REDCASTLE RESOURCES LIMITED — Annual Report 2005

Oct 23, 2005

CONTENTS

Corporate Governance Statement	$\overline{2}$
Directors' Report	9
Auditor's Independence Declaration	15
Statement of Financial Performance	16
Statement of Financial Position	17
Statement of Cash Flows	18
Notes to the Financial Statements	19
Directors' Declaration	36
Independent Audit Report	37
Shareholder Information	39

CORPORATE GOVERNANCE STATEMENT

BACKGROUND

Corporate governance is the manner in which companies are managed and directed. It is the way in which the Board makes decisions that adds value to the company, and therefore the shareholders. while still remaining a good corporate citizen.

On the 31st March 2003 the ASX Corporate Governance Council introduced the 10 Principles of Good Corporate Governance and 28 Best Practice Recommendations, On the 1 July 2004, the amendments to the Corporations Act 2001 known as CLERP 9 initiatives also came into effect. The ASX Listing Rule 4.10.3 requires all listed entities to disclose in a statement the extent to which the entity has followed the best practice recommendations set by the ASX Corporate Governance Council during the reporting period.

The Board is committed to improving its corporate governance practices and embracing the principles put out by the ASX Corporate Governance Council, however, the Board is of a view that the adoption of the practices and principles should be in line with the growth in size, changes in the nature and increase in complexity of the company's business.

The Board aims to achieve all of the Best Practice Recommendations in stages as the company grows and its circumstances change over time.

This statement sets out the key corporate governance principles and practices of the company for the financial year ended.

Principle 1: Lay solid foundations for management and oversight

The Company is structured such that there are clearly defined roles, segregation of duties and responsibilities and approved levels of authority between the management and the governance of the company.

The Board sets the overall corporate governance policy for the company including determining the strategic direction, establishing policies and goals for management and monitoring the achievement of them. The Board then delegates responsibility for the day to day management of the company to the Chief Executive Officer and the senior executive team.

The key responsibilities of the Board include:

• setting the long-term strategy and annual business plan $\bullet$ including objectives and milestones to be achieved;

• evaluating capital, cash and operating risk budgets and making appropriate recommendations on an annual basis;

• reviewing and approving the company's financial, strategic and operational goals and assessing key business developments as formulated by management in line with the objectives and goals set by the Board;

• monitoring the performance of the company against the financial objectives and operational goals set by the Board and reviewing the implementation of Board approved strategies;

• $\bullet$ assessing the appropriateness of the skill sets and the levels of experience of the members of the Board, individually and as a whole and selecting new members to join the Board when a vacancy exists;

• appointing, removing and determining the terms of engagement of the Directors, Chief Executive Officer and Company Secretary;

• overseeing the delegation of authority for the day to day management of the company;

• ensuring that the risk management systems, financial reporting and information systems, personnel, policies and procedures are all operating efficiently and effectively by establishing a framework of internal controls and compliance;

• reviewing major contracts, goods or services on credit terms, acceptance of counter-party risks and issuing guarantees on behalf of the company;

• approving the capital structure and major funding requirements of the company;

• making recommendations as to the terms of engagement, independence and the appointment and removal of the external auditors:

• setting the Code of Conduct for the company and ensuring that appropriate standards of corporate governance and ethics are effectively communicated throughout the company and complied with;

• reviewing the adherence by each director to the Directors' Code of Ethics:

• establishing policies to ensure that the company complies with the ASX Continuous Disclosure Policy;

• approving the company's half year and full year reports to the shareholders. ASX and ASIC: and

• ensuring that recruitment, retention, termination, remuneration, performance review and succession planning policies and procedures are in place and complied with.

Principle 2: Structure the Board to add value

The Board is presently structured to maximise value to the company and the shareholders. The Board is of a size and composition that is conducive to making decisions expediently, with the benefit of a variety of perspectives, experiences and skills.

Board composition

As at the end of the financial year, the Board composed of three members. The details of each of the three directors' position, date of appointment, qualifications, experience and expertise and assessment of independence is listed in the table below.

Alfred Wong (Age 44) MBA (NSW University), BA (HKU), ASIA

Non Executive Chairman

Date of appointment 21 May 2001

Experience and expertise Alfred is the founder and the Managing Director of the Great Pacific Financial Group, a well respected private financial institution with over 10 years experience in property investment banking. Alfred has also held a number of executive management positions in leading financial institutions and banks in Australia, including Capita Financial Group and State Bank NSW.

Directorships Alfred is the Executive Chairman of Green Pacific Energy Limited since 2003, non executive chairman of Qmastor Limited since 2003 and non executive Director of Tourism, Hotels and Leisure Limited since 2004, all of them are ASX listed companies.

Assessment of independence Alfred holds 750,000 shares (6.31% of total share capital) and therefore, is not an independent director.

Danny Au-Yeung (Age 45) Fellow of the Chartered Association of Certified Accountants (UK), Member of the Australian Society of Certified Practising Accomptants

Director (Chief Executive Officer)

Date of appointment 21 May 2001

Experience and expertise Danny brings with him 20 years of experience in the financial industry, having held senior positions in Ernst & Young and Capita Financial Group. He is highly experienced in the structuring of subordinated financing structures for properties and infrastructure projects.

Directorships Danny is a non executive director of Green Pacific Energy Limited since 2003, an ASX listed company.

Assessment of independence As Danny is the Chief Executive Officer of the Company, he is an executive director and is not an independent director.

Ivan Wong (Age 42) BSc (Hons)

Non Executive Director

Date of appointment 21 May 2001

Experience and expertise Ivan is an IT specialist. He also has extensive experience in the mortgage industries being the Director of Great Pacific Finance Pty Ltd, a leading specialist mortgage originator with over $500 million in funds under management. He also has access to in-depth and instantaneous information on the property industry as the founder of Universal Title Searchers, a leading provider of public, legal and

CORPORATE GOVERNANCE STATEMENT

business information with the first and only windows-based software package for electronic information transfer in Australia.

Assessment of independence As Ivan holds 250,000 shares in the company making him one of the top 20 shareholders, he is not an independent director.

It is noted that the company's board composition is not in keeping with the commentary and guidance to Best Practice Recommendations 2.1. The Board is of the opinion that the current stage of growth which the company is at requires the company to have a board, which has more of a hands-on and technical experience in order to enhance company performance. The company also relies on the experience and expertise of its current Board members to develop the long term objectives of the company. However, the board is committed to follow the guidance to Best Practice Recommendations 2.1 by appointing independent directors to the Board in the coming year.

The Chairman is also not an independent director as recommended by Best Practice Recommendations 2.2, however, the role of the Chairman is held by someone other than the Chief Executive Officer, in order to ensure that no single individual has unfettered powers.

Term of office

The members of the Board are elected by the shareholders to ensure that the Board has the appropriate mix of expertise and experience. One-third of the Board retires and make themselves available for re-election at the following AGM, with the exception of the Chief Executive Officer. No director, with the exception of the Chief Executive Officer, is allowed to retain office for more than 3 years without submitting himself or herself for re-election.

When a vacancy exists on the Board, the Board appoints the most suitable candidate from a panel of candidates, who then must stand for election at the next Annual General Meeting if he or she wishes to continue as a member of the Board in the following year.

Personal interests & conflicts

Directors must not take advantage of their position as directors and must not allow their personal interests, or the interests of any associated person to interfere or exert undue influence on their conduct or decisions as a director.

Directors also have a duty to avoid conflicts of interest between the best interests of the company and their own personal or commercial interests. Conflicts of interest can be either actual or potential. If a conflict of interest arises, directors must disclose their interests to the Board immediately. The directors concerned must not be present at

the meeting while the matter is being considered and must not be allowed to vote on the matter either.

Independent professional advice

Each director has the right to seek independent professional advice at the company's expense, however prior approval from the Chairman is required, which may not be unreasonably withheld. Where the Chairman wishes to obtain independent professional advice, the Chairman is required to make a request to, and obtain the prior authorisation of, the Chairman of the Audit & Risk Management Committee.

Nomination responsibilities

The Board also has responsibility in relation to the following functions:

• advise the Board on the appropriateness of the composition and size of the Board;
• establish formal procedures to identify and assess potential candidates for the Board with reference to their skills, experience, expertise and personal qualities;
• identify, nominate and recommend appropriate candidates to the Board with the help of external consultants, if appropriate; and
• draw up an appointment letter stating the terms and conditions of the appointment and retirement of any newly appointed members of the Board;

The Board has decided not to formally set up a Nomination Committee at this stage as it has managed this part of its responsibility quite effectively given the current stage of its development. However, the Board will engage external consultants to give advice and make recommendations to the whole Board.

Principle 3: Promote ethical and responsible decision-making

Code of Conduct & Ethics

The company has a Code of Conduct, which sets the standards in accordance with which each director, manager and employee of the company is expected to act. The code is communicated to all levels of the company and deals with areas such as professional conduct, customers/consumers, suppliers, advisers/ regulators, competitors, the community and the employees.

In addition to the Code of Conduct, the company also has a Directors' Code of Ethics, which sets out particular issues relevant to directors' obligations to the company.

Share trading policy

The constitution permits directors, senior executives and

other officers of the company to trade in company shares as long as they comply with the company's Share Trading Policy. The Share Trading Policy is a code that is designed to minimise the potential for insider trading.

Directors must notify the Chairman of the Board, before they buy or sell shares in the company. If the Chairman of the Board intends to trade in the company shares, the Chairman of the Board must give prior notice to the Chairman of the Audit & Risk Management Committee. The details of the share trading must be given to the Company Secretary, in writing, within 3 business days of completion of such trade and the Company Secretary must lodge details of changes in a director's shareholding in the company with the ASX within 5 business days of such trading.

Senior executives must give prior notice to the Chief Executive Officer, while other officers must notify the Company Secretary, before trading in the company shares and details of all such transactions must be given, in writing, to the Company Secretary within 7 business days.

Any changes in substantial shareholding of the directors, senior executives or other officers must be reported to the ASX within 2 business days of such trading. The policy also recommends that trading in the company shares only occur in the following trading windows:

• 30 days after the announcement of the company's half year results; and
• 30 days after the announcement of the company's full year $\bullet$ results.

Principle 4: Safeguard integrity in financial reporting

Sign-off by Chief Executive Officer and Chief Financial Officer

In order to give assurance as to the integrity of the financial statements, the Chief Executive Officer and the Chief Financial Officer have provided a statement in writing to the Board stating that the company's financial reports present a true and fair view, in all material respects, of the company's financial condition and operational results and are in accordance with relevant accounting standards.

Audit & Risk Management Committee - audit responsibilities

The Board has decided to establish an Audit & Risk Management Committee, which acts as an advisory body to the Board in relation to the following responsibilities:

review the company's financial statements and any other ٠ financial information distributed externally and make an assessment of whether the management processes are sufficient for supporting external reporting;

• monitor the procedures in place to ensure that the company is in compliance with all relevant legislation and accounting standards, including the Corporations Act and ASX Listing Rules;
• ensure that there is compliance with the Code of Conduct and the Directors' Code of Ethics and is periodically reviewed;
• review policies to avoid conflicts of interest and review past or proposed transactions between members of the Board and the company and assess the impact on directors' independence;
• assess the procedures and make recommendations for the selection and appointment of the external auditor and for the rotation of external audit engagement partners at least once every five years;
• assess the performance and independence of the external auditors and whether independence of this function has been compromised having regard to the provision of nonaudit services: and
• assess the reasonableness of the external audit fees proposed for the audit work to be performed;

The Audit & Risk Management Committee also has delegated responsibility from the Board in relation to:

• the external audit planning process, in terms of the scope of the audit and the nature and impact of accounting policy and standard changes;
• reviewing the external audit recommendations in terms of the review points raised and where major deficiencies in controls or procedures have been identified, whether prompt remedial action has been put in place; and
• reviewing the draft financial report and making the necessary recommendations to the Board for the approval of the financial report.

As at the date of this report, the company has not appointed any member to the Audit & Risk Management Committee and as such, the responsibilities and duties of this Committee were taken up by the Board during the year. The small size and the hands on approach of the current Board enable it to handle particular issues relevant to verifying and safeguarding the integrity of the company's financial reporting with the same efficiency as an audit committee.

The Board adopted a formal charter for the Audit & Risk Management Committee to reflect the matters set out in the

CORPORATE GOVERNANCE STATEMENT

commentary and guidance to Best Practice Recommendation 4.2. The Board is aware that the small size of the current Board and the absence of independent Directors do not allow the Board to structure the Audit & Risk Management Committee in accordance to the commentary and guidance to Best Practice Recommendation 4.3, but is committed to follow the recommendation once independent directors are appointed in the coming year.

The board's responsibilities in relation to risk management matters are detailed under Principle 7: Recognise And Manage Risk.

Principle 5: Make timely and balanced disclosure

The company is committed to ensuring that all information that may have a material impact on the share value of the company if a reasonable person had access to such information, is disclosed to the market in a timely and balanced manner. To ensure accountability, the implications of this commitment is communicated to all employees, through the implementation of the Continuous Disclosure Policy, which is also in accordance with the ASX Listing Rules and the Corporations Act requirements on Continuous Disclosure.

The Board has appointed the Chief Executive Officer and the Company Secretary as the two officers responsible for all disclosure under this policy. The officers must review and verify the information before the Company Secretary, who is the authorised contact for communications with the ASX, releases it to the market through the ASX.

The company acknowledges that the continuous disclosure regime allows listed companies a high degree of judgement as to the information that must be disclosed and when the disclosure is required. The company will adopt a best practice approach to ensure that the company meets the substance and the spirit of the continuous disclosure regime on a consistent basis.

The company also makes regular disclosure of its results through other communications such as the following:

• in late February, the company's half year results were announced to the market:
• in August/September, the company's full year results were announced to the market; and
• in late October, the annual report will be sent to shareholders.

Principle 6: Respect the rights of shareholders

Communication to shareholders

The company has implemented an External Communications Policy, to ensure that all external communication (including

but not limited to market releases and public relations materials) is submitted to the Chief Executive Officer for approval. External communication can only be released with his/her written consent. This is important for ensuring that only factual, clear and balanced information is disseminated to all shareholders equally and in a timely manner. During the year the following information was made available to all shareholders:

• half year and full year results announcements;
• 2004 annual report;
• notices of meeting and explanatory information for shareholder meetings.

Shareholders may also request information, such as the Constitution, minutes of shareholders' meeting or any other information on the company by writing to the Company Secretary.

Annual General Meeting

The Board encourages full participation of shareholders at the Annual General Meeting (to be held on 25 November 2005) to ensure a high level of accountability and identification with the company's strategy and goals. To assist shareholders in communicating issues to the Board, reply paid question cards will be issued with the annual report. A list of the issues and questions will be made available to shareholders attending the Annual General Meeting.

The Board has also requested representatives from Hall Chadwick, the company's external auditor, to be present at the Annual General Meeting to answer questions that shareholders might have about the scope and conduct of the audit, the preparation and content of the auditor's report, the accounting policies adopted by the Company and the independence of the auditor.

Principle 7: Recognise and manage risk

Risk management responsibilities

A significant function of the Audit & Risk Management Committee is the monitoring and assessment of risk oversight and internal compliance and control systems. The committee acts as an advisory body to the Board in relation to the following responsibilities:

• review and advise on the acceptance of major contracts, goods or services on credit terms, acceptance of counterparty risks and issuing guarantees on behalf of the company;

• evaluate the long-term strategy and the annual business plan, and identify the significant risks associated with the capital and operating budgets;

• assess risks arising from actions by competitors, industrial disputes, government policy changes, environmental issues and the use of information systems and technology;

• monitor internal control framework especially the information systems used to collect and collate the data and any enhancements that can be made;

• review the reports produced from the systems, especially reports on any major defalcations, frauds, and thefts from the company and any significant or abnormal transactions; and

• review reports on the adequacy of insurance coverage.

As explained in the discussion under Principle 4: Safeguard Integrity In Financial Reporting, the Board is currently undertaking these specific functions of the Audit & Risk Management Committee with the same efficiency as a formal committee structure.

Sign-off by Chief Executive Officer and Chief Financial Officer

The Chief Executive Officer and the Chief Financial Officer have provided a statement in writing to the Board stating that the integrity of the company's financial reports are founded on a sound system of risk management and internal compliance and control, which implemented the policies adopted by the Board. The statement also certifies that the company's risk management and internal compliance and control systems are also operating efficiently and effectively in all material respects.

Principle 8: Encourage enhanced performance

Performance evaluation

The Board also has responsibility with respect to the following functions:

• develop policies and procedures to identify, assess and enhance the skills, expertise and competencies of the directors individually and the Board as a whole; and
• develop a process and establish the criteria for evaluating the performance of the directors and the Board as a whole;

Formal appraisals will also be conducted annually for all employees and Key Performance Measures are the primary basis for performance reviews. Key individual performance targets are set for senior management, which are linked to the company's business plan and goals. Personal development and continuous learning is also strongly encouraged and agreed with either, the Chief Executive Officer or the Chief Financial Officer and regular feedback on progress against these targets and performance measures is given to encourage and enhance employee performance and management effectiveness.

Monthly financial results

The Chief Financial Officer distributes the monthly financial results of the company to members of the Board before each monthly Board meeting. This will ensure the Board is kept up to date with all the necessary information to effectively discharge their duties in its discussions and deliberations. The Board is also free to meet and question individual members of management to clarify issues on any matter pertaining to the company.

Director induction and training

New directors are provided with an induction program to introduce them to the company structure, culture and business operations. The program includes an information pack comprising the company's most recent annual and half year reports, the current year business plan, the Constitution and the Director's Code of Ethics.

Sessions are also organised for new directors to meet the senior management and visit the key assets (such as construction site of borrowers) of the company.

Directors are also encouraged to undertake continuous professional development, at the company's expense, to keep their skills up to date.

Principle 9: Remunerate fairly and responsibly

Remuneration responsibilities

The Board also has responsibilities with respect to the following functions:

• review the remuneration of directors to ensure there is a clear relationship between individual/corporate performance and their remuneration;
• review and make recommendations on the remuneration packages and policies applicable to the Managing Director, Chief Financial Controller and other senior personnel including the share option scheme, incentive performance packages, superannuation entitlements, retirement and termination entitlements, fringe benefits, professional indemnity and liability insurances; and
• obtain market comparisons, Australian and International benchmarks and seek external professional advice periodically on the appropriateness of the remuneration packages so as to be able to attract, motivate and retain exceptional performers.

Board remuneration

The total non-executive directors' remuneration pool was approved by the shareholders at the 2004 Annual General Meeting. The remuneration pool currently stands at a

CORPORATE GOVERNANCE STATEMENT

maximum of $200,000 per annum and shall remain the same until amended and approved by the shareholders. Currently, only executive directors are remunerated in accordance to their executive contract. No remuneration has been paid to the two non-executive directors. Equity-based remuneration in the form of share options has not been granted to any directors during the year.

The details of the nature and amount of each element of the emolument paid to each of the directors for the year ended is disclosed in the Remuneration Report on pages 12 to 13.

Executive remuneration

The details of the nature and amount of each element of the emolument paid to the executives of the company for the year ended is disclosed in the Remuneration Report on pages 12 to 13.

The Board has decided not to set up a Remuneration Committee at this stage of the development of the company. The Board is of a view that the existing Board can effectively and efficiently manage the relatively simple remuneration system of the company given the small size of the Board, the minimal number of executives and the simple remuneration structure currently adopted by the company. However, the Board will regularly review the situation of the company to ensure a remuneration committee of appropriate structure as per recommendation 9.2 is set up when the growth in complexity in structure and operations of the company warrant a formal committee structure.

Principle 10: Recognise the legitimate interests of stakeholders

The company is involved in the financial service industry that is governed by various legislation, in particular, trade practices and fair dealing laws, consumer protection, respect for privacy and Financial Service Reform Act and the Corporations Act. Compliance with these legislations will help to maintain legitimacy, fairness and ethics in the company's dealing with various stakeholders. The company engages external consultants and advisors of appropriate expertise to help the Board to ensure compliance with various relevant legislations, especially in the preparation of disclosure documents to external stakeholders such as borrowers and investors.

The company is indirectly involved in the property development industry through the provision of finance. Most of these developments, especially the larger scale one, invariably have an impact on the environment. In the process of approving the provision of loan facilities to such projects, compliance with environmental issues in accordance with Environmental Protection Authority requirements will usually be checked as a prerequisite.

The Board in representing all stakeholders, like the employees, creditors, suppliers, customers, community and government bodies, must also be mindful of the competing interests of their shareholders whom they represent. In doing so, the company must strike a balance between attractive returns to the shareholders and environmentally sound practices, which has been included as one of the strategic review in the company's long term business plan.

The company's Code of Conduct also sets out the standards in accordance with which the company expects all its employees to behave. This was discussed under Principle 3: Promote Ethical And Responsible Decision-Making.

DIRECTORS' REPORT

The Directors present their report on the consolidated entity consisting of Great Pacific Capital Limited and the entities it controlled for the vear ended 30 June 2005.

DIRECTORS

The following persons held office as Directors at any time during or since the end of the financial year:

Alfred Wong, Chairman Danny Au-Yeung Ivan Wong

PRINCIPAL ACTIVITY

The principal activity of the consolidated entity during the year is the development of structured finance products, in particular the provision of subordinated debt facilities in funding residential and commercial property development and infrastructure projects.

RESULTS

The net result of the consolidated entity after applicable income tax for the year ended 30 June 2005 was a profit of $3,559,250 (30 June 2004: $5,115,468).

DIVIDENDS

No dividends were declared for the year ended 30 June 2005 (30 June 2004: $NIL).

REVIEW OF OPERATIONS

Company overview and strategy

Brief history and vision 1.

Great Pacific Capital Limited is a Sydney-based company listed on the Australian Stock Exchange (ASX code "GRP") which specialises in the development of structured finance products, in particular the provision of subordinated debt facilities in funding residential and commercial property development and infrastructure projects.

The Company was incorporated in 2001 with a vision of becoming a leading specialist in providing subordinated debt facilities while delivering excellent returns to the shareholders.

An important strategy to achieve the Company's objective is to maximise capital productivity by diversifying beyond our more accustomed range of commercial and residential projects into large-scale infrastructure project financing.

$\hat{z}$ . Dynamics of the business

$(a)$ Residential property cycle in Australia

As mentioned in the 2004 annual report, the residential property market started to slow down in the 2004/2005 financial year. Although the fall in house prices did not constitute a price crash when prices fell by 23 to 45 percent, the volume of activities in the residential property market decreased as compared to 2003/2004 financial year.

$\binom{2}{3}$ Great Pacific Capital Limited's business

The Company has focused on creating a niche market for its business. This involves employing our expertise to identify development projects that contribute to achieving our objective. This, in terms of residential properties, translates to projects with high quality finish, in good locations, and with appealing lifestyle facilities. The Company will then create the most attractive funding structure that will benefit all participants.

As explained in last year's annual report, the Company started to look at projects of longer time frames with future development potential.

The approach taken by the Company to enter into this market is to identify significantly undervalued business assets (including properties) of future development potential and then become involved in the arrangement of debt and equity for its acquisition.

The Company's role may be either as an arranger or provider of finance or origination of equity participating syndicate. The Company may then be directly or indirectly involved as the asset manager to manage and unlock the potential of such assets.

However, the slow down in the property market means that the number of projects that suit our selection criteria is smaller as compared to previous year. As such, the Company has taken the opportunity to consolidate the Company's position in its existing projects.

One example is the rearrangement of the loan facility provided to the owner of the land at the Bellambi West Colliery site. This will enable the Company to share the upside in the longer term equity return of the joint venture development project entered into by the borrower.

DIREGTORS' REPORT

Operating results for the year

1. Results

The net result of the consolidated entity after applicable income tax for the year ended 30 June 2005 was a profit of $3,559,250, a decrease of 30.4% from $5,115,468 in 2004.

The loan provided by GPC No.1 (City Quarter) to finance the redevelopment project at the former Camperdown Children's Hospital has experienced further delay in repayment due to the slow down of the property market. The Company is now in discussions with the various financiers involved in this project with a view of setting up a proper repayment schedule.

In view of the slow down in the property market and the uncertainty surrounding the final repayment, the Board considered it is prudent to make a provision of $2 million for this receivable.

$\overline{2}$ Shareholder returns

Basic earnings per share for the year was 29.95 cents per share, a decrease of 30.4% from 43.04 cents per share in 2004 mainly due to the provision against the receivables. Net assets of the group increased to $19.7 million as compared to $17.14 million in 2004. This reflected the continuous growth in strength of the Company.

In term of shareholders' wealth, the net tangible asset backing per ordinary share increased to $1.66 as compared to $1.44 in 2004. This, when compared to the original listing price of $$1.00$ per share represented a gain in value of about 66%.

Review of financial position

1. Capital structure and treasury policy

The Company obtains its funding from investors to finance its loan portfolio. As such it is important that the inflow and outflow of funds are properly matched both in terms of timing and amount.

The Company has established a policy to ensure that there is proper balance in allocating funds between

• (a) creating loan portfolio for future income;
• (b) providing liquidity to service redemption of investment and payment of interest as well as operating costs; and
• (c) maintaining contingency support in case of unexpected events.

Cash from operations and other sources of cash 2.

Cash from operations represents interest and fees received when loans are repaid by the borrower. The term of the loan provided by the Company usually allows interest to be capitalised until payment on maturity. Therefore, cash inflow in the form of interest receipts will not be on a regular monthly or quarterly basis. During the year, one loan has been fully repaid and one partly repaid resulting in a cash inflow in terms of interest income.

Other sources of cash inflow are in the form of loan repayments from borrowers; investments from investor or short to medium term finance provided by other financial institutions. These activities usually occur on a recurring basis as the company continues its growth.

З. Liquidity and funding

Given the nature of the Company's loan portfolio which will not provide regular monthly or quarterly cash inflows, management of the liquidity of the Company is of utmost importance. The proper balance is achieved by the matching of cash inflows and outflows both in terms of amount and time frame.

Occasional mismatch could happen, as there will be unexpected delays in development projects and therefore delays in repayment schedules. To manage this situation, the Company will maintain a buffer when setting up a loan portfolio both in terms of amount and duration although the cost of maintaining this is quite high. As an alternative, the Company also has access to short term finance from other financial institutions which have previous dealings with the Company and are familiar with the operation of the Company, as well as a commercial overdraft facility from our banker. The cost of such short term finance will then depend on the time frame required and the amount of security provided.

$\Delta$ . Resources of the Company

The Company's focus is on the quality of the projects and therefore the typical transactions of the Company are of high value but low volume. As such, the Company is able to operate with the minimal number of executives and staff with an emphasis on the experience of the provision of sub-ordinated debt facilities.

The Company's approach is to maintain this core structure of minimum executives and staff who have the skills and experience in identifying quality projects and creating the most appropriate funding structures. They are then complemented by external consultants who are retained on an as needed basis to provide the most appropriate expertise to complete the relevant projects.

This approach will allow flexibility to meet the specific need of transactions as they arise without carrying a large employee overhead.

Impact of legislation and other external requirements 5. Any new legislation such as the introduction and subsequent abolishment of vendors tax in New South Wales or other external factors such as increase in interest rates will affect the housing industry and therefore the business of the Company. However, with the Company focusing on high quality projects with good potential, the experience of the staff of the Company and the flexibility of the Company's approach, the Company believes it can easily adapt to changes in industry trends.

LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS

With the slow down in the property market, the Board believe it is appropriate for the Company to consolidate the Company's position in its existing projects by either rearranging existing loan facilities or concentrating on setting up appropriate repayment schedules to speed up repayments.

At this stage of the property cycle, the Company will not rush into any new facility unless the project is of supreme quality that meets all our selection criteria. As such, the Company expects a decrease in activities in the coming year.

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

During the financial year, there are no significant changes in the state of affairs of the Company and its controlled entities.

MATTERS SUBSEQUENT TO THE END OF FINANCIAL YEAR

There are no matters or circumstances that have arisen since 30 June 2005 that have significantly affect, or may significantly affect:

• $(a)$ The consolidated entity's operations in the future financial years, or
• The result of those operations in future financial years, or $(b)$
• The consolidated entity's state of affairs in the future $(c)$ financial years.

INSURANCE OF DIRECTORS AND OFFICERS

During the financial year, the Company effected an insurance policy to insure the Directors and officers of the Company and its controlled entities.

The liabilities insured are costs and expenses that may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as officers of entities in the consolidated group. The contract prohibits the disclosure of the amount of premium.

INFORMATION ON DIRECTORS

Alfred Wong (Age 44)

MBA (NSW University) BA (HKU), ASIA

Non Executive Chairman

Alfred is the Executive Chairman of Green Pacific Energy Limited since 2003, non executive chairman of Qmastor Limited since 2003 and non executive Director of Tourism, Hotels and Leisure Limited since 2004, all of them are ASX. listed companies.

Mr Wong had also held a number of executive management positions in leading financial institutions and banks Australia, including Capita Financial Group and State Bank NSW.

Danny Au-Yeung (Age 45)

FCCA (UK)ASCPA

Chief Executive Officer

Company Director, Accountant, Non-executive Director of Green Pacific Energy Limited since 2003, an ASX listed company.

Mr Au-Yeung had held senior positions in Ernst & Young and Capita Financial Group and is also a member of the Australian Society of Certified Practicing Accountants and a fellow of the Chartered Association of Certified Accountants, UK.

Ivan Wong (Age 42)

BSc (Hon) (University of QLD)

Non Executive Director

Company Director, IT Specialist.

Mr Wong is also the Director of Great Pacific Finance Pty Ltd, a leading specialist mortgage originator with over $500 million in funds under management and the founder of Universal Title Searchers, a leading provider of public, legal and business information with the first and only windows-based software package for electronic information transfer in Australia.

PARTICULARS OF DIRECTORS INTEREST IN SHARES AND OPTIONS OF THE COMPANY

Director	Number of ordinary shares
Alfred Wong	750,000
Danny Au-Yeung	750,000
Ivan Wong	250,000

DIRECTORS' REPORT

All the share options previously issued to Directors expired on 30 June 2004. No other share options had been issued to any directors during and after the year.

INFORMATION ON COMPANY SECRETARY

Edwin Yeung

ASCPA, FCCA (UK), HKCPA

Mr Edwin Yeung is a registered company auditor with over 20 years experience in the accounting and auditing fields. He started his career as an auditor with Coopers & Lybrand and had since held various senior accounting and internal audit positions with various large insurance and financial institutions.

MEETINGS OF DIRECTORS

The numbers of meetings of the company's board of Directors held during the financial year ended 30 June 2005 and the number of meetings attended by each Director were as follows:

Name	Full meeting of Directors
	Number eligibleto attend	Numberattended
Alfred Wong	13	13
Danny Au-Yeung	13	13
Ivan Wong	13	ι٦

REMUNERATION REPORT

A. Principles used to determine the nature and amount of remuneration

Non executive Directors

The total non-executive directors' remuneration pool was recommended by the Board and was approved by the shareholders at the Annual General Meeting. The remuneration pool currently stands at a maximum of $200,000 per annum and shall remain the same until amended and approved by the shareholders.

In recommending the remuneration pool, the board takes into account current market and industry specific practice to ensure non-executive directors' fee and payments are appropriate and in line with market situation.

Currently no remuneration has been paid to the two nonexecutive directors.

Executive Directors and executives

Executive directors and executives are remunerated in

accordance to their executive service contracts as approved by the Board. In approving the reward for executives, the Board will ensure it rewards competency and experience while remain competitive and reasonable as compared to current market and industry specific practice and are in line with the shareholders' interests.

B. Executive pay

The total remuneration package of executives consists of the followings:

• $(a)$ Base pay;
• $(b)$ Benefits: and
• Superannuation contribution. $(c)$
• $(a)$ Base pay

Base pay is the fixed cash salary set by the service contract. The base pay is set to be in line with the market rate for a comparable role in an organisation similar to the size of the Company. Base pay is reviewed annually to ensure it remains competitive in the market but there is no guarantee of annual increases in the service contract.

The base pay will also be reviewed if the executive is promoted or takes on additional roles within the Company.

(b) Benefits

Benefits are prescribed benefit to be provided at the executives' discretion. Prescribed benefits include the use of motor vehicle, reimbursement of the running cost and the use of car park in the office building.

(c) Superannuation contribution

The Company contribute to the executives' superannuation fund at the statutory prescribed rate which is currently at 9%. The contribution rate applies to the cash salary only.

C. Share options

The Company has set up a Directors, executives and staff share option plan under which share options can be issued in lieu of payment for services or as rewards for performance.

During the year, no share options have been issued to any directors, executives or staff.

All share options issued to directors previously expired on 30 June 2004.

D. Directors' and executive remuneration

Details of the nature and amount of the remuneration of each director of Great Pacific Capital Limited and each executive officer of the Company and the consolidated entity receiving the highest remuneration for the financial year are as follows:

		Primary	Post employment	Eauity	Total
Consolidated entity Directors	Salary & fees	Non cash benefits		Options
		S	S		S
2005
Wong, A
Au-Yeung, D	120,000		10,800		130,800
Wong, I
Total remuneration 2005	120,000		10,800		130,800
2004
Wong, A
Au-Yeung, D	120,000		10,800		130,800
Wong, I
Werry, G	54,500				54,500
Total remuneration 2004	174,500		10,800		185,300

222

	Primary		Post employment	Equity	Total
Executive	Salary & fees	Non cash benefits	Superannuation	Options
					S
2005
Yeung, E	100.000	67,064	9,000		176,064
Total remuneration 2005	100,000	67,064	9,000		176,064
2004
Yeung, E	100.000	26,406	9,000		135,406
Total remuneration 2004	100,000	26,406	9,000		135,406

E. Shareholdings

	Balance as at	Received as	Ontions	Net purchases	Balance as at
	1 July 2004	remuneration	exercised	or sales	30 June 2005
	Number	Number	Number	Number	Number
Consolidated entity Directors
Wong, A	750,000				750,000
Au-Yeung, D	750,000				750,000
Wong, I	250,000				250,000
Executive
Yeung, E	2,000				2,000
Total	1,752,000				1,752,000

ENVIRONMENTAL REGULATIONS

The consolidated entity's operations are not subject to environmental regulations under either Commonwealth or State legislation.

NON-AUDIT SERVICES

The board of directors is satisfied that the provision of non-audit services during the year is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are satisfied that the services disclosed below did not compromise the external auditor's independence for the following reasons:

• All non-audit services are reviewed and approved by the board prior to commencement to ensure they do not adversely affect the integrity and objectivity of the auditors; and
• The nature of the services provided do not compromise the $\bullet$ general principles relating to auditor independence as set out in the Institute of Chartered Accountants in Australia and CPA Australia's Professional Statement F1: Professional Independence.

The following fees for non-audit services were paid/payable to the external auditors during the year ended 30 June 2005:

Taxation services	29,536
Other
	30,011

AUDITOR'S INDEPENDENCE DECLARATION

The lead auditor's independence declaration for the year ended 30 June 2005 has been received and can be found on page 15 of this Annual Report.

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.

Signed at Sydney this 29th day of September 2005 in accordance with a resolution of the Directors.

Director

AUDITOR'S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE CORPORATIONS ACT 2001TO THE DIRECTORS OF GREAT PACIFIC CAPITAL LIMITED

	$\bigoplus$ Hall ChadwickChartered Accountants & Business Advisers
	GREAT PACIFIC CAPITAL LIMITEDABN 57 096 781 716AND CONTROLLED ENTITIES	SydneyLovel 29St Mostins Tower31 Market StreetSydney 2000New South WalesGPO Box 3555SYDNEY NSW 2003
	AUDITOR'S INDEPENDENCE DECLARATIONUNDER SECTION 307C OF THE CORPORATIONS ACT 2001TO THE DIRECTORS OF GREAT PACIFIC CAPITAL LIMITED	$\infty$DX 1451 SydneyTelephone: (02) 9263 2608Focsimile: (02) 9263 280CEmoli: hosydinfo@holichadwick.com.nuPontin
	I declare that, to the best of my knowledge and belief during the year ended 30June 2005 there have been:	Telephone: (02) 4721 8144Focsimile: (02) 4721 8155PortnersRobert EliottGeottrey McDonaldDrew TownsendDovid Kenney
(i)(ii)	no contraventions of the auditor independence requirements as set outin the Corporations Act 2001 in relation to the audit; andno contraventions of any applicable code of professional conduct inrelation to the audit.	Richard AlbarranGino MalaccoPost LeroyAssociatosSteven GlodmonMischell Boll
	Hall Chadwick	Other firms in:MelbourneBrisbonePesthAdulaideGold Coost
	Level 29, 31 Market StSydney NSW 20
PartnerDate:	DREW TOWNSEND29 September 2005
		www.hallchodwick.com.ouNational Association
	Liability limited by a Scheme approved under Professional Standards Legislation	Holl ChadwickInternational AssociationAGN InternationalAssociations of
		independent Flans

STATEMENT OF FINANCIAL PERFORMANCEFOR THEYEAR ENDED 30 JUNE 2005

		Consolidated	Consolidated	Parent entity	Parent entity
		2005	2004	2005	2004
	Notes	٩	$	S	s
Interest income	2	12,531,156	12,649,099	399,922	622,883
Interest expense	$\overline{2}$	(4,861,616)	(5,442,584)	(2, 431, 568)	(391,040)
Net interest income		7,669,540	7,206,515	(2,031,646)	231,843
Fee and commission income	3	1,832,497	3,016,599	3,348,797	4,636,228
Fee and commission expense	3	(149, 550)	(302, 357)	(112,500)	(20,090)
Net fee and commission income		1,682,947	2,714,242	3,236,297	4,616,138
Other income		66,607	317,765		89,151
Deferred expense written off		(6,250)	(75,000)	(6,250)	(75,000)
Depreciation and amortisation expense	4	(17, 876)	(382, 895)	(8,960)	(10, 924)
Employee expense		(578, 232)	(490, 110)	(578, 232)	(490, 110)
Lease and rental expense		(262,700)	(315, 229)	(164, 469)	(138, 414)
Legal and professional fees		(1,214,971)	(912,098)	(748, 236)	(714, 412)
Fixed assets written off			(99, 291)		(99,291)
Provision for doubtful debts		(2,000,000)
Other expenses from ordinary activities		(240,710)	(461, 479)	(203, 337)	(211, 368)
Profit/(loss) from ordinary activities
before income tax		5,098,355	7,502,420	(504, 833)	3,197,613
Income tax (expense)/benefit
relating to ordinary activities	5	(1,539,105)	(2,386,952)	141,851	(985,509)
Net profit/(loss) attributable to
members of the parent entity		3,559,250	5,115,468	(362, 982)	2,212,104
(Decrease)/increase in asset revaluation reserve	20	(1,000,000)	2,240,527
Total changes in equity other than those
resulting from transactions with owners as owners		2,559,250	7,355,995	(362, 982)	2,212,104
		Cents per share
Basic earnings per share	7	29.95	43.04
Diluted earnings per share	7	29.95	43.04

The above statement of financial performance is to be read in conjunction with the notes to the financial statements.

STATEMENT OF FINANCIAL POSITION

		Consolidated	Consolidated	Parent entity	Parent entity
	Notes	2005	2004	2005	2004
		$	$	S	$
ASSETS
Cash and liquid assets	10	141,031	1,248,758	19,488	271,506
Receivables	11	25,877,806	19,862,643	23,909,224	8,152,192
Loans	12	11,498,967	18,226,959		8,208,354
Deferred tax assets	13	685,348	66,565	685,348	66,565
Investments	14	2,260,000		16	16
Other assets	15	3,943	19,109		6,250
Property, plant and equipment	16	3,338,287	5,814,039	38,287	14,039
Total assets		43,805,382	45,238,073	24,652,363	16,718,922
LIABILITIES
Overdraft		775,999		775,999
Payables	17	2,191,559	2,927,368	1,166,210	245,566
Current tax liabilities		134,415	1,765,895	134,415	1,765,895
Provision - annual leave		39,526	28,265	39,526	28,265
Borrowings	18	16,760,000	20,141,911	11,250,000	4,000,000
Deferred tax liabilities		4,202,076	3,232,077	4,202,076	3,232,077
Total liabilities		24,103,575	28,095,516	17,568,226	9,271,803
Net assets		19,701,807	17,142,557	7,084,137	7,447,119
EQUITY
Contributed equity	19	4,735,500	4,735,500	4,735,500	4,735,500
Reserves	20	1,898,508	2,898,508
Retained profits	21	13,067,799	9,508,549	2,348,637	2,711,619
Total equity		19,701,807	17,142,557	7,084,137	7,447,119

The above statement of financial position is to be read in conjunction with the notes to the financial statements.

STATEMENT OF CASH FLOWSFOR THEYEAR ENDED 30 JUNE 2005

	Consolidated	Consolidated	Parent entity	Parent entity
Notes	2005	2004	2005	2004
	ę	$	S	s
CASH FLOWS FROM OPERATING ACTIVITIES
Interest received	3,712,057	12,878,273	745,099	21,380
Interest paid	(5,204,747)	(5,905,307)	(1,395,604)	(238,076)
Fee received	2,807,530	2,000,625	2,546,376	1,151,125
Fee paid	(149, 550)	(272, 490)
Operating receipts	125,000	415,014
Operating payments	(5,724,938)	(2,672,455)	(3,940,709)	(1,858,434)
Net amounts receivable from controlled entities			1,325,800	4,693,212
Net cash (used in)/provided by
24(a)operating activities	(4, 434, 648)	6,443,660	(719, 038)	3,769,207
CASH FLOWS FROM INVESTING ACTIVITIES
Payment for investments	(2,260,000)			(2)
Proceeds from sale of investment	1,500,000
Proceeds from repayment of loans	15,147,939	23,483,237	7,791,426
Loans to developers and borrowers	(8, 419, 947)	(20, 243, 750)
Payments for property, plant and equipment	(33,207)	(845,009)	(33,207)	(6,100)
Net increase in amounts receivable from controlled entities			(6,150,905)	749,995
Net cash provided by investing activities	5,934,785	2,394,478	1,607,314	743,893
CASH FLOWS FROM FINANCING ACTIVITIES
Payment for dividends	(1,952)	(574, 082)	(1,952)	(574,082)
Proceeds from borrowings	10,490,000	7,969,864	5,150,000	7,100,000
Repayments of borrowings	(6,846,911)	(3,100,000)	(900,000)	(3,600,000)
Proceeds from issue of debenture	955,596	5,860,000
Redemption of debenture / promissory notes	(7,980,596)	(22,998,844)
Net increase in amounts payable to controlled entities			(6,164,341)	(7,542,630)
Net cash used in financing activities	(3,383,863)	(12, 843, 062)	(1,916,293)	(4,616,712)
Net decrease in cash held	(1,883,726)	(4,004,924)	(1,028,017)	(103, 612)
Cash at the beginning of the financial year	1,248,758	5,253,682	271,506	375,118
Cash at the end of the financial year24(b)	(634,968)	1,248,758	(756, 511)	271,506

The above statement of cash flows is to be read in conjunction with the notes to the financial statements.

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2005

1. Summary of significant accounting policies Basis of preparation of financial report

This general purpose financial report for the year ended 30 June 2005 has been prepared in accordance with Australian Accounting Standards, in particular AASB1032: Specific Disclosure by Financial Institutions, other authoritative pronouncements of the Australia Accounting Standard Board, Urgent Issues Group Consensus Views and the Corporations Act 2001.

The financial report covers the economic entity of Great Pacific Capital Limited and controlled entities, and Great Pacific Capital Limited as an individual parent entity. Great Pacific Capital Limited is a listed public company, incorporated and domiciled in Australia.

The financial report has been prepared on an accruals basis and is based on historical costs and does not take into account changing money values, or, except where stated, current valuations of non-current assets. Cost is based on the fair values of the consideration given in exchange for assets.

Accounting policies adopted has been consistently applied with those of previous year, unless otherwise specified.

The following is a summary of the significant accounting policies adopted by the consolidated entity in the preparation of the financial report.

Principles of consolidation $(a)$

The consolidated financial statements incorporate the assets and liabilities of all entities controlled by Great Pacific Capital Limited ("the Company or Parent entity") as at 30 June 2005 and the results of all controlled entities for the financial year then ended.

Control exists where Great Pacific Capital Limited has the capacity to dominate the decision-making in relation to the financial and operating policies of another entity so that the other entity operates with Great Pacific Capital Limited to achieve the objectives of Great Pacific Capital Limited. A list of controlled entities is contained in Note 22 to the financial statements.

Great Pacific Capital Limited and its controlled entities together are referred to in this financial report as the consolidated entity. The effects of all transactions between entities in the consolidated entity are eliminated in full.

(b) Revenue

Fees, commissions and interest income from the provision of financial services are recognised on an accrual basis.

Taxation $(c)$

(i) Income tax

Tax effect accounting procedures are followed. Income tax expense is calculated on the operating profit adjusted for permanent differences between taxable and accounting income. Any future income tax benefit relating to tax losses is not carried forward as an asset unless the benefit can be regarded as being virtually certain of realisation. Income tax on net cumulative timing differences is set aside to the deferred income tax and future income tax benefit accounts at the tax rates which are expected to apply when those timing differences reverse.

Future income tax benefits arising as a result of timing differences are only bought to account when realisation of the asset is assured beyond reasonable doubt. Benefits arising as a result of tax losses are bought to account, as realisation of this asset is virtually certain in the coming years.

(ii) Tax Consolidation Regime

Great Pacific Capital Limited and its whollyowned Australian subsidiaries have formed an income tax consolidated group under the Tax Consolidation Regime. Great Pacific Capital Limited will recognise the current and deferred tax assets and liabilities for the tax consolidated group. Each company in the Group will contribute to the income tax payable in proportion to their contribution to the net profit before tax of the tax consolidated group.

Under this arrangement, the head entity recognises all the current and deferred tax assets and liabilities for the tax consolidation group in its own accounts.

(iii) Goods and services tax

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

NOTESTO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2005

and payables are stated inclusive of GST. The net amount of GST recoverable from, or payable to, the ATO is included as part of current receivables and payables in the statement of financial position.

Investments $(d)$

Interests in unlisted securities in the consolidated financial statements, are brought to account at cost.

Controlled entities are brought to account at cost in the consolidated financial statements.

(e) Land and buildings

Land and buildings are measured on the fair value basis, being the amount for which an asset could be exchanged between knowledgeable willing parties in an arm's length transaction. They will be revalued by an independent third party registered property valuer on a as required basis but at least once every three years.

Depreciation (作)

Depreciation on property, plant and equipment is calculated on a straight line basis. The depreciation rate used is based on the expected useful life of the assets. The expected useful lives are as follows:

Office fittings	13 years
Computer equipment	4 years
Communication equipment	7 years
Furniture and fixtures	13 years

Recoverable amount of non current assets $(\alpha)$

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

(h) Deferred expenses

The deemed value of shares issued to the Directors and the underwriter for the initial public offer are classified as deferred expenses and are written off over three years. Should the carrying value of the deferred expenses be assessed to be in excess of their recoverable amounts, the deferred expenses will be written down to the recoverable amount immediately.

Employee benefits ti)

(i) Wages and salaries and annual leave

Liabilities for wages and salaries and annual leave are recognised, and are measured as the amount unpaid at the reporting date at current pay rates in respect of employee's services up to that date.

(ii) Superannuation

The amount charged to the statement of financial performance in respect of superannuation represents the contributions made by the consolidated entity to various superannuation funds nominated by the employees.

Borrowing costs (i)

Borrowing costs are recognised as expenses in the period in which they are incurred, except where they are included as part of the costs of acquiring land and building for redevelopment. Borrowing costs carried forward are amortised over the life of the loan or 5 years, whichever is earlier.

${k}$ Comparatives

Where required by Accounting Standards comparative figures have been adjusted to conform with changes in presentation for the current year.

() Adoption of Australian Equivalents to International Financial Reporting Standards

The introduction of the Australian Equivalents to International Financial Reporting Standards (AIFRS) effective for financial years commencing 1 January 2005, requires the production of accounting data for future comparative purposes at the beginning of the next financial year. The adoption of AIFRS will be reflected in the economic entity's and the parent entity's financial statements for the year ending 30 June 2006. On first time adoption of AIFRS, comparatives for the financial year ended 30 June 2005 are required to be restated. The majority of the AIFRS transitional adjustments will be made retrospectively against retained earnings at 1 July 2004.

The economic entity's management are assessing the significance of these changes and preparing for their implementation.

The directors are of the opinion that the key differences in the economic entity's accounting policies, which will arise from the adoption of IFRS are:

(i) Income tax

Currently, the economic entity adopts the liability method of tax-effect accounting whereby the income tax expense is based on the accounting profit adjusted for any permanent differences. Timing differences are currently brought to account as either a provision for deferred income tax or future income tax benefit. Under the AASB 112: Income Taxes, the economic entity will be required to adopt a balance sheet approach under which temporary differences are identified for each asset and liability rather than the effects of the timing and permanent differences between taxable income and accounting profit.

The most significant impact will be the recognition of a deferred tax liability at 1 July 2004 of approximately $392,394 (parent: $392,394) in relation to the asset revaluation at 30 June 2005. This adjustment will have no effect on profit for the year ended 30 June 2005. The deferred tax is recognised directly to equity being a reduction in the asset revaluation reserve.

(ii) Impairment of assets

Under AASB 136: Impairment of Assets, the recoverable amount of an asset is determined as the higher of fair value less costs to sell, and value in use. In determining value in use, projected future cash flows are discounted using a risk adjusted pretax discount rate and impairment is assessed for the individual asset or at the 'cash generating unit'

level. A 'cash generating unit' is determined as the smallest group of assets that generates cash flows that are largely independent of the cash inflows from other assets or groups of assets. The current policy is to determine the recoverable amount of an asset on the basis of undiscounted net cash flows that will be received from the asset's use and subsequent disposal. It is likely that this change in accounting policy will lead to impairments being recognised more often.

The Director have assessed that there will be no material impact on transition.

(iii) Dischaures in the Financial Statements of Financial Institutions

AASB130: Disclosures in the Financial Statements of Banks and Similar Financial Institutions, prescribes the presentation and disclosure requirements of banks and similar financial institutions in the financial report.

The entity has prepared this financial report in accordance with AASB 1032. The Director have reviewed its' AIFRS equivalent AASB130 and have determined that there are no significant differences.

On transition to AIFRS the estimated cumulative financial effect of the reliably known differences on the parent and economic entity's reported net profit and equity as at 30 June 2005 is listed above. As noted above, these amounts represent management's best estimates, and could differ from acruals.

$\mathbf{2}$ Interest income and expense

	Consolidated	Consolidated	Parent entity	Parent entity
	2605	2004	2005	2004
	$	$	S	Տ
Interest income
Loans and advances	12,489,549	12,542,768	369,437	601,503
Other	41,607	106,331	30,485	21,380
Total interest income	12,531,156	12,649,099	399,922	622,883
Interest expense
Borrowings	4,743,413	5,434,154	2,342,419	390,451
Other	118,203	8,430	89.149	589
Total interest expense	4,861,616	5,442,584	2,431,568	391,040

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2005

$3.$ Fee and commission income and expense Fee and commission income

	Consolidated	Consolidated	Parent entity	Parent entity
	2005	2004	2005	2004
	s	S	S	S
Arranger fee		151,125		151,125
Establishment fee		350,000		350,000
Management fee		49,500	1,516,300	1,669,129
Success fee		525,000		525,000
Other	1,832,497	1,940,974	1,832,497	1,940,974
Total fee and commission income	1,832,497	3,016,599	3,348,797	4,636,228
The management fee charged by Great Pacific CapitalLimited to its controlled entities represents the fee formanaging the loan portfolio of the controlled entitiesand is based on a fixed rate of 12% on the value of theloan portfolio.
Fee and commission expense
Application fee	149,550	119,821	112,500	20,090
Arranger fee		10,000
Commission		122,490
Management fee		50,046
Total fee and commission expense	149,550	302,357	112,500	20,090
Depreciation and amortisation
Depreciation	8,960	10,924	8,960	10,924
Amortisation - borrowing costs	8,916	5,305
Amortisation - goodwill		366,666
	17,876	382,895	8,960	10,924

5. Income tax

$\overline{4}$ .

Reconciliation of prima facie tax on profit/(loss) from ordinary activities before income tax expense to income tax attributable to operating profit/(loss):

	Consolidated	Consolidated	Parent entity	Parent entity
	2005	2004	2005	2004
	S	Ś	S	s
Prima facie tax payable on profit/(loss) from ordinaryactivities before income tax at 30%
• consolidated entity	1,529,506	2,250,727
* parent entity			(151, 450)	959,284
• other members of the income tax consolidated group			1,680,956	1,961,499
Tax effect of permanent differences:
Amortisation of goodwill		110,000
Write-off of deferred expenses	1,875	22,500	1,875	22,500
Other non-deductible expenses	7,591	3,125	7,591	3,125
Allocation of income tax expense to wholly-ownedsubsidiaries under the tax sharing agreement			(1,680,956)	(1,961,499)
Under/(over) provision for income tax in prior year	133	600	133	600
Income tax expense/(benefit) attributable
to operating profit	1,539,105	2,386,952	(141, 851)	985,509

6. Dividends and dividend franking account

No dividend (2004: $NIL) was declared in respect of the year ending 30 June 2005.

The balance of the franking account, which arises from income tax paid, after adjusting for any franking credits which will arise from the payment of income tax provided for in the financial statements and franking debits from the payment of dividends declared at the reporting date, is $2,837,989 (30 June 2004: $18,841).

$\overline{7}$ . Earnings per share

	Consolidated	Consolidated
	2005	2004
	Cents per share
Basic earnings per share	29.95	43.04
Diluted earnings per share	29.95	43.04
(a) Reconciliation of earnings to net profit	S	S
Net profit	3,559,250	5,115,468
Earnings used in the calculation of basic earnings per share	3,559,250	5,115,468
Earnings used in the calculation of diluted earnings per share	3,559,250	5,115,468
	Number of share
(b) Weight average number of shares
Weighted average number of shares used in the calculations
of basic earnings per share	11,885,500	11,885,500
Weighted average number of shares used in the calculations
of diluted earnings per share	11,885,500	11,885,500

(c) Classification of securities

There are no options outstanding at 30 June 2005.

NOTESTO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2005

Auditors' remuneration 8.

		Consolidated	Consolidated	Parent entity	Parent entity
		2005	2004	2005	2004
		$	$	S	$
	Amounts paid, or due and payable for audit or
	review services of statutory financial reports	44,713	41,356	44,713	41,356
	Amounts paid, or due and payable for other services	30,011	35,030	30,011	35,030
	Total auditors' remuneration	74,724	76,386	74,724	76,386
9.	Directors' and executive remuneration
	Refer to remuneration report contained in the Directors'Report on pages 12 to 13.
	10. Cash and liquid assets
	Cash and cash at bank	41,031	1,148,758	19,488	271,506
	Term deposits	100,000	100,000
		141,031	1,248,758	19,488	271,506
	11. Receivables
	Interest on loans and advances	27,226,258	19,382,193		2,493,825
	Provision for doubtful debts	(2,000,000)
	Receivable from controlled entities			16,270,008	1,444,598
	Receivable from controlled entities - tax related			5,705,803	4,024,848
	Other debtors	651,548	480,450	1,933,413	188,921
		25,877,806	19,862,643	23,909,224	8,152,192
	12. Loans
	$Loans - other$	11,498,967	18,226,959		8,208,354
	Maturity analysis
	Not longer than 3 month
	Longer than $3 &$ not longer than $12$ months	11,498,967	18,226,959		8,208,354
		11,498,967	18,226,959		8,208,354

Loans are all secured by mortgage over land, residential and commercial properties and guarantee from borrowers.

The loans made by the consolidated entities as disclosed above were negotiated with independent third parties borrowers on arm's length terms and are secured against properties owned by independent third parties. The relevant subsidiaries undertake thorough due diligence in respect of each loan. Part of that due diligence involves commissioning valuation reports from registered property valuers to assess the value of the properties against which the loans are secured.

Included in Note 12 is $28,803 representing the principal sum of the loan provided for the redevelopment project at the former Camperdown Children's Hospital with interest receivable of $15,200,575 included in Note 11 above.

This loan provided by GPC No.1 (City Quarter) has experienced further delay in repayment due to the slow down of the property market. The Company is now in discussions with the various financiers involved in this project with a view of setting up a proper repayment schedule.

In view of the slow down in the property market and the uncertainty surrounding the final repayment, the

Board considered it is prudent to make a provision of $2 million for this receivable.

The Company had provided a loan facility to the owner of the coal mine and land at the Bellambi West Colliery site. The principal sum outstanding as at 30 June 2005 was $$11,!470,164$ and was included in Note 12 above. The related interest receivable on this loan was included in Note 11 above and stood at $12,025,683 as at 30 June 2005. During the year, the borrower had sold the coal mine to a third party mining company thus eliminating its financial commitment to maintain the mine.

In July 2005 the borrower had signed a joint venture agreement with a reputable development company to develop the land at the Bellambi West Colliery site.

In view of this joint venture agreement, the GPCL Group have rearranged the loan facility previously provided to enable the GPCL Group to share the upside in the longer term equity return of the joint venture

agreement upon the completion of the development of the land. The joint venture agreement also allows the joint venture partners to refinance the existing loan facility, which will result in earlier repayment to the GPCL Group.

An independent valuation report estimated the gross realisation valuation of the land upon completion of development to be $157.5 million with an "as it is" land value of $52 million. This current "as it is" valuation of $52 million is not sufficient to cover the senior debts of $33.8million and the amount owing to the GPCL Group of $23.5 million secured by this land. However, in view of the arrangements put into place to develop the land and the potential upside upon completion of the development, the Directors of the Company were and continue to be satisfied at the time of this financial report that there is sufficient value in the land against which the loans are secured to repay the loans provided by the GPCL Group.

13. Deferred tax assets

$\ddagger$

		Consolidated	Consolidated	Parent entity	Parent entity
	Note	2665	2004	2005	2004
			S	S	s
Future income tax benefit arising fromtiming differences		685,348	66,565	685,348	66,565
4. Investments
Investment – listed		1,560,000
Investment – unlisted		700,000
Investment in controlled entities	22			16	16
		2,260,000		16	16
Market value of listed investment		1,248,000

The listed investment was acquired on a vendor finance basis. The vendor has also provided a letter providing a minimum value should the market price of this listed investment drop below a prescribed value. The unlisted investment represents unit in the trust that owns the land at the Bellambi West Colliery site. In view of the existence of the joint venture agreement to develop the land, the Directors are satisfied the carrying value of this investment can be recovered upon completion of the development.

NOTESTO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED SO JUNE 2005

15. Other assets

	Consolidated	Consolidated	Parent entity	Parent entity
	2005	2004	2005	2004
	s	S	S	S.
Deferred expenses	350,000	350,000	350,000	350,000
Accumulated deferred expenses written off	(350,000)	(343,750)	(350,000)	(343,750)
		6,250		6,250
Borrowing costs	22,265	22,265
Accumulated amortisation	(18, 322)	(9, 406)
	3,943	12,859	—
	3,943	19,109		6,250
Property, plant and equipment16.
Land, at independent valuation	3,300,000	5,800,000
	3,300,000	5,800,000
Furniture, fixtures and fittings	34,712	1,752	34,712	1,752
Accumulated depreciation	(1,300)	(326)	(1,300)	(326)
Written down value	33,412	1,426	33,412	1,426
Computer and other equipment	30,584	30,337	30,584	30,337
Accumulated depreciation	(25,709)	(17, 724)	(25,709)	(17, 724)
Written down value	4,875	12,613	4,875	12,613
	3,338,287	5,814,039	38,287	14,039

Valuations

The independent valuations on land and buildings owned by the consolidated entity were carried out between 15 July and 29 July 2004 by TC Wetherall (JP, API, RAPI, AIBS) of TCW Consulting Pty Ltd, Wollongong. The valuations were performed on the basis of market value as at balance date. The net increment/(decrement) arising from the valuations has been transferred to the asset revaluation reserve (Note 20). During the year, there was a disposal of land resulting in the devaluation of the value of the land as compared to its selling price. The net devaluation arising from sale of land had been transferred to the asset revaluation reserve.

Reconciliations

		Consolidated	Consolidated	Parent entity	Parent entity
		2005$	2004$	2005S	2004s
	(a) Land
	Balance at the beginning of the year	5,800,000	2,650,000
	Additions		909,473
	Disposal	(1,500,000)
	(Devaluation) / Revaluations during the year	(1,000,000)	2,240,527
	Balance as at the end of the year	3,300,000	5,800,000
	(b) Furniture, fixtures and fittings
	Balance at the beginning of the year	1,426	96,788	1,426	96,788
	Additions	32,961	1,600	32,961	1,600
	Depreciation expense	(975)	(3,084)	(975)	(3,084)
	Write off		(93, 878)		(93, 878)
	Balance as at the end of the year	33,412	1,426	33,412	1,426
	(c) Computer and other equipment
	Balance at the beginning of the year	12,613	20,807	12,613	20,807
	Additions	247	5,060	247	5,060
	Depreciation expense	(7,985)	(7, 840)	(7,985)	(7, 840)
	Write off		(5, 414)		(5, 414)
	Balance as at the end of the year	4,875	12,613	4,875	12,613
17.	Payables
	Accrued expenses	49,335	74,571	49,335	54,207
	Sundry creditors	164,296	531,738	44,268	30,895
	Interest payable on debenture / promissory notes	905,321	2,160,595
	Interest payable on borrowings	1,072,607	160,464	1,072,607	160,464
		2,191,559	2,927,368	1,166,210	245,566
	18. Borrowings
	Bank loan - secured		2,401,747
	Promissory and debenture notes	5,510,000	12,535,000
	Other short term borrowings	11,250,000	5,205,164	11,250,000	4,000,000
		16,760,000	20,141,911	11,250,000	4,000,000
	Maturity analysis
	Not longer than 3 months	4,250,000	5,205,164	4,250,000	4,000,000
	Longer than 3 and not longer than 12 months	9,900,000	7,794,995	7,000,000
	Longer than 1 and not longer than 5 years	2,610,000	7,141,752
		16,760,000	20,141,911	11,250,000	4,000,000

NOTESTO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2005

The bank loan is secured by first mortgage over the consolidated entity's land and buildings and fixed and floating charges over the assets of the controlled entities acquiring the land and buildings. During the year, the bank loan was replaced by a commercial overdraft facility of $3,000,000 secured by first mortgage over the same properties. The promissory and debenture notes are

repayable at various maturity dates and secured by floating charges over assets of the controlled entities issuing these notes. Interest is payable monthly in arrears with rates ranging from 5% per annum to 9% per annum. Bonus payments with rates ranging from 8% to 15% are payable upon maturity of the promissory and debenture notes. During the year, all promissory notes issued in previous years have been repaid upon their maturity.

19 Contributed equity

		Consolidated	Consolidated	Parent entity	Parent entity
		2005	2004	2005	2004
		$	Ś.	S	s
	11,885,500 ordinary shares (2004: 11,885,500)	4,735,500	4,735,500	4,735,500	4,735,500
	Ordinary shares entitle the holder to participate in thedividends and the proceeds on winding up in proportionto the number of and amounts paid on the shares held.
	At shareholders meetings each ordinary share is entitledto one vote when a poll is called, otherwise eachshareholder has one vote on a show of hands.
20	Reserves
	Asset revaluation	1,307,981	2,898,508
	Asset realisation	590,527
		1,898,508	2,898,508
	Movement during the year
	(a) Asset Revaluation Reserve
	Balance at the beginning of the year	2,898,508	657,981
	(Devaluation)/revaluation of land	(1,000,000)	2,240,527
	Transfer to asset realisation reserve being incrementrealised on sale of land	(590, 527)
	Balance at the end of the year	1,307,981	2,898,508
	The asset revaluation reserve records revaluations ofnon-current assets.
	(b) Asset Realisation Reserve
	Balance at the beginning of the year
	Realised increment on sale of land transferred from
	asset revaluation reserve	590,527
	Balance at the end of the year	590,527

The asset realisation reserve records realised gains on sale of non-current assets.

21 Retained profits

	Consolidated	Consolidated	Parent entity	Parent entity
	2605	2004	2005	2004
		S	S.	S
Balance at the beginning of the year	9,508,549	4,987,357	2,711,619	1,093,791
Net profit/(loss) attributable to the members of
Great Pacific Capital Limited	3,559,250	5,115,468	(362, 982)	2,212,104
Dividends paid		(594, 276)		(594, 276)
Balance at the end of the year	13,067,799	9,508,549	2,348,637	2,711,619

eens

22 Investments in controlled entities

Name of Entities	Place of incorporation.	Class of shares	Equity holding
GPC No. 1 (City Quarter) Pty Ltd	NSW, Australia	Ordinary	100%
GPC No. 2 (Camperdown) Pty Ltd	ACT, Australia	Ordinary	100%
GPC No. 3 (Huntley) Pty Ltd	NSW, Australia	Ordinary	100%
GPC No. 4 (North Sydney) Pty Ltd	NSW, Australia	Ordinary	100%
GPC No. 5 (Wombarra) Pty Ltd	NSW, Australia	Ordinary	100%
GPC No. 6 (Barrack Point) Pty Ltd	NSW, Australia	Ordinary	100%
GPC No. 7 Pty Ltd	NSW, Australia	Ordinary	100%
GPC No. 8 (Bulli) Pty Ltd	NSW, Australia	Ordinary	100%
GPC No. 9 (Shell Harbour) Pry Ltd	NSW, Australia	Ordinary	100%
GPC No. 10 Pty Ltd	NSW, Australia	Ordinary	100%
GPC No. 11 Pty Ltd	ACT, Australia	Ordinary	100%
GPC No. 12 Pty Ltd	ACT, Australia	Ordinary	100%
GPC No. 13 (Balmoral) Pty Ltd	NSW, Australia	Ordinary	100%
GPC Equipment Pty Ltd	NSW, Australia	Ordinary	100%
GPC Mineral Investments Pty Ltd	NSW, Australia	Ordinary	100%
GPC Finance Pty Ltd	NSW, Australia	Ordinary	100%

NOTESTO THE FINANCIAL STATEMENTS FOR THE YEAR RADIO ED SOUUNE 2005

23 Related parties Directors

The names of persons who were Directors of Great Pacific Capital Limited at anytime during the financial year are as follows:

Mr Alfred Wong, Mr Danny Au-Yeung and Mr Ivan Wong. Directors' holdings of shares and options

Ordinary.	Share	Ordinary	Share
「気軽などの殺	octions	shares	options
2005	2005	2004	2004
number held	number held	number held	-number held

The interests of Directors of the consolidated entity and their related entities in shares and share options of the Company

Other Directors related transactions

Other than those transactions as disclosed above and the remunerations received by Directors as disclosed in remuneration report on pages 12 to 13 of the Directors' Report, there are no other Directors related transactions entered into by the consolidated entity during the financial year ended 30 June 2005 and the previous financial period ended 30 June 2004.

Wholly-owned aroup

The wholly-owned group consists of Great Pacific Capital Limited and its wholly-owned controlled entities set out in note 22.

Transactions between Great Pacific Capital Limited and other entities in the wholly-owned group during the financial year consisted of:

• 1,750,000 2.500,000
  • (a) Loans advanced by Great Pacific Capital Limited and its controlled entities.
  • (b) Loans repaid to Great Pacific Capital Limited and its controlled entities.
  • (c) The payment of interest on the above loans.
  • (d) Management fees payable to Great Pacific Capital Limited by its controlled entities for managing their loan portfolio.

There are no fixed terms for the repayment of principal on loans advanced between entities within the consolidated group. The management fee is charged at a fixed rate of 12% based on the value of loan portfolio.

Aggregate amounts included in the determination of the operating profit before income tax that resulted from transactions with entities in the wholly-owned group are as follows:

	Parent entity	Parent entity
	2005	2004
	S	S
Management fee income	1,516,300	1,669,129
Aggregate amounts receivable/payable to entities in thewholly-owned group at balance date
Receivable from controlled entities
operating expenses	16,270,008	1,444,598
tax related	5,705,803	4,024,848
	21,975,811	5,469,446

Other related entities

(a) Great Pacific Equity Loan Pty Limited is a company owned by one of the Directors of Great Pacific Capital Limited, Mr Danny Au-Yeung and is regarded as a related entity.

Transactions between Great Pacific Capital Limited and its controlled entities and Great Pacific Equity Loan Pty Limited during the financial year consisted of:

(i) Investments by Great Pacific Equity Loan Pty Limited in the consolidated entity.

(ii) Loans advanced by Great Pacific Equity Loan Pty Limited to the consolidated entity.

(iii) The payment of interest on the above investments and loans.

Investments by Great Pacific Equity Loan Pty Limited are in the form of debenture notes issued by GPC Finance Pty Limited under the same terms and conditions as those issued to all other third party investors.

Loans advanced by Great Pacific Equity Loan Pty Limited have no fixed term of repayment and interest is charged at between 20% to 25% per annum which is the same as the rate paid by Great Pacific Equity Loan Pty Limited to obtain the funds.

Aggregate amounts included in the determination of the operating profit before income tax that resulted from transactions with Great Pacific Equity Loan Pty Limited:

Aggregate amounts payable to Great Pacific Equity LoanPty Limited at balance date:
Debenture notes	660,000	550,000
Loan advancesTotal payable	660,000	1,205,1641,755,164

• (b) Mr Alfred Wong and Mr Danny Au-Yeung are also directors of Bellpac Pty Limited, a Company owned by the Balgownie Coal Investment Trust and is regarded as a director related entity.
• (c) Mr Alfred Wong and Mr Danny Au-Yeung are also directors of Green Pacific Energy Limited, an ASX listed company which shares the same office as the Company and is regarded as a director related entity. Mr Alfred Wong, also owns shares in Green Pacific Energy Limited through his company, Great Pacific Financial Group Pty Limited. The amount receivable from Green Pacific Energy Limited as at 30 June 2005 for shared office expenses was $275,982 and was included as other debtors under Note 11.
• (d) Mr Alfred Wong and Mr Ivan Wong are directors of Great Pacific Finance Pty Limited, a company which shares the same office as the Company and is regarded as a director related entity. The amount receivable from Great Pacific Finance Pty Limited as at 30 June 2005 for shared office expenses was $197,945 and was included as other debtors under Note 11.

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED SO JUNE 2005

24. Notes to the statement of cash flows

	Consolidated	Consolidated	Parent entity	Parent entity
	2005Ŝ	2004	2005ġ.	2004
		S		s
(a) Reconciliation of net cash provided by/(used in) operating activities to profit from ordinaryactivities after income tax
Net cash provided by/(used in) operating activities	(4,434,648)	6,443,660	(719, 038)	3,769,207
Depreciation	(8,960)	(10, 924)	(8,960)	(10, 924)
Amortisation - borrowing cost	(8,916)	(5,305)
Amortisation - goodwill		(366, 666)
Write off of deferred expenses	(6,250)	(75,000)	(6,250)	(75,000)
Establishment fee capitalised		350,000		350,000
Fixed assets written off		(99, 281)		(99, 291)
Other		8,698
Increase/(decrease) in operating assets
Interest receivable	5,324,619	1,803,751	(713, 879)	1,069,749
Other receivables	692,110	(1, 197, 037)	734,625	1,596,769
Other	618,783	(522, 179)	618,783	1,123,861
(Increase)/decrease in operating liabilities
Interest payable	343,131	2,194,118	(912, 143)	(160, 464)
Payables	389,161	(1, 541, 313)	(6,340)	(32,970)
Provisions for tax	1,631,480	(1,988,505)	1,631,480	(2,084,474)
Provisions	(981,260)	121,451	(981, 260)	(3,234,359)
Profit from ordinary activities after income tax	3,559,250	5,115,468	(362, 982)	2,212,104
(b) Reconciliation of cash
For the purpose of the Statement of Cash Flows, cashat the end of the financial year is reconciled to thefollowing items in the Statement of Financial Position:
Cash and cash at bank	41,031	1,148,758	19,488	271,506
Bank overdraft	(775, 999)		(775,999)
Term deposits	100,000	100,000
	(634,968)	1,248,758	(756, 511)	271,506
(c) Overdraft facility
Overdraft facility	3,000,000		3,000,000
Amount utilised	(775, 999)		(775, 999)
	2.224.001		2.224.001

Commercial overdraft facility of $3,000,000 was

established during the year. This facility was secured by first mortgage over land and building of the consolidated entities.

25. Segment information

The consolidated entity operates in one geographical segment, being Australia and in one business segment, being the provision of subordinated debt facilities in funding residential and commercial property development.

26. Events occurring after reporting date

There are no matters or circumstances that have arisen since 30 June 2005 that have significantly affect, or may significantly affect:

• (a) The consolidated entity's operations in the future financial years, or
• (b) The result of those operations in future financial years, or
• (c) The consolidated entity's state of affairs in the future financial years.

27. Contingencies

Litigations

In the normal course of business operations, Great Pacific Capital Limited and its controlled entities enter into various types of business contracts that may give rise to contingent liabilities. As at 30 June 2005, there is one outstanding legal claim detailed as follows:

28. Lease commitments

Non-cancellable operating lease contracted for but not capitalised in the financial statements:

The administrator of Thin Seam Mining Pty Ltd, a mining contractor in the Bellambi West Colliery before its acquisition by Bellpac Pty Ltd, commenced a claim for the indemnity of costs incurred during the administration process. The costs incurred were estimated to be approximately $800,000 although there has been no claim for a specific amount. The Company denied the existence of such an indemnity. Hearing of this case before the Supreme Court was completed on 11 February 2005 with final judgement delivered on 26 April 2005 in favour of the Company together with costs. However, an appeal was lodged by the administrators on 7 September 2005 with the hearing scheduled on 27 February 2006.

Guarantees Provided

Some entities within the consolidated entity have provided guarantees to third parties in relation to the performance and obligations of certain borrowers or other entities within the consolidated entity in respect to loan facility. The guarantees are for the term of the facility. The periods covered by the guarantees range from 3 to 5 years. The consolidated entity charges a guarantee fee based on the amount of the facility for providing such guarantees.

The total value of the facilities provided whereby guarantees have been provided to third parties amounted to $33.8 million (2004: $25.0 million). This amount represents the maximum exposure to the consolidated entity.

	Consolidated	Consolidated	Parent entity	Parent entity
	2005	2004	2005	2004
	S	$	S	S
Payable
Not later than I year	123,187	346,332	123,187	110,578
Later than 1 year but not later than 5 years	641,974	1,373,855	641,974	588,007
More than 5 years	363,593	463,497	363,593	463,497
	1,128,754	2,183,684	1,128,754	1,162,082

The property lease is a non-cancellable lease with a ten year term, with rent payable monthly in advance. The lease agreement provides for rent to be increased by 4% per annum. There is an option to extend the lease term for four years.

The lease allows for subletting and assignment of the lease to third parties by obtaining written consent from the lessor.

The equipment lease is for mining equipment with a total value of $1,000,000 for a term of 60 months with lease payments payable on a monthly basis. The equipment has been subleased to Bellpac Pty Limited, the company which operates the coal mine at Bellambi West Colliery, under similar terms and conditions. The lease was disposed and taken over by the new owner of the coal mine at Bellambi West Colliery upon its disposal.

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2005

29. Financial instruments

(a) Interest rate risk

The exposure to interest rate risk and the weighted average effective interest rates on the financial assets and liabilities of the consolidated entity are summarised in the following tables:

			Consolidated
	Floatinginterestrate		Fixedinterest ratematuring in		Non-Interestbearing	Total	Weightedaverageinterest rate
	S	1 yearor lessS	Over1 to 5 yrsŚ	Morethan 5 yrsŔ	Ġ.	Ş	$%$
30 June 2005
Financial assets
Cash	41,031					41,031	1.64
Term deposit		100,000				100,000	4.75
Receivables					25,877,806	25,877,806
Loans		11,498,967				11,498,967	35.01
	41,031	11,598,967			25,877,806	37,517,804
Financial liabilities
Bank overdraft	775,999					775,999	9.00
Payables					2,191,559	2,191,559
Debenture notes			2,900,000 2,610,000			5,510,000	20.00
Other short term borrowings		11,250,000				11,250,000	21.54
	775,999	14,150,000 2,610,000			2,191,559	19,727,558
30 June 2004
Financial assets
Cash	1,148,757				L	1,148,758	2.64
Term deposit		100,000				100,000	4.75
Receivables					19,862,643	19,862,643
Loans	8,208,354	10,018,605				18,226,959	21.78
	9,357,111	10,118,605	$\overline{\phantom{0}}$		19,862,644	39,338,360
Financial liabilities
Payables					2,927,368	2,927,368
Promissory and debenture notes			7,135,000 5,400,000			12,535,000	18.96
Other short term borrowings		5,205,164				5,205,164	27.30
Bank loan			659,995 1,741,752			2,401,747	7.38
	$\equiv$	13,000,159 7,141,752			2,927,368	23,069,279

(b) Credit risk

The credit risk exposures of the consolidated entity are to the non-repayment of receivables, loans and advances due from third parties and the amounts are as indicated by the carrying amount of the financial assets recognised in the balance sheet. There is a concentration of credit risk due to the small number of debtors in the consolidated entity's model of operation.

The consolidated entity has taken steps to minimise the risk of default by undertaking loans which are secured by mortgage over land, residential and commercial properties and guarantees from borrowers.

(c) Net fair values

The net fair values of financial assets and liabilities are either equal to or approximate their carrying amounts. The carrying amounts of all financial assets and liabilities are reviewed to ensure they are not in excess of the net fair value.

30. Company details

Great Pacific Capital Limited is a company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business is Level 23, 123 Pitt Street, Sydney, NSW 2000.

DIRECTORS' DECLARATION

In the opinion of the Directors of Great Pacific Capital Limited:

• $\mathbf{1}$ . the financial statements and notes, set out on pages 16 to 35 are in accordance with the Corporations Act 2001:
  • (a) give a true and fair view of the financial position of the Company and consolidated entity as at 30 June 2005 and of their performance for the financial year ended on that date; and
  • (b) comply with Accounting Standards and the Corporation Regulations 2001; and
• the Chief Executive Officer and Chief Finance Officer $\overline{2}$ . have each declared that:
  • (a) the financial records of the Company for the financial year have been properly maintained in accordance with section 286 of the Corporations act $2001:$
  • (b) The financial statements and notes for the financial year comply with the Accounting Standards, and
  • (c) The financial statements and notes for the financial year give a true and fair view; and
• there are reasonable grounds to believe that the $\mathfrak{Z}$ . Company will be able to pay its debts as and when they become due and payable.

Signed at Sydney this 29th day of September 2005 in accordance with a resolution of the Directors.

INDEPENDENT AUDIT REPORT TO THE MEMBERS OF GREAT PACIFIC CAPITAL LIMITED

$\bigoplus$ Hall Chadwick
Chartered Accountants & Business AdvisersGREAT PACIFIC CAPITAL LIMITEDABN 57 096 781 716
AND CONTROLLED ENTITIES	axdaxy.Level 29
INDEPENDENT AUDIT REPORT TO THE MEMBERS OF	St Mattins Tower31 Morket Street
GREAT PACIFIC CAPITAL LIMITED	Sydney 2000New South Wales
ScopeThe financial report and directors' responsibility	GPO Box 3555
The financial report comprises the statement of financial position, statement of financial	SYDNEY NSW 2001Of.DX 1451 Sydney
performance, statement of cash flows, accompanying notes to the financial statements, andthe directors' declaration for Great Pacific Capital Limited (the company) and Great PacificCapital Limited (the consolidated entity), for the year ended 30 June 2005. The consolidatedentity comprises both the company and the entities it controlled during that year.	Telephone: (02) 9263 2600Focsimile: (02) 9263-2800Email: Acsydinfo@hailchodwick.com.au
The directors of the company are responsible for the preparation and true and fairpresentation of the financial report in accordance with the Corporations Act 2001. Thisincludes responsibility for the maintenance of adequate accounting records and internalcontrols that are designed to prevent and detect fraud and error, and for the accountingpolicies and accounting estimates inherent in the financial report.	PannithТекерһоле: (02) 4721 8144Focs(mile: (02) 4724 8455PortnersRobert Elliott
Audit Approach	Geoffrey McDonaldDrew Towasend
We conducted an independent audit in order to express an opinion to the members of thecompany. Our audit was conducted in accordance with Australian Auditing Standards, inorder to provide reasonable assurance as to whether the financial report is free of materialmisstatement. The nature of an audit is influenced by factors such as the use of professionaljudgment, selective testing, the inherent limitations of internal control, and the availability ofpersuasive rather than conclusive evidence. Therefore, an audit cannot quarantee that allmaterial misstatements have been detected.	David KenneyRichard AibarranGino MalaccoPoul LeroyAssociatesSteven GlodmonMitchell BallOther firms in:
We performed procedures to assess whether in all material respects the financial reportpresents fairly, in accordance with the Corporations Act 2001, including compliance withAccounting Standards and other mandatory financial reporting requirements in Australia, aview which is consistent with our understanding of the company's and the consolidatedentity's financial position, and of their performance as represented by the results of theiroperations and cash flows.	MelbourneBrisbanePostsAdelaideGold Coast
We formed our audit opinion on the basis of these procedures, which included:
examining, on a test basis, information to provide evidence supporting the amounts anddisclosures in the financial report, and
assessing the appropriateness of the accounting policies and disclosures used and thereasonableness of significant accounting estimates made by the directors.
While we considered the effectiveness of management's internal controls over financialreporting when determining the nature and extent of our procedures, our audit was notdesigned to provide assurance on internal controls.
independence
In conducting our audit, we followed applicable independence requirements of Australianprofessional ethical pronouncements and the Corporations Act 2001.
In accordance with ASIC Class Order 05/83, we declare to the best of our knowledge andbelief that the auditor's independence declaration set out on page 16 of the Financial Reporthas not changed as at the date of providing our audit opinion.
Audit OpinionIn our opinion, the financial report of Great Pacific Capital Limited is in accordance with:
the Corporations Act 2001, including:臽.
giving a true and fair view of the company's and consolidated entity's financialĪ,position as at 30 June 2005 and of their performance for the year ended on thatdate; and
complying with Accounting Standards in Australia and the Corporations Regulations2001; and
Ь.other mandatory professional reporting requirements in Australia.
	www.holichodwick.com.ouNational Association
	Holl ChadwickInternational Association
Liability limited by a Scheme approved under Professional Standards Legislation	AGN InternationalAssociations of
	independent fisms

GREAT PACIFIC CAPITAL LIMITEDABN 57 096 781 716AND CONTROLLED ENTITIES	€ Hall Chadwids
INDEPENDENT AUDIT REPORT TO THE MEMBERS OFGREAT PACIFIC CAPITAL LIMITED
Without qualification to the opinion expressed above, attention is drawn to thefollowing matter:
Inherent uncertainty regarding realization of loans, receivables and investments
As disclosed in Notes 11, 12 and 14 of the Financial Statements, the company has provideda loan facility to the owner of the coal mine at the Bellambi West Colliery site and acquiredunits in the owner of the Balgownie Investment Coal Trust. The "as it is" currentindependent valuation of the land value is not sufficient to cover both the senior debts andthe loan provided to the owner of the coal mine by the consolidated entity. The recoupmentof the carrying value of the loan balance outstanding; the interest receivable on the loan andthe investment in the Balgownie Coat Trust is dependent upon the ultimate sale of theresidential development of the land at the Bellambi West Colliery site in accordance with thejoint venture agreement executed in July 2005, for a consideration in relation to theconsolidated entity's entitlement of at least the carrying value of the loan; the interestreceivable on the loan and the investment balance.
Hall Chadwick
Level 29, 31 Market Street
Sydney /NSW 2000
Drew TownsendPartner
Date: 29 September 2005

SHAREHOLDER INFORMATION

RESTRICTION ON SHARES

There are no shares under escrow as at 30 June 2005.

MAJOR SHAREHOLDERS

At 19 September 2005, the 20 largest holders of Ordinary Shares held 9,535,826, shares equal to 80.23 percent of the total number of shares on issue.

Major shareholders	Number of shares	%
Skyworth Investments Limited	1,700,000	14.30
Edessa Holdings Pty Limited	987,500	8.31
Ace Bond Capital Limited	807,500	6.79
Graham Werry	750,000	6.31
Alfred Wong	750,000	6.31
Danny Au-Yeung	750,000	6.31
Osmond Kwok	502,000	4.22
Bernard Chiu	500,000	4.21
Master Max Far East Limited	500,000	4.21
David & Catherine Hewett Pty Ltd	345,000	2.90
Nels Tong	287,750	2.42
Helen Ho	285,200	2.40
Ivan Wong	250,000	2.10
Mrs Christine Batley	211,000	1.78
Paul Ho	200,000	1.68
Mrs Beryl Joyce Clough	200,000	1.68
Carolyn Wong	166,100	1.40
Golden Peace Investment Limited	140,000	1.18
Francis Young	102,000	0.86
Mr Susanto Sjaifuddin	101,776	0.86
	9,535,826	80.23

SUBSTANTIAL SHAREHOLDERS

At 19 September 2005, the following shareholders were regarded as substantial shareholders:

	Number of Shares
Skyworth Investments Limited	1,700,000
Edessa Holdings Pty Limited	987,500
Ace Bond Capital Limited	807,500
Graham Werry	750,000
Alfred Wong	750,000
Danny Au Yeung	750,000

DISTRIBUTION OF SHAREHOLDINGS

At 19 September 2005, the distribution of shareholdings was as follows:

	Number	% of	Number	% ಚ
Range	of holders	holders	of shares	shares
$1 - 1,000$ shares		2.10	4,782	0.04
$1,001 - 5,000$ shares	230	68.86	533,339	4.49
$5,001 - 10,000$ shares	33	9.88	282,327	2.38
$10,001 - 100,000$ shares	44	13.17	1,628,226	13.70
100,001 shares and over	20	5.99	9,436,826	79.39
	334	100.00	11,885,500	100.00

As at 19 September 2005, there were 4 shareholders with less than a marketable parcel of ordinary shares totalling 1,782 shares.

VOTING RIGHTS OF SHAREHOLDERS

All fully paid ordinary shareholders are entitled to vote at any meeting of the members of the Company and their voting rights are on:

• show of hands one vote per shareholder; and
• poll one vote per full paid ordinary share.

REGISTERED OFFICE

Level 23 Angel Place 123 Pitt Street Sydney NSW 2000

GPO Box 3364 Sydney NSW 2001

Telephone 02 9202 3000 Facsimile 02 9202 3098

COMPANY SECRETARY

Edwin Yeung

SHARE REGISTRY

Computershare Investor Services Pty Limited

Level 3 60 Carrington Street Sydney NSW 2000

Mailing Address

GPO Box 7045 Sydney NSW 2001

Telephone 1300 855 080 Facsimile 02 8234 5050 Website www.computershare.com

Stock Exchange Listed Securities

Great Pacific Capital Limited's ordinary shares are listed on the Australian Stock Exchange under Security Code GRP.