KORVEST LTD - Annual Report 2011 | FinancialReports.eu

Korvest Ltd and its controlled entities ABN 20 007 698 106

Annual Report 30 June 2011

		Page
•	Directors’ report (including remuneration report)	3
•	5 Year Summary	16
•	Corporate governance statement	17
•	Statement of comprehensive income	25
•	Statement of financial position	26
•	Statements of cash flows	27
•	Statements of changes in equity	28
•	Notes to the consolidated financial statements	29
•	Directors’ declaration	61
•	Audit report	62
•	Lead auditor’s independence declaration	64
•	ASX additional information	65

Korvest Ltd and its controlled entities Directors’ report

For the year ended 30 June 2011

The directors present their report together with the financial report of Korvest Ltd (‘the Company’) and its controlled entities (‘the Consolidated Entity’ or ‘Group’) for the financial year ended 30 June 2011 and the auditor’s report thereon.

DIRECTORS

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

Name, qualifications and	Age	Experience, special responsibilities and other
independence status		directorships
Peter W Stancliffe	63	Appointed as a Director and Chairman on 1
BE (Civil) FAICD Chairman		January 2009. Director Hills Holdings Limited
Non-Independent Non-		Director Automotive Holdings Group Limited
Executive Director
Alexander H W Kachellek	58	A Director since June 2007.
BSc.CEng MIET		Mr Kachellek has experience in a number of
Managing Director		industries including Data Communications and
		Automotive, Lean Operations Consultancy and
		Manufacturing.
		Director Austmine Ltd
Graham L Twartz	54	A Director since 1999.
B.A.(Adel), Dip Acc (Flinders)		Chairman of Audit Committee.
Non-Independent Non-		Managing Director, Hills Holdings Limited.
Executive Director
Peter Brodribb	66	A Director since 1984.
F.I.E (Aust)		Appointed Non-Executive Director in January
Non-Independent Non- Executive Director		2005 after retiring from the position of Managing Director that he had held since 1984.
Steven J W McGregor	39	Company Secretary since April 2008.
BA (Acc), CA		Appointed as Finance Director 1 January 2009
Finance Director

COMPANY SECRETARY

Mr Steven J W McGregor CA, BA(Acc) was appointed to the position of company secretary in April 2008. Mr McGregor previously held the role of chief operating officer and company secretary with an unlisted public company for seven years.

RE-ELECTIONS

In accordance with the Articles of Association, Peter Stancliffe and Steven McGregor retire from the Board at the forthcoming Annual General Meeting on 21 October 2011. Both are eligible for re-election at that meeting and offer themselves accordingly.

Korvest Ltd and its controlled entities Directors’ report

For the year ended 30 June 2011

DIRECTORS’ MEETINGS

The number of directors’ meetings (including meetings of committees of directors) and number of meetings attended by each of the directors of the Company during the financial year are:

Director Board Meetings Audit Committee Meetings Remuneration Committee Meetings	Director Board Meetings Audit Committee Meetings Remuneration Committee Meetings	Director Board Meetings Audit Committee Meetings Remuneration Committee Meetings	Director Board Meetings Audit Committee Meetings Remuneration Committee Meetings
A Mr P.W. Stancliffe 13 Mr A.H.W. Kachellek 13 Mr G.L. Twartz 12 Mr P. Brodribb 13 Mr S.J.W. McGregor 13	B A 13 2 13 - 13 2 13 2 13 -	B A 2 2 - - 2 2 2 2 - -	B 2 - 2 2 -

A = Number of Board meetings attended B = Total Number of Board meetings available for attendance

FINANCIAL RESULTS

The revenue from trading activities for the year under review was $67.384m up 20.8% on the previous year. Profit after tax was $4.221m up by 6.0%. These results were achieved in an environment where trading conditions remain inconsistent in a number of markets in which Korvest operates. Activity in the second half improved with the Industrial Products group in particular experiencing significant improvement.

Korvest Ltd and its controlled entities Directors’ report

For the year ended 30 June 2011

DIVIDENDS

The directors announced a fully franked final dividend of 15.0 cents per share compared to 15.0 cents per share last year and 11.0 cents at the half year. The full year dividend in relation to the 2011 year will be 26.0 cents per share compared to 32.0 cents per share for the previous year.

The final dividend will be paid on 8th September 2011.

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

Cents per share Declared and paid during the year 2011 Interim 2011 ordinary 11.0 Final 2010 ordinary 15.0 Total amount	Total amount $’000 Franked/ unfranked Date of payment 951 Fully franked 11 March 2011 1,293Fully franked 7 September 2010 2,244

Franked dividends declared as paid during the year were franked at the rate of 30 per cent.

Declared after end of year
After the reporting date the following dividends were	proposed by the directors. The dividends hav
not been provided for and there are no income tax consequences to the Company.
Final ordinary 15.0	1,314 Fully franked 8 September 2011
Total amount	1,314

After the reporting date the following dividends were proposed by the directors. The dividends have not been provided for and there are no income tax consequences to the Company.

The financial effect of these dividends has not been brought to account in the financial statements for the year ended 30 June 2011 and will be recognised in subsequent financial reports.

	*Note*	Total
		amount
		$’000
Dividends have been dealt with in the
financial report as:
- Dividends	23	2,244
- Dividends – subsequent to 30 June 2011	23	1,314

STRATEGY AND FUTURE PERFORMANCE

Korvest Ltd’s businesses operate across a range of markets within Australia. It is expected that these markets will be trending moderately upwards over the course of the 2012 year however the state by state and month by month inconsistencies that have been observed over the last few years are expected to continue. Korvest is well placed to take advantage of any improvements in market conditions as they occur and in light of this is expected to produce a satisfactory result in the 2012 year.

Korvest Ltd and its controlled entities Directors’ report (continued)

For the year ended 30 June 2011

ACTIVITIES

The principal continuing activities of the consolidated entity consist of hot dip galvanising, sheet metal fabrication, walkway fabrication, manufacture of cable and pipe support systems and fittings.

REVIEW OF OPERATIONS

The consolidated entity is comprised of the Industrial Products Group which includes the EzyStrut and Indax businesses, and the Production Group which includes the Korvest Galvanisers and Korvest Manufacturing businesses.

Industrial Products

In the Industrial Products group the EzyStrut cable and pipe support business supplies products to contractors for small industrial developments and also supplies products for major infrastructure developments. During the current year a number of projects have contributed positively to the improved performance for this business. On a state by state basis all branches achieved revenue growth in the FY2011 year, however the magnitude of that growth did vary substantially between states where different levels of infrastructure investment were observed. Product innovation within the cable support business enabled EzyStrut to have a competitive advantage in some product lines and this underpinned the improved performance in FY2011.

Included in the Industrial Products group is the Indax grating and stanchion business. The performance for this business was below expectations. During the year Indax suffered a decline in margins and profitability, despite a growth in sales, due to acceptance of larger scale projects carrying lower inherent margins, higher than anticipated material and distribution costs and additional costs resulting from capacity constraints and administrative processes. These projects were completed during FY2011.

Production

In the Production group the Galvanising business had another difficult year. Volumes remained at similar levels to those experienced in FY2010 with month to month tonnage tending to vary due to a lack of consistent project work in the South Australian market. The recent trend of increased pricing pressure due to surplus industry capacity continued throughout the FY2011 year.

SIGNIFICANT CHANGES

The directors are not aware of any significant changes in the state of affairs of the consolidated entity that have occurred during the financial year which have not been covered elsewhere in this report.

Korvest Ltd and its controlled entities Directors’ report (continued)

For the year ended 30 June 2011

EVENTS SUBSEQUENT TO REPORTING DATE

At the date of this report there is no matter or circumstance that has arisen since 30 June 2011, that has significantly affected, or may significantly affect:

(i) the operations of the consolidated entity;
(ii) the results of those operations; or
(iii) the state of affairs of the consolidated entity;

in the financial years subsequent to 30 June 2011.

LIKELY DEVELOPMENTS

In the opinion of the directors it would prejudice the interests of the consolidated entity if the Directors’ report was to refer to any additional information as to likely developments in the operations of the consolidated entity, including the expected results of those operations in subsequent financial years. Such information has therefore not been included in this report.

DIRECTORS AND OFFICERS INSURANCE

Since the end of the previous financial year the Company has paid insurance premiums in respect of directors’ and officers’ liability and legal expenses insurance contracts, for current and former directors and officers of the Company. The insurance premiums relate to:

a) costs and expenses incurred by the relevant officers in defending proceedings, whether civil or criminal and whatever their outcome; and
b) 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.

The premiums were paid in respect of all of the directors and officers of the Company. The directors have not included details of the nature of the liabilities covered or the amount of the premium paid in respect of the directors’ and officers’ liability and legal expenses insurance contracts, as such disclosure is prohibited under the terms of the contract.

Korvest Ltd and its controlled entities Directors’ report (continued)

For the year ended 30 June 2011

REMUNERATION REPORT

Principles of compensation - audited

Remuneration levels are competitively set to attract and retain appropriately qualified and experienced directors and senior executives. Remuneration packages are made up of fixed remuneration and performance-based remuneration. The remuneration structure takes into account,

(a) the overall level of remuneration for each director and executive;
(b) the executive’s ability to control performance; and
(c) the amount of incentives within each executive’s remuneration.

The Managing Director’s incentive is paid as a fixed percentage on the consolidated earnings before interest and taxation (EBIT). Incentives for other executives are paid as a fixed percentage of either their divisional or consolidated EBIT depending on the individual executive’s area of responsibility. The incentive percentage paid ranges from 0.64% to 3.6%. Executives (excluding Executive Directors) also receive shares as part of the Employee Bonus Share Plan that is equally available to all employees who meet the plan service requirements. Executives including Executive Directors were eligible to receive options as part of the Executive Share Plan. The Executive Share Plan was discontinued in 2010 and no issue of options was made under this Plan during the 30 June 2011 year. The Board considers that the above performance structure is generating the desired outcome.

The company’s securities trading policy prohibits those that are granted share-based payments as part of their remuneration from entering into other arrangements that limit their exposure to losses that would result from share price decreases.

Non-executive directors receive a fixed fee. The total remuneration for all non-executive directors was last voted upon by shareholders at the AGM held on 16 October 2009 and is not to exceed $200,000.

Two non-executive directors are also directors of Hills Holdings Limited. Transactions with Hills Holdings Limited are disclosed in Note 30.

Service Contracts

It is the Company’s policy that service contracts for key management personnel are unlimited in term but capable of termination on 1 to 3 months’ notice, and that they company retains the right to terminate the contract immediately by making payment in lieu of notice. The Company has entered into a service contract with each executive key management person.

The key management personnel are also entitled to receive on termination of employment their statutory entitlements and accrued annual leave and long service leave, as well as any entitlement to incentive payments and superannuation benefits.

Consequences of performance on shareholder wealth

In considering the Company’s performance and benefits for shareholder wealth, the remuneration committee have regard to the indices set out in the 5 Year Summary on page 16.

Korvest Ltd and its controlled entities Directors’ report (continued) For the year ended 30 June 2011

REMUNERATION REPORT (continued)

Directors and Executive Remuneration (Company and Consolidated) - audited

Details of the nature and amount of each major element of remuneration of each director of the Company, each of the five named Company and Group executives who receive the highest remuneration and other key management personnel are:-

Name		Short Term	Post employment	Term- ination benefits $	Share based payments Shares $	Share based payments Options $	Total $	S300A (1)(e)(i) Proportion of remuneration performance related %	S300A (1)(e)(vi) Value of options as proportion of remuneration %
		Salary & Fees $ Bonus $	Superannuation benefits $
Specified directors
P.W. Stancliffe	2011	51,666 -	4,650	-	-	-	56,316	-	-
Non-executive(Chairman)	2010	50,000 -	4,500	-	-	-	54,500	-	-
G.L. Twartz	2011	31,000 -	-	-	-	-	31,000	-	-
Non-executive(Director)	2010	30,000 -	-	-	-	-	30,000	-	-
P. Brodribb	2011	31,000 -	2,790	-	-	-	33,790	-	-
Non-executive(Director)	2010	30,000 -	2,700	-	-	-	32,700	-	-
A.H.W. Kachellek	2011	240,005 87,039	29,944	-	-	5,635	362,623	24.0	1.55
Executive(Managing Director)	2010	221,129 67,114	25,657	-	998	5,635	320,533	20.9	1.76
S.J.W. McGregor	2011	202,208 -	18,252	-	-	262	220,722	-	0.12
Executive(Finance Director)	2010	192,579 -	17,389	-	-	262	210,230	-	0.12

Korvest Ltd and its controlled entities Directors’ report (continued) For the year ended 30 June 2011

REMUNERATION REPORT (continued)

Directors and Executive Remuneration (Company and Consolidated) – audited (continued)

Name		Short Term	Post employment	Term- ination benefits $	Share based payments Shares $	Share based payments Options $	Total $	S300A (1)(e)(i) Proportion of remuneration performance related %	S300A (1)(e)(vi) Value of options as proportion of remuneration %
		Salary & Fees $ Bonus $	Super- annuation benefits $
Specified Executives
C.A. Hartwig	2011	195,004 113,888	26,104	-	998	2,052	338,046	33.7	0.61
General Manager Ezystrut (commenced 23 June 2010) General Manager Ezystrut & Indax (commenced 17 April 2009, ceased 23 June 2010) General Manager Galvanising & Indax(ceased 16 April 2009)	2010	179,554 50,549	19,590	-	998	2,052	252,743	20.0	0.81
S.W. Evans	2011	153,923 23,789	16,340	-	-	-	194,052	12.2	-
General Manager Galvanising (commenced 1 July 2009)	2010	147,005 19,361	14,505	-	-	-	180,871	10.7	-
A. P. Ifkovich	2011	131,110 8,200	12,538	-	-	-	151,848	5.4	-
General Manager Indax (Commenced 9 August 2010) Former Executives	2010	- -	-	-	-	-	-	-	-
C.D. Peck	2011	- -	-	-	-	-	-	-	-
General Manager Operations (ceased 23 June 2010)	2010	140,003 36,969	17,724	101,517	998	1,622	298,833	12.37	0.54

Korvest Ltd and its controlled entities Directors’ report (continued) For the year ended 30 June 2011

REMUNERATION REPORT (continued)

Options and rights over equity instruments granted as compensation - audited

No options were granted during the financial year nor have any options been granted since the end of the financial year.

Exercise of options granted as compensation

During the reporting period the following shares were issued on the exercise of options previously granted as compensation:

	Number of shares	Amount paid $/share
Directors A Kachellek S McGregor	30,000 15,000	$3.79 $3.79
Executives C Hartwig	10,000	$3.79

There are no amounts unpaid on the shares issued as a result of the exercise of the options in the 2011 financial year.

Under the terms of the Korvest Ltd Executive Share Plan upon exercise of the options the individual must pay the exercise price over a maximum term of 20 years. Dividends, after deduction of an amount intended for the participant’s tax, are applied in payment of the exercise price. The arrangement to pay the exercise price over 20 years is interest free and without personal recourse to the participants (recourse is limited to the shares themselves).

Analysis of options and rights over equity instruments granted as compensation - audited

Details of vesting profiles of the options granted as remuneration to each director and key executive of the Company are detailed below.

	Options	Granted
	Number	Date	% vested in year	% forfeited or lapsed in year	Year in which grant vests
Directors A Kachellek S McGregor	30,000 15,000	Mar 2009 Apr 2010	100% 100%	-% -%	30 June 2011 30 June 2011
Executives C Hartwig	10,000	Mar 2009	100%	-%	30 June 2011

There are no unvested options on issue as at reporting date.

Korvest Ltd and its controlled entities Directors’ report (continued) For the year ended 30 June 2011

REMUNERATION REPORT (continued)

The movement during the reporting period, by value, of options over ordinary shares in the Company held by each company director and key executives are detailed below.

		Value of Options	Value of Options
	Granted in year $ (A)	Exercised in year $ (B)	Lapsed or forfeited in year $ (C)
Directors A Kachellek SMcGregor	- -	20,100 10,050	- -
Executives CHartwig	-	6,700	-

(A) The value of options granted in the year is the fair value of the options calculated at grant date using a binominal option- pricing model. The total value of the options granted is included in the table above. This amount is allocated to remuneration over the vesting period (i.e. in years 1 July 2009 to 1 July 2014) which includes the minimum service period.
(B) The value of options exercised during the year is calculated as the market price of the Company on the Australian Securities Exchange as at close of trading on the date the options were exercised after deducting the price paid to exercise the option. No options were exercised for accounting purposes during the financial year.
(C) The value of the options that lapsed during the year represents the benefit foregone and is calculated at the date the option lapsed using a binominal option – pricing model with no adjustments for whether the performance criteria had been achieved.

Further details regarding options granted to executives under the Executive Share Plan are in Notes 21 and 29 to the financial statements.

Korvest Ltd and its controlled entities Directors’ report (continued)

For the year ended 30 June 2011

Analysis of bonuses included in remuneration – audited

With the exception of the Finance Director, executive bonuses are paid based on either consolidated earnings before interest and taxation (EBIT) or divisional EBIT depending on the responsibilities of the individual executive. A percentage of EBIT is determined at the beginning of the year based on budgets. This percentage is then applied to actual EBIT achieved. Potential bonuses paid to executives under this methodology are not capped and therefore Korvest is unable to disclose the % of short term incentives that vested or were forfeited.

The Finance Director’s bonus is based on achievement of specified outcomes during the year. Those outcomes did not occur and therefore during the financial year 100% of the bonus entitlement was forfeited.

DIRECTORS’ INTERESTS

The relevant interest of each director over the shares and rights or options over such instruments issued by the companies within the consolidated entity and other related bodies corporate. As notified by the directors to the Australian Securities Exchange in accordance with S250G(1) of the Corporations Act 2001, at the date of this report is as follows:

	Korvest Ltd	Korvest	Hills Holdings	Hills Holdings	Hills Holdings
	Ordinary Shares	Ltd	Limited	Limited	Limited
		Share	Ordinary	Share	Performance
		Options	Shares	Options	Rights
PeterStancliffe	1,000	-	19,104	-	-
Alexander Kachellek	30,695	-	-	-	-
Peter Brodribb	15,781	-	16,469	-	-
Graham Twartz	29,115	-	207,342	100,000	118,926
Steven McGregor	15,500	-	-	-	-

Korvest Ltd and its controlled entities Directors’ report (continued)

For the year ended 30 June 2011

NON-AUDIT SERVICES

During the year KPMG, the Company’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 in accordance with written advice provided by resolution of the Audit Committee, is satisfied that the provision of these services did not compromise the auditor’s 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 Company; and
the non-audit services provided do not undermine the general principles relating to auditor independence as they did not involve reviewing or auditing the auditor’s own work, acting in a management or decision making capacity for the Company, acting as an advocate for the Company or jointly sharing risk and rewards.

For details of non-audit services fees charged refer to Note 9 to the financial statements.

FINANCIAL INSTRUMENTS DISCLOSURE

The consolidated entity’s activities expose it to interest rate fluctuations and credit, liquidity and cash flow risks from its operations. The Board has established policies and procedures in each of these areas to manage these risks. For details of financial instruments refer to Note 24 to the financial statements.

ENVIRONMENT

The consolidated entity’s operations are subject to various environmental regulations under both Commonwealth and State legislation. The consolidated entity has established a process whereby compliance with existing environmental regulations and new regulations is monitored continually. This process includes procedures to be followed should an incident occur which adversely impacts the environment.

The directors are not aware of any breaches of environmental legislation during the financial year which are material in nature. The consolidated entity has, in accordance with its compliance policy, been investigating whether the quality of soil and ground water is affected by the operations of the site’s previous owners.

The directors are satisfied that these investigations and actions taken to date will ensure continued compliance with environmental legislation.

LEAD AUDITOR’S INDEPENDENCE DECLARATION

The lead auditor’s independence declaration is set out on page 64 and forms part of the Directors’ report for the financial year ended 30 June 2011.

Korvest Ltd and its controlled entities Directors’ report (continued) For the year ended 30 June 2011

ROUNDING OFF

The Company is of a kind referred to in ASIC Class Order 98/100 dated 10 July 1998 and in accordance with that Class Order, amounts in the financial report and Directors’ report have been rounded off to the nearest thousand dollars, unless otherwise stated.

Signed at Adelaide this Monday 22[nd ] of August 2011 in accordance with a resolution of the directors.

==> picture [136 x 71] intentionally omitted <==

P. W. STANCLIFFE, Director

==> picture [145 x 39] intentionally omitted <==

A. H. W. KACHELLEK, Director

Korvest Ltd and its controlled entities For the year ended 30 June 2011

5 Year Summary

Sales Revenue ($'000) Profit after tax ($'000) Depreciation/Amortisation ($'000) Cash flow from operations ($'000) Profit from ordinary activities - As % of Shareholders’ Equity - As % of Sales Revenue - Per issued share Dividend - Total amount ($'000) - Per issued share - Times covered by profit from ordinary activities Number of employees Shareholders - Equity to total assets ratio - Number at year end Net assets per issued ordinary share Share price as at 30 June	2011 2010 2009 2008 2007 67,384 55,774 62,892 54,877 45,434
	4,221 3,983 5,655 4,716 4,583
	1,279 1,060 985 695 605
	3,185 3,864 7,590 2,178 3,244
	12.7% 13.2% 19.5% 18.1% 21.1% 6.3% 7.1% 9.0% 8.6% 10.1% 48.9c 46.3c 65.8c 54.9c 53.7c
	2,244 2,921 2,660 2,395 2,219 26.0c 32.0c 34.0c 28.0c 27.0c 1.9 1.4 2.1 2.0 2.0 242 221 204 194 187 75% 79% 77% 75% 75% 1,247 1,165 1,094 1,056 1,125 $3.79 $3.49 $3.36 $3.06 $2.54 $3.57 $4.65 $3.70 $5.15 $5.78

Korvest Ltd and its controlled entities For the year ended 30 June 2011

Corporate governance statement

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

Principle 1 - Lay solid foundations for management and oversight

The Company complies with the ASX recommendation of recognising and publishing the respective roles and responsibilities of Board and management.

The Board’s primary role is the protection and enhancement of long-term shareholder value. The Board believes that good corporate governance is essential to fulfilling its role and that it positively contributes to long-term shareholder value.

The Board delegates responsibility for the day-to-day management of the Company to the Managing Director and senior executives, but remains responsible for overseeing the performance of the management team. To ensure that this responsibility is clearly defined, the Board has delegated a range of authorities to management through formal delegations. These include limited expenditure authority along with the limited authority to enter into contracts and engage staff.

In general, the Board is responsible for, and has the authority to determine, all matters relating to the policies, practices, management and operations of the Company. It is required to do all things that may be necessary to be done in order to carry out the objectives of the Company. The Board has the final responsibility for the successful operations of the Company. Without intending to limit this general role of the Board, the specific or principal functions and responsibilities include:

Acting as an interface between the Company and shareholders;
Setting the goals of the Company;
Reviewing the annual progress and performance of the Company in meeting its objectives;
Providing the overall strategic direction of the Company;
Determining policies governing the operations of the Company;
Appointing and approving the terms and conditions of the appointment of the Managing Director (MD);
Reviewing and providing feedback on the performance of the MD;
Endorsing the terms and conditions for senior executives reporting to the MD through the Remuneration Committee;
Establishing and determining the powers and functions of the committees of the Board, including the Audit and the Remuneration Committee;
Approving major operating plans;
Approving the annual budget and long-term budgets;
Board approval of all banking facilities;
Approving all significant items of capital expenditure;
Approving all significant operational expenditures outside budget;
Approving all mergers and acquisitions, and property acquisitions and disposals;
Approving the issue or cancellation of shares;
Approving all significant loans to outside parties or employees;

Korvest Ltd and its controlled entities For the year ended 30 June 2011

Corporate governance statement (continued)

Approving half-yearly and yearly accounts;
Keeping the market informed about Korvest in accordance with ASX rules;
Reviewing its own performance;
Resolution of major issues of material nature affecting the organisation;
Approving management reporting processes and documentation;
Approving all significant contracts, leases and other company commitments; and
Ensuring that all requirements of the ASX, ASIC, ACCC, ATO and other relevant legislation are met.

A copy of the Board Charter and responsibilities is available on the Company website at www.korvest.com.au

Executive performance

The Managing Director via a formal performance management process reviews the performance of senior executives regularly. The executives are assessed on their performance against specified performance objectives. During the reporting period each senior executive has undertaken this process with the Managing Director.

Principle 2 - Structure the Board to add value

ASX recommends the Company have a Board of an effective composition, size and commitment to adequately discharge its responsibilities and duties. The Company has not complied with all aspects of this Principle and the areas of divergence are detailed below.

Board composition

The Company constitution allows for a maximum of ten directors. The Company Board currently comprises five directors, three being non-executive directors plus the Managing Director and Finance Director. The directors come from a variety of business and professional backgrounds and bring to the Board a range of skills and experience relevant to the consolidated entity. Details of the directors’ experience, expertise and terms in office are set out on page 3 of this annual report.

Board independence

Three non-executive directors are non-independent. Two of the directors that are non-independent, Mr P W Stancliffe and Mr G L Twartz are considered non-independent primarily due to their positions as directors at Hills Holdings Limited which holds a major interest in Korvest. The other, Mr P. Brodribb, is considered non-independent due to his former position of Managing Director of Korvest.

In the event of a tied vote, the Chairman, a non-independent non-executive director, has the casting vote. This is not in accordance with ASX recommendation 2.1 but is considered appropriate by the directors for a small, established public company.

The Board believes that the first priority in the selection of directors is their ability to add value to the Board and enhance the performance whilst safeguarding shareholders’ interests. Accordingly, relevant expertise and competence is considered as important as technical independence.

The skills and experience of each director is set out in the Director’s report.

Korvest Ltd and its controlled entities For the year ended 30 June 2011

Corporate governance statement (continued)

The role of the Chairman

The Chairman, Mr P W Stancliffe, whilst non-executive, is a non-independent director. This is not in accordance with ASX recommendation 2.2 but is considered appropriate given that Hills Holdings Limited holds 48.1% of the shares in the Company. Mr Stancliffe’s considerable experience in the various industries within which the company operates and the various positions and activities engaged in outside the entity are considered invaluable in his role as Chairman.

The Board believes that the role of Chairman should be filled by the person most suited to the role, with the most relevant skills and experience and who adds the greatest value to the Board and to the company.

In accordance with Recommendation 2.3 the roles of Chairman and CEO are not held by the same person with Mr A Kachellek being the Managing Director for the Company.

Nomination Committee

The Board has not established a Nomination Committee due to the size of the Company.

A director appointed to fill a casual vacancy must stand for election at the next Annual General Meeting. One third of the non-executive directors must retire at each Annual General Meeting, being those longest in office since their last election. Those directors are eligible for re-election at that meeting.

Board performance

The Company’s Board informally reviews the operations of the Board and its committees and the performance of its individual directors. The review is conducted annually, focusing on a few key issues each year with a view to assessing overall performance over a three year period. The Board has also formalised a process for the induction of new directors to ensure they are provided with the information required to properly perform their role.

Board operations

During 2011 the Board met 13 times and the directors’ attendance at those meetings is set out on page 4 of this annual report. The directors receive a comprehensive Board pack, which includes financial statements and executive reports. The Chairman and the Managing Director communicate regularly between Board meetings. Senior executives attend and present to Board and committee meetings on particular issues when required.

All directors have unrestricted access to company records, information and personnel and the Board has a policy of allowing individual directors to seek independent professional advice at the Company’s expense, subject to the approval of cost by the Chairman. Such approval shall not be unreasonably withheld.

Korvest Ltd and its controlled entities For the year ended 30 June 2011

Corporate governance statement (continued)

Principle 3 - Promote ethical and responsible decision-making

The Company complies with the ASX recommendation that the Company actively promote ethical and responsible decision making.

While the Board has adopted those ASX principles of good corporate governance that it has deemed pertinent, it believes that these types of rules and regulations are of limited value unless supported by a foundation of honesty and integrity.

The Board has adopted a formal (written) Code of Conduct for Korvest, effectively a corporate creed that is best applied by asking “What is the right thing to do?” The code applies to all employees within the company from the Board, through management to all other staff. The code encourages all staff and other stakeholders to report any breaches of the code to the Chairman of the Board, who is required to investigate and report on all such matters.

The Code of Conduct is supported by more detailed policies setting out the philosophy of the company in relation to its various stakeholders. A copy of the code is available on the website at www.korvest.com.au.

Share dealings by directors and officers

In accordance with the Company’s constitution, all directors are required to be shareholders and hold a minimum of 500 shares within two months of their appointment. The company has for many years encouraged the holding of its shares by directors and employees.

The Board has adopted a securities trading policy that specifically precludes directors and officers from buying or selling shares during specified black out periods relative to the announcement of the annual or half-year results or if in possession of price sensitive information not generally available to the public. Employees are not to deal in shares on a short term basis. A copy of the policy is available on the Korvest website and details of directors’ individual shareholdings are set out in Note 29 to the financial statements.

Principle 4 - Safeguard integrity in financial reporting

The Company complies with the ASX recommendation that a structure be in place to independently verify and safeguard the integrity of the Company’s financial reporting.

Commitment to financial integrity

The Board has policies designed to ensure that the Company’s financial reports meet high standards of disclosure and provide the information necessary to understand the Company’s financial performance and position. The policies require that the Managing Director and Finance Director provide to the Board prior to the Board approving the annual and half-year accounts, a written statement that the accounts present a true and fair view, in all material respects, of the Company’s financial performance and position and are in accordance with relevant accounting standards, laws and regulations.

Korvest Ltd and its controlled entities For the year ended 30 June 2011

Corporate governance statement (continued)

Audit Committee

The Board has an Audit Committee. The committee has a Board approved charter setting out its role, responsibilities, structure and membership requirements. A copy of its charter can be found on the Korvest website.

The committee consists of three directors, all of whom are non-executive and non-independent. The Chairman of the committee is a non-independent director who is not the Chairman of the Board. The composition of the committee is not in accordance with ASX recommendation 4.3 but is considered appropriate by the directors for a small, established public company. The Managing Director, Finance Director and external auditors are invited to attend the committee meetings. Details of membership and attendance at committee meetings are set out on page 4 of this annual report.

Audit process

The Company’s financial accounts are subject to an annual audit by an independent, professional auditor, who also reviews the half-year accounts. The Board requests the external auditor to attend the Annual General Meeting each year and to be available to answer shareholder questions regarding the conduct of the audit and the preparation and content of the auditor’s report.

Auditor independence

The Board has in place policies for ensuring the quality and independence of the company’s external auditor. The majority of fees paid to the external audit firm for work other than the audit of the accounts were for taxation services. Details of the amounts paid for both audit and non-audit services are set out in Note 9 of this annual report. The Board requires that adequate hand-over occurs in the year prior to rotation of an audit partner to ensure an efficient and effective audit under the new partner.

Risk management and oversight

The Managing Director is charged with implementing appropriate risk systems within the Company. He includes in his report to the Board any issues or concerns.

The Board reviews all major strategies for their impact on the risks facing the Company and takes appropriate action. Similarly, the Company reviews all aspects of its operations for changes to the risk profile on an annual basis.

Principle 5 - Make timely and balanced disclosure

The Company complies with the ASX recommendations that the Company should promote timely and balanced disclosures of all material matters concerning the Company.

The Board has established continuous disclosure controls to ensure compliance with ASX Listing Rules that include senior executives providing regular sign-off concerning matters that require disclosure to the ASX.

Korvest Ltd and its controlled entities For the year ended 30 June 2011

Corporate governance statement (continued)

Principle 6 - Respect the rights of shareholders

The Company complies with the ASX recommendations that the Company should respect the rights of shareholders and facilitate the effective exercise of those rights.

The Board is committed to ensuring that shareholders are informed of all non-confidential material matters. It accomplishes this through:

the annual report distributed during September each year; and
making appropriate disclosure to the market where necessary.

Shareholders are encouraged to attend the Annual General Meeting where the Board is available to answer questions raised by shareholders.

Principle 7 - Recognise and manage risk

The company complies with the ASX recommendation that the Company should establish a sound system of risk oversight and management and internal control.

The Audit and Compliance Committee oversees the operation of the risk management controls established by the Company.

The Managing Director is charged with implementing appropriate risk systems within the company. He includes in his report to the Board any issues or concerns.

In accordance with recommendation 7.3 the Managing Director and Finance Director have declared, in writing to the Board, that the financial risk management and associated compliance and controls have been assessed and found to be operating efficiently and effectively. The operational and other risk management compliance and controls, have also been assessed and found to be operating efficiently and 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 company.

Principle 8 - Remunerate fairly and responsibly

The ASX recommendation is that the Company should ensure that the level and composition of remuneration is sufficient and reasonable and that its relationship to corporate and individual performance is defined.

The Company has complied with this Principle during the reporting period. For further information see the Remuneration report in the Directors’ report.

Korvest Ltd and its controlled entities For the year ended 30 June 2011

Corporate governance statement (continued)

Commitment to responsible executive remuneration

The Board believes that it has a responsibility to ensure that executive remuneration is fair and reasonable, having regard to the competitive market for executive talent, structured effectively to motivate and retain valued executives and designed to produce value for shareholders.

Remuneration Committee

The Remuneration Committee sets policies for directors’ and senior officers’ remuneration, makes specific recommendations to the Board on the remuneration of directors and senior officers and undertakes a detailed review of the performance of the Managing Director at least annually. The committee consists of three non-executive, non-independent directors. Details of membership and attendance at committee meetings are set out on page 4 of this annual report.

Directors’ remuneration

The remuneration of non-executive directors is different to that of executives. Executive directors receive a salary and may receive shares in accordance with plans approved by shareholders. Further details in respect of executive remuneration are set out on pages 8 to 13 of this report.

Non-executive directors receive a set fee per annum and are fully reimbursed for any out of pocket expenses necessarily incurred in carrying out their duties. They do not receive any performance related remuneration, nor shares or options as part of their remuneration.

When reviewing directors’ fees, the Board takes into account any changes in the size and scope of the company’s activities, the potential liability of directors and the demands placed on them in discharging their responsibilities. The Board also considers the advice of independent remuneration consultants.

Retirement benefits

Directors receive their statutory superannuation entitlements only.

Korvest Ltd and its controlled entities For the year ended 30 June 2011

Corporate governance statement (continued)

Other items

Indemnity and insurance of directors

In accordance with the Company’s constitution and to the extent permitted by law, the Company indemnifies every person who is, or has been, a director or secretary and may agree to indemnify a person who is or has been an officer of a group company against a liability incurred by that person in his or her capacity as such a director, secretary or officer, to another person (other than the Company or a related body corporate of the Company) provided that the liability does not arise out of conduct involving a lack of good faith. In addition, the Company has directors and officers insurance against claims and expenses that the Company may be liable to pay under these indemnities.

Commitment to its staff

The Company aspires to be a well regarded and progressive employer that provides safe and rewarding workplaces for all of its staff so that they can fully contribute their talents to the achievement of corporate goals.

The Company encourages its staff to become shareholders and share in the success of the company. The current employee share plan offers all permanent staff with more than two years continuous service ordinary shares in the Company.

The Company is committed to protecting the health, safety and wellbeing of its staff, contractors and visitors to its premises.

Commitment to the environment

The Company cares about the environment and recognises that protection of it is an integral and fundamental part of its business. The Company has an environmental management system in place and management assists staff to understand and implement the relevant aspects of this system in their day-today work. Environmental compliance is monitored with relevant issues being reported through management to the Board.

Commitment to the community

The Board believes that the Company has a responsibility to the Australian, South Australian and local community. The Company aspires to be a good corporate citizen through the effective provision of quality products and services, through the taxes it pays, the employment and training it provides its staff, the involvement of its staff in professional, educational and community organisations and through the donations it makes to various charities. The Company is justifiably proud of its reputation as a dependable Australian entity.

Korvest Ltd and its controlled entities Statement of comprehensive income

For the year ended 30 June 2011

In thousands of AUD *Note* Revenue 6 Expenses, excluding net finance costs 7 Profit before financing costs Finance income 10 Finance expenses 10 Net finance income Profit before income tax Income tax expense 11 Profit for the year Other comprehensive income Revaluation of property, plant & equipment Foreign currency translation differences Total comprehensive income for the period Attributable to: Equity holders of the parent Total comprehensive income for the period Earnings per share attributable to the ordinary equity holders of the Company: Basic earnings per share from continuing operations 12 Diluted earnings per share from continuing operations 12	Consolidated 2011 2010 67,384 55,774
	67,384 55,774 (61,363) (50,187)
	6,021 5,587
	30 149 (27) -
	3 149
	6,024 5,736 (1,803) (1,753)
	4,221 3,983
	908 - - 100
	5,129 4,083
	5,129 4.083
	5,129 4,083
	0.49 0.46
	0.49 0.46

The statement of comprehensive income is to be read in conjunction with the notes of the financial statements set out on pages 29 to 60.

Korvest Ltd and its controlled entities Statement of financial position

As at 30 June 2011

In thousands of AUD *Note* Assets Cash and cash equivalents 13 Trade and other receivables 14 Inventories 15 Current tax receivable 16 Total current assets Property, plant and equipment 18 Total non-current assets Total assets Liabilities Trade and other payables 19 Employee benefits 21 Income tax payable 16 Provisions 22 Total current liabilities Employee benefits 21 Deferred tax liability 17 Provisions 22 Total non-current liabilities Total liabilities Net assets Equity Issued capital Reserves Retained earnings Total equity attributable to equity holders of the parent Total equity	Consolidated 2011 2010 1,577 2,605 16,025 10,825 9,176 9,806 - 13
	26,778 23,249
	17,243 15,296
	17,243 15,296
	44,021 38,545
	7,459 5,256 1,187 1,061 237 - - 496
	8,883 6,813
	467 385 1,120 880 333 196
	1,920 1,461
	10,803 8,274
	33,218 30,271
	3,713 3,662 4,250 3,331 25,255 23,278
	33,218 30,271
	33,218 30,271

The statement of financial position is to be read in conjunction with the notes to the financial statements set out on pages 29 to 60.

Korvest Ltd and its controlled entities Statement of cash flows

For the year ended 30 June 2011

For the year ended 30 June 2011
In thousands of AUD *Note* Cash flows from operating activities Cash receipts from customers Cash paid to suppliers and employees Cash generated from operations Interest received Interest paid Income taxes paid Net cash from operating activities 28 Cash flows from investing activities Proceeds from sale of property, plant and equipment Acquisition of property, plant and equipment 18 Net cash from investing activities Cash flows from financing activities Dividends paid 23 Net cash from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at 1 July Cash and cash equivalents at 30 June 13	Consolidated 2011 2010 68,769 61,696 (63,885) (55,655)
	4,884 6,041 30 149 (27) - (1,702) (2,326)
	3,185 3,864
	72 22 (2,041) (2,362)
	(1,969) (2,340)
	(2,244) (2,921)
	(2,244) (2,921)
	(1,028) (1,397) 2,605 4,002
	1,577 2,605

The statement of cash flows is to be read in conjunction with the notes to the financial statements set out on pages 29 to 60.

Korvest Ltd and its controlled entities

Statement of changes in equity

For the year ended 30 June 2011

For the year ended 30 June 2011
Consolidated In thousands of AUD Balance at 1 July 2010 Total comprehensive income Revaluation of Property, Plant & Equipment Shares issued under the Share Plans Dividends to shareholders Balance at 30 June 2011 Balance at 1 July 2009 Total comprehensive income Shares issued under the Share Plans Dividends to shareholders Balance at 30 June 2010	Share capital Equity compens- ation reserve Trans- lation reserve Asset revaluation reserve Retained earnings Total
	3,662 56 - 3,275 23,278 30,271
	- - - - 4,221 4,221
	- - - 908 - 908
	51 11 - - - 62
	- - - - (2,244) (2,244)
	3,713 67 - 4,183 25,255 33,218
	3,617 42 (100) 3,275 22,216 29,050 - - 100 - 3,983 4,083 45 14 - - - 59 - - - - (2,921) (2,921)
	3,662 56 - 3,275 23,278 30,271

The statement of changes in equity is to be read in conjunction with the notes to the financial statements set out on pages 29 to 60.

Korvest Ltd and its controlled entities Notes to the consolidated financial statements

1.	Reporting entity	30	8.	Personnel expenses	42
2.	Basis of preparation	30	9.	Auditors’ remuneration	43
3.	Significant accounting policies	30	10.	Net financing costs	43
(a)	Basis for consolidation	31	11.	Income tax expense	43
(b)	Foreign currency	31	12.	Earnings per share	44
(c)	Financial instruments	31	13.	Cash and cash equivalents	44
(d)	Share Capital	32	14.	Trade and other receivables	45
(e)	Property, plant and equipment	33	15.	Inventories	45
(f)	Leased assets	33	16.	Current tax assets and liabilities	45
(g)	Inventories	33	17.	Deferred tax assets and liabilities	45
(h)	Impairment	34	18.	Property, plant and equipment	47
(i)	Employee benefits	35	19.	Trade and other payables	48
(j)	Provisions	36	20.	Loans and borrowings	48
(k)	Revenue	36	21.	Employee benefits	49
(l)	Finance income and expenses	36	22.	Provisions	51
(m)	Operating lease payments	36	23.	Capital and reserves	51
(n)	Income tax	36	24.	Financial instruments	53
(o)	Goods and services tax	37	25.	Operating leases	55
(p)	Earnings per share	37	26.	Capital and other commitments	55
(q)	Segment reporting	37	27.	Consolidated entities	56
(r)	Presentation of financial statements	38	28.	Reconciliation of cash flows from	56
				operating activities
(s)	New standards and interpretations not	38
	yet adopted		29.	Key management personnel disclosures	57
4	Financial risk management	39	30.	Non-key management personnel	59
				disclosures
5.	Segment reporting	40
			31.	Subsequent events	60
6.	Revenue and other income	42
			32.	Parent entity disclosures	60
7.	Expenses	42

Korvest Ltd and its controlled entities Notes to the consolidated financial statements

1. Reporting entity

Korvest Ltd (the ‘Company’) is a company domiciled in Australia. The address of the Company’s registered office is 580 Prospect Road, Kilburn SA 5084. The consolidated financial statements of the Company as at and for the year ended 30 June 2011 comprise the Company and its subsidiaries (together referred to as the ‘Group’ or ‘Consolidated Entity’). The Group primarily is involved in manufacturing businesses as detailed in the segment note.

2. Basis of preparation

(a) Statement of compliance

The financial report is a general purpose financial report which has been prepared in accordance with Australian Accounting Standards (AASBs) (including Australian Interpretations) adopted by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001. The consolidated financial report of the Group complies with International Financial Reporting Standards (IFRSs) and interpretations adopted by the International Accounting Standards Board (IASB).

The financial report was approved by the Board of Directors on 22[nd] August 2011

(b) Basis of measurement

The consolidated financial statements have been prepared on the historical cost basis except for land and buildings, which are measured at fair value

(c) Functional and presentation currency

These consolidated financial statements are presented in Australian dollars, which is the Company’s functional currency and the functional currency of the majority of the Group. The Company is of a kind referred to in ASIC Class Order 98/100 dated 10 July 1998 and in accordance with that Class Order, all financial information presented in Australian dollars has been rounded to the nearest thousand unless otherwise stated.

(d) Use of estimates and judgements

The preparation of financial statements 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 assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year are included in the following notes:

•Note 14 – Trade and other receivables
•Note 15 – Inventories
•Note 22 – Provisions

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.

Korvest Ltd and its controlled entities Notes to the consolidated financial statements

3. Significant accounting policies (continued)

(a) Basis of consolidation

(i) Subsidiaries

Subsidiaries are entities controlled by the Group. Control exists when the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

(ii) Transactions eliminated on consolidation

Intra-group balances and any unrealised gains and losses or income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements.

(b) Foreign currency

(i) Foreign currency transactions

Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to Australian dollars at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the statement of comprehensive income. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to Australian dollars at foreign exchange rates ruling at the dates the fair value was determined.

(ii) Foreign operations

The assets and liabilities of foreign operations, including fair value adjustments arising on consolidation, are translated to Australian dollars at foreign exchange rates ruling at the reporting date. The income and expenses of foreign operations are translated to Australian dollars at rates approximating the foreign exchange rates ruling at the dates of the transactions.

Foreign currency differences are recognised directly in equity. When a foreign operation is disposed of, in part or in full, the relevant amount in the foreign currency translation reserve is transferred to profit or loss.

(c) Financial instruments

(i) Non-derivative financial instruments

Non-derivative financial instruments includes: 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 nonderivative financial instruments are measured as described below.

A financial instrument is recognised if the Group becomes a party to the contractual provisions of the instrument. Financial assets are derecognised if the Group’s contractual rights to the cash flows from the financial assets expire or if the Group transfers the financial asset to another party without retaining control or substantially all risks and rewards of the asset. Regular way purchases and sales of financial assets are accounted for at trade date, i.e. the date that the Group commits itself to purchase or sell the asset. Financial liabilities are derecognised if the Group’s obligations specified in the contract expire or are discharged or cancelled.

Korvest Ltd and its controlled entities Notes to the consolidated financial statements

3. Significant accounting policies (continued)

(c) Financial instruments (continued)

(i) Non-derivative financial instruments (continued)

Cash and cash equivalents

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.

Trade and other receivables

Trade and other receivables are initially recognised at fair value and subsequently measured at amortised cost less any impairment charges.

Trade and other payables

Liabilities are recognised for amounts to be paid in the future for goods and services received, whether or not billed to the Group. They are initially recognised at fair value and subsequently measured on the amortised cost basis, using the effective interest basis.

Trade payables are non-interest bearing and are normally settled on 30 to 60 day terms.

Interest-bearing borrowings

Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in the statement of comprehensive income over the period of the borrowings on an effective interest basis.

(d) Share capital

Ordinary shares

Incremental costs directly attributable to issue of ordinary shares and share options are recognised as a deduction from equity, net of any related income tax benefit.

Dividends

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

Korvest Ltd and its controlled entities Notes to the consolidated financial statements

3. Significant accounting policies (continued)

(e) Property, plant and equipment

(i) Land and Buildings

Land and buildings are stated at fair value. Land and buildings are independently valued at least every four years on an existing use basis, and in the intervening years are valued by the directors based on the most recent independent valuation.

(ii) Plant and Equipment

Items of plant and equipment are stated at cost or deemed cost less accumulated depreciation and impairment losses. The cost of selfconstructed assets includes the cost of materials, direct labour, the initial estimate, where relevant, of the costs of dismantling and removing the items and restoring the site on which they are located, and an appropriate proportion of production overheads.

(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 costs of the day-to-day servicing of property, plant and equipment are recognised in the statement of comprehensive income as incurred.

(iv) Depreciation

Depreciation is provided so as to write off the cost of each non-current asset excluding freehold land over its effective useful life ranging from 3 to 40 years. The straight line method is used. The depreciation rates used for each class of asset for the current and comparative period are buildings - 2.5% and plant and equipment - a range of depreciation rates averaging 10%. The residual value, the useful life and the depreciation method applied to an asset are reassessed at least annually.

(v) Disposal

Gains and 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 and equipment and are recognised net within “other income” in the statement of comprehensive income. When revalued assets are sold, the amounts included in the revaluation reserve are transferred to retained earnings.

(f) Leased assets

Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. Upon initial recognition the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset.

Other leases are operating leases and the leased assets are not recognised on the Group’s statement of financial position.

(g) Inventories

Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the first-in first-out principle, and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads based on normal operating capacity. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

Korvest Ltd and its controlled entities Notes to the consolidated financial statements

3. Significant accounting policies (continued)

(h) Impairment

(i) Financial assets

A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset.

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.

Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics.

All impairment losses are recognised in profit or loss.

An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. For financial assets measured at amortised cost, the reversal is recognised in profit or loss.

(ii) Non-financial assets

The carrying amounts of the Group’s non-financial assets, other than 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.

An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. A cashgenerating unit is the smallest identifiable asset group that generates cash flows that largely are independent from other assets and groups. Impairment losses are recognised in profit or loss.

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.

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.

Korvest Ltd and its controlled entities Notes to the consolidated financial statements

3. Significant accounting policies (continued)

(i) Employee benefits

(i) Defined contribution superannuation funds

A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution superannuation funds are recognised as a personnel expense in profit or loss when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available.

(ii) Long-term benefits

The Group’s net 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. The obligation is calculated using expected future increases in wage and salary rates, including related on-costs and expected settlement dates, and is discounted using the rates attached to the Commonwealth Government bonds at the reporting date which have maturity dates approximating to the terms of the Group’s obligations.

(iii) Short-term benefits

Liabilities for employee benefits for wages, salaries and annual leave represent present obligations resulting from employees’ services provided to reporting date and are calculated at undiscounted amounts based on remuneration wage and salary rates that the Group expects to pay as at reporting date including related on-costs, such as workers compensation insurance and payroll tax. Nonaccumulating non-monetary benefits, such as medical care, housing, cars and free or subsidised goods and services, are expensed based on the net marginal cost to the Group as the benefits are taken by the employees.

A provision 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 estimated reliably.

(iv) Share-based payment transactions

The fair value of options at the date 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.

Employee Share Bonus Plan

The Employee Share Bonus Plan allows Group employees to acquire shares of the Company. Shares are allotted to employees who have served a qualifying period. Up to $1,000 per year in shares is allotted to each qualifying employee. The fair value of shares issued is recognised as an employee expense with a corresponding increase in equity. The fair value of the shares granted is measured using a present value method.

Executive Share Plan

The Executive Share Plan allows Group employees to acquire shares of the Company. The fair value of options granted is recognised as an employee expense with a corresponding increase in equity. The fair value is measured at grant date and spread over the period during which the employees become unconditionally entitled to the options. The valuation method takes into account the exercise price of the option, the life of the option, the current price of the underlying shares, the expected volatility of the share price, the dividends expected of the shares and the risk-free interest rate for the life of the option.

Korvest Ltd and its controlled entities Notes to the consolidated financial statements

3. Significant accounting policies (continued)

(j) 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.

(k) Revenue

(i) Goods sold

Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of returns and allowances, trade discounts and volume rebates. Revenue is recognised when the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, and there is no continuing management involvement with the goods. Transfer of risks and rewards vary according to the terms of individual sale contracts. Transfer usually occurs when the product is received by the customer.

(l) Finance income and expenses

Finance income comprises interest income on funds invested. Interest income is recognised as it accrues.

Finance expenses comprise interest expense on borrowings. Interest expense is recognised as it accrues.

(m) Operating lease payments

Payments made under operating leases are recognised in the statement of comprehensive income on a straight-line basis over the term of the lease. Lease incentives received are recognised in the statement of comprehensive income as an integral part of the total lease expense and spread over the lease term.

(n) Income tax

Income tax expense comprises current and deferred tax. Income tax expense is recognised in profit or loss except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

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

Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. 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 income taxes levied by the same tax authority on the same taxable entity.

A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which temporary difference 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.

Korvest Ltd and its controlled entities Notes to the consolidated financial statements

3. Significant accounting policies (continued)

(o) 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 taxation authority. 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 statement of financial position.

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

(p) 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.

(q) 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. All operating segments’ operating results are regularly reviewed by the Group’s Managing Director to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available.

Segment results that are reported to the Managing Director 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, 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.

Korvest Ltd and its controlled entities Notes to the consolidated financial statements

3. Significant accounting policies (continued)

(r) Presentation of financial statements

The Group applies revised AASB 101 Presentation of Financial Statements (2007), which became effective as of 1 January 2009. As a result, the Group presents in the consolidated statement of changes in equity all owner changes in equity, whereas all non-owner changes in equity are presented in the consolidated statement of comprehensive income.

(s) New standards and interpretations not yet adopted

A number of new standards, amendments to standards and interpretations are effective for annual reporting periods beginning after 1 July 2010, and have not been applied in preparing these consolidated financial statements. None of these are expected to have a significant effect on the consolidated financial statements of the Company.

Korvest Ltd and its controlled entities Notes to the consolidated financial statements

4. Financial risk management

Overview

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

credit risk;
liquidity risk; and
market risk.

The board of directors has overall responsibility for the establishment and oversight of the risk management framework.

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. The Audit Committee oversees how management monitors compliance with the 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.

Trade and other receivables

Credit risk arises from cash and cash equivalents and deposits with banks and financial institutions, as well as credit exposures to customers, including outstanding receivables and committed transactions.

Management has established a credit policy under which each new customer is analysed individually for creditworthiness before the Group’s standard payment and delivery terms and conditions are offered. The Group’s review includes external ratings and trade references. Purchase limits are established for each customer, which represent the maximum open amount without requiring further approval. These limits are reviewed monthly. Customers that fail to meet the Group’s benchmark creditworthiness may transact with the Group only on a prepayment basis.

The maximum exposure to credit risk at the reporting date is the carrying amount of the financial assets as summarised in Note 24.

In most cases goods are sold subject to retention of title clauses, so that in the event of non-payment the Group may have a priority claim. The Group does not require collateral in respect of trade and other receivables.

The Group has established an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables. The main components of this allowance are a specific loss component that relates to individually significant exposures, and a collective loss component established for groups of similar assets in respect of losses that have been incurred but not yet identified.

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 manages liquidity risk by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. Surplus funds are generally only invested in instruments that are tradeable in highly liquid markets.

Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, 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, while optimising the return.

Korvest Ltd and its controlled entities Notes to the consolidated financial statements

4. Financial risk management (continued)

Currency risk

The Group is exposed to currency risk with respect to some purchases that are denominated in currencies other than Australian Dollars (AUD). The currency in which these transactions are primarily denominated is US dollars (USD).

Interest rate risk

The Group is not currently exposed in any material way to interest rate risk. The risk is limited to the re-pricing of short term deposits utilised for surplus funds. Such deposits generally re-price approximately every 30 days.

Other market price risk

The Group has no material financial instrument exposure to other market price risk as it is not exposed to either commodity price risk or equity securities price risk. The Group does not enter into commodity contracts other than to meet the Group’s expected usage requirements.

Capital management

The Group's objectives when managing capital are to safeguard its ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

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

5. Segment Reporting

The entity has two reportable segments. The business is organised based on products and services. The following summary describes the operations in each of the Group’s reportable segments.

Industrial Products - includes the manufacture of electrical and cable support systems and steel fabrication. It includes the businesses trading under the EzyStrut and Indax names.

Production – represents the Korvest Galvanising business, which provides hot dip galvanising services. The reportable segment also includes light to medium fabrication of components and machine guarding.

Both reportable segments consist of the aggregation of a number of operating segments in accordance with AASB 8 Operating Segments.

Information regarding the operations of each reportable segment is included below in the manner reported to the chief operating decision maker as defined in AASB 8. Performance is measured based on segment earnings before interest and tax (EBIT). Inter-segment transactions are not recorded as revenue. Instead a cost allocation relating to the transactions is made based on negotiated rates.

	Industrial Products	Industrial Products	Production	Production	Total
In thousands of AUD	2011	2010	2011	2010	2011	2010
External revenue	61,799	50,013	5,585	5,761	67,384	55,774
Depreciation and amortisation	735	576	417	355	1,152	931
Reportable segment profit before tax	5,430	5,296	664	858	6,094	6,154
Reportable segment assets	29,281	23,444	4,221	4,801	33,502	28,245
Capital expenditure	1,691	1,682	237	575	1,928	2,257

Korvest Ltd and its controlled entities Notes to the consolidated financial statements

5. Segment reporting (continued)

In thousands of AUD Reconciliation of reportable segment profit, assets and other material items Profit Total profit for reportable segments Unallocated amounts – other corporate expenses Consolidated profit before income tax Assets Total assets for reportable segments Other unallocated amounts Consolidated total assets Other material items Depreciation – reportable segments Unallocated amounts – other corporate depreciation Consolidated total	2011 2010 6,094 6,154 (70) (418)
	6,024 5,736
	33,502 28,245 10,519 10,300
	44,021 38,545
	1,152 931 127 129
	1,279 1,060

Geographical segments

The entity operates predominately in Australia.

Customers

The Group does not derive 10% or more of its revenue from any single customer.

Korvest Ltd and its controlled entities Notes to the consolidated financial statements

In thousands of AUD *Note* 6. Revenue and other income Revenue Sales of goods 7. Expenses Cost of goods sold Distribution expenses Sales and marketing expenses Administration expenses Restructuring costs Foreign currency translation reserve on winding up of NZ subsidiary Other expenses Profit from ordinary activities before income tax has been arrived at after charging / (crediting) the following items Depreciation of buildings Depreciation of plant and equipment 18 Increase / (decrease) in provisions 22 Executive share plan expense 21,23 Employee share bonus plan expense 21,23 Impairment loss/(reversal) on trade receivables 14 Impairment loss/(reversal) on inventories 15 (Gain) / loss on disposal of property, plant and equipment Research and development expense 8. Personnel expenses Wages and salaries Other associated personnel expenses Contributions to defined contribution superannuation funds 21a Increase in liability for annual leave 21 Increase/(decrease) in liability for long service leave 21 Equity-settled transactions 21b	Consolidated 2011 2010 67,384 55,774
	67,384 55,774
	39,776 30,966 6,207 4,574 13,532 12,207 1,807 2,136 - 186 - 100 41 18
	61,363 50,187
	58 58 1,221 1,002
	1,279 1,060
	(308) (65) 11 14 51 45 318 207 146 (182) 40 18 48 368 15,727 13,486 2,374 2,293 1,220 1,119 150 50 59 34 62 59
	19,592 17,041

Korvest Ltd and its controlled entities Notes to the consolidated financial statements

In AUD Note 9. Auditors’ remuneration Audit services Auditors of the Company KPMG Australia: Audit and review of financial reports Other services Auditors of the Company KPMG Australia Taxation services In thousands of AUD 10. Net financing costs Interest income on bank deposits held Interest expense from bank overdrafts Net financing income 11. Income tax expense Recognised in the statement of comprehensive income Current tax expense Current year Adjustments for prior years Deferred tax expense Origination and reversal of temporary differences 17 Total income tax expense in statement of comprehensive income	Consolidated 2011 2010 63,500 60,000
	63,500 60,000
	27,594 23,223
	27,594 23,223
	30 149 (27) -
	3 149
	2,039 1,565 (87) (9)
	1,952 1,556
	(149) 197
	1,803 1,753

Korvest Ltd and its controlled entities Notes to the consolidated financial statements

		Consolidated	Consolidated
	In thousands of AUD	2011	2010
11.	Income tax expense (continued)
	Numerical reconciliation between tax expense and pre-tax net profit
	Profit before tax	6,024	5,736
	Income tax using the domestic corporation tax rate of 30% (2010:
	30%)	1,807	1,721
	Increase in income tax expense due to:
	Non-deductible expenses	83	41
	Under / (over) provided in prior years	(87)	(9)
	Income tax expense on pre-tax net profit	1,803	1,753

12. Earnings per share

Basic and diluted earnings per share

The calculation of basic earnings per share at 30 June 2011 was based on the profit attributable to ordinary shareholders of $4,221,110 (2010: $3,983,343) and a weighted average number of ordinary shares outstanding during the financial year ended 30 June 2011 of 8,624,404 (2010: 8,597,020). The calculation of diluted earnings per share at 30 June 2011 was based on the profit attributable to ordinary shareholders of $4,231,842 (2010: $3,997,323) and a weighted average number of ordinary shares outstanding during the financial year ended 30 June 2011 of 8,710,358 (2010: 8,670,787).

Weighted average number of ordinary shares In thousands of shares Issued ordinary shares at 1 July Effect of shares issued during year Weighted average number of ordinary shares at 30 June Weighted average number of ordinary shares (diluted) In thousands of shares Weighted average number of ordinary shares (basic) Effect of Executive Share Plan Weighted average number of ordinary shares at 30 June Earnings per share Basic and diluted earnings per share In AUD From continuing operations	2011 2010 8,611 8,591 13 6 8,624 8,597 2011 2010 8,624 8,597 86 74 8,710 8,671 2011 2010 0.49 0.46
	0.49 0.46

Weighted average number of ordinary shares
In thousands of shares
Issued ordinary shares at 1 July
Effect of shares issued during year
Weighted average number of ordinary shares at 30 June
Weighted average number of ordinary shares (diluted)
In thousands of shares
Weighted average number of ordinary shares
(basic)
Effect of Executive Share Plan
Weighted average number of ordinary shares at 30 June
Earnings per share
Basic and diluted earnings per share
In AUD
From continuing operations

2011
2010
8,611
8,591
13
6
8,624
8,597
2011
2010
8,624
8,597
86
74
8,710
8,671
2011
2010
0.49
0.46

0.49
0.46

13. Cash and cash equivalents

	Consolidated	Consolidated
In thousands of AUD	2011	2010
Bank balances	985	1,470
Call deposits	592	1,135
Cash and cash equivalents in the statement of cash flows	1,577	2,605
The Group had an undrawn overdraft facility of $1.7 million as at 30 June 2011.

Korvest Ltd and its controlled entities Notes to the consolidated financial statements

In thousands of AUD *Note* 14. Trade and other receivables Current Other receivables and prepayments Trade receivables 24	Consolidated 2011 2010 141 117 15,884 10,708
	16,025 10,825

Group trade receivables are shown net of provided impairment losses amounting to $499,000 (2010: $239,000).

15. Inventories

Inventories
Raw materials and consumables Work in progress Finished goods	863 1,535 67 120 8,246 8,515
	9,176 9,806

Finished goods are shown net of impairment losses amounting to $1,078,000 (2010: $932,000) arising from the likely inability to sell a product range.

16. Current tax assets and liabilities

The current tax liability for the consolidated entity of $236,545 (2010: $13,240 asset) represents the amount of income taxes payable (2010 receivable) in respect of current and prior periods.

17 . Deferred tax assets and liabilities

Recognised deferred tax assets and liabilities

Deferred tax assets and liabilities are attributable to the following:

Consolidated In thousands of AUD Property, plant and equipment Inventories Provisions / accruals Other items Tax (assets) / liabilities Set off of tax Net tax (assets) / liabilities	Assets Liabilities Net 2011 2010 2011 2010 2011 2010 - (22) 1,845 1,410 1,845 1,388 (323) (280) 346 372 23 92 (602) (532) - - (602) (532) (150) (71) 4 3 (146) (68) (1,075) (905) 2,195 1,785 1,120 880 1,075 905 (1,075) (905) - - - - 1,120 880 1,120 880

Korvest Ltd and its controlled entities Notes to the consolidated financial statements

17 . Deferred tax assets and liabilities (continued)

Movement in temporary differences during the year

In thousands of AUD Property, plant and equipment Inventories Provisions / accruals Other items In thousands of AUD Property, plant and equipment Inventories Provisions / accruals Other items	Consolidated
	Balance 30 June 10 Recognised in income Recognised in equity Balance 30 June 11
	(1,388) (68) (389) (1,845)
	(92) 69 - (23)
	532 70 - 602
	68 78 - 146
	(880) 149 (389) (1,120)
	Balance 1 July 09 Recognised in income Recognised in equity Balance 30 June 10 (1,279) (109) - (1,388) (22) (70) - (92) 544 (12) - 532 74 (6) - 68
	(683) (197) - (880)

Korvest Ltd and its controlled entities Notes to the consolidated financial statements

18. Property, plant and equipment

In thousands of AUD Balance at 1 July 2009 Other acquisitions Disposals Balance at 30 June 2010 Balance at 1 July 2010 Revaluation Other acquisitions Disposals Balance at 30 June 2011 Depreciation and impairment losses Balance at 1 July 2009 Depreciation charge for the year Disposals Balance at 30 June 2010 Balance at 1 July 2010 Depreciation charge for the year Disposals Revaluation Balance at 30 June 2011 Carrying amounts At 1 July 2009 At 30 June 2010 At 1 July 2010 At 30 June 2011	Consolidated Land and buildings (fair value) Plant and equipment (cost) Total 6,989 13,940 20,929 - 2,362 2,362 - (92) (92)
	6,989 16,210 23,199

	6,989 16,210 23,199
	1,111 - 1,111
	- 2,041 2,041
	- (232) (232)
	8,100 18,019 26,119
	70 6,825 6,895 58 1,002 1,060 - (52) (52) 128 7,775 7,903 128 7,775 7,903 58 1,221 1,279 - (120) (120) (186) - (186) - 8,876 8,876 6,919 7,115 14,034 6,861 8,435 15,296 6,861 8,435 15,296 8,100 9,143 17,243

An independent valuation of Land and Buildings was carried out in May 2011 by Mr Jeffrey Millar, AAPI of AON Valuation Services, on the basis of the open market value of the properties concerned in their existing use. Land was valued at $5,000,000 and buildings were valued at $3,100,000. The carrying amount of the Land and Buildings at cost at 30 June 2011 if not revalued would be $1,138,585.

A deferred tax liability of $389,000 was recognised in relation to the revaluation of land and buildings.

Korvest Ltd and its controlled entities Notes to the consolidated financial statements

19. Trade and other payables

Trade and other payables
In thousands of AUD *Note* Other trade payables and accrued expenses Non-trade payables and accrued expenses 24	Consolidated 2011 2010 5,738 3,937 1,721 1,319
	7,459 5,256

20. Loans and borrowings

This note provides information about the contractual terms of the consolidated entity’s interest-bearing loans and borrowings. For more information about the consolidated entity’s exposure to interest rate and foreign currency risk, see Note 24.

borrowings. For more information about the consolidated entity’s exposure to interest rate Note 24.	and foreign currency risk, see
In thousands of AUD Non-current liabilities Unsecured government loan at nominal value Fair value adjustment Unsecured government loan at fair value	Consolidated 2011 2010 40 40 (40) (40)
	- -

Korvest Ltd and its controlled entities Notes to the consolidated financial statements

21. Employee benefits Current In thousands of AUD Liability for annual leave Liability for long service leave Non Current Liability for long-service leave Total employee benefits	Consolidated 2011 2010 890 740 297 321 1,187 1,061 467 385
	1,654 1,446

(a) Defined contribution superannuation funds

The consolidated entity makes contributions to defined contribution superannuation funds. The amount recognised as expense was $1,220,238 for the financial year ended 30 June 2011 (2010: $1,119,055).

(b) Share based payments

In March 2005, the Group established a share option plan that entitled selected senior executives to acquire shares in the entity subject to the successful achievement of performance targets related to improvements in total shareholder returns over a two-year option period. The plan was discontinued in 2010.

The options are exercisable if the total shareholder return (measured as share price growth plus dividends paid) over a twoyear period from the grant date exceeds ten percent plus CPI per annum. Once exercised the shares are forfeited if the holder ceases to be an employee of the Group within a further three-year period. The shares issued pursuant to these options are financed by an interest free loan from the holding company repayable within twenty years from the proceeds of dividends declared by the holding company. These loans are of a non-recourse nature. For accounting purposes these 20year loans are treated as part of the options to purchase shares, until the loan is extinguished at which point the shares are recognised.

The options are offered only to selected senior executives. Details of the options are as follows:

	Number of options	Number	Number
Grant date		outstanding at	outstanding at
		balance date	balance date
		AIFRS	ASX
March 2005	60,000	52,500	-
March 2009	85,000	65,000	-
Total share options	145,000	117,500	-

Options subject to a non-recourse loan for the purchase of shares are not recognised as exercised by International Financial Reporting Standards, until the loan is extinguished at which point the shares are recognised.

Grant date Exercise date Expiry date Exercise price Consolidated 2011 Mar 05 Jan 07 Jan 2027 $4.36 Mar 09 Jan 11 Jan 2031 $3.79 Apr 10 Jan 11 Jan 2031 $3.79 Weighted average exercise price	Number of options at beginning of year Options granted Options lapsed / forfeited Options exercised Number of options at end of year on issue
	52,500 - - - 52,500
	60,000 - (10,000) - 50,000
	15,000 - - - 15,000
	127,500 - (10,000) - 117,500
	$4.03 - $4.04

Korvest Ltd and its controlled entities Notes to the consolidated financial statements

21. [Employee Benefits (continued) ]

Share-based payments (continued)

Share-based payments (continued)
Grant date Exercise date Expiry date Exercise price Consolidated 2010 Mar 05 Jan 07 Jan 2027 $4.36 Mar 08 Jan 10 Jan 2030 $6.00 Mar 09 Jan 11 Jan 2031 $3.79 Apr 10 Jan 11 Jan 2031 $3.79 Weighted average exercise price In thousands of AUD Share options granted in 2005 Share options granted in 2007 Share options granted in 2008 Share options granted in 2009 Expense arising from employee share scheme Total expense recognised as employee costs	Number of options at beginning of year Options granted Options lapsed / forfeited Options exercised Number of options at end of year on issue
	52,500	- - - 52,500
	60,000	- (60,000) - -
	85,000	- (25,000) - 60,000
	-	15,000 - - 15,000
	197,500	15,000 (85,000) - 127,500
	$4.61	$3.79 $4.03 Consolidated 2011 2010 - 3 2 2 8 8 1 1 51 45 62 59

Korvest Ltd and its controlled entities Notes to the consolidated financial statements

22. Provisions

Provisions
In thousands of AUD Consolidated Balance at 1 July 2010 Provisions made during the year Provisions reduced during the year Provisions used during the year Balance at 30 June 2011 Current Non-current	Site restoration and safety 692 - (308) (51)
	333
	- 333
	333

Site restoration and safety

An initial provision of $360,000 was made during the financial year ended 30 June 2003 and further provisions have been made in the intervening years in respect of the consolidated entity’s obligation to rectify potential environmental damage and site safety issues at the main site premises in Kilburn. Some expenditure was required in relation to these issues during the financial year ended 30 June 2011 at a cost of $51,000 (2010: $72,000). During the financial year ended 30 June 2011 the provision was reassessed and reduced by $308,000.

23. Capital and reserves

Share capital

Share capital In thousands of shares On issue at 1 July Issued under the Employee Share Bonus Plan On issue at 30 June – fully paid	The Company Ordinary shares 2011 2010 8,611 8,591 29 20
	8,640 8,611

The Company made two issues of ordinary shares under the Employee Share Bonus Plan during the year. All employees meeting the service criteria were eligible to participate in the issue. The shares are issued at market value.

Effective 1 July 1998, the Company Law Review Act abolished the concept of par value shares and the concept of authorised capital. Accordingly, 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.

Korvest Ltd and its controlled entities Notes to the consolidated financial statements

23. Capital and reserves (continued)

Translation reserve

The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations where their functional currency is different to the presentation currency of the reporting entity.

Revaluation reserve

The revaluation reserve relates to land and buildings measured at fair value in accordance with Australian Accounting Standards.

Equity Compensation reserve

The reserve for own shares represents the value of shares held by an equity compensation plan that the consolidated entity is required to include in the consolidated financial statements. This reserve will be reversed against share capital or retained earnings when the underlying shares vest in the employee. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the consolidated entity’s own equity instruments.

Dividends

Dividends recognised in the current year by the Company are:

In thousands of AUD Cents per share	Total amount Franked / unfranked Date of payment
2011
Interim 2011 ordinary 11.0	951 Fully franked 1 March 2011
Final 2010ordinary 15.0	1,293 Fullyfranked 7September 2010
Total amount	2,244
2010 Interim 2010 ordinary 17.0 Final 2009 ordinary 17.0 Total amount	1,460 Fully franked 5 March 2010 1,461 Fully franked 1 September 2009 2,921

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

After the balance sheet date the following dividends were proposed by the directors. The dividends have not been provided. The declaration and subsequent payment of dividends has no income tax consequences.

	Cents per share	Total amount	Franked /	Date of
In thousands of AUD			unfranked	payment
Final ordinary	15.0	1,314	Fully franked	8 September 2011
Total amount		1,314

The financial effect of these dividends have not been brought to account in the financial statements for the financial year ended 30 June 2011 and will be recognised in subsequent financial reports.

Korvest Ltd and its controlled entities Notes to the consolidated financial statements

23. Capital and reserves (continued)

Dividends In thousands of AUD 30% franking credits available to shareholders of Korvest Ltd for subsequent financial years	The Company 2011 2010 11,458 10,602

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 by the tax consolidated group 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 reporting date but not recognised as a liability is to reduce it by $563,022 (2010: $553,674).

24. Financial instruments

Credit risk

Exposure to credit risk

The carrying amount of the Group’s financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date is summarised below:

		Consolidated	Consolidated
In thousands of AUD	*Note*	2011	2010
Cash and cash equivalents	13	1,577	2,605
Trade and other receivables	14	16,025	10,825

Impairment losses

The ageing of the Group’s trade and other receivables at the reporting date was:

Group

roup
In thousands of AUD Not past due Past due 0-30 days Past due 31-90 days More than 91 days	Gross Impairment Gross Impairment 2011 2011 2010 2010 7,665 (15) 7,377 - 5,209 (110) 3,321 - 2,842 (73) 250 (123) 808 (301) 116 (116)
	16,524 (499) 11,064 (239)

Korvest Ltd and its controlled entities Notes to the consolidated financial statements

24. Financial instruments (continued)

The movement in the allowance for impairment in respect of trade receivables during the year was as follows:

Group

roup
In thousands of AUD Balance at 1 July Amounts written off against allowance Impairment loss (recognised) / reversed Balance at 30 June	2011 2010 (239) (249) - 85 (260) (75)
	(499) (239)

Based on historic default rates, the Group generally believes that no impairment allowance is necessary in respect of trade receivables not past due or past due by up to 91 days. However in the current year allowances have been made in all ageing categories as a result of a customer being placed into administration in June 2011.

The Group sells to a variety of customers including wholesalers and end users and does not have a concentration of credit risk in any one sector. The Group’s entire credit risk is within the geographic region of Australia.

Liquidity risk

The following are the contractual maturities of financial liabilities, including estimated interest payments. The amounts disclosed are the contractual undiscounted cash flows (inflows shown as positive, outflows as negative).

Consolidated

onsolidated
In thousands of AUD Non-derivative financial liabilities Trade and other payables	2011 2010 Carrying amount Contractual cash flows 6 mths or less Carrying amount Contractual cash flows 6 mths or less
	7,459 (7,459) (7,459) 5,256 (5,256) (5,256)
	7,459 (7,459) (7,459) 5,256 (5,256) (5,256)

Currency risk

Exposure to currency risk

The Group did not have any material exposure to foreign currency risk and as a result movements in the Australian dollar against other currencies will not have a material impact on the Group’s profit or equity.

Korvest Ltd and its controlled entities Notes to the consolidated financial statements

24. Financial instruments (continued)

Interest rate risk

Exposure to interest rate risk

Movements in interest rates will not have a material impact on the Group’s profit or equity.

Fair values

The fair values together with the carrying amounts shown in the statement of financial position are as follows:

Consolidated In thousands of AUD *Note* Trade and other receivables 14 Cash and cash equivalents 13 Trade and other payables 19	Carrying amount Fair value Carrying amount Fair value 2011 2011 2010 2010 16,025 16,025 10,825 10,825 1,577 1,577 2,605 2,605 (7,459) (7,459) (5,256) (5,256)
	10,143 10,143 8,174 8,174

All fair value instruments recognised in the statement of financial position are Level 3, i.e. inputs for the asset or liability that are not based on observable market data (unobservable inputs).

25. Operating leases

Leases as lessee

Non-cancellable operating lease rentals are payable as follows:

In thousands of AUD Less than one year Between one and five years More than five years	Consolidated 2011 2010 732 699 1,367 1,398 - -
	2,099 2,097

The consolidated entity leases a number of warehouse and factory facilities under operating leases. The leases typically run for a period of five years, with an option to renew the lease after that date. Lease payments are increased every five years to reflect market rentals. None of the leases includes contingent rentals. Rentals are increased by CPI each year.

During the financial year ended 30 June 2011, $792,826 was recognised as an expense in the statement of comprehensive income in respect of operating leases (2010: $656,996).

26. Capital and other commitments

In thousands of AUD Capital expenditure commitments Plant and equipment Contracted but not provided for and payable: Within one year One year or later and no later than five years Later than five years	Consolidated 2011 2010 170 23 - - - -
	170 23

Korvest Ltd and its controlled entities Notes to the consolidated financial statements

27. Consolidated entities

	Country of
	Incorporation	Ownership interest
		2011	2010
		%	%
Ultimate Parent entity
Hills Holdings Limited	Australia	48	46
Subsidiaries
Korvest NZ Ltd	New Zealand	-	-

Hills Holdings Limited controls Korvest Ltd by virtue of their control of the Company’s Board through the chairman’s casting vote, effective management of the Company and exposure to the risks and benefits of ownership, or control of voting rights through the dilution of minority shareholders.

The New Zealand operations ceased trading in November 2007 and the company Korvest NZ Ltd was deregistered in August 2009.

28. Reconciliation of cash flows from operating activities

In thousands of AUD *Note* Cash flows from operating activities Profit for the period Adjustments for: Depreciation 18,7 Impairment / (reversal) of trade receivables 7 Impairment / (reversal) of inventories 7 (Gain) / loss on sale of property, plant and equipment 7 Impairment of receivable Equity-settled share-based payment expenses 21(b) Foreign currency translation reserve on winding up Profit before changes in working capital (Increase)/decrease in trade and other receivables (Increase)/decrease in inventories (Decrease)/increase in trade and other payables (Decrease)/increase in deferred tax liabilities (Decrease)/increase in income taxes payable (Decrease)/Increase in provisions and employee benefits Net cash from operating activities	Consolidated 2011 2010 4,221 3,983 1,279 1,060 318 207 146 (182) 40 18 - - 62 59 - 100
	6,066 5,245 (5,519) 163 485 (1,141) 2,151 150 (149) 197 250 (769) (99) 19
	3,185 3,864

In thousands of AUD
Note
Cash flows from operating
activities
Profit for the period
Adjustments for:
Depreciation
18,7
Impairment / (reversal) of trade receivables
7
Impairment / (reversal) of inventories
7
(Gain) / loss on sale of property, plant and equipment
7
Impairment of receivable
Equity-settled share-based payment expenses
21(b)
Foreign currency translation reserve on winding up
Profit before changes in working capital
(Increase)/decrease in trade and other receivables
(Increase)/decrease in inventories
(Decrease)/increase in trade and other payables
(Decrease)/increase in deferred tax liabilities
(Decrease)/increase in income taxes payable
(Decrease)/Increase in provisions and employee
benefits
Net cash from operating activities

Consolidated
2011
2010
4,221
3,983
1,279
1,060
318
207
146
(182)
40
18
-
-
62
59
-
100

6,066
5,245
(5,519)
163
485
(1,141)
2,151
150
(149)
197
250
(769)
(99)
19

3,185
3,864

Korvest Ltd and its controlled entities

Notes to the consolidated financial statements

29. Key management personnel disclosures

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

Non-executive Directors Executives Peter W Stancliffe (Chairman) C A Hartwig (General Manager EzyStrut & Indax) 17 April Graham L Twartz 2009 to 23 June 2010, (General Manager, EzyStrut) since 23 Peter Brodribb June 2010. S W Evans (General Manager Galvanising) Executive Directors A P Ifkovich (General Manager, Indax) Commenced 9 Alexander H W Kachellek (Managing Director) August 2010. Steven J W McGregor (Finance Director and C D Peck (General Manager, Operations) Ceased Company Secretary) employment 23 June 2010.

The key management personnel compensation included in ‘personnel expenses’ (see Note 8) are as follows:

In AUD Short-term employee benefits Other long term benefits Termination benefits Equity compensation benefits	*Consolidated* 2011 2010 1,268,833 1,164,261 110,617 102,066 - 101,517 8,947 12,565
	1,388,397 1,380,409

Individual directors and executives compensation disclosures

Information regarding individual directors and executives compensation and some equity instruments disclosure as permitted by Corporations Regulations 2M.3.03 and 2M.6.04 is provided in the Remuneration report section of the Directors’ report.

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

Other key management personnel transactions with the Company or its controlled entities

From time to time, key management personnel of the Company or its controlled entities, or their related entities, may purchase goods from the consolidated entity. These purchases are on the same terms and conditions as those entered into by other consolidated entity employees or customers and are trivial or domestic in nature.

Korvest Ltd and its controlled entities Notes to the consolidated financial statements

29. Key management personnel disclosures (continued)

Options and rights over equity instruments

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

								ASX
	Held at 1 July 2010 IFRS	Granted as compen- sation	Exercised	Other changes	*	Held at 30 June 2011 IFRS	Held at 30 June 2011 ASX	Vested and exercised during the year ended 30 June
								2011
Directors
A Kachellek	30,000	-	-		-	30,000	-	30,000
S McGregor	15,000	-	-		-	15,000	-	15,000
Executives
C Hartwig	10,000	-	-		-	10,000	-	10,000

Other changes represent options that expired, were cancelled or were forfeited during the year.

No options held by key management personnel are vested but not exercisable.

							ASX
	Held at 1 July 2009 IFRS	Granted as compen- sation	Exercised	Other changes *	Held at 30 June 2010 IFRS	Held at 30 June 2010 ASX	Vested and exercised during the year ended 30 June
							2010
Directors
A Kachellek	60,000	-	-	(30,000)	30,000	30,000	-
S McGregor	15,000	15,000	-	(15,000)	15,000	15,000	-
Executives
C Hartwig	20,000	-	-	(10,000)	10,000	10,000	-

Other changes represent options that expired or were forfeited during the year.

Korvest Ltd and its controlled entities Notes to the consolidated financial statements

29. Key management personnel disclosures (continued)

Movements in shares

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

			Allocated
			under
Directors	Held at	Purchases	Employee	Received on exercise of		Held at
	1 July 2010		share plan	options	Sales	30 June 2011
P. Stancliffe	1,000	-	-	-	-	1,000
G. Twartz	29,115	-	-	-	-	29,115
P. Brodribb	15,781	-	-	-	-	15,781
S. McGregor	500	-	-	15,000	-	15,500
A. Kachellek	695	-	-	30,000	-	30,695
Executives
C. Hartwig	310	-	219	10,000	-	10,529
S. Evans	-	-	-	-	-	-
A Ifkovich	-	-	-	-	-	-

No shares were granted to key management personnel during the reporting period as compensation other than those provided under the employee share plan on the same terms and conditions as for all employees.

30. Non-key management personnel disclosures

Identity of related parties

The consolidated entity has a related party relationship with its ultimate parent entity (see Note 27), its former subsidiary (see Note 27) and with its key management personnel (see Note 29).

Other related party transactions

Ultimate Parent Entity

During the year the following material transactions took place with Hills Holdings Limited under normal commercial terms and conditions.

terms and conditions.
In AUD ($)	Consolidated
	2011	2010
Sales	157,212	495,511
Purchases	1,050,634	1,014,237
Payment of dividends	1,057,191	1,346,519
Amounts payable at reporting date (current)	95,526	210,369
Amounts receivable at reporting date (current)	10,091	45,512

Korvest Ltd and its controlled entities Notes to the consolidated financial statements

31. Subsequent events

There has not arisen between the end of the 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 consolidated entity, to affect significantly the operations of the consolidated entity in subsequent financial periods.

32. Parent entity disclosures

As at, and throughout the year ended 30 June 2011 the parent company of the Group was Korvest Ltd.

	Company
In thousands of AUD	2011	2010
Result of the parent entity
Profit for the period	4,221	3,983
Other comprehensive income	908	-
Total comprehensive income for the period	5,129	3,983
Financial position of the parent entity at
year end
Current assets	26,778	23,249
Total assets	44,021	38,545
Current liabilities	8,883	6,813
Total liabilities	10,803	8,274
Total equity of the parent entity comprising
of:
Share capital	3,713	3,662
Reserves	4,250	3,331
Retained earnings	25,255	23,278
Total Equity	33,218	30,271
Parent entity capital commitments
Plant and equipment
Contracted but not provided for and payable:
Within one year	170	23

Directors’ declaration

1 In the opinion of the directors of Korvest Ltd (the Company):
(a) the consolidated financial statements and notes set out on pages 25 to 60 and the Remuneration report in the Directors’ report, set out on pages 8 to 13 , are 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 2011 and of its performance for the financial year ended on that date; and
- (ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and
(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.
2 There are reasonable grounds to believe that the Company and the group entities identified in Note 27 will be able to meet any obligations or liabilities to which they are or may become subject to.
3 The directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the chief executive officer and chief financial officer for the financial year ended 30 June 2011.
4 The directors draw attention to Note 2(a) to the consolidated financial statements, which includes a statement of compliance with International Financial Reporting Standards.

Dated at Adelaide this 22[nd] day of August 2011.

Signed in accordance with a resolution of directors:

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Peter Stancliffe Director

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ASX Additional information

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

Shareholdings (as at 11 August 2011)

Substantial shareholders

The number of shares held by substantial shareholders and their associates are set out below: Shareholder Hills Finance Pty Ltd Donald Cant Pty Ltd

Number 4,210,349 527,203

Voting rights

Ordinary shares

Refer to note 23 in the financial statements

Options

Refer to note 21 in the financial statements

Distribution of equity security holders

Category 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,000 - 100,000 100,000 and over	NUMBER OF EQUITY SECURITY HOLDERS Total Holders Units % Issued Capital 669 227,387 2.60 416 1,039,472 11.87 90 648,843 7.41 70 1,813,506 20.71 5 5,028,909 57.41 1,250 8,758,117 100.00

The number of shareholders holding less than a marketable parcel of ordinary shares is 199.

Securities Exchange

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

Other information

Korvest Ltd, incorporated and domiciled in Australia, is a publicly listed company limited by shares.

On Market Buy Back

There is no current on market buy back.

ASX Additional information (continued) Twenty largest shareholders

Name	Number of ordinary	Percentage of
	Shares held	capital held
Hills Finance Pty Ltd	4,210,349	48. 07
Donald Cant Pty Ltd	527,203	6.02
Angueline Investments Pty Limited	171,000	1.95
HSBC Custody Nominees (Australia) Limited	120,357	1.37
Mr John Frederick Bligh	94,940	1.08
Capucin Pty Ltd	91,182	1.04
Ling Nominees Pty Ltd	61,900	0.71
JP Morgan Nominees Australia Limited	60,368	0.69
De Bruin Nominees Pty Ltd (De Bruin Super Fund a/c)	60,000	0.69
Rotret Three Pty Ltd	54,108	0.62
Australian Reward Investment Alliance	53,118	0.61
Mardie Pty Ltd	50,358	0.57
Brazil Farming Pty Ltd	47,727	0.54
LTM Nominees Pty Ltd	40,179	0.46
Manovert Pty Ltd (Rollinson Super Fund a/c)	39,165	0.45
Mr Dean Greenslade	39,000	0.45
Mr Glenn Arthur Moore & Mrs Elizabeth Moore
(Moore Superannuation a/c)	35,898	0.41
Mr Ronald Stacy Muggleton & Mrs Norma Muggleton	35,365	0.40
Lincoln College Inc	30,927	0.35
Little Heroes Foundation	30,927	0.35

	5,854,071	66,83

Offices and officers

Company Secretary

Steven John William McGregor BA(Acc), CA

Principal Registered Office

Korvest Ltd 580 Prospect Road Kilburn, South Australia, 5084 Ph: (08) 8360 4500 Fax: (08) 8360 4599

Locations of Share Registries

Adelaide

Computershare Investor Services Pty Ltd Level 5 115 Grenfell Street Adelaide, South Australia, 5000 Ph: (08) 8236 2300 Fax: (08) 8236 2305

AI assistant

KORVEST LTD — Annual Report 2011

65199_rns_2011-08-21_10bb0f8a-e928-4221-b43d-b8b9ccc57ef3.pdf

Contents

DIRECTORS

COMPANY SECRETARY

RE-ELECTIONS

Korvest Ltd and its controlled entities Directors’ report

DIRECTORS’ MEETINGS

FINANCIAL RESULTS

DIVIDENDS

STRATEGY AND FUTURE PERFORMANCE

Korvest Ltd and its controlled entities Directors’ report (continued)

ACTIVITIES

REVIEW OF OPERATIONS

Industrial Products

Production

SIGNIFICANT CHANGES

Korvest Ltd and its controlled entities Directors’ report (continued)

EVENTS SUBSEQUENT TO REPORTING DATE

LIKELY DEVELOPMENTS

DIRECTORS AND OFFICERS INSURANCE

REMUNERATION REPORT

Principles of compensation - audited

Service Contracts

Consequences of performance on shareholder wealth

Korvest Ltd and its controlled entities Directors’ report (continued) For the year ended 30 June 2011

REMUNERATION REPORT (continued)

Directors and Executive Remuneration (Company and Consolidated) - audited

REMUNERATION REPORT (continued)

Directors and Executive Remuneration (Company and Consolidated) – audited (continued)

REMUNERATION REPORT (continued)

Options and rights over equity instruments granted as compensation - audited

Exercise of options granted as compensation

Analysis of options and rights over equity instruments granted as compensation - audited

REMUNERATION REPORT (continued)

Korvest Ltd and its controlled entities Directors’ report (continued)

Analysis of bonuses included in remuneration – audited

DIRECTORS’ INTERESTS

Korvest Ltd and its controlled entities Directors’ report (continued)

NON-AUDIT SERVICES

FINANCIAL INSTRUMENTS DISCLOSURE

ENVIRONMENT

LEAD AUDITOR’S INDEPENDENCE DECLARATION

ROUNDING OFF

Korvest Ltd and its controlled entities For the year ended 30 June 2011

5 Year Summary

Corporate governance statement

Principle 1 - Lay solid foundations for management and oversight

Korvest Ltd and its controlled entities For the year ended 30 June 2011

Corporate governance statement (continued)

Executive performance

Principle 2 - Structure the Board to add value

Board composition

Board independence

Corporate governance statement (continued)

The role of the Chairman

Nomination Committee

Board performance

Board operations

Korvest Ltd and its controlled entities For the year ended 30 June 2011

Corporate governance statement (continued)

Principle 3 - Promote ethical and responsible decision-making

Share dealings by directors and officers

Principle 4 - Safeguard integrity in financial reporting

Commitment to financial integrity

Corporate governance statement (continued)

Audit Committee

Audit process

Auditor independence

Risk management and oversight

Principle 5 - Make timely and balanced disclosure

Corporate governance statement (continued)

Principle 6 - Respect the rights of shareholders

Principle 7 - Recognise and manage risk

Principle 8 - Remunerate fairly and responsibly

Corporate governance statement (continued)

Commitment to responsible executive remuneration

Remuneration Committee

Directors’ remuneration

KORVEST LTD Annual Report 2011