CVC LIMITED — Annual Report 2004

Sep 20, 2004

FINANCIAL REPORT

For the year ended 30 June 2004

ACN 002 700 361

DIRECTORS' REPORT

Your Directors present the Financial Report of CVC Limited ("the Company") and of the Consolidated Entity ("CVC"), being the Company and its controlled entities, for the year ended 30 June 2004 together with the Auditors' Report thereon.

DIRECTORS

The names of Directors in office at the date of this report are Vanda Russell Gould (Chairman), John Scott Leaver, John Douglas Read Alexander Damien Harry Beard and John Thomas Riedl.

DIRECTORS' MEETINGS

The number of Directors' Meetings and number of meetings attended by each of the Directors of the Company during the financial year were:

	Directors' Meetings
	No of Meetings attended	No of Meetings held
Vanda Russell Gould
John Scott Leaver		4
John Douglas Read		4
Alexander Damien Harry Beard		4
John Thomas Riedl		4

The Company has an audit committee. The number of meetings and the number of meetings attended by each of the Directors on the Audit Committee during the financial year were:

	Audit Committee Meetings
	No of Meetings attended	No of Meetings held
John Douglas Read
Alexander Damien Harry Beard
John Thomas Riedl

PRINCIPAL ACTIVITIES

CVC's principal activity is the provision of investment capital to companies with substantial profit growth prospects. The principal activities of the corporations to which investment capital has been provided during the year were financing, property related investments and packaging supplies.

REVIEW OF OPERATIONS

The Chairman's Report, Review of Operations and the annexure to the Financial Report contain details of CVC's operations during the year.

CONSOLIDATED RESULT

The consolidated profit for the year attributable to the members of the Company is calculated as follows:

	2004 \$	2003 S
Net profit after income tax Outside equity interests	10.795.193 (649.171)	5,234,703 (191,643)
Net profit after income tax attributable to members	10,146,022	5,043,060

DIVIDENDS

A final dividend in respect of the year ended 30 June 2004 will be announced separately shortly. An interim dividend in respect of the year ended 30 June 2004, of 1.5 cents per ordinary share amounting to \$1,632,994, was paid on 25 March 2004. A final dividend in respect of the year ended 30 June 2003, of 2 cents per ordinary share amounting to \$2,184,935, was paid on 5 December 2003.

DIRECTORS' REPORT (CONTINUED)

STATE OF AFFAIRS

Significant changes in the state of affairs of CVC during the financial year included:

• the on market buy-back 5.7 million of the Company's shares;
• the finalisation of the dispute in relation to land held at Fern Bay, New South Wales;
• expansion of the Pro-Pac business through organic growth and 'bolt-on' acquisitions; and
• continuing development of, and realisation of part of the CVC investment in, Sunland Group Limited.

LIKELY DEVELOPMENTS

The likely developments in the operations of CVC will involve an increase in the range of investment activities undertaken with the emphasis on obtaining higher yields. The profitability or otherwise of those investments cannot be meaningfully predicted at the date of this report.

ENVIRONMENTAL REGULATION

CVC's operations are subject to various environmental regulations under both Commonwealth and State legislation. The Directors are not aware of any breaches of any particular and significant environmental regulation affecting the group's operations.

ENVIRONMENTAL MANAGEMENT

CVC is committed to achieving a high standard of environmental performance.

EVENTS SUBSEQUENT TO BALANCE DATE

CVC has continued to make and realise investments and loans in support of its existing investee businesses and for new investees subsequent to balance date. In particular, the company has acquired a 25% stake in Ron Finemore Transport Ptv Limited, which has in turn acquired the Lewington's group of transport businesses.

The Company has settled its long-standing disputes with the Australian Taxation Office. Full provision has been made in this financial report for the financial effects of the settlement.

At a general meeting of the Company on 9 August 2004, shareholders approved:

• the a payment of \$4 million to CVC Investment Managers Pty Ltd as settlement of all performance fees to 30 June 2004; $(i)$
• $(ii)$ the novation of the management agreements with CVC Investment Managers Pty Limited to CVC Managers Pty Limited:
• $(iii)$ the issue of 7,391,304 ordinary shares in the Company for the acquisition of the investment management business of CVC Investment Managers Pty Ltd;
• $(iv)$ Increases in Non-Executive Director remuneration:
• the introduction of an Executive and Non-Executive Long Term Incentive Plan and the issue of up to 5 million ordinary $(v)$ shares in the Company, including 1 million shares to Mr A DH Beard, under the plan;
• a share buy-back program of up to 20 million ordinary shares of the Company; and $(vi)$
• $(vii)$ the sale of part of the Company's investment in Pro-Pac Group Limited.

Resolutions to effect (i), (ii), (iii) and part of (iv) above were contingent on the granting of an Australian Financial Services Licence to CVC Managers Pty Limited. At the date of this report, this licence has not yet been granted and so the effects of these approvals have not yet been actioned.

Since the end of the year the Company has bought back 3,508,772 shares on market.

There has not arisen in the interval between the end of the financial year and the date of this report any other matter or circumstance that has affected or may significantly affect the operations of CVC, the results of those operations, or the state of affairs of CVC, in future financial years.

DIRECTORS' REPORT (CONTINUED)

INFORMATION ON DIRECTORS

Vanda Russell Gould (Chairman)

B.Comm (Uni, of NSW): M.Comm (Uni of NSW)

Fellow of the Institute of Chartered Accountants in Australia. Fellow of the Australian Institute of Certified Public Accountants. Licensed Securities Dealer. Chairman of Vita Life Sciences Limited. Director of CVC Sustainable Investments Limited, CVC REEF Limited, CVC Investment Managers Pty Limited and CVC Managers Pty Limited. Director of numerous other private and public companies including educational establishments.

John Scott Leaver (Non-Executive Director)

B.Ec. (Uni. of Sydney). Licensed Securities Dealer. Board member since 1984. Chairman of Sunland Group Limited. Director of CVC Investment Managers Pty Limited and CVC Managers Pty Limited.

John Douglas Read (Non-Executive Director)

B.Sc. (Hons.) (Cant.), M.B.A. (A.G.S.M.) Board Member since 1989. Chairman of the Environmental Group Limited. Director of CVC Private Equity Limited, CVC Sustainable Investments Limited and the Australian Institute for Commercialisation Limited.

Alexander Damien Beard (Director and Company Secretary)

B Com. (Uni. of NSW). Member of the Institute of Chartered Accountants in Australia. Director of Greens Foods Limited, CVC Private Equity Limited, CVC Sustainable Investments Limited, CVC Investment Managers Pty Limited and CVC Managers Pty Limited.

John Thomas Riedl (Non-Executive Director) B.Sc, B.E. (Elect), (Hons.) (Sydney) Director of numerous public and private companies.

SHARE OPTIONS

There were no options in issue during the vear or to the date of this report.

DIRECTORS' INTERESTS AND BENEFITS

The relevant interest of each Director in the share capital of the Company as at the date of this report is as follows:

_________
14,672,323
15.013.307
483,956
14,663,443
30.000

At the date of this report, through their directorship of CVC Sustainable Investments Limited, Messrs Beard, Gould and Read (1,000,000 shares) hold indirect interests in 1,000,000 ordinary shares in Pro-Pac Group Limited. Mr Beard has a further indirect interest in 138,840 ordinary shares in Pro-Pac Group Limited.

Ordinary Shares

At the date of this report, Messrs Gould and Leaver have an indirect interest in 297 shares in Stinoc Limited.

Directors benefits are set out in Notes 6 and 27.

DIRECTORS' REPORT (CONTINUED)

INDEMNIFICATION AND INSURANCE OF OFFICERS AND AUDITORS

a) Indemnification

CVC has not, during or since the end of the financial year, in respect of any person who is or has been an officer or auditor of CVC or a related body corporate indemnified or made any relevant agreement for indemnifying such persons against a liability, including costs and expenses in successfully defending legal proceedings.

b) Insurance Premiums

CVC has not, during the year or since the end of the financial year, in respect of any person who is or has been an auditor of the Company or a related body corporate paid or agreed to pay a premium in respect of a contract insuring against a liability for the costs or expenses of defending legal proceedings.

The Company has paid insurance premiums in respect of directors and officers liability and legal expense insurance for directors and officers of the Company.

In accordance with subsection 300(9) of the Corporations Act 2001 further details have not been disclosed due to confidentiality provisions contained in the insurance contract.

Signed in accordance with a resolution of the Board of Directors.

Dated at Sydney this 20th day of September 2004.

ALEXANDER BEARD Director

JOHN READ Director

(AND ITS CONTROLLED ENTITIES)

STATEMENTS OF FINANCIAL PERFORMANCE FOR THE YEAR ENDED 30 JUNE 2004

	Notes		Consolidated		The Company
		2004	2003	2004	2003
		\$	\$	S	\$
Revenue
Revenue from sale of goods		18,415,189	3,994,716
Proceeds from share sales		23,693,414	98,473	23,700,169	98,473
Proceeds from sale of loans		1,652,713		1,652,713
Interest income		2,941,089	2,594,689	2,488,819	1,698,692
Other revenue from ordinary activities		912,069	297,242	1,525,743	1,156,713
Total revenue from ordinary activities	2	47,614,474	6,985,120	29,367,444	2,953,878
Share of net profits of associates accounted for using the
equity method	25	10,052,118	4,305,914
Share of net profits of joint ventures accounted for using
the equity method	30	2,784,730	4,543,120	2,784,730	4,543,120
Expenses
Amortisation of goodwill	3	442,175	103,081
Borrowing costs		11,231	203,118	11,231	1,085,487
Cost or carrying value of shares sold		17,100,946	192,829	10,273,112	192,829
Cost of goods sold		10,026,859	2,174,925
Cost of loans sold		3,305,426		3,305,426
Employee expenses		3,145,106	702,479
Loans written-off			1,290,523		1,290,523
Management & consultancy fees		6,646,353	2,685,464	5,516,431	1,455,011
Movement in other loan provisions for non-recovery		4,247,399	(1,615,693)	4,566,666	65,040
Movement in unrealised loss on investments		100,248	3,742,843	(1,772,719)	2,340,056
Other expenses from ordinary activities	3	3,176,723	942,411	435,386	427,001
Profit from ordinary activities before related income tax
expense	3	12,248,856	5,412,174	9,816,641	641,051
Income tax expense	4	1,453,663	177,471	775,339	224,118
Net profit		10,795,193	5,234,703	9,041,302	416,933
Net profit attributable to outside equity interests	23	649,171	191,643
Net profit attributable to members of the parent entity		10,146,022	5,043,060	9,041,302	416,933
Other changes in equity attributable to members of the
Parent entity other than those arising from transactions
with owners as owners:
Share of decrease in equity of associate accounted for
using the equity method			(805,093)
Total changes in equity attributable to members of the
parent entity other than those arising from transactions
with owners as owners		10,146,022	4,237,967	9,041,302	416,933
Basic & diluted earnings per share	8	0.0943	0.0460

The statements of financial performance are to be read in conjunction with the notes to the financial statements set out on pages 9 to 37.

(AND ITS CONTROLLED ENTITIES)

STATEMENTS OF FINANCIAL POSITION AS AT 30 JUNE 2004

	Notes	Consolidated		The Company
		2004	2003	2004	2003
		\$	\$	S	\$
CURRENT ASSETS
Cash assets	26	12,269,691	2,477,100	9,507,658	799,577
Receivables	9	7,615,477	13,165,058	4,409,449	4,968,518
Inventories	10	1,132,013	801,437
Other financial assets	11	4,922,116	4,669,488	4,922,116	4,669,488
Current tax assets	4	40,152	311,208
Other assets	12	238,692	60,612	30,871	45,483
Total current assets		26,218,141	21,484,903	18,870,094	10,483,066
NON-CURRENT ASSETS
Receivables	9	2,889,908	17,218,269	3,479,281	17,352,220
Investments accounted for using the equity method	13	49,524,380	33,402,952	12,099,991	9,315,261
Other financial assets	11	11,861,444	10,328,167	27,133,430	13,980,626
Intangible assets	14	5,157,691	5,257,104
Property, plant and equipment	15	670,692	617,178
Deferred tax assets	4	139,700	4,015		4,015
Total non-current assets		70,243,815	66,827,685	42,712,702	40,652,122
TOTAL ASSETS		96,461,956	88,312,588	61,582,796	51,135,188
CURRENT LIABILITIES
Payables	16	11,714,568	3,044,732	26,160,149	15,264,426
Interest bearing liabilities	17		215,000
Provisions	18	208,830	1,935,389
Current tax liabilities	4	991,657	368,817	601,265	54,200
Total current liabilities		12,915,055	5,563,938	26,761,414	15,318,626
NON-CURRENT LIABILITIES
Provisions	18	143,206
Deferred tax liabilities	4	177,557		177,557
Total non-current liabilities		320,763		177,557
TOTAL LIABILITIES		13,235,818	5,563,938	26,938,971	15,318,626
NET ASSETS		83,226,138	82,748,650	34,643,825	35,816,562
EQUITY
Contributed equity	19	20,237,527	26,633,636	20,237,527	26,633,636
Reserves Retained profits	20 21	60,530,410	54,202,318	14,406,298	9,182,926
Total parent entity interest		80,767,937	80,835,954	34,643,825	35,816,562
Outside equity interest	23	2,458,201	1,912,696
TOTAL EQUITY		83,226,138	82,748,650	34,643,825	35,816,562

The statements of financial position are to be read in conjunction with the notes to the financial statements set out on pages 9 to 37.

(AND ITS CONTROLLED ENTITIES)

STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2004

	Notes	Consolidated		The Company
		2004	2003	2004	2003
		\$	\$	S	\$
CASH FLOWS FROM OPERATING ACTIVITIES
Cash receipts in the course of operations		19,906,117	4,274,088	126,819	56,249
Cash payments in the course of operations		(20,511,459)	(6,381,214)	(2,082,408)	(1,662,637)
Interest received		1,049,594	1,000,022	938,294	978,553
Dividends received		1,979,736	1,319,223	1,398,925	1,100,464
Interest paid		(11,231)	(88, 117)	(11,231)	(100, 179)
Income taxes paid		(517,895)	1,011,180	(46,702)	286,862
Net cash provided by operating activities	26	1,894,862	1,135,182	323,697	659,312
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for property, plant and equipment		(177, 387)	(11,700)
Payments for equity investments		(22, 234, 186)	(2,231,587)	(19,937,209)	(2,226,587)
Payment for controlled entity		(2.024.070)	(3,282,931)	(1,518,611)	(4,667,165)
Proceeds on disposal of equity investments		25,346,127	58,691	25,352,878	58,691
Loans provided		(7,161,807)	(12, 448, 690)	(12,902,197)	(12,658,971)
Loans repaid		24,556,385	16,964,000	27,603,562	16,964,000
Net cash provided by/ (used in) investing activities		18,305,062	(952, 217)	18,598,423	(2,530,032)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of borrowings		(193, 294)
Dividends paid to members of parent entity		(3,817,930)	(1,646,041)	(3,817,930)	(1,646,041)
Dividends paid to outside equity interests			(1,713,000)
Shares bought-back on market		(6,396,109)		(6,396,109)
Issue of shares to outside equity interests			1,214,404
Net Cash used in financing activities		(10, 407, 333)	(2,144,637)	(10, 214, 039)	(1,646,041)
Net increase/ (decrease) in cash held		9,792,591	(1,961,672)	8,708,081	(3,516,761)
Cash at the beginning of the financial year		2,477,100	4,438,772	799,577	4,316,338
CASH AT THE END OF THE FINANCIAL YEAR	26	12,269,691	2,477,100	9,507,658	799,577

The statements of cash flows are to be read in conjunction with the notes to the financial statements set out on pages 9 to 37.

(AND ITS CONTROLLED ENTITIES)

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2004

Note	Contents
1.	Statement of Significant Accounting Policies
2.	Revenue from Ordinary Activities
3.	Profit from Ordinary Activities Before Income Tax Expense
4.	Taxation
5.	Dividends
6.	Remuneration of Directors and Executives
7.	Auditors' Remuneration
8.	Earnings Per Share
9.	Receivables
10.	Inventories
11.	Other Financial Assets
12.	Other Assets
13.	Investments accounted for using the equity method
14.	Intangibles
15.	Property, Plant & Equipment
16.	Payables
17.	Interest - Bearing Liabilities
18.	Provisions
19.	Contributed Equity
20.	Reserves
21.	Retained Profits
22.	Financing Arrangements
23.	Controlled Entities
24.	Operations by Segments
25.	Investments in Associated Companies
26.	Notes to the Statements of Cash Flows
27.	Related Party Information
28.	Commitments
29.	Contingent Liabilities
30.	Interests in Joint Ventures
31.	Additional Financial Instruments Disclosure
32.	Employee Entitlements
33.	The Effects of the Adoption of Australian Equivalents to International Financial Reporting Standards

(AND ITS CONTROLLED ENTITIES)

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2004 (Continued)

NOTE₁: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

The significant policies which have been adopted in the preparation of this Financial Report are:

$1.1$ Basis of Preparation

The Financial Report is a general purpose financial report, which has been prepared in accordance with applicable Accounting Standards, Urgent Issues Group Consensus Views, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001. It has been prepared on the basis of historical costs and, except where stated, does not take into account changing money values or current valuations of non-current assets.

These accounting policies have been consistently applied by each entity in CVC and except where there is a change in accounting policy, are consistent with those of the previous year.

$1.2$ Principles of Consolidation

Controlled entities

The financial statements of controlled entities are included in results only from the date control commences until the date control ceases.

Outside interests in the equity and results of the entities that are controlled by the Company are shown as a separate item in the consolidated financial statements.

Associates

Associates are those entities, other than partnerships, over which CVC exercises significant influence but not control. In the consolidated financial statements investments in associates are accounted for using equity accounting principles. Investments in associates are carried at the lower of the equity accounted amount and recoverable amount. CVC's equity accounted share of the associates' net profit or loss is recognised in the consolidated statement of financial performance from the date significant influence commences until the date significant influence ceases. CVC's equity accounted share of movements in retained profits from changes in accounting policies by associates is recognised directly in consolidated retained profits (note 21). CVC's equity accounted share of other movements in reserves of associates is recognised directly in consolidated reserves.

Inint neutures

CVC's interests in unincorporated joint ventures are brought to account by including its proportionate share of the joint venture's assets, liabilities, expenses and revenue on a line-by-line basis, from the date joint control commences to the date joint control ceases.

CVC's interests in joint venture partnerships are accounted for using equity accounting principles. Investments in joint venture partnerships are carried at the lower of the equity accounted amount and recoverable amount. CVC's equity accounted share of the joint venture partnerships' net profit or loss is recognised in the consolidated statement of financial performance from the date joint control commences to the date joint control ceases. CVC's share of other movements in reserves is recognised directly in consolidated reserves.

Transactions eliminated on consolidation

Unrealised gains and losses and inter-entity balances resulting from transactions with or between controlled entities are eliminated in full on consolidation.

Unrealised gains resulting from transactions with associates and joint ventures are eliminated to the extent of CVC's interest. Unrealised gains relating to associates and joint venture entities are eliminated against the carrying amount of the investment. Unrealised losses are eliminated in the same way as unrealised gains, unless they evidence a recoverable amount impairment.

Goodwill

Goodwill represents the excess of the purchase consideration over the fair value of identifiable net assets acquired at the time of acquisition of a business or shares in a controlled entity. Goodwill is amortised on a straight line basis over the period during which benefits are expected to be received. The periods in use during the year and previous year were 10 - 13 years.

(AND ITS CONTROLLED ENTITIES)

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2004 (Continued)

Note 1: Statement of Significant Accounting Policies (Cont'd)

$1.3$ Investments

Controlled Entities:

Investments in controlled entities are carried in the Company's financial statements at the lower of cost and recoverable amount.

Associated Companies:

In the Company's financial statements investments in shares of associates are carried at the lower of cost and recoverable amount.

loint ventures

The Company's interests in unincorporated joint ventures are brought to account by including its proportionate share of the joint venture's assets, liabilities, expenses and revenue on a line-by-line basis, from the date joint control commences to the date joint control ceases.

The Company's interests in joint venture partnerships are accounted for using equity accounting principles. Investments in joint venture partnerships are carried at the lower of the equity accounted amount and recoverable amount. The Company's equity accounted share of the joint venture partnerships' net profit or loss is recognised in the statement of financial performance from the date joint control commences to the date joint control ceases. The Company's share of other movements in reserves are recognised directly in reserves.

Set-off of financial assets and liabilities

For investments with direct associated debt, the financial assets and liabilities are reflected on a net basis where this reflects a right, and an intention, to set-off the expected future cash flows from settling those assets and liabilities.

Other entities:

Investments in other listed companies are measured at the lower of cost and recoverable amount, being the current quoted market prices.

Investments in other unlisted entities are carried at the lower of cost and recoverable amount.

$1.4$ Income Tax

Tax effect accounting procedures are followed, whereby income tax expense is calculated on operating profit adjusted for any permanent differences between taxable and accounting income. The tax effect of timing differences, which arise from items being brought to account in different periods for income tax and accounting purposes, is carried forward in the statement of financial position as a future income tax benefit or a provision for deferred income tax.

Future income tax benefits are not brought to account unless realisation of the asset is assured beyond reasonable doubt. Future income tax benefits relating to tax losses are only brought to account when their realisation is virtually certain.

$1.5$ Cach

For the purposes of the statement of cash flows, cash includes cash on hand and in banks, and money market investments, readily convertible to cash within 2 working days, net of outstanding bank overdrafts.

$1.6$ Inventories

Inventories are carried at the lower of cost and net realisable value.

Net Realisable Value

Net realisable value is determined on the basis of each entity's normal selling pattern. Expenses of marketing, selling and distribution to customers are estimated and are deducted to establish net realisable value.

(AND ITS CONTROLLED ENTITIES)

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2004 (Continued)

Note 1: Statement of Significant Accounting Policies (Cont'd)

$1.7$ Payables

Liabilities are recognised for amounts to be paid in the future for goods or services provided to CVC prior to the year end. Trade accounts payable are normally settled within 30 days.

1.8 Accounts Receivable

Trade Delitors

Trade Debtors to be settled within 30 days are carried at amounts due.

Torus Dobtore

Term debtors are carried at amounts due and settled on completion of projects. A market rate of interest is charged on outstanding amounts and debtors are required to provide collateral.

Doubtful Debts

The collectability of debts is assessed regularly and specific provision is made for any doubtful accounts.

1.9 Property, Plant and Equipment

Acquisition

Items of property, plant and equipment are recorded at cost and depreciated as outlined below.

The cost of property, plant and equipment constructed by controlled entities includes the cost of materials and direct labour and an appropriate proportion of fixed and variable overheads.

Assets are depreciated or amortised from the date of acquisition or, in respect of internally constructed assets, from the time an asset is completed and held ready for use.

Leased Plant and Eauinment

Leases of plant and equipment under which the Company or its controlled entities assume substantially all the risks and benefits of ownership are classified as finance leases. Other leases are classified as operating leases.

Finance leases are capitalised. A lease asset and a liability equal to the present value of the minimum lease payments are recorded at the inception of the lease. Lease liabilities are reduced by repayments of principal. The interest components of the lease payments are charged to the statement of financial performance. Contingent rentals are expensed as incurred.

Payments made under operating leases are charged against profits in equal instalments over the accounting periods covered by the lease term, except where an alternative basis is more representative of the pattern of benefits to be derived from the leased property.

1.10 Employee Entitlements

Wages, Salaries and Annual Leave

The provision for employee entitlements in relation to wages and annual leave represent present obligations resulting from employee's services provided up to balance date.

Long Service Leave

The provision for employee entitlements to long service leave represents the present value of the estimated future cash outflows to be made resulting from employees' services provided up to the balance date.

(AND ITS CONTROLLED ENTITIES)

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2004 (Continued)

Note 1: Statement of Significant Accounting Policies (Cont'd)

$1.11$ Land Held for Sale

Valuation

Development properties are carried at the lower of cost and net realisable value. Cost includes the costs of acquisition, development, and holding costs such as interest, rates and taxes. Interest and other holding costs incurred after completion of development are expensed as incurred.

1.12 Revenue and Revenue Recognition

Revenues are recognised at fair value of the consideration received net of the amount of goods and services tax (GST). Exchanges of goods or services of the same nature and value without any cash consideration are not recognised as revenues.

Sale of goods

Revenue from the sale of goods is recognised (net of returns, discounts and allowances) when control of the goods passes to the customer.

Interest Income

Interest income is recognised as it accrues unless collectability is in doubt, taking into account the effective vield on the financial asset.

Sale of non-current assets

The gross proceeds of non-current asset sales are included as revenue at the date control of the asset passes to the buyer, usually when an unconditional contract of sale is signed.

The gain or loss on disposal is calculated as the difference between the carrying amount of the asset at the time of disposal and the net proceeds on disposal.

Research and development grants

Where a grant is received relating to research and development costs that have been expensed, the grant is recognised as revenue. Where a grant is received relating to research and development costs that have been deferred, the grant is deducted from the carrying amount of the deferred research and development.

Dividends

Revenue from dividends and other distributions from controlled entities is recognised by the parent entity when they are declared by the controlled entities.

Revenue from dividends from associates is recognised by the parent entity when dividends are received.

Revenue from dividends from other investments is recognised when received.

Dividends received out of pre-acquisition reserves are eliminated against the carrying amount of the investment and not recognised in revenue.

(AND ITS CONTROLLED ENTITIES)

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2004 (Continued)

Note 1: Statement of Significant Accounting Policies (Cont'd)

Borrowing Costs 1.13.

Borrowing costs include interest, amortisation of discounts or premiums relating to borrowings.

Borrowing costs are expensed as incurred unless they relate to qualifying assets. Qualifying assets are assets which take more than 12 months to get ready for their intended use or sale. In these circumstances, borrowing costs are capitalised to the cost of the asset. Where funds are borrowed specifically for the acquisition, construction or production of a qualifying asset, the amount of borrowing costs capitalised is those incurred in relation to that borrowing, net of any interest earned on that borrowing. Where funds are borrowed generally, borrowing costs are capitalised using a weighted average capitalisation rate.

1.14 Non-Current Assets

The carrying amounts of all non-current assets are reviewed to determine whether they are in excess of their recoverable amount at balance date. If the carrying amount of a non-current asset exceeds the recoverable amount, the asset is written down to the lower amount. In assessing recoverable amounts the relevant cash flows have not been discounted to their present value.

1.15 Depreciation and Amortisation

Fixed assets are depreciated/amortised using the straight line and diminishing value methods over the estimated useful lives, with the exception of finance lease assets. Finance lease assets are amortised over the term of the relevant lease, or where it is likely CVC will obtain ownership of the asset, the life of the asset. Depreciation and amortisation rates and methods are reviewed annually for appropriateness. When changes are made, adjustments are reflected prospectively in current and future periods only. Depreciation and amortisation are expensed, except to the extent that they are included in the carrying amount of another asset as an allocation of production overheads.

The current depreciation rates for each classes of assets are as follows: Plant and Equipment 5% to 50% 15% to 25% Leased Assets

Complex Assets

The components of major assets that have materially different useful lives, are effectively accounted for as separate assets, and are separately depreciated/amortised.

Goods and Services Tax 1.16

Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except where the amount of GST incurred is not recoverable from the Australian Tax Office (ATO). In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of expense.

Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the ATO is included as a current asset or liability in the statement of financial position.

Cash flows are included in the statement of cash flows on a gross basis. The GST components of cash flows arising from investing and financing activities which are recoverable from or payable to the ATO are classified as operating cash flows.

Comparative Figures 1.17

Where necessary, comparative figures have been adjusted to conform with changes in presentation in the current year.

(AND ITS CONTROLLED ENTITIES)

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2004 (Continued)

	Consolidated		The Company
	2004	2003.	2004	2003
	\$	S	\$	\$
REVENUE FROM ORDINARY ACTIVITIES NOTE 2:
Revenue from operating activities:
Revenue from Sale of Goods	18,415,189	3,994,716
Proceeds from share sales	23,693,414	98,473	23,700,169	98,473
Proceeds from sale of loans	1,652,713		1,652,713
Interest:
Related parties	295,547	364,401	295,547	364,401
Other parties	2,645,542	2,230,288	2,193,272	1,334,291
Dividends
Other parties	692,251	102,569	1,398,925	1,100,464
Other Revenue	219,818	194,673	126,818	56,249
Revenue From Ordinary and Operating Activities	47.614.474	6,985,120	29,367,444	2,953,878

NOTE 3: PROFIT FROM ORDINARY ACTIVITIES BEFORE INCOME TAX EXPENSE

Profit from ordinary activities before income tax expense has been arrived at after charging/ (crediting) the following items:

Borrowing costs:
Related parties				985,308
Other	11,231	203,118	11,231	100,179
Total borrowing costs	11,231	203,118	11,231	1,085,487
Other operating expenses:
Audit Fees	112,500	75,000	66,500	60,000
Depreciation of plant and equipment	121,179	30,434
Directors fees	50,000	39,582	50,000	39,582
Freight costs	271,212	54,637
Insurance	81,162	34,628	27,148	13,940
Legal costs	118,051	131,418	108,871	120,988
Operating lease rental expense	537,877	62,010
Royalty costs	519,383	108,527
All other operating expenses	1,365,359	406,175	182,867	192,491
Total Other Operating Expenses	3,176,723	942,411	435,386	427,001
Other items:
Performance fees payable	4,000,000		4,000,000
Losses/ (gains) on disposals of:
Property, plant and equipment	2,694
Investments	(6,592,468)		(13, 427, 057)
Loans	1,652,713		1,652,713

(AND ITS CONTROLLED ENTITIES)

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2004 (Continued)

	Consolidated		The Company
	2004	2003	2004	2003
	s	S	\$	\$
NOTE 4: TAXATION
4.1 Income Tax Expense:
Prima facie income tax expense calculated at 30% (2003: 30%)
on the profit from Ordinary activities	3,674,657	1,623,653	2,944,992	192,315
Increase in income tax expense due to:
Prima facie income tax on profit from ordinary activities of
subsidiaries within tax consolidation group			(214, 156)	196,253
Provision to reflect recoverable amount of equity accounted
component of investment carrying value		170,440
Amortisation of goodwill	132,653	30,924
Tax losses not recognised	4,543	28,274		28,241
Sundry items				38,034
Decrease in income tax expense due to:
Tax attributable to equity accounted profits	(359,313)	(926,778)
Sundry items	(5,701)	(53,920)	5,999
Franked dividends received	(495,774)	(378, 738)	(495, 774)	(329, 236)
Div 43 Building allowances	(354, 831)	(402, 673)	(354, 831)	(402, 673)
Recovery of tax losses not previously recognised	(1,904,744)	(65,765)	(1,862,227)	(75,580)
	691,490	25,417	24,003	(352, 646)
Prior year under provision	168,406	152,054	157,569	576,764
Settlement of long standing tax disputes (i)	593,767		593,767
Income tax expense attributable to profit from ordinary
activities	1,453,663	177,471	775,339	224,118

(i) Subsequent to the end of the financial year, the Company has reached agreement with the Australian Taxation Office to settle revised income taxation assessments issued to the Company in respect of the 1988, 1991 and 1994 financial years. The Company had provided in full in the current financial year for the additional expense of \$593,767 arising from this settlement.

$4.2$ Current Tax Assets:

Income tax instalments refundable Balance at end of year	40,152	311,208	$\mathbf{w}$
Current Tax Liabilities: 4.3
Income tax payable:
Balance at end of year	991,657	368,817	601,265	54,200
Deferred Tax Assets/Liabilities: 4.4
Future income tax benefit:
Balance at end of year	139,700	4,015	$\mathbf{a}$	4,015
Deferred income tax liability:
Balance at end of year	177,557	$\overline{\phantom{a}}$	177.557

(AND ITS CONTROLLED ENTITIES)

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2004 (Continued)

	Consolidated		The Company
	2004	2003		2003
	\$	S	\$	\$
NOTE 4: TAXATION (Continued)
4.4 Deferred Tax Assets/Liabilities (Continued):
Future income tax benefits not taken to account:
Tax revenue losses carried forward at 30% (2003: 30%)	636.928	1.276.229	44.897	680.366
Unrealised capital losses at 30% (2003: 30%)	1,721,158	-	1,721,158
Tax capital losses carried forward at 30% (2003: 30%)	14,344,681	17,497,654	9,075,414	12.228.386

The potential future income tax benefits will only be obtained if:

• the relevant company, or tax consolidated group, derives future assessable income of a nature and an amount sufficient to $(i)$ enable the benefit to be realised:
• the relevant company complied and continues to comply with the conditions for deductibility imposed by the law; and $(ii)$
• no changes in tax legislation adversely affect the realising of the benefit. $(iii)$

4.5 Tax Consolidation

The Company and its applicable wholly owned subsidiaries have adopted the provisions of the tax consolidation regime for the full accounting period ending 30 June 2004. Formal notification of the adoption to the Australian Taxation Office has been made. Tax balances within this financial report reflect the expected effects of the adoption of the tax consolidation regime with a formal tax sharing arrangement between subsidiaries.

NOTE 5: DIVIDENDS

Dividends proposed or paid and not provided for in previous years by the Company are:

	Cents per share	Total \$	Date of Payment	Tax rate for franking credit	Percentage franked
Declared during the financial period and included within the statement of financial position:
2003
Final - ordinary	2.00	2.184.935	4 December 2003	30%	100%
2004
Interim – ordinary	1.50.	1.632.995	25 March 2004	30%	100%

Declared after the end of the financial period and not included in the statement of financial position:

At the date of this report the final dividend for 2004 has not been declared.

	The Company
	2004	2003
	Я	q,
Dividend Franking account
Franking credits available to shareholders for subsequent financial years	2.243.972	2.696.421

The franking account is stated on a tax paid amount.

The above available amounts are based on the balance of the dividend franking account at vear-end adjusted for:

$(a)$ franking credits that will arise from the payment of the amount of the provision for income tax

$(b)$ franking debits that will arise from the payment of dividends recognised as a liability at year-end

franking credits that will arise from the receipt of dividends recognised as receivables at year end $(c)$

$(d)$ franking credits that the entity may be prevented from distributing in subsequent years.

The ability to utilise the franking credits is dependent upon there being sufficient available profits to declare dividends.

(AND ITS CONTROLLED ENTITIES)

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2004 (Continued)

NOTE 6: REMUNERATION OF DIRECTORS AND EXECUTIVES

Income paid or payable, or otherwise made available to all Directors of the Company from the Company or any related party.

	S	\$
Fees – John Douglas Read	25.000	25,000
Fees – John Thomas Riedl	25.000	14.582
	50.000	39.582

No amounts were paid or payable, directly or indirectly to executive officers of the Company.

Except as detailed above, the Company paid no other remuneration to directors or executives during the year.

The costs of the services of directors: Messrs Beard, Gould and Leaver, and executives are covered by the management agreement with the Investment Manager, CVC Investment Managers Pty Limited. Messrs Beard, Gould and Leaver are directors of the Company and of CVC Investment Managers Pty Limited. Mr Read is a director of the Company and was a director of CVC Investment Managers until September 2003. During the financial year CVC Investment Managers Pty Limited did not pay any remuneration to Directors or Executives of the Company. During the financial year CVC Investment Managers Pty Limited paid management fees of \$941,334 (2003; \$878,050) to unrelated entities and \$500,000 (2003; \$500,000) to entities related to Directors Gould and Leaver, for the provision of professional services, including the services of Directors and Executives.

Mr Read also receives director fees of \$15,000 per annum from CVC Private Equity Limited, a related company, for services to that Company.

NOTE 7: AUDITORS' REMUNERATION

Amounts received or due and receivable to Auditors of the Company:

		Consolidated		The Company
	2004	2003	2004	2003
	\$	\$	S	\$
Audit Services	107,500	75,000	66,500	60,000
Other Services	5,000	$\overline{a}$	$\ddot{}$
	112,500	75,000	66,500	60,000

The Auditors received no other benefits.

NOTE 8: EARNINGS PER SHARE

Basic & Diluted Earnings per Share (dollars per share)	0.0943	0.0460
Reconciliation of earnings used in the calculation of earnings per share:
Operating profit after income tax	10,795,193	5,234,703
Outside equity interests Less:	(649.171)	(191, 643)
Earnings	10,146,022	5,043,060

Weighted average number of ordinary shares	107,606,827	109,736,032

Number of Shares

(AND ITS CONTROLLED ENTITIES)

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2004 (Continued)

		Consolidated		The Company
	2004	2003	2004	2003
	\$	\$	s	\$
NOTE 9: RECEIVABLES
Current
Trade debtors	3,136,836	2,630,330
Other debtors	136,200	79,460	67,008	13,250
Loans to other corporations	6,546,774	10,908,949	6,546,774	5,089,682
Provision for non-recovery of loans to other corporations	(2,344,333)	(1,913,681)	(2,344,333)	(1,594,414)
Loans to related entities	140,000	1,460,000	140,000	1,460,000
Total Current Receivables	7,615,477	13,165,058	4,409,449	4,968,518
Non-Current
Loans to other corporations	4,595,890	5,735,388	4,595,890	5,735,388
Provision for non-recovery of loans to other corporations	(3,845,890)	(29, 143)	(3,845,890)	(29, 143)
Loans to controlled entities			2,454,335	1,256,342
Provision for non-recovery of loans to controlled entities			(1,122,391)	(1,122,391)
Loans to director related entities	2,139,908	3,162,256	1,397,337	3,162,256
Loans to joint ventures		8,349,768		8,349,768
Total Non-Current Receivables	2,889,908	17,218,269	3,479,281	17,352,220

Further details of loans to related entities are set out in Note 27.

NOTE 10: INVENTORIES

Current
Finished goods – at cost	1,132,013	801.437	$^{\tiny{}}\,$	$\sim$
Total Current Inventories	1,132,013	801.437	$^{\tiny{}}\,$
	_________	_________	____	___

(AND ITS CONTROLLED ENTITIES)

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2004 (Continued)

Consolidated		The Company
2004	2003	2004	2003
\$	\$	S	\$
4,922,116	3,609,776	4,922,116	3,609,776
	1,059,712		1,059,712
4,922,116	4,669,488	4,922,116	4,669,488
10,502,909	7,519,533	10,502,909	7,519,533
		6,289,230	4,770,619
5,772,580	5,578,817	2,412,507	1,970,241
6,088,864	4,749,350	4,892,761	2,279,696
		13,538,932	4,960,070
11,861,444	10,328,167	27,133,430	13,980,626
		31,402,532	25,546,108
14,102,366	12,049,741	2,855,766	1,970,241
14,102,366	12,049,741	33,168,298	27,516,349

The directors have valued shares in listed corporations at the lower of cost and market value as at 30 June 2004.

NOTE 12: OTHER ASSETS

Current
Prepayments and deposits	216.654	18.098	11.662	10,810
Goods and Services Tax	22.038	42.514	19.209	34.673
	238.692	60.612	30.871	45,483

NOTE 13: INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

Non-Current
Equity accounted shares of joint ventures (Note 30)	12,099.991	9.315.261	12,099,991	9,315,261
Equity accounted shares in listed associated companies
(Note 25)	32,380,577	24,087,691
Equity accounted shares in other associated companies
(Note 25)	5.043.812
	49,524,380	33,402,952	12,099,991	9,315,261
Market value of shares in listed associated companies	42,778,007	31,146,341

(AND ITS CONTROLLED ENTITIES)

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2004 (Continued)

		Consolidated		The Company
	2004 \$	2003 \$	2004 s	2003 \$
NOTE 14: INTANGIBLE ASSETS
Goodwill	5,702,947	5,360,185
Accumulated Amortisation	(545,256)	(103,081)
	5,157,691	5,257,104
NOTE 15: PROPERTY, PLANT AND EQUIPMENT
Plant and Equipment
At cost	1,508,695	1,449,904
Accumulated depreciation	(838,003)	(832,726)
Total property, plant and equipment	670,692	617,178
Reconciliations
Plant and Equipment
Carrying amount at beginning of year	617,178
Assets acquired in business acquisition		635,912
Additions	177,387	11,700
Disposals	(2,694)
Depreciation	(121, 179)	(30, 434)
Carrying amount at end of year	670,692	617,178
Total Property, Plant & Equipment	670,692	617,178
NOTE 16: PAYABLES
Current
Trade creditors	2,066,214	1,632,839	8,050	41,127
Loans from controlled entities			17,374,782	14,328,506
Loans from joint venture entities	4,715,322	756,875	4,715,322	756,875
Performance fees payable	4,000,000		4,000,000
Sundry creditors and accruals	770,624	472,808	61,995	137,918
GST Payable	162,408	182,211

Total Current Accounts Payable

11,714,568

3,044,733

26,160,149

15,264,426

(AND ITS CONTROLLED ENTITIES)

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2004 (Continued)

		Consolidated		The Company
	2004	2003	2004	2003
	\$	\$	s	\$
NOTE 17: INTEREST BEARING LIABILITIES
Current
Loans from other persons		215,000
NOTE 18: PROVISIONS
Current
Employee entitlements	208,830	303,374
Deferred consideration and costs for acquisition of controlled entity		1,577,644
Other		54,371
Total Current Provisions	208,830	1,935,389
Non-Current
Employee entitlements	143,206
		2004		2003
	Number	S	Number	\$
NOTE 19: CONTRIBUTED EQUITY
Issued and Paid-Up Ordinary Share Capital
Balance at beginning of the year Shares bought back on market	109,736,032 (5,741,576)	26,633,636 (6, 396, 509)	109,736,032	26,633,636
Difference between cost and dividend equivalent of 157,851
shares acquired on market for dividend reinvestment plan		400

Balance at end of the year 103,994,456 20,237,527 109,736,032 26,633,636

On 21 December 1999 the Company commenced an on-market share buy-back scheme for an unlimited duration but limited to 7,000,000 ordinary shares. During the financial year the Company bought back the remaining 5,741,576 shares that could be bought back under the scheme.

On 19 August 2004 the Company commenced an on-market share buy-back scheme for an unlimited duration but limited to 20,000,000 ordinary shares. At the date of this report 3,508,772 shares had been bought back under this scheme.

(AND ITS CONTROLLED ENTITIES)

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2004 (Continued)

	Consolidated			The Company
	2004	2003	2004	2003
	\$	\$	s	\$
RESERVES NOTE 20:
Capital Profits Reserve
Balance at beginning of the year
Equity accounted share of reserve movement in associated
entity		21,215
Transfer to retained profits		(21, 215)
Balance at end of the year
NOTE 21: RETAINED PROFITS
Retained Profits at the beginning of the year	54,202,318	51,589,177	9,182,926	10,412,032
Net Profit Attributable to members of the parent
company	10,146,022	5,043,060	9.041.302	416,933
Dividends	(3,817,930)	(1,646,041)	(3,817,930)	(1,646,041)
Share of decrease in retained profits of associate accounted
for using the equity method		(805,093)
Transfer from capital profits reserve		21,215
Retained Profits at the end of the year	60,530,410	54,202,318	14,406,298	9,182,926

NOTE 22: FINANCING ARRANGEMENTS

At 30 June 2004, CVC had access to the following specific lines of credit.

Total facilities available:
Toint venture - Finance loans	46.500.000	48.500.000	46.500.000	48,500,000
Bank facility	5.000.000	5.000.000	5.000.000	5,000,000
	51.500.000	-53.500.000-	51.500.000	53.500.000

Joint venture facilities are shown gross and not the 50% share attributable to CVC. Joint venture facilities are fully drawn and are secured on property within the joint ventures. The bank facility has not been drawn

(AND ITS CONTROLLED ENTITIES)

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2004 (Continued)

NOTE 23: CONTROLLED ENTITIES

$23.1$ Particulars in Relation to Controlled Entities

The consolidated financial statements at 30 June 2004 include the following controlled entities. The financial years of all controlled entities are the same as that of the parent entity. All companies are incorporated in Australia.

	Interest Held
	2004	2003
	$\%$	$\theta_{\rm th}$
CVC Limited
Controlled Entities:
Biomedical Systems Pty Limited	100	100
CVC Communication and Technology Pty Ltd	100	100
CVC (Newcastle) Pty Limited	100	100
CVC Technologies Pty Limited	100	100
Kingarrow Pty Limited	100	100
Laserex Pty Limited	100	100
The Eco Fund Pty Limited (formerly: Campburn Pty Limited)	100	100
Stinoc Pty Limited (formerly: Stinoc Limited)	99	80
Pro-Pac Group Limited	82	77
Pro-Pac Packaging (Aust.) Pty Ltd	66	62
Pro-Pac Packaging Manufacturing (Syd) Pty Ltd	66	62
Pro-Pac Packaging Manufacturing (Melb) Pty Ltd	66	62
Pro-Pac Packaging Manufacturing (Bris) Pty Ltd	66	62
Pro-Pac (GLP) Pty Ltd	66	62

23.2 Outside Equity Interests in Controlled Entities comprise:

Reconciliation of outside equity interests in controlled entities:

	Consolidated
	2004	2003
	\$	\$
Balance at beginning of the year	1,912,696	611,700
Share of net profit	649,171	191,643
Arising on acquisitions of new subsidiaries		1,748,901
New shares issued by subsidiary	36,399
Capital reduction by subsidiary	(140.065)	(639, 548)
Balance at end of the year	2,458,201	1,912,696

The outside equity interests at the end of the year comprises interests in:

Share Capital Retained Profits/Accumulated Losses	1,285,226 1.172.975	6,378,626 (4,465,930)
	2.458.201 -------------------------------------- ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,	1.912.696 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

(AND ITS CONTROLLED ENTITIES)

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2004 (Continued)

	Consolidated		The Company
	2004	2003	2004	2003
				\$
NOTE 23: CONTROLLED ENTITIES (Cont'd)

Acquisition of controlled entities 23.3

Pro-Pac Packaging (Aust) Pty Ltd $a)$

Pro-Pac Group Limited, a controlled entity, acquired an 80% private equity interest in Pro-Pac Packaging (Aust) Pty Limited and it's subsidiaries with effect from 1 April 2003.

Consideration and costs paid	(5,382,541)
Cash acquired	2,708,384
Outflow of cash	(2,674,157)
Fair value of net assets acquired:
- Cash assets	2,708,384
- Inventory	836,347
- Trade debtors	2,444,456
- Other current assets	33,533
- Property, plant and equipment	635,912
- Trade creditors	(1,591,239)
- Employee entitlements	(283, 952)
- Tax liabilities	(277, 251)
- Related party loans	(2,212,924)
- Other current liabilities	(293,266)
	2,000,000
Net assets at fair value at 80% ownership	1,600,000
Goodwill arising	5,360,185
Estimated total consideration and costs (a)	6,960,185

At 30 June 2003 a further instalment of consideration was payable, to be calculated based on an adjusted audited earnings figure a) for the year ended 30 June 2003. As at the date of the 2003 financial report the final consideration to be paid for the acquisition had not been finalised and a provision was carried forward at \$1,577,644. During the year the final consideration was determined at \$1,581,877 and was paid.

During the current financial year Pro-Pac Packaging (Aust) Pty Limited acquired two 'bolt-on' unincorporated businesses for goodwill payments totalling \$308,744.

(AND ITS CONTROLLED ENTITIES)

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2004 (Continued)

	Consolidated		The Company
	2004	2003	2004	2003
NOTE 23: CONTROLLED ENTITIES (Continued)

23.3 Acquisition of controlled entities (continued)

$b)$ Stinoc Pty Limited

On 28 March 2003, as a result of the effects of a rights issue by Stinoc Pty Limited, Stinoc Pty Limited became an 80.19% controlled entity of CVC.

(488,317)		(488,317)
714,769
226,452		(488,317)
714,769
2,216
(38,222)
678,763
544,288
(55, 971)
	488,317

The discount on acquisition was included as other income.

On 7 May 2004, Stinoc Pty Limited performed a capital reduction. As a result of this capital reduction the Company's interest in the share capital of Stinoc Pty Limited increased to 99% with a reduction in cash balances of CVC of \$151,787.

Laserex Pty Limited $\mathbf{c}$

On 5 March 2003, as a result of the effects of a capital reduction by Laserex Pty Limited, Laserex Pty Limited, previously a 98% controlled entity, became a 100% controlled entity of CVC. The effect of the capital reduction was that outside equity interests in the controlled entity were removed at a cash cost to CVC of \$835,226.

23.4 Disposal of Controlled Entities

During the years ended 30 June 2004 and 30 June 2003 there were no disposals of controlled entities.

(AND ITS CONTROLLED ENTITIES)

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2004 (Continued)

NOTE 24: OPERATIONS BY SEGMENTS

$24.1$ Primary Segments - Business Segments

Information, in round thousands, as permitted under class order 98/100, for each business segment is as follows:

30 June 2004:	Private Equity & Venture Capital	Listed Investments	Property	Eliminations	Consolidated
Revenues:	$$000$ s	\$000s	\$'000's	\$'000's	$\$'000$ s
Revenue from External Customers	22,889	24,385	340		47,614
Inter-segment revenue
Operating Revenue	22,889	24,385	340		47,614
Equity Accounted Net Profits	763	10,468	1,606		12,837
Total Segment Revenue	23,652	34,853	1,946		60,451
Results:
Result Before Non-Cash Items	4,443	17,752	1,947		24,142
Depreciation	(121)				(121)
Amortisation	(442)				(442)
Other Non-Cash Expenses:
Increase/(Reduction) in Loan ÷
Provision for Non-Recovery	(4,567)		319		(4,248)
Unrealised Loss on Investments ÷,	300	(400)			(100)
Segment Result	(387)	17,352	2,266		19,231
Unallocated Corporate Expenses Income Tax Expense					(6,982) (1, 454)
Profit After Taxation					10,795
Assets:
Segment Assets excluding Equity
Accounted Investments	35,300	10,694	2,105	(1,341)	46,758
Equity Accounted Investments	3,685	32,381	8,743	4,715	49,524
Segment Assets	38,985	43,075	10,848	3,374	96,282
Unallocated Assets					180
Total Assets					96,462
Liabilities:
Segment Liabilities	8,517		18	3,374	11,909
Unallocated Liabilities					1,327
Total Liabilities					13,236
Cost of acquisition of non-current assets	486				486

Private Equity and Venture Capital involves equity and debt investments in non-listed entities. It includes shares, debt, convertible notes and other investments. Property comprises joint venture interests in the Chevron Renaissance shopping centre, the Bel-Air shops and property interests through CVC (Newcastle) Pty Ltd and Winten (No.20) Pty Ltd. Listed investments comprises investments listed on recognised stock exchanges.

(AND ITS CONTROLLED ENTITIES)

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2004 (Continued)

NOTE 24: OPERATIONS BY SEGMENTS (continued)

$24.1$ Primary Segments - Business Segments (continued)

30 June 2003:	Private Equity & Venture Capital	Listed Investments	Property	Eliminations	Consolidated
	$\$'000's$	\$'000's	\$'000's	\$'000's	\$000s
Revenues:
Revenue from customers
outside the group	5,605	296	1,084		6,985
Inter-segment revenue	834			(834)
Operating Revenue	6,439	296	1,084	(834)	6,985
Equity Accounted Net Profits	3,479	4,306	1,064		8,849
Total Segment Revenue	9,918	4,602	2,148	(834)	15,834
Results:
Result Before Non-Cash Items	6,460	4,409	1,199		12,068
Depreciation	(30)				(30)
Amortisation	(103)				(103)
Other Non-Cash Expenses	(3,315)	(1,390)	937		(3,768)
Segment Result	3,012	3,019	2,136		8,167
Unallocated corporate expenses					(2,755)
Income Tax Expense					(177)
Profit After Taxation					5,235
Assets:
Segment Assets excluding Equity
Accounted Investments	39,647	10,248	6,982	(2,282)	54,595
Equity Accounted Investments	4,537	24,088	8,153	(3,375)	33,403
Segment Assets	44,184	34,336	15,135	(5,657)	87,998
Unallocated Assets					315
Total Assets					88,313
Liabilities:
Segment Liabilities	4,048		6,646	(5,657)	5,037
Unallocated Liabilities					527
Total Liabilities					5,564
Cost of acquisition of non-current assets	5,360				5,360

$24.2$ Secondary Segments - Geographical Segments

CVC operates predominantly in Australia.

(AND ITS CONTROLLED ENTITIES)

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2004 (Continued)

INVESTMENTS IN ASSOCIATED ENTITIES NOTE 25:

Details of material interests in associated entities as at 30 June 2004 are as follows:

			Ownership Interest
			Consolidated		The Company
	Principal	Class of	2004	2003	2004	2003
Name	Activities	Share	$\%$	%	$\%$	%
Sunland Group Limited	Property development	Ord	19.17	28.58	14.07	23.44
CVC Private Equity Limited (a)	Private equity investment	Ord	24.56	-	24.56	۰
Winten (No.20) Pty Limited	Property development	Ord	50.00	$\overline{\phantom{0}}$	$\overline{\phantom{0}}$	$\overline{\phantom{a}}$

(a) An investment of 10.48% of the equity in CVC Private Equity Limited was held at 30 June 2003. However, at that time, the investment was not considered to be an associate to be accounted for using the equity method and was instead included within shares in other investments at cost or realisable value within non-current other financial assets.

The balance date of all the associated companies is 30 June 2004 and all were incorporated in Australia.

		Investment Carrying Amount				Dividends Received/Receivable
		Consolidated		The Company		Consolidated		The Company
Name	2004	2003	2004	2003	2004	2003	2004	2003
	£.	\$		SS.		\$.		\$
Sunland Group Limited	32.380.577	24.087.691	9.342.577	4.960.070	1,287,485	1.216.654	1.025.079	1,003,982
CVC Private Equity Limited	4,196,355	$\overline{\phantom{a}}$	4.196.355		w.
Winten (No.20) Pty Limited	847,457		$\overline{\phantom{a}}$				Ŧ

Investments in associated companies are accounted for on a cost basis in the company accounts and under the equity accounting method in the consolidated accounts. Movements in the carrying amount of the investments under the equity accounting method are as follows:

	Consolidated
		2004			2003
	Sunland	CVC Private	Winten	Total	Sunland
	Group	Equity	$(N_0, 20)$		Group
				S	\$
Balance at the start of year	24,087,691			24,087,691	21,782,309
Share of associates profits/ (losses) before tax	14,756,708	(388, 175)	(27,521)	14,341,012	5,880,853
Share of associates tax expense	(4,288,891)			(4,288,891)	(1,574,939)
Reclassification of investments		1,832,609	874,978	2,707,587
New interests acquired	8,637,866	2,751,921		11,389,787
Interests disposed during the year	(9,525,312)		÷	(9,525,312)
Dividends received during the year	(1,287,485)			(1,287,485)	(1,216,654)
Share of associates adjustment in equity					(805,093)
Share of associates capital reserve movement					21,215
Balance at the end of the year	32,380,577	4,196,355	847,457	37,424,389	24,087,691

The full financial information at 30 June for Sunland Group Limited has historically not been publicly available at the time of the preparation of the Company's financial report. Accordingly, the investment has been accounted for using financial information for the half year to 31 December 2003. This is consistent with prior years. At 31 December 2003, CVC's ownership interest in Sunland was 19.78%.

(AND ITS CONTROLLED ENTITIES)

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2004 (Continued)

Consolidated		The Company
2004	2003	2004	2003
\$	ъ		\$

NOTE 26: NOTES TO THE STATEMENT OF CASH FLOWS

Reconciliation of Cash 26.1

For the purposes of the statements of cash flows, cash includes cash on hand and at bank and short term deposits at call, net of outstanding bank overdrafts. Cash as at the end of the financial year as shown in the statements of cash flows is reconciled to the related items in the statements of financial position as follows:

Cash Assets	12,269,691	2,477,100	9,507,658	799.577
			,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,	---------------------------------------

$26.2$ Reconciliation of profit from ordinary activities after income tax to the net cash provided by operating activities

Profit from ordinary activities after income tax	10,795,193	5,234,703	9,041,302	416,933
Add/(less) non-cash items:
Share of equity accounted profits	(12,836,848)	(8,849,034)	(2,784,730)	(4,543,120)
Dividends received from equity accounted associates	1,287,485	1.216,654
Depreciation and amortisation of property plant and
equipment	121,179	30.434
Amortisation of goodwill	442,175	103,081
Discount on acquisition		(55, 971)
Unrealised loss on investments	100,248	3,742,843	(1,772,719)	2,340,056
Profit on disposal of investments	(6,592,468)		(13, 427, 057)
Loss on disposal of short term investments		91,050		91,050
Loss on sale of loan	1,652,713		1,652,713
Movements in loan provisions	4,247,399	(561,265)	4,566,666	1,121,968
Loss on Sale of Property, Plant & Equipment	2,694
Borrowing costs in operating profit	(21,705)	92,500
Interest income not received	(1,891,495)	(1,604,487)	(1,550,525)	(720, 139)
Interest expense not paid				985,308
Movement in current tax assets & liabilities	893,895	1,679,574	547,065	1,006,227
Movement in deferred tax assets & liabilities	41,872	(492, 247)	181,572	(495, 247)
Changes in assets and liabilities:
Receivables	(544, 499)	570,940	(36,201)	830,914
Inventories	(330,576)	34,910
Payables	4,711,389	(301,057)	3,890,999	(363, 828)
Provisions	(5,709)	19,422
Other assets	(178,080)	183,132	14,612	(10, 810)
Net cash provided by operating activities	1,894,862	1,135,182	323,697	659,312

26.3 Financing Facilities

Refer Note 22.

(AND ITS CONTROLLED ENTITIES)

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2004 (Continued)

NOTE 27: RELATED PARTY INFORMATION

Directors

The names of each person holding the position of Director of CVC during the financial year are:

Vanda Russell Gould John Scott Leaver John Douglas Read Alexander Damien Harry Beard John Thomas Riedl

Details of directors' remuneration, superannuation and retirement payments are set out in Note 6.

Apart from the details disclosed in this financial report, no director has entered into a contract with the Company or CVC since the end of the previous financial year and there were no contracts involving directors' interests existing at year-end.

Other Transactions

CVC Investment Managers Pty Limited, of which Messrs Gould, Leaver and Beard were Directors during the relevant period, is entitled to a management fee of 4% of the funds under management of CVC for providing fund raising, accounting, secretarial and management services. CVC Investment Managers Ptv Limited is also entitled to a further payment (Incentive Fee) assessed at 20% of the increment in the net asset value of the Company during each year (refer note 29). CVC Investment Managers Pty Limited is responsible for the engagement of several Directors and Executive Officers of CVC together with the provision of administration and management services.

Management fees of \$1,443,720 (2003: \$1,387,380) were paid to CVC Investment Managers Pty Limited and its controlled entities by CVC during the year. CVC Investment Managers Pty Limited and its controlled entities received management fees from the controlled entities and associated companies of CVC for the provision of services directly to those companies totalling \$1,050,758 (2003: \$1,084,476).

At a general meeting of the company held on 9 August 2004, shareholders approved the payment of \$4 million to CVC Investment Managers Pty Ltd as settlement of all performance fees to 30 June 2004. Payment of all incentive fees is contingent on the granting of an Australian Financial Services Licence to CVC Managers Pty Limited. At the date of this report, this licence has not been granted and so the settlement of all performance fees has not yet been actioned.

During prior years CVC lent \$9,842,505 to The Keriland Joint Venture in which it had an effective 25% interest. During the year ended 30 June 2003 the joint venture was dissolved and the balance of the Ioan written down to \$7,300,000 to be repaid by instalments. At 30 June 2003 two instalments totalling \$1,460,000 were outstanding. Final payment for \$1,460,000 was received in July 2003. The balance of the interests in The Keriland Hotel Joint Venture are held by Sunland Group Limited ("Sunland"). Mr Leaver is a director of CVC and Sunland.

During the year, CVC committed to take up its rights in a Sunland rights issue and received an amount of \$126,818, for the commitment, from the underwriter of the rights issue.

As at 30 June 2003, CVC Communications & Technology Pty Limited, a 100% controlled entity, had loaned \$12,289,575 to the Company. During the year 30 June 2004, CVC received a further amount of \$3,024,504. There were a number of smaller other loans between wholly owned controlled entities during the period.

As at 30 June 2003, CVC held \$1,594,946 Vita Life Sciences Limited convertible notes. During the year CVC purchased further Vita Life Sciences Limited convertible notes for \$1,500,000. During the year CVC sold all Vita Life Sciences Limited convertible notes for \$1,652.713. Mr Gould is a director of Vita Life Sciences Limited.

During the year, the Company acquired 3,931,316 shares through the underwriting of a rights-issue by CVC Private Equity Limited. Messrs Beard and Read are directors of CVC Private Equity Limited.

(AND ITS CONTROLLED ENTITIES)

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2004 (Continued)

NOTE 27: RELATED PARTY INFORMATION (Continued)

Other Transactions (Continued)

During the year ended 30 June 2001, the Company committed to advance \$3,461,829 to CVC Reef Limited, a director related entity, in the form of convertible notes. At 30 June 2004, \$1,707,734 had been advanced to CVC Reef Limited and \$544,387 repaid to CVC Limited. As at 30 June 2004, \$1,163,347 in convertible notes were due from CVC Reef Limited and accrued interest of \$233,990 had been capitalised.

The ownership interests in related parties are set out in Note 23 (controlled entities), Note 25 (associated entities) and Note 30 (joint ventures).

Dividends of \$1,287,485 (2003: \$1,216,654) were received by CVC from Sunland, an associated company of CVC. Dividends of \$327,155 were received from Greens Foods Limited. Mr Beard is a director of Greens Foods Limited.

		Consolidated		The Company
	2004	2003	2004	2003
	\$	\$	S	\$
COMMITMENTS NOTE 28:
Capital Expenditure Commitments
Contracted but not provided for and payable:
not later than one year
Non-cancellable operating lease expense commitments
Future operating lease commitments not provided for in-
the financial statements and payables:
within one year	358,072	304,150
later than one year but not later than five years	92,307	209,331
	450,379	513,481

NOTE 29: CONTINGENT LIABILITIES

The Company is a defendant in an action brought in the Supreme Court of New South Wales by the liquidator of Amann Aviation Pty Limited (in liquidation) ('Amann'). The liquidator alleges, that certain group companies were involved in an alleged failure to pay tax on damages awarded to Amann as a result of proceedings brought by CVC against the Commonwealth in 1987. The liquidator alleges in the statement of claim that CVC be required to repay to him amounts paid to CVC as a result of the 1987 proceedings, together with damages, interest and the costs of these proceedings. The directors deny any liability and further CVC holds a secured charge over Amann so that in the event that monies were found to be repayable to Amann, they must be paid back to CVC because of the security held by CVC, which has not been challenged. Resolution of this matter may be subject to determination by the Court and accordingly cannot be quantified. However, the directors believe that there will be no material loss to the Company from this matter.

As described in note 27, CVC Investment Managers Pty Limited ('CVCIM'), is entitled to an incentive fee calculated at 20% of the increase in net asset value of CVC during each financial year. At a general meeting of the Company on 9 August 2004, shareholders approved the a payment of \$4 million to CVCIM, as settlement of all performance fees to 30 June 2004, and the acquisition of the investment management business of CVCIM, effectively removing the liability to CVC for future periods. These approvals are contingent on the granting of an Australian Financial Services Licence to CVC Managers Pty Limited. At the date of this report, this licence has not yet been granted. The Company has accrued the \$4 million settlement in these 2004 results.

(AND ITS CONTROLLED ENTITIES)

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2004 (Continued)

			Consolidated		The Company
		2004	2003	2004	2003
		\$	\$	s	\$
NOTE 30:	INTERESTS IN JOINT VENTURES
	Joint Ventures Partnerships
	Interests in joint ventures partnerships	12,099,991	9,315,261	12,099,991	9,315,261

The Company and CVC hold 50% interests (2003: 50%) in three joint ventures: Chevron Developments, Bel Air Real Estate and Skyline Investments Australia.

The principal activities of Chevron Developments are the ownership and operation of the Chevron Renaissance shopping centre on the Gold Coast, Queensland and the provision of finance for property development. The principal activity of Bel Air Real Estate joint venture partnership is the ownership and operation of a shopping strip on the Gold Coast, Queensland. The principal activity of Skyline Investments Australia is the provision of finance to property developments on the Gold Coast, Queensland.

Movements in interests in joint ventures partnerships are as follows:

At beginning of the year	9.315.261	4.772.141	9.315.261	4.772.141
Share of profit for the year	2.784.730	4.543.120	2.784.730	4.543.120
At end of the vear	12.099.991	9.315.261	12.099.991	9.315.261

The interests in joint ventures partnerships at the end of the financial year are split as follows:

Current Assets	3,747,653	14,321,095	3,747,653	14,321,095
Non-Current Assets	32,300,744	27,907,355	32,300,744	27,907,355
Current Liabilities	570,683	169.276	570,683	169,276
Non-Current Liabilities	23,377,723	32,743,913	23,377,723	32,743,913
Net Assets	12,099,991	9,315,261	12,099,991	9,315,261
Retained Profits	12,099,991	9.315.261	12.099.991	9,315,261

The share of the profit for the year from interests in joint ventures partnerships is split as follows:

Revenues	6.088.643	7.254.147	6,088,643	7,254,147
Expenses	3,303,913	2,711,027	3.303.913	2,711,027
Operating Profit	2.784.730	4.543.120	2.784.730 -----------------------------------	4.543.120

Refer also notes 28 and 29 for details of commitments and contingent liabilities.

(AND ITS CONTROLLED ENTITIES)

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2004 (Continued)

NOTE 31: ADDITIONAL FINANCIAL INSTRUMENTS DISCLOSURE

Interest rate risk a)

CVC's exposure to interest rate risk and the effective weighted average interest rate for classes of financial assets and financial liabilities is set out below:

		Fixed Interest Rate Maturing in:
		Floating Interest Rate	1 year or less	Between 1 & 5 years	Non- interest bearing	TOTAL
	Note	\$	\$	S	\$	S
2004: Financial Assets
Cash Assets	26	3,265,932	9,003,759			12,269,691
Receivables	9		2,000,000	4,349,778	4,155,607	10,505,385
Weighted Average Interest Rate		3.5%	6.5%	21.6%
Financial Liabilities
Accounts Payable	16				11,714,568	11,714,568
Interest Bearing Liabilities	17
Weighted Average Interest Rate
2003:
Financial Assets
Cash Assets	26	1,098,966	1,378,134			2,477,100
Receivables	9		3,495,268	14,368,501	12,519,588	30,383,357
Weighted Average Interest Rate		3.5%	9.7%	21.1%
Financial Liabilities
Accounts Payable	16				3,044,732	3,044,732
Interest Bearing Liabilities	17	215,000				215,000
Weighted Average Interest Rate		29.0%			۰

(b) Credit Risk Exposure

Credit risk represents the loss that would be recognised if counterparties failed to perform as contracted.

The credit risk on financial assets, excluding investments, of CVC which have been recognised on the statement of financial position, is the carrying amount, net of any provision for doubtful debts.

Collateral is obtained on longer-term receivables.

Net Fair Value of Financial Assets and Liabilities ${c}$

Monetary financial assets and financial liabilities not readily traded in an organised financial market are determined by valuing them at the present value of contractual future cash flows on amounts due from customers (reduced for expected credit losses) or due to suppliers. The carrying amounts of bank term deposits, accounts receivable, loans receivable accounts payable, dividends payable and employee entitlements approximate net fair value.

The net fair value of investments in unlisted shares in other corporations is determined by reference to the underlying net assets and an assessment of future maintainable earnings and cash flows of the respective corporations.

(AND ITS CONTROLLED ENTITIES)

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2004 (Continued)

NOTE 31: ADDITIONAL FINANCIAL INSTRUMENTS DISCLOSURE (Continued)

(d) Set-off of financial assets and debt instruments

The presentation of assets and liabilities are reflected on a net basis when this reflects the entity's right of set-off and the expected future cash flows from settling the assets and liabilities. At 30 June 2004, CVC and the Company has a \$15.3 million investment in the Everest Babcock & Brown Absolute Return Fund, which invests in a range of debt and equity investments. The investment has a full capital guarantee and has been geared with borrowings of \$12.3 million, at a fixed interest rate of 7.2%. This investment has been shown as a net \$3 million investment, at cost, within 'other investments at cost or realisable value' within other financial assets (note 11). Interest expense in relation to the borrowings has not been recognised and instead has been offset against the unrealised increase in the value of the investment. At 30 June 2004, the market value of the net investment, based on the value of the underlying investments within the fund less borrowings and accrued interest, was \$0.4 million greater than the carrying value.

	Consolidated		The Company
	2004	2003	2004	2003
	\$	\$	\$	\$
EMPLOYEE ENTITLEMENTS NOTE 32:
Aggregate liability for employee entitlements including on-costs
Current	208,830	303,374	$\bullet$
Non-Current	143,206		$\,$
Number of employees at year-end	52	52

NOTE 33: THE EFFECTS OF THE ADOPTION OF AUSTRALIAN EQUIVALENTS TO INTERNATIONAL FINANCIAL REPORTING STANDARDS

In July 2004, as part of the process to harmonise Australian Accounting Standards with International Financial Reporting Standards, the Australian Accounting Standards Board issued a suite of new and revised Australian Accounting Standards. These standards will first apply to CVC for the financial year ending 30 June 2006, but at that time CVC must also present comparative information for the financial vear ending 30 June 2005 as though the new standards had also applied at that time.

During the run-up to the formal issuing of the new standards CVC has maintained a watching brief on developments and how they could be expected to affect CVC. Following the issue of the standards CVC has commenced a formal process of assessing the impacts of the new standards on CVC.

CVC has now completed its preliminary appraisal of the effects of the Adoption of Australian Equivalents to International Financial Reporting Standards. This review has been targeted at determining:

those changes that are expected to have material financial reporting effects on CVC

The aims of this process are to allow CVC to most efficiently allocate resources to areas that are most likely to have a significant effect so as to be able:

• to more effectively communicate the expected impacts in line with ongoing disclosure obligations to shareholders and the market in general, and
• to be able to satisfy the reporting requirements of "AASB 1047 Disclosing the Impacts of Adopting Australian Equivalents to International Financial Reporting Standards".
• the impacts on the statement of financial position, 'balance sheet', of CVC at 30 June 2004

To smooth the transition to the new accounting standards this process aims to determine an opening position at 30 June 2004/1 July 2004 prepared in accordance with the new accounting standards so as to provide a starting point for the preparation of comparative information for 30 June 2005.

(AND ITS CONTROLLED ENTITIES)

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2004 (Continued)

THE EFFECTS OF THE ADOPTION OF AUSTRALIAN EOUIVALENTS TO INTERNATIONAL FINANCIAL NOTE 33: REPORTING STANDARDS (Continued)

As a result of the preliminary appraisal CVC has identified a number of areas where key differences in accounting policies are expected to arise from adopting the new accounting standards. These issues are discussed in the sections below.

In addition to the key issues there are also expected to be a number of minor changes that are not discussed in this report. It is also important to note that CVC is continuing its work in this area and the issues discussed may be subject to revision and augmentation as more detailed analysis is completed.

AASB 139 - Financial Instruments: Recognition and Measurement

AASB 139 states that where there is a quoted market price in an active market for an investment it should be revalued at each reporting date to the market value. This is expected to significantly increase the reported value of investments of CVC. At 30 June 2004, the reported value of investments in the consolidated balance sheet would increase by approximately \$14 million.

The impact on the profit will depend on classifications of investments into those that are "held for trading" and those that are "available for sale". For investments held for trading the movements in market values between reporting dates will form part of the reported profit for each reporting period. For investments that are available for sale the movements in market values are reflected in equity as an effective form of revaluation reserve. CVC has not yet determined the split of investments between these two categories.

AASB 128 Investments in Associates - Venture Capital Exemption

AASB 128 provides that a Venture Capital entity can account for investments that would otherwise be classified as associates as investments to be accounted for as equity investments held for trading in accordance with AASB 139, refer above. CVC has not vet determined whether to apply this exemption to its investments in associates. If the exemption was applied, the value of the consolidated investment in Sunland Group Limited would increase by approximately \$10 million and movements in the market value of the investment for each reporting period would form part of consolidated profits.

AASB 128 Investments in Associates - Equity Accounted

If CVC does not elect to use the venture capital exemption, the following additional considerations in respect of equity accounted associate investments apply:

AASB 128 allows a maximum period of 3 months between the accounts of the associate and the current reporting date. Currently CVC reports the result of its investment in Sunland Group Limited in arrears by six months and so the value of the investment would need to be adjusted at each reporting period to reflect a more recent result.

In addition to the specific effects of AASB 128, each of the Associate investments will be required to adopt Australian Equivalents to International Financial Reporting Standards in totality. To the extent that this adoption will effect the net assets, profits and reserves of each of the associate investments of the Group a proportionate effect, through equity accounting, can be expected on the Group. CVC is not expecting any material adjustments to arise in respect of the adoption of the new standards by the CVC Private Equity Limited and Winten (No. 20) Pty Ltd associate investments. CVC has not at this stage sought to estimate the effects on Sunland Group Limited and is awaiting specific disclosure from that Company.

AASB 3 - Business Combinations

AASB 3 requires that goodwill arising on acquisitions be subject to testing at each reporting date for impairment instead of being amortised in line with current accounting standards. In the 2004 financial year, \$0.4 million was charged against consolidated results for goodwill amortisation.

(AND ITS CONTROLLED ENTITIES)

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2004 (Continued)

THE EFFECTS OF THE ADOPTION OF AUSTRALIAN EOUIVALENTS TO INTERNATIONAL FINANCIAL NOTE 33: REPORTING STANDARDS (Continued)

AASB 140 - Investment Property

At 30 June 2004. CVC has equity accounted interests in the Chevron Developments and Bel Air Real Estate joint ventures. Each of these joint ventures owns investment property, which is currently held at undepreciated cost. AASB 140 requires that all investment properties are either revalued each year to market/fair value, with movements in value being reflected in the statement of financial performance, or carried at depreciated cost.

CVC has not vet determined which valuation method will be used. If the market value method was applied, then the equity accounted valuation of the joint ventures at 30 June 2004 could be expected to increase by approximately \$8 million. If CVC was to apply the depreciated cost method, then the equity accounted valuation of the joint ventures at 30 June 2004 could be expected to reduce, to reflect the accumulated depreciation from acquisition to 30 June 2004, by approximately \$4 million.

AASB 136 - Impairment of Assets

AASB 136 applies tighter criteria, including the requirement to use discounted cash flows, for the determination as to whether the value of an asset is impaired and should be written down than apply under the existing Australian accounting standards. This can be expected to result in greater and more frequent write-downs in values of investments and receivables for investment companies. However, CVC considers that it generally applies conservative methodologies in valuing such assets and accordingly is not expecting any significant changes to the values of assets at 30 June 2004 arising from the adoption of this new standard.

AASB 112 - Income Taxes

AASB 112 differs from current accounting policies for income taxes by requiring a balance sheet approach to deferred tax assets and liabilities but applying a less strict approach to the recognition of deferred tax assets in relation to tax losses. The balance sheet approach requires a consideration of differences between carrying values in the balance sheet and the tax cost base for the equivalent asset/liability. The less strict approach to the recognition of deferred tax assets in relation to tax losses requires a deferred tax asset to be recognised where the prospect of recovery of the tax losses is probable instead of virtually certain.

At 30 June 2004 it is expected that the effect of this new standard on CVC will not be significant. This is because the additional deferred tax liabilities arising in relation to such items as: the revaluation of listed investments to market value, the difference between the equity accounted value of associates compared to their original cost value and possibly revaluations of investment properties, are expected to be mitigated by the recognition of additional, compensating, deferred tax assets in respect of capital tax losses.

DIRECTORS' DECLARATION

For the Year-Ended 30 June 2004

In the opinion of the Directors of CVC Limited:

• the financial statements and notes, set out in pages 6 to 37, are in accordance with the Corporations Act 2001, $(a)$ including:
• giving a true and fair view of the financial position of the Company and CVC as at 30 June 2004 and of their $(i)$ performance, as represented by the results of their operations and their cash flows, for the year ended on that date; and
• complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting $(ii)$ requirements; and
• $(b)$ there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

Dated at Sydney this 20th day of September 2004.

Signed in accordance with a resolution of the Board of Directors.

ADH Beard Director

ID Read Director

INDEPENDENT AUDITORS' REPORT

TO THE MEMBERS OF CVC LIMITED

Scope

The financial report and directors' responsibility

The financial report comprises the statement of financial position as at 30 June 2004, and the statement of financial performance, statement of cash flows, accompanying notes to the financial statements, and the directors' declaration for the year ended 30 June 2004 for both CVC Limited ("the Company") and the CVC Limited group ("CVC") as set out on pages 6 to 38. CVC comprises both the Company and the entities it controlled during that year.

The directors of the Company are responsible for the preparation and true and fair presentation of the financial report in accordance with the Corporations Act 2001. This includes responsibility for the maintenance of adequate accounting records and internal controls that are designed to prevent and detect fraud and error, and for the accounting policies and accounting estimates within the financial report.

Audit approach

We conducted an independent audit in order to express an opinion to the members of the Company. Our audit was conducted in accordance with Australian Auditing Standards, in order to provide reasonable assurance as to whether or not the financial report is free of material misstatement. The nature of an audit is influenced by several factors including the use of professional judgement, selective testing, the inherent limitations of internal control, and the availability of audit evidence which maybe persuasive rather than conclusive. Accordingly, an audit cannot guarantee that all material misstatements have been detected.

We performed procedures to assess whether in all material respects the financial report presents fairly, in accordance with the Corporations Act 2001, including compliance with Accounting Standards and other mandatory financial reporting requirements in Australia, a view which is consistent with our understanding of the Company's and CVC's financial position, and of their performance as represented by the results of their operations and cash flows.

We formed our audit opinion on the basis of these procedures, which included:

• examining, on a test basis, information to provide evidence supporting the amounts and disclosures in the financial report, and - assessing the appropriateness of the accounting policies and disclosures used and the reasonableness of significant accounting estimates made by the directors.

When determining the nature and extent of our procedures we considered the effectiveness of management's internal controls over financial reporting. Our audit was not designed to provide assurance on internal controls.

Independence

In conducting our audit, we followed applicable independence requirements of Australian professional ethical pronouncements and the Corporations Act 2001.

Audit opinion

In our opinion, the financial report of CVC Limited is in accordance with:

(a) the Corporations Act 2001, including:

• giving a true and fair view of the Company's and CVC's financial position as at 30 June 2004 and of their performance for $(i)$ the year ended on that date; and
• complying with Accounting Standards in Australia and the Corporations Regulations 2001; and $(ii)$

(b) other mandatory financial reporting requirements in Australia.

Dated at Sydney this 20th day of September 2004.

P Meade Partner

HLB MANN JUDD (NSW Partnership) Chartered Accountants