other deposits were held by FPQ in trust primarily as guarantees for performance under timber sales agreements and contracts. Deposits held as at balance date amounted to $Nil (2009: $250,905). These deposits are not recognised in the financial statements but are reported for information purposes. Transactions and balances relating to these deposits are subject to audit by the Queensland Auditor-General.

The trust deposits held on 30 June 2010 were transferred to Forestry Plantations Queensland Pty Ltd as part of the sale process.

28. Financial instruments

Categorisation of Financial Instruments

FPQ had the following categories of financial assets and financial liabilities:

2010 2009Category Note $'000 $'000

Financial AssetsCash and cash equivalents 9 - 39,653

Receivables 10 - 13,923

Other financial assets 14 - -

Total - 53,576

Financial Liabilities

Payables 16 - 6,742

Other financial liabilities - QTC Borrowings 18 - 76,153

Total - 82,895

Financial Risk Management

FPQ’s activities exposed it to a variety of financial risks – credit risk, liquidity risk, market risk, and interest rate risk.

Financial risk management is implemented pursuant to Government and FPQ policies. These policies provide written principles for overall risk management and seek to minimise potential adverse effects on the financial performance of FPQ.

Further detail on each risk exposure is outlined below.

Credit Risk

Credit risk exposure refers to the situation where FPQ may have incurred financial loss as a result of another party to a financial instrument failing to discharge their obligation.

The maximum exposure to credit risk at balance date in relation to each class of recognised financial assets is the gross carrying amount of those assets inclusive of any provisions for impairment.

The following table represents FPQ’s maximum exposure to credit risk based on contractual amounts net of any allowances:

2010 2009Maximum Exposure to Credit Risk Note $'000 $'000

Financial Assets

Cash and cash equivalents 9 - 39,653

Receivables 10 - 13,923

Other financial assets 14 - - Total - 53,576

Credit risk in respect of trade debtors is managed in the following ways:




Page 28 of 32

• Continuous monitoring of payment terms to ensure funds owed are received on a timely basis; and

• Trade debtors are secured by either cash deposit, or other financial guarantee.

No financial assets and financial liabilities have been offset and presented net in the Statement of Financial Position.

No financial assets have had their terms renegotiated so as to prevent them from being past due or impaired, and are stated at the carrying amounts as indicated.

The method for calculating any provisional impairment for risk is based on past experience, current and expected changes in economic conditions and changes in client credit ratings. The recognised impairment loss is $Nil for the current reporting period. This is a decrease of $142,496 from 2009.

As at the end of the current reporting period there are no financial assets outstanding. For the 2008-09 reporting period, $12,678,221 (99.7% of the total owing) of the financial assets not impaired were either not yet due or less than one month overdue, and $38,596 were outstanding over 60 days.

There are no impaired financial assets as at the end of the current reporting period.. In regard to impaired financial assets in the 2008-09 reporting period, $382,920 were over 60 days overdue and $40,419 were either not yet due or less than one month overdue.

Liquidity Risk

Liquidity risk refers to the situation where FPQ may encounter difficulty in meeting obligations associated with financial liabilities.

FPQ was exposed to liquidity risk through its trading in the normal course of business and borrowings from Queensland Treasury Corporation.

FPQ managed liquidity risk through the use of a liquidity management strategy. This strategy aimed to reduce the exposure to liquidity risk by ensuring FPQ had sufficient funds available to meet employee and supplier obligations as they fell due. This was achieved by ensuring that minimum levels of cash are held within the various bank accounts so as to match the expected duration of the various employee and supplier liabilities.

The contractual maturity analysis of financial liabilities, calculated based on cash flows relating to the repayment of the principal amount outstanding at balance date, is set out in the following table.

Liquidity Risk Tables

2010

Financial liabilitiesPayablesOther - QTC borrowings

$'000

- -

$'000 $'000

- -

$'000

- - -

- -

- Total - 1816

Maturity Date

-

Financial instruments Note

1 year or

less

1 to 5

years

Greater

than

5 years Total

2009

Financial liabilitiesPayables

Other - QTC borrowingsTotal

1 to 5

years

Greater

than

5 years

6,74216

1 year or

less$'000 $'000 $'000

- -

Maturity Date

Financial instruments TotalNote$'000

6,742

18 - - 76,153 76,1536,742 - 76,153 82,895




Page 29 of 32

Market Risk

FPQ was not materially exposed to commodity price changes.

Interest Rate Risk

FPQ was exposed to interest rate risk through its borrowings from Queensland Treasury Corporation, and cash deposited in interest bearing accounts. FPQ did not undertake any hedging in relation to interest risk and manages its risk as per the liquidity risk management strategy.

The following interest rate sensitivity analysis depicts the outcome of profit and loss if interest rates would change by +/- 1% from the year-end rates applicable to FPQ’s financial assets and liabilities. With all other variables held constant, FPQ would have a surplus and equity increase/(decrease) of $Nil (2009: $365,000). This is mainly attributable to FPQ’s exposure to variable interest rates on its borrowings from Queensland Treasury Corporation.

Profit Equity Profit Equity

Cash and cash equivalents - - - - -QTC borrowings - - - - -

Financial Instruments

Overall effect on profit and equity - -

-1% +1%2010 Interest Rate Risk

Carrying

Amount

- -

Profit Equity Profit EquityCash and cash equivalents 39,653 (397) (397) 397 397QTC borrowings 76,153 762 762 (762) (762)

Financial InstrumentsCarrying

Amount

2009 Interest Rate Risk-1% +1%

(365) (365)Overall effect on profit and equity 365 365

Foreign Currency Risk

FPQ did not trade in foreign currency and its transactions are denominated in Australian dollars. As a result, FPQ has no exposure to movements in foreign currency.

Fair Value

FPQ did not recognise any financial assets or financial liabilities at fair value.

The fair value of trade receivables and payables are assumed to approximate the value of the original transaction, less any provision for impairment.

The fair value of borrowings is notified by the Queensland Treasury Corporation. It is calculated using discounted cash flow analysis and the effective interest rate and is disclosed below:

Financial instruments

Other - QTC borrowings - -

Total - - 76,153 79,28276,153 79,282

$'000 $'000 $'000 $'000

Carrying Amount Fair Value2010 2009 2010 2009




Page 30 of 32

29. Related Party disclosures

Entities subject to common control

FPQ was a Queensland corporation sole, with all shares held by the shareholding Ministers on behalf of the State of Queensland. All State of Queensland controlled entities meet the definition of a related party of FPQ.

FPQ transacted with other State of Queensland controlled entities, including Government Departments, Government Owned Corporations, Corporations Sole, and Public Service Offices. All material transactions are negotiated on terms equivalent to those that prevail in arm’s length transactions.

The value of these material related party transactions and balances, as reported in the Statement of Financial Position and Statement of Comprehensive Income, are disclosed below:

2010 2009

Note $'000 $'000

Other financial liabi lity Loan with Queensland Treasury Corporation (QTC). 18 - 76,153

Payables - creditors Payable to FPQO for work performance services and

accrued interest expense to QTC.

16 - 1,816

Dividend payable Dividend payable is to the Queensland Government (refer

Note 2.19).

16 - 3,261

Sale costs Reimbursement to Treasury for costs associated with sale

of business and assets.

18,731 -

Other expenses Payment to Treasury for engaging two former executives. 510 -

Work Performance Agreement Fee Work performance services between FPQ and FPQO. 25,575 29,679

Work Performance Agreement Fee Work performance services between FPQ and FPQ PL. 7,103 -

Interest expense QTC loan interest includes administration fee and loan

guarantee fee.

6 8,069 5,131

Related party disclosures Nature of transaction




Page 31 of 32

Certificate of Forestry Plantations Queensland

These general purpose financial statements have been prepared pursuant to section 62 (1) of the Financial Accountability Act 2009 (the Act) and other prescribed requirements. In Accordance with Section 62 (1)(b) of the Act we certify that in our opinion:

(i) the prescribed requirements for the establishment and keeping of the accounts have been complied with in all material respects; and

(ii) the final statements have been drawn up to present a true and fair view, in accordance with prescribed accounting standards, of the transactions of Forestry Plantations Queensland for the period 1 July 2009 to 30 November 2010 and of the financial position as at the end of that period.

STUART SANDERSON B.Com (CPA) DR W A HOEY

Former Responsible Officer for Financial Administration Former Chief Plantation Forestry Officer



FPQO Final Annual Report 2009-10

Queensland OfficeForestry Plantations


The Forestry Plantations Queensland Office (FPQO), a public service office under section 29(1) of the Public Service Act 2008, was established on 1 May 2006 (under the former Public Service Act 1996) as a provider of forest plantation management services to Forestry Plantations Queensland (FPQ), notably human resources, on a commercial basis.

FPQO also had custodial responsibility for State Plantation Forests, a category of State Forest used for plantation production. FPQO’s strategic imperatives were to: • Develop and maintain forest management

knowledge, expertise and capacity. • Fulfil its obligations to FPQ under its Work

Performance Agreement with the Corporation (see below), including the delivery of FPQ’s Operational Plan.

• Assume custodial responsibility for Queensland’s state-owned plantation forest lands.

• Provide FPQ with appropriate access to these forests for the purpose of managing and dealing with plantation and related natural resource products.

FPQO was wound up on 30 November 2010

Staffing

FPQO staff operated under a Work Performance Agreement between FPQO and FPQ. Under this arrangement, FPQO employees carried out the operations of FPQ and assisted in delivering its Operational Plan.

At 26 March 2010, the date at which all FPQO staff were transferred to FPQ Pty Ltd, FPQO employed 381 staff. The majority of these staff worked in regional plantation forestry centres. Due to the seasonal nature of FPQ’s commercial operations, FPQO’s staff numbers varied over the course of a year, with staffing levels typically fluctuating with silvicultural operational requirements.

FPQO’s full time equivalent (FTE) staff numbers were reduced by 11.5 per cent during 2009-10 (the Office employed 436 FTE staff at 30 June 2009) due primarily to productivity improvements, including changes in nursery production technology. The reduction in FTE numbers did not involve any involuntary redundancies.

Voluntary early retirements and deployment

Seventy-one FPQO staff took voluntary early retirement packages during 2009-10, at a total cost to the Office of $2,137,216. FPQO had four employees on secondment who left the organisation during 2009-10.

FPQ Office


Enterprise bargaining

Prior to the transfer of employees from FPQO to Forestry Plantations Queensland Pty Ltd (FPQ Pty Ltd) and the subsequent sale of shares in FPQ Pty Ltd to Hancock Queensland Plantations Pty Ltd the State of Queensland agreed to guarantee all employment conditions and entitlements to all transferring employees for a period of three years after the sale.

In June 2009, negotiations commenced between the State of Queensland (represented by the Department of Employment and Industrial Relations and Queensland Treasury), relevant unions and FPQO management. Initial negotiations for what became the Forestry Plantations Queensland Office Workforce Transition Code of Practice, October 2009 concluded in September 2009. The purpose of the Code was to ensure agreement between the parties as to what conditions of employment would be included in the Enterprise Agreement.

Negotiations for what was to become the Forestry Plantations Queensland Enterprise Agreement 2010 (the Agreement), commenced in December 2009 with agreement being approved by employee ballot, which closed on 23 April 2010. The final agreement was approved by Fair Work Australia on 10 May 2010 and commenced operation on 18 May 2010. The key points of the Agreement are:• Three years of employment security after the date

of sale for permanent employees. Employment remains subject to the issues of discipline and performance.

• No forced relocations for 12 months. A forced relocation is where an employee’s place of work changes and they are required to establish a new place of residence in order to continue their employment.

• Limited scope of matters that may be included under an Individual Flexibility Arrangement (IFA) (clause 4.12 of the Agreement).

• A “Closed Agreement” clause (Section 7).• The requirement to consult with Unions about

organisational change and restructuring, especially with regard to the contracting out of services currently provided by FPQ employees.

The Agreement has a nominal expiry date of 30 June 2013.

Diploma of Management

FPQO’s second intake of students for its Diploma of Management undertook their final assessment through the first half of 2009 and graduated at an official ceremony at the Queensland Museum on 3 December 2009. The qualification, issued through the Royal Melbourne Institute of Technology, consists of 11 competencies and includes on-the-job coaching, work projects and formal tertiary-level education. The

course targets middle managers and future leaders, with a specific emphasis on forestry in a commercial environment.

Offered for the first time in 2007-08, the diploma is the first qualification of its type for FPQO staff. The intake comprised 19 FPQO staff, including nine female staff.

Graduates-in-training

FPQO employed two graduate foresters-in-training in 2009-10. This brings the total number of graduates to 84, since the graduate training program started in 1997. Under the program, graduates work for FPQO for 18 months in a temporary capacity and then apply for permanent positions when their training is complete.


FPQO’s Code of Conduct (also applicable to FPQ) continued in place to meet the needs of a commercial business, while adhering to all obligations of the Public Sector Ethics Act 1994.

Whistleblowers Protection Act 1994

During 2009-10, no public interest disclosures were received by FPQO or referred to FPQO by any Legislative Assembly member under Section 28A of the Whistleblowers Protection Act 1994. In addition, no public interest disclosures were requested of FPQO, or made by FPQO during the period in review.

FPQ Office


FPQO - FINANCIAL STATEMENTS

Page 1 of 16

FORESTRY PLANTATIONS QUEENSLAND OFFICE FINAL FINANCIAL STATEMENTS for the period 1 July 2009 to 30 November 2010 CONTENTS PAGE

STATEMENT OF COMPREHENSIVE INCOME 53 STATEMENT OF FINANCIAL POSITION 54 STATEMENT OF CHANGES IN EQUITY 55 STATEMENT OF CASH FLOWS 56 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS 57

1. CORPORATE INFORMATION 57 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 57 3. OTHER REVENUE 61 4. EMPLOYEE EXPENSES 61 5. OTHER OPERATING EXPENSES 62 6. RECEIVABLES 62 7. PROPERTY 62 8. PAYABLES 63 9. ACCRUED EMPLOYEE BENEFITS 63 10. RECONCILIATION OF NET OPERATING RESULT TO NET CASH PROVIDED BY/(USED IN) OPERATING ACTIVITIES 63 11. ASSET REVALUATION RESERVE BY CLASS 63 12. CONTINGENT LIABILITY – WORKERS ’ COMPENSATION CLAIMS 63 13. RESTRUCTURE OF ADMINISTRATIVE ARRANGEMENTS 63 14. FINANCIAL INSTRUMENTS 64

CERTIFICATE OF FORESTRY PLANTATIONS QUEENSLAND OFFICE 66 INDEPENDENT AUDITOR’S REPORT 67



Page 2 of 16

STATEMENT OF COMPREHENSIVE INCOME


Note $'000 $'000

Income from discontinued operationsWork performance arrangement fee 25,575 29,374

Other Revenue 3 419 183Total income from discontinued operations 25,994 29,557

Expenses from discontinued operations

Employee expenses 4 25,928 29,513Other operating expenses 5 57 44

Total expenses from discontinued operations 25,985 29,557

Operating result from discontinued operations 9 -

Other comprehensive income

Increase/(decrease) in asset revaluation surplus 11 - 14,335

Total other comprehensive income - 14,335

Total comprehensive income 9 14,335

17 months to 30

Nov 2010

12 months to

30 June 2009

This Statement of Comprehensive Income is to be read in conjunction with the notes to the financial statements.



Page 3 of 16

STATEMENT OF FINANCIAL POSITION

as at 30 November 2010

30 Nov 2010 30 June 2009Note $'000 $'000

Current assetsCash & cash equivalents - 4,809Receivables - debtors 6 - 585

Total current assets - 5,394

Non current assetsLand 7 - 216,177

Total non current assets - 216,177

Total assets - 221,571

Current liabilitiesPayables 8 - 457Accrued employee benefits 9 - 3,167

Total current liabilities - 3,624

Total liabilities - 3,624

Net assets - 217,947

EquityCapital - 131,814Accumulated surplus - - Reserves - Asset revaluation surplus 11 - 86,133

Total equity - 217,947

This Statement of Financial Position is to be read in conjunction with the notes to the financial statements.



Page 4 of 16

STATEMENT OF CHANGES IN EQUITY


Note $'000 $'000

Capital


Net assets transferred to other departments 13 (216,177) -Equity withdrawal 84,363 -


Accumulated surplus

Balance at beginning of financial period - -Operating result from operations 9 -

Transfer from asset revaluation surplus 86,133 -

Equity withdrawal (86,142)

Balance at end of financial period - -

Asset revaluation surplus


Transfer of asset revaluation surplus to accumulated surplus 11 (86,133) -

Increment / (decrement) on revaluation of land 11 - 14,335Balance at end of financial period - 86,133

Total equity - 217,947

Total equity at beginning of financial period 217,947 203,612

Operating result from operations 9 -Total other comprehensive income:

Asset revaluation net increment 14,335

Transactions with owners as owners:Non-reciprocal transfer of assets and liabilities (217,956) -

Total equity at end of financial period - 217,947

17 months to

30 Nov 2010

12 months to

30 June 2009

This Statement of Changes in Equity is to be read in conjunction with the notes to the financial statements.



Page 5 of 16

STATEMENT OF CASH FLOWS


Note $'000 $'000

Cash flows from operating activities

Inflows:Receipts from customers 25,988 29,829GST input tax credits from ATO 6 1GST collected from customers 1,754 2,978Interest received 181 189Other 246 8

Outflows:Payments to suppliers and employees (29,143) (30,000)GST paid to suppliers (3) (4)GST remitted to ATO (2,027) (2,923)Other (32) (47)

Net cash provided by/(used in) operating activities 10 (3,030) 31

Cash flows from financing activities

Net cash provided by/(used in) financing activities - -

Cash flows from investing activities

Return of capital (1,779) -

Net cash provided by/(used in) investing activities (1,779) -

Net increase/(decrease) in cash and cash equivalents held (4,809) 31

Cash and cash equivalents at the beginning of the financial period 4,809 4,778

Cash and cash equivalents at the end of the financial period - 4,809

17 months to

30 Nov 2010

12 months to

30 June 2009

This Statement of Cash Flows is to be read in conjunction with the notes to the financial statements.


FPQO - NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS


Page 6 of 16

Notes to and forming part of the financial statements

1. Corporate information

These are the final financial statements for Forestry Plantations Queensland Office (FPQO). FPQO is a Queensland public service office established under the Public Service Act 2008. The head office and principal place of business of FPQO during the period was Level 2, 104 Melbourne Street, South Brisbane.

FPQO was established on 1 May 2006 as a result of the Queensland Government’s reform of the commercial forest plantation management activities previously undertaken by DPI Forestry. FPQO’s primary functions were to provide forest management resources and expertise to Forestry Plantations Queensland (FPQ) under a Work Performance Agreement pursuant to Section 34 of the Forestry Plantations Queensland Act 2006, and to assume responsibility for State Forests, and the Crown Lands that are reserved as State Forest and allocated for plantation production. The Queensland Government nominated the business and assets of FPQ for sale on 2 June 2009. The formal process of restructuring the State’s plantation businesses for sale commenced on 26 November 2009. This included the establishment of Forestry Plantations Queensland Pty Ltd as a fully owned subsidiary of FPQ on 8 March 2010. On 26 March 2010, the majority of FPQO employees were transferred to Forestry Plantations Queensland Pty Ltd by a transfer notice under the Infrastructure Investment (Asset Restructuring and Disposal) Act 2009, and delegations were put in place to permit Forestry Plantations Queensland Pty Ltd to provide the forest management resources required to support FPQ’s business. By 30 June 2010 there were no employees remaining in FPQO. On 18 May 2010, the State of Queensland, FPQ and Hancock Queensland Plantations Pty Ltd entered into a share sale agreement for Hancock Queensland Plantations Pty Ltd to acquire the shares in Forestry Plantations Queensland Pty Ltd and for the granting of a Plantation Licence to Forestry Plantations Queensland Pty Ltd, allowing it to manage, use and sell the timber on State Plantation Forests for 99 years. The Share Sale Agreement settled on 30 June 2010. The granting of the Plantation Licence to Forestry Plantations Queensland Pty Ltd on 30 June 2010 triggered commencement of amendments to the Forestry Act 1959, which vested administrative responsibility for State Plantation Forest with the Department of Environment and Resource Management (effectively removing control of State Plantation Forests from FPQO).

The values of the assets transferred and liabilities assumed are disclosed in note 13.

After the sale of Forestry Plantations Queensland Pty Ltd, FPQO has continued to operate in order to finalise the share sale completion process, undertake financial and annual reporting and facilitate the abolition of the Office. Pursuant to Section 45(5) of the Financial and Performance Management Standard 2009, the Treasurer has approved that FPQO’s financial statements be submitted for audit by 30 November 2010.

On 23 September 2010 all equity in FPQO was withdrawn from contributed equity and accumulated surplus by the State Government through the return of $1.779 million to Queensland Treasury. The equity withdrawal was affected by a Project Direction pursuant to the Infrastructure Investment (Asset Restructuring and Disposal) Act 2009.

The abolition of FPQO was effected on 30 November 2010, pursuant to the Natural Resources and Other Legislation Amendment Act 2010.

2. Summary of significant accounting policies

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

2.1 Basis of accounting

These financial statements are general purpose financial statements and have been prepared in accordance with applicable Australian Accounting Standards, minimum reporting requirements included in the Financial Reporting Requirements for Queensland Government Agencies, and other authoritative pronouncements.

The accounts have been prepared on an accrual basis and, except where stated otherwise, in accordance with the historical cost convention.


FPQO - NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTD.)


Page 7 of 16

At reporting date FPQO is not considered a going concern as all assets and liabilities were transferred to Queensland Treasury prior to the entity being abolished. Therefore, the going concern basis has not been applied for the reporting period. The 2008-09 balances are presented in accordance with the following accounting policies.

2.2 Cash and cash equivalents

For the purposes of the Statement of Financial Position and the Statement of Cash Flows, cash assets include all cash and cheques receipted but not banked at balance date as well as deposits at call with financial institutions.

2.3 Receivables

Debtors are recognised at the amounts due at the time of service delivery. Terms are net 30 days. A provision for impairment is made when collection of the full amount is no longer probable. Bad debts are written off as incurred.

2.4 Land

Prior to 30 June 2010, FPQ carried out its forestry establishment, management and marketing operations principally on State Plantation Forest land pursuant to a deed of profit-a-prendre executed with FPQO. Control of this land remained with FPQO; with, to the extent allowed under the Forestry Act 1959, FPQ being granted full and exclusive access to State Plantation Forests to carry out its plantation operations. The deed of profit-a-prendre was executed between FPQ and FPQO in 2006 for a consideration of one dollar and remained in place until 30 June 2010 when it was terminated.

Amendments to the Forestry Act 1959, affected by the Natural Resources and Other Legislation Amendment Act 2010, had the effect of transferring control of State Plantation Forest from FPQO to the Department of Environment and Resource Management at the time of granting the Plantation Licence.

2.5 Revaluations of land

Land is measured at fair value in accordance with AASB 116 Property, Plant and Equipment, and Queensland Treasury's Non-Current Asset Accounting Policies for the Queensland Public Sector.

Land is comprehensively revalued at least once every five years with interim valuations, using appropriate indices, being otherwise performed on an annual basis, where there has been a material variance in the index.

Any revaluation increment arising on the revaluation of the land is credited to the asset revaluation surplus, except to the extent it reverses a revaluation decrement for that same class of assets previously recognised as an expense, in which case the increase is recognised in the Statement of Comprehensive Income. A revaluation decrement is charged as an expense, except to the extent that it reverses a previous increment for that same class of assets and a positive balance exists in the revaluation surplus for that asset class.

2.6 Impairment of land

All land is assessed for indicators of impairment on an annual basis. If an indicator of possible impairment existed, FPQO determined the asset’s recoverable amount. Any amount by which the asset’s carrying amount exceeds the recoverable amount is recorded as an impairment loss.

The asset’s recoverable amount is determined as the higher of the asset’s fair value less costs to sell, and its value in use. An impairment loss is offset against the asset revaluation surplus for land to the extent reserve funds are available with any remaining balance recognised in the Statement of Comprehensive Income.

2.7 Payables

Trade creditors are recognised upon receipt of the goods or services ordered and are measured at the agreed purchase/contract price gross of applicable trade and other discounts. Amounts owing are generally settled on 7, 14 or 30 day terms.

2.8 Financial Instruments

Recognition Financial assets and financial liabilities were recognised in the Statement of Financial Position when FPQO became party to the contractual provisions of the financial instrument.




Page 8 of 16

Classification Financial instruments are classified and measured as follows:

• Cash and cash equivalents – held at fair value through profit and loss • Receivables – held at amortised cost • Payables – held at amortised cost

FPQO did not enter into transactions for speculative purposes, nor for hedging. Apart from cash and cash equivalents, FPQO held no financial assets classified at fair value through profit and loss.

All other disclosures relating to the measurement and financial risk management of financial instruments held by FPQO are included in note 14.

2.9 Employee benefits

Employer superannuation contributions and long service leave levies are regarded as employee benefits.

Payroll tax and workers’ compensation insurance are a consequence of employing employees, but are not counted in an employee’s total remuneration package. They are not employee benefits and are recognised separately as employee related expenses.

Wages, salaries, recreation leave and sick leave

Wages, salaries and recreation leave due but unpaid at reporting date are recognised in the Statement of Financial Position at the current salary rates.

All accrued recreation leave is disclosed as a current liability in the financial statements as past trends indicate that leave accrued approximates to leave taken, on an annual basis.

Prior history indicates that on average, sick leave taken each reporting period is less than the entitlement accrued. This is expected to continue in future periods. Accordingly, it is unlikely that existing accumulated entitlements will be used by employees and no liability for unused sick leave entitlements is recognised.

As sick leave is non-vesting, an expense is recognised for this leave as it is taken.

Long service leave

Under the Queensland Government’s long service leave scheme, a levy is made on FPQO to cover the cost of employees’ long service leave. The levies are expensed in the period in which they are payable. Amounts paid to employees for long service leave are claimed from the scheme quarterly in arrears.

No provision for long service leave is recognised in the financial statements, the liability being held on a whole-of–Government basis and reported in the financial report prepared pursuant to AASB 1049 Whole of Government and General Government Sector Financial Reporting.

Superannuation

Employer superannuation contributions are paid to QSuper, the superannuation plan for Queensland Government employees, at rates determined by the Treasurer on advice of the State Actuary. Contributions are expensed in the period in which they are paid or payable. FPQO’s obligation is limited to its contribution to QSuper.

No liability is recognised for accruing superannuation benefits in these financial statements, the liability being held on a whole-of-Government basis and reported in the financial statements prepared pursuant to AASB 1049 Whole of Government and General Government Sector Financial Reporting.

Executive Remuneration

The executive remuneration disclosures in the employee expenses note in the financial statements include: • the aggregate remuneration of all senior executive officers (including the Chief Executive Officer) whose

remuneration for the financial period is $100,000 or more; and • the number of senior executives whose total remuneration for the financial period falls within each successive

$20,000 band, commencing at $100,000.




Page 9 of 16

The remuneration disclosed is all remuneration paid or payable, directly or indirectly, by FPQO or any related party in connection with the management of the affairs of the entity or any of its subsidiaries, whether as an executive or otherwise. For this purpose, remuneration includes:

• wages and salaries; • accrued leave (that is, the increase/decrease in the amount of annual and long service leave owed to an executive,

inclusive of any increase in the value of leave balances as a result of salary rate increases or the like); • performance pay paid, or due and payable, in relation to the financial period, provided that a liability exists (namely

a determination has been made prior to the financial statements being signed), and can be reliably measured even though the payment may not have been made during the financial period;

• accrued superannuation (being the value of all employer superannuation contributions during the financial period, both paid and payable as at balance date);

• car parking benefits and the cost of motor vehicles, such as lease payments, fuel costs, registration/insurance, repairs/maintenance, and fringe benefit tax on motor vehicles incurred by FPQO during the financial period, both paid and payable as at balance date, net of any amounts subsequently reimbursed by the executives;

• housing, being the market value of the rent or rental subsidy, where rent is part-paid by the executive during the financial period, both paid and payable as at balance date;

• allowances (which are included in remuneration agreements of executives, such as airfares or other travel costs paid to/for executives whose homes are situated in a location other than the location they work in); and

• fringe benefits tax included in remuneration agreements.

The disclosures apply to all senior executives appointed under the Public Service Act 2008 and classified as SES1 and above, with remuneration above $100,000 in the financial period. ‘Remuneration’ means any money, consideration or benefit, but excludes amounts:

• paid to an executive by FPQO or a subsidiary where the person worked during the financial period wholly or mainly outside Australia during the time the person was so employed; or

• in payment or reimbursement of out-of-pocket expenses incurred for the benefit of the entity or any of its subsidiaries.

In addition, separate disclosure of separation and redundancy/termination benefit payments is included.

2.10 Insurance

FPQO’s risks were insured through the Queensland Government Insurance Fund, premiums being paid on a risk assessment basis.

2.11 Non-reciprocal transfers of assets and liabilities

Non-reciprocal transfers of assets and liabilities between wholly-owned Queensland Public Sector entities are accounted for as adjustments to capital in accordance with Interpretation 1038 Contributions by Owners Made to Wholly Owned Public Sector Entities. Refer to notes 1 and 13 for information relating to non-reciprocal transfers that have occurred during the reporting period.

2.12 Taxation

FPQO was a State body as defined under the Income Tax Assessment Act 1936 and is exempt from Commonwealth taxation with the exception of Fringe Benefits Tax (FBT) and Goods and Services Tax (GST). As such, GST credits receivable from/payable to the ATO and FBT liabilities were recognised and accrued.

2.13 Issuance of financial statements

The financial statements are authorised for issue by the Chief Executive and the Chief Financial Officer at the date of signing the Management Certificate.

2.14 Judgement and assumptions

FPQO made no judgements or assessments which may cause a material adjustment to the carrying amounts of assets and liabilities within the next reporting period.




Page 10 of 16

2.15 Rounding

Amounts included in the financial statements are in Australian dollars and have been rounded to the nearest $1000 or, where that amount is $500 or less, to zero. Sub-totals and totals may not add due to rounding, but the overall discrepancy is no greater than two.

Comparative information has been restated when necessary to be consistent with disclosures in the current reporting period.

2.16 New and Revised Accounting Standards

FPQO did not voluntarily change any of its accounting policies during the financial period. FPQO complied with the revised AASB 101 Presentation of Financial Statements applicable from 2009-10. This revised standard does not have any measurement or recognition implications. In accordance with the amended AASB 101, the Balance Sheet has been re-named the Statement of Financial Position, and the Cash Flow Statement has now been re-named the Statement of Cash Flows. The former Income Statement has been replaced by a Statement of Comprehensive Income which now includes certain transactions that were previously detailed in the Statement of Changes in Equity (refer to the items under the sub-heading “Other Comprehensive Income”). The Statement of Changes in Equity includes details of transactions with owners in their capacity as owners, in addition to the total comprehensive income for the relevant components of equity.

FPQO was not permitted to early adopt a new or amended accounting standard ahead of the specified commencement date unless approval is obtained from the Treasury Department. Consequently, FPQO has not applied any Australian accounting standards and interpretations that have been issued but are not yet effective.

Any new or amended Australian accounting standards with future commencement dates will not have an impact on FPQO due to it being a terminating entity.

3. Other revenue

2010 2009$'000 $'000

Interest - Other 172 175

Commissions - Other 1 3

Other 246 5Total 419 183

4. Employee expenses

2010 2009

$'000 $'000

Employee benefitsWages and salaries 22,266 25,076Employer superannuation contributions 1,943 2,699Long service leave levy 568 427

Employee related expensesPayroll tax 1,151 1,312Workers' compensation premium (2) (4)Other employee related expenses 2 3

25,928 29,513

The number of employees including both ful l-time and part-time

employees measured on a full-time equivalent basis at balance date. - 436

The majority of FPQO employees were transferred to Forestry Plantations Queensland Pty Ltd under a transfer notice effective 26 March 2010 pursuant to the Infrastructure Investment (Asset Restructuring and Disposal) Act 2009. No employees remained in FPQO after 30 June 2010.




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Executive remuneration

2010 2009The number of senior executives who received or were due to

receive total remuneration of $100,000 or more:

$340 000 to $359 999 1 1

Total 1 1

2010 2009

$'000 $'000

Total remuneration of executives shown above * 351 346

* The amount calculated as executive remuneration in these financial statements includes thedirect remuneration received, as well as items not directly received by senior executives, such

as the movement in leave accruals and fringe benefits tax paid on motor vehicles. This amount

will therefore differ from advertised executive remuneration packages which do not include

the latter items.

The total separation and redundancy/termination benefit paymentsduring the year to executives shown above. - -

5. Other operating expenses

2010 2009

$'000 $'000

Other expenses

Bad & doubtful debts 1 - Audit fees 5 10Insurance premiums - Qld Government Insurance Fund 24 30Other 27 4

Total 57 44

Total external audit fees relating to the 2009–10 financial period are $14,600 (2009: $10,300) with an amount of $9,000 paid directly by FPQ. There are no non-audit services included in this amount.

6. Receivables 2010 2009$'000 $'000

CurrentTrade debtors - 250Interest receivable - 9Other debtors - 326

Total - 585

7. Property 2010 2009$'000 $'000

LandAt fair value (1) - 216,177

Land movement reconciliation

Carrying amount at start of the period 216,177 201,842

Net Revaluation Increments/Decrements - 14,335

Transfer to DERM (216,177) -

Carrying amount at end of the period - 216,177

Valuation of property, plant and equipment (1) All land is carried at fair value, in accordance with Queensland Treasury's Non-Current Asset Policies for the Queensland Public Sector. Land is revalued on a 3 year rolling basis by the independent expert valuer, State Valuation Service.




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8. Payables 2010 2009$'000 $'000

Current

Tax payable - Payroll - 119 - GST payable - 270

Accrued expenses - 68

Total - 457

9. Accrued employee benefits 2010 2009$'000 $'000

Current Accrued recreation leave - 2,647Accrued long service leave levy - 115Other accrued employee benefits - 405

Total - 3,167

Liability for employee entitlements was relinquished with the transfer or resignation of all employees during the year.

10. Reconciliation of net operating result to net cash provided by/(used in) operating activities 2010 2009$'000 $'000

Surplus/(deficit) from ordinary activities 9 -

Changes in assets and liabilities:(Increase)/decrease in receivables 422 469(Increase)/decrease in GST input tax credits receivable 3 (3)(Increase)/decrease in prepayments 163 (163)Increase/(decrease) in employee benefits (2,647) (136)Increase/(decrease) in GST payable (273) 55Increase/(decrease) in payables (707) (191)

Net cash provided by operating activities (3,030) 31

11. Asset revaluation reserve by class

2010 2009

$'000 $'000

Opening balance of asset revaluation reserve for land assets 86,133 71,798

Revaluation increment - Land - 14,335

Transfer to accumulated surplus - disposal of assets (86,133) -

Closing balance of asset revaluation reserve for land assets - 86,133

The asset revaluation surplus represents the net effect of upwards and downwards revaluations of assets to fair value.

12. Contingent liability – workers’ compensation claims

Claims relating to employees for personal injuries suffered during the course of their employment are dealt with by WorkCover. Damages and costs arising from workers’ compensation claims will also be met by WorkCover, and therefore do not represent a contingent liability for FPQO.

13. Restructure of administrative arrangements

On 30 June 2010, FPQ’s plantation forest assets were transferred to FPQO, which in turn, pursuant to amendments to the Forestry Act 1959, transferred the plantation forest assets to the Department of Environment and Resource Management. This transfer was affected for plantation assets on freehold land via the Share Sale Agreement and for plantation assets on State Plantation Forests via the termination of the profit-a-prendre between FPQ and FPQO and the granting of the Plantation Licence. The value of the plantation assets transferred was $420,578,937.




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The amendments to the Forestry Act 1959, affected by the Natural Resources and Other Legislation Amendment Act 2010, had the effect of transferring control of State Plantation Forest land from FPQO to the Department of Environment and Resource Management at the time of granting the Plantation Licence. The value of land transferred was $216,176,646.

On 26 March 2010, a Transfer Notice made under the Infrastructure Investment (Asset Restructuring and Disposal) Act 2009 had the effect of transferring the majority of employees and associated employee obligations to Forestry Plantations Queensland Pty Ltd.

14. Financial instruments

Categorisation of financial instruments

FPQO has the following categories of financial assets and financial liabilities:

2010 2009Category Note $'000 $'000Financial Assets

Cash and cash equivalents - 4,809

Receivables 6 - 585Total - 5,394

Financial LiabilitiesPayables 8 - 457

Total - 457

Financial Risk Management

FPQO’s activities exposed it to a variety of financial risks – credit risk, liquidity risk, market risk, and interest rate risk.

Financial risk management was implemented pursuant to Government and FPQO policies. These policies provided written principles for overall risk management and seek to minimise potential adverse effects on the financial performance of FPQO. Further detail on each risk exposure is outlined below. Credit risk

Credit risk exposure refers to the situation where FPQO may have incurred financial loss as a result of another party to a financial instrument failing to discharge their obligation.

The maximum exposure to credit risk at balance date in relation to each class of recognised financial assets is the gross carrying amount of those assets inclusive of any provisions for impairment.

The following table represents FPQO’s maximum exposure to credit risk based on contractual amounts net of any allowances.

2010 2009

Maximum Exposure to Credit Risk Note $'000 $'000

Financial assetsCash and cash equivalents - 4,809

Receivables 6 - 585

Total - 5,394

No collateral is held as security relating to the financial assets held by FPQO.




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No financial assets and financial liabilities have been offset and presented net in the Statement of Financial Position.

No financial assets have had their terms renegotiated so as to prevent them from being past due or impaired, and are stated at the carrying amounts as indicated. Credit risk in respect of debtors is managed by implementing net 30 day payment terms. There are no receivables overdue at balance date. There is no impairment of financial assets for the 2009-10 financial period, nor was there any impairment of financial assets in the 2008-09 financial period.

Exposure to credit risk is monitored on a regular basis.

Liquidity Risk

Liquidity risk refers to the situation where FPQO may have encountered difficulty in meeting obligations associated with financial liabilities.

FPQO was exposed to liquidity risk through its trading in the normal course of business.

FPQO managed liquidity risk through the use of a liquidity management strategy. This strategy aimed to reduce the exposure to liquidity risk by ensuring FPQO had sufficient funds available to meet employee and supplier obligations as they fell due.

Market Risk

FPQO was not materially exposed to commodity price changes.

Interest rate risk

FPQO was exposed to interest rate risk through cash deposited in interest bearing accounts. Interest is earned on cash balances at floating interest rates ranging from 2.85% to 4.35% (2009: 2.85% to 7.10%).

FPQO did not undertake any hedging in relation to interest risk and manages its risk as per the liquidity risk management strategy.

Foreign currency risk

FPQO did not trade in foreign currency and its transactions are denominated in Australian dollars. As a result, FPQO has no exposure to movements in foreign currency.

Fair value

FPQO did not recognise any financial assets or financial liabilities at fair value.

The fair value of trade receivables and payables is assumed to approximate the value of the original transaction, less any provision for impairment.




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Certificate of Forestry Plantations Queensland Office

These general purpose financial statements have been prepared pursuant to section 62(1) of the Financial Accountability Act 2009 (the Act), and other prescribed requirements. In Accordance with Section 62 (1)(b) of the Act we certify that in our opinion:

(i) the prescribed requirements for the establishment and keeping of the accounts have been complied with in all material respects; and

(ii) the final statements have been drawn up to present a true and fair view, in accordance with prescribed accounting standards, of the transactions of Forestry Plantations Queensland Office for the period 1 July 2009 to 30 November 2010 and of the financial position as at the end of that period.

JM PRIDAY, CTA, MBA, CA(SA) DR W A HOEY

Former Chief Financial Officer Former Chief Executive



Published by Queensland Treasury

Copyright

Copyright protects this publication. Except for purposes permitted by the Copyright Act, reproduction by any means (photocopying,

electronic, mechanical, recording or otherwise) is prohibited without the prior written permission of the Under Treasurer of

Queensland Treasury.

While every care has been taken in preparing these annual reports, Forestry Plantations Queensland, Forestry Plantations

Queensland Office and Queensland Treasury accept no responsibility for decisions or actions taken as a result of any data, information, statement or advice, expressed or implied,

contained herein.

Printed December 2010

ISSN 1837-0187

Obtaining copies of these annual reports

Consistent with Queensland Government sustainability initiatives, only limited copies of these annual reports have been printed. Electronic copies of these annual reports will be available from the Queensland Parliament website www.parliament.qld.gov.au, once tabled by responsible Ministers.

Forestry Plantations Queensland is independently certified to the Australian Forestry Standard AFS4708 for the

commercial management of its softwood and hardwood plantations, nurseries, defined forest areas and forest management services. This standard has international

status via mutual recognition with other national certification schemes granted by the Programme for the

Endorsement of Forest Certification Schemes.

2009-10

Profitable sustainable

plantation forests

10-081

Final Annual Reports

Documents

FPQ Final Annual Report 2009-10 · I am pleased to present the annual report of FPQ for 2009-10, including matters consequential to the sale of its business operations on 30 June