RAIDEN RESOURCES LIMITED — Annual Report 2011

Aug 22, 2011

==> picture [110 x 91] intentionally omitted <==

SHELL VILLAGES AND RESORTS LIMITED AND CONTROLLED ENTITIES

[To be renamed]

[SVC Group Limited]

ABN: 68 009 161 522

Annual Financial Report For the Year Ended 30 June 2011

Shell Villages and Resorts Limited and Controlled Entities – Annual Report 2011

CONTENTS

	Page
Corporate Governance	1
Directors’ Report	3
Auditor’s Independence Declaration	9
Consolidated Statement of Comprehensive Income	10
Consolidated Statement of Financial Position	11
Consolidated Statement of Changes in Equity	12
Consolidated Statement of Cash Flows	13
Notes to Consolidated Financial Statements	14
Directors’ Declaration	32
Independent Auditor’s Report	33
Additional Information	35

Shell Villages and Resorts Limited and Controlled Entities – Annual Report 2011

CORPORATE GOVERNANCE

Unless disclosed below, all the best practice recommendations of the ASX Corporate Governance Council have been applied for the entire financial year ended 30 June 2011.

The Board of Directors is responsible for the corporate governance of the consolidated entity. It monitors the business affairs of the Company on behalf of shareholders by whom they are elected and to whom they are accountable.

Board Composition

The composition of the Board shall be determined in accordance with the following principles and guidelines: The Board shall comprise at least 3 Directors, increasing where additional expertise is considered desirable in certain areas;

The Board shall not comprise a majority of executive Directors; and

Directors shall bring characteristics, which allow a mix of qualifications, skills and experience.

Where there is no formal review process in place, in order to ensure that the Board continues to discharge its responsibilities in an appropriate manner, the performance of all Directors is informally reviewed by the Chairman. Directors whose performance is unsatisfactory may be asked to retire.

The skills, experience and expertise relevant to the position of each director who is in office at the date of the annual report and their term of office are detailed in the director’s report.

The names of independent directors of the company are:

Mr Greg Cornelson (appointed 11 February 2011, resigned 14 February 2011)

Mr Brett Crowley (appointed 11 February 2011)

Mr David Diamond (Appointed 28 April 2010, resigned 8 February 2011)

Mr Ian Dorney (appointed 11 February 2011)

Mr Boris Patkin

Mr Richard Pritchard

Performance Evaluation and Communication to Shareholders

The Board of Directors aims to ensure that the shareholders, on behalf of whom they act, are informed of all information necessary to assess the performance of all Directors. Information is communicated to the shareholders through:

Annual Report which is distributed to all shareholders and posted on the ASX website www.asx.com.au; The Half-yearly report which is posted on the ASX website www.asx.com.au;

The Annual General Meeting and other meetings called to obtain approval for Board action as appropriate;

The Company’s compliance with ASX continuous disclosure requirements;

All public announcements and associated documents which are made available on the Company website at www.svcgroup.com.au

The Role of Shareholders

The Board of Directors aims to ensure that the shareholders are informed of all major developments affecting the consolidated entity’s state of affairs:

Proposed major changes in the consolidated entity which may impact on share ownership rights are submitted to a vote of shareholders.

Notices of all meetings of shareholders are made available to shareholders.

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

The shareholders are requested to vote on the appointment and aggregate remuneration of directors, the granting of options and shares and changes to the Constitution. Copies of the Constitution are available to any shareholder who requests it.

The External Auditor is to attend the Annual General Meeting and is available to answer shareholder questions about the conduct of the audit and the preparation and content of the Auditor’s report.

1

Shell Villages and Resorts Limited and Controlled Entities – Annual Report 2011

CORPORATE GOVERNANCE (CONTINUED)

Audit Committee

The Board of Directors holds responsibilities of the audit committee.

Internal Control Framework

The Board acknowledges that it is responsible for the overall internal control framework but recognises that no cost effective internal control system will preclude all errors and irregularities. The Board believes that the current cost control framework to be suitable to the Company’s current operations. There is no Internal Audit function as the cost would significantly outweigh the benefits.

Trading Policy

The company’s policy regarding directors and employees trading in its securities is set by the board. The policy restricts directors and employees from acting on material information until it has been released to the market and adequate time has been given for this to be reflected in the security’s prices.

Conflict of Interest

In accordance with Corporations Act 2001 and the company’s constitution, the directors must keep the Board advised on an ongoing basis of any interest that could potentially conflict with those of the Company. Details of Director related entity transactions with the Company and the consolidated entity are set out in the note 25.

Independent Professional Advice

Each director will have the right to seek independent professional advice at the Company’s expense. However, prior approval of the Chairman will be required, which will not be unreasonably withheld.

Business Risk Management

The Board will monitor and receive advice on areas of operational and financial risk, and consider strategies for appropriate risk management arrangements.

Specific areas which were initially identified and which will be regularly considered by the Board Meetings include foreign currency fluctuations, performance of activities, human resources, the environment and continuous disclosure obligations.

Ethical Standards

The Board’s policy for all Directors and management to conduct themselves with the highest ethical standards. All directors and employees will be expected to act with integrity and objectivity, striving at all times to enhance the reputation and performance of the consolidated entity.

Other Information

Further information relating to the company’s corporate governance practices and policies can be obtained from the company upon the request of shareholders.

2

Shell Villages and Resorts Limited and Controlled Entities – Annual Report 2011

DIRECTORS’ REPORT

Your directors present their report on the company and its controlled entities for the financial year ended 30 June 2011.

Directors

The names of directors in office at any time during or since the end of the 2011 financial year are:

Mr Greg Cornelson (appointed 11 February 2011, resigned 14 February 2011)

Mr Brett Crowley (appointed 8 February 2011)

Mr David Diamond (Appointed 28 April 2010, resigned 8 February 2011)

Mr Ian Dorney (appointed 11 February 2011)

Mr Boris Patkin

Mr Richard Pritchard

Directors have been in office since the start of the financial year to the date of this report unless otherwise stated.

Company Secretary

The following person held the position of company secretary since the start of the financial year to the date to the date of this report:

Mr Boris Patkin (resigned on 8 February 2011)

Mr Brett Crowley (appointed on 8 February 2011)

Mr Crowley is a Chartered Accountant and solicitor and brings with him strong experience in the role of Company Secretary. Mr Crowley is currently Company Secretary for Venture Limited and Flat Glass Industries Limited.

Principal Activities

The principal activities of the consolidated group during the 2011 financial year were care and maintenance pending satisfying compliance with the Listing Rules of ASX Limited for reinstatement of the company’s listing on ASX and restructuration of the consolidated group’s capital structure.

There were no other significant changes in the nature of the consolidated group’s principal activities during the financial year.

Operating Results

The consolidated loss of the consolidated group after providing for income tax amounted to $375,192 (2010: Loss of $418,949).

Financial Position

At 30 June 2011, the consolidated group had net liabilities of $2,065,826 ( 2010: $2,127,936) with cash on hand of $1,855 (2010: $59,852).

State of Affairs

There were no significant changes in state of affairs of the Company during the financial year.

Review of Operations

The new Board appointed on 28 April 2010 has proceeded to raise capital and work towards satisfying compliance with ASX Listing Rules with a view to have the Company's securities reinstated for trading with ASX. The Board has also been restructuring the group’s capital structure as described in Note 1.

The new Board has also been reviewing the various past transactions instigated by the previous management to ascertain that they were in the best interests of the consolidated group.

Likely Developments and Expected Results of Operations

During the subsequent financial year the Company expects to continue taking necessary action to satisfy compliance with the Listing Rules of ASX Limited and reinstate the Company’s securities for trading on the Australian Securities Exchange.

The Company will be restructuring its debts with the issue of new shares in settlement of liabilities and will be raising capital to strengthen the balance sheet and seek the development of new business opportunities.

Dividends Paid or Recommended

No dividends have been paid or declared during the financial year ended 30 June 2011 (2010: nil), nor have the directors recommended that any dividend be paid.

3

Shell Villages and Resorts Limited and Controlled Entities – Annual Report 2011

DIRECTORS’ REPORT (CONTINUED)

Information on Current Directors

Mr Boris Patkin

Qualifications

Experience

Special Responsibilities

Current directorship of other listed public companies Former directorship of other listed public companies in the last 3 years

Mr Richard Pritchard

Qualifications

Experience

Special Responsibilities

Current directorship of other listed public companies Former directorship of other listed public companies in the last 3 years

Mr Brett Crowley

Qualifications

Experience

Special Responsibilities

Current directorship of other listed public companies Former directorship of other listed public companies in the last 3 years

Non-executive Director

Bachelor of Science (Industrial Chemistry) Masters in Commerce (Marketing and Financial Management) Board member since December 2008

Actively promoting new investment opportunities and investor relations

None

None

Non executive director

Bachelor Degree in Civil Engineering (Hons)

Richard Pritchard holds an Honours Degree in Civil Engineering. He has had over 18 years experience in Civil Engineering and 7 years in financial services industry, having been responsible for numerous infrastructure projects in the fields of telecommunications, transport, water, mining and energy. Mr Pritchard is a Graduate member of the Institute of Company Directors and is a Member of the Institute of Engineers Australia.

Review and assessment of possible new investments

Blackcrest Resources (ASX:BCR)

None

Non-executive Director B.Com, DipLaw

Brett Crowley is a Solicitor and Barrister (NSW) and a Chartered Accountant. He is an experienced ASX listed public company Chairman, Director and Company Secretary. He was formerly a partner of Ernst & Young in Hong Kong and Australia from 1988 to 1994 and a partner of KPMG from 1998 to 2000. He currently practices as a Solicitor in a firm primarily handling tax, corporate, contracts and property matters.

Legal advice to board, company secretarial capabilities

None

Venture Limited (resigned April 2011)

4

Shell Villages and Resorts Limited and Controlled Entities – Annual Report 2011

DIRECTORS’ REPORT (CONTINUED)

Mr Ian William Dorney

Non-executive director

Qualifications Dip Fin Services Experience Ian Dorney has over 20 years experience in the financial services industry and has held senior management and board positions in a number of financial services companies. He founded Mortgage Systems Australia in 1992 which merged with Equity & Law, a financial planning business, in 1998. He is the Managing Director and Responsible Officer of Equity & Law. Since 1995 has personally controlled and been responsible for a number of successful property developments.

Special Responsibilities

Capital raising and corporate advisory

Current directorship of other listed public companies None Former directorship of other listed public companies None in the last 3 years

REMUNERATION REPORT – AUDITED

This report details the nature and amount of remuneration for each director of Shell Villages & Resorts Limited, and for the executives receiving the highest remuneration.

Remuneration policy

The remuneration policy of Shell Villages and Resorts Limited has been designed to align director and executive objectives with shareholder and business objectives by providing a fixed remuneration component and offering specific long-term incentives based on key performance areas affecting the consolidated group’s financial results.

The board’s policy for determining the nature and amount of remuneration for board members and senior executives of the economic entity is based on the following factors:

• Length of service,

• Experience of individual involved,

• The overall performance of the market in which the Company is in,

• The overall performance of the Company.

There is no predetermined equity compensation element within the remuneration structure nor predetermined performance conditions to be satisfied.

The table below sets out key management personnel’s compensation together with the earnings for the same period.

period.
Financial year ended	Total remuneration $	EPS cents	Share price Cents
30 June 2007	66,000	(7.5)	10
30 June 2008	212,550	(15.3)	18
30 June 2009	343,381	(2.4)	-
30 June 2010	153,750	(1.0)	-
30 June 2011	141,200	(0.7)	-

Note: EPS and share price are shown as at the reporting date without adjustments for consolidations and bonus share issues. The Company’s shares were suspended from Official Quotation on 1 October 2008.

5

Shell Villages and Resorts Limited and Controlled Entities – Annual Report 2011

DIRECTORS’ REPORT (CONTINUED)

Key Management Personnel Remuneration

Details of the remuneration of the directors, other key management personnel (defined as those who have the authority and responsibility for planning, directing and controlling the major activities of the consolidated entity) and specified executives of Shell Villages and Resorts Limited are set out in the following tables.

The key management personnel of the consolidated entity consisted of the directors of Shell Villages and Resorts Limited.

2011 Directors G Cornelson1 B Crowley2 D Diamond3 I Dorney2 B Patkin R Pritchard	Short-term benefits Post employ- ment Share- based payment Cash salary and fees Non- cash benefits Super- annuation Termi- nation benefits Shares Total Total remune- ration repre- sented by shares $ $ $ $ $ $ % - - - - - - - 32,750 - - - - 32,750 - 17,875 - - - - 17,875 - 13,750 - - - - 13,750 - - - - - - - - 63,075 - - - - 63,075 -
	127,750 - - - - 127,750 -

1 Appointed 11 February 2011, resigned 14 February 2011

2 Appointed 11 February 2011

3 Resigned 8 February 2011

The Directors’ fees for the period ended 30 June 2011 have not been paid as at the date of this report. The Directors, agreed, subject to shareholders’ approval at a general meeting, for the total remuneration due and payable at 30 June 2011 be made in fully paid ordinary shares in the Company at $0.01 per share. Mr Boris Patkin will receive 10,000,000 fully paid ordinary shares in accordance with a deed as described in Note 1.

2010 Directors C Budd1 R Kerr1 B Patkin D Diamond2 R Pritchard2	Short-term benefits Post employ- ment Share- based payment Cash salary and fees Non- cash benefits Super- annuation Termi- nation benefits Shares Total Total remune- ration repre- sented by shares $ $ $ $ $ $ % - - - - - - - - - - - - - - 140,000 - - - - 140,000 - 6,875 - - - - 6,875 - 6,875 - - - - 6,875 -
	153,750 - - - - 153,750 -

1 Resigned 28 April 2010

2 Appointed 28 April 2010

6

Shell Villages and Resorts Limited and Controlled Entities – Annual Report 2011

DIRECTORS’ REPORT (CONTINUED)

Directors’ securities holding

As at the date of this report, the relevant interests of the parent company directors in the securities of the parent entity were as follows:

Mr Brett Crowley Mr Ian Dorney Mr Boris Patkin Mr Richard Pritchard	Number of fully paid ordinary shares - - 2,023,347 -
	2,023,347

End of audited Remuneration Report

Meetings of Directors

The number of meetings of directors and the number of meetings attended by each of the directors of the company during the financial year were as follows:

	Directors’ Meetings	Directors’ Meetings
	Number eligible to attend	Number attended
Mr Greg Cornelson (appointed 11 February 2011;
resigned 14 February 2011)	-	-
Mr Brett Crowley (appointed 11 February 2011)	3	3
Mr David Diamond (resigned 8 February 2011)	3	3
Mr Ian Dorney (appointed 11 February 2011)	3	3
Mr Boris Patkin	4	4
Mr Richard Pritchard	6	6

Proceedings on Behalf of Company

No person has applied for leave of Court to bring proceedings on behalf of the company or intervene in any proceedings to which the company is a party for the purpose of taking responsibility on behalf of the company for all or any part of those proceedings.

The company was not a party to any such proceedings during the year.

Non-audit Services

The board of directors is satisfied that no non-audit services were performed by the external auditors during the year.

Indemnifying officers or auditor

The company has not during or since the end of the year indemnified an officer or an auditor for the company or of any related body corporate, against a liability incurred by such an officer or auditor. The company has not paid or agreed to pay a premium to insure a current or former officer or the auditor against legal liabilities.

Environmental Regulations

The consolidated group’s operations are not subject to significant environmental regulation under the law of the Commonwealth and State. The directors are not aware of any significant breach, or pending legal action, in the period covered by this report.

7

Shell Villages and Resorts Limited and Controlled Entities – Annual Report 2011

DIRECTORS’ REPORT (CONTINUED)

After balance date events

In the opinion of the directors, no items transactions or events of a material and unusual nature have arisen in the interval between the end of the financial year and the date of this report which have significantly affected, or may significantly affect, the operations of the consolidated group, the results of those operations, or the state of affairs of the consolidated group in subsequent financial years other than the following:

• (a) In accordance with a deed of settlement dated 24 June 2011, the company agreed to convert 1,300,000 convertible notes into 20,000,000 ordinary shares. The carrying value of the convertible notes as at 30 June 2011 was $796,804. Shareholders’ approval is to be sought in the next annual general meeting.

Under the deed, the company also agreed to issue 10,000,000 ordinary shares to Mr B Patkin, a director, to settle the amounts owed to Mr B Patkin and his related entities. Shareholders’ approval is to be sought in the next annual general meeting.

• (b) The Board of Directors resolved on 8 July 2011 to raise $250,000 by the issue of 50,000,000 shares at $0.005 per share. This capital raising for sophisticated and professional persons is to take place immediately post submission of audited accounts to ASIC. This issue will target AFSL holders who will assist in the raising of further capital through a disclosure statement post the Annual General Meeting.

Auditor’s Independence Declaration

The lead auditor’s independence declaration for the year ended 30 June 2011 has been received and can be found on page 9 of the Annual Report and forms part of this report.

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

==> picture [190 x 54] intentionally omitted <==

Richard Wyn Pritchard Director

Dated this 22[nd] day of August 2011

8

==> picture [595 x 75] intentionally omitted <==

==> picture [595 x 75] intentionally omitted <==

AUDITOR’S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE CORPORATIONS ACT 2001 TO THE DIRECTORS OF SHELL VILLAGES & RESORTS LIMITED

I declare that, to the best of my knowledge and belief, during the year ended 30 June 2011 there have been:

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

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

PROSPERITY AUDIT SERVICES

==> picture [158 x 71] intentionally omitted <==

PAUL HORNE Partner

22 August 2011 Sydney

Sydney Level 2 580 George Street Sydney NSW 2000 PO Box 20726 World Square NSW 2002 T 02 9261 2288 F 02 9261 2376

Newcastle Hunter Mall Chambers 2[nd] Floor, 175 Scott Street Newcastle NSW 2300 PO Box 234 Newcastle NSW 2300 T 02 4907 7222 F 02 4929 6759

Brisbane Suite 1, Level 3 200 Creek Street Brisbane QLD 4000 GPO Box 2246 Brisbane QLD 4001 T 07 3839 1755 F 07 3839 1037

mail@prosperityadvisers.com.au www.prosperityadvisers.com.au Prosperity Audit Services ABN 87 879 283 831

==> picture [30 x 42] intentionally omitted <==

Chartered Accountants Liability limited by a Scheme approved under the Professional Standards Legislation.

Sydney | Newcastle | Brisbane

9

Shell Villages and Resorts Limited and Controlled Entities – Annual Report 2011

STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2011

	Note	Consolidated Group	Consolidated Group
		2011	2010
		$	$
Revenue
Other income	2	847	5,244
Expenses
Consulting fees		(63,710)	(29,545)
Directors fees		(77,000)	(153,750)
Finance costs		(75,650)	(131,213)
Legal fees		(36,464)	(44,146)
Other expenses		(123,215)	(65,539)
Loss before income tax expense		(375,192)	(418,949)
Income tax expense	3	-	-
Loss for the year		(375,192)	(418,949)
Other comprehensive income
Other comprehensive income for the year, net of tax		-	-
Total comprehensive loss for the year		(375,192)	(418,949)
Earnings per share
Earnings per share attributable to ordinary shareholders of the parent entity:
Basic loss per share (cents)	6	(0.7)	(1.0)
Diluted loss per share (cents)	6	(0.7)	(1.0)

The accompanying notes form part of this financial report.

10

Shell Villages and Resorts Limited and Controlled Entities – Annual Report 2011

STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2011

Note ASSETS CURRENT ASSETS Cash and cash equivalents 7 Financial assets 8 Other current assets 9 TOTAL CURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES Trade and other payables 10 Financial liabilities 11 TOTAL CURRENT LIABILITIES TOTAL LIABILITIES NET LIABILITIES EQUITY Issued capital 12 Reserves Accumulated losses TOTAL EQUITY	Consolidated Group 2011 $ 2010 $ 1,855 59,852 10,000 10,000 206,052 157,869
	217,907 227,721
	217,907 227,721
	1,466,929 1,252,876 816,804 1,102,781
	2,283,733 2,355,657
	2,283,733 2,355,657
	(2,065,826) (2,127,936)
	43,243,754 42,806,452 493,152 493,152 (45,802,732) (45,427,540)
	(2,065,826) (2,127,936)

The accompanying notes form part of this financial report.

11

Shell Villages and Resorts Limited and Controlled Entities – Annual Report 2011

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2011

Consolidated Group Balance at 1 July 2009 Total comprehensive loss for the year Balance at 30 June 2010 Total comprehensive loss for the year Transactions with owners in their capacity as owners: Shares issued during the year Transaction costs Balance at 30 June 2011	Issued Capital Accumulated Losses Option Reserve Total $’000 $’000 $’000 $’000 42,806,452 (45,008,591) 493,152 (1,708,987) - (418,949) - (418,949)
	42,806,452 (45,427,540) 493,152 (2,127,936) - (375,192) - (375,192) 439,552 - - 439,552 (2,250) - - (2,250)
	43,243,754 (45,802,732) 493,152 (2,065,826)

The accompanying notes form part of this financial report.

12

Shell Villages and Resorts Limited and Controlled Entities – Annual Report 2011

STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 30 JUNE 2011

Note CASH FLOWS FROM OPERATING ACTIVITIES Interest received Cash payments in the course of operations Finance costs Net cash (used in) operating activities 16(b) CASH FLOWS FROM INVESTING ACTIVITIES Payment for loan advanced Net cash (used in) investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of shares Proceeds from borrowings Net cash provided by financing activities Net (decrease)/increase in cash held Cash at beginning of financial year Cash at end of financial year 16(a)	Consolidated Group 2011 $ 2010 $ 559 3,166 (103,556) (298,541) - (77)
	(102,997) (295,452)
	- (10,000)
	- (10,000)
	45,000 - - 365,000
	45,000 365,000
	(57,997) 59,548 59,852 304
	1,855 59,852

The accompanying notes form part of this financial report.

13

Shell Villages and Resorts Limited and Controlled Entities – Annual Report 2011

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

The financial statements cover Shell Villages and Resorts Limited and its controlled entities as a consolidated entity (“Group”). Shell Villages and Resorts Limited is a listed public company, incorporated and domiciled in Australia.

The following is a summary of the material accounting policies adopted by the consolidated group in the preparation of the financial report. The accounting policies have been consistently applied, unless otherwise stated.

Statement of compliance

Compliance with Australian Accounting Standards ensures that the financial statements and notes of the Group comply with International Financial Reporting Standards (IFRS).

Basis of Preparation

The financial report is a general purpose financial report that has been prepared in accordance with Australian Accounting Standards, including Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001 .

Reporting Basis and Conventions

The financial statements have been prepared on an accruals basis and are based on historical costs, modified, where applicable, by the revaluation of selected non-current assets and financial instruments for which the fair value basis of accounting has been applied.

A summary of the parent entity financial information has been disclosed in Note 20 of the financial statements.

Going Concern Basis of Accounting

During the years ended 30 June 2009, 30 June 2010 and 30 June 2011, the consolidated entity recorded a consolidated operating loss of $937,186, $418,949 and $375,192 respectively and reported net current liabilities of $1,072,969, $2,127,936 and $2,065,826 at 30 June 2009, 30 June 2010 and 30 June 2011 respectively. In addition, the entity was reliant upon shareholder capital and unsecured borrowings to meet its business and loan obligations. The continuing viability of the entity and its ability to continue as a going concern and meet its debts and commitments as and when they fall due is dependent upon the following key events:

• restructure of the company’s debts including conversion of the company’s convertible notes to equity;

• ongoing support from the company’s creditors;

• continued share capital raising; and

• development of new business opportunities and profitable projects.

14

Shell Villages and Resorts Limited and Controlled Entities – Annual Report 2011

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011 (continued)

Debt restructure and proposed capital raising

Subsequent to the balance date, the company has commenced restructuring its debts and will proceed to issue new shares to private investors. Details of those transactions and a Pro-forma Statement of Financial Position as at 30 June 2011 are set out below. The Pro-forma Statement of Financial Position is prepared on the assumption that all debt conversions and proposed share issues are as though they occured as at 30 June 2011.

CURRENT ASSETS Cash and cash equivalents Financial assets Other current assets TOTAL CURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES Trade and other payables Financial liabilities TOTAL CURRENT LIABILITIES TOTAL LIABILITIES NET LIABILITIES EQUITY Issued capital Reserves Accumulated losses TOTAL EQUITY	Consolidated Group Debt restructure Proposed capital raising Pro-forma Consolidated Group 30 June 2011 (a) (b) 30 June 2011 $ $ $ $ 1,855 - 1,750,000 1,751,855 10,000 - - 10,000 206,052 - - 206,052
	217,907 - 1,750,000 1,967,907
	217,907 - 1,750,000 1,967,907
	1,466,929 (1,121,695) - 345,234 816,804 (796,804) - 20,000
	2,283,733 (1,918,499) - 365,234
	2,283,733 (1,918,499) - 365,234
	(2,065,826) 1,918,499 1,750,000 1,602,673
	43,243,754 1,918,499 1,750,000 46,912,253 493,152 - - 493,152 (45,802,732) - - (45,802,732)
	(2,065,826) 1,918,499 1,750,000 1,602,673

(a) The company has reached agreement with its major creditors to convert certain debts into equity, subject to shareholder approval. The detail of the arrangements are as follows:

• (i) In accordance with a deed of settlement dated 24 June 2011, the company agreed to convert 1,300,000 convertible notes into 20,000,000 ordinary shares. The carrying value of the convertible notes as at 30 June 2011 was $796,804. Shareholders’ approval is to be sought n the next annual general meeting.

Under the deed, the company also agreed to issue 10,000,000 ordinary shares to Mr B Patkin, a director, to settle the amounts owed to Mr B Patkin and shareholders’ approval is to be sought in the next annual general meeting.

• (ii) Pursuant to a deed dated 18 March 2010, the company agreed to settle the payable balance with a creditor by converting a portion of the entire payable balance into ordinary shares. The amount subject to conversion was $269,000 as at 30 June 2011.

• (iii) The company agreed to issue new shares to its directors to settle the directors’ fees payable. As at 30 June 2011, the total directors’ fees payable balance was $279,200. Shareholders’ approval is to be sought in the next annual general meeting as to the share issue.

• (b) The Board of Directors has considered and decided on a recapitalisation plan which will require the issue of 50,000,000 ordinary shares at $0.005 per share to raise $250,000. A further issue of 150,000,000 shares at $0.01 is planned. The fund raised are to be issued to fulfill the company’s business plan in broadening its property development focus to a range of development proposals and exploring other business opportunities outside property industry.

15

Shell Villages and Resorts Limited and Controlled Entities – Annual Report 2011

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011 (continued)

As can be seen in the above Pro-forma Statement of Financial Position, upon successful resolution and issue of the various share parcels to convert debt to equity the Company will be left with a significantly improved creditor position. The Company has been offered terms for a capital raising and is reviewing other opportunities in regards to a three phase capital raising whereby initial capital is to be raised as soon as practical via a Sophisticated and Professional placement as described in section 708 of the Corporations Act. The Company will then look to utilise part of these funds to produce a disclosure document for the raising of capital for the continued business of the Company as described below. Upon re-listing the Company may also consider a share placement plan to existing shareholders.

Business plan

In 2008 the then Board of Directors of SVC embarked on a sell down of all the property assets held within the portfolio, 2008 coincided with the GFC and property prices were depressed, at the end of this liquidation period SVC was left in a difficult financial position. The residential property market stabilised in 2009-10 in line with improvements to domestic, economic and financial conditions. The resilience of the labour market has maintained consumer confidence levels and minimised the forced sale of residential homes throughout Australia. The situation in 2010-11 is a slightly more risky one, with rising interest rates and weak levels of dwelling commencements prevailing in the first few months of the year. Longer term, strong population growth combined with a physical shortage of housing is expected to place increased pressure for the development of new housing.

With the over-65 demographic growing at double the rate of the rest of the population, Australia would require a minimum of 2100 additional retirement villages, or more than 311,000 dwellings, by 2050, according to the Retirement Village Association.

In view of the above SVC is broadening its property development focus to a range of development proposals that are available and have the potential for significant returns in the current market, targeting properties with the potential of an uplift in zonings followings the NSW State Government’s direction to standardise local Council LEPs, residential subdivisions and development of senior living and affordable housing products.

To enable the search and selection of the most desirable projects SVC has contracted HD Consulting Pty Ltd. to search, propose, and negotiate terms for possible acquisitions. HD Consulting Pty Ltd has an excellent track record in property development in NSW with many successful developments having been sourced and developed successfully on their own behalf, for clients, and syndicates.

In tandem with this business plan SVC will continue to asses other business opportunities within and outside of the property industry.

The Directors intend to provide satisfaction to ASX that the Company is in compliance with listing rules to enable the Company to be re-quoted.

The Directors believe that the company will be successful in the above matters, and realise its assets and settle its liabilities and commitments in the normal course of business and at the amounts stated in the financial report. Accordingly, the directors have prepared the financial report on a going concern basis.

Uncertainties

The debt restructure arrangement will be subject to shareholder approval. In addition, the share capital raising is subject to shareholder approval and in the ability of the company to attract investors to the company to subscribe for new shares.

Due to the above facts, there exists significant uncertainty that the company will not successfully fulfil those key events and therefore the company may not be able to realise its assets and extinguish its liabilities in the normal course of business at the amounts stated in the financial report. Accordingly, the going concern basis used in the preparation of the financial report would not be appropriate.

New accounting standards and interpretations

AASB 9 Financial Instruments and AASB 2009-11 Amendments to Australian Accounting Standards arising from AASB 9 (effective from 1 January 2013)

AASB 9 Financial Instruments addresses the classification and measurement of financial assets and is likely to affect the group’s accounting for its financial assets. The standard is not applicable until 1 January 2013 but is available for early adoption. The group is yet to assess its full impact. However, initial indications are that it may affect the group’s available-for-sale financial assets, since AASB 9 only permits the recognition of fair value gains and losses in other comprehensive income if they relate to equity investments that are not held for trading. Fair value gains and losses on available-for-sale debt investments, for example, will therefore have to be recognised directly in profit or loss. The group has not yet decided when to adopt AASB 9.

16

Shell Villages and Resorts Limited and Controlled Entities – Annual Report 2011

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011 (continued)

AASB 1053 Application of Tiers of Australian Accounting Standards and AASB 2010-2 Amendments to Australian Accounting Standards arising from Reduced Disclosure Requirements (effective from 1 July 2013)

On 30 June 2010 the AASB officially introduced a revised differential reporting framework in Australia. Under this framework, a two-tier differential reporting regime applies to all entities that prepare general purpose financial statements. Shell Villages and Resorts Limited is listed on the ASX and is not legible to adopt the new Australian Accounting Standards – Reduced Disclosure Requirements. The two standards will therefore have no impact on the financial statements of the entity.

AASB 2010-6 Amendments to Australian Accounting Standards – Disclosures on Transfers of Financial Assets (effective for annual reporting periods beginning on or after 1 July 2011)

Amendments made to AASB 7 Financial Instruments: Disclosures in November 2010 introduce additional disclosures in respect of risk exposures arising from transferred financial assets. The amendments will affect particularly entities that sell, factor, securitise, lend or otherwise transfer financial assets to other parties. They are not expected to have any significant impact on the group’s disclosures. The group intends to apply the amendment from 1 July 2011.

AASB 2010-8 Amendments to Australian Accounting Standards – Deferred Tax: Recovery of Underlying Assets (effective from 1 January 2012)

In December 2010, the AASB amended AASB 112 Income Taxes to provide a practical approach for measuring deferred tax liabilities and deferred tax assets when investment property is measured using the fair value model. AASB 112 requires the measurement of deferred tax assets or liabilities to reflect the tax consequences that would follow from the way management expects to recover or settle the carrying amount of the relevant assets or liabilities, that is through use or through sale. The amendment introduces a rebuttable presumption that investment property which is measured at fair value is recovered entirely by sale. The group will apply the amendment from 1 July 2012. It is currently evaluating the impact of the amendment.

Accounting Policies

a. Principles of Consolidation

A controlled entity is any entity Shell Villages and Resorts Limited has the power to control the financial and operating policies of so as to obtain benefits from its activities.

A list of controlled entities is contained in Note 14 to the financial statements. All controlled entities have a June financial year-end.

All inter-company balances and transactions between entities in the consolidated group, including any unrealised profits or losses, have been eliminated on consolidation. Accounting policies of subsidiaries have been changed where necessary to ensure consistencies with those policies applied by the parent entity.

Where controlled entities have entered or left the consolidated group during the year, their operating results have been included/excluded from the date control was obtained or until the date control ceased.

Minority equity interests in the equity and results of the entities that are controlled are shown as a separate item in the consolidated financial report.

Investments in subsidiaries are accounted for at cost in the individual financial statements of the parent entity.

b. Income Tax

The charge for current income tax expense is based on the profit for the year adjusted for any non-assessable or disallowed items. It is calculated using the tax rates that have been enacted or are substantially enacted by the balance sheet date.

Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss.

Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or liability is settled. Deferred tax is recognised in profit or loss except where it relates to items that may be recognised in other comprehensive income or directly in equity, in which case the deferred tax is adjusted in other comprehensive income or directly against equity.

Deferred income tax assets are recognised to the extent that it is probable that future tax profits will be available

17

Shell Villages and Resorts Limited and Controlled Entities – Annual Report 2011

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011 (continued)

against which deductible temporary differences can be utilised.

The amount of benefits brought to account or which may be realised in the future is based on the assumption that no adverse change will occur in income taxation legislation and the anticipation that the consolidated group will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law.

c.

Financial Instruments

Other than trade and other receivables, the group does not invest in other financial assets. The accounting policy of trade and other receivables is set out in Note 1(x).

Non-derivative financial liabilities are measured at amortised cost.

d.

Impairment of Assets

At each reporting date, the group reviews the carrying values of its tangible and intangible assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, is compared to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to the income statement.

Impairment testing is performed annually for goodwill and intangible assets with indefinite lives.

Where it is not possible to estimate the recoverable amount of an individual asset, the group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

e.

Foreign Currency Transactions and Balances

Functional and presentation currency

The functional currency of each of the group’s entities is measured using the currency of the primary economic environment in which that entity operates. The consolidated financial statements are presented in Australian dollars which is the parent entity’s functional and presentation currency.

Transaction and balances

Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the year-end exchange rate. Nonmonetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined.

Exchange differences arising on the translation of monetary items are recognised in the income statement, except where deferred in equity as a qualifying cash flow or net investment hedge.

Exchange differences arising on the translation of non-monetary items are recognised directly in equity to the extent that the gain or loss is directly recognised in equity, otherwise the exchange difference is recognised in the income statement.

Exchange differences arising on translation of foreign operations are transferred directly to the group’s foreign currency translation reserve in the balance sheet. These differences are recognised in the income statement in the period in which the operation is disposed.

f.

Employee Benefits

Provision is made for the company’s liability for employee benefits arising from services rendered by employees to balance date. Employee benefits that are expected to be settled within one year have been measured at the amounts expected to be paid when the liability is settled, plus related on-costs. Employee benefits payable later than one year have been measured at the present value of the estimated future cash outflows to be made for those benefits.

g.

Provisions

Provisions are recognised when the group has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured.

18

Shell Villages and Resorts Limited and Controlled Entities – Annual Report 2011

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011 (continued)

h. Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within short-term borrowings in current liabilities on the balance sheet.

• i. Trade and other receivables

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment.

Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off by reducing the carrying amount directly. An allowance account (provision for impairment) is used when there is objective evidence that the group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter into bankruptcy or financial reorganisation, and default or delinquency in payments are considered indicators that the trade receivables are impaired. The amount of impairment allowance is the difference between the asset’s carrying value and the present value of estimated future cash flows, discounted at the original effective interest rate.

The amount of impairment loss is recognised in the income statement. When a trade receivable for which an impairment allowance had been recognised becomes uncollectible in a subsequent period, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against other expenses in the income statement.

j. Trade and other payables

These amounts represent liabilities for goods and services provided to the group prior to the end of the financial year and which are unpaid.

k. Borrowings and borrowing costs

Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any differences between the proceeds (net of transactions costs) and the redemption amount is recognised in the income statement over the period of the borrowings using the effective interest method.

The fair value of the liability portion of a convertible note is determined using a market interest rate for an equivalent non-convertible note. This amount is recorded as a liability on an amortised basis until extinguished on conversion or maturity of the note. The remainder of the proceeds is allocated to the conversion option. This is recognised and included in shareholders’ equity, net of income tax effects

Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in the income statement.

l. Revenue

Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of return, trade allowances, rebates and amounts collected on behalf of third parties. Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial assets.

m.

Contributed equity

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity or as a deduction, net of tax, from the proceeds.

If the entity reacquires its own equity instruments, for example, as the result of a share buy-back, those instruments are deducted from equity and the associated shares are cancelled. No gain or loss is recognised in the profit or loss and the consideration paid including any directly attributable incremental costs is recognised directly in equity.

19

Shell Villages and Resorts Limited and Controlled Entities – Annual Report 2011

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011 (continued)

n. Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Tax Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the balance sheet are shown inclusive of GST.

Cash flows are presented in the cash flow statement on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows.

• o. Earnings per share

• (i) Basic earnings per share

Basic earnings per share is calculated by dividing

• The profit attributable to equity holders of the company, excluding any costs or servicing equity other than ordinary shares

By the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year and excluding treasury shares.

(ii) Diluted earnings per share

Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account

• The after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares, and

The weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares.

• p. Critical Accounting Estimates and Judgments

The directors evaluate estimates and judgments incorporated into the financial report based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the group.

Key Estimates — Impairment

The group assesses impairment at each reporting date by evaluating conditions specific to the group that may lead to impairment of assets. Where an impairment trigger exists, the recoverable amount of the asset is determined. Value-in-use calculations performed in assessing recoverable amounts incorporate a number of key estimates.

NOTE 2: REVENUE

		Consolidated	Group
		2011	2010
		$	$
Other income
—	Interest received	847	5,244

20

Shell Villages and Resorts Limited and Controlled Entities – Annual Report 2011

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011 (continued)

NOTE 3: INCOME TAX EXPENSE

NOTE 3: INCOME TAX EXPENSE
a. The components of tax expense comprise: Current tax Deferred tax b. The prima facie tax on profit from ordinary activities before income tax is reconciled to the income tax as follows: Operating loss from ordinary activities Prima facie tax payable on profit from ordinary activities before income tax at 30% (2010: 30%) Tax effect of: - Non-temporary differences Temporary differences and tax losses not recognised Income tax expense c. Tax losses	Consolidated Group 2011 $ 2010 $ - - - -
	- -
	(388,942) (418,949) (116,682) (125,685) - - 116,682 125,685
	- -

Unused tax losses at balance date are estimated to be $1,290,000. However, these estimates will only be finalised upon lodgement of outstanding tax returns.

21

Shell Villages and Resorts Limited and Controlled Entities – Annual Report 2011

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011 (continued)

NOTE 4: KEY MANAGEMENT PERSONNEL DISCLOSURES

Key management personnel remuneration has been included in the Remuneration Report section of the Directors Report.

a. Key Management Personnel Compensation

					Consolidated Group	Consolidated Group	Consolidated Group
					2011	2010
					$		$
Short term employee	benefits				127,450		153,750
Post-employment benefits						-	-
Other long-term benefits						-	-
Termination benefits						-	-
Share-based payments						-	-
					127,450		153,750
b. Shareholdings - Number of Shares held by			Key Management Personnel
	Balance	Share	Received	Options	Net	Final	Balance
	1 July or	consolida-	as	Exercised	Change	Notice	30 June
	date of	tion	Compensa		Other*
	appoint-		-tion
	ment
2011
Mr G Cornelson1
Mr B Crowley2	-	-	-	-	-	-	-
Mr D Diamond3	-	-	-	-	-	-	-
Mr I Dorney2	-	-	-	-	-	-	-
Mr B Patkin	2,023,347	-	-	-	-	-	2,023,347
Mr R Pritchard2	-	-	-	-	-	-	-
Total	2,023,347	-	-	-	-		2,023,347
2010
Mr C Budd	1,285,641	-	-	-	-	(1,285,641	-
Mr B Patkin	2,023,347	-	-	-	-	-	2,023,347
Mr R Kerr	-	-	-	-	-	-	-
Mr D Diamond	-	-	-	-	-	-	-
Mr R Pritchard	-	-	-	-	-	-	-
Total	3,308,988	-	-	-	-	(1,285,641	2,023,347

1 Appointed 11 February 2011, resigned 14 February 2011

2 Appointed 11 February 2011

3 Resigned 8 February 2011

• Net Change Other refers to shares purchased or sold during the financial year.

22

Shell Villages and Resorts Limited and Controlled Entities – Annual Report 2011

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011 (continued)

c. Loans to Key Management Personnel

Details of loans made to directors of Shell Villages and Resorts Limited and other key management personnel of the group, including their personally related parties, are set out below.

• (i) Aggregates for key management personnel

	Balance at the	Interest paid		Interest not		Balance at the	Number in
	start of the	and payable		charged		end of the	group at the
	year	for the year				year	end of the
							year
Consolidated Group
	$	$		$		$	$
2011	10,000		-		-	10,000		1
2010	-		-		-	10,000		1

In 2011 there were no loans to individuals that exceeded $100,000 at any time (2010: nil).

Loans outstanding at the end of the current and prior year include an unsecured loan to Sustainable Energy Australasia Limited (SEA), a company of which Director Richard Pritchard is a director and substantial shareholder, The $10,000 loan was made for an indefinite period and is interest free. The loan was for the purpose of procuring due diligence work by independent legal and technical advisers for the Company’s potential acquisition of SEA. The amounts shown for interest not charged in the tables above represent the difference between the amount paid and payable for the year and the amount of interest that would have been charged on an arm’s length basis.

No write-down or allowance for doubtful receivables have been recognised in relation to any loans made to key management personnel.

NOTE 5: AUDITOR’S REMUNERATION Remuneration of the auditor of the parent entity for: — auditing or reviewing the financial report NOTE 6: EARNINGS PER SHARE	Consolidated Group 2011 $ 2010 $ 20,000 20,000
(a) Basic and diluted earnings per share
From continuing operations (cents)	(0.7) (1.0)
(b) Information concerning the classification of securities

Convertible notes are considered to be potential ordinary shares. However, as the convertible notes are anti-dilutive they are ignored in the calculation of the diluted earnings per share.

NOTE 7: CASH AND CASH EQUIVALENTS

Cash at bank and in hand NOTE 8: FINANCIAL ASSETS CURRENT Loan receivable	1,855 59,852
	10,000 10,000

23

Shell Villages and Resorts Limited and Controlled Entities – Annual Report 2011

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011 (continued)

The loan bears no interest and is repayable on demand. Refer to Note 4c above for further details with regards to this loan.

NOTE 9: OTHER CURRENT ASSETS CURRENT Other receivables Other assets NOTE 10: TRADE AND OTHER PAYABLES CURRENT Unsecured liabilities Trade payables Sundry payables and accrued expenses NOTE 11: FINANCIAL LIABILITIES CURRENT Unsecured liabilities Convertible notes Unsecured borrowings	Consolidated Group 2011 $ 2010 $ 183,446 153,151 22,606 4,718 206,052 157,869 553,832 342,656 913,097 910,220
	1,466,929 1,252,876
	796,804 737,781 20,000 365,000
	816,804 1,102,781

(a) Convertible notes

The AGM in January 2009 approved the issue of $1,300,000 convertible notes at the face value of $1 each to refinance the liability owed to Allan Shell and Roma Shell for the purchase of Hearts Monitors Pty Ltd.

The convertible notes bear interest at 9% per annum starting from 1 January 2009, accruing on a daily basis and capitalised monthly. The notes are convertible into ordinary shares or repayable on 31 December 2010. The notes are convertible at the average of the daily volume weighted average sale prices of shares sold on ASX during the 5 business day period prior to the date of conversion.

The noteholder:

• (i) must elect to convert 350,000 notes not earlier than 1 January 2009 nor later than 30 June 2009;

(ii) must elect to convert 350,000 notes no earlier than 1 January 2010 nor later than 30 September 2010;

(iii) may elect to convert some or all of the remaining 600,000 notes from 1 October 2010 to the maturity of the notes.

The convertible notes are presented in the balance sheet as follows:

Face value of notes issued or balance brought forward Value of conversion rights Converted at 30 June 2011 Interest expense	Consolidated Group 2011 $ 2010 $ 737,781 636,018 - - - -
	737,781 636,018 59,023 101,763

24

Shell Villages and Resorts Limited and Controlled Entities – Annual Report 2011

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011 (continued)

Interest paid Total	- -
	796,804 737,781

In March 2010 the convertible notes, which were held by third parties, were assigned to Snowy Plains Pty Ltd, on behalf of a group of investors, a company of which Director Mr Boris Patkin is Chief Executive Officer.

*The unsecured borrowing represents funds received from potential investors in the company. On 15 November 2010, a general meeting of shareholders approved the issue of 36,500,000 fully paid ordinary shares at $0.01 each. In February 2011 34,500,000 shares have been issued at $0.01 each to extinguish $345,000 of this debt.

NOTE 12: ISSUED CAPITAL

NOTE 12: ISSUED CAPITAL
			2011	2010
			$	$
(a) Ordinary shares
84,090,409 (2010: 43,108,368) fully paid ordinary shares			43,243,754	42,806,452
	2011		2010
	Number	$	Number	$
At the beginning of reporting period	43,108,368	42,806,452	43,108,368	42,806,452
Shares issued during year:
15 February 2011*	26,250,000	262,500	-	-
24 February 2011*	8,250,000	82,500	-	-
9 May 2011	4,500,000	45,000	-	-
22 June 2011 *	1,982,041	49,552	-	-
Transaction costs	-	(2,250)
At reporting date	84,090,409	43,243,754	43,108,368	42,806,452

*Shares issued in settlement of debts

Ordinary shares participate in dividends and the proceeds on winding up of the parent entity in proportion to the number of shares held.

At the shareholders’ meetings each ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has one vote on a show of hands. At the shareholders’ meetings each ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has one vote on a show of hands.

(b) Capital risk management

The group’s objective when managing capital is to safeguard its ability to continue as a going concern. In order to maintain or adjust the capital structure, the company may issue new shares or return capital to shareholders.

The company’s strategy is to complete the restructure of its debts and raise capital by the issue of new shares to strengthen its financial position.

NOTE 13: CONTROLLED ENTITIES

NOTE 13: CONTROLLED ENTITIES
	Country of Incorporation	Percentage	Owned (%)*
		2011	2010
Kalgoorlie Tailings Project Pty Ltd	Australia	100%	100%
Shell Villages and Resorts Helidon Spa Pty Ltd	Australia	100%	100%
Shell Villages and Resorts Mollymook Pty Ltd	Australia	100%	100%
Shell Villages and Resorts Bribie Island Pty Ltd	Australia	100%	100%

25

Shell Villages and Resorts Limited and Controlled Entities – Annual Report 2011

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011 (continued)

NOTE 13: CONTROLLED ENTITIES

Shell Villages and Resorts Commercial Pty Ltd Australia 100% 100%

• Percentage of voting power is in proportion to ownership

NOTE 14: CONTINGENT LIABILITIES AND CONTINGENT ASSETS

The company has sought legal advice in respect of the clawback of assets or their value, disposed of in 2008 and 2009. A claim is currently being quantified but is otherwise subject to legal-professional privilege and there will be a further announcement by the directors.

NOTE 15: SEGMENT REPORTING

Basis of accounting for purposes of reporting by operating segments

Accounting policies adopted

Unless stated otherwise, all amounts reported to the Board of Directors as the chief decision maker with respect to operating segments are determined in accordance with accounting policies that are consistent to those adopted in the annual financial statements of the Consolidated Group.

The reportable operating segment is corporate office management which is the Consolidated Group’s current principal activity.

Corporate office activities are not allocated to operating segments and form part of the balance of unallocated revenue, expenses, assets and liabilities.

Segment assets

Where an asset is used across multiple segments, the asset is allocated to the segment that receives the majority of economic value from the asset. In the majority of instances, segment assets are clearly identifiable on the basis of their nature and physical location.

Segment liabilities

Liabilities are allocated to segments where there is direct nexus between the incurrence of the liability and the operations of the segment. Segment liabilities include trade and other payables.

Total segment revenue Inter-segment revenue Revenue from external customers Loss before income tax Depreciation and amortisation Impairment of assets Income tax expense Total segment assets Total segment liabilities	2011 2010 Corporate office $ Total $ Corporate office $ Total $ 847 847 5,244 5,244 - - - -
	847 847 5,244 5,244
	(388,942) (388,942) (418,949) (418,949)
	- - - - - - - - - - - - 217,907 217,907 227,721 227,721 (2,283,733) (2,283,733) (2,355,657) (2,355,657)

26

Shell Villages and Resorts Limited and Controlled Entities – Annual Report 2011

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011 (continued)

NOTE 16: NOTES TO STATEMENT OF CASH FLOWS

NOTE 16: NOTES TO STATEMENT OF CASH FLOWS
aReconciliation of cash Cash and cash equivalents b . Reconciliation of loss after income tax to net cash used in operating activities Loss after income tax Add non-cash items in operating costs: Gain on sale of discontinued operations Share based payments Changes in assets and liabilities, net of the effects of purchase and disposal of subsidiaries (Increase)/decrease in trade and other receivables (Increase)/decrease in other assets Increase/(decrease) in trade and other payables Net cash used in operating activities	Consolidated Group 2011 $ 2010 $ 1,855 59,852
	(375,192) (418,949) - - - - - 122,479 (48,183) 64,015 320,378 190,205
	(102,997) (295,452)

NOTE 17: RELATED PARTY TRANSACTIONS

Key management personnel remuneration has been included in the Remuneration Report section of the Directors Report.

During the financial year an amount of $2,250 was due and payable to Equity & Law Investment Services Pty Ltd, a company in which Director Ian Dorney is a director, for share placement fee on equity capital raised. There were no other related party transactions during the year. Refer to Note 4c in regards to a related party loan.

27

Shell Villages and Resorts Limited and Controlled Entities – Annual Report 2011

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011 (continued)

NOTE 18: FINANCIAL INSTRUMENTS

a. Financial Risk Management

The Group holds the following financial instruments:

Financial assets Cash and cash equivalents Financial assets Other current assets Financial liabilities Trade and other payables Financial liabilities	Consolidated Group 2011 $ 2010 $ 1,855 59,852 10,000 10,000 206,052 157,869
	217,907 227,721
	1,466,929 1,252,876 816,804 1,102,781
	2,283,733 2,355,657

The group’s financial instruments consist mainly of deposits with banks, accounts receivable and payable, loans and convertible notes.

The main purpose of non-derivative financial instruments is to raise finance for group operations.

The economic entity currently has no derivative financial instruments.

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

• credit risk;

• liquidity risk;

• market risk; and

• interest risk.

b. Credit Risk

Credit risk is the risk of financial loss to the Group if a customer or a counter party to a financial instrument fails to meet its contractual obligations.

The Group currently holds the following receivables based on the type of receivables:

Other receivables Loan to Sustainable Energy Australia Ltd Other current assets	Consolidated Group 2011 $ 2010 $ 106,920 153,151 10,000 10,000 21,607 4,718 138,527 157,869

The loan is repayable on demand and other receivables and other current assets are receivable within one year.

28

Shell Villages and Resorts Limited and Controlled Entities – Annual Report 2011

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011 (continued)

NOTE 18: FINANCIAL INSTRUMENTS (CONTINUED)

c. 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 without incurring unacceptable losses or risking damage to the Group’s reputation. As noted in Note 1 the consolidated group will be restructuring its debts with the issue of shares in settlement of most of its liabilities.

The table below analyses the Group’s financial liabilities into relevant maturity groupings based on the remaining period at the reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows:

Consolidated 2011 Convertible notes Financial liabilities Trade and other payables 2010 Convertible notes Financial liabilities Trade and other payables	Carrying Amount Contractual Cash flows 6 mths or less 6-12 mths 1-2 years 2-5 years More than 5 years $ $ $ $ $ $ $ 796,804 796,804 796,804 - - - - 20,000 20,000 20,000 1,478,429 1,478,429 1,478,429 - - - -
	2,251,385 2,251,385 2,251,385 - - - -
	737,781 737,781 737,781 - - - - 365,000 365,000 365,000 - - - - 1,252,876 1,252,876 1,252,876 - - - -
	2,355,657 2,355,657 2,355,657 - - - -

d. Market Risk

Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates will affect the Group’s income or the value of its holdings of financial instruments.

The Group operates from Australia and transacts only in Australian dollars, hence, there is no currency risk. The Group’s main interest rate risk arises from convertible notes. Convertible notes issued at variable rates of 9% expose the Group to cash flow interest rate risk. As at the reporting date, the Group had the following variable rate borrowings outstanding:

	2011 Weighted		2010 Weighted
	average interest	2011 Balance	average interest	2010 Balance
	rate		rate
		$		$
Convertible notes	9.00%	796,804	9.00%	737,781
Financial liabilities	-	20,000	-	365,000

An analysis by maturity is provided in note (c) above.

29

Shell Villages and Resorts Limited and Controlled Entities – Annual Report 2011

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011 (continued)

Sensitivity analysis for variable rate instruments for the consolidated entity, showing an effect of increase/(decrease) of profit or loss and equity to an increase of interest rates by 100 basis points is shown below:

	Increase in	interest rate		Decrease in interest rate
	by	1%		by 1%
	Profit	Equity		Profit Equity
	$	$		$ $
2011
Convertible notes	(7,968)		-	7,968	-
2010
Convertible notes	(7,378)		-	7,378	-

This analysis assumes that all other variables remain constant.

NOTE 20 – PARENT ENTITY INFORMATION

Assets Current assets Non-current assets Total assets Liabilities Current liabilities Total liabilities Equity Issued capital Reserves Accumulated losses Financial performance (Loss) profit for the year Other comprehensive income Total comprehensive loss for the year	2011 2010 $ $ 157,907 167,720 36 36
	157,943 167,756
	2,283,734 2,355,657
	2,283,734 2,355,657
	43,243,754 42,806,452 393,153 393,153 (45,762,698) (45,387,505)
	(2,125,791) (2,187,901)
	(375,192) (418,728) - -
	(375,192) (418,728)

The Parent Entity has not entered into any financial guarantees which are outstanding and has no contingent liabilities or commitments for the acquisition of property, plant and equipment as at 30 June 2011 and 30 June 2010.

30

Shell Villages and Resorts Limited and Controlled Entities – Annual Report 2011

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011 (continued)

NOTE 21. EVENTS AFTER REPORTING DATE

There has not arisen in the interval since 30 June 2011 and up to the date of this report, any matter, that, in the opinion of the directors, has significantly affected or may significantly affect the operations of the Group, the results of those operations or the state of affairs of the group in future financial years other than:

• (a) In accordance with a deed of settlement dated 24 June 2011, the company agreed to convert 1,300,000 convertible notes into 20,000,000 ordinary shares. The carrying value of the convertible notes as at 30 June 2011 was $796,804. Shareholders’ approval is to be sought in the next annual general meeting.

Under the deed, the company also agreed to issue 10,000,000 ordinary shares to Mr B Patkin, a director, to settle the amounts owed to Mr B Patkin and his related entities. Shareholders’ approval is to be sought in the next annual general meeting.

• (b) The Board of Directors resolved on 8 July 2011 to raise $250,000 by the issue of 50,000,000 shares at $0.005 per share. This capital raising for sophisticated and professional persons is to take place immediately post submission of audited accounts to ASIC. This issue will target AFSL holders who will assist in the raising of further capital through a disclosure statement post the Annual General Meeting.

NOTE 22. COMPANY DETAILS

Shell Villages and Resorts Limited

Level 9,

• 5 Hunter Street

Sydney NSW 2000

The principal places of business are:

Shell Villages and Resorts Limited Level 9,

• 5 Hunter Street

Sydney NSW 2000

The financial report was authorised for issue on 22[nd] August 2011 by the Board of Directors.

31

Shell Villages and Resorts Limited and Controlled Entities – Annual Report 2011

DIRECTORS’ DECLARATION

In the directors’ opinion:

• the attached financial statements and notes thereto comply with the Corporations Act 2001, the Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements;

• the attached financial statements and notes thereto comply with International Financial Reporting Standards as issued by the International Accounting Standards Board as described in Note 1 to the financial statements;

• the attached financial statements and notes thereto give a true and fair view of the consolidated entity’s financial position as at 30 June 2011 and of its performance for the financial year ended on that date; and

• there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payables.

The directors have given the declarations required by section 295A of the Corporations Act 2001.

Signed in accordance with a resolution of directors made pursuant to section 295(5) of the Corporations Act 2001.

On behalf of the directors

==> picture [191 x 54] intentionally omitted <==

Richard Wyn Pritchard Director

Dated this 22[nd] day of August 2011

32

==> picture [596 x 75] intentionally omitted <==

==> picture [596 x 75] intentionally omitted <==

INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF SHELL VILLAGES & RESORTS LIMITED FOR THE YEAR ENDED 30 JUNE 2011

Report on the Financial Report

We have audited the accompanying financial report of Shell Villages and Resorts Limited (the company), which comprises the statement of financial position as at 30 June 2011, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year ended on that date, a summary of significant accounting policies and other explanatory notes and the directors’ declaration for both Shell Villages and Resorts Limited and Controlled Entities (the consolidated entity). The consolidated entity comprises the company and the entities it controlled at the year’s end or from time to time during the financial year.

Directors’ Responsibility for the Financial Report

The directors of the company are responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001 . This responsibility includes establishing and maintaining internal control relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101: Presentation of Financial Statements, that the financial report, comprising the financial statements and notes, complies with International Financial Reporting Standards as issued by the International Accounting Standards Board.

Auditor’s Responsibility

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

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

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

Sydney Level 2 580 George Street Sydney NSW 2000 PO Box 20726 World Square NSW 2002 T 02 9261 2288 F 02 9261 2376

Newcastle Hunter Mall Chambers 2[nd] Floor, 175 Scott Street Newcastle NSW 2300 PO Box 234 Newcastle NSW 2300 T 02 4907 7222 F 02 4929 6759

Brisbane Suite 1, Level 3 200 Creek Street Brisbane QLD 4000 GPO Box 2246 Brisbane QLD 4001 T 07 3839 1755 F 07 3839 1037

mail@prosperityadvisers.com.au www.prosperityadvisers.com.au Prosperity Audit Services ABN 87 879 283 831

==> picture [30 x 42] intentionally omitted <==

Chartered Accountants Liability limited by a Scheme approved under the Professional Standards Legislation.

Sydney | Newcastle | Brisbane

33

==> picture [596 x 76] intentionally omitted <==

==> picture [596 x 75] intentionally omitted <==

INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF SHELL VILLAGES & RESORTS LIMITED FOR THE YEAR ENDED 30 JUNE 2011 (continued)

Independence

In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001 . We have given to the directors of the Company a written Auditor’s Independence Declaration, a copy of which is included on page 9 of the financial report.

Auditor's Opinion

In our opinion, the financial report of Shell Villages & Resorts Limited is in accordance with the Corporations Act 2001 , including:

• i. giving a true and fair view of the company’s and consolidated entity’s financial position as at 30 June 2011 and of their performance for the year ended on that date; and

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

Material uncertainty in relation to the going concern basis

Without qualifying our opinion, we draw attention to Note 1 in the financial report which indicates that the consolidated entity incurred a net loss of $375,192 for the year ended 30 June 2011 and reported net current liabilities of $2,065,826 as at 30 June 2011 and net cash outflows from operations of $102,997. These conditions along with other matters described in Note 1 indicate the existence of a material uncertainty which may cast significant doubt on the company’s ability to continue as a going concern.

Report on the remuneration report

We have audited the remuneration report included in pages 5 to 7 of the directors’ report for the year ended 30 June 2011. The directors of the company are responsible for the preparation and presentation of the remuneration report in accordance with section 300A of the Corporations Act 2001 . Our responsibility is to express an opinion on the remuneration report based on our audit conducted in accordance with Australian Auditing Standards.

Auditor’s Opinion

In our opinion, the remuneration report of Shell Villages and Resorts Limited for the year ended 30 June 2011 complies with section 300A of the Corporations Act 2001 .

PROSPERITY AUDIT SERVICES

PAUL HORNE Partner

22 August 2011 Sydney

34

Shell Villages and Resorts Limited and Controlled Entities – Annual Report 2011

ADDITIONAL INFORMATION FOR LISTED PUBLIC COMPANIES

The following additional information is required by the Australian Stock Exchange Ltd in respect of listed public companies only. The information is current as at 1 July 2011.

1. Shareholding

Shareholding
a. Distribution of Shareholders Category (size of holding) 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 – and over	Number Number of Holders Shares Held 195 92,317 438 1,027,978 132 963,674 178 5,688,677 82 76,317,763
	1,025 84,090,409

The number of shareholdings held in less than marketable parcels is 621.

b. 20 Largest Shareholders — Ordinary Shares

b. 20 Largest Shareholders — Ordinary Shares
Name 1. MR HUW MORRIS JONES 2. MR DECLAN NIGEL PRITCHARD 3. DR ALLAN MICHAEL SHELL 4. MR ALLAN MICHAEL SHELL AND MRS ROMA SHELL 5. MISTIC INVESTMENT PTY LTD 6. MR RAYMOND JOSEPH ALLEN 7. BMSCT PTY LIMITED 8. MR HAO GIA DANG 9. MRS FIONA MAREE FARRUGIA 10. MR RONALD HARRY JOHNSON 11. MR DARRELL DANIEL SMITH 12. MR STEPHEN GRIMSON 13. VAPOFO PTY LTD 14. CHRISWALL HOLDINGS PTY LTD 15. MOORE STEPHENS (QUEENSLAND) LTD 16. H NOMINEES PTY LTD 17. DIRDOT PTY LIMITED 18. SNOWY PLAINS PTY LTD 19. MR COREY BUDD 20. MR NIGEL CLARK Twenty largest shareholders Others	Number of Ordinary Fully Paid Shares Held % Held of Issued Ordinary Capital 5,000,000 5.95% 5,000,000 5.95% 3,955,671 4.70% 3,500,000 4.16% 2,748,310 3.27% 2,500,000 2.97% 2,500,000 2.97% 2,500,000 2.97% 2,500,000 2.97% 2,500,000 2.97% 2,500,000 2.97% 2,000,000 2.38% 2,000,000 2.38% 1,825,695 2.17% 1,779,893 2.12% 1,610,554 1.92% 1,561,809 1.86% 1,411,026 1.68% 1,285,641 1.53% 1,250,000 1.49%
	49,928,599 59.37% 34,161,810 40.63%
	84,090,409 100.00%

35

Shell Villages and Resorts Limited and Controlled Entities – Annual Report 2011

ADDITIONAL INFORMATION FOR LISTED PUBLIC COMPANIES

2. Voting Rights

The voting rights attached to each class of equity security are as follows:

Ordinary shares

— At meetings of members each member entitled to vote can vote in person by proxy or attorney or, in the case of member which is a body corporate, by representative duly authorised.

— Each ordinary share is entitled to one vote when a poll is called, otherwise each member present at a meeting or by proxy has one vote on a show of hands.

• 3.. The names of the joint company secretary are Mr Brett Crowley and Mr Richard Pritchard

• The address of the principal registered office in Australia is

Level 9,

• 5 Hunter Street

Sydney NSW 2000

1. Registers of securities are held at the following addresses

Computershare Investor Services Pty Ltd

Level 2, Reserve Bank Building

45 ST George’s Terrace Perth, WA, AUSTRALIA, 6000

6. Stock Exchange Listing

Quotation has been granted for all the ordinary shares of the company on all Member Exchanges of the Australian Securities Exchange Limited.

7. Unquoted Securities

The company does not have any unquoted securities at the year end.

36