FINBAR GROUP LIMITED — Annual Report 2012

Aug 28, 2012

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2012

Finbar Group Limited 28th Annual Report for the year ended 30 June 2012

developing better lifestyles

contents

FY2012 summary of results	2
chairman’s message	4
managing director’s report	6
about fnbar	8
development overview	14
development timeline	15
perth metro completed projects	17
perth metro under construction	20
perth metro future developments	26
fnbar regional completed projects	28
fnbar regional future developments	29
commercial investments	30
fnancial report	33
directors’ report	34
consolidated statement of comprehensive income	49
consolidated statement of changes in equity	50
consolidated statement of fnancial position	51
consolidated statement of cash fows	52
notes to the fnancial statements	53
directors’ declaration	82
independent auditor’s report to members of Finbar Group Limited 83
lead auditor’s independence declaration	85
ASX additional information	86
corporate directory	88

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| pelago west

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FY2012 summary of results

profit $28.3m

dividend paid per share $0.09c

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$28.3m
$23.5m $24m
$18.9m
$12.2m
FY08 FY09 FY10 FY11 FY12
$0.09
$0.085
$0.075
$0.07
$0.06
FY08 FY09 FY10 FY11 FY12
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summary of shareholder returns

Shareholder Returns

Shareholder Returns Net Proft Earnings per share Dividends per share Market price per share Change in share price Return on capital employed Return on total equity	2012 2011
	$28,300,279 $24,023,464 $0.13 $0.12 $0.09 $0.085 $1.08 $0.98 $0.10 -$0.02 17.80% 14.55% 15.27% 14.11%

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| adagio
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chairman’s message

John Chan - Executive Chairman

Dear Shareholder

On behalf of the Board of Directors, I am pleased to present you with the 28th Annual Report of your Company for the financial year ended 30 June 2012, the Company’s 17th year as a residential property developer.

Finbar Group achieved a significant milestone this financial year announcing a record after tax profit of $28.3 million, an 18% increase on the previous year.

Our agile business model has allowed us to introduce products into new markets while meeting demand in terms of price and product expectation. This has been particularly evident through our increased presence in the North West region of Western Australia.

We have continued to strengthen our relationship with the State Government of Western Australia for regional development in the Pilbara region by being selected as the preferred developer for the $300+ million apartment project in Port Hedland at the end of July. This is part of our long term commitment to provide the best social outcome for local communities, in support of the Pilbara cities vision, and establish assets that will transform lifestyles and last through current and future generations in the North West.

Given our strong financial performance this year and a continued positive outlook, we have rewarded shareholders with a 16% increase in the interim dividend paid in February. Coupled with our final dividend announced recently it has resulted in a 9 cent fully franked dividend attributable to the financial year.

In April 2012, we relocated to new corporate office premises in the Fairlanes office building at 181 Adelaide Terrace in East Perth. This relocation to one of our flagship properties ensures Finbar is geographically closer to the majority of our company projects and our key stakeholders while helping us attract and retain the most capable property people in our industry and providing your company with the capability for growth now and into the future.

We took the opportunity to refresh our corporate brand at the time of our office relocation to reflect our commitment to develop better lifestyles using fresh ideas and concepts. The new corporate brand also reinforces our leading position as the largest residential apartment developer in Perth and the Pilbara region of Western Australia and has been well accepted.

In December 2011, Finbar strengthened its Board by appointing Lee Verios as a Non-executive Director. Mr Verios is a well credentialed company director with significant commercial experience and holds positions in a variety of public and private enterprises.

On behalf of the Board and Shareholders, I would like to take this opportunity to thank our management, our staff, our joint venture partners and our consultants for their dedication and commitment towards achieving long term success at Finbar.

We acknowledge and appreciate your support over the past year and anticipate sharing further success with you in the future.

We look forward to welcoming you to our new corporate office and updating you on our projects, a number of which can be seen from our office windows, at the Annual General Meeting in October.

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John Chan Executive Chairman

23 August 2012

Finbar has relocated to new corporate office premises - our flagship property Fairlanes

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Finbar’s new corporate premises at Fairlanes Office Above and Below Fairlanes Office
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managing director’s report

Finbar accomplished another record profit year during FY12 alongside an improving local property market. Again, we have placed your company in a robust position with development progress, supported by pre-sales, and a strong supplemented pipeline of new projects both in Perth and the North West which are all expected to secure future profitability and growth.

The largest contribution to the FY12 record annual profit resulted from the completion of the Fairlanes project. Launched in March 2009 in the midst of the Global Financial Crisis, we remain very proud of this wholly owned project. As Finbar’s tallest development to date, Fairlanes represents our capability to deliver a state of the art mixed use building with a successful fusion of residential, office and retail space.

We achieved another significant milestone during FY12 through the completion of Pelago West, which was the Company’s first expansion project in the North West providing housing for regional communities supporting the resources sector. Whilst the profitability of this project will not flow though until FY13 upon settlement of the apartments, it has created a major positive impact on Finbar’s local and national profile placing the Company in a leading position to capitalise on future opportunities in the North West region. Pelago West is currently 87% pre-sold or leased with residents starting to settle their apartments as at the date of this report. Pelago West has provided an excellent example of Finbar’s ability to execute a strategy of introducing a product into a new market in a timely manner and within price and budget expectations. We pride ourselves on maintaining our low cost base structure while delivering superior profit margins to our shareholders. We initially raised capital for our Pilbara expansion in December 2010 and are delighted to confirm that we are now obtaining the benefits of this initiative which will be reflected in our FY13 half year accounts.

At the end of June, we commenced the second stage of the Pelago high rise apartment project in Karratha, which will comprise 174 apartments and 2000 square metres of commercial space with completion expected by the end of the 2013 calendar year. With the completion of Pelago West in June, this has provided Finbar with substantial efficiencies in remaining mobilised in Karratha and further confidence to complete Pelago East within the specific timeline and budget.

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Darren Pateman, Managing Director
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Pelago West

In the current financial year, we will witness the completion of the Adagio Apartments in East Perth and the Lime Apartments in East Victoria Park with both developments also anticipated to contribute to FY13 earnings. Work has commenced on St Marks Apartments in Highgate and Pelago East in Karratha, as previously mentioned. We will soon commence construction on the Ecco Apartments in Perth and the Au Apartments in East Perth. In terms of our future pipeline, we announced that we had secured the new Springs Rivervale project in January 2012 while more recently we have been selected by the State Government to redevelop the former Port Hedland Hospital site into a $300+ million residential and commercial complex overlooking the Spoilbank Marina. Further details of these developments can be found within this report.

We are anticipating steady growth in earnings for FY13 as we manage a series of properties through different stages of the development cycle. In addition, we have retained the assets of Fairlanes, Gateway and Pelago West to generate reoccurring investment income to supplement our property development business, which are anticipated to contribute to earnings growth in the future.

We are encouraged by the recent return to the market of property investors who have been largely absent since the commencement of the Global Financial Crisis and have traditionally represented the strongest driver of demand for our properties. This increase in property investment activity has resulted in sales activity increasing by 50% on the corresponding period last year, when demand was primarily being driven by the owner occupier market. A good example of such renewed activity is the Ecco development in East Perth which is 50% pre-sold and has already secured 40% of its sales from investors since marketing commenced in February 2012.

We have maintained a strong balance sheet and cashflow which is critical for us to continue recycling our capital through the product lifecycle of identifying, developing, managing and selling new projects, and to be in the position to take advantage of new development opportunities as they are sourced. Finbar has enjoyed nurturing relationships with a number of successful joint venture partners who have continued to reinvest alongside Finbar and share in the proceeds of this leveraged growth. We are still recognised as Western Australia’s most reliable apartment developer which has strengthened our relationship with the State Government and helped us to be selected as a preferred developer of residential apartment accommodation in the North West.

Finbar stands to benefit substantially from improving economic conditions, the return to the market of the property investor, and a low interest rate environment. We continue to exercise caution with continued volatility in global markets, although we strongly believe Finbar’s exposure to the North West region and core Perth accommodation demand areas will continue to benefit from a State experiencing strong economic growth.

We continue to link our debt to long term facilities secured on investment property with recurrent income or project specific construction finance facilities which are repaid from pre-sales on completion. We would like to thank Commonwealth Bank, Westpac, and NAB for their project finance support as we continue to launch new projects to achieve long term earnings growth.

More recently, we have attracted a number of new institutional shareholders onto the share register who have contributed towards an improvement in our share register structure and liquidity of Finbar’s shares.

We generate the majority of our income from earnings that can only be reported on physical completion and settlement of sold apartments. The sales process for an apartment project is a continual process that commences shortly after the project receives its statutory development approvals and is often sold-out only after construction completion. For this reason, the provision of accurate guidance on earnings for the Company remains a challenging proposition until we approach the financial year end. Whilst we are unable to provide an accurate guidance for FY13 earnings at this early stage, we are confident, based on current construction and sales progress, that we will see further earnings growth in FY13 and exceed our FY12 record profit.

I would like to thank all of the Finbar team, our building contractors, service providers, consultants and State Government departments who we work closely with for their dedication and determination to raise our performance standards continually higher while striving to deliver further growth in earnings and underlying company value for shareholders.

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Darren Pateman Managing Director

23 August 2012

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about finbar

Finbar Group Limited is an Australian property development company listed on the Australian Stock Exchange trading under the security code ‘FRI’.

Incorporated in 1984, Finbar first listed as a property development company in 1995 and has established itself as the market leader in built form apartment development in the Perth metropolitan area and Karratha. Over the past 18 years Finbar has managed the construction and delivery of 3,044 apartments worth an estimated $1.55 billion.

Finbar’s core business lies in the development of medium to high density residential apartments and commercial property within the state of Western Australia where it carries out its development projects in its own right or through incorporated special purpose entities and Joint Venture companies, of which the Company either directly or indirectly holds interests in project profitability and earns project management fees.

In addition to residential projects, the Company has also retained interest in 22,000m[2] of commercial space in three commercial office buildings in the Perth metropolitan area and in the Pilbara, which have been retained to supplement core residential development income.

The company has expanded into the affluent North West of the State providing apartment accommodation for communities that support the resources sector. Branded under the business unit, Finbar Regional Communities, this expansion has proven to be highly successful and is providing the Company with a strong potential for growth in the region with development interests now in Karratha and Port Hedland.

Finbar outsources its development activities to external consultants, sales persons, and building contractors. The administration of the Company along with the operating, investment, and acquisitions decisions are made by the Company board and management. The Company employs just thirteen staff in its East Perth offices who are an experienced, well-credentialed, and long term team.

It is the Company’s conservative approach to its business which has held Finbar in good stead throughout cyclical market trends and the company is well positioned for sustainable results and future growth.

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| pelago west
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Matilda Bay

Blue 2

Bluewater

85

Riverstone

Seville on the Point

$1.55 billion

Reflections

Fairlanes

Adagio - Symphony City

The Westralian

3,044

Times 2

Infinity

The Saint

42%

18 on Plain

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Market Rise
Chelsea
Code Kingston
Circl e
Verv e
Altair
Domus
Royale
Au
Soho
Cos mopolitan Wellington Place
The Rise
One28
1 75 Hay
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about finbar

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Cattrall Park, Karratha

corporate social responsibility

Key Activities

Karratha Community Chest

Finbar has established an Annual Community Chest offering financial assistance to not-for-profit community, sporting, cultural, service groups, associations and individuals that are based within the Shire of Roebourne. The objective is to contribute high quality programmes, community events, facilities and services that provide a return benefit to the local community.

New Karratha Leisure Complex

During FY12, Finbar contributed towards the funding of the $65 million Karratha Leisure Complex, a state of the art facility which is anticipated to become the Pilbara’s premier sport and entertainment precinct. The complex will consist of top class facilities including a resort-style aquatic centre with children’s splash playground and three swimming pools as well as indoor and outdoor multi-purpose sports venues.

The complex has secured a large majority of the funding from Regional Development Australia and the Western Australian State Government. Construction of the facility commenced in January 2012 and is due for completion in February 2013 with the complex being open to the public from April 2013 onwards.

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Karratha Leisure Centre

The Rotary Club of Crawley

During FY12, Finbar agreed to sponsor two young people each year to join the Rotary Club of Crawley in Perth for a three year period.

The Rotary Club is an organisation consisting of business professionals and community leaders that volunteer time, talent and resources in order to remedy vital community needs.

West Australian Ballet

Finbar continues to remain a major sponsor of West Australian Ballet which is based in Perth. West Australian Ballet offers an extensive dance programme including three to four major seasons in Perth, regional touring throughout the State, choreographic workshops and a detailed education programme. In 2011, West Australian Ballet toured to Karratha, Mandurah, Bunbury, Albany and Canberra.

Princess Margaret Hospital for Children

Finbar provides an annual purchase of important equipment to Princess Margaret Hospital for Children.

Princess Margaret Hospital for Children is an internationally recognised paediatric organisation with approximately 250,000 patient visits from around the State every year.

The Karratha Leisure Complex is one of six strategic community projects delivering immediate improvements to lifestyle options for local residents and assisting in transforming Karratha from a mining town to a significant Australian city in the North West.

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| wa ballet

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Information current as of 17th August 2012

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Pelago West / $85.6m

Adagio / $174.1m

Lime / $51.4m

St Marks / $66.5m

ECCO / $51.8m

Pelago East / $140m

Dianella / $60m

Port Hedland / $300m

Knightsgate / $14.6m

Au / $107.2m

Springs / $128m

Toccata / $120m

Concerto & Harmony / $160m

| fairlanes

perth metro

completed projects

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settled $100,075,000 / 93% pending settlement $4,675,000 / 4% unsold $2,665,000 / 2%

total project sales value $108,180,000

fairlanes residential

181 Adelaide Terrace, East Perth

PROJECT COMPANY / 175 Adelaide Terrace Pty Ltd MARKETING COMMENCED / March 2009

CONSTRUCTION COMPLETION / May 2012

TOTAL PROJECT SALES VALUE / $108,180,000

Fairlanes was the largest contributor to this year’s profit result with 118 units in the 128 unit project settling in the reporting period. A total of 4 lots have settled since the end of the reporting period, and an additional 5 units are scheduled to settle by the end of September 2012. Only 1 unit remains unsold in the project and it is anticipated that this will be sold and settled in the financial year ending 30 June 2013.

AVERAGE PRICE TO DATE / $830,906

TOTAL APARTMENT LOTS / 128

LOTS SOLD / 127

LOTS SETTLED / 122 FINBAR’S ULTIMATE INTEREST / 100%

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perth metro

completed projects

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settled $18,351,000 / 90% unsold $2,108,000 / 10%

total project sales value $20,459,000

18 on plain

18 Plain Street, East Perth

PROJECT COMPANY/ 22 Plain Street Pty Ltd MARKETING COMMENCED / March 2010 CONSTRUCTION COMPLETION / March 2012

18 on Plain was completed in March 2012.

27 residential units were settled in this reporting period, with 2 residential units settled since the end of the reporting period. There are 2 unsold commercial lots in the project and it is anticipated that these lots will be sold and settled in the financial year ending 30 June 2013.

TOTAL PROJECT SALES VALUE / $20,459,000

AVERAGE PRICE TO DATE / $632,793

TOTAL APARTMENT LOTS / 29

TOTAL COMMERCIAL LOTS / 2

LOTS SOLD / 29

LOTS SETTLED / 29

FINBAR’S ULTIMATE INTEREST / 50%

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times 2 apartments

143 Adelaide Terrace, East Perth

PROJECT COMPANY / 143 Adelaide Terrace Pty Ltd MARKETING COMMENCED / November 2009 CONSTRUCTION COMPLETION / April 2011

All lots are now sold. 30 units were settled in the reporting period. The Company is pleased to report that the development has come to an end.

TOTAL PROJECT SALES VALUE / $94,197,500

AVERAGE PRICE / $466,324

TOTAL APARTMENT LOTS / 200

TOTAL COMMERCIAL LOTS / 2

LOTS SOLD / 202

LOTS SETTLED / 202

DATE OF LAST LOT SETTLED / 9 Jan 2012

FINBAR’S ULTIMATE INTEREST / 50%

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perth metro

under construction

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adagio apartments

90 Terrace Road, East Perth

TOTAL LOTS / 113 – 2 and 3 bedroom apartments SALES CONTRACTS SECURED / $85,745,000 COMMERCIAL / 2

TOTAL PROJECT SALES VALUE / $174,168,000

Stage one of the Company’s Symphony City redevelopment will comprise of 113 luxurious 2 and 3 bedroom apartments over 23 storeys. The development has an approximate end value of $174.2 million and to date the Company has secured 54 pre-sale contracts valued at $85.7 million. Construction of the structure is now up to level 20 of 23 with internal fit-out of the lower floors underway.

AVERAGE SALE PRICE TO DATE / $1,587,870

ESTIMATED COMPLETION DATE / Financial Year 2013

% SOLD / 49%

PROJECT COMPANY / 88 Terrace Road Pty Ltd

FINBAR’S ULTIMATE INTEREST / 50%

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lime

189 Swansea Street East, East Victoria Park

TOTAL LOTS / 95 – 2 bedroom apartments SALES CONTRACTS SECURED / $28,664,900

Lime apartments located just 10 minutes from the Perth CBD encompasses 95 two bedroom apartments plus 16 commercial lots with an approximate end value of $51.4 million. Marketing commenced last reporting period in March 2011 and to-date the Company has sold 67 lots valued at $28.7 million. Construction is anticipated to be completed in September 2012 with settlement to follow in the first half of the Financial Year 2013.

COMMERCIAL / 16

TOTAL PROJECT SALES VALUE / $51,452,900

AVERAGE SALE PRICE TO DATE / $447,889

ESTIMATED COMPLETION DATE / Financial Year 2013

% SOLD / 56%

PROJECT COMPANY / 185 Swansea Street Pty Ltd

FINBAR’S ULTIMATE INTEREST / 50%

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perth metro

under construction

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st marks apartments

131 Harold Street, Highgate

TOTAL LOTS / 130 – 1, 2 and 3 bedroom apartments SALES CONTRACTS SECURED / $40,157,000 TOTAL PROJECT SALES VALUE / $66,490,000 AVERAGE SALE PRICE TO DATE / $528,382

St Marks Apartments is located just a stone’s throw away from the vibrant Beaufort Street café strip.

St Marks comprises of 130 apartments in 1, 2 and 3 bedroom layouts with an approximate end value of $66.5 million. The Company launched the project to the market this reporting period in September 2011 and has to-date secured 76 presales contracts valued at $40.2 million. Construction works have now commenced.

ESTIMATED COMPLETION DATE / Financial Year 2014

% SOLD / 60%

PROJECT COMPANY / Finbar Property Trust

FINBAR’S ULTIMATE INTEREST / 100%

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au apartments

208 Adelaide Terrace and 311 Hay Street, East Perth

TOTAL LOTS / 192 – 1, 2 and 3 bedroom apartments SALES CONTRACTS SECURED / $54,603,500

COMMERCIAL / 2

Au Apartments, located opposite the Perth Mint and Pan Pacific Hotel in East Perth was launched to the market in October 2011. The project includes 192 apartments in 1, 2 and 3 bedroom configuration plus 2 commercial lots distributed over two separate 10 storey structures. The Company has secured 51% in pre-sales amounting to 101 lots valued at $54.6 million. The existing building on site has been demolished and construction will commence in September.

TOTAL PROJECT SALES VALUE / $107,198,000

AVERAGE SALE PRICE TO DATE / $540,629

ESTIMATED COMPLETION DATE / Financial Year 2014

% SOLD / 51%

PROJECT COMPANY / 208 Adelaide Terrace Pty Ltd

FINBAR’S ULTIMATE INTEREST / 45%

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perth metro

under construction

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knightsgate residence

9 Citadel Way, Currambine

TOTAL LOTS / 43 – 1 and 2 bedroom apartments SALES CONTRACTS SECURED/ $9,211,000 TOTAL PROJECT SALES VALUE / $14,554,000

Knightsgate Residences located in Currambine encompasses a total of 43 – 1 and 2 bedroom apartments over three storeys. The Company launched to the market in the last reporting period in February 2011 and has so far secured 28 pre-sales being 63% of the project totalling $9.2 million. Construction works have now commenced.

AVERAGE SALE PRICE TO DATE / $328,964

ESTIMATED COMPLETION DATE / Financial Year 2014

% SOLD / 63%

PROJECT COMPANY / 17 Sunlander Drive Pty Ltd FINBAR’S ULTIMATE INTEREST / 50%

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ecco apartments

262 Lord Street, Perth

TOTAL LOTS / 90 – 1, 2 and 3 bedroom apartments SALES CONTRACTS SECURED / $26,218,000

Ecco Apartments located at 262 Lord Street in Perth is a 50% Joint Venture project which the Company launched to the market in February 2012. The Company has secured 51% in pre-sales totalling 52 apartments valued at $26.2 million. Demolition work is now complete and construction scheduled to commence in September 2012.

COMMERCIAL / 8

TOTAL PROJECT SALES VALUE / $51,826,000

AVERAGE SALE PRICE TO DATE / $504,192

ESTIMATED COMPLETION DATE / Financial Year 2014

% SOLD / 51%

PROJECT COMPANY / 262 Lord Street Perth Pty Ltd

FINBAR’S ULTIMATE INTEREST / 50%

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perth metro

future developments

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the springs

Corner Great Eastern Highway and Graham Farmer Freeway

The Springs, located within close proximity to Crown Metropol along Great Eastern Highway is proposed to comprise of 188 apartments in 1, 2 and 3 bedroom configurations over 16 levels plus a separate 6 level office building containing approximately 6,200m[2] of NLA, subject to Development Approval.

APPROXIMATE PROJECT VALUE / $128 million

ESTIMATED COMPLETION DATE / Financial Year 2015

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dianella

36 Chester Avenue, Dianella

36 Chester Avenue located in Dianella is a 50% Joint Venture project with an approximate end value of $60 - $80 million. The Company is awaiting the revised Dianella Districts Centre Structure Plan to allow increased density and height. This Structure Plan is anticipated by the end of 2012 calendar year. The Company is proposing between 80 and 135 residential lots up to 6 levels comprising 1, 2 and 3 bedroom apartments.

APPROXIMATE PROJECT VALUE / $60 - $80 million

ESTIMATED COMPLETION DATE / Financial Year 2015

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concerto and harmony

193 Terrace Road, East Perth

Concerto & Harmony Apartments located at 193 Adelaide Terrace in East Perth will be the second stage of the Symphony City redevelopment totalling approximately $160 million. The Company is currently in the planning stage of a mix of office and apartments along with the refurbishment of the heritage building as additional office space.

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toccata

88 Terrace Road, East Perth

Toccata Apartments, located in East Perth will be the final stage of the Symphony City redevelopment. The development will comprise of 43 luxury apartments plus two commercial lots over 22 storeys with an approximate end value of $120 million.

APPROXIMATE PROJECT VALUE / $120 million

ESTIMATED COMPLETION DATE / Financial Year 2015

APPROXIMATE PROJECT VALUE / $160+ million

ESTIMATED COMPLETION DATE / Financial Year 2016

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finbar regional completed projects

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pelago west apartments

23 Sharpe Avenue, Pegs Creek

TOTAL LOTS / 114 – 1, 2 and 3 bedroom apartments SALES CONTRACTS SECURED / $56,429,854 COMMERCIAL / 8

TOTAL PROJECT SALES VALUE / $85,591,554 (Residential only)

AVERAGE SALE PRICE TO DATE / $705,950

Stage one of the Company’s first Pilbara project was launched to the market in March 2011. The development includes 114 apartments in 1, 2 and 3 bedroom layouts over 8 storeys in what is to be Karratha’s first high rise building. The residential portion of the development has a total end value of approximately $85.6 million of which the Company has secured 82 pre-sale lots valued at $56.4 million with a further 19 lots pre-leased. The Company received Occupation Permit in July 2012 and titles issued early August 2012. Settlement has now commenced.

ESTIMATED COMPLETION DATE / Financial Year 2013

% SOLD / 66%

PROJECT COMPANY / Finbar Karratha Pty Ltd

FINBAR’S ULTIMATE INTEREST / 100%

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future developments

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| pelago east

| port hedland

pelago east apartments

26 Sharpe Avenue, Pegs Creek

Stage two of the Company’s Pelago project in Karratha encompasses a total of 174 – studio, 1, 2 and 3 bedroom apartments plus 14 commercial lots totalling 1,722m[2] of ground floor commercial space. Pelago East is now under construction with an approximate end value of $140 million.

APPROXIMATE PROJECT VALUE / $140 million

ESTIMATED COMPLETION DATE / Financial Year 2014

port hedland

Sutherland and Morgans Streets, Port Headland

The Company was appointed as the preferred developer by the State Government of a significant apartment site overlooking the Spoilbank Marina in the Pilbara town of Port Hedland.

The project located on the former Port Hedland Hospital site will comprise of 367 short stay serviced apartments plus 3,900m[2] of ground floor commercial lots with an approximate end value of $300 million.

Subject to approvals, the Company anticipates to commence marketing and construction in early 2013.

APPROXIMATE PROJECT VALUE / $300 million

ESTIMATED COMPLETION DATE / Financial Year 2015

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commercial investments

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fairlanes office

181 Adelaide Terrace, East Perth

COMPANY NAME / 175 Adelaide Terrace Pty Ltd

PROJECT / 6 level office building below Fairlanes Residential. 5 levels of office above private lobby with ground floor tenancies

STATUS / 1,018m[2] retained / 2,364m[2] leased / 3,250m[2] under offer

NLA / 7,687m[2]

VALUE / $52 million

Fairlanes Perth comprises a total of 7,687m[2] of commercial office space positioned below the residential component of the development with an asset value of $52 million which the company will retain for its own use and investment income purposes. The Company has secured leases for 2,364m[2] of office space with 3,250m[2] currently secured under Heads of Agreement and in negotiation. It is anticipated that the property will be fully leased and generating income during the financial year ending 30 June 2013.

PROFIT SHARE / 100%

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gateway

59 Albany Highway, Victoria Park

COMPANY NAME / 59 Albany Highway Pty Ltd PROJECT / 7 level office building with ground floor retail STATUS / 99% Leased, 9 year WALE

NLA / 12,828m[2]

VALUE / $68 million ($46.75 million net of minority interest) PROFIT SHARE / 68.75%

Gateway is a 68.75% Joint Venture commercial building located just by the causeway in Victoria Park. The building has a total net lettable area of 12,828m[2] over 7 storeys with a book value of $68 million generating approximately $5.1 million per annum. The building is 99% leased.

==> picture [279 x 426] intentionally omitted <==

pelago west commercial

23 Sharpe Ave, Pegs Creek

COMPANY NAME / Finbar Karratha Pty Ltd

PROJECT / Street front commercial below Pelago West Apartments NLA / 1,067m[2]

STATUS / 564m[2] leased

VALUE / $11 million

ESTIMATED ANNUAL IMPACT ON EBITDA / $800,000 PROFIT SHARE / 100%

FINBAR’S ULTIMATE INTEREST / 100%

Pelago West contains 8 commercial lots totalling 1,067m[2] of NLA with an approximate value of $11 million which the Company will retain as investment asset. The Company has secured leases for 564m[2] of space. It is anticipated that the property will be fully leased during the financial year ending 30 June 2013.

31

fairlanes }

==> picture [596 x 173] intentionally omitted <==

financial report for the year ended 30 June 2012

contents

contents
Directors’ Report (including Corporate Governance Statement)	34
Consolidated Statement of Comprehensive Income	49
Consolidated Statement of Changes in Equity	50
Consolidated Statement of Financial Position	51
Consolidated Statement of Cash Flows	52
Notes to the Financial Statements	53
Directors’ Declaration	82
Independent Auditor’s Report	83
Lead Auditor’s Independence Declaration	85
ASX Additional Information	86
Corporate Directory	88

ABN 97 009 113 473 ACN 009 113 473

33

==> picture [227 x 66] intentionally omitted <==

directors’ report for the year ended 30 June 2012

The Directors present their report together with the consolidated financial report of the Group, comprising Finbar Group Limited (‘the Company’) and its subsidiaries and the Group’s interest in jointly controlled entities for the financial year ended 30 June 2012 and the independent auditor’s report thereon.

contents

1	Directors	35
2	Company Secretary	36
3	Directors’ Meetings	36
4	Corporate Governance Statement	36
4.1	Board of Directors	36
4.2	Remuneration Committee	37
4.3	Remuneration Report - Audited	38
4.3.1	Principles of Remuneration - Audited	38
4.3.2	Directors’ and Executive Offcers’ Remuneration - Audited	39
4.3.3	Analysis of Bonuses included in Remuneration - Audited	40
4.3.4	Equity Instruments - Audited	40
4.4	Audit Committee	40
4.5	Risk Management	41
4.6	Ethical Standards	42
4.7	Communication with Shareholders	43
4.8	Diversity	44
5	Principal Activities	44
6	Operating and Financial Review	44
7	Dividends	46
8	Events Subsequent to Reporting Date	47
9	Likely Developments	47
10	Directors’ Interests	47
11	Indemnifcation and Insurance of Offcers and Auditors	47
12	Non-audit Services	48
13	Lead Auditor’s Independence Declaration	48

34

Finbar Group Limited 30 June 2012 Annual Financial Report

directors’ report for the year ended 30 June 2012

1 DIRECTORS

The Directors of the Company at any time during or since the end of the financial year are:

Executive Director and Chairman

John CHAN - BSc, MBA, MAICD

Director since 27 April 1995

Chairman since 15 July 2010

John Chan is Executive Director and Chairman of Finbar, and a Director of its Subsidiaries and Jointly Controlled entities.

John was appointed Director in 1995 and was instrumental in re-listing Finbar on the ASX as a property development company. Prior to joining Finbar, John headed several property and manufacturing companies both in Australia and overseas.

John holds a Bachelor of Science from Monash University in Melbourne and a Master of Business Administration from the University of Queensland. John is a Member of the Australian Institute of Company Directors, is a Trustee for the Western Australian Chinese Chamber of Commerce, and is a former Senate Member of Murdoch University.

Managing Director

Darren John PATEMAN -

Director since 6 November 2008

EMBA, Grad Dip App CorpGov, ACSA, ACIS, MAICD, AFAIM

Darren Pateman is the Managing Director of Finbar and a Director of its Subsidiaries and Jointly Controlled entities.

Darren joined Finbar in 1995 and has had an active role in the growth of Finbar since re-listing on the stock exchange as a property development company in 1995. He has held a number of positions in his 16 years with the Company and was appointed Managing Director on 15 July 2010.

Darren is a Chartered Secretary and holds an Executive Master of Business Administration from the University of Western Australia and a Graduate Diploma in Applied Corporate Governance. Darren is an Associate of the Institute of Chartered Secretaries and Administrators, a Member of the Australian Institute of Company Directors and an Associate Fellow of the Australian Institute of Management.

Non-executive (Independent) Director

Paul Anthony RENGEL - B Com, FCA

Director from 22 May 1992 to 29 September 2011

Paul Rengel passed away on 29 September 2011. Paul was Chairman of Finbar for 18 years between 1992 and 2010 before stepping down to become Non-executive Director in July 2010. During his tenure as Chairman, Paul presided over Finbar’s transition from a delisted former shipping company to an ASX listed property development company.

Non-executive Director

John Boon Heng CHEAK - B Com, B Eco

Director since 28 April 1993

John Cheak joined the Board in 1993 and has extensive experience in the governance of companies in property development and marine transportation sectors.

John has a Bachelor of Economics degree from the University of Western Australia and is a Singapore citizen.

John is a Non-executive Director of CH Offshore Limited, Singapore which is a publicly-listed marine transportation company.

Non-executive Director

Kee Kong LOH - B Acc, CPA

Director since 28 April 1993

Kee Kong Loh joined the Board in April 1993 and has substantial experience in the governance of companies in property development, marine transportation, and electronics manufacturing sectors.

He has a degree in accountancy from the University of Singapore and is a member of the Institute of Certified Public Accountants of Singapore.

Loh is a director of PCI Limited (Singapore) which is a publicly listed company in Singapore, where he is a resident.

Non-executive (Independent) Director

Lee VERIOS - LLB, MAICD

Director since 6 December 2011

Lee Verios joined the Board in December 2011. He is a well credentialed commercial lawyer having practised in Western Australia for over 40 years. Until his retirement from practising law in 2010, Lee was partner in the international law firm of Norton Rose and the leader of their Commercial Property division in Perth. Throughout his legal career, Lee has held senior management roles in each of the firms of which he has been a member.

In addition to his legal practice, Lee is an experienced Company Director, having held positions in a variety of public and private enterprises. He has been a director of privately owned investment company Wyllie Group Pty Ltd since July 2004, and is a Non-executive Director of ASX listed Decmil Group Limited, a design and civil engineering construction company.

Lee is a member of the Australian Institute of Company Directors, the Law Society of Western Australia, the Hellenic Australian Chamber of Commerce and Industry and was previously Chairman of the Australian Indonesian Business Council (WA Branch).

35

Finbar Group Limited 30 June 2012 Annual Financial Report

directors’ report (continued) for the year ended 30 June 2012

2 COMPANY SECRETARY

The Company Secretary of the Company at any time during or since the end of the financial year is:

Edward Guy BANK - B Bus, ASCPA

Company Secretary since 15 July 2010

Ed is a Certified Practicing Accountant with twenty five years experience in private practice including seven years as the Company’s external accountant. Ed joined the Company in 2005 in the capacity of Chief Financial Officer.

Ed continues to hold the position of Chief Financial Officer.

3 DIRECTORS’ MEETINGS

The number of Directors’ meetings attended by each of the Directors of the Company during the financial year are:

Director John CHAN Darren John PATEMAN Paul Anthony RENGEL John Boon Heng CHEAK Kee Kong LOH Lee VERIOS	Board Board Resolutions Audit Audit Remuneration Remuneration Meetings Meetings Without Committee Committee Committee Committee Held Attended Meetings Meetings Held Meetings Attended Meetings Held Meetings Attended
	4 4 4 N/A N/A N/A N/A 4 4 4 N/A N/A N/A N/A 1 - 1 1 - 1 - 4 4 4 2 2 2 2 4 4 4 2 2 2 2 2 2 2 1 1 1 1

4 CORPORATE GOVERNANCE STATEMENT

This statement outlines the main Corporate Governance practices that were in place throughout the financial year, which comply with ASX Corporate Governance Council recommendations, unless otherwise stated.

4.1 BOARD OF DIRECTORS

Role of the Board

The Board’s primary role is the protection and enhancement of long-term shareholder value.

To fulfil this role, the Board is responsible for the overall corporate governance of the Group including formulating its strategic direction, approving and monitoring site acquisition and project concepts, appointing, removing and creating succession policies for Directors and Senior Executives, establishing and monitoring the achievement of management’s goals and ensuring the integrity of internal control and management information systems.

The Board is also responsible for approving and monitoring financial and other reporting.

The Board has delegated responsibility for operation and administration of the Group to the Executive Chairman, the Managing Director and executive management.

Board Processes

To assist in the execution of responsibilities, the Board has an Audit Committee and a Remuneration Committee.

In addition to Board meetings, the Board members communicate regularly and attend to the majority of the governance matters via circular resolution.

The agenda for meetings is prepared in conjunction with the Executive Chairman, Managing Director and the Chief Financial Officer. Standing items include the Managing Director’s report, financial reports, strategic matters, governance and compliance. Submissions are circulated in advance. Executives are regularly involved in Board discussions.

Director Education

Directors have the opportunity to visit the Group facilities and meet with management to gain a better understanding of business operations. Directors are given access to continuing education opportunities to update and enhance their skills and knowledge.

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Finbar Group Limited 30 June 2012 Annual Financial Report

Independent Professional Advice and Access to Group Information

Each Director has the right of access to all relevant Group information and to the Group’s executives and, subject to prior consultation with the Executive Chairman, may seek independent professional advice from a suitably qualified adviser at the Group’s expense. The Director must consult with an advisor suitably qualified in the relevant field, and obtain the Executive Chairman’s approval of the fee payable for the advice before proceeding with the consultation. A copy of the advice received by the Director is made available to all other members of the Board.

Composition of Board

The names of the Directors of the Company in office at the date of this report are set out in the Directors’ report on Page 35 of this report. The composition of the Board is determined using the following principles:

• The Board shall comprise Directors with a range of expertise encompassing the current and proposed activities of the Company;

• Where a vacancy is considered to exist, the Board selects an appropriate candidate through consultation with external parties and consideration of the needs of shareholders and the Company. Such appointments are referred to shareholders at the next opportunity for re-election in general meeting;

• New Directors are provided the opportunity to meet with management and familiarise themselves with the business operations of the Group; and

• The procedures for the election and retirement of Directors are governed by the Company’s constitution and the listing Rules of the Australian Stock Exchange Limited (ASX).

An Independent Director is a Director who is not a member of management (a Non-executive Director) and who:

• Holds less than five percent of the voting shares of the Company and is not an officer of, or otherwise associated, directly or indirectly, with a shareholder of more than five per cent of the voting shares of the Company;

• Has not within the last three years been employed in an executive capacity by the Company or another Group member, or been a Director after ceasing to hold any such employment;

• Within the last three years has not been a principal or employee of a material professional adviser or a material consultant to the Company or another Group member;

• Is not a material supplier or customer of any Group member, or an officer of or otherwise associated directly or indirectly with a material supplier or customer;

• Has no material* contractual relationship with any Group member other than as a Director of the Company; and

• Is free from any interest and any business or other relationship which could, or could reasonably be perceived to, materially* interfere with the Director’s ability to act in the best interests of the Group.

• *The Board considers, ‘material’, in this context, to be where any Director-related business relationship has represented, or is likely in the future to represent, less than five per cent of the relevant Director-related business’ revenue. The Board considered the nature of the relevant industries’ competition and the size and nature of each Director-related business relationship, in arriving at this threshold.

The Company does not currently have a Nomination Committee as the responsibility is handled directly by the Board of Directors.

4.2 REMUNERATION COMMITTEE

The Remuneration Committee reviews and makes recommendations to the Board on remuneration packages and policies applicable to the Executive Officers and Directors themselves of the Company and of other Group Executives. It is also responsible for share option schemes, incentive performance packages, superannuation entitlements, retirement and termination entitlements, fringe benefits policies and professional indemnity and liability insurance policies.

The members of the Remuneration Committee are:

• Kee Kong LOH (Chairman) - Non-executive Director

• Lee VERIOS - Non-executive Independent Director

• John Boon Heng CHEAK - Non-executive Director

The Board policy is that the Remuneration Committee will comprise of at least one Independent Director and two Non-executive Directors. The Executive Chairman, John Chan, is invited to Remuneration Committee meetings, as required, to discuss Senior Executives’ performance and remuneration packages but does not attend meetings involving matters pertaining to him.

37

Finbar Group Limited 30 June 2012 Annual Financial Report

directors’ report (continued) for the year ended 30 June 2012

4.3 REMUNERATION REPORT - AUDITED

4.3.1 PRINCIPLES OF REMUNERATION - AUDITED

Remuneration of Directors and Executives is referred to as remuneration as defined in AASB 124 and Section 300A of the Corporations Act 2001 .

Key management personnel have authority and responsibility for planning, directing and controlling the activities of the Group, including Directors of the Company and other Executives. Key management personnel comprise the Directors of the Company and Executives for the Company and the Group including the S300A Executives.

Remuneration levels for key management personnel and the secretary of the Company, and key management personnel and secretaries of the Group are competitively set to attract and retain appropriately qualified and experienced Directors and Executives. The Remuneration Committee obtains independent advice on the appropriateness of remuneration packages of both the Company and the Group given trends in comparative companies both locally and internationally and the objectives of the Company’s remuneration strategy.

The remuneration structures explained below are designed to attract suitably qualified candidates, reward the achievement of strategic objectives, and achieve the broader outcome of creation of value for shareholders. The remuneration structures take into account:

• the capability and experience of the key management personnel;

• the key management personnel’s ability to control the Group’s performance; and

• the Group’s performance including:

• the Group’s earnings;

• the growth in share price and delivering constant returns on shareholder wealth; and

• the amount of incentives within each key management person’s remuneration.

Remuneration packages include a mix of fixed and variable remuneration, short-term performance-based incentives and can include long-term performance-based incentives.

Fixed Remuneration

Fixed remuneration consists of base remuneration (which is calculated on a total cost basis and includes any FBT charges related to employee benefits including motor vehicles), as well as employer contributions to superannuation funds.

Remuneration levels are reviewed annually through a process that considers individual, segment and overall performance of the Group. In addition external consultants provide analysis and advice to ensure the Directors’ and Senior Executives’ remuneration is competitive in the market place. A Senior Executive’s remuneration is also reviewed on promotion.

Performance Linked Remuneration

Performance linked remuneration includes short-term incentives and can include long-term incentives and are designed to reward key management personnel for meeting or exceeding their financial and personal objectives. The short-term incentive (STI) is an ‘at risk’ bonus provided in the form of cash, whilst the long-term incentive (LTI) is provided as options over ordinary shares of the Company under the rules of the Executive Option Plan 2003.

Short-term Incentive

The Remuneration Committee sets the key performance indicators (KPIs) for the key management personnel. The KPIs generally include measures relating to the Group, the relevant segment, and the individual, and as well as financial, people, customer, strategy and risk measures. The measures are chosen as they directly align the individual’s reward to the KPIs of the Group and to its strategy and performance.

The primary financial performance objective is ‘profit before tax’. The non-financial objectives vary with position and responsibility and include measures such as achieving strategic outcomes, customer satisfaction and personal development. The STI for the year ended 30 June 2012 was based wholly on a percentage of ‘profit before tax’.

At the end of the financial year the Remuneration Committee assess the actual performance of the Group, the relevant segment and the individual against the KPIs set. The performance evaluation in respect of the year ended 30 June 2012 has taken place in accordance with this process.

Long-term Incentive

Options are issued under the Executive Option Plan 2003 (made in accordance with thresholds set in the plan approved by shareholders at the 26 June 2003 Annual General Meeting) which, subject to the Boards’ discretion, provides for key management personnel to receive up to an annual aggregate of five per cent of fully paid issued shares by way of options over ordinary shares, for no consideration.

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Finbar Group Limited 30 June 2012 Annual Financial Report

Short-term and Long-term Incentive Structure

The Remuneration Committee considers that the above performance-linked remuneration structure is generating the desired outcome. The evidence of this is firstly in respect to the strong growth in profits in recent years, as well as the increase in the Company share price.

Consequences of Performance on Shareholders Wealth

In considering the Group’s performance and benefits for shareholder wealth, the Remuneration Committee has regard to the following indices in respect of the current financial year and the previous four financial years:

Total comprehensive income Dividends paid Change in share price Return on capital employed Return on total equity	2012 2011 2010 2009 2008
	$27,292,927 $28,225,305 $23,561,832 $18,895,446 $12,228,014 $18,896,550 $15,115,909 $9,928,923 $8,472,983 $9,682,097 $0.10 -$0.02 $0.20 $0.18 -$0.18 17.39% 16.38% 26.94% 24.79% 11.90% 14.49% 16.18% 21.13% 24.47% 18.15%

Profit before tax is considered as one of the financial targets in setting the STI. Profit amounts for 2008 to 2012 have been calculated in accordance with Australian Accounting Standards (AASBs).

Dividends, changes in share price, and return of capital are included in the total shareholder return (TSR) calculation which is one of the performance criteria assessed for the LTI. The other performance criteria assessed for the LTI is growth in earnings per share, which takes into account the Group’s net profit.

The overall level of key management personnel’s remuneration takes into account the performance of the Group over a number of years.

Service Contracts

No service contracts have been entered into by the Company and the Group for Executive Directors and Senior Executives, including the Managing Director.

Directors

Total base remuneration for all Directors, last voted upon by shareholders at the November 2011 AGM, is not to exceed $250,000 per annum and are set based on advice from external advisors with reference to fees paid to other Directors of comparable companies. Directors’ base fees are presently up to $250,000 per annum.

4.3.2 DIRECTORS’ AND EXECUTIVE OFFICERS’ REMUNERATION - AUDITED

Details of the nature and amount of each major element of remuneration of each Director of the Company and of the named Group Executive who receive the highest remuneration during the financial year ended 30 June 2012 are:

		Short-Term				Post-Employment	Post-Employment
	Directors Fees	Salary	STI Cash	Total	Superannuation Other Long Term		Total	S300A(1)(e)(i)
			Bonus (A)					Proportion of
								Remuneration
								Performance
								Related
	$	$	$	$	$	$	$	%
Executive Directors
Mr John Chan, Executive Chairman	60,691	380,000	433,212	873,903	34,200	-	908,103	47.71%
Mr Darren John Pateman, Managing Director	40,341	350,000	346,570	736,911	31,500	-	768,411	45.10%
Non-executive Directors
Mr Paul Anthony Rengel	21,018	-	-	21,018	-	-	21,018	-
Mr John Boon Heng Cheak	40,341	-	-	40,341	-	-	40,341	-
Mr Kee Kong Loh	50,516	-	-	50,516	-	-	50,516	-
Mr Lee Verios	31,974	-	-	31,974	-	-	31,974	-
Executives
Mr Edward Guy Bank, CFO*	-	200,000	216,606	416,606	17,999	24,387	458,992	47.19%
	244,881	930,000	996,388	2,171,269	83,699	24,387	2,279,355	43.71%

39

Finbar Group Limited 30 June 2012 Annual Financial Report

directors’ report (continued) for the year ended 30 June 2012

4.3.2 DIRECTORS’ AND EXECUTIVE OFFICERS’ REMUNERATION - AUDITED (CONTINUED)

Details of the nature and amount of each major element of the emolument of each Director of the Company and the named Officers of the Group receiving the highest remuneration during the financial year 30 June 2011 are:

		Short-Term				Post-Employment	Post-Employment
	Directors Fees	Salary	STI Cash	Total	Superannuation Other Long Term		Total	S300A(1)(e)(i)
			Bonus (A)					Proportion of
								Remuneration
								Performance
								Related
	$	$	$	$	$	$	$	%
Executive Directors
Mr John Chan, Executive Chairman	43,009	254,807	455,832	753,648	37,290	-	790,938	57.63%
Mr Darren John Pateman, Managing Director	30,855	203,846	373,363	608,064	31,515	-	639,579	58.38%
Non-executive Directors
Mr Paul Anthony Rengel	41,030	-	-	41,030	-	-	41,030
Mr John Boon Heng Cheak	30,855	-	-	30,855	-	-	30,855
Mr Kee Kong Loh	36,932	-	-	36,932	-	-	36,932
Executives
Mr Edward Guy Bank, CFO*	-	152,885	260,850	413,735	22,318	15,790	451,843	57.73%
	182,681	611,538	1,090,045	1,884,264	91,123	15,790	1,991,177	54.74%

* Excludes accrued annual leave of $66,439 (2011: $46,655)

Notes in relation to the Table of Directors’ and Executive Officers’ Remuneration - Audited

(A) Short-term Incentive Cash Bonus:

The short-term incentive bonus is for performance during the respective financial years using the criteria set out on Page 38.

Details of the Group’s policy in relation to the remuneration that is performance related is discussed on Page 38.

4.3.3 ANALYSIS OF BONUSES INCLUDED IN REMUNERATION - AUDITED

Details of the vesting profile of the short term incentive bonuses awarded as remuneration to each Director of the Company and each of the named Group Executives are detailed below.

Executive Directors Mr John Chan Mr Darren John Pateman Executives Mr Edward Guy Bank, CFO	Short-Term Incentive Bonus Included in % vested Remuneration in year $ %
	433,212 100% 346,570 100% 216,606 100%
	996,388 100%

Amounts included in remuneration for the financial year represent the amount of entitlements in the financial year based on achievement of personal goals and satisfaction of performance criteria. Any discretionary amounts of executive bonuses are yet to be determined, and therefore may impact future financial years.

4.3.4 EQUITY INSTRUMENTS - AUDITED

All options refer to options over ordinary shares of Finbar Group Limited, which are exercisable on a one-for-one basis under the Executive Option Plan 2003. At 30th June 2012 there were no options in issue.

4.4 AUDIT COMMITTEE

The Audit Committee has a documented charter, approved by the Board. All members must be Non-executive Directors with at least one independent. The Chairman may not be the Chairman of the Board. The Audit Committee advises on the establishment and maintenance of a framework of internal control and appropriate ethical standards for the management of the Group.

40

Finbar Group Limited 30 June 2012 Annual Financial Report

The members of the Audit Committee are:

• Lee VERIOS (Chairman) - Non-executive Independent Director

• Kee Kong LOH - Non-executive Director

• John Boon Heng CHEAK - Non-executive Director

The external auditors, the Managing Director and the Chief Financial Officer are invited to Audit Committee meetings at the discretion of the committee.

The Managing Director and the Chief Financial Officer declared in writing to the Board that the financial records of the Company and Group entities for the financial year have been properly maintained and the Group’s financial report for the financial year ended 30 June 2012 comply with accounting standards and present a true and fair view of the Group’s financial condition and operational results. This statement is required annually.

The responsibilities of the Audit Committee include:

• reviewing the annual and half-year financial reports and other financial information distributed externally. This includes approving new accounting policies to ensure compliance with Australian Accounting Standards (AASBs), and assessing whether the financial information is consistent with committee members’ information and adequate for shareholder needs;

• assessing management processes supporting external reporting;

• assessing corporate risk assessment processes;

• establishing procedures for selecting, appointing, and if necessary, removing the external auditor;

• assessing whether non-audit services provided by the external auditor are consistent with maintaining the external auditor’s independence. Each reporting period the external auditor provides an independence declaration in relation to the audit or review;

• providing advice to the Board in respect of whether the provision of the non-audit services by the external auditor is compatible with the general standard of independence of auditors imposed by the Corporations Act 2001 ;

• assessing the adequacy of the internal control framework and the Group’s ethical standards;

• organising, reviewing and reporting on any special reviews or investigations deemed necessary by the Board;

• monitoring fraud control and monitoring prompt and appropriate rectification of any deficiencies or breakdowns identified;

• monitoring the procedures to ensure compliance with the Corporations Act 2001 and the ASX Listing Rules and all other regulatory requirements;

• addressing any matters outstanding with auditors, Australian Taxation Office, Australian Securities and Investments Commission, ASX and financial institutions.

The Audit Committee reviews the performance of the external auditors on an annual basis and meets with them during the year to:

• discuss the external audit, identifying any significant changes in structure, operations, internal controls or accounting policies likely to impact the financial statements and to review the fees proposed for the audit work to be performed;

• review the half-year and preliminary final report prior to lodgement with the ASX, and any significant adjustments required as a result of the auditor’s findings, and to recommend Board approval of these documents, prior to announcement of results;

• review the draft annual and half-year financial report, and to recommend Board approval of the financial report;

• review the results and findings of the auditor, the adequacy of accounting and financial controls, and to monitor the implementation of any recommendations made.

The Audit Committee considers annually the necessity to request the attendance of the auditors at annual general meetings so as to be available to answer shareholder questions about the conduct of the audit and content of the Auditor’s report.

4.5 RISK MANAGEMENT

Oversight of the Risk Management Procedures

The Board oversees the establishment, implementation, and annual review of the Group’s risk management procedures. Management has established and implemented informal risk management procedures for assessing, monitoring and managing all risks including operational, financial reporting, and compliance risks for the Group. The Managing Directors and the Chief Financial Officer have provided assurance, in writing to the Board, that the financial reporting risk management and associated compliance and controls have been assessed and found to be operating effectively. The operational and other risk management compliance and controls have also been assessed and found to be operating effectively. All risk assessments covered the whole financial year and the period up to the signing of the Annual Financial Report for all material operations in the Group, and Jointly Controlled entities.

41

Finbar Group Limited 30 June 2012 Annual Financial Report

directors’ report (continued) for the year ended 30 June 2012

4.5 RISK MANAGEMENT (CONTINUED)

Risk Profile

Management provide, at the request of the Audit Committee, the risk profile that outlines the material business risks of the Group.

The Audit Committee reports the status of material business risks to the Board at each Board meeting.

Material risks for the Group may arise from such matters as actions by competitors, government policy changes, difficulties in appointed builders sourcing raw materials and skilled labour, environment, occupational health, property, financial reporting and the purchase, development and use of information systems.

The Board adopts practices to identify significant areas of business risk and to effectively manage those risks in accordance with the Group’s risk profile. Where necessary, the Board draws on the expertise of appropriate external consultants to assist.

The Group strives to ensure that its products are of the highest standard.

The Board is responsible for the overall internal control framework, but recognises that no cost-effective internal control system will preclude all errors and irregularities.

Risk Management and Compliance Control

Comprehensive practices have been established to ensure:

• capital expenditure and revenue commitments above a certain size obtain prior Board approval;

• financial exposures are controlled, including use of derivatives. Further details of the Group’s policies relating to interest rates management and credit risk are included in Notes 5 and 27 in the Notes to the Financial Statements;

• management systems are monitored and reviewed to achieve high standards of performance and compliance with regulations;

• business transactions are properly authorised and executed;

• the quality and integrity of personnel (see below);

• financial reporting accuracy and compliance with the financial reporting regulatory framework (see below);

• environmental regulation compliance (see below).

Quality and Integrity of Personnel

Training and development and appropriate remuneration and incentives with regular performance reviews create an environment of cooperation and constructive dialogue with employees and senior management.

Financial Reporting

The Managing Director and the Chief Financial Officer have provided assurance, in writing to the Board that the Group’s financial reports are founded on a sound system of risk management and internal compliance and control which implements the policies adopted by the Board.

There is a comprehensive accounting system. Monthly actual results are reported against budgets approved by the Directors and revised forecasts for the year are prepared regularly. Procedures are in place to ensure price sensitive information is reported to the Australian Stock Exchange (ASX) in accordance with Continuous Disclosure Requirements.

A review is undertaken at each half year end of all related party transactions.

Environmental Regulation

The Group’s operations are not subject to any significant environmental regulations under either Commonwealth or State legislation.

Compliance with the requirements of environmental regulations and with specific requirements of site environmental licences was substantially achieved across all operations with no instances of non-compliance in relation to licence requirements noted.

The Board is not aware of any significant breaches of environmental regulations during the period covered by this report.

4.6 ETHICAL STANDARDS

All Directors, Managers and Employees are expected to act with the utmost integrity and objectivity, striving at all times to enhance the reputation and performance of the Group.

Conflict of Interest

Directors must keep the Board advised, on an ongoing basis, of any interest that could potentially conflict with those of the Group.

Where the Board believes that a significant conflict exists for a Director on a Board matter, the Director concerned does not receive the relevant Board papers and is not present at the meeting whilst the item is considered. Details of Director related entity transactions with the Company and the Group are set out in Note 31 in the Notes to the Financial Statements.

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Finbar Group Limited 30 June 2012 Annual Financial Report

Code of Conduct

All Directors, Managers and Employees are expected to maintain high ethical standards including the following:

• aligning the behaviour of the Board and Management with the code of conduct by maintaining appropriate core Group values and objectives;

• fulfilling responsibilities to shareholders by delivering shareholder value;

• usefulness of financial information by maintaining appropriate accounting policies, practices and disclosure;

• fulfilling responsibilities to clients, customers and consumers by maintaining high standards of product quality, service standards, commitments to fair value, and safety of goods produced;

• employment practices such as occupational health and safety, employment opportunity, training and education support, community activities, sponsorships and donations;

• responsibilities to the individual, such as privacy, use of privileged or confidential information, and conflict resolution;

• managing actual or potential conflicts of interest;

• corporate opportunities such as preventing Directors and key Executives from taking advantage of property, information or position for personal gain;

• confidentiality of corporate information;

• fair dealing;

• protection and proper use of the Group’s assets;

• compliance with laws;

• reporting unlawful or of unethical behaviour including protection of those who report violations in good faith.

Trading in General Company Securities by Directors and Employees

The key elements of the Trading in Company Securities by Directors and Employees policy are:

• identification of those restricted from trading - Directors and Senior Executives may acquire shares in the Company, but are prohibited from dealing in Company shares or exercising options:

• within two trading days after either the release of the Company’s half-year and annual results to the Australian Stock Exchange (‘ASX’), the Annual General Meeting or any major announcement;

• whilst in possession of price sensitive information not yet released to the market;

• raising the awareness of legal prohibitions including transactions with colleagues and external advisers;

• raising awareness that the Company prohibits those restricted from trading in Company shares as described above from entering into transactions such as margin loans that could trigger a trade during a prohibited period;

• requiring details to be provided of the trading activities of the Directors of the Company;

• identification of processes for unusual circumstances where discretions may be exercised in cases such as financial hardship.

4.7 COMMUNICATION WITH SHAREHOLDERS

The Board provides shareholders with information using a comprehensive Continuous Disclosure policy which includes identifying matters that may have a material effect on the price of the Company’s securities, notifying them to the ASX, posting them on the Company’s website, and issuing media releases.

In summary, the Continuous Disclosure policy operates as follows:

• the Executive Chairman, the Managing Director and the Chief Financial Officer are responsible for interpreting the Group’s policy and where necessary informing the Board. The Company Secretary is responsible for all communications with the ASX. Such matters are advised to the ASX in accordance with the ASX Listing Rules and the Corporations Act;

• the full Annual Report is distributed to all shareholders (unless a shareholder has specifically requested not to receive the document), including relevant information about the operations of the Group during the year, changes in the state of affairs and details of future developments;

• the half-yearly report contains summarised financial information and a review of the operations of the Group during the period. The half-year reviewed financial report is lodged with the Australian Securities and Investments Commission and the ASX, and sent to any shareholder who requests it;

• proposed major changes in the Company and the Group which may impact on share ownership rights are submitted to a vote of shareholders;

• all announcements made to the market, and related information (including information provided to analysts or the media during briefings), are placed on the Company’s website after they are released to the ASX;

• the full texts of notices of meetings and associated explanatory material are placed on the Company’s website;

• the external auditor being requested to attend the annual general meetings to answer questions concerning the conduct of the audit, the preparation and content of the auditor’s report, accounting policies adopted by the Group and the independence of the auditor in relation to the conduct of the audit.

43

Finbar Group Limited 30 June 2012 Annual Financial Report

directors’ report (continued) for the year ended 30 June 2012

4.7 COMMUNICATION WITH SHAREHOLDERS (CONTINUED)

All of the above information, including that of the previous two years, is made available on the Company’s website within one day of public release.

The Board encourages full participation of shareholders at the Annual General Meeting, to ensure a high level of accountability and identification with the Group’s strategy and goals. Important issues are presented to the shareholders as single resolutions.

The shareholders are requested to vote on the appointment and aggregate remuneration of Directors, the granting of options and shares to Directors, the Remuneration report and changes to the Constitution. Copies of the Constitution are available to any shareholder on request.

4.8 DIVERSITY

The Board is currently developing a Diversity Policy. When selecting new employees or advancing existing employees, no consideration is given to gender, age or ethnicity, but instead selections are based upon individual achievements, skill and expertise.

Gender representation

Gender representation
Board Key Management Personnel Senior Management Group	2012 2011 Female Male Female Male
	- 100% - 100% - 100% - 100% 50% 50% 50% 50% 38% 62% 31% 69%

5 PRINCIPAL ACTIVITIES

The principal activities of the Group during the course of the financial year continued to be property development and investment.

The Group’s focus is the development of medium to high-density residential buildings and commercial developments in Western Australia by way of direct ownership, ownership through fully owned Subsidiaries or by Jointly Controlled entities (through companies registered specifically to conduct the development).

The Group holds rental property through 59 Albany Highway Joint Venture Pty Ltd (wholly owned subsidiary of 59 Albany Highway Pty Ltd) and 175 Adelaide Terrace Pty Ltd (wholly owned subsidiary of the Company).

There were no significant changes in the nature of the activities of the Group during the financial year.

6 OPERATING AND FINANCIAL REVIEW

OPERATING AND FINANCIAL REVIEW
Operating Results Total comprehensive income attributable to the Owners of the Group Shareholder Returns Total comprehensive income attributable to Owners of the Group Basic EPS Diluted EPS Dividends paid Dividends paid per share Market price per share Change in share price Return on capital employed attributable to the Owners of the Group Return on total equity attributable to Owners of the Group	2012 2011 $28,300,279 $24,023,464 2012 2011 2010 2009 2008
	$28,300,279 $24,023,464 $23,571,133 $18,970,991 $12,230,513 $0.13 $0.13 $0.16 $0.13 $0.09 $0.13 $0.13 $0.16 $0.13 $0.09 $18,896,550 $15,115,909 $9,928,923 $8,472,983 $9,682,097 $0.09 $0.085 $0.07 $0.06 $0.07 $1.08 $0.98 $1.00 $0.80 $0.62 $0.10 -$0.02 $0.20 $0.18 -$0.18 17.80% 14.55% 26.95% 24.87% 11.90% 15.27% 14.11% 21.13% 24.56% 18.16%

Total comprehensive income amounts for 2008 to 2012 have been calculated in accordance with Australian Accounting Standards (AASBs).

Returns to shareholders increase through both dividends and capital growth. Dividends for 2012 were fully franked and it is expected that dividends in future years will continue to be fully franked.

44

Finbar Group Limited 30 June 2012 Annual Financial Report

Review of Operations

Completed Projects

Times Two – 143 Adelaide Terrace, East Perth : All lots are now sold. 30 units were settled in the reporting period. The Company is pleased to report that the development is now complete.

The Edge – 8 Hordern Street, Victoria Park : All units are now sold. 4 units were settled in the reporting period. The Company is pleased to report that the development is now complete.

The Saint – 118 Adelaide Terrace, East Perth : All lots are now sold. 1 unit was sold and settled in the reporting period. The Company is pleased to report that the development is now complete.

Verve – 145 Newcastle Street, Perth : All units are sold with 1 remaining lot contracted to settle in the financial year ending 30 June 2013.

Gateway – 59 Albany Highway, Victoria Park : The Gateway building is being held as an investment property and is 99% leased. 18 on Plain – 18 Plain Street, East Perth : 18 on Plain was completed in March 2012. 27 residential units were settled in this reporting period, with 2 residential units having been settled since the end of the reporting period. There are 2 unsold commercials lots in the project and it is anticipated that these lots will be sold and settled in the financial year ending 30 June 2013.

Fairlanes Residential – 181 Adelaide Terrace, East Perth : Fairlanes was the largest contributor to this year’s profit result with 118 units in the 128 unit project settling in the reporting period. A total of 4 lots have settled since the end of the reporting period, and an additional 5 units are scheduled to settle by the end of September 2012. Only 1 unit remains unsold in the project and it is anticipated that this will be sold and settled in the financial year ending 30 June 2013.

Fairlanes Office – 181 Adelaide Terrace, East Perth : Fairlanes Perth comprises a total of 7,687m[2] of commercial office space positioned below the residential component of the development with an asset value of $52 million which the company will retain for its own use and investment income purposes. The Company occupies 1018m[2] and has secured leases for 2,364m[2] of office space with 3,250m[2] currently secured under Heads of Agreement and in negotiation. It is anticipated that the property will be fully leased during the financial year ending 30 June 2013.

Currently Under Construction

Pelago West – 23 Sharpe Avenue, Pegs Creek : Stage one of the Company’s first Pilbara project was launched to the market in March 2011. The development includes 114 apartments in 1, 2 and 3 bedroom layouts over 8 storeys in what is to be Karratha’s first high rise building. The development has a total end value of approximately $85.6 million of which the Company has secured 82 pre-sale lots valued at $56.4 million with a further 19 lots pre-leased. The Company received Occupation Permit in July 2012 and titles issued early August 2012. Settlement will commence on the 23rd August 2012.

Pelago West also contains 8 commercial lots totalling 1,067m[2] of NLA with a book value of $11 million which the Company will retain as investment asset. The Company has secured leases for 564m[2] of space. It is anticipated that the property will be fully leased during the financial year ending 30 June 2013.

Lime – 189 Swansea Street East, East Victoria Park : Lime apartments located just 10 minutes from the Perth CBD encompasses 95 two bedroom apartments plus 16 commercial lots with an approximate end value of $51.4 million. Marketing commenced last reporting period in March 2011 and to-date the Company has sold 67 lots valued at $28.7 million. Construction is anticipated to be completed in September 2012 with settlement to follow in the first half of the Financial Year 2013.

Adagio – 90 Terrace Road, East Perth : Stage one of the Company’s Symphony City redevelopment and by far its most exclusive project will be made up of 113 luxurious 2 and 3 bedroom apartments over 23 storeys. The development has an approximate end value of $174.2 million and to date the Company has secured 54 pre-sale contracts valued at $85.7 million. Construction of the structure is now up to level 20 with internal fit-out of the lower floors underway.

St Marks – 131 Harold Street, Highgate : Located just a stone’s throw away from the vibrant Beaufort Street café strip. St Marks comprises of 130 apartments in 1, 2 and 3 bedroom layouts with an approximate end value of $66.5 million. The Company launched the project to the market this reporting period in September 2011 and has to-date secured 76 pre-sales contracts valued at $40.2 million. Construction works have now commenced.

Au – 208 Adelaide Terrace & 311 Hay Street, East Perth : Au Apartments located opposite the Perth Mint and Pan Pacific Hotel in East Perth launched to the market this reporting period in October 2011. The project includes 192 apartments in 1, 2 and 3 bedroom configuration plus 2 commercial lots distributed over two separate 10 storey structures. The Company has secured 51% in presales amounting to 101 lots valued at $54.6 million. The existing building on site has been demolished and construction has now commenced.

Knightsgate Residences – 9 Citadel Way, Currambine : Knightsgate Residences located in Currambine encompasses a total of 43 – 1 and 2 bedroom apartments over 3 storeys. The Company launched to the market in the last reporting period in February 2011 and has so far secured 28 pre-sales being 63% of the project totalling $9.2 million. Construction works have now commenced.

45

Finbar Group Limited 30 June 2012 Annual Financial Report

directors’ report (continued) for the year ended 30 June 2012

6 OPERATING AND FINANCIAL REVIEW (CONTINUED)

Currently Under Construction (Continued)

Ecco – 262 Lord Street, Perth : Ecco Apartments located at 262 Lord Street in Perth is a 50% Joint Venture project which the Company launched to the market in February 2012. The Company has secured 51% in pre-sales totalling 52 apartments valued at $26.2 million. Demolition works commenced with 90% of the site now cleared and construction scheduled to commence in September 2012.

Future Projects

Pelago East, 26 Sharpe Avenue, Pegs Creek : Stage two of the Company’s Pelago project in Karratha encompasses a total of 174 – studio, 1, 2 and 3 bedroom apartments plus 14 commercial lots totalling 1,683m[2] of ground floor commercial space. Pelago East is now under construction with an approximate end value of $140 million.

36 Chester Avenue, Dianella : 36 Chester Avenue located in Dianella is a 50% Joint Venture project with an approximate end value of $60 - $80 million. The Company is awaiting revised Dianella Districts Centre Structure Plan to allow increased density and height anticipated by the end of 2012 calendar year. The Company is proposing between 80 and 135 residential lots up to 6 levels comprising 1, 2 and 3 bedroom apartments.

Concerto & Harmony – 193 Adelaide Terrace, East Perth : Concerto & Harmony Apartments located at 193 Adelaide Terrace in East Perth will be the second stage of the Symphony City redevelopment totalling approximately $160 million. The Company is currently in the planning stage of a mix of office and apartments along with the refurbishment of the heritage building as additional office space.

Toccata – 88 Terrace Road, East Perth : Toccata Apartments, located in East Perth will be the final stage of the Symphony City redevelopment. The development will comprise of 43 luxury apartments plus 2 commercial lots over 22 storeys with an approximate end value of $120 million.

The Springs, Rivervale : The Springs, located within close proximity to Crown Metropol along Great Eastern Highway, totalling approximately $128 million will comprise of 188 apartments in 1, 2 and 3 bedroom configurations over 15 levels. The development also includes a separate 5 level office building containing approximately 6,200m[2] of NLA.

Port Hedland : The Company was appointed preferred developer by the State Government of a significant apartment site overlooking the Spoilbank Marina in the Pilbara town of Port Hedland.

Significant Changes in State of Affairs

In the opinion of the Directors there were no significant changes in the state of affairs of the Group that occurred during the financial year under review.

7 DIVIDENDS

Dividends paid or declared by the Company to members since the end of the previous financial year were:

Cents per Total Amount Franked / Date of Payment Share $ Unfranked Dividends Paid During the Year 2012 Interim 2012 ordinary 3.50 7,470,970 Franked 11 April 2012 Final 2011 ordinary 5.50 11,425,580 Franked 5 September 2011 Total Dividends Paid 18,896,550 Franked dividends declared or paid during the year were franked at the rate of 30%. Proposed Dividend After the balance date the following dividend has been proposed by the Directors. The dividend has not been provided for and there are no income tax consequences. Final 2012 ordinary 5.50 11,779,508 Franked 4 September 2012 Total Dividend Proposed 11,779,508 The fnancial effect of this dividend has not been brought to account in the fnancial statements for the year ended 30 June 2012 and will be recognised in subsequent fnancial reports. Note $ Dealt with in the fnancial report as - Dividends 22 18,896,550	Cents per Share	Total Amount Franked / Date of Payment $ Unfranked

Dividend Reinvestment Plan

In accordance with Rule 13 of the Company’s Dividend Reinvestment Plan (DRP), the Directors elected to reactivate the DRP in the 2011 financial year until further notice and as such the DRP will be active for the above mentioned dividend.

46

Finbar Group Limited 30 June 2012 Annual Financial Report

8 EVENTS SUBSEQUENT TO REPORTING DATE

Other than the item below, there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the Directors of the Company, to affect significantly the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial years.

Since the end of the financial year the Group has been selected as the preferred developer of the former Port Hedland Hospital site, a significant apartment site overlooking the Spoilbank Marina in the Pilbara town of Port Hedland.

9 LIKELY DEVELOPMENTS

The Group will continue to pursue its policy of increasing the profitability and market share of its major business sectors during the next financial year.

The Group will continue planned development projects on existing land and will seek new opportunities for the acquisition of future development projects.

Further information about likely developments in the operations of the Group and the expected results of these operations in future years have not been included in this report as the disclosure of such information would, in the opinion of the Directors’, be likely to result in unreasonable prejudice to the Group.

10 DIRECTORS’ INTERESTS

The relevant interest of each Director in the shares and options over such instruments by the companies within the Group, as notified by the Directors to the Australian Stock Exchange Limited in accordance with S205G(1) of the Corporations Act 2001 , as at the date of this report is as follows:

the Directors to the Australian Stock Exchange Limited in accordance wit report is as follows:	h S205G(1) of the_Corporations Act 2001_, as at the date of this
Director	Ordinary Shares
Mr John Chan	23,361,742
Mr Darren John Pateman	2,265,174
Mr John Boon Heng Cheak	483,073
Mr Kee Kong Loh	2,000,904
Mr Lee Verios	-

11 INDEMNIFICATION AND INSURANCE OF OFFICERS AND AUDITORS

Indemnification

The Company has agreed to indemnify the current Directors of the Company and of its Subsidiaries against all liabilities to another person (other than the Company or related body corporate) that may arise from their position as Directors of the Company and its Subsidiaries, except where the liability arises out of the conduct involving a lack of good faith.

During the financial year, the Company entered into an agreement with their current auditors, KPMG, indemnifying them against any claims by third parties arising from their report on the annual financial report, except where the liability arises out of conduct involving a lack of good faith.

Insurance Premiums

During the financial year the Company has paid insurance premiums of $19,636 (2011: $19,636) in respect of Directors and Officers liability and legal expenses insurance contracts, for Directors and Officers, including Executive Officers of the Company. The insurance premiums relate to:

• costs and expenses incurred by the relevant Officers in defending proceedings, whether civil or criminal and whatever their outcome;

• other liabilities that may arise from their position, with the exception of conduct involving a wilful breach of duty or improper use of information or position to gain a personal advantage.

47

Finbar Group Limited 30 June 2012 Annual Financial Report

directors’ report (continued) for the year ended 30 June 2012

12 NON-AUDIT SERVICES

During the year KPMG, the Group’s auditor, has performed certain other services in addition to their statutory duties.

The Board has considered the non-audit services provided during the year by the auditor and is satisfied that the provision of those nonaudit services during the year by the auditor is compatible with, and did not compromise, the auditor independence requirements of the Corporations Act 2001 for the following reasons:

• all non-audit services were subject to the corporate governance procedures adopted by the Group and have been reviewed to ensure they do not impact the integrity and objectivity of the auditor;

• the non-audit services provided do not undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants , as they did not involve reviewing or auditing the auditor’s own work, acting in a management or decision making capacity for the Group, acting as an advocate for the Group or jointly sharing risks and rewards.

Details of the amounts paid to the auditor of the Group, KPMG, and its related practices for audit and non-audit services provided during the year are set out below:

Audit Services: Auditors of the Company Audit and review of the fnancial reports Audit and review of the fnancial reports of equity accounted investees Services Other Than Statutory Audit: Taxation compliance services	Consolidated 2012 2011 $ $
	165,000 211,400 - 9,000
	165,000 220,400
	14,800 11,000
	14,800 11,000

13 LEAD AUDITOR’S INDEPENDENCE DECLARATION

The Lead Auditor’s Independence Declaration is set out on Page 85 and forms part of the Directors’ Report for the financial year ended 30 June 2012.

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

==> picture [93 x 39] intentionally omitted <==

Darren Pateman

Managing Director

Dated at Perth this twentieth day of August 2012.

48

Finbar Group Limited 30 June 2012 Annual Financial Report

consolidated statement of comprehensive income for the year ended 30 June 2012

Note Revenue 7 Cost of sales Gross Proft Other income 8 (Loss)/Proft on disposal of property, plant & equipment Administrative expenses Other expenses 9 Results from Operating Activities Financial income 11 Finance costs 11 Net Finance Costs Share of proft of Equity Accounted Investees (net of income tax) 15 Proft before Income Tax Income tax expense 12 Proft for the year Other comprehensive income 8 Income tax relating to components of other comprehensive income 12 Other comprehensive income for the year, net of income tax Total comprehensive income for the year Proft attributable to: Owners of the Group Non-controlling interest Proft for the year Total comprehensive income attributable to: Owners of the Group Non-controlling interest Total comprehensive income for the year Earnings per Share: Basic earnings per share (cents per share) 23 Diluted earnings per share (cents per share) 23	Consolidated 2012 2011 $ $
	92,890,974 54,085,516 (65,410,677) (38,582,647)
	27,480,297 15,502,869 19,387,891 14,844,117 (73,452) 2,629,645 (5,990,003) (4,651,541) (2,856,222) (2,089,493)
	37,948,511 26,235,597
	2,594,894 5,590,544 (2,481,528) (2,724,402)
	113,366 2,866,142
	1,069,844 5,841,381
	39,131,721 34,943,120 (13,328,854) (6,717,815)
	25,802,867 28,225,305
	2,128,657 - (638,597) -
	1,490,060 -
	27,292,927 28,225,305
	26,810,219 24,023,464 (1,007,352) 4,201,841
	25,802,867 28,225,305
	28,300,279 24,023,464 (1,007,352) 4,201,841
	27,292,927 28,225,305
	12.61 12.98 12.61 12.98

The Consolidated Statement of Comprehensive Income is to be read in conjunction with the Notes to the Financial Statements set out on Pages 53 to 81.

49

Finbar Group Limited 30 June 2012 Annual Financial Report

consolidated statement of changes in equity for the year ended 30 June 2012

			Attributable to equityholders of the Company	Attributable to equityholders of the Company	Attributable to equityholders of the Company	Attributable to equityholders of the Company
	Share Capital		Share Option	Retained	Asset	Total	Non-controlling	Total Equity
			Reserve	Earnings	Revaluation		Interest
					Reserve
		$	$	$	$	$	$	$
Balance as at 1 July 2010	77,285,791		2,895,027	31,384,838		111,565,656	(54,382)	111,511,274
Total comprehensive income for the year
Proft				24,023,464		24,023,464	4,201,841	28,225,305
Transactions with owners, recognised directly in equity
Transfer of reserve			(2,895,027)	2,895,027		-		-
Issue of ordinary shares	49,813,238					49,813,238		49,813,238
Dividends to shareholders	Note 22			(15,115,909)		(15,115,909)		(15,115,909)
Balance as at 30 June 2011	127,099,029		-	43,187,420	-	170,286,449	4,147,459	174,433,908
Balance as at 1 July 2011	127,099,029		-	43,187,420		170,286,449	4,147,459	174,433,908
Total comprehensive income for the year
Proft				26,810,219		26,810,219	(1,007,352)	25,802,867
Other comprehensive income				-	1,490,060	1,490,060	-	1,490,060
Transactions with owners, recognised directly in equity
Issue of ordinary shares	5,591,701					5,591,701		5,591,701
Dividends to shareholders	Note 22			(18,896,550)		(18,896,550)		(18,896,550)
Balance as at 30 June 2012	132,690,730		-	51,101,089	1,490,060	185,281,879	3,140,107	188,421,986

Amounts are stated net of tax

The Consolidated Statement of Changes in Equity is to be read in conjunction with the Notes to the Financial Statements set out on Pages 53 to 81.

50

Finbar Group Limited 30 June 2012 Annual Financial Report

consolidated statement of financial position as at 30 June 2012

Note ASSETS Current Assets Cash and cash equivalents 21a Trade and other receivables 19 Inventories 18 Prepayments 20 Investments in Equity Accounted Investees 15 Other investments 16 Total Current Assets Non Current Assets Trade and other receivables 19 Inventories 18 Investment property 13 Investments in Equity Accounted Investees 15 Property, plant and equipment 14 Other investments 16 Total Non Current Assets Total Assets LIABILITIES Current Liabilities Trade and other payables 26 Loans and borrowings 24 Current tax payable 17 Employee benefts 25 Total Current Liabilities Non Current Liabilities Loans and borrowings 24 Deferred tax liabilities 17 Employee benefts 25 Total Non Current Liabilities Total Liabilities Net Assets EQUITY Share capital 22 Retained earnings Reserves Total Equity Attributable to Holders of the Group Non-controlling interest Total Equity	Consolidated 2012 2011 $ $
	31,733,295 61,303,639 15,360,717 8,252,396 104,724,249 2,884,321 255,371 859,152 578,460 5,632,530 157,414 152,372
	152,809,506 79,084,410
	9,042,484 12,167,005 39,336,869 115,075,905 113,106,803 68,000,000 484,974 691,053 15,248,725 3,903,677 2,322,445 1,813,253
	179,542,300 201,650,893
	332,351,806 280,735,303
	14,634,061 8,062,637 63,161,681 39,180,700 6,751,955 3,504,716 32,615 48,510
	84,580,312 50,796,563
	53,489,583 55,206,406 5,807,532 261,739 52,393 36,687
	59,349,508 55,504,832
	143,929,820 106,301,395
	188,421,986 174,433,908
	132,690,730 127,099,029 51,101,089 43,187,420 1,490,060 -
	185,281,879 170,286,449 3,140,107 4,147,459
	188,421,986 174,433,908

The Consolidated Statement of Financial Position is to be read in conjunction with the Notes to the Financial Statements set out on Pages 53 to 81.

51

Finbar Group Limited 30 June 2012 Annual Financial Report

consolidated statement of cash flows for the year ended 30 June 2012

Note Cash Flows from Operating Activities Cash receipts from customers Cash paid to suppliers and employees Cash used in Operating Activities Interest paid Income tax paid Net Cash used in Operating Activities 21b Cash Flows from Investing Activities Proceeds from sales of investments Proceeds from sale of property, plant & equipment 14 Interest received Dividends received from Equity Accounted Investees Acquisition of property, plant and equipment 14 Acquisition of other investments Loans to Equity Accounted Investees Net Cash provided by Investing Activities Cash Flows from Financing Activities Proceeds from issue of share capital 22 Proceeds from borrowings 24 Dividends paid (net of DRP) 22 Net Cash from Financing Activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at 1 July Cash and Cash Equivalents at 30 June 21a	Consolidated 2012 2011 $ $
	100,843,491 147,215,492 (125,815,921) (179,937,526)
	(24,972,430) (32,722,034) (17,073,194) (8,260,901) (5,174,416) (3,083,735)
	(47,220,040) (44,066,670)
	- 25 - 3,296,220 10,959,972 5,381,249 6,330,736 1,255,000 (3,883,748) (3,436,536) (666,624) (1) (3,931,354) 3,809,949
	8,808,982 10,305,906
	- 47,495,218 22,145,544 19,318,328 (13,304,830) (13,292,528)
	8,840,714 53,521,018
	(29,570,344) 19,760,254 61,303,639 41,543,385
	31,733,295 61,303,639

The Consolidated Statement of Cash Flows is to be read in conjunction with the Notes to the Financial Statements set out on Pages 53 to 81.

52

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notes to the financial statements for the year ended 30 June 2012

INDEX TO NOTES TO THE FINANCIAL STATEMENTS

Note	Note	Page	Page
1	Reporting Entity		54
2	Basis of Preparation		54
3	Signifcant Accounting Policies		54
4	Determination of Fair Values		60
5	Financial Risk Management		61
6	Operating Segments		63
7	Revenue		64
8	Other Income		64
9	Other Expenses		65
10	Personnel Expenses		65
11	Finance Income and Finance Costs		65
12	Income Tax Expense		66
13	Investment Property		67
14	Property, Plant and Equipment		67
15	Investments in Equity Accounted Investees		68
16	Other Investments		70
17	Tax Assets and Liabilities		70
18	Inventories		71
19	Trade and Other Receivables		71
20	Prepayments		71
21a	Cash and Cash Equivalents		72
21b	Reconciliation of Cash Flows from Operating	Activities	72
22	Capital and Reserves		72
23	Earnings per Share		74
24	Loans and Borrowings		74
25	Employee Benefts		75
26	Trade and Other Payables		75
27	Financial Instruments		76

Note	Page
28 Operating Leases	77
29 Capital and Other Commitments	78
30 Contingencies	78
31 Related Parties	78
32 Group Entities	80
33 Subsequent	81
34 Auditors’ Remuneration	81
35 Parent Entity Disclosures	81

INDEX TO SIGNIFICANT ACCOUNTING POLICIES

Note	Note	Page
(a)	Basis of Consolidation	54
(b)	Financial Instruments	55
(c)	Property, Plant and Equipment	56
(d)	Investment Property	57
(e)	Inventories	57
(f)	Impairment	57
(g)	Employee Benefts	58
(h)	Provisions	58
(i)	Revenue	58
(j)	Finance Income and Finance Costs	59
(k)	Income Tax	59
(l)	Goods and Services Tax	59
(m)	Earnings per Share	59
(n)	Segment Reporting	60
(o)	Presentation of Financial Statements	60
(p)	New Standards and Interpretations not yet Adopted	60

53

Finbar Group Limited 30 June 2012 Annual Financial Report

notes to the financial statements (continued) for the year ended 30 June 2012

1 REPORTING ENTITY

Finbar Group Limited (the ‘Company’) is a company domiciled in Australia. The address of the Company’s registered office is Level 6, 181 Adelaide Terrace, East Perth, WA 6004. The consolidated financial statements of the Group as at and for the year ended 30 June 2012 comprise the Company and its Subsidiaries (together referred to as the “Group” and individually as “Group entities”) and the Group’s interest in Jointly Controlled entities. The Group is a for-profit entity and is primarily involved in residential property development and property investment (see Note 6).

2 BASIS OF PREPARATION

(a) Statement of Compliance

The consolidated financial statements are general purpose financial statements which have been prepared in accordance with Australian Accounting Standards (AASBs) adopted by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001 . These consolidated financial statements of the Group comply with International Financial Reporting Standards (IFRSs) and interpretations adopted by the International Accounting Standards Board (IASB).

The consolidated financial statements were approved by the Board of Directors on 20 August 2012.

(b) Basis of Measurement

The consolidated financial statements have been prepared on the historical cost basis except for the following:

• financial instruments recognised through profit and loss are measured at fair value;

• investment property is measured at fair value.

The methods used to measure fair values are discussed further in Note 4.

(c) Functional and Presentation Currency

These consolidated financial statements are presented in Australian dollars, which is the functional currency for all of the Group entities.

(d) Use of Estimates and Judgements

The preparation of consolidated financial statements in conformity with AASBs requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates 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 any future periods affected.

Information about critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements is included in the following notes:

• Note 13 - valuation of investment property;

• Note 27 - valuation of financial instruments.

(e) Changes in Accounting Policies

Overview

There have been no changes in accounting policies during the year.

3 SIGNIFICANT ACCOUNTING POLICIES

The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements, and have been applied consistently by Group entities.

(a) Basis of Consolidation

(i) Subsidiaries

Subsidiaries are entities controlled by the Group. The financial statements of Subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. The accounting policies of subsidiaries have been changed when necessary to align them with the policies adopted by the Group.

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Finbar Group Limited 30 June 2012 Annual Financial Report

(ii) Jointly Controlled Entities (Equity Accounted Investees)

Jointly Controlled entities are those entities over whose activities the Group has joint control, established by contractual agreement and requiring unanimous consent for strategic and operating decisions. Investments in Jointly Controlled entities are accounted for using the equity method (Equity Accounted Investees) and are initially recognised at cost. The consolidated financial statements include the Group’s share of the income and expenses and equity movements of Equity Accounted Investees, after adjustments to align the accounting policies with those of the Group, from the date that the joint control commences until the date the joint control ceases. When the Group’s share of losses exceeds its interest in an Equity Accounted Investee, the carrying amount of that interest is reduced to nil and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the Equity Accounted Investee. Investments in Jointly Controlled entities are carried at the lower of the equity accounted amount and the recoverable amount. Investments in Jointly Controlled entities are treated as current assets where it is expected that the investment will be realised within a twelve month time frame.

(iii) Joint Ventures - Jointly Controlled Operations

A jointly controlled operation is a joint venture carried on by each venturer using its own assets in pursuit of the joint operations. The consolidated financial statements include the assets that the group controls and the liabilities that it incurs in the course of pursuing the joint operation, and the expenses that the Group incurs and its share of the income that it earns from the joint operation.

(iv) Transactions Eliminated on Consolidation

Intra-group balances and transactions, and any unrealised gains and losses or income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with Equity Accounted Investees are eliminated against the investment to the extent of the Group’s interest in the Equity Accounted Investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment. Gains and losses are recognised as the contributed assets are consumed or sold by the Equity Accounted Investee or, if not consumed or sold by the Equity Accounted Investee, when the Group’s interest in such entities is disposed of.

(b) Financial Instruments

(i) Non-derivative Financial Instruments

Non-derivative financial instruments comprise investments in equity and debt securities, trade and other receivables, cash and cash equivalents, loans and borrowings, and trade and other payables.

Non-derivative financial instruments are recognised initially at fair value plus, for instruments not at fair value through profit or loss, any directly attributable transaction costs, except as described below. Subsequent to initial recognition non-derivative financial instruments are measured as described below.

Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.

Accounting for finance income and expense is discussed in Note 3(j).

Other

Other non-derivative financial instruments are measured at amortised cost using the effective interest method, less any impairment losses.

(ii) Derivative Financial Instruments

Derivatives are recognised initially at fair value; attributable transaction costs are recognised in profit or loss when incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes in fair value are recognised in profit and loss.

(iii) Share Capital

Ordinary shares

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options are recognised as a deduction from equity, net of any tax effects.

Repurchase of share capital

When share capital recognised in equity is repurchased, the amount of the consideration paid, which includes directly attributable costs, net of any tax effects, is recognised as a deduction from equity.

Dividends

Dividends are recognised as a liability in the period in which they are declared.

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Finbar Group Limited 30 June 2012 Annual Financial Report

notes to the financial statements (continued) for the year ended 30 June 2012

3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(c) Property, Plant and Equipment

(i) Recognition and Measurement

Items of property, plant and equipment are measured at cost or deemed cost less accumulated depreciation and impairment losses.

Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets include the cost of materials, direct labour, any other costs directly attributable to bringing the asset to a working order for its intended use, the costs of dismantling and removing the items and restoring the site on which they are located, and capitalised borrowing costs (see below).

Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

Gains on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant & equipment and are recognised net within “Other income” in profit or loss.

Losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant & equipment and are recognised net within “Administrative expenses” in profit or loss.

When revalued assets are sold, the amounts included in the revaluation reserve are transferred to retained earnings.

In respect to borrowing costs relating to qualifying assets, the Group capitalises costs directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of the asset.

(ii) Reclassification to Investment Property

Property that is being constructed for future use as investment property is accounted for as property, plant and equipment until construction or development is complete, at which time it is remeasured to fair value and reclassified as investment property. Any gain or loss arising on remeasurement is recognised in profit or loss.

When the use of a property changes from owner-occupied to investment property, the property is remeasured to fair value and reclassified as investment property. Any loss is recognised in the revaluation reserve to the extent that an amount is included in revaluation reserve for that property, with any remaining loss recognised immediately in profit or loss. Any gain arising on revaluation is recognised in profit or loss to the extent the gain reverses a previous impairment loss on the property, with any remaining gain recognised in a revaluation reserve in equity.

(iii) Subsequent Costs

The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The carrying amount of the replaced part is derecognised. The costs of the day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred.

(iv) Revaluation Model to Property, Plant and Equipment

After recognition as an asset, an item of property, plant and equipment whose fair value can be measured reliably shall be carried at a revalued amount, being its fair value at the date of the revaluation less any subsequent accumulated depreciation and subsequent accumulated impairment losses. Revaluations shall be made with sufficient regularity to ensure that the carrying amount does not differ materially from that which would be determined using fair value at the end of the reporting period.

If an item of property, plant and equipment is revalued, the entire class of property, plant and equipment to which that asset belongs shall be revalued. Any gain or loss arising on remeasurement is recognised in other comprehensive income and reserves.

(v) Depreciation and Amortisation

Depreciation and amortisation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. Assets are depreciated or amortised from the date of acquisition. Land is not depreciated.

The estimated useful lives in the current and comparative periods are as follows:

• Office property 40 years

• • Office furniture and equipment, fixtures and fittings 5 - 25 years • Plant and equipment 3 - 10 years

Depreciation and amortisation rates and methods are reviewed at each reporting date. When changes are made, adjustments are reflected prospectively in the current and future periods only.

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Finbar Group Limited 30 June 2012 Annual Financial Report

(d) Investment Property

Investment property is property held either to earn rental income or for capital appreciation or for both, but not for sale in the ordinary course of business, use in the production or supply of goods and services or for administrative purposes. Investment property is measured at fair value (see Note 4) with any change therein recognised in profit or loss.

Cost includes expenditure that is directly attributable to the acquisition of the investment property. The cost of self-constructed investment property includes the cost of materials and direct labour, any other costs directly attributable to bringing the investment property to a working condition for their intended use and capitalised borrowing costs.

When the use of a property changes such that it is reclassified as property, plant or equipment, its fair value at the date of reclassification becomes its cost for subsequent accounting.

(e) Inventories

Inventories, including land held for resale, are stated at the lower of cost and net realisable value.

Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

Cost includes the cost of acquisition, development costs, holding costs and directly attributable interest on borrowed funds where the development is a qualifying asset. Capitalisation of borrowing costs is ceased during extended periods in which active development is interrupted. When a development is completed and ceases to be a qualifying asset, borrowing costs and other costs are expensed as incurred.

Current and Non-current Inventory Assets

Inventory is classified as current when it satisfies any of the following criteria:

• it is expected to be realised in, or is intended for sale or consumption in, the entity’s normal operating cycle;

• it is held primarily for the purpose of being traded; or

• it is expected to be realised within twelve months of the reporting date.

All other inventory is treated as non-current.

• (f) Impairment

(i) Financial Assets (Including Receivables)

A financial asset not carried at fair value is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset and the loss event had a negative effect on the estimated future cash flows of that asset that can be measured reliably.

Objective evidence that financial assets (including equity securities) are impaired can include default or delinquency by a debtor, restructuring of an amount due to the Group on terms the Group would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, the disappearance of an active market for a security.

An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount, and the present value of the estimated future cash flows discounted at the original effective interest rate. Losses are recognised in profit and loss and reflected in an allowance account against receivables. When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is recognised through profit or loss.

(ii) Non-financial Assets

The carrying amounts of the Group’s non-financial assets other than investment property, inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists then the asset’s recoverable amount is estimated.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. 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. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash flow from continuing use that are largely independent of the cash flows of other assets or groups of assets (the “cash generating unit”).

An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in profit or loss.

Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

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Finbar Group Limited 30 June 2012 Annual Financial Report

notes to the financial statements (continued) for the year ended 30 June 2012

3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

• (g) Employee Benefits

(i) Superannuation Contributions

Obligations for contributions to superannuation funds are recognised as an expense in profit or loss.

(ii) Long-term Employee Benefits

The Group’s obligation in respect of long-term service benefits is the amount of future benefit that employees have earned in return for their service in the current and prior periods plus related on costs; that benefit is discounted to determine its present value, and the fair value of any related assets is deducted. The discount rate is the yield at the reporting date on AA credit-rated or government bonds that have maturity dates approximating the terms of the Group’s obligations. The calculation is performed using the projected unit credit method. Any actuarial gains or losses are recognised in profit of loss in the period in which they arise.

(iii) Termination Benefits

Termination benefits are recognised as an expense when the Group is demonstrably committed, without realistic possibility of withdrawal, to a formal detailed plan to either terminate employment before the normal retirement date, or to provide termination benefits as a result of an offer made to encourage voluntary redundancy. Termination benefits for voluntary redundancies are recognised as an expense if the Group has made an offer encouraging voluntary redundancy, it is probable that the offer will be accepted, and the number of acceptances can be estimated reliably.

(iv) Short-term Employee Benefits

Short-term employee benefits are measured on an undiscounted basis and are expensed as the related service is provided.

A liability is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be recognised reliably.

(v) Share-based Payment Transactions

The grant date fair value of options granted to employees is recognised as an employee expense, with a corresponding increase in equity, over the period in which the employees become unconditionally entitled to the options. The amount recognised is adjusted to reflect the actual number of share options that vest, except for those that fail to vest due to market conditions not being met.

(h) Provisions

A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability.

• (i) Revenue

Revenues are measured at the fair value of the consideration received or receivable, net of discounts, rebates and the amount of goods and services tax (GST) payable to the taxation authority.

(i) Property Development Sales

Revenue from the sale of residential, retail, commercial and industrial property is recognised when the significant risks and rewards of ownership have been transferred to the buyer, recovery of consideration is probable, the associated costs and possible return of the property can be estimated reliably, there is no continuing management involvement with the property and the amount of revenue can be measured reliably.

The timing of transfers of risks and rewards vary depending on the individual terms of the contract of sale.

(ii) Property Development Supervision Fees

Revenue from services rendered, including fees arising from the provision of development project supervision services, is recognised in profit or loss in proportion to the stage of completion of the transaction at reporting date. The stage of completion is assessed by reference to an assessment of the costs incurred and the costs to be incurred. No revenue is recognised if there are significant uncertainties regarding recovery of the consideration due, the revenue cannot be measured reliably, the costs incurred or to be incurred cannot be measured reliably, or the stage of completion cannot be measured reliably.

(iii) Management Fee Revenue

Management fee revenue is recognised in profit or loss in proportion to the stage of completion of the transaction at the reporting date. Management fee revenue is recognised when the amount can be measured reliably or when contractually due.

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Finbar Group Limited 30 June 2012 Annual Financial Report

(iv) Commissions

When the Group acts in the capacity of an agent rather than as the principal in a transaction, the revenue recognised is the net amount of commission made by the Group.

(v) Rental Income

Rental income from investment property is recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives granted are recognised as an integral part of the total rental income, over the term of the lease.

(j) Finance Income and Finance Costs

Finance income comprises interest income on funds invested (including available-for-sale financial assets), interest on loans to Equity Accounted Investees, dividend income, gains on the disposal of available-for-sale assets, changes in the fair value of financial assets at fair value through profit or loss, and gains on hedging instruments that are recognised in profit or loss. Interest income is recognised as it accrues in profit or loss, using the effective interest method. Dividend income is recognised in profit or loss on the date that the Group’s right to receive payment is established, which in the case of quoted securities is the ex-dividend date.

Finance costs comprise interest expense on borrowings, changes in fair value of financial assets at fair value through profit or loss, impairment losses recognised on financial assets, and losses on hedging instruments that are recognised in profit or loss. Borrowing costs that are not directly attributable to the acquisition or production of a qualifying asset are recognised in profit or loss using the effective interest method.

(k) Income Tax

Income tax expense comprises current and deferred tax. Current and deferred tax are recognised in profit or loss except to the extent that it relates to items recognised directly in equity or in other comprehensive income.

Current tax is the expected tax payable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment 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. Deferred tax is not recognised for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss, and differences relating to investments in subsidiaries and Jointly Controlled entities to the extent that it is probable that they will not reverse in the foreseeable future. In addition, deferred tax is not recognised for taxable temporary differences arising on the initial recognition of goodwill. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets and they relate to taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Additional income tax expenses that arise from the distribution of dividends are recognised at the same time as the liability to pay the related dividend is recognised. The Group does not distribute non-cash assets as dividends to its shareholders.

• (l) Goods and Services Tax

Revenue, 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 Taxation Office (ATO). In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or as part of the expense.

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 balance sheet.

• 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.

(m) Earnings per Share

The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which comprise share options granted to employees.

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Finbar Group Limited 30 June 2012 Annual Financial Report

notes to the financial statements (continued) for the year ended 30 June 2012

3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(n) Segment Reporting

Determination and Presentation of Operating Segments

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. An operating segment’s operating results are regularly reviewed by the Chief Operating Decision Maker (CODM) to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete information is available.

Segment results that are reported to the CODM include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets (primarily the Group’s headquarters), head office expenses, and income tax assets and liabilities.

Segment capital expenditure is the total cost incurred during the period to acquire property, plant and equipment, and intangible assets other than goodwill.

(o) Presentation of Financial Statements

The Group applies revised AASB101 Presentation of Financial Statements (2007) . As a result, the Group presents in the consolidated statement of changes in equity all owner changes in equity, whereas all non-owners changes in equity are presented in the consolidated statement of comprehensive income.

(p) New Standards and Interpretations not yet Adopted

A number of new standards, amendments to standards and interpretations are effective for annual periods beginning after 1 July 2011, and have not been applied in preparing these consolidated financial statements. None of these is expected to have a significant effect on the consolidated financial statements of the Group, except for IFRS 9 Financial Instruments , which becomes mandatory for the Group’s 2016 consolidated financial statements and could change the classification and measurement of financial assets. The Group does not plan to adopt this standard early and the extent of the impact has not been determined.

4 DETERMINATION OF FAIR VALUES

A number of the Group’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods. Where applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.

(a) Investment Property

An external, independent valuation company, having appropriately recognised professional qualifications and recent experience in the location and category of the property being valued, values the Group’s investment property portfolio no less than once every three years. The fair values are based on market values, being the estimated amount for which a property could be exchanged on the date of the valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably and willingly.

In the absence of current prices in an active market, the valuations are prepared by considering the aggregate of the estimated cash flows expected to be received from renting out the property. A yield that reflects the specific risks inherent in the net cash flows is then applied to the net annual cash flows to arrive at the property valuation.

Valuations reflect, where appropriate: the type of tenants actually in occupation or responsible for meeting lease commitments or likely to be in occupation after letting vacant accommodation, the allocation of maintenance and insurance responsibilities between the Group and the lessee, and the remaining economic life of the property. When rent reviews or lease renewals are pending with anticipated reversionary increases, it is assumed that all notices and where appropriate counter-notices, have been served validly and within the appropriate time.

Any gain arising on revaluation is recognised in the profit and loss to the extent the gain reverses a previous impairment loss on the property, with any remaining gain recognised in a revaluation reserve in equity.

(b) Trade and Other Receivables

The fair value of trade and receivables, excluding construction work in progress, is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date. This fair value is determined for disclosure purposes.

(c) Derivatives

The fair value of interest rate swaps is based on quotation from the relevant financial provider.

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Finbar Group Limited 30 June 2012 Annual Financial Report

(d) Share-based Payment Transactions

The fair value of employee stock options is measured using the Black-Scholes option-pricing model. Measurement inputs include share price on measurement date, exercise price of the instrument, expected volatility (based on weighted average historic volatility adjusted for changes expected due to publicly available information), weighted average expected life of the instruments (based on historical experience and general option holder behaviour), expected dividends, and the risk-free interest rate (based on government bonds). Service and non-market performance conditions attached to the transactions are not taken into account in determining fair value.

(e) Financial Guarantees

For financial guarantee contracts liabilities, the fair value at initial recognition is determined using a probability weighted discounted cash flow approach. This method takes into account the probability of default by the guaranteed party over the term of the contact, the loss given default (being the proportion of the exposure that is not expected to be recovered in the event of default) and exposure at default (being the maximum loss at the time of default).

5 FINANCIAL RISK MANAGEMENT

Overview

The Group has exposure to the following risks from their use of financial instruments:

• credit risk;

• liquidity risk;

• market risk.

This note presents information about the Group’s exposure to each of the above risks, their objectives, policies and processes for measuring and managing risk, and the management of capital. Further quantitative disclosures are included throughout these consolidated financial statements.

Risk Management Framework

The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework. The Board is responsible for developing and monitoring risk management policies.

Risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. The Group, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.

The Group Audit Committee oversees how management monitors compliance with the Group’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Group.

Credit Risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s receivables from customers and investment securities.

Trade and Other Receivables

The nature of the Group’s business means that most sales contracts occur on a pre-sales basis, before significant expenditure has been incurred on the development. All pre-sale contracts require a deposit at the point of entering into the contract, these funds being held in trust independently of the Group. Generally, pre-sale contracts are executed on an unconditional basis. Possession of a development property does not generally pass until such time as the financial settlement of the property has been completed, and title to a development property does not pass until the financial settlement of the property has been completed. Where possession of the development property is granted prior to settlement, title to the property remains with the Group until financial settlement of the property has been completed.

The demographics of the Group’s customer base has little or no influence on credit risk. Approximately 13.60% (2011: 19.53%) of the Group’s revenue is attributable to multiple sales transactions with single customers.

The Board of Directors has established a credit policy which undertakes an analysis of each sale. Purchase limits are established on customers, with these purchase limits being reviewed on each property development.

The Group’s trade and other receivables relate mainly to the Groups loans to Equity Accounted Investees (within which the Group holds no more than a 50% interest) and Goods and Services Tax refunds due from the Australian Taxation Office.

The Group has not established an allowance for impairment, as no losses are expected to be incurred in respect of trade and other receivables.

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Finbar Group Limited 30 June 2012 Annual Financial Report

notes to the financial statements (continued) for the year ended 30 June 2012

5 FINANCIAL RISK MANAGEMENT (CONTINUED)

Investments

The Group has limited its exposure to credit risk by only investing in liquid securities, such liquid securities primarily placed with large Australian banking institutions. Given the high credit ratings of these banking institutions, the Board of Directors does not expect any counterparty to fail to meet its obligations.

Liquidity Risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.

The Group uses project by project costing to cost its products and services, which assists it in monitoring cash flow requirements and optimising its cash return on investments. Typically the Group ensures that it has sufficient cash on demand to meet expected operational expenses for a period of 60 days, including the servicing of financial obligations; this excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters. In addition, the Group maintains the following lines of credit:

• $1.0 million overdraft facility that is secured as a part of the overall finance facility for Finbar Karratha Pty Ltd. Interest is payable at overdraft reference rates;

• $1.2 million overdraft facility that is secured as a part of the overall finance facility for 88 Terrace Road Pty Ltd. Interest is payable at overdraft reference rates.

Market Risk

Market risk is the risk that changes in market prices, such as interest rates and equity prices will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, whilst optimising the return.

The Group enters into derivatives, and also incurs financial liabilities, in order to manage market risks. All such transactions are carried out by the Chief Financial Officer under guidance from the Executive Chairman and the Managing Director.

Interest Rate Risk

The Group continuously reviews its exposure to changes in interest rates and where it is considered prudent will enter into borrowings on a fixed rate basis. This is generally achieved by entering into interest rate swaps.

Capital Management

The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Board of Directors monitors the return on capital, which the Group defines as net operating income divided by total shareholders’ equity, excluding non-controlling interests. The Board of Directors also monitors the level of dividends to ordinary shareholders.

The Board seeks to maintain a balance between the higher returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital position. The Group’s target is to achieve a return on assets of between 6.00% and 8.00%; for the year ended 30 June 2012 the return was 12.97% (2011: 12.63%). In comparison the weighted average interest expense on interest-bearing borrowings (excluding liabilities with imputed interest) was 5.94% (2011: 6.00%).

The Group’s debt to adjusted capital ratio at the end of the financial year was as follows:

Total liabilities Less: Cash and cash equivalents Net Debt Total equity Adjusted capital Debt-to adjusted capital ratio at 30 June	2012 2011 $ $
	143,929,820 106,301,395 31,733,295 61,303,639
	112,196,525 44,997,756
	188,421,986 174,433,908
	188,421,986 174,433,908
	0.60 0.26

From time to time the Company purchases its own shares on the market; the timing of these purchases depends on market prices. Shares purchased are cancelled from issued capital on purchase. The intention of the Board of Directors in undertaking such purchases is to enhance the capital return to the shareholders of the Company. Buy decisions are made on a specific transaction basis by the Board of Directors; the Company does not have a defined share buy-back plan.

There were no changes in the Group’s approach to capital management during the year.

Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements.

62

Finbar Group Limited 30 June 2012 Annual Financial Report

6 OPERATING SEGMENTS

The Group operates predominantly in the property development sector and has identified 3 reportable segments, as described below, which are the Group’s strategic business units. The strategic business units offer different products, and are managed separately because they require different technology, marketing strategies and have different types of customers. For each of the strategic business units, the Chief Operating Decision Maker (CODM) reviews internal management reports on a regular basis. The following describes the operations in each of the Group’s reportable segments:

• Residential apartment development in Western Australia;

• Commercial office/retail development in Western Australia;

• Rental of commercial property in Western Australia.

Information about Reportable Segments External Revenues - Company and Subsidiaries External Revenues - Equity Accounted Investees External Revenues - Total Interest Income Interest Expense Depreciation and Amortisation Reportable Segment Proft before Income Tax - Company and Subsidiaries Reportable Segment Proft before Income Tax - Equity Accounted Investees Reportable Segment Proft before Income Tax - Total Reportable Segment Assets - Company and Subsidiaries Reportable Segment Assets - Equity Accounted Investees Capital Expenditure Information about Reportable Segments External Revenues - Company and Subsidiaries External Revenues - Equity Accounted Investees External Revenues - Total Interest Income Interest Expense Depreciation and Amortisation Reportable Segment Proft before Income Tax - Company and Subsidiaries Reportable Segment Proft before Income Tax - Equity Accounted Investees Reportable Segment Proft before Income Tax - Total Reportable Segment Assets - Company and Subsidiaries Reportable Segment Assets - Equity Accounted Investees Capital Expenditure For the Year ended 30 June 2012 For the Year ended 30 June 2011	Residential Commercial Rental of Other Total Apartment Offce/Retail Commercial Development Development Property $ $ $ $ $
	92,354,291 3,468 6,251,834 937,645 99,547,238 12,102,946 - 31,155 1,468 12,135,569
	104,457,237 3,468 6,282,989 939,113 111,682,807
	39,467 - - 2,555,427 2,594,894 - - - 2,473,652 2,473,652 - - - 42,113 42,113
	26,944,253 2,828 3,395,612 827,167 31,169,860 1,390,547 - 31,155 1,468 1,423,170
	28,334,800 2,828 3,426,767 828,635 32,593,030
	131,133,559 19,913,683 122,565,579 8,312,262 281,925,083 23,367,856 5,469,125 - - 28,836,981 - - - 3,859,838 3,859,838
	Residential Commercial Rental of Other Total Apartment Offce/Retail Commercial Development Development Property $ $ $ $ $
	45,714,332 4,906,039 6,021,361 8,225,765 64,867,497 40,782,911 2,532,500 25,612 - 43,341,023
	86,497,243 7,438,539 6,046,973 8,225,765 108,208,520
	61,717 - - 5,098,398 5,160,115 - - - 2,713,581 2,713,581 - - 1,231 66,367 67,598
	6,093,252 5,944,471 1,724,021 8,225,765 21,987,509 6,617,848 1,619,867 25,612 - 8,263,327
	12,711,100 7,564,338 1,749,633 8,225,765 30,250,836
	99,804,846 28,715,912 70,794,600 45,515 199,360,873 16,010,038 2,472,229 - - 18,482,267 - - 3,537,602 - 3,537,602

The revenues from equity accounted investees are reported in this table as they are managed by Finbar and reported to CODM’s. Revenues from equity accounted investees are not reported in the statement of comprehensive income.

63

Finbar Group Limited 30 June 2012 Annual Financial Report

notes to the financial statements (continued) for the year ended 30 June 2012

6 OPERATING SEGMENTS (CONTINUED)

Reconciliation of Reportable Segment Revenues, Profit or Loss, Assets and Liabilities

Note Revenues Total revenue for development reportable segments 7 Total revenue for other reportable segments Total revenue for rental and other segments included in other income 8 Consolidated Revenue Total revenue for development reportable segments - Equity Accounted Investees Total revenue for rental segments included in other income - Equity Accounted Investees Total revenue for other reportable segments included in other income - Equity Accounted Investees Total Reportable Segments Revenue Proft or Loss Total proft or loss for reportable segments Financial income - Company and Subsidiaries Financial income - Equity Accounted Investees Financial expense - Company and Subsidiaries Financial expense - Equity Accounted Investees Unallocated amounts: Other corporate expenses Revaluation of investment property Income tax applicable to share of proft of Equity Accounted Investees Consolidated Proft before Income Tax Assets Total assets for reportable segments Cash and cash equivalents Investments in Equity Accounted Investees Other assets Consolidated Total Assets Geographical information The Group operates predominantly in the one geographical segment of Western Australia. 7 REVENUE Property development sales Supervision and management fees Total Revenue 8 OTHER INCOME Administration fees Rental income Commission income Other Total Other Income before revaluation Revaluation of investment property Total Other Income Revaluation of property (reported as other comprehensive income)	2012 2011 $ $
	92,357,759 50,620,371 937,645 8,225,765
	93,295,404 58,846,136 6,251,834 6,021,361
	99,547,238 64,867,497 12,102,946 43,315,411 31,155 25,612 1,468 -
	111,682,807 108,208,520
	32,593,030 30,250,836 2,594,894 5,590,544 166,058 131,955 (2,481,528) (516,554) (1,764) (6,098) (5,998,202) (4,687,195) 12,731,627 6,691,781 (472,394) (2,512,149)
	39,131,721 34,943,120
	281,925,083 199,360,873 31,733,295 61,303,639 1,063,434 6,323,583 17,629,994 13,747,208
	332,351,806 280,735,303
	92,357,759 50,620,371 533,215 3,465,145
	92,890,974 54,085,516
	110,429 29,526 6,251,834 6,021,361 4,769 5,614 289,232 2,095,835
	6,656,264 8,152,336 12,731,627 6,691,781
	19,387,891 14,844,117
	2,128,657 -

64

Finbar Group Limited 30 June 2012 Annual Financial Report

9 OTHER EXPENSES

Rental property expenses Total Other Expenses PERSONNEL EXPENSES Wages and salaries Superannuation contributions (Decrease)/Increase in liability for annual leave Increase in liability for long service leave Directors fees Total Personnel Expenses FINANCE INCOME AND FINANCE COSTS Recognised in Proft and Loss Interest income on loans to Equity Accounted Investees Interest income on bank deposits Interest income on property settlements Interest rate Swap Contract change in fair value Total Finance Income Interest expense Bank charges Total Finance Cost Net Finance Income/(Costs) Analysis of Finance Costs Total fnance costs Less: Finance costs capitalised to inventory Add: Finance costs relating to property developments sold Made up of: Finance costs relating to property developments sold Finance costs relating to administration	2012 2011 $ $
	2,856,222 2,089,493
	2,856,222 2,089,493
	2,847,396 2,453,393 166,786 158,786 (15,895) 5,483 15,706 12,565 244,881 182,681
	3,258,874 2,812,908
	993,612 2,255,551 1,561,815 2,842,847 39,467 61,717 - 430,429
	2,594,894 5,590,544
	2,473,652 2,713,581 7,876 10,821
	2,481,528 2,724,402
	113,366 2,866,142
	8,218,031 6,064,905 (5,736,503) (3,340,503) 3,251,522 1,047,352
	5,733,050 3,771,754
	3,251,522 1,047,352 2,481,528 2,724,402
	5,733,050 3,771,754

10 PERSONNEL EXPENSES

11 FINANCE INCOME AND FINANCE COSTS

Finance costs have been capitalised to work in progress at a weighted average rate of 5.94% (2011: 6.00%)

65

Finbar Group Limited 30 June 2012 Annual Financial Report

notes to the financial statements (continued) for the year ended 30 June 2012

12 INCOME TAX EXPENSE Recognised in Income Statement Current Tax Expense Current year Income tax recognised directly to equity Adjustments for prior periods Non-recoverable amounts Deferred Tax Expense Origination and reversal of temporary differences Income Tax Expense excluding share of Income Tax on Equity Accounted Investees Income Tax relating to components of other comprehensive income Total Income Tax Expense excluding share of Income Tax on Equity Accounted Investees Numerical Reconciliation between Tax Expense and Pre-tax Net Proft Proft for the year Other comprehensive income Total income tax expense Proft excluding Income Tax Income tax using the Group’s domestic rate of 30% (2011: 30%) Increase in income tax expense due to: Non-deductible expenses Non-recoverable amounts Decrease in income tax expense due to: Tax effect of share of Jointly Controlled entities’ net proft Tax effect of dividend imputation credits (Over)/under provided in prior years Under/(over) provided in prior years - revaluation of investment property Total Income Tax Expense Made up of: Income Tax Expense excluding share of Income Tax on Equity Accounted Investees Income Tax relating to components of other comprehensive income Income Tax Recognised Directly in Equity Decrease in income tax expense due to: Tax incentives not recognised in income statement Total Income Tax Recognised Directly in Equity	2012 2011 $ $
	18,710,532 7,847,775 136,443 175,843 (108,404) (9) (367) (25)
	18,738,204 8,023,584
	(5,409,350) (1,305,769)
	(5,409,350) (1,305,769)
	13,328,854 6,717,815
	638,597 -
	13,967,451 6,717,815
	25,802,867 28,225,305 2,128,657 - 13,328,854 6,717,815
	41,260,378 34,943,120
	12,378,113 10,482,936 11,526 (2,012,673) (366) (25) (320,952) (1,752,414) - -
	12,068,321 6,717,824 (108,404) (9) 2,007,534 -
	13,967,451 6,717,815
	13,328,854 6,717,815 638,597 -
	13,967,451 6,717,815
	(136,443) (175,843)
	(136,443) (175,843)

66

Finbar Group Limited 30 June 2012 Annual Financial Report

13 INVESTMENT PROPERTY

Balance at 1 July Transferred from Inventory Change in fair value Balance at 30 June	2012 2011 $ $
	68,000,000 12,000,000 32,375,176 49,308,219 12,731,627 6,691,781
	113,106,803 68,000,000

Investment property comprises two commercial properties that are leased to third parties (see Note 28).

14 PROPERTY, PLANT AND EQUIPMENT

Cost Balance at 1 July 2010 Additions Disposals Balance at 30 June 2011 Balance at 1 July 2011 Additions Transferred from inventory Change in fair value Disposals Balance at 30 June 2012 Depreciation Balance at 1 July 2010 Disposals Depreciation and amortisation charge for the year Balance at 30 June 2011 Depreciation Balance at 1 July 2011 Disposals Depreciation and amortisation charge for the year Balance at 30 June 2012 Carrying Amounts At 1 July 2010 At 30 June 2011 At 1 July 2011 At 30 June 2012	Property Offce Furniture Plant and Fixtures and Total and Equipment Equipment Fittings $ $ $ $ $
	868,323 296,656 249,894 189,443 1,604,316 52,266 70,793 3,361,954 - 3,485,013 (868,323) - - - (868,323)
	52,266 367,449 3,611,848 189,443 4,221,006
	52,266 367,449 3,611,848 189,443 4,221,006 1,908,693 5,479 1,945,666 - 3,859,838 5,473,035 - - - 5,473,035 2,128,657 - - - 2,128,657 - (179,391) (11,098) (51,479) (241,968)
	9,562,651 193,537 5,546,416 137,964 15,440,568
	183,074 182,826 33,497 52,083 451,480 (201,749) - - - (201,749) 18,675 41,505 3,818 3,600 67,598
	- 224,331 37,315 55,683 317,329
	- 224,331 37,315 55,683 317,329 - (135,349) (9,044) (23,206) (167,599) - 35,007 7,098 8 42,113
	- 123,989 35,369 32,485 191,843
	685,249 113,830 216,397 137,360 1,152,836
	52,266 143,118 3,574,533 133,760 3,903,677
	52,266 143,118 3,574,533 133,760 3,903,677
	9,562,651 69,548 5,511,047 105,479 15,248,725

67

Finbar Group Limited 30 June 2012 Annual Financial Report

notes to the financial statements (continued) for the year ended 30 June 2012

15 INVESTMENTS IN EQUITY ACCOUNTED INVESTEES

The Group’s share of profit in Equity Accounted Investees for the year was $1,069,844 (2011: $5,841,381).

Jointly Controlled Entities

The Group accounts for investments in Jointly Controlled entities using the equity method.

The Group has the following investments in Jointly Controlled entities:

Jointly Controlled Entities Assets

Jointly Controlled Entities Assets 2011 Ownership 22 Plain Street Pty Ltd 50.00% 78 Terrace Road Joint Venture Pty Ltd 50.00% 132 Terrace Road Joint Venture Pty Ltd 50.00% 143 Adelaide Terrace Pty Ltd 50.00% 185 Swansea Street Pty Ltd 50.00% 375 Hay Street Pty Ltd 50.00% 406 & 407 Newcastle Street Pty Ltd 50.00% 701 Wellington Street Pty Ltd 50.00% Rivervale Concepts Pty Ltd 50.00% 36 Chester Avenue Pty Ltd 50.00% Jointly Controlled Entities Liabilities 2011 22 Plain Street Pty Ltd 78 Terrace Road Joint Venture Pty Ltd 132 Terrace Road Joint Venture Pty Ltd 143 Adelaide Terrace Pty Ltd 185 Swansea Street Pty Ltd 375 Hay Street Pty Ltd 406 & 407 Newcastle Street Pty Ltd 701 Wellington Street Pty Ltd Boas Gardens Estate Pty Ltd (De-registered) Rivervale Concepts Pty Ltd 36 Chester Avenue Pty Ltd Jointly Controlled Entities Assets 2012 Ownership 22 Plain Street Pty Ltd 50.00% 78 Terrace Road Joint Venture Pty Ltd 50.00% 132 Terrace Road Joint Venture Pty Ltd 50.00% 143 Adelaide Terrace Pty Ltd 50.00% 185 Swansea Street Pty Ltd 50.00% 375 Hay Street Pty Ltd 50.00% 406 & 407 Newcastle Street Pty Ltd 50.00% 701 Wellington Street Pty Ltd 50.00% Rivervale Concepts Pty Ltd* 50.00% 36 Chester Avenue Pty Ltd 50.00% Rowe Avenue Pty Ltd 50.00%	Current Assets Non-current Assets Total Assets $ $ $
	8,336,336 297,705 8,634,041 128 - 128 6,772 - 6,772 16,973,670 - 16,973,670 20,010 12,606,705 12,626,715 112,732 - 112,732 1,444,435 391,612 1,836,047 96,923 - 96,923 366,047 - 366,047 34,222 6,443,255 6,477,477
	27,391,275 19,739,277 47,130,552
	Current Liabilities Non-current Liabilities Total Liabilities $ $ $
	8,571,190 173,307 8,744,497 218 - 218 218 - 218 5,923,902 190,306 6,114,208 77,922 12,757,459 12,835,381 11,563 - 11,563 204,556 39,403 243,959 50,157 - 50,157 575 - 575 3,818 - 3,818 10,047 6,468,746 6,478,793
	14,854,166 19,629,221 34,483,387
	Current Assets Non-current Assets Total Assets $ $ $
	2,604,032 - 2,604,032 - - - - - - 278,669 - 278,669 35,320,054 1,261,880 36,581,934 63,697 377 64,074 1,341,573 17,527 1,359,100 5,028 - 5,028 7,975 - 7,975 13,487 7,335,498 7,348,985 978,662 10,487,335 11,465,997
	40,613,177 19,102,617 59,715,794

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Finbar Group Limited 30 June 2012 Annual Financial Report

Jointly Controlled Entities Liabilities 2012 22 Plain Street Pty Ltd 78 Terrace Road Joint Venture Pty Ltd 132 Terrace Road Joint Venture Pty Ltd 143 Adelaide Terrace Pty Ltd 185 Swansea Street Pty Ltd 375 Hay Street Pty Ltd 406 & 407 Newcastle Street Pty Ltd 701 Wellington Street Pty Ltd Rivervale Concepts Pty Ltd 36 Chester Avenue Pty Ltd Rowe Avenue Pty Ltd Net Proft/(Loss) Recognised from Jointly Controlled Entities 2011 22 Plain Street Pty Ltd 78 Terrace Road Joint Venture Pty Ltd 132 Terrace Road Joint Venture Pty Ltd 143 Adelaide Terrace Pty Ltd 185 Swansea Street Pty Ltd 375 Hay Street Pty Ltd 406 & 407 Newcastle Street Pty Ltd 701 Wellington Street Pty Ltd Boas Gardens Estate Pty Ltd (De-registered) Rivervale Concepts Pty Ltd 36 Chester Avenue Pty Ltd Net Proft/(Loss) Recognised from Jointly Controlled Entities 2012 22 Plain Street Pty Ltd 78 Terrace Road Joint Venture Pty Ltd (De-registered) 132 Terrace Road Joint Venture Pty Ltd (De-registered) 143 Adelaide Terrace Pty Ltd 185 Swansea Street Pty Ltd 375 Hay Street Pty Ltd 406 & 407 Newcastle Street Pty Ltd 701 Wellington Street Pty Ltd Boas Gardens Estate Pty Ltd (De-registered) Rivervale Concepts Pty Ltd* 36 Chester Avenue Pty Ltd Rowe Avenue Pty Ltd	Current Liabilities Non-current Liabilities Total Liabilities $ $ $
	1,554,349 71,475 1,625,824 - - - - - - 175,205 - 175,205 35,796,592 1,119,368 36,915,960 1,376 - 1,376 340 39,403 39,743 227 - 227 227 - 227 (1) 7,361,273 7,361,272 88,859 11,380,235 11,469,094
	37,617,174 19,971,754 57,588,928
	Revenues Expenses Proft/(Loss) before income tax $ $ $
	- 53,323 (53,323) - 391 (391) 909 97 812 77,846,327 61,845,631 16,000,696 - 294,815 (294,815) 61,081 10,499 50,582 5,979,043 5,329,331 649,712 2,736,007 2,339,321 396,686 - 206 (206) 7,455 48,266 (40,811) - 1,883 (1,883)
	86,630,822 69,923,763 16,707,059
	Revenues Expenses Proft/(Loss) before income tax $ $ $
	15,497,897 13,942,664 1,555,233 186 94 92 - 79 (79) 8,705,995 6,996,420 1,709,575 - 179,085 (179,085) - 8,471 (8,471) 64,311 (10,359) 74,670 - 1,965 (1,965) 749 172 577 2,000 46,481 (44,481) - 15,673 (15,673) - 4,428 (4,428)
	24,271,138 21,185,173 3,085,965

* Jointly Controlled entities entered into with Wembley Lakes Estates Pty Ltd. John Chan and Darren John Pateman have interests in but not control of Wembley Lakes Estates Pty Ltd.

69

Finbar Group Limited 30 June 2012 Annual Financial Report

notes to the financial statements (continued) for the year ended 30 June 2012

16 OTHER INVESTMENTS

OTHER INVESTMENTS
Current Capitalised lease incentives Total Current Investments Non Current Investments in Subsidiaries Capitalised lease incentives Total Non Current Investments	2012 2011 $ $
	157,414 152,372
	157,414 152,372
	666,606 - 1,655,839 1,813,253
	2,322,445 1,813,253

17 TAX ASSETS AND LIABILITIES

The current tax liability for the Group of $6,751,955 (2011: $3,504,716) represents the amount of income taxes payable in respect of current and prior periods.

Recognised Deferred Tax Assets and Liabilities

Deferred tax assets and liabilities are attributable to the following:

Inventories Interest bearing loans and borrowings Revaluation of investment property Other items Tax value of carry-forward losses recognised Tax assets/(liabilities) Set off of tax Net Tax Liabilities	Assets Liabilities Net 2012 2011 2012 2011 2012 2011 $ $ $ $ $ $
	- - (8,411,752) (7,224,012) (8,411,752) (7,224,012) 3,867,150 3,326,456 - - 3,867,150 3,326,456 - - (6,465,620) - (6,465,620) - 463,120 234,967 (1,327,534) (542,131) (864,414) (307,164) 6,067,104 3,942,981 - - 6,067,104 3,942,981
	10,397,374 7,504,404 (16,204,906) (7,766,143) (5,807,532) (261,739) (10,397,374) (7,504,404) 10,397,374 7,504,404 - -
	- - (5,807,532) (261,739) (5,807,532) (261,739)

Movement in Temporary Differences During the Year

Inventories Interest bearing loans and borrowings Other items Tax value of carry-forward losses recognised Inventories Interest bearing loans and borrowings Revaluation of investment property Other items Tax value of carry-forward losses recognised	Balance Recognised in Recognised in Balance 1 July 2010 Proft or Loss Equity 30 June 2011 $ $ $ $
	6,735,632 488,380 - 7,224,012 (4,464,349) 1,137,893 - (3,326,456) 67,927 63,394 175,843 307,164 (3,559,083) (383,898) - (3,942,981)
	(1,219,873) 1,305,769 175,843 261,739
	Balance Recognised in Recognised in Balance 1 July 2011 Proft or Loss Equity 30 June 2012 $ $ $ $
	7,224,012 1,187,740 - 8,411,752 (3,326,456) (540,694) - (3,867,150) - 6,465,620 - 6,465,620 307,164 420,807 136,443 864,414 (3,942,981) (2,124,123) - (6,067,104)
	261,739 5,409,350 136,443 5,807,532

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Finbar Group Limited 30 June 2012 Annual Financial Report

18 INVENTORIES

Current Work in progress Completed stock Total Current Inventories Non Current Work in progress Total Non Current Inventories	2012 2011 $ $
	97,893,018 - 6,831,231 2,884,321
	104,724,249 2,884,321
	39,336,869 115,075,905
	39,336,869 115,075,905

During the year ended 30 June 2012 work in progress recognised as cost of sales by the Group amounted to $63,957,959 (2011: $37,759,904).

During the year ended 30 June 2012 there were no write-downs in the value of inventories (2011: $Nil).

19 TRADE AND OTHER RECEIVABLES

Current Other trade receivables Amounts receivable from Jointly Controlled entities Total Current Trade and Other Receivables Non Current Other trade receivables Amounts receivable from Jointly Controlled entities Total Non Current Trade and Other Receivables	6,773,207 4,183,967 8,587,510 4,068,429
	15,360,717 8,252,396
	- 3,200,000 9,042,484 8,967,005
	9,042,484 12,167,005

The Group’s exposure to credit risk and impairment losses to trade and other receivables are disclosed at Note 27.

20 PREPAYMENTS

Balance at 1 July Prepayment amount expensed to administrative expenses Net reduction of sundry prepayments Balance at 30 June Made up as follows: Prepayment of administrative expenses Prepayment of sundry development expenses Total Prepayments	859,152 1,491,478 (589,817) (527,449) (13,964) (104,877)
	255,371 859,152
	- 591,317 255,371 267,835
	255,371 859,152

Prepayment of Administrative Expense

On 31 January 2008 the Company announced that the management agreement with J&R Management Pty Ltd under which the executive management staff and other staff provided to Finbar Group Limited had ceased.

The Company has recognised the amount initially through Trade and other payables and through Prepayments. As each development project, the subject of work in progress pursuant to Clause 5A of the Agreement is completed, the amount of work in progress applicable to that development project is expensed to profit or loss.

71

Finbar Group Limited 30 June 2012 Annual Financial Report

notes to the financial statements (continued) for the year ended 30 June 2012

21A CASH AND CASH EQUIVALENTS

Note Bank balances Short term deposits Cash and Cash Equivalents Short term deposits - to secure commercial bill interest coverage 24 Cash and Cash Equivalents in the Statement of Cash Flows	2012 2011 $ $
	31,733,295 59,988,639 - 715,000
	31,733,295 60,703,639 - 600,000
	31,733,295 61,303,639

The Group’s exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities is disclosed at Note 27.

21B RECONCILIATION OF CASH FLOWS FROM OPERATING ACTIVITIES

Cash Flows from Operating Activities Proft for the year Adjustments for: Other comprehensive income for the year, net of income tax Depreciation and amortisation 14 Revaluation of investment property 13 Revaluation of property,plant & equipment 14 Net fnancing (income)/expense 11 Share of net proft of Jointly Controlled entities’ 15 Loss/(gain) on disposal of property, plant & equipment 14 Income tax expense 12 Operating Proft before Changes in Working Capital and Provisions Change in trade and other receivables Change in current inventories 18 Change in non-current inventories 18 Change in prepayments 20 Transferred from inventories to investment property 13 Transferred from inventories to property, plant & equipment 14 Change in provision for employee benefts 25 Change in trade and other payables 26 Cash used in Operating Activities Interest paid 11 Income taxes paid Net Cash used in Operating Activities	25,802,867 28,225,305 1,490,060 - 42,113 67,598 (12,731,627) (6,691,781) (2,128,657) - (113,366) (2,866,142) (1,069,844) (5,841,381) 73,452 (2,629,645) 13,967,451 6,717,815
	25,332,449 16,981,769 (8,122,458) (5,908,259) (101,839,928) 85,491,890 75,739,036 (90,403,653) 603,781 632,326 (32,375,176) (49,308,219) (5,473,035) - (189) 18,047 6,571,424 4,237,566
	(39,564,096) (38,258,533) (2,481,528) (2,724,402) (5,174,416) (3,083,735)
	(47,220,040) (44,066,670)

The increases and decreases in trade and other receivables as well as trade and other payables reflect only those changes that relate to operating activities. The remaining increases and decreases relate to investing activities.

22 CAPITAL AND RESERVES

Share Capital On issue at 1 July Issued under Dividend Reinvestment Plan Issued for cash On Issue at 30 June - Fully Paid	Company Ordinary Shares 2012 2011 207,737,781 162,541,761 6,435,087 5,538,070 - 39,657,950
	214,172,868 207,737,781

The Company does not have authorised capital or par value in respect of its issued shares.

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All shares rank equally with regard to the Company’s residual assets.

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Finbar Group Limited 30 June 2012 Annual Financial Report

Dividends

Dividends recognised in the current year by the Group are:

Dividends Paid During the Year 2012 Interim 2012 ordinary Final 2011 ordinary Total Amount Dividends Paid During the Year 2011 Interim 2011 ordinary Final 2010 ordinary Total Amount	Cents per Share	Total Amount Franked/ Date of Payment $ Unfranked
	3.50 5.50 3.00 5.50	7,470,970 Franked 11 April 2012 11,425,580 Franked 5 September 2011 18,896,550 6,176,111 Franked 8 April 2011 8,939,798 Franked 20 September 2010 15,115,909

Franked dividends declared or paid during the year were franked at the rate of 30%.

After 30 June 2012 the following dividend has been proposed by the Directors. The dividend has not been provided. The declaration and subsequent payment of dividends has no income tax consequences.

Proposed Dividend

Dividends proposed by the Group are:

Proposed Dividend Dividends proposed by the Group are:
Final 2012 ordinary Total Amount	Cents per Share	Total Amount Franked/ Date of Payment $ Unfranked
	5.50	11,779,508 Franked 4 September 2012 11,779,508

The financial effect of this dividend has not been brought to account in the financial statements for the financial year ended 30 June 2012 and will be recognised in subsequent financial reports.

Dividend Reinvestment Plan

The Company has a dividend reinvestment plan under which holders of ordinary shares may elect to have all or part of their dividend entitlements satisfied by the issue of new ordinary shares rather than by being paid in cash.

In accordance with Rule 13 of the Company’s Dividend Reinvestment Plan (DRP), the Directors elected to reactivate the DRP in the 2011 financial year until further notice and as such the DRP will be active for the above mentioned dividend.

Dividend Franking Account

Dividend Franking Account 30% franking credits available to shareholders of Finbar Group Limited for subsequent fnancial years	Company 2012 2011 $ $
	9,475,093 10,532,868

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

(a) franking credits that will arise from the payment of the current tax liabilities;

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

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

(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. The impact on the dividend franking account of dividends proposed after the balance sheet date but not recognised as a liability is to reduce it by $5,048,361 (2011: $4,896,676).

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Finbar Group Limited 30 June 2012 Annual Financial Report

notes to the financial statements (continued) for the year ended 30 June 2012

23 EARNINGS PER SHARE

Basic Earnings per Share

The calculation of basic earnings per share at 30 June 2012 was based on the profit attributable to ordinary shareholders of $26,810,219 (2011: $24,023,464) and a weighted average number of ordinary shares outstanding during the year ended 30 June 2012 of 212,566,057 (30 June 2011: 185,041,746), calculated as follows:

Proft Attributable to Ordinary Shareholders Weighted Average Number of Ordinary Shares Issued ordinary shares at 1 July Effect of share issue - Dividend Reinvestment Plan 20 September 2010 Effect of share issue 14 December 2010 Effect of share issue 4 February 2011 Effect of share issue 9 February 2011 Effect of share issue - Dividend Reinvestment Plan 8 April 2011 Effect of share issue - Dividend Reinvestment Plan 5 September 2011 Effect of share issue - Dividend Reinvestment Plan 11 April 2012 Weighted Average Number of Ordinary Shares at 30 June Basic Earnings per Share (cents per share)	2012 2011 $ $
	26,810,219 24,023,464
	207,737,781 162,541,761 2,846,017 13,524,682 1,369,462 4,335,180 424,644 4,671,635 - 156,641 -
	212,566,057 185,041,746
	12.61 12.98

Diluted Earnings per Share

The calculation of diluted earnings per share at 30 June 2012 was based on the profit attributable to ordinary shareholders of $26,810,219 (2011: $24,023,464) and a weighted average number of ordinary shares outstanding during the year ended 30 June 2012 of 212,566,057 (30 June 2011: 185,041,746), calculated as follows:

Proft Attributable to Ordinary Shareholders (Diluted) Weighted Average Number of Ordinary Shares (Diluted) Weighted average number of ordinary shares at 30 June Effect of share options on issue Weighted Average Number of Ordinary Shares (Diluted) at 30 June Diluted Earnings per Share (cents per share)	26,810,219 24,023,464
	212,566,057 185,041,746 - -
	212,566,057 185,041,746
	12.61 12.98

24 LOANS AND BORROWINGS

This note provides information about the contractual terms of the Group’s interest-bearing loans and borrowings. For more information about the Group’s exposure to interest rate risk see Note 27.

Current liabilities

Commercial bills (Secured) Total Current Interest Bearing Loans and Borrowings Non Current liabilities Commercial bills (Secured) Shareholders loans to subsidiaries (Unsecured) Total Non-current Interest Bearing Loans and Borrowings	63,161,681 39,180,700
	63,161,681 39,180,700
	43,770,000 43,770,000 9,719,583 11,436,406
	53,489,583 55,206,406

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Finbar Group Limited 30 June 2012 Annual Financial Report

Terms and debt repayment schedule Terms and conditions of outstanding loans are as follows: Commercial bills (Secured) Commercial bills (Secured) Commercial bills (Secured) Commercial bills (Secured)* Commercial bills (Secured) Commercial bills (Secured) Shareholder loans to subsidiaries (Unsecured) Shareholder loans to subsidiaries (Unsecured) Shareholder loans to subsidiaries (Unsecured) Shareholder loans to subsidiaries (Unsecured) Total Facilities Available	Nominal Financial Year Interest Rate of Maturity	2012 2011 $ $ $ $
		Face Value Carrying Amount Face Value Carrying Amount
	BBRD 2011 5.66% 2016 BBSY+2.00% 2012 BBRD+1.70% 2012 BBSY+1.09% 2013 BBSY+1.25% 2014 BBSY+5.00% 2012 BBSY+5.00% 2014 BBSY+5.00% 2014 BBSY+5.00% 2014	- - 43,770,000 43,770,000 43,770,000 43,770,000 - - - - 33,180,700 33,180,700 - - 6,000,000 6,000,000 38,461,181 38,461,181 - - 24,700,500 24,700,500 - - - - 2,955,942 2,955,942 4,944,429 4,944,429 5,165,982 5,165,982 210,418 210,418 - - 4,564,736 4,564,736 3,314,482 3,314,482
		116,651,264 116,651,264 94,387,106 94,387,106

Financing Arrangements

Bank overdrafts

Bank overdrafts of the Subsidiaries are secured by a registered mortgage debenture over the Controlled entity’s assets and undertakings. Bank overdrafts are payable on demand and are subject to annual review.

Commercial bills

Commercial bills (refer Note 27) are denominated in Australian dollars.

The commercial bill loans of the Subsidiaries are secured by registered first mortgages over the development property land and buildings of the Controlled entity as well as a registered mortgage debenture over the Controlled entity’s assets and undertakings.

* The interest coverage on the commercial bill of $6,000,000 is secured by a $600,000 short term deposit (see Note 21A)

Shareholder Loans

Shareholder Loans are repayable upon the completion of the project. The Shareholder Loans above relate to projects which are anticipated to complete in the financial year ending 30 June 2014.

25 EMPLOYEE BENEFITS

Current Liability for annual leave Non Current Liability for long-service leave TRADE AND OTHER PAYABLES Current liabilities Trade and other payables Other payables and accrued expenses Total Trade and Other Payables	2012 2011 $ $
	32,615 48,510
	52,393 36,687
	2012 2011 $ $
	12,848,216 7,024,824 1,785,845 1,037,813
	14,634,061 8,062,637

26 TRADE AND OTHER PAYABLES

At 30 June 2012, Consolidated trade and other payables include retentions of $463,360 (2011: $297,370) relating to construction contracts in progress.

The Group’s exposure to liquidity risk related to trade and other payables is disclosed at Note 27.

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Finbar Group Limited 30 June 2012 Annual Financial Report

notes to the financial statements (continued) for the year ended 30 June 2012

27 FINANCIAL INSTRUMENTS

Credit Risk

Exposure to Credit Risk

The carrying amount of the Group’s financial assets represent the maximum credit exposure. The Group’s maximum exposure to credit risk at the reporting date was:

risk at the reporting date was:
		Carrying	Amount
	Note	2012	2011
		$	$
Lease accounting recognition - current	16	157,414	152,372
Lease accounting recognition - non current	16	1,655,839	1,813,253
Trade and other receivables - current	19	15,360,717	8,252,396
Trade and other receivables - non-current	19	9,042,484	12,167,005
Cash and cash equivalents	21a	31,733,295	61,303,639
		57,949,749	83,688,665
The Group’s maximum exposure to credit risk for trade receivables at the reporting date by receivable category was:
Equity Accounted Investees		17,629,994	13,035,434
Working capital advances and bonds		2,211,058	2,014,533
Loan to Joint Venture partner		2,580,000	2,580,000
GST refunds due and sundry other trade debtors		1,982,149	2,789,434
		24,403,201	20,419,401

Impairment Losses

None of the Group’s trade receivables are past due and based on historic default rates the Group believes that no impairment allowance is necessary in respect of trade receivables.

Liquidity Risk

The following are the contractual maturities of non-derivative financial liabilities, including estimated interest payments and excluding the impact of netting agreements:

Note Non-derivative Financial Liabilities Secured bank loans: Commercial bills 24 Shareholder Loans 24 Trade and other payables 26 Non-derivative Financial Liabilities Secured bank loans: Commercial bills 24 Shareholder Loans 24 Trade and other payables 26	30 June 2012 Carrying Contractual 1 Year 1-3 Years More than Amount Cash Flows or Less 3 Years $ $ $ $ $
	106,931,681 118,500,435 67,298,289 51,202,146 - 9,719,583 11,397,183 - 11,397,183 - 14,634,061 14,634,061 14,634,061 - -
	131,285,325 144,531,679 81,932,350 62,599,329 -
	30 June 2011 $ $ $ $ $
	82,950,700 83,566,783 83,566,783 - - 11,436,406 16,925,881 1,372,369 15,553,512 - 8,062,637 8,062,637 8,062,637 - -
	102,449,743 108,555,301 93,001,789 15,553,512 -

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Finbar Group Limited 30 June 2012 Annual Financial Report

Interest Rate Risk

Profile

At the reporting date the interest rate profile of the Group’s interest-bearing financial assets and liabilities was:

Variable Rate Instruments Financial Assets Financial Liabilities	Carrying Amount 2012 2011 $ $
	49,363,289 74,339,073 (116,651,264) (94,387,106)
	(67,287,975) (20,048,033

Cash Flow Sensitivity Analysis for Variable Rate Instruments

A change of 100 basis points in interest rates would have (decreased)/increased the Group’s equity and profit or loss by the amounts shown below. This analysis assumes that all variables remain constant. The analysis is on the same basis for 2011.

30 June 2012 Variable rate instruments 30 June 2011 Variable rate instruments Fair Values	Proft or Loss Equity 100bp Increase 100bp Decrease 100bp Increase 100bp Decrease $ $ $ $
	(416,191) 416,191 (416,191) 416,191
	(351,695) 351,695 (351,695) 351,695

Fair Values Versus Carrying Amounts

The fair values of financial assets and liabilities, together with the carrying amounts shown on the balance sheet are as follows:

Trade and other receivables Cash and cash equivalents Secured bank loans Trade and other payables	30 June 2012 30 June 2011 Carrying Amount Fair Value Carrying Amount Fair Value $ $ $ $
	24,403,201 24,403,201 20,419,401 20,419,401 31,733,295 31,733,295 61,303,639 61,303,639 (106,931,681) (106,931,681) (82,950,700) (82,950,700) (14,634,061) (14,634,061) (8,062,637) (8,062,637)
	(65,429,246) (65,429,246) (9,290,297) (9,290,297)

Guarantees

Subsidiaries

The Company has provided a $7,500,000 limited guarantee and indemnity to Westpac Banking Corporation for security on a finance facility in 88 Terrace Road Pty Ltd.

Equity Accounted Joint Ventures

The Company has provided a $5,000,000 limited guarantee and indemnity to Westpac Banking Corporation for security on a finance facility in 185 Swansea Street Pty Ltd.

28 OPERATING LEASES

OPERATING LEASES
Note Leases as Lessor The Group leases out its investment property held under an operating lease. Rental income received from investment property 13 Other rental property income received	2012 2011 $ $
	6,198,395 5,311,784 53,439 709,577
	6,251,834 6,021,361

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Finbar Group Limited 30 June 2012 Annual Financial Report

notes to the financial statements (continued) for the year ended 30 June 2012

29 CAPITAL AND OTHER COMMITMENTS

Commitments and Contingent Liabilities Property Development Contracted but not provided for and payable: Within one year Later than one year Total Property Development Commitments Property Development - Jointly Controlled Entities Contracted but not provided for and payable: Within one year Later than one year Total Property Development Commitments - Jointly Controlled Entities Group’s Share of Property Development - Jointly Controlled Entities Contracted but not provided for and payable: Within one year Later than one year Total Share of Property Development Commitments - Jointly Controlled Entities Group’s Property Development Commitments including Jointly Controlled Entities Contracted but not provided for and payable: Within one year Later than one year Total Property Development Commitments including Jointly Controlled Entities	2012 2011 $ $
	78,921,348 103,969,550 13,876 33,411,723
	78,935,224 137,381,273
	3,528,585 26,210,829 - 2,652,659
	3,528,585 28,863,488
	1,764,293 13,105,415 - 1,326,330
	1,764,293 14,431,745
	80,685,641 117,074,965 13,876 34,738,053
	80,699,517 151,813,018

30 CONTINGENCIES

The Directors are of the opinion that provisions are not required in respect of these matters, as it is not probable that a future sacrifice of economic benefits will be required or the amount is not capable of reliable measurement.

Guarantees The Company has guaranteed the bank facilities of certain subsidiaries Guarantees The Company has guaranteed the bank facilities of certain equity accounted joint ventures	2012 2011 $ $
	7,500,000 26,500,000
	5,000,000 -

31 RELATED PARTIES

The following were key management personnel of the Group at any time during the reporting period and unless otherwise indicated were key management personnel for the entire period:

Executive Directors

Mr John Chan

Mr Darren John Pateman

Non-executive Directors

Mr Paul Anthony Rengel (Retired 29 September 2011)

Mr John Boon Heng Cheak

Mr Kee Kong Loh

Mr Lee Verios (Appointed 6 December 2011)

Executives

Mr Edward Guy Bank

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Finbar Group Limited 30 June 2012 Annual Financial Report

Note The key management personnel compensation included in ‘personnel expenses’ is as follows: Short term employee benefts Other long term benefts Post employment benefts Employee benefts 10	2012 2011 $ $
	2,171,269 1,884,264 24,387 15,790 83,699 91,123
	2,279,355 1,991,177

Individual Directors and Executives Compensation Disclosures

Information regarding individual Directors and Executives compensation are provided in the Remuneration Report section of the Directors’ report on pages 38 to 40.

Apart from the details disclosed in this note, no Director has entered into a material contract with the Group since the end of the previous financial year and there were no material contracts involving Directors’ interests existing at year-end.

Movements in Shares

The movement during the reporting period in the number of ordinary shares in Finbar Group Limited held, directly, indirectly or beneficially, by each key management person, including their related parties, is as follows:

Directors Mr John Chan Mr Darren John Pateman Mr Paul Anthony Rengel Mr John Boon Heng Cheak Mr Kee Kong Loh Executives Mr Edward Guy Bank Directors Mr John Chan Mr Darren John Pateman Mr Paul Anthony Rengel Mr John Boon Heng Cheak Mr Kee Kong Loh Executives Mr Edward Guy Bank	Held at 1 July 2011 Purchases Sales Held at 30 June 2012
	22,586,513 775,229 - 23,361,742 2,246,619 18,555 - 2,265,174 623,000 - - 623,000 453,934 29,139 - 483,073 2,000,904 - - 2,000,904 300,000 - - 300,000
	28,210,970 822,923 - 29,033,893
	Held at 1 July 2010 Purchases Sales Held at 30 June 2011
	20,830,020 1,756,493 - 22,586,513 2,189,228 57,391 - 2,246,619 623,000 - - 623,000 380,000 73,934 - 453,934 1,930,656 70,248 - 2,000,904 266,503 33,497 - 300,000
	26,219,407 1,991,563 - 28,210,970

No options for shares were granted to key management personnel as remuneration during the reporting period.

Identity of Related Parties

The Group has a related party relationship with Jointly Controlled entities (see Note 15) and with its key management personnel.

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Finbar Group Limited 30 June 2012 Annual Financial Report

notes to the financial statements (continued) for the year ended 30 June 2012

31 RELATED PARTIES (CONTINUED)

Other Related Party Transactions

Jointly Controlled Entities

Loans are made by the Group to Jointly Controlled entities for property development undertakings. Loans outstanding between the Group and Jointly Controlled entities are interest bearing and are repayable at the completion of the Jointly Controlled entity’s development project.

As at 30 June the balance of these loans were as follows: 22 Plain Street Pty Ltd 36 Chester Avenue Pty Ltd 185 Swansea Street Pty Ltd 406 & 407 Newcastle Street Pty Ltd Rowe Avenue Pty Ltd	2012 2011 $ $
	605,516 3,970,546 3,366,955 3,180,896 7,981,994 5,786,109 - 97,883 5,675,529 -
	17,629,994 13,035,434

In the financial statements of the Group, investments in Jointly Controlled entities are carried at the lower of the equity accounted amount and the recoverable amount.

32 GROUP ENTITIES

Country of Incorporation Parent Company Finbar Group Limited Subsidiaries 8 Davidson Terrace Pty Ltd Australia 17 Sunlander Drive Pty Ltd Australia 17-19 Carr Street Pty Ltd (De-registered) Australia 52 Mill Point Road Pty Ltd Australia 59 Albany Highway Pty Ltd Australia 88 Terrace Road Pty Ltd Australia 135 Adelaide Terrace Developments Pty Ltd (De-registered) Australia 175 Adelaide Terrace Pty Ltd Australia 208 Adelaide Terrace Pty Ltd Australia 262 Lord Street Perth Pty Ltd Australia Burt Way Developments Pty Ltd Australia Finbar Finance Pty Ltd Australia Finbar Funds Management Limited Australia Finbar Property Trust Australia Finbar Karratha Pty Ltd Australia Finbar Project Management Pty Ltd Australia Lake Street Pty Ltd Australia Lot 1 to 10 Whatley Crescent Pty Ltd Australia Subsidiaries of Subsidiaries 59 Albany Highway Joint Venture Pty Ltd Australia

Shareholding/ Ownership Interest Unit Holding $ 2012 2011

1 100% 100% 1 100% 100% - - 100% 1 100% - 11 68.75% 68.75% 1 100% 100% - - 100% 1 100% 100% 6 60% - 1 100% - 1 100% 100% 1 100% 100% 1 100% 100% 100 100% 100% 1 100% 100% 2 100% 100% 1 100% 100% 1 100% 100% 131 130 100% 85.38%

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Finbar Group Limited 30 June 2012 Annual Financial Report

33 SUBSEQUENT EVENTS

Other than the item below, there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the Directors of the Company, to affect significantly the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial years.

Since the end of the financial year the Group has been selected as the preferred developer of the former Port Hedland Hospital site, a significant apartment site overlooking the Spoilbank Marina in the Pilbara town of Port Hedland.

34 AUDITORS’ REMUNERATION

Audit Services: Auditors of the Group Audit and review of the fnancial reports Audit and review of the fnancial reports of equity accounted investees Services other than Statutory Audit: Taxation compliance services	2012 2011 $ $
	165,000 211,400 - 9,000
	165,000 220,400
	14,800 11,000
	14,800 11,000

35 PARENT ENTITY DISCLOSURES

As at, and throughout the financial year ending 30 June 2012 the parent company of the Group was Finbar Group Limited.

Result of the Parent Entity Proft for the year Total Comprehensive Income for the Year Financial Position of the Parent Entity Current Assets Total Assets Current Liabilities Total Liabilities Total Equity of the Parent Entity comprising of: Share capital Retained earnings Total Equity	2012 2011 $ $
	9,807,518 22,488,623
	9,807,518 22,488,623
	17,395,422 63,838,238 175,975,576 179,582,967 2,447,854 4,283,656 7,443,019 7,553,098 132,690,721 127,099,001 35,841,836 44,930,868
	168,532,557 172,029,869

Parent Entity Contingencies

The Directors are of the opinion that provisions are not required in respect of these matters, as it is not probable that a future sacrifice of economic benefits will be required or the amount is capable of reliable measurement.

Parent Entity Guarantees in respect of Debts of Subsidiaries

Parent Entity Guarantees in respect of Debts of Subsidiaries
Guarantees The Company has guaranteed the bank facilities of certain Controlled entities: The Company has guaranteed the bank facilities of certain equity accounted joint ventures:	2012 2011 $ $
	7,500,000 26,500,000
	5,000,000 -

The Company has provided a $7,500,000 limited guarantee and indemnity to Westpac Banking Corporation for security on a finance facility in 88 Terrace Road Pty Ltd.

The Company has provided a $5,000,000 limited guarantee and indemnity to Westpac Banking Corporation for security on a finance facility in 185 Swansea Street Pty Ltd.

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Finbar Group Limited 30 June 2012 Annual Financial Report

directors’ declaration

1. In the opinion of the Directors of Finbar Group Limited (‘the Company’):

2. a) The consolidated financial statements and notes that are contained in Pages 49 to 81 and the Remuneration report in the Directors’ report, set out on Pages 38 to 40, are in accordance with the Corporations Act 2001 , including:

3. i) giving a true and fair view of the Group’s financial position as at 30 June 2012 and of its performance for the year ended on that date; and

4. ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and

5. 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.

6. There are reasonable grounds to believe that the Company and the group entities identified in Note 32 will be able to meet any obligations or liabilities to which they are or may become subject to.

7. The Directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the Managing Director and the Chief Financial Officer for the financial year ended 30 June 2012.

8. The Directors draw attention to Note 2(a) to the consolidated financial statements, which contains a statement of compliance with International Financial Reporting Standards.

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

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Darren Pateman

Managing Director

Dated at Perth this Twentieth day of August 2012.

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Finbar Group Limited 30 June 2012 Annual Financial Report

independent auditor’s report to members of Finbar Group Limited

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REPORT ON THE FINANCIAL REPORT

We have audited the accompanying financial report of Finbar Group Limited (the company), which comprises the consolidated statement of financial position as at 30 June 2012, and consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year ended on that date, notes 1 to 35 comprising a summary of significant accounting policies and other explanatory information and the directors’ declaration of the Group comprising the company and the entities it controlled at the year’s end or from time to time during the financial year.

Directors’ responsibility for the financial report

The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that is free from material misstatement whether due to fraud or error. In note 2(a), the directors also state, in accordance with Australian Accounting Standard AASB 101 Presentation of Financial Statements , that the financial statements of the Group comply with International Financial Reporting Standards.

Auditor’s responsibility

Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of the financial report that gives a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.

We performed the procedures to assess whether in all material respects the financial report presents fairly, in accordance with the Corporations Act 2001 and Australian Accounting Standards, a true and fair view which is consistent with our understanding of the Group’s financial position and of its performance.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Independence

In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.

Auditor’s opinion

In our opinion:

(a) the financial report of the Group is in accordance with the Corporations Act 2001, including:

(i) giving a true and fair view of the Group’s financial position as at 30 June 2012 and of its performance for the year ended on that date; and

(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001.

(b) the financial report also complies with International Financial Reporting Standards as disclosed in note 2(a).

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Finbar Group Limited 30 June 2012 Annual Financial Report

independent auditor’s report (continued) to members of Finbar Group Limited

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REPORT ON THE REMUNERATION REPORT

We have audited the Remuneration Report included in paragraph 4.3 of the directors’ report for the year ended 30 June 2012. The directors of the Company are responsible for the preparation and presentation of the remuneration report in accordance with Section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the remuneration report, based on our audit conducted in accordance with auditing standards.

Auditor’s opinion

In our opinion, the remuneration report of Finbar Group Limited for the year ended 30 June 2012, complies with Section 300A of the Corporations Act 2001 .

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KPMG

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Kevin Smout Partner

Perth 20 August 2012

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Finbar Group Limited 30 June 2012 Annual Financial Report

lead auditor’s independence declaration under section 307C of the Corporation Act 2001

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To: the directors of Finbar Group Limited

I declare that, to the best of my knowledge and belief, in relation to the audit for the financial year ended 30 June 2012 there have been:

(i) no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and

(ii) no contraventions of any applicable code of professional conduct in relation to the audit.

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KPMG

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Kevin Smout Partner

Perth

20 August 2012

85

Finbar Group Limited 30 June 2012 Annual Financial Report

ASX additional information

Additional information required by the ASX Limited Listing Rules and not disclosed elsewhere in this report is set out below.

SHAREHOLDINGS (AS AT 30 JUNE 2012)

Substantial Shareholders

The number of shares held by substantial shareholders and their associates are set out below:

Substantial Shareholders The number of shares held by substantial shareholders and their associates are set out below:
Shareholder Name Chuan Hup Holdings HSBC Custody Nominees (Australia) Limited Apex Equity Holdings Berhad JP Morgan Nominees Australia Limited	Number %
	37,561,662 17.54 17,735,458 8.28 16,461,320 7.69 13,696,424 6.40

Voting rights

Ordinary shares

Refer to Note 22 in the Notes to the Financial Statements.

Distribution of Equity Security Holders Range 1-1,000 1,001-5,000 5,001-10,000 10,001-100,000 100,001-over	Number of Holders Ordinary Shares
	213 89,201 422 1,338,046 287 2,268,644 575 17,364,113 110 193,112,864
	1,607 214,172,868

The number of shareholders holding less than a marketable parcel of ordinary shares is 81.

Stock Exchange

The Company is listed on the Australian Securities Exchange. The Home exchange is Perth.

ASX Code: FRI

Other information

Finbar Group Limited, incorporated and domiciled in Australia, is a publicly listed company limited by shares.

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Finbar Group Limited 30 June 2012 Annual Financial Report

Twenty Largest Shareholders:

Chuan Hup Holdings Limited HSBC Custody Nominees (Australia) Limited Apex Equity Holdings Berhad JP Morgan Nominees Australia Limited Blair Park Pty Ltd Rubi Holdings Pty Ltd (John Rubino Super Fund A/C) National Nominees Limited DBS Vickers Securities (Singapore) Pte Ltd Mr James Chan Mrs Siew Eng Mah Apex Investments Pty Ltd Apex Equity Holdings Berhad Cogent Nominees Pty Ltd Mr Ah-Hwa Lim Mr Wan Kah Chan and Mrs Mui Tee Chan Baguio International Limited Mr Guan Seng Chan Forward International Pty Ltd Mr Wan Soon Chan Pateman Equity Pty Ltd Top 20	Number of % Ordinary Shares Held
	37,561,662 17.54 17,735,458 8.28 16,461,320 7.69 13,696,424 6.40 8,691,545 4.06 8,668,930 4.05 8,361,780 3.90 6,201,000 2.90 6,102,757 2.85 5,091,662 2.38 4,900,000 2.29 3,834,724 1.79 3,157,970 1.47 3,133,571 1.46 3,000,000 1.40 2,879,344 1.34 2,534,191 1.18 2,502,549 1.17 2,267,536 1.06 1,527,715 0.71
	158,310,138 73.92

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Finbar Group Limited 30 June 2012 Annual Financial Report

corporate directory

OFFICES AND OFFICERS

Directors

Mr John Chan (Executive Chairman) Mr Darren John Pateman (Managing Director) Mr John Boon Heng Cheak Mr Kee Kong Loh Mr Lee Verios

Company Secretary Mr Edward Guy Bank

Principal Registered Office

Finbar Group Limited Level 6 181 Adelaide Terrace EAST PERTH WA 6004 PO Box 3380 EAST PERTH WA 6951 Telephone: +61 8 6211 3300 Facsimile: +61 8 9221 8833 Email: info@finbar.com.au Website: www.finbar.com.au

Share Registry

Computershare Investor Services Pty Ltd Level 2, Reserve Bank Building 45 St Georges Terrace PERTH WA 6000 Telephone: +61 8 9323 2000

Auditors

KPMG 235 St Georges Terrace PERTH WA 6000

88

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finbar.com.au

Cover Photo: Fairlanes