SELECT HARVESTS LIMITED — Annual Report 2012

Aug 30, 2012

ASX ANNOUNCEMENT

SELECT HARVESTS REPORTS FULL YEAR RESULTS

31[st] August 2012

Select Harvests Limited (SHV ASX), a leading Australian almond producer and marketer, today announces its financial results for the 12 months ended 30[th] June 2012.

Key headlines

• FY12 Reported Net Loss After Tax of $4.5m (FY11 Reported Net Profit After Tax: $17.7m) includes after tax impact of $17.4m of non cash asset write downs

• FY12 Underlying NPAT $9.5m (FY11 Underlying NPAT: $8.9m)

• Asset review resulted in $22.1m net adjustments, including the following asset writedowns:

• $20.0m – Western Australian Greenfields almond project assets (comprising $4m feasibility cost, $1m land, $15m infrastructure)

• $4.9m – Redundant and obsolete processing assets

• Operating cash flow of $22m (FY11: $0.5m)

• Almond Division experienced challenging year:

• Wet weather impacted crop quality, processing costs and almond price

• Continued impact of strong Australian dollar

• Strong improvement in Food Division, Underlying EBIT up 27%

• New leadership of Board and business in place:

• Michael Iwaniw appointed Chairman in November 2011

• Paul Thompson appointed Managing Director in June 2012

• Program to optimise balance sheet, reduce working capital and costs well progressed:

• Sold 11GL permanent water rights for $18m

• Global supply and demand fundamentals remain attractive The Directors have declared a fully franked final dividend of 3c per share to be paid on 22 October 2012 to shareholders based on their holding at 11 September 2012

Paul Thompson, Select Harvests’ Managing Director, said:

“The performance of our Almond Division was disappointing with below industry average yields experienced across the industry, and wet harvesting conditions impacting the quality of the almond crop. Our Food Division delivered a 27% improvement in underlying EBIT reflecting the benefits of increased operational discipline and a strong performance from our value- added brands such as Lucky.

“A number of new initiatives are in place to improve performance across the business. Over the coming months our focus will be on driving operational improvements and efficiency to reduce costs, and on leveraging our size, expertise and unique integrated business.

“The balance sheet has been strengthened and we have made good progress in improving capital efficiency and re-aligning our asset base, with the $18 million sale of water rights during the year.

“The fundamentals underpinning the global almond industry remain extremely robust. Demand for almonds continues to increase domestically and internationally and is on track to outstrip supply.

“As the largest vertically integrated nut and health food company listed on the ASX, Select Harvests is uniquely positioned to benefit from the growing demand and the increased maturity profile of the Company’s orchards.”

Results Summary

Results Summary
	Reported		Underlying
EBIT ($000’s)	FY11	FY12	FY11	FY12
Managed Orchards	11,644	9,332	11,644	14,240
Company Orchards	9,819	(12,883)	2,334	3,076
Almond Division	21,463	(3,551)	13,978	17,316
Food Division	3,709	6,027	4,739	6,027
Corporate Costs	(3,310)	(4,971)	(3,310)	(3,721)
Operating EBIT	21,862	(2,495)	15,407	19,622
Interest Expense	(3,389)	(6,248)	(3,389)	(6,248)
Net Profit Before Tax	18,473	(8,743)	12,018	13,374
Tax (Expense)/Income	(799)	4,274	(3,113)	(3,860)
Net Profit After Tax	17,674	(4,469)	8,905	9,514
Earnings Per Share	33.7	(7.9)	17	16.8
Operating cash flow	547	22,031	-	-
Net Debt	73,030	66,934	-	-

A reconciliation of the adjustments between Reported and Underlying results is included as an appendix to this announcement.

Almond Division

Almond Division FY12 Underlying EBIT was $17.3m, up 23.6% from $14.0m in FY11. The performance of the Almond Division was again impacted by below average yields which have been experienced across the Australian almond industry, albeit that yields were above the previous year. Again these poor yields were the result of unseasonably wet weather during harvest, impacting on product quality, processing costs and price. The 3[rd] challenging year in a row.

Full horticultural programs are underway across Managed and Company Orchards and we expect yields to improve as trees return to full productive health and orchards reach maturity. The management team has also instigated a third-party benchmarking exercise to review our farming and horticultural practises.

Managed Orchards

FY12 Managed Orchards Underlying EBIT was $14.2m, up from $11.6m in FY11. This primarily reflects higher year-on-year processing volumes. FY11 Underlying EBIT was impacted by lower volumes and higher costs due to wet harvesting conditions.

On 1st July 2012, the management of 29,500 acres of orchards in Robinvale reverted to Olam. This will have a part year impact on FY13 earnings as the remainder of the 2012 crop is processed in the first half of FY13. There will be no contribution from Olam to the FY14 earnings.

Select Harvests continues to manage 4,400 acres of almond orchards in the Robinvale area on behalf of third party orchard owners.

Company Orchards

FY12 Company Orchards Underlying EBIT was $3.1m (FY11 Underlying EBIT: $2.3m). The Company Orchards crop increased by 43% in FY12 to 5,830mt (FY11: 4,068mt), an increase which includes the benefit of the Belvedere acquisition in NSW in June 2011. Almond prices achieved are +4.8% higher than last year, in spite of the continued strength of the Australian dollar. Working capital requirements for the Company Orchards have plateaued, reflecting the maturity profile of the established Company Orchards.

Asset write-downs

Following a review of the Company’s assets, the Board has taken a decision to incur a $20m write-down of the value of the Western Australian Greenfield development. This write-down includes feasibility costs, land and infrastructure impairment provisions.

3,949 acres of orchards have been planted, which are supported by 22GL of water entitlements. While many of the base assumptions for the development remain valid, variability of terrain has resulted in a lower planted area. In addition, the project has experienced higher infrastructure and planting costs than initially expected, and future projected costs will potentially be higher. A full review of the development is being undertaken and investor partners may be required to invest and realise the full potential of the project.

The Company will also incur a $4.9m write-down on its redundant processing assets. The Company’s state-of-the art Carina West Processing Facility has sufficient capacity to meet future demand.

Food Division

The Food Division is a key differentiator for Select Harvests, providing the Company with a route to domestic and international markets.

The division recorded a significantly improved performance in FY12 with Underlying EBIT up 27% to $6.0m (FY11 Underlying EBIT: $4.7m). This reflected improved operational discipline in the business and a strong performance from the value-added brands including the consumer brand Lucky, and our industrial supply business. We also improved revenues from marketing services which benefited from increased volumes arising from Managed Orchards.

In March, Select Harvests announced that it had appointed Kidder Williams to oversee the sale of non-core health and snack food brands; SunSol, Soland and Nu-Vit. As part of that process a number of expressions of interest were received. The Company will only proceed with a sale if sufficient value can be realised. There remains significant potential to unlock value in these brands by introducing further operating efficiencies across the health food business.

Funding and Capital management

In line with the Board’s focus on funding and capital management, the Company has undertaken a number of measures to strengthen its Balance Sheet. These include scheduled debt reductions and the continuation of a long-term debt funding agreement with the NAB comprising $60m term debt and $35m working capital facility.

The Company has made strong progress in a strategy to re-align its asset base and strengthen its Balance Sheet, announcing in June the sale of 11GL of water entitlements for $18m. Additional projects have commenced to reduce working capital and recycle assets.

Dividend

A final fully franked dividend of 3 cents per share has been declared, resulting in a total dividend for the year of 8 cents per share. The final dividend will be payable on 22 October 2012 to shareholders based on their holding at 11 September 2012.

Outlook

The outlook for Select Harvests remains positive. There is significant upside potential from driving operational improvements and efficiencies across the business.

The Almond Division stands to benefit from the improved maturity profile of orchards, improved yields and crop quality. Independent experts have been engaged to ensure top quartile horticultural and management practices. The initial crop evaluation for the 2013 crop is promising with good pollination conditions and low water costs.

The new management team will increase focus on quality and service in Processing and put a greater emphasis on benchmarking in Managed Orchards and Company Orchards.

There is further upside potential from driving efficiency across the Food Division and further aligning the business units across the value chain. Plans to realign the “Go To Market” strategy are underway.

The fundamentals underpinning the global almond industry remain very compelling. Demand for almonds continues to grow domestically and internationally and is on track to outstrip supply.

ENDS

For further information please contact

Investors and Analysts Paul Thompson, Managing Director +61 3 9474 3544 Paul Chambers, Chief Financial Officer +61 3 9474 3544 Andrew Angus, Investor Relations +61 402 823 757

Media nightingale communications +61 3 9614 6930 Tim Williamson +61 458 680 130

Appendix

Adjustments between Reported and underlying EBIT

Managed Orchards

Managed Orchards
$000’s	FY11	FY12
Reported	11,644	9,332
Processing Asset impairment write down	-	4,908
Underlying EBIT	11,644	14,240

Company Orchards

Company Orchards
Reported	9,819	(12,883)
Gain on sale of water	-	(4,041)
WA asset impairment	-	20,000
Discount on acquisition net of stamp duty	(7,485)	-
Underlying EBIT*	2,334	3,076
*Includes Biological assets fair value adjustment	2,397	2,508

Food Division

Reported	3,709	6,027
Product recall costs	1,030	-
Underlying EBIT	4,739	6,027

Corporate

Corporate
Reported	(3,310)	(4,971)
Restructure costs R and D tax consulting	- -	800 450
Underlying EBIT	(3,310)	(3,721)

Appendix

Summary of Tax (Expense)/Income

$000’s	FY11	FY12
Reported	(799)	4,274
R and D credits	(2,233)	(2,500)
Tax on water sale		2,212
Tax on asset impairments	-	(7,472)
Tax on product recall	(309)	-
Tax on corporate one off costs	-	(374)
Other	(228)
Underlying	(3,313)	(3,860)

Rule 4.3A

Appendix 4E Preliminary final report

Name of entity

Select Harvests Limited

ABN or equivalent company reference: 87 000 721 380

1. Reporting period

1. Reporting period
Report for the financial year
ended	30 June 2012
Previous corresponding period
is the financial year ended	30 June 2011

2. Results for announcement to the market

(All amounts in this report are expressed in A$’000 unless otherwise stated)

Revenues from ordinary activities_(item 2.1) Down 0.5% to $251,322 Profit (loss) from continuing ordinary activities after tax attributable to members (_item 2.2) Down 125.3% to ($4,469) Net profit (loss) for the period attributable to members (item 2.3) Profit (loss) from continuing ordinary activities after tax attributable to members excluding the impact of impairment of property, plant and equipment Down Down 125.3% 26.6% to to ($4,469) $12,966
Dividends(item 2.4)	Amount per security	Franked amount per security
Final dividend	3 ¢	3 ¢
Previous corresponding period	3 ¢	3 ¢
Record date for determining entitlements to the dividend (item 2.5)	11 September 2012
Brief explanation of any of the figures reported above necessary to enable the figures to be understood (item 2.6): Please refer to the attached announcement to the ASX.

3. Statement of Financial Performance (item 3)

Refer to the attached financial report

4. Statement of Financial Position (item 4)

Refer to the attached financial report

SELECT HARVESTS LIMITED ABN: 87 000 721 380

5. Statement of Cash Flows (item 5)

Refer to the attached financial report

6. Dividends (item 6)

6. Dividends(item 6)
			Date of payment	Total amount of dividend
Interim Dividend - year ended	30	June	16 April 2012	$2,819,633
2012

Amount per security

Amount per security
	Amount per security	Franked amount per security at 30 % tax	Amount per security of foreign sourced dividend
Total dividend: Current year Previous year	8¢	8¢	0¢
	13¢	13¢	0¢

Total dividend on all securities

Total dividend on all securities
	Current period $A'000	Previous
		corresponding
		Period -$A'000
Ordinary securities_(each class separately)_	4,524	7,254
Preference securities_(each class separately)_	-	-
Other equity instruments_(each class separately)_	-	-
	4,524	7,254
Total

7. Details of dividend or distribution reinvestment plans in operation are described below (item 7) :

Not applicable

The last date(s) for receipt of election notices for participation in the dividend or distribution reinvestment plan

Not applicable

8. Statement of retained earnings (item 8)

Refer to the attached financial report.

-2-

SELECT HARVESTS LIMITED ABN: 87 000 721 380

9. Net tangible assets per security (item 9)

Net tangible asset backing per ordinary security

(item 9)
Current period	Previous corresponding period
$ 2.19	$ 2.17

10. Details of entities over which control has been gained or lost during the period: (item 10)

Control gained over entities

Name of entities (item 10.1) - Date(s) of gain of control (item - 10.2) Contribution to consolidated profit (loss) from ordinary $ - activities after tax by the controlled entities since the date(s) in the current period on which control was acquired (item 10.3) Profit (loss) from ordinary activities after tax of the $ - controlled entities for the whole of the previous corresponding period (item 10.3)

Loss of control of entities

Name of entities (item 10.1) Date(s) of loss of control (item 10.2) Contribution to consolidated profit (loss) from ordinary activities after tax by the controlled entities to the date(s) in the current period when control was lost (item 10.3). Profit (loss) from ordinary activities after tax of the controlled entities for the whole of the previous corresponding period (item 10.3)

11. Significant information relating to the entity’s financial performance and financial position. (item 12)

Please refer to the attached announcement.

-3-

SELECT HARVESTS LIMITED ABN: 87 000 721 380

12. The financial information provided in the Appendix 4E is based on the annual financial report (attached), which has been prepared in accordance with Australian accounting standards (item 13) .

13. Commentary on the results for the period. (item 14)

Please refer to the attached announcement and financial report.

14. Audit of the financial report

The financial report has been audited and the audit opinion is attached.

15. Audit opinion

The audit opinion is unqualified.

16. Annual General Meeting

The Annual General Meeting will be held at the Sofitel Melbourne on Collins, Melbourne, Victoria, 3000, on 20 November 2012 at 11.00am.

17. Periodic Disclosure Requirements Compliance Statement

• 1 The financial report and information provided in Appendix 4E uses the same accounting policies as those applied at 30 June 2011.

• 2 The Appendix 4E information gives a true and fair view of the matters disclosed in the annual financial report.

• The economic entity has a formally constituted Audit & Risk Committee.

==> picture [90 x 72] intentionally omitted <==

Sign here: Paul Chambers (Company Secretary)

Date: 31 August 2012

Print name: Paul Chambers

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Select Harvests Limited ABN 87 000 721 380

==> picture [427 x 39] intentionally omitted <==

Annual Financial Report

for the year ended 30 June 2012

Corporate Information

ABN 87 000 721 380

Directors

M Iwaniw (Chairman) P Thompson (Managing Director) M Carroll (Non-Executive Director) R M Herron (Non-Executive Director) F Grimwade (Non-Executive Director)

Company Secretary

P Chambers

Registered Office - Select Harvests Limited

360 Settlement Road THOMASTOWN VIC 3074

Postal address PO Box 5 THOMASTOWN VIC 3074

Telephone (03) 9474 3544 Facsimile (03) 9474 3588

Email info@selectharvests.com.au

Solicitors

Minter Ellison Lawyers

Bankers

National Australia Bank Limited

Auditor

PricewaterhouseCoopers

Share Register

Computershare Investor Services Pty Limited Yarra Falls 452 Johnston Street Abbotsford VIC 3067 Telephone (03) 9415 5040 Facsimile (03) 9473 2562

Website

www.selectharvests.com.au

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Select Harvests Limited

Annual Financial Report

30 June 2012

Contents

Contents
Directors' Report	3
Auditor’s Independence Declaration	16
Corporate Governance Statement	17
Income Statement	25
Statement of Comprehensive Income	26
Balance Sheet	27
Statement of Changes in Equity	28
Statement of Cash Flows	29
Notes to the Financial Statements	30
Directors' Declaration	79
Independent Auditor’s Report to the Members	80
ASX Additional Information	82

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Select Harvests Limited

Annual Financial Report

30 June 2012

DIRECTORS’ REPORT

The directors present their report together with the financial report of Select Harvests Limited and controlled entities (referred to hereafter as the “consolidated entity”) for the year ended 30 June 2012.

Directors

The qualifications, experience and special responsibilities of each person who has been a director of Select Harvests Limited at any time during or since the end of the financial year is provided below, together with details of the company secretary as at the year end. Directors were in office for this entire period unless otherwise stated.

Names, qualifications, experience and special responsibilities

M Iwaniw (Chariman)

Appointed to the board on 27 June 2011 and appointed Chairman 3 November 2011. He began his career as a chemist with the Australian Barley Board (ABB), became managing director in 1989 and retired 20 years later. During these years he accumulated extensive experience in all facets of the company’s operations, including leading the transition from a statutory authority and growing the business from a small base to an ASX 100 listed company. Helped orchestrate the merger of ABB Grain, AusBulk Ltd and United Grower Holdings Limited to form one of Australia’s largest agri-businesses. He has a Bachelor of Science, a graduate diploma in business administration and is a member of the Australian Institute of Company Directors. He has acted as a Non-executive director for a number of companies including Toepfer International, New World Grain, Australian Bulk Alliance and 5-star flour mill, and is currently a nonexecutive director of Australian Grain Growers Cooperative.

Interest in shares and options: 100,000 fully paid shares.

P Thompson (Managing Director)

Appointed the Managing Director and Chief Executive Officer of Select Harvests Limited on 9 July 2012. Has over 30 years of management experience. Formerly President of SCA Australasia, part of the SCA Group, one of the world’s largest personal care and tissue products manufacturers. Member of the Australian Institute of Company Directors and has formerly held positions as a Director of the Food & Grocery Council and councillor in the Australian Industry Group. Member of the Nomination Committee.

Interest in Shares and Options: NIL fully paid shares.

R M Herron , FCA & FAICD (Non-Executive Director)

Joined the Board on 27 January 2005. A Chartered Accountant, Mr Herron retired as a Senior Partner of PricewaterhouseCoopers in December 2002. He was a member of the Coopers & Lybrand (now PricewaterhouseCoopers) Board of Partners where he was National Deputy Chairman and was the Melbourne office Managing Partner for six years. He also served on several international committees within Coopers & Lybrand. He is Chairman of Royal Automobile Club Of Victoria (RACV) Ltd, Chairman of GUD Holdings Ltd, and a major industry superannuation fund. Chairman of the Audit and Risk Committee, and a member of the Remuneration Committee and Nomination Committee.

Interest in Shares and Options: 41,965 fully paid shares.

M Carroll, BAgSc, MBA & FAICD (Non-Executive Director)

Joined the board on 31 March, 2009. He works with a range of agribusiness companies in a board and advisory capacity, and has directorships with Queensland Sugar Limited, Sunny Queen Farms, Meat and Livestock Australia, Rural Finance Corporation, Rural Funds Management and Warnambool Cheese and Butter. He has 18 years experience in banking and finance, having established and led the Agribusiness division within the National Australia Bank. He has worked for a number of companies in the agricultural sector including Monsanto Agricultural Products and a venture capital biotechnology company. He is Chairman of the Remuneration Committee, and a member of the Audit and Risk Committee and Nominations Committee.

Interest in Shares and Options: 0 fully paid shares.

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Select Harvests Limited

Annual Financial Report

30 June 2012

DIRECTORS’ REPORT

F S Grimwade, B.Com, LLB (Hons), MBA, (Non-Executive Director)

Appointed to the board on 27 July, 2010. He works with a wide range of companies in a board or advisory capacity. He is Chairman of CPT Global Limited, a Principal and Executive Director of Fawkner Capital, a specialist corporate advisory firm, and is also a director of Troy Resources Ltd, XRF Scientific Limited and Fusion Retail Brands Pty Ltd. He has held General Management positions in Colonial Agricultural Company, Colonial Mutual Group, Colonial First State Investments Group, Western Mining Corporation and Goldman, Sachs & Co.

Interest in shares and options: 100,000 fully paid shares.

J C Leonard, B.Mktng & Bus. Admin, MBA (Former Chairman)

Joined the Board on 21 July 2004. Has held senior management positions with the Mars group of companies in Australia including General Manager of Mars Confectionery, Managing Director of Uncle Bens, and Managing Director of Mars Australia and New Zealand. In addition, he has served as President, Asia Pacific of all Mars businesses, and a Director of the Managing Board of Mars Incorporated global business. Is a Director of Patties Foods Limited. He was Chairman of the Board, a member of the Audit and Risk Committee, Remuneration Committee and Nomination Committee.

Curt Leonard retired 1 June 2012.

J Bird (Former Managing Director)

Became the CEO of Select Harvests Limited in January 1998. Has had many years experience in the food industry and international trade. Formerly Managing Director of Jorgenson Waring Foods. Appointed Managing Director and joined the Board in September 2001. Member of the Nomination Committee.

John Bird retired 1 March 2012.

P Chambers , BSc Hons, CA (Chief Financial Officer and Company Secretary)

Joined Select Harvests as Chief Financial Officer and Company Secretary in September 2007. He is a Chartered Accountant and has over 25 years experience in senior financial management roles in Australian and European organisations, including corporate positions with the Fosters Group, and Henkel Australia and New Zealand.

Interest in shares and options: 22,000 fully paid shares.

Corporate Information

Nature of operations and principal activities

The principal activities during the year of entities within the consolidated entity were:

• Processing, packaging, marketing and distribution of edible nuts, dried fruits, seeds, and a range of natural health foods, and

• The growing, processing and sale of almonds to the food industry from company owned almond orchards, the provision of management services to external owners of almond orchards, including orchard development, tree supply, farm management, land rental and irrigation infrastructure, and the marketing and selling of almonds on behalf of external investors.

Employees

The consolidated entity employed 571 full time employees as at 30 June 2012 (2011: 633 employees).

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Select Harvests Limited

Annual Financial Report

30 June 2012

DIRECTORS’ REPORT

Review and results of operations

Loss attributable to the members of Select Harvests Limited for the year ended 30 June 2012 was $4.5 million compared to a profit of $17.7 million in 2011.

The Company has recognised impairment losses of $24.9 million in relation to property, plant and equipment during the period. $20.0 million of the impairment losses relate to the Company’s orchards in Western Australia with the remaining $4.9 million relating to almond processing plant and equipment assets.

For additional information refer to the announcement lodged with the ASX.

Significant changes in the state of affairs

There have been no significant changes in the state of affairs of the Company.

Significant events after the balance date

On 31 August 2012, the Directors declared a final dividend of 3 cents per share payable on 22 October 2012 to shareholders on the register on 11 September 2012.

On 22 August 2012 the annual review of the company’s debt facility agreement with the National Australia Bank (NAB) was completed with the total debt facility limit being amended from $115,000,000 to $95,000,000.

Likely developments and expected results

In 2013, the Company will consolidate its investments in almond orchards, continue to pursue new growth opportunities, and review operations to enhance profitability.

Environmental regulation and performance

The consolidated entity's operations are subject to environmental regulations under laws of the Commonwealth or of a State or Territory. Details of the consolidated entity’s performance in relation to such environmental regulations follow:

The consolidated entity holds licences issued by the Environmental Protection Authority which specify limits for discharges to the environment which are the result of the consolidated entity's operations. These licences regulate the management of discharge to the air and stormwater run off associated with the operations. There have been no significant known breaches of the consolidated entity's licence conditions.

The company takes its environmental responsibilities seriously, has a good record in environmental management to date, and adheres to environmental plans that preserve the habitat of native species. Almond developments have had a positive environmental impact. The change in land use and the increase in food source have seen a rejuvenation of remnant native vegetation and an increase in the wildlife population, in particular bird species. The company has committed funding to the monitoring of Regent parrot populations around our orchards and the effectiveness of protecting native vegetation corridors in preserving wildlife.

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Select Harvests Limited

Annual Financial Report

30 June 2012

REMUNERATION REPORT

The information provided in this Remuneration Report has been audited as required by section 308(3C) of the Corporations Act 2001.

Principles used to determine the nature and amount of remuneration

The objective of the Group’s executive reward framework is to set remuneration levels to attract and retain appropriately qualified and experienced directors and senior executives. The framework aligns executive reward with achievement of specific business plans and performance indicators, which include financial and operational targets relevant to performance at the consolidated entity level, divisional level, or functional level, as applicable, for the financial year.

Remuneration packages include a mix of fixed remuneration, performance based remuneration and equity based remuneration. Executive directors and key management personnel may receive short and long term incentives.

The Board has established a Remuneration Committee which makes recommendations to the Board on remuneration packages and other terms of employment for executive and non-executive directors. The Remuneration Committee may obtain independent advice on the appropriateness of remuneration packages, given trends in the marketplace. The Group has structured an executive reward framework that is market competitive, performance driven and compliant with the Group’s reward strategy.

Non-executive directors

Non-executive directors receive fees but do not receive any performance related remuneration nor are they issued options or performance rights on securities. This reflects the responsibilities and the Group’s demands of directors. Non-executive directors’ fees are periodically reviewed by the Board to ensure that they are continually appropriate and in line with market expectations.

Directors’ fees

The current directors’ fees were last reviewed with effect from 1 July 2011 and are as follows:

	From 1 July
	2011
Base Fees (excluding superannuation)
Chairman	$145,000
Other non-executive directors	$72,267
Additional Fees (excluding superannuation)
Chair of the Audit and Risk Committee	$10,000
Chair of the Remuneration Committee	$8,000

Executive Pay

The executive pay and reward framework has three components:

1. base pay and benefits (including superannuation);

2. short term performance incentives; and

3. long term incentives involving the issue of performance rights in the Select Harvests Limited executive Long Term Incentive Plan.

The combination of these three components forms the executive’s total remuneration.

Base pay and benefits

A total employment cost package which can be structured as a combination of cash and non cash benefits at the discretion of the company.

Executives receive a base pay that is reviewed annually to ensure market competitiveness in line with the objectives of the remuneration framework. There are no guaranteed base pay increases in any executives’ contracts.

Executives may receive benefits including motor vehicle and certain private expense reimbursements.

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Select Harvests Limited

Annual Financial Report

30 June 2012

REMUNERATION REPORT

Short-term incentives

Executive directors and senior executives may receive short term incentives based on achievement of business plans and performance indicators, which include financial and operational targets relevant to performance at the consolidated entity level, divisional level, or functional level, as applicable, for the financial year. The Remuneration Committee is responsible for assessing whether the KPIs are met based on detailed reports on performance prepared by management. Financial targets ensure that variable reward is only available when value has been created for shareholders. Operational targets allow for the recognition of efficiencies that will provide for future shareholder value.

Long-term incentives

The Group offers executive directors and senior executives the opportunity to participate in the long term incentive plan (LTI Plan) involving the issue of performance rights to the employee under the LTI Plan. The LTI Plan provides for the offer of a parcel of performance rights that vest proportionately over three years, with half of the rights vesting upon achievement of earnings per share (EPS) growth targets and the other half vesting upon achievement of total shareholder return (TSR) targets. The EPS growth targets are based on the average growth of the company’s EPS over the three years prior to vesting. The TSR targets are measured based on the company’s average TSR compared to the TSR of a peer group of ASX listed companies over the three years prior to vesting. The performance targets and vesting proportions are as follows:

	Measure	Proportion of Rights to Vest
	EPS
	Below5% growth	Nil
	5% growth	25%
	5.1%-6.9% growth	Proratavesting
	7% or highergrowth	50%
	TSR
	Belowthe 60~~th~~ percentile*	Nil
	60~~th~~ percentile*	25%
	61~~st~~– 74~~th~~ percentile*	Proratavesting
	At orabove75~~th~~ percentile*	50%

• Of the peer group of ASX listed companies

The Remuneration Committee is responsible for assessing whether the targets are met based on reports prepared by management.

Performance of Select Harvests Limited

The overall level of executive reward takes into account the performance of the consolidated entity over a number of years, with greater emphasis given to the current year. Over the past 5 years, the consolidated entity’s EPS has fallen 117%.

Earnings	Per Share
	2008	2009	2010	2011	2012
Cents	46.7	42.6	43.3	33.7	(7.9)
Growth	(34%)	(9%)	2%	(22%)	(123%)

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Select Harvests Limited

Annual Financial Report

30 June 2012

REMUNERATION REPORT

Details of remuneration

Details of the remuneration of the directors and the key management personnel as defined in AASB 124 Related Party Disclosures of Select Harvests Limited and the consolidated entity are set out in the following tables.

The key management personnel of the consolidated entity includes the directors as listed above and the following senior executives:

NAME POSITION EMPLOYER P Ross General Manager Almond Processing Select Harvests Limited T Millen General Manager Horticultural & Farm Select Harvests Limited Operations L Van Driel Group Trading Manager Select Harvests Food Products Pty Ltd P Chambers Chief Financial Officer & Company Secretary Select Harvests Limited M Graham General Manager Food Division Select Harvests Food Products Pty Ltd

The nature and amount of each major element of the remuneration of each director of the Company and each of the key management personnel of the company and the consolidated entity for the financial year is detailed below. It should be noted that performance rights granted referred to in the remuneration details set out in this report comprise a proportion of rights which have not yet vested and are reflective of rights that may vest in future years.

2012	ANNUAL REMUNERATION	LONG TERM REMUNERATION
	Base Short Non Cash Super- Fee Term Benefits annuation Incentives Contri- butions $ $ $ $	Long Perform- Service ance Leave Rights Accrued Granted $ $	Termina- tion Benefits $	$ Total
Non Executive Directors F Grimwade J C Leonard M Carroll R M Herron M Iwaniw Executive Director J Bird Other key management personnel* P Chambers M Graham L Van Driel T Millen P Ross	66,300 - - 5,967 83,017 - - 7,472 73,639 - - 6,628 75,474 - - 6,793 223,307 - - - 467,204 - 20,949 41,619 252,574 - 46,171 23,001 229,222 - 38,462 20,716 231,900 - 18,211 20,081 223,980 - 16,497 18,382 255,046 - -22,954	- - - - - - - - - - - - - - - - 6,377 - 7,352 - - -	- - - - - 686,745 - - - - -	72,267 90,489 80,267 82,267 223,307 1,216,517 321,746 288,400 276,569 266,211 278,000

• Includes fees of $108,412 received for fulfilling the Executive Chairman role for the period 5 March 2012 to 9 July 2012.

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Select Harvests Limited

Annual Financial Report

30 June 2012

REMUNERATION REPORT

Notes

The elements of remuneration have been determined on the basis of the cost to the company and the consolidated entity.

Performance rights granted as part of 2012 remuneration have been valued using the Black-Scholes option pricing model, which takes account of factors such as the option exercise price, the current level and volatility of the underlying share price and the time to maturity of the option.

Key management personnel are those directly accountable and responsible for the operational management and strategic direction of the Company and the consolidated entity.

2011	ANNUAL REMUNERATION	LONG TERM REMUNERATION
	Base Short Non Cash Super- Fee Term Benefits annuation Incentives Contri- butions $ $ $ $	Long Options Service Granted+ Leave Accrued $ $	$ Total
Non Executive Directors M A Fremder F Grimwade J C Leonard M Carroll R M Herron M Iwaniw Executive Director J Bird Other key management personnel M Graham K Martin** L Van Driel T Millen P Chambers P Ross	27,083 - - 2,438 59,583 - - 5,363 130,000 - - 11,700 65,000 - - 5,850 65,000 - - 5,850 - - - - 642,874 105,000 27,932 36,995 224,047 28,000 23,465 23,443 336,922 26,265 - 17,026 206,499 37,950 31,219 21,510 196,791 25,300 11,899 19,448 226,449 43,500 43,171 24,135 248,073 27,040 - 22,327	- - - - - - - - - - - - 10,885 (106,827) 4,333 - - ( 25,500) 3,964 ( 23,000) 3,604 ( 23,500) 4,494 ( 27,000) 4,135 ( 25,000)	29,521 64,946 141,700 70,850 70,850 - 716,858 303,288 354,713 278,142 233,541 314,749 276,575

• Retired 27 October 2010

• ** Commenced 27 July 2010

• *** Commenced 27 June 2011

• **** Departed 25 February 2011 (Base fee includes Termination Payments of $174,007)

• • Amounts have been restated to reflect the actual bonus for 2011

++ Options granted includes a negative adjustment for options previously recognised as remuneration that will not vest

Notes

The elements of remuneration have been determined on the basis of the cost to the company and the consolidated entity.

Options granted as part of 2011 remuneration have been valued using the Black-Scholes option pricing model, which takes account of factors such as the option exercise price, the current level and volatility of the underlying share price and the time to maturity of the option.

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Select Harvests Limited

Annual Financial Report

30 June 2012

REMUNERATION REPORT

The actual relative proportions of remuneration that are linked to performance and those that are fixed are as follows:

2012	Fixed Remuneration	At risk - STI	At risk - LTI
	2012 2011 % %	2012 2011 % %	2012 2011 % %
Non Executive Directors
J C Leonard M Carroll R M Herron F Grimwade M Iwaniw	100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0	- - - - - - - - - -	- - - - - - - - - -
Executive Director
J Bird	100.0 78.4	-21.6	- -
Other key management personnel
P Chambers M Graham L Van Driel T Millen P Ross	100.0 87.7 100.0 88.6 100.0 88.1 100.0 86.7 100.0 100.0	- 12.3 - 11.4 - 11.9 - 13.3 - -	- - - - - - - - - -

Service Agreements

On appointment to the Board, all non-executive directors enter into a service agreement with the company in the form of a letter of appointment. The letter summarises the Board policies and terms, including compensation, relevant to the office of director.

Remuneration and other terms of employment for the managing director, chief financial officer and other key management personnel are also formalised in service agreements. Each of these agreements provide for provision of performance related cash bonuses.

The major provisions of the agreements are set out below.

Name	Term of Agreement	Base Salary Incl **Superannuation **
P Thompson	On-going – 6 Months Notice	450,000
P Chambers*	On-going – 3 Months Notice	305,080
M Graham*	On-going – 3 Months Notice	288,400
T Millen*	On-going – 3 Months Notice	263,803
L Van Driel*	On-going	264,098
P Ross*	On-going – 3 Months Notice	278,000

• Base salaries quoted are for the year ended 30 June 2012. They are reviewed annually by the Remuneration Committee, however the review for the 30 June 2013 year is yet to be completed.

Other than the notice periods noted above there are no specific termination benefits applicable to the service agreements.

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Select Harvests Limited

Annual Financial Report

30 June 2012

REMUNERATION REPORT

Share-based compensation

Long Term Incentive Plan

The current LTI Plan provides for the offer of a parcel of performance rights with a three year expiry period to participating employees on an annual basis. The rights vest annually in three tranches on achievement of the performance hurdles as described previously.

Individual parcels of rights offered to participating employees are based on a percentage of fixed remuneration. Performance rights granted as remuneration are subject to continuing service with the consolidated entity. Performance rights granted as remuneration are valued at grant date in accordance with AASB 2 Share-based Payments. Options previously granted as remuneration under the former executive share option scheme in relation to 409,742 shares, valued at $117,459 have lapsed during the year.

The assessed fair value at grant date is determined using a Black-Scholes option pricing model that takes into account the exercise price, the term of the rights, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the right.

Performance rights are granted under the plan for no consideration. The plan rules contain a restriction on removing the ‘at risk’ aspect of the instruments granted to executives. Plan participants may not enter into any transaction designed to remove the ‘at risk’ aspect of an instrument before it vests.

During or since the end of the financial year, the Company granted 655,740 performance rights to unissued ordinary shares to the key management personnel of the company as part of their remuneration.

2012	Number of rights granted during the year	$ Value of rights at grant date	Number of rights/options vested during **the year **	Number of options lapsed during **the year **	$ Value at lapse date
Executive J Bird Other key management personnel P Chambers M Graham L Van Driel T Millen P Ross	- 173,880 167,940 - 151,740 162,180	- 198,708 191,919 - 173,406 185,337	- - - - - -	539,784 136,426 41,320 116,214 117,685 126,757	- - - - - -

No options or performance rights were exercised in the financial year ended 30 June 2012 (or in 2011).

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Select Harvests Limited

Annual Financial Report

30 June 2012

REMUNERATION REPORT

Details of remuneration: Bonuses and share based compensation benefits

For each cash bonus and grant of options included above, the percentage of the available bonus or grant that was paid, or that vested, in the financial year, and the percentage that was forfeited because the person did not meet the service and performance criteria is set out below. No part of the bonuses is payable in future years. No options will vest if the conditions are not satisfied hence the minimum value of the option yet to vest is nil. The maximum value of the options yet to vest has been calculated based on the option price.

price.	price.	price.
Name 2012 Cash bonus			Options
	Paid %	Forfeited %	Year granted	Vested %	Forfeited % *	Financial years in which options/ rights may vest
J Bird	-	100%	2009 2010	- -	100 100	2012 2013
P Chambers	-	100%	2009 2010 2012 2012 2012	- - - - -	100 100 - - -	2012 2013 2014 2015 2016
M Graham	-	100%	2010 2012 2012 2012	- - - -	100 - - -	2013 2014 2015 2016
L Van Driel	-	100%	2009 2010	- -	100 100	2012 2013
T Millen	-	100%	2009 2010 2012 2012 2012	- - - - -	100 100 - - -	2012 2013 2014 2015 2016
P Ross	-	100%	2009 2010 2012 2012 2012	- - - - -	100 100 - - -	2012 2013 2014 2015 2016

• These options are not legally forfeited, but they have been deemed unlikely to vest.

Use of Remuneration Consultants

During the year the remuneration committee employed the services of Oppeus International Pty Ltd (Oppeus) to provide recommendations in relation to the senior executive long term incentive plan design, incorporating the company’s key management personnel. Under the terms of the engagement, Oppeus provided remuneration recommendations as defined in section 9B of the Corporations Act 2001 and was paid $9,500 for these services.

Oppeus has confirmed the recommendations have been made free from undue influence by members of the company’s key management personnel.

The following arrangements were made to ensure remuneration recommendations were free from undue influence:

• Oppeus was engaged by the Board and reported directly to the chair of the Remuneration Committee; and

• The report containing the remuneration recommendations was provided by Oppeus directly to the chair of the Remuneration Committee.

As a consequence the Board is satisfied that the recommendations were made free from undue influence from any members of the key management personnel.

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Select Harvests Limited

Annual Financial Report

30 June 2012

Dividends – Select Harvests Limited

Dividends – Select Harvests Limited
DIVIDENDS		Cents	2012
			$’000
Interim for theyear
 on ordinary shares		5.0	2,820
Final for 2012 shown as recommended in the 2012 report
 on ordinary shares		3.0	1,704

Indemnification and insurance of directors and officers

During the year the Company entered into an insurance contract to indemnify directors and officers against liabilities that may arise from their position as directors and officers of the Company and its controlled entities. The terms of the contract do not permit disclosure of the premium paid.

Officers indemnified include the Company Secretary, all directors, and executive officers participating in the management of the Company and its controlled entities.

Directors’ meetings

The number of meetings of directors (including meetings of committees of directors) held during the financial year and the number of meetings attended by each director was as follows:

	Directors’ Meetings Number Eligible to Attend Number Attended	Meetings of Committees Audit and Risk Remuneration Nomination Number Eligible to Attend Number Attended Number Eligible to Attend Number Attended Number Eligible to Attend Number Attended
M Iwaniw 14 14 4 4 2 2 1 1 R M Herron 14 14 4 4 2 2 1 1 M Carroll 14 14 4 4 2 2 1 1 F Grimwade 14 14 4 4 2 2 1 1 J C Leonard 13 12 4 4 2 2 1 1 J Bird 7 7 - - - - - -

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Select Harvests Limited

Annual Financial Report

30 June 2012

Committee membership

During or since the end of the financial year, the company had an Audit and Risk Committee, a Remuneration Committee, and a Nomination Committee comprising members of the Board of Directors. Members acting on the committees of the Board during or since the end of the financial year were:

Audit and Risk Remuneration Nomination R M Herron (Chairman) M Carroll (Chairman) M Iwaniw (Chairman) F Grimwade F Grimwade P Thompson M Carroll R M Herron R M Herron M Iwaniw M Iwaniw M Carroll J C Leonard J C Leonard F Grimwade J C Leonard J Bird

M Iwaniw joined the Board 27 July 2011 P Thompson joined the Board 9 July 2012 J Bird resigned from the Board 1 March 2012 J C Leonard resigned from the Board 1 June 2012

Director’s interests in contracts

Directors’ interests in contracts are disclosed in Note 32 to the financial statements.

Auditor’s independence declaration

A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 16.

Non-audit services

Non-audit services are approved by resolution of the Audit and Risk Committee and approval is provided in writing to the board of directors. Non-audit services provided by the auditors of the consolidated entity during the year are detailed in Note 31. The directors are satisfied that the provision of the non-audit services during the year by the auditor is compatible with the general standard of independence for auditors imposed by Corporations Act 2001 as non-audit services are reviewed by the Audit and Risk Committee to ensure they do not impact the impartiality and objectivity of the auditor.

Rounding

The amounts contained in this report and in the financial report have been rounded to the nearest $1,000 (where rounding is applicable) under the option available to the company under ASIC Class Order 98/100. The Company is an entity to which the Class Order applies.

Proceedings on behalf of the company

There are no material legal proceedings in place on behalf of the company as at the date of this report.

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Select Harvests Limited

Annual Financial Report

30 June 2012

Corporate Governance

In recognising the need for the highest standards of corporate behaviour and accountability, the directors of Select Harvests Limited support and have adhered to the ASX principles of corporate governance. The Company's corporate governance statement is contained in detail in the corporate governance section of this annual report.

This report is made in accordance with a resolution of the directors.

==> picture [161 x 74] intentionally omitted <==

M Iwaniw Chairman

Melbourne, 31 August 2012

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Auditor’s Independence Declaration

As lead auditor for the audit of Select Harvests Limited for the year ended 30 June 2012, I declare that to the best of my knowledge and belief, there have been:

• a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and

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

This declaration is in respect of Select Harvests Limited and the entities it controlled during the period.

==> picture [47 x 28] intentionally omitted <==

==> picture [47 x 27] intentionally omitted <==

John O’Donoghue Partner PricewaterhouseCoopers

Melbourne 31 August 2012

PricewaterhouseCoopers, ABN 52 780 433 757 Freshwater Place, 2 Southbank Boulevard, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001 T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au

Liability limited by a scheme approved under Professional Standards Legislation.

Select Harvests Limited

Annual Financial Report

30 June 2012

Corporate governance statement

This statement outlines the key corporate governance practices of the consolidated entity which considers the ASX Principles of Good Corporate Governance and Best Practice Recommendations issued by the ASX Corporate Governance Council. During the reporting period, the company has been compliant with the ASX Guidelines.

These principles are:

Principle 1 – Lay solid foundations for management and oversight Principle 2 – Structure the board to add value Principle 3 – Promote ethical and responsible decision making Principle 4 – Safeguard integrity in financial reporting Principle 5 – Make timely and balanced disclosure Principle 6 – Respect the right of shareholders Principle 7 – Recognise and manage risk Principle 8 – Remunerate fairly and responsibly

The statements set out below refer to the above Principles as applicable.

Board of Directors and its Committees

The role of the Board and Board Processes set out below are with reference to Principle 1, Lay solid foundations for management and oversight .

Role of the Board

The Board of Directors of Select Harvests Limited is responsible for the overall corporate governance of the consolidated entity. The Board guides and monitors the business and affairs of Select Harvests Limited on behalf of the shareholders by whom they are elected and to whom they are accountable. Details of the Board’s charter are located on the company’s website.

The Board seeks to identify the expectations of the shareholders, as well as other regulatory and ethical expectations and obligations. In addition, the Board is responsible for ensuring that management’s objectives and activities are aligned with the expectations and risks identified by the Board and ensuring arrangements are in place to adequately manage those risks.

To ensure that the Board is well equipped to carry out its responsibilities it has established guidelines for the nomination and selection of Directors and for the operation of the Board. A number of channels are used to source candidates to ensure the company benefits from a diverse range of individuals during the selection process.

The Board has delegated responsibility for the operation and administration of the company to the Managing Director and the executive management team. The Board ensures that this team is appropriately qualified and experienced to carry out its responsibilities and has in place procedures to assess the performance of the Managing Director and the executive management team.

Board Processes

To assist in the execution of its responsibilities, the Board has established a Remuneration Committee, and an Audit and Risk Committee. The Board also performs, as part of its function, the role of Nomination Committee. These Committees have written charters, which are reviewed on a regular basis and are located on the company’s website. The Board has also established a framework for the management of the consolidated entity.

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Select Harvests Limited

Annual Financial Report

30 June 2012

Corporate governance statement

The full Board holds twelve scheduled meetings each year, plus any additional meetings at such other times as may be necessary to address any specific matters that may arise.

The agenda for meetings is prepared and includes the Managing Director's report, financial reports, business segment reports, strategic matters, governance and compliance. Submissions are circulated in advance. Executives are involved in Board discussions where appropriate, and Directors have other opportunities, including visits to operations, for contact with a wider group of employees.

Set out below, Director Education, Independent Advice and Access to Company Information, Composition of the Board and the Nomination Committee, make reference to Principle 2, Structure the board to add value .

Director Education

The consolidated entity has a process to educate new Directors about the nature of the business, current issues, the corporate strategy, and the expectations of the consolidated entity concerning performance of Directors. Directors also have the opportunity to visit the facilities of the consolidated entity and to meet with management to gain a better understanding of business operations. Directors are able to access continuing education opportunities to update and enhance their skills and knowledge.

Independent Professional Advice and Access to Company Information

Each Director has the right of access to all relevant company information and to the Company's executives and, subject to prior consultation with the Chairman, may seek independent professional advice at the consolidated entity's expense.

Composition of the Board

The names of the Directors of the company in office at the date of this report are set out in the Directors’ report.

The composition of the Board is determined in accordance with the following ASX principles:

• The Board should comprise at least four Directors;

• The Board should maintain a majority of independent non-executive Directors;

• The Chairperson must be a non-executive director; and

• The Board should comprise Directors with an appropriate range of qualifications, skills and experience.

The Board assesses the independence of each Director in light of interests known to the Board, as well as those disclosed by each Director. In accordance with the ASX Corporate Governance Council's recommendations, the Board wishes to outline the following:

• A former non–executive director of the company (resigned 1 June 2012), Mr J C Leonard, owns (directly or indirectly) almond orchards totalling 1,782 acres in respect to which the consolidated entity provides orchard management services under contract at market rates.

Nomination Committee

The Board of Directors, as one of its important functions, performs the role of Nomination Committee. The Board’s role as Nomination Committee is to ensure that the composition of the Board of Directors is appropriate for the purpose of fulfilling its responsibilities to shareholders.

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Select Harvests Limited

Annual Financial Report

30 June 2012

Corporate governance statement

The duties and responsibilities of the Board in its role as Nomination Committee are as follows:

• To access and develop the necessary and desirable competencies of Board members;

• To develop and review Board succession plans;

• To evaluate the performance of the Board;

• To recommend to the Board, the appointment and removal of Directors; and

• Where a vacancy exists, to determine the selection criteria based on the skills deemed necessary and to identify potential candidates with advice from external consultants.

The Chairman of the Board evaluates the performance of each Board member annually in the last quarter of each financial year. The Chairman of the Audit Committee reviews the performance of the Chairman of the Board in the same period. The performance of each Board member is reviewed against the Board charter and any specific objectives agreed and set by the Board for the consolidated entity.

The Nomination Committee meets annually unless otherwise required. The Committee met once during the financial year and the Committee members’ attendance record is disclosed in the table of Directors’ meetings. The members of the Nomination Committee are disclosed in the Directors’ Report.

Further details of the Nomination Committee’s charter are available on the Company’s website. The statements set out below in relation to Remuneration, the Remuneration Committee and Remuneration Policies are with reference to Principle 8, Remunerate fairly and responsibly .

Remuneration

Remuneration Committee

The Remuneration Committee reviews and makes recommendations to the Board on remuneration packages and policies applicable to the Managing Director, senior executives and the Directors themselves. It evaluates the performance of the Managing Director and is also responsible for share option schemes, incentive performance packages, superannuation entitlements and fringe benefits policies. Remuneration levels are reviewed annually and the Remuneration Committee may obtain independent advice on the appropriateness of remuneration packages, given trends in the marketplace.

The members of the Remuneration Committee are disclosed in the Directors’ Report.

The Managing Director is invited to Remuneration Committee meetings as required to discuss senior executives' performance and remuneration packages.

The Remuneration Committee meets once a year or as required. The Committee met once during the financial year and the Committee members’ attendance record is disclosed in the table of Directors’ meetings.

Further details of the Remuneration Committee’s charter are available on the company’s website.

Remuneration Policies

Remuneration levels are set to attract and retain appropriately qualified and experienced Directors and senior executives. The Remuneration Committee may obtain independent advice on the appropriateness of remuneration packages, given trends in the marketplace. Remuneration packages include a mix of fixed remuneration, performance based remuneration, and equity based remuneration.

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Select Harvests Limited

Annual Financial Report

30 June 2012

Corporate governance statement

Executive Directors and senior executives may receive short term incentives based on achievement of specific business plans and performance indicators, which include financial and operational targets relevant to performance at the consolidated entity level, divisional level, or functional level, as applicable, for the financial year. In addition, the consolidated entity offers executive Directors and senior executives participation in the long-term incentive scheme involving the issue of options to the employee under the executive share option scheme. The executive share option scheme provides for the offer of a parcel of options to participating employees on an annual basis, with a three-year expiry period, exercisable at the market price set at the time the offer was made. The options are granted each year and vest over three years on achievement of the performance hurdles.

Non-executive directors do not receive any performance related remuneration.

Set out below are statements in relation to the Audit and Risk Committee and Risk Management, with reference to Principle 7, Recognise and Manage Risk , and Principle 4, Safeguard integrity in Financial Reporting .

Audit and Risk Committee

The Audit and Risk Committee has a documented charter, approved by the Board. All members of the Committee are non-executive directors with a majority being independent, and the Chairman of the Audit and Risk Committee is not the Chairman of the Board of Directors.

The members of the Audit and Risk Committee during the financial year are disclosed in the Directors’ Report.

The external auditors, the Managing Director and Chief Financial Officer are invited to Audit and Risk Committee meetings at the discretion of the Committee, and the external auditor also meets with the Audit Committee during the year without management being present. The Committee met four times during the year and the Committee members’ attendance record is disclosed in the table of Directors’ meetings.

The Managing Director and the Chief Financial Officer have provided a statement in writing to the Board that the consolidated entity’s financial reports for the year ended 30 June 2012 present a true and fair view, in all material respects, of the consolidated entity’s financial condition and operational results and are in accordance with the relevant accounting standards. This statement is required annually.

Further details of the Audit and Risk Committee’s charter are available on the Company’s website.

The duties and responsibilities of the Audit and Risk Committee include:

• Recommending to the Board the appointment of the external auditors;

• Recommending to the Board the fee payable to the external auditors;

• Reviewing the audit plan and performance of the external auditors;

• Determining that no management restrictions are being placed upon the external auditors;

• Evaluating the adequacy and effectiveness of the reporting and accounting controls of the company through active communication with operating management and the external auditors;

• Reviewing all financial reports to shareholders and/or the public prior to their release;

• Evaluating systems of internal control;

• Monitoring the standard of corporate conduct in areas such as arms-length dealings and likely conflicts of interest;

• Requiring reports from management and the external auditors on any significant regulatory, accounting or reporting development to assess potential financial reporting interest;

• Reviewing and approving all significant company accounting policy changes;

• Reviewing the company’s taxation position;

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Select Harvests Limited

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30 June 2012

Corporate governance statement

• Reviewing the annual financial statements with the Chief Financial Officer and the external auditors, and recommending acceptance to the Board;

• Evaluating the adequacy and effectiveness of the company’s risk management policies and procedures including insurance; and

• Directing any special projects or investigations deemed necessary by the Board or by the Committee.

The Audit and Risk Committee is committed to ensuring that it carries out its functions in an effective manner. Accordingly, it reviews its charter at least once in each financial year.

Risk Management

The Board oversees the establishment, implementation, and review of a system of risk management within the consolidated entity. The consolidated entity's areas of focus in respect of risk management practices include, but are not limited to, environment, occupational health and safety, property, financial reporting and internal control.

The Board is responsible for the overall risk management and internal control framework, but recognises that no cost-effective risk management and internal control system will preclude all errors and irregularities. The Board has the following procedures in place to monitor performance and to identify areas of concern:

• Strategic planning; The Board reviews and approves the strategic plan that encompasses the consolidated entity's strategy, designed to meet the stakeholders' needs and manage business risk. The strategic plan is dynamic and the Board is actively involved in developing and approving initiatives and strategies designed to ensure the continued growth and success of the consolidated entity;

• Financial reporting; The Board reviews actual results against budgets approved by the Directors and revised forecasts prepared during the year;

• Functional reporting; Key areas subject to regular or periodical reporting to the Board include, but are not limited to, operational, treasury (including foreign exchange), environmental, occupational health & safety, insurance, and legal matters;

• Continuous disclosure; A process is in place to identify matters that may have a material effect on the price of the Company's securities and to notify them to the ASX; and

• Investment appraisal; Guidelines for capital expenditure include annual budgets, appraisal and review procedures, due diligence requirements where businesses are being acquired or divested.

The Managing Director and Chief Financial Officer have provided a statement in writing to the Board that the declaration made in respect of the consolidated entity’s financial reports is founded on a system of risk management and internal compliance and control which reflects the policies adopted to date by the Board, and that the consolidated entity’s risk management and internal control and compliance system is operating effectively in all material respects based on the criteria for effective internal control established by the Board.

The statements set out below on Ethical standards, Conflict of Interest and Dealings in Company Shares are with reference to Principle 3, Promote ethical and responsible decision making.

Ethical Standards

All Directors, managers and employees are expected to act with the utmost integrity and objectivity, striving at all times to enhance the reputation and performance of the consolidated entity. The consolidated entity’s code of conduct includes the following:

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Select Harvests Limited

Annual Financial Report

30 June 2012

Corporate governance statement

Diversity

Selects Harvests is an equal opportunity employer and recruits people from a diverse range of backgrounds.

Workplace diversity encompasses the full variety of differences between people in the organisation. It includes differences in gender, race, ethnicity, age, disability and cultural background. Select Harvests recognises that embracing such diversity in its workforce contributes to the achievement of the Group’s objectives and enhances its reputation as an employer.

Select Harvests is committed to achieving the goals of providing access to equal opportunities at work based on merit and fostering a culture that embraces the value of diversity.

To support this goal, the Board has developed a Diversity Policy which is available on the Group’s website.

While Select Harvest has a rich diversity of ethnicities and cultural backgrounds amongst its employees, we recognise the need to improve diversity at senior executive and board level and to make stronger progress on our commitment to building a gender diverse workforce. At 30 June 2012 there were 131 female employees within the Group (24% of total employees). There were no female senior executives or Board members.

In order to enhance the commitment to gender and broader diversity principles, we are working to achieve objectives which include:

OBJECTIVE:	MEASURABLE ACTION:
Review and communicate the company’s core values	New Company Values Statement to be developed and rolled out
Increased focus on gender participation and distribution across the Group	Survey management and employee attitudes to diversity Review, refresh and re communicate the Diversity Policy
Review the means by which the Group recruits, develops and retains females across the Group	Review Recruitment Policy & Procedures
Continue to build on our current workplace flexibility options	Review and enhance position flexibility and Employment Terms and Conditions
Regular reporting to the Board on gender diversity	Enhance Board Reports to provide greater insight on diversity

Conflict of Interest

Directors must keep the Board advised, on an ongoing basis, of any interest that could potentially conflict with those of the Company. Should a situation arise where the Board believes that a material conflict exists, the Director concerned shall not receive the relevant Board papers and will not be present at the meeting when the item is considered. Details of Director related entity transactions with the Company and consolidated entity are set out in the Notes to the financial statements.

Dealings in Company Shares

Directors and senior management are prohibited from dealing in Company shares except within a four week trading window that commences 48 hours after the release of the consolidated entity's results at year end and half year on the basis that they are not in possession of any price sensitive information. Directors must advise the ASX of any transactions conducted by them in shares in the Company.

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Select Harvests Limited

Annual Financial Report

30 June 2012

Corporate governance statement

The statement below in relation to Communication with Shareholders is with reference to Principle 5, Make timely and balanced disclosures and Principle 6, Respect the right of shareholders .

Communication with Shareholders

The Board of Directors aims to ensure that shareholders are informed of all major developments affecting the consolidated entity's state of affairs. Information is communicated to shareholders as follows:

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

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

• The consolidated entity has nominated the Company Secretary to ensure compliance with the consolidated entity’s continuous disclosure requirements, and overseeing and co-ordinating disclosure of information to the ASX;

• Information is posted on the consolidated entity’s website immediately after ASX confirms an announcement has been made to ensure that the information is made available to the widest audience. The consolidated entity’s website is www.selectharvests.com.au;

• The Board encourages full participation of shareholders at the Annual General Meeting to ensure a high level of accountability and identification with the consolidated entity's strategy and goals. It is the policy of the consolidated entity and the policy of the auditor for the lead engagement partner to be present at the Annual General Meeting to answer any questions about the conduct of the audit and the preparation and content of the auditor’s report; and

• Occasional letters from the Chairman and Managing Director may be utilised to provide shareholders with key matters of interest.

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Select Harvests Limited

Annual Financial Report

30 June 2012

SELECT HARVESTS Limited ABN 87 000 721 380

Annual financial report

Contents

Financial report Page Income statement Statement of comprehensive income Balance sheet Statement of changes in equity Statement of cash flows Notes to the financial statements Directors’ declaration Independent auditor’s report to the members ASX additional information

This financial report covers the consolidated entity consisting of Select Harvests Limited and its subsidiaries. The financial report is presented in the Australian currency.

Select Harvests Limited is a company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business is:

Select Harvests Limited 360 Settlement Road Thomastown Vic 3074

A description of the nature of the consolidated entity’s operations and its principal activities is included in the review of operations and activities and in the directors’ report, both of which are not part of this financial report.

The financial report was authorised for issue by the directors on 31 August 2012. The company has the power to amend and reissue the financial report.

Through the use of the internet, we have ensured that our corporate reporting is timely, complete, and available globally at minimum cost to the company. All financial reports and other information are available on our website: www.selectharvests.com.au.

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Select Harvests Limited

Annual Financial Report

30 June 2012

Income Statement

For the year ended 30 June 2012	Notes	CONSOLIDATED
		2012 2011
		$’ 000 $’ 000
Revenue Sales of goods and services 4 Gain on sale of permanent water rights 4 Other revenue 4 Total revenue Other income (expenses) Biological asset fair value adjustment 15 Total other income (expenses) excluding discount on acquisition Expenses Cost of sales 5 Distribution expenses Marketing expenses Occupancy expenses Administrative expenses Finance costs 5 Other expenses Impairment of property, plant and equipment 5 Discount on acquisition 7 PROFIT/(LOSS) BEFORE INCOME TAX Income tax benefit/(expense) 6 PROFIT/(LOSS) ATTRIBUTABLE TO MEMBERS OF SELECT HARVESTS LIMITED 25(c) Earnings per share for profit attributable to the ordinary equity holders of the company: Basic earnings per share (cents per share) 29 Diluted earnings per share (cents per share) 29		246,766 248,316 4,041 - 515 1,642
		251,322 249,958
		2,508 2,397
		2,508 2,397
		(215,212) (222,939) (6,936) (7,249) (614) (1,114) (1,308) (1,276) (4,383) (3,544) (6,489) (3,774) (2,723) (2,247) (24,908) - - 8,261
		(8,743) 18,473
		4,274 (799)
		(4,469) 17,674
		(7.9) 33.7 (7.9) 33.7

The above income statement should be read in conjunction with the accompanying Notes.

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Select Harvests Limited

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30 June 2012

Statement of Comprehensive Income

For the year ended 30 June 2012	Notes	CONSOLIDATED
		2012 2011
		$’ 000 $’ 000
Profit/(Loss) for the year Other comprehensive income Changes in fair value of cash flow hedges, net of tax Other comprehensive income/(expense) for the year TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO MEMBERS OF SELECT HARVESTS LIMITED		(4,469) 17,674 (401) 179
		(401) 179
		(4,870) 17,853

The above statement of comprehensive income should be read in conjunction with the accompanying Notes.

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Select Harvests Limited

Annual Financial Report

30 June 2012

Balance Sheet

As at 30 June 2012	Notes	CONSOLIDATED
		2012 2011
		$’ 000 $’ 000
CURRENT ASSETS Cash and cash equivalents 9 Trade and other receivables 10 Inventories 11 Derivative financial instruments 12 Current tax receivables TOTAL CURRENT ASSETS NON CURRENT ASSETS Other assets 13 Property, plant and equipment 14 Biological assets – almond trees 15 Intangible assets 16 TOTAL NON CURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES Trade and other payables 17 Interest bearing liabilities 18 Derivative financial instruments 12 Provisions 19 TOTAL CURRENT LIABILITIES NON CURRENT LIABILITIES Trade and other payables 20 Interest bearing liabilities 21 Deferred tax liabilities 22 Provisions 23 TOTAL NON CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Contributed equity 24 Reserves 25 Retained profits 25 TOTAL EQUITY		1,061 7,398 37,398 39,565 36,644 37,618 375 348 1,458 6,299
		76,936 91,228
		1,047 1,283 90,970 116,523 74,171 49,585 36,183 46,961
		202,371 **214,352 **
		279,307 305,580
		25,365 26,721 25,495 16,458 818 79 2,691 3,196
		54,369 **46,454 **
		- 137 42,500 64,000 21,171 25,123 937 1,051
		64,608 90,311
		118,977 136,765
		160,330 168,815
		95,957 95,066 10,472 11,201 53,901 62,548
		160,330 168,815

The above balance sheet should be read in conjunction with the accompanying Notes.

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Select Harvests Limited

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Statement of changes in equity

CONSOLIDATED		Contributed Equity	Reserves	Retained Earnings
	Notes				Total
Balance at 1 July 2010 Profit for the year Other comprehensive income Total comprehensive income for the year Transactions with equity holders in their capacity as equity holders: Contributions of equity, net of transaction costs and deferred tax 24 Dividends paid or provided 8 Employee share options Balance at 30 June 2011 Profit for the year Other comprehensive income/(expense) Total comprehensive income for the year Transactions with equity holders in their capacity as equity holders: Contributions of equity, net of transaction costs and deferred tax 24 Dividends paid or provided 8 Employee share options Transfer to retained earnings Balance at 30 June 2012		47,470 11,327 54,824 113,621
		- - 17,674 17,674 - 179 - 179
		- 179 17,674 17,853 47,596 - - 47,596 - - (9,950) (9,950) - (305) - (305)
		95,066 11,201 62,548 168,815
		- - (4,469) (4,469) - (401) - (401)
		- (401) (4,469) (4,870) 891 - - 891 - - (4,506) (4,506) - - - 120 - (328) 328 -
		95,957 10,472 53,901 160,450

The above statement of changes in equity should be read in conjunction with the accompanying Notes.

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Select Harvests Limited

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30 June 2012

Statement of cash flows

For the year ended 30 June 2012	Notes	CONSOLIDATED
		2012 2011
		$’ 000 $’ 000
CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers (inclusive of goods and services tax) Payments to suppliers and employees (inclusive of goods and services tax) Interest received Interest paid Income tax received/(paid) Net Cash Inflow From Operating Activities 26 CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of water rights Proceeds from sale of property, plant and equipment Payment for property, plant and equipment Acquisition of almond orchards 7 Tree development costs Net Cash Outflow From Investing Activities CASH FLOWS FROM FINANCING ACTIVITIES Net proceeds from equity raising 24 Commercial bill draw downs Repayments of borrowings Dividends payment on ordinary shares, net of DRP Net Cash Inflow (Outflow) from financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Cash and cash equivalents at the end of the financial year 9(a)		260,748 318,352 (239,533) (314,120)
		21,215 4,232 241 385 (4,415) (5,911) 4,990 1,841
		22,031 547
		15,689 - 357 - (9,641) (21,087) - (24,991) (18,694) (19,415)
		(12,289) (65,493)
		- 45,057 - 79,000 (12,000) (55,000) (3,616) (8,202)
		(15,616) 60,855
		(5,874) (4,091) 5,940 10,031
		66 5,940

The above cash flow statement should be read in conjunction with the accompanying Notes.

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Select Harvests Limited

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Notes to the Financial Statements

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. The financial statements are for the consolidated entity consisting of Select Harvests Limited and its subsidiaries.

(a) Basis of preparation

This general purpose financial report has been prepared in accordance with Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Interpretations and the Corporations Act 2001. Select Harvests Limited is a for profit entity for the purpose of preparing the financial statements.

Restatement of prior period

As disclosed in the interim financial report for the half-year reporting period ended 31 December 2011, the 2011 financial statements have been restated to reflect the following:

• (i) Accounting for the acquisition of the Belvedere orchard in the Company Orchards Division was provisional at 30 June 2011. Since the 30 June 2011 financial report, further information was obtained about the valuation of the 2011 almond crop proceeds at the acquisition date. As a result, in the balance sheet the provisional acquired receivables balance was restated upwards by $2,500,000 with corresponding increases in the deferred tax liability of $750,000 and retained earnings of $1,750,000. In the income statement discount on acquisition has been restated upwards by $1,750,000.

• (ii) The company identified that total almond processing cost accruals in the Managed Orchard Division were understated by $2,500,000 as at 30 June 2011. The company has therefore restated the prior period balance sheet to reflect this adjustment, with a corresponding increase in the tax receivable of $750,000 and a decrease in retained earnings of $1,750,000. In the income statement cost of sales has been restated upwards by $2,500,000 and income tax expense has been restated downwards by $750,000.

Compliance with IFRS

The consolidated financial statements of the Select Harvests Limited group comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

Historical cost convention

These financial statements have been prepared under the historical cost convention, as modified by the revaluation of available-for-sale financial assets, financial assets and liabilities (including derivative instruments) at fair value through the income statement, biological assets, and certain classes of property, plant and equipment.

Critical accounting estimates

The preparation of financial statements in conformity with AIFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the consolidated entity’s accounting policies. The areas involving a higher level of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 3.

(b) Principles of consolidation

The consolidated financial statements are those of the consolidated entity, comprising Select Harvests Limited (the parent entity) and all entities which Select Harvests Limited controlled at any point during the year and at balance date.

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Notes to the Financial Statements

Subsidiaries are all those entities (including special purpose entities) over which the consolidated entity has power to govern the financial and operating policies, generally accompanying of more than one-half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the consolidated entity controls another entity.

Subsidiaries are fully consolidated from the date at which control is transferred to the consolidated entity. They are deconsolidated from the date that control ceases.

The acquisition method of accounting is used to account for the acquisition of subsidiaries by the consolidated entity.

The financial statements of subsidiaries are prepared for the same reporting period as the parent entity, using consistent accounting policies. Adjustments are made to bring into line any dissimilar accounting policies which may exist.

All intercompany balances and transactions, including unrealised profits arising from intra-group transactions, have been eliminated in full.

Investments in subsidiaries are accounted for at cost in the individual financial statements of Select Harvests Limited.

(c) Foreign currency translation

(i) Functional and presentation currency

Items included in the financial statements of each entity comprising the consolidated entity are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). The consolidated financial statements are presented in Australian dollars, which is the functional and presentation currency of Select Harvests Limited.

(ii) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement, except when deferred in equity as qualifying cash flow hedges.

(d) Cash and cash equivalents

For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, money market investments readily convertible to cash within two working days, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the balance sheet.

(e) Inventories

Inventories are valued at the lower of cost and net realisable value except for almond stocks which are measured at fair value less estimated cost to sell at the point of harvest, and subsequently at Net Realisable Value under AASB 102 Inventories.

Costs, incurred in bringing each product to its present location and condition, are accounted for as follows:

• Raw materials and consumables: purchase cost on a first in first out basis;

• Finished goods and work in progress: cost of direct material and labour and a proportion of manufacturing overheads based on normal operating capacity; and

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Notes to the Financial Statements

• Almond stocks are valued in accordance with AASB 141 Agriculture whereby the cost of the non living (harvested) produce is deemed to be its net market value immediately after it becomes non living. This valuation takes into account current almond selling prices and current processing and selling costs.

• Other inventories comprise consumable stocks of chemicals, fertilisers and packaging materials.

(f) Biological assets

Almond trees

Almond trees are classified as a biological asset and valued in accordance with AASB 141 Agriculture. A fair value review is completed at each period end to ensure compliance with AASB 141. The value of almond trees is measured at fair value using a discounted cash flow methodology.

The discounted cash flows incorporate the following factors:

• Almond trees have an estimated 30 year economic life, with crop yields consistent with long term almond industry yield rates;

• Selling prices are based on long term average trend prices being $6 per Kg;

• Growing, processing and selling costs are based on long term average levels;

• Temporary water costs are based on long term average market prices where assets have no permanent water rights attached;

• Cash flows are discounted at a post tax rate of 13%, that takes into account the cost of capital plus a suitable risk factor; and

• An appropriate rental charge is included to represent the use of the developed land on which the trees are planted.

Nursery trees are grown by the consolidated entity for sale to external almond orchard owners and for use in almond orchards owned by the consolidated entity. Nursery trees are carried at fair value.

Growing almond crop

The growing almond crop is valued in accordance with AASB 141 Agriculture. This valuation takes into account current almond selling prices and current growing, processing and selling costs. The calculated crop value is then discounted to take into account that it is only partly developed, and then further discounted by a suitable factor to take into account the agricultural risk until crop maturity.

New orchards growing costs

All costs associated with the establishment, planting and growing of almond trees for an orchard in a new area where there is no previous experience of commercial almond production are accumulated for the first three years of that orchard. Once the fair value of this orchard becomes reliably measurable, the orchard is measured in accordance with the almond trees policy noted above.

( g) Derivatives

Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The consolidated entity designates derivatives as either; (1) hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedge); or (2) hedges of highly probable forecast transactions (cash flow hedges).

The consolidated entity documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The consolidated entity also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions have been and will continue to be highly effective in offsetting changes in fair values or cash flows of hedged items.

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Notes to the Financial Statements

(i) Fair value hedge

Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the income statement, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk.

(ii) Cash flow hedge

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in equity in the cash flow hedge reserve. The gain or loss relating to the ineffective portion is recognised immediately in the income statement.

Amounts accumulated in equity are recycled in the income statement in the periods when the hedged item will affect profit or loss (for instance when the forecast sale that is hedged takes place). However, when the forecast transaction that is hedged results in the recognition of a non financial asset (for example, inventory) or a non financial liability, the gains and losses previously deferred in equity are transferred from equity and included in the measurement of the initial cost or carrying amount of the asset or liability.

When a hedging instrument expires or is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement.

(h) Property, plant and equipment

Cost and valuation

All classes of property, plant and equipment are measured at historical cost less accumulated depreciation. The carrying amount of property, plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount from those assets. The recoverable amount is assessed on the basis of the expected net cash flows which will be received from the assets’ employment and subsequent disposal. The expected net cash flows have been discounted to present values in determining recoverable amounts.

Depreciation

The depreciable amount of all fixed assets including buildings and capitalised leased assets, but excluding freehold land water rights are depreciated on a straight line basis over their estimated useful lives to the entity commencing from the time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements.

The useful lives for each class of assets are:

Buildings: 25 to 40 years Leasehold improvements: 5 to 40 years Plant and equipment: 5 to 20 years Leased plant and equipment: 5 to 10 years Irrigation systems: 10 to 40 years

Capital works in progress

Capital works in progress are valued at cost and relate to costs incurred for owned orchards and other assets under development.

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Select Harvests Limited

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Notes to the Financial Statements

(i) Leases

Leases are classified at their inception as either operating or finance leases based on the economic substance of the agreement so as to reflect the risks and benefits incidental to ownership.

Operating leases

The minimum lease payments of operating leases, where the lessor effectively retains substantially all of the risks and benefits of ownership of the leased item, are recognised as an expense on a straight line basis over the term of the lease.

Finance leases

Leases which effectively transfer substantially all the risks and benefits incidental to ownership of the leased item to the consolidated entity are capitalised at the present value of the minimum lease payments and disclosed as plant and equipment under lease. A lease liability of equal value is also recognised.

Capitalised leased assets are depreciated over the shorter of the estimated useful life of the assets and the lease term. Minimum lease payments are allocated between interest expense and reduction of the lease liability with the interest expense calculated using the interest rate implicit in the lease and charged directly to the income statement.

The cost of improvements to or on leasehold property is capitalised, disclosed as leasehold improvements, and amortised over the unexpired period of the lease or the estimated useful lives of the improvements, whichever is the shorter.

(j) Business Combinations

The acquisition method of accounting is used to account for all business combinations, regardless of whether equity instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the group. The consideration transferred also includes the fair value of any asset or liability resulting from a contingent consideration arrangement and the fair value of any pre-existing equity interest in the subsidiary. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. On an acquisition-by-acquisition basis, the group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest's proportionate share of the acquiree’s net identifiable assets.

The excess of the consideration transferred the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the group's share of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the subsidiary acquired and the measurement of all amounts has been reviewed, the difference is recognised directly in the income statement as a discount on acquisition.

Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity's incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions.

Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value with changes in fair value recognised in profit or loss.

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Select Harvests Limited

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30 June 2012

Notes to the Financial Statements

(k) Intangibles

Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the consolidated entity’s share of the net identifiable assets of the acquired subsidiary/business at the date of acquisition. Goodwill is not amortised. Instead, goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less any accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill is allocated to cash-generating units for the purpose of impairment testing.

Brand names

Brand names are measured at cost. Directors are of the view that brand names have an indefinite life. Brand names are therefore not depreciated. Instead, brand names are tested for impairment annually or more frequently if events or changes in circumstances indicate that they might be impaired, and are carried at cost less any accumulated impairment losses.

Permanent water rights

Permanent water rights are recorded at historical cost. Such rights have an indefinite life, and are not depreciated. As an integral component of the land and irrigation infrastructure required to grow almonds, the carrying value is tested annually for impairment. If events or changes in circumstances indicate impairment, the carrying value is adjusted to take account of any impairment losses.

(l) Revenue Recognition

Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, trade allowances, and amounts collected on behalf of third parties. Revenue is recognised to the extent that it is probable that the economic benefits will flow to the entity, the revenue can be reliably measured, and the risks and rewards have passed to the buyer. The following specific recognition criteria must also be met before revenue is recognised:

Sale of Goods

Control of the goods has passed to the buyer.

Interest

Interest income is recognised using the effective interest method. When a receivable is impaired, the group reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on impaired loans is recognised using the original effective interest rate.

Dividends

Dividends are recognised as revenue when the right to receive payment is established.

Almond Pool Revenue

Under contractual arrangements, the group acts as an agent for external growers by simultaneously acquiring and selling the almonds and therefore, does not make a margin on those sales. These amounts are not included in the group’s revenue.

As at 30 June 2012 the group held almond inventory on behalf of external growers which was not recorded as inventory of the Company.

All revenue is stated net of the amount of Goods and Services Tax (GST).

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Select Harvests Limited

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30 June 2012

Notes to the Financial Statements

(m) Income Tax

The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the national income tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses.

Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss.

Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.

Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.

Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity.

Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of GST except:

• Where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and

• Receivables and payables are stated with the amount of GST included.

The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet.

Cash flows are included in the cash flow statement on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to the taxation authority are classified as operating cash flows.

Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.

(n) Impairment of assets

Goodwill and other Intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units).

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Notes to the Financial Statements

(o) Employee benefits

(i) Short-term obligations:

Liabilities for wages and salaries, including non-monetary benefits and annual leave expected to be settled within 12 months after the end of the period in which the employees render the related service are recognised in respect of employees' services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled.

The liability for annual leave is recognised in the provision for employee benefits. All other short-term employee benefit obligations are presented as payables.

(ii) Other long-term benefit obligations

The liability for long service leave and annual leave which is not expected to be settled within 12 months after the end of the period in which the employees render the related service is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the end of the reporting period on national government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.

Contributions are made by the consolidated entity to an employee superannuation fund and are charged as expenses when incurred.

Share-based payments

Share-based compensation benefits are provided to employees via the Select Harvests Limited Long Term Incentive Plan (LTIP). Information relating to this scheme is set out in Note 35.

The fair value of performance rights granted under the Select Harvests Limited LTIP is recognised as an employee benefit expense with a corresponding increase in equity. The fair value is measured at grant date and recognised over the period during which the employees become unconditionally entitled to the performance rights. The fair value at grant date is independently determined using a Black Scholes option pricing model that takes into account the term of the right, the vesting and performance criteria, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the right. The fair value of the performance rights granted is adjusted to reflect market vesting conditions, but excludes the impact of any non market vesting conditions (for example, profitability and sales growth targets). Non market vesting conditions are included in assumptions about the number of rights that are expected to vest. At each balance sheet date, the entity revises its estimate of the number of rights that are expected to vest. The employee benefit expense recognised each period takes into account the most recent estimate. The impact of the revision to original estimates, if any, is recognised in the income statement with a corresponding adjustment to equity.

(p) Financial Instruments

Financial Assets

Collectability of trade receivables is reviewed on an ongoing basis. Trade receivables are carried at full amounts due less any provision for doubtful debts. A provision for doubtful debts is recognised when collection of the full amount is no longer probable, and where there is objective evidence of impairment, debts which are known to be non collectible are written off immediately.

Amounts receivable from other debtors are carried at full amounts due. Other debtors are normally settled on 30 days from month end unless there is a specific contract which specifies an alternative date.

Amounts receivable from related parties are carried at full amounts due.

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Notes to the Financial Statements

Financial Liabilities

The bank overdraft is carried at the principal amount and is part of the Net Cash balance in the Statement of Cash Flows. Interest is charged as an expense as it accrues.

Liabilities are recognised for amounts to be paid in the future for goods and services received, whether or not billed to the consolidated entity.

Finance lease liabilities are accounted for in accordance with AASB 117 Leases.

(q) Fair value estimation

The fair value of certain financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes.

The fair value of financial instruments traded in active markets, such as foreign exchange hedge contracts and the Interest Rate Cap, are based on quoted market prices at the balance sheet date. The quoted market price used for financial assets held by the consolidated entity is the current bid price; the appropriate quoted market price for financial liabilities is the current ask price.

The nominal value less estimated credit adjustments of trade receivables and payables are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the consolidated entity for similar instruments.

(r) Borrowings

Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in the income statement over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the facility to which it relates.

Borrowings are classified as current liabilities unless the group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period.

(s) Borrowing costs

Borrowing costs incurred for the construction of any qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its intended use. All other borrowing costs, inclusive of all facility fees, bank charges, and interest, are expensed as incurred.

(t) Earnings per share

(i) Basic Earnings per share

Basic earnings per share are calculated by dividing the profit attributable to equity holders of the company by the weighted average number of ordinary shares outstanding during the financial year.

(ii) Diluted earnings per share

Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares.

38

Select Harvests Limited

Annual Financial Report

30 June 2012

Notes to the Financial Statements

(u) Segment Reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Chief Executive Officer

(v) New accounting standards and UIG pronouncements

Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2012 reporting periods. The group's assessment of the impact of these new standards and interpretations is set out below.

AASB 9 Financial Instruments, AASB 2009-11 Amendments to Australian Accounting Standards arising from AASB 9 and AASB 2010-7 Amendments to Australian Accounting Standards arising from AASB 9 (December 2010) (effective from 1 January 2013)

AASB 9 Financial Instruments addresses the classification, measurement and derecognition of financial assets and financial liabilities. The standard is not applicable until 1 January 2013 but is available for early adoption. There will be no impact on the group’s accounting for financial liabilities, as the new requirements only affect the accounting for financial liabilities that are designated at fair value through the income statement and the group does not have any such liabilities. The derecognition rules have been transferred from AASB 139 Financial Instruments: Recognition and Measurement and have not been changed. The group has not yet decided when to adopt AASB 9.

AASB 10 Consolidated Financial Statements, AASB 11 Joint Arrangements, AASB 12 Disclosure of Interests in Other Entities, revised AASB 127 Separate Financial Statements and AASB 128 Investments in Associates and Joint Ventures and AASB 2011-7 Amendments to Australian Accounting Standards arising from the Consolidation and Joint Arrangements Standards (effective 1 January 2013)

In August 2011 the AASB issued a suite of five new and amended standards which address the accounting for joint arrangements, consolidated financial statements and associated disclosures.

AASB 10 replaces all of the guidance on control and consolidation in AASB 127 Consolidated and Separate Financial Statements, and Interpretation 12 Consolidation – Special Purpose Entities. The core principle that a consolidated entity presents a parent and its subsidiaries as if they are a single economic entity remains unchanged, as do the mechanics of consolidation. However, the standard introduces a single definition of control that applies to all entities. The group does not expect the standard to have an impact on its composition.

AASB 11 introduces a principle based approach to accounting for joint arrangements. As the group does not have any joint arrangements no impact is expected from this standard.

AASB 12 sets out the required disclosures for entities reporting under the two new standards, AASB 10 and AASB 11, and replaces the disclosure requirements currently found in AASB 127 and AASB 128. Application of the standard by the group will not affect any of the amounts recognised in the financial statements.

Amendments to AASB 128 will not impact the group as the group does not have any joint venture arrangements or associated entities.

The group does not expect to adopt the new standards before their operative date, therefore they will be first applied in the financial statements for the annual reporting period ending 30 June 2014.

39

Select Harvests Limited

Annual Financial Report

30 June 2012

Notes to the Financial Statements

IFRS 13 Fair Value Measurement (effective 1 January 2013)

IFRS 13 was released in May 2011. The AASB is expected to issue an equivalent Australian standard shortly. IFRS 13 explains how to measure fair value and aims to enhance fair value disclosures. The group has yet to determine which, if any, of its current measurement techniques will have to change as a result of the new guidance. It is therefore not possible to state the impact, if any, of the new rules on any of the amounts recognised in the financial statements. However, application of the new standard will impact the type of information disclosed in the notes to the financial statements. The group does not intend to adopt the new standard before its operative date, which means that it would be first applied in the annual reporting period ending 30 June 2014.

There are no other standards that are not yet effective and that are expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions.

(w) Provisions

Provisions are recognised when the consolidated entity has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and the amount has been reliably estimated.

(x) Trade and other payables

These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year which are unpaid. These amounts are unsecured and are usually paid within 30 days of recognition.

(y) Contributed equity

Ordinary shares are classified as equity. The value of new shares or options issued is shown in equity.

(z) Comparatives

Where necessary, comparatives have been reclassified and repositioned for consistency with current year disclosures.

(aa) Rounding amounts

The company is of a kind referred to in Class Order 98/100, issued by the Australian Securities & Investments Commission, relation to the “rounding off” of amounts in the financial report. Amounts in the financial report have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, to the nearest dollar.

(ab) Parent entity financial information

The financial information for the parent entity, Select Harvests Limited, disclosed in note 37 has been prepared on the same basis as the consolidated financial statements, except as set out below.

(i) Investments in subsidiaries, associates and joint venture entities

Investments in subsidiaries, associates and joint venture entities are accounted for at cost in the financial statements of Select Harvests Limited.

(ii) Tax consolidation legislation

Select Harvests Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation.

The head entity, Select Harvests Limited, and the controlled entities in the tax consolidated group account for their own current and deferred tax amounts. These tax amounts are measured as if each entity in the tax consolidated group continues to be a standalone taxpayer in its own right.

40

Select Harvests Limited

Annual Financial Report

30 June 2012

Notes to the Financial Statements

In addition to its own current and deferred tax amounts, Select Harvests Limited also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax consolidated group.

The entities have also entered into a tax funding agreement under which the wholly-owned entities fully compensate Select Harvests Limited for any current tax payable assumed and are compensated by Select Harvests Limited for any current tax receivable and deferred tax assets relating to unused tax losses or unused tax credits that are transferred to Select Harvests Limited under the tax consolidation legislation. The funding amounts are determined by reference to the amounts recognised in the wholly-owned entities' financial statements.

The amounts receivable/payable under the tax funding agreement are due upon receipt of the funding advice from the head entity, which is issued as soon as practicable after the end of each financial year. The head entity may also require payment of interim funding amounts to assist with its obligations to pay tax instalments.

Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as current amounts receivable from or payable to other entities in the group.

Any difference between the amounts assumed and amounts receivable or payable under the tax funding agreement are recognised as a contribution to (or distribution from) wholly-owned tax consolidated entities.

2. FINANCIAL RISK MANAGEMENT

The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk and commodity price risk), credit risk and liquidity risk. The Group uses different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate risk, foreign exchange and other price risks, and ageing analysis for credit risk.

Risk management is carried out by management pursuant to policies approved by the Board of Directors.

(a) Market risk

(i) Foreign exchange risk

Foreign exchange risk arises when future commercial transactions and recognised assets and liabilities are denominated in a currency that is not the consolidated entity’s functional currency.

The Group sells both almonds harvested from owned orchards through the almond pool and processed products internationally in United States dollars, and purchases raw materials and other inputs to the manufacturing and almond growing process from overseas suppliers predominantly in United States dollars.

Management and the Board review the foreign exchange position of the Group and, where appropriate, take out forward exchange contracts, transacted with the Group’s banker, to manage foreign exchange risk.

The exposure to foreign currency risk at the reporting date was as follows:

Group	30 June 2012	30 June 2011
	USD $000’s	USD $000’s
Trade receivables net of payables	7,131	6,034
Cash at bank/(overdraft)	(1,019)	(1,344)
Foreign exchange contracts
- buy foreign currency (cash flow hedges)	4,813	3,000
- sell foreign currency (cash flow hedges)	9,547	2,186

41

Select Harvests Limited

Annual Financial Report

30 June 2012

Notes to the Financial Statements

Group sensitivity analysis

Based on financial instruments held at the 30 June 2012, had the Australian dollar strengthened/weakened by 5% against the US dollar, with all other variables held constant, the Group’s post tax profit for the year would have been $200,000 lower/$221,000 higher (2011: $147,000 lower/$162,000 higher), mainly as a result of the US dollar denominated financial instruments as detailed in the above table. Equity would have been $354,000 lower/$391,000 higher (2011: $121,000 lower/$134,000 higher), arising mainly from foreign forward exchange contracts designated as cash flow hedges.

(ii) Cash flow interest rate risk

The Group’s interest rate risk arises from borrowings issued at variable rates, which exposes the Group to cash flow interest rate risk. The Group’s borrowings at variable interest rate are denominated in Australian dollars.

At the reporting date the Group had the following variable rate borrowings:

	30 June 2012 Weighted Average Interest Rate	Balance	30 June 2011 Weighted Average Interest Rate	Balance
% $000 % $000 Debt facilities 7.14% 67,000 8.48% 79,000 Overdraft (USD) 1.18% 995 3.80% 1,458

An analysis of maturities is provided in 2(c) below

The Group analyses interest rate exposure on an ongoing basis in conjunction with debt facility, cash flow and capital management. As part of the Risk Management policy of Select Harvests Limited, the company has entered into an agreement to swap $30,000,000 of debt at a rate of 5.12% to reduce the risk that higher interest rates pose to the company’s cash flows. The weighted average interest rate of 7.14% in the table above is inclusive of the interest rate swap.

Group sensitivity

At 30 June 2012, if interest rates had changed by +/- 25 basis points from the year end rates with all other variables held constant, post tax profit for the year would have been $116,000 lower/higher (2011: $136,000 lower/higher.

42

Select Harvests Limited

Annual Financial Report

30 June 2012

Notes to the Financial Statements

Interest rate risk

The consolidated entity's exposure to interest rate risks and the effective interest rates of financial assets and financial liabilities, both recognised and unrecognised at the balance date, are as follows:

			Fixed interest rate maturing in:	Fixed interest rate maturing in:	Fixed interest rate maturing in:	Fixed interest rate maturing in:	Fixed interest rate maturing in:	Fixed interest rate maturing in:
Financial Instruments	Floating interest		1 year or less		Over 1 to 5 years		More than 5		Non-interest		Total carrying		Weighted
	rate						years		bearing		amount as per		average effective
											the balance sheet		interest rate
	2012	2011	2012	2011	2012	2011	2012	2011	2012	2011	2012	2011	2012	2011
	$'000	$'000	$'000	$'000	$'000	$'000	$'000	$'000	$'000	$'000	$'000	$'000	%	%
(i) Financial assets
Cash	1,061	7,398	-	-	-	-	-	-	-	-	1,061	7,398	-	-
Trade and other receivables	-	-	-	-	-	-	-	-	37,001	36,996	37,001	36,996	-	-
Interest Rate Cap	-	-	-	-	-	-	-	-	-	320	-	320	-	-
Forward exchange contracts	-	-	-	-	-	-	-	-	375	28	375	28	-	-
Total financial assets	1,061	7,398	-	-	-	-	-	-	37,376	37,344	38,437	44,742	-	-
(ii) Financial liabilities
Bank overdraft – USD @ AUD	995	1,458	-	-	-	-	-	-	-	-	995	1,458	1.2	3.8
Commercial Bills	67,000	79,000	-	-	-	-	-	-	-	-	67,000	79,000	7.1	8.5
Trade creditors	-	-	-	-	-	-	-	-	13,075	12,443	13,075	12,443	-	-
Other creditors	-	-	-	-	-	-	-	-	12,170	10,874	12,290	10,874	-	-
Interest Rate Swap	-	-	-	-	-	-	-	-	664	-	664	-	-	-
Forward exchange contracts	-	-	-	-	-	-	-	-	154	79	154	79	-	-
Total financial liabilities	67,995	80,458	-	-	-	-	-	-	26,063	23,396	94,178	103,854	-	-

43

Select Harvests Limited

Annual Financial Report

30 June 2012

Notes to the Financial Statements

(b) Credit risk

Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions, as well as exposure to wholesale, retail and farm investor customers, including outstanding receivables and committed transactions.

The Group has no significant concentrations of credit risk. The Group has policies in place to ensure that sales of products and services are made to customers with an appropriate credit history. Derivative counterparties and cash transactions are limited to high credit quality financial institutions.

The credit quality of financial assets that are neither past due or impaired can be assessed by reference to external credit ratings (if available) or to historical information about default rates. Given that the majority of income is derived from large, blue chip customers with no history of default, the provision raised against receivables is deemed to be satisfactory.

The Group’s banking partner has a long-term credit rating of AA (Standard & Poors).

Refer to note 10 for a summary of aged receivables impaired, and past due but not impaired.

(c) Liquidity risk

The Group manages liquidity risk by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities.

Financing arrangements

As outlined in note 28, on 22 August 2012 a review of the company’s debt facility agreement with the NAB was completed with various facility limits being revised as a result. The following contains the NAB facility limits both at 30 June 2012 and following the review:

Debt facilities Review Date	30 June 2012 Facility Limit	Post Balance Date Adjusted Facility Limit
1. Core debt 21/06/2016 2. Working capital Annual Review 3. Acquisition Annual Review 4. USD Overdraft Annual Review	$50,000,000 $32,000,000 $30,000,000 $3,000,000	$60,000,000 $32,000,000 - $3,000,000
	$115,000,000	$95,000,000

The debt margin above is based on a margin above BBSY or LIBOR.

The Group had access to the following undrawn borrowing facilities at the reporting date:

	2012	2011
	$’000	$’000
Floating rate
- Working capital/Acquisition facility	$A 45,000	$A 34,542
- Bank overdraft facility USD	$US 1,981	$US 2,119

The bank overdraft facility may be drawn at any time and may be terminated by the bank without notice. The commercial bill acceptance facility may be drawn at any time over a three year term.

44

Select Harvests Limited

Annual Financial Report

30 June 2012

Notes to the Financial Statements

(d) Fair Value Measurement

The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes. As of 1 July 2009, Select Harvests Limited has adopted the amendment to AASB 7 Financial Instruments: Disclosures which requires disclosure of fair value measurements by level of the following fair value measurement hierarchy:

• (a) Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level one);

• (b)Inputs other than quoted prices included within level one that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices) (Level two); and

• (c)Inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level three).

At both 30 June 2012 and 30 June 2011, the group’s assets and liabilities measured and recognised at fair value comprised the interest rate swap derivative, interest rate cap derivative and foreign exchange forward contracts. Both are measured with reference to level 2.

Maturities of financial liabilities

The table below analyses the Group’s financial liabilities, net and gross settled derivative instruments into relevant maturity groupings based on the remaining period at the reporting date on the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

45

Select Harvests Limited

Annual Financial Report

30 June 2012

Notes to the Financial Statements

	Less than 6 months 6 – 12 months More than 12 months Total contractual cash flows Carrying Amount (assets)/ liabilities
	$’000 $’000 $’000 $’000 $’000
Group at 30 June 2012 Non derivatives Variable Rate Debt facilities Bank Overdraft Derivatives Interest Rate Swap USD buy – outflow USD sell – (inflow) USD net	20,750 3,750 42,500 67,000 67,000 995 - - 995 995 285 285 94 664 664 4,490 323 - 4,813 154 (9,547) - - (9,547) (375)
	(5,057) 323 - (4,734) (221) Less than 6 months 6 – 12 months More than 12 months Total contractual cash flows Carrying Amount (assets)/ liabilities
	$’000 $’000 $’000 $’000
Group at 30 June 2011 Non derivatives Variable Rate Debt facilities Bank Overdraft Derivatives Interest Rate Cap USD buy – outflow USD sell – (inflow) USD net	2,500 17,500 74,000 94,000 79,000 1,458 - - 1,458 1,458 (99) (94) (137) (330) (320) 3,000 - - 3,000 79 (2,186) - - (2,186) (28)
	814 - - 814 51

46

Select Harvests Limited

Annual Financial Report

30 June 2012

Notes to the Financial Statements

3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

Estimates and judgements are continually evaluated and are based on historical experience and other factors.

Critical accounting estimates and assumptions

The consolidated entity makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Almond trees

Almond trees are classified as a biological asset and valued in accordance with AASB 141 "Agriculture”. The consolidated entity’s accounting policies in relation to almond trees are detailed in Note 1(f). In applying this policy, the consolidated entity has made various assumptions. These are detailed in Note 15 of the financial statements. As at 30 June 2012, the value of almond trees carried in the financial statements of the consolidated entity is $74.2 million (2011:$49.6 million). The valuation of almond trees is very sensitive to the assumption of the long term almond price. Any change to the long term almond price may have a material impact on these valuations.

Estimated impairment of intangible assets

The Group tests annually whether intangible assets, has suffered any impairment, in accordance with the accounting policy stated in note 1(k). The recoverable amounts of cash generating units have been determined based on value-in-use calculations.

Key assumptions are disclosed in note 16.

Income taxes

The income tax provision is developed at Balance Sheet date based on a preliminary estimate of the tax payable or receivable. This includes an estimate of allowable R&D tax concession credits. The tax return in relation to the financial year ended 30 June 2012 will be prepared and submitted during the financial year ended 30 June 2013. Due to uncertainties associated with changes to the R&D tax concession rules, no accrual has been made for possible R&D credits in 2012.

WA Project expenditure

Costs in relation to the Western Australia Greenfield orchard development have been capitalised. Impairment losses of $20 million have been recognised in relation to this project as a result of the reassessment of its recoverable amount, with the remaining amount capitalised on the balance sheet of $41m, consisting of land and irrigation infrastructure, plant and equipment and almond trees. A discounted cash flow analysis is prepared to determine the value in use of the project, which reflects its recoverable amount. A number of estimates are made in determining the value in use in accordance with AASB 136 “Impairment of Assets”. These include:

• Estimated remaining capital expenditure to bring the project to maturity

• Estimated future crop yields and selling prices

• Estimated future growing, processing and selling costs

A pre-tax discount rate of 17% is applied to the calculation.

The project is currently subject to a Strategic Review. It is reasonably possible, on the basis of existing knowledge, that outcomes within the next financial year that are different from the assumptions could require a material adjustment to the carrying amount.

47

Select Harvests Limited

Annual Financial Report

30 June 2012

Notes to the Financial Statements

Almond processing plant and equipment

The Company has reviewed the carrying value of all assets at the almond processing plant. This review identified some assets which no longer have a future use, resulting in an impairment loss of $4.9 million being recognised, The remaining amount capitalised on the balance sheet for the hulling and cracking plant and equipment is $38.8m. A discounted cash flow analysis is prepared to determine the value in use of the remaining plant and this supports the carrying value of these assets. A number of estimates are made in determining the value in use in accordance with AASB 136 “Impairment of Assets”. These include:

• Estimated future processing volumes

• Estimated future capital expenditure and operating costs

It is reasonably possible, on the basis of existing knowledge, that outcomes within the next financial year that are different from the assumptions could require a material adjustment to the carrying amount. A pre-tax discount rate of 13% was applied to the calculation.

	Notes	Consolidated	Consolidated
		2012	2011
		$’000	$’000
4. REVENUE
Revenue from continuing operations
- Management services		95,445	104,801
-Sale of goods		151,321	143,515
		246,766	248,316
Other revenue
- Gain on sale of permanent water rights		4,041	-
- Bank interest		241	385
-Other revenue		274	**1,257 **
Total other revenue		4,556	1,642
Total revenue		251,322	249,958

48

Select Harvests Limited

Annual Financial Report

30 June 2012

Notes to the Financial Statements

	Notes		Consolidated
			2012		2011
			$’000		$’000
5. EXPENSES
Profit before tax includes the following specific expenses:
Cost of goods & services sold			215,212		222,939
Depreciation of non current assets
Buildings			51		46
Plantation land and irrigation systems			338		406
Plant and equipment			5,724		4,760
Total depreciation of non current assets			6,113		5,212
Finance costs
other persons			6,489		3,774
Total finance costs			6,489		3,774
Impairment losses: trade receivables			34		3
Foreign exchange loss/(gain)			(111)		47
Operating lease rental minimum lease
payments			13,013		11,990
Net loss/(gain) on disposal of property, plant
and equipment			254		(16)
Impairment of property, plant and equipment (a)
Land and irrigation systems				20,000	-
Plant and equipment			4,908		-
			24,908		-

(a) Impairment of property, plant and equipment

Impairment of land and irrigation systems relates to impairment losses recognised in relation to the Company’s orchards in Western Australia.

Impairment of plant and equipment relates to impairment losses recognised in relation to almond processing plant and equipment.

WA impairment

The WA impairment arose as a result of a re-evaluation of the project, due to the fact that less acres were planted than planned, infrastructure and planting costs were higher than initially expected and future costs are now considered likely to be higher than originally planned. The recoverable amount for the WA project is determined on a value in use basis, using a 17% pre-tax discount rate.

Almond processing plant impairment

This impairment arose as a result of a re-assessment of future operations and the likelihood of utilising equipment which had been maintained as an overrun facility.

49

Select Harvests Limited

Annual Financial Report

30 June 2012

Notes to the Financial Statements

	Notes	Notes	Consolidated	Consolidated	Consolidated
			2012	2011
			$’000	$’000
6. INCOME TAX
(a) Income tax expense/(benefit)
Current tax			(3,006)	(3,375)
Deferred tax			387	4,835
(Over) provided in prior years			(1,655)	(661)
			(4,274)	799
Income tax expense is attributable to:
Profitfromcontinuing operations			(4,274)	799
Aggregate income tax expense			(4,274)	799
Deferred income tax (revenue) expense
included in income tax expense comprises:
Decrease (increase) in deferred tax assets	22		(7,977)	439
(Decrease) increase in deferred tax liabilities	22		6,709	4,396
			(1,268)	4,835
(b) Numerical reconciliation of income tax expense to prima facie tax payable
Profit/(loss) from continuing operations			(8,743)	18,473
before income tax expense
Tax at the Australian tax rate of 30% (2011 – 30%)			(2,623)	5,542
Tax effect of amounts that are not deductible
(taxable) in calculating taxable income
Other non assessable items			4	(2,507)
Current year R&D estimate			-	(1,575)
(Over) provided in prior years			(1,655)	(661)
Income tax expense			(4,274)	799

50

Select Harvests Limited

Annual Financial Report

30 June 2012

Notes to the Financial Statements

7. BUSINESS COMBINATIONS

Summary of Acquisitions

On 2 December 2010, Select Harvests acquired 532 acres of established almond orchards at Lake Powell, Northern Victoria.

On 19 January 2011, Select Harvests purchased 116 acres of established almond orchards at Bannerton Park, Northern Victoria.

On 22 June 2011, Select Harvests purchased 1,500 acres of established almond orchards near Narranderra, New South Wales.

Accounting for the acquisitions was provisional at 30 June 2011. Since the 30 June 2011 financial report further information was obtained about the valuation of the 2011 almond crop proceeds at the acquisition date. No changes have been made to the provisional balances of the other assets and liabilities acquired.

Details of the purchase consideration, the net assets acquired and discount on acquisition are as follows:

$’000 Purchase consideration Cash paid 24,991

The provisional and final fair values of assets and liabilities recognised as a result of the acquisitions are as follows:

	Provisional	Final
	Fair Value	Fair Value
	$’000	$’000
Property, plant and equipment	14,052	14,052
Biological assets – almond trees	12,248	12,248
Inventory	197	2,697
Water rights	7,825	7,825
Annual leave liability	(30)	(30)
Deferred tax liability	(2,790)	(3,540)
Net Identifiable Assets	31,502	33,252
Discount arising on acquisition	6,511	8,261
Net Cash outflow on acquisition	24,991	24,991

The change in fair value of inventory, deferred tax liability and discount on acquisition relates to the Belvedere orchard acquisition (on 22 June 2011) and this amount has been reflected in the restated 30 June 2011 financial statement comparatives as outlined in note 1 (a).

51

Select Harvests Limited

Annual Financial Report

30 June 2012

Notes to the Financial Statements

	Notes	Consolidated	Consolidated
		2012	2011
		$’000	$’000
8. DIVIDENDS PAID OR PROPOSED FOR ON ORDINARY SHARES
(a) Dividendspaidduringtheyear
(i) Interim –paid 16 April 2012 (2011: 22 April 2011)
Fully franked dividend (5c per share)
(2011: 10c per share)		2,820	5,566
		2,820	5,566
(ii) Final –paid 13 October 2011 (2011: 4 October 2010)
Fully franked dividend (3c per share)
(2011: 11c per share)		1,686	4,384
		4,506	9,950

(b) Dividends proposed and not recognised as a liability.

A final dividend of 3 c per share has been declared by the directors ($1,704,381)

(c) Franking credit balance
Franking credits available for the subsequent financial
Franking credits available for subsequent		13,865	18,717
reporting periods
		13,865	18,717

The above amounts represent the balance of the franking account (presented as the gross dividend value) as at the end of the reporting period, adjusted for franking debits that will arise from the receipt of the amount of the tax receivable.

The impact on the franking account of the dividend recommended by the directors since year end, but not recognised as a liability at year end, is $1,704,381 (2011 $1,686,809).

9. CASH AND CASH EQUIVALENTS

9. CASH AND CASH EQUIVALENTS	9. CASH AND CASH EQUIVALENTS	9. CASH AND CASH EQUIVALENTS
Cash at bank and in hand		1,061	7,398
		**1,061 **	7,398
(a) Reconciliation to cash at the end of the year
The above figures are reconciled to cash at the end of		the financial
year as shown in the statement of cash flows as follows:
Balances as above		1,061	7,398
Bankoverdrafts	18	(995)	(1,458)
		66	5,940

52

Select Harvests Limited

Annual Financial Report

30 June 2012

Notes to the Financial Statements

	Notes	Consolidated	Consolidated	Consolidated
		2012	2011
		$’000	$’000
10. TRADE AND OTHER RECEIVABLES (CURRENT)
Trade receivables		37,001	36,996
Provision for impairment of trade receivables		(24)	(3)
		36,977	36,993
Prepayments		421	2,572
		37,398	39,565

As at 30 June 2012 current trade receivables of the Group with a value of $24,446 (2011: $3,305) were impaired. The amount of the provision was $24,446 (2011:$3,305).

The ageing of these receivables is as follows:

		Consolidated	Consolidated
		2012		2011
		$’000		$’000
Over 6 months		24		3
		24		3
Movements in the provision for impairment of	receivables are as follows:
At 1 July		3		170
Provision for impairment recognised during theyear		34		3
Receivables written off during the year		(13)		(170)
At 30 June		24		3

(b) Trade receivables past due but not impaired

As at 30 June 2012, trade receivables of $3,970,002 (2011: $4,457,660) were past due but not impaired. These relate to a number of customers for whom there is no recent history of default. The ageing analysis of these receivables is as follows:

receivables is as follows:
		Consolidated
		2012		2011
		$’000		$’000
Up to 3 months		3,600		4,099
3 to 6 months		370		227
> 6 months		-		132
		3,970		4,458

53

Select Harvests Limited

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30 June 2012

Notes to the Financial Statements

(c) Effective interest rates and credit risk

All receivables are non-interest bearing.

The company minimises concentrations of credit risk in relation to trade receivables by undertaking transactions with a large number of customers from across the range of business segments in which the consolidated entity operates. Refer to Note 2 for more information on the risk management policy of the consolidated entity.

Information concerning the effective interest rate and credit risk of both current and non-current receivables is set out in Note 2.

(d) Fair value

Due to the short-term nature of these receivables, their carrying amount is assumed to approximate their fair value.

	Notes	Consolidated	Consolidated
		2012	2011
		$’000	$’000
11. INVENTORIES (CURRENT)
Raw materials
Raw materials at cost		6,296	6,587
		6,296	6,587
Finished goods
Finished goods at cost		7,450	5,610
		7,450	5,610
Other inventory
Other inventory at cost		5,707	9,817
		5,707	9,817
Almond stocks
Almond stock at net realisable value	1(e)	17,191	15,604
		36,644	37,618

12. DERIVATIVE FINANCIAL INSTRUMENTS (CURRENT)

12. DERIVATIVE FINANCIAL INSTRUMENTS (CURRENT)	12. DERIVATIVE FINANCIAL INSTRUMENTS (CURRENT)	12. DERIVATIVE FINANCIAL INSTRUMENTS (CURRENT)	12. DERIVATIVE FINANCIAL INSTRUMENTS (CURRENT)	12. DERIVATIVE FINANCIAL INSTRUMENTS (CURRENT)	12. DERIVATIVE FINANCIAL INSTRUMENTS (CURRENT)
Current Assets
Forward exchange contracts – cash flow hedges		375	28
Interest rate cap–cash flow hedges		-	320
Total current derivative financial instrument assets		375	348
Current Liabilities
Interest rate swap – cash flow hedges		664	-
Forward exchange contracts–cash flow hedges		154	79
Total current derivative financial instrument liabilities		818	79

54

Select Harvests Limited

Annual Financial Report

30 June 2012

Notes to the Financial Statements

(i) Cash flow hedges

On 5 August 2011, the consolidated entity entered into an agreement to fix the interest rate applicable to $30m of debt at 5.12% until 25 August 2013. The market value of the cap is recognised as a current liability in the balance sheet. Movements in the fair value of the cap are treated similarly to those of forward exchange contracts. Movements caused by changes in the intrinsic value of the cap are recognised in Other Comprehensive Income to the extent that the hedge is effective; those relating to a change in the time value of money are recognised in the income statement.

The consolidated entity also enters into forward exchange contracts to buy and sell specified amounts of foreign currency in the future at stipulated exchange rates. The objective of entering the forward exchange contracts is to protect the consolidated entity against unfavourable exchange rate movements for highly probable contracted and forecasted sales and purchases undertaken in foreign currencies.

The accounting policy in regard to forward exchange contracts is detailed in Note 1(c).

At balance date, the details of outstanding forward exchange contracts are:

Buy United States Dollars Settlement	Sell Australian Dollars	Sell Australian Dollars	Average Exchange Rate	Average Exchange Rate
	2012	2011	2012	2011
	$’000	$’000	$	$
Less than 6 months	4,490	3,000	0.99	1.04
6 months to 1 year	323	-	0.97	-
	4,813	3,000
Sell United States Dollars Settlement	Buy Australian Dollars		Average Exchange Rate
	2012	2011	2012	2011
	$’000	$’000	$	$
Less than 6 months	9,547	2,186	0.97	1.05
	9,547	2,186

(ii) Credit risk exposures

The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date to recognised financial assets is the carrying amount of those assets, net of any provisions for doubtful debts of those assets, as disclosed in the balance sheet and Notes to the financial statements.

Credit risk for derivative financial instruments arises from the potential failure by counterparties to the contract to meet their obligations at maturity. The credit risk exposure to forward exchange contracts and the interest rate cap are the net fair values of these instruments.

The net amount of the foreign currency the consolidated entity will be required to pay or purchase when settling the brought forward exchange contracts should the counterparty not pay the currency it is committed to deliver to the Company at balance date was $4,733,901 (2011: $813,858).

The consolidated entity does not have any material credit risk exposure to any single debtor or group of debtors under financial instruments entered into by the consolidated entity.

55

Select Harvests Limited

Annual Financial Report

30 June 2012

Notes to the Financial Statements

	Notes	Consolidated	Consolidated	Consolidated	Consolidated	Consolidated
		2012	2011
		$’000	$’000
13. OTHER ASSETS (NON-CURRENT)
Prepayments		1,047	1,283
		1,047	1,283
	Notes	Consolidated
		2012	2011
		$’000	$’000
14. PROPERTY, PLANT AND EQUIPMENT (NON-CURRENT)
Buildings
At cost		11,910	11,909
Accumulated depreciation		(851)	(799)
	14(a)	11,059	11,110
Plantation land and irrigation systems(i)
At cost		75,230	58,068
Accumulated depreciationandimpairment		(23,714)	(3,490)
	14(a)	51,516	54,578
Total land and buildings		62,575	65,688
Plant and equipment(i)
At cost		70,257	71,297
Accumulated depreciation and impairment		(42,902)	(35,601)
	14(a)	27,355	35,696
Capital works in progress
At cost	14(a)	1,040	15,139
Total plant and equipment		28,395	50,835
Total property, plant and equipment
Cost		158,437	156,413
Accumulated depreciation		(67,467)	(39,890)
Total written down amount		90,970	116,523

(i) Items have been reclassified between the plantation land and irrigation systems and plant and equipment asset categories in the 30 June 2011 comparatives.

56

Select Harvests Limited

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30 June 2012

Notes to the Financial Statements

(a) Reconciliations

Reconciliations of the carrying amounts of property, plant and equipment at the beginning and end of the current financial year.

	Notes	Consolidated	Consolidated
		2012	2011
		$’000	$’000
Buildings
Carrying amount at beginning		11,110	9,856
Acquired through business combinations		-	1,300
Depreciation expense		(51)	(46)
		11,059	11,110
Plantation land and irrigation systems
Carrying amount at beginning		54,578	35,974
Acquired through business combinations		-	10,756
Impairment of land and irrigation systems		(20,000)	-
Disposals		(3,211)	-
Depreciation expense		(338)	(406)
Transfers between classes		20,487	8,254
		51,516	54,578
Plant and equipment
Carrying amount at beginning		35,696	29,775
Acquired through business combinations		-	1,996
Additions		349	-
Impairment of plant and equipment		(4,908)	-
Disposals		(1,399)	(16)
Transfers between classes		3,341	8,701
Depreciation expense		(5,724)	(4,760)
		27,355	35,696
Capital works in progress
Carrying amount at beginning		15,139	11,955
Additions		9,729	20,139
Transfers between classes		(23,828)	(16,955)
		1,040	15,139
Total written down value		90,970	116,523

57

Select Harvests Limited

Annual Financial Report

30 June 2012

Notes to the Financial Statements

15. BIOLOGICAL ASSETS – ALMOND TREES (NON-CURRENT)

The consolidated entity, as part of its operations, grows, harvests, and sells almonds. Harvesting of almonds occurs from February through to April each year. The almond orchards are located in Victoria NSW and WA.

As at 30 June 2012 the consolidated entity owned a total of 8,232 acres of almond orchards (2011: 6,254 acres) and leased a total of 4,521 acres of almond orchards (2011: 4,521 acres).

For almond trees on orchards leased on a long term basis by the company, the future economic risks and rewards associated with these trees remain with Select Harvests. Accordingly, the trees are deemed to be an asset of the company.

During the year ended 30 June 2012, 5,830 metric tonnes of almonds were harvested from these orchards (2011: 4,173 metric tonnes). These almonds had a fair value less estimated point of sale costs of $24.3 million (2011: $19.8 million).

million (2011: $19.8 million).	million (2011: $19.8 million).
		Consolidated
		2012	2011
		$’000	$’000
Carrying amount at1July		49,585	17,363
Transferred toinventory		(1,066)	(1,838)
Change in fair value		2,508	2,397
Acquired through business combinations		-	12,248
Additions		23,144	19,415
Carrying amount at 30 June		74,171	49,585

==> picture [63 x 90] intentionally omitted <==

The value of crop bearing almond trees is calculated using a discounted cash flow methodology. The discounted cash flow incorporates the following factors:

• Almond trees have an estimated 30 year economic life, with crop yields consistent with long term yield rates, which are in line with almond industry sourced data;

• Selling prices are based on long term average trend prices being $6 per kg;

• Growing, processing and selling costs are based on expected future costs;

• Temporary water costs are based on long term average market prices where assets have no permanent water rights attached;

• Cash flows are discounted at a rate of 13% (2011: 14%) which takes into account the cost of capital plus an appropriate risk factor; and

• An appropriate rental charge is included to represent the use of the developed land on which the trees are planted.

Price risk

The Group is exposed to commodity price risk in relation to its owned and leased orchards. The Group sells almonds harvested from owned and leased orchards domestically and overseas throughout the year based on an almond price which will fluctuate from time to time due to changes in international market conditions. The Group has an active and ongoing almond marketing and selling program in place which is continually monitored and adapted for changes in almond prices.

The Group also purchases raw materials and other inputs to the manufacturing and almond growing process domestically and overseas. The price of such inputs will also fluctuate from time to time based on market forces. Where practical, the consolidated entity, through its procurement programs, contracts from time to time to acquire such quantity of inputs as is projected to be required at fixed prices.

58

Select Harvests Limited

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30 June 2012

Notes to the Financial Statements

(a) Financial risk management strategies

The consolidated entity is exposed to financial risks arising from changes in the Australian dollar price of almonds because export sales are denominated in US dollars. The consolidated entity reviews its outlook for almond prices regularly in considering the need for active financial risk management.

(b) Non-current assets pledged as security

Refer to Note 21 for information on biological assets whose title is restricted and the carrying amounts of any biological assets pledged as security by the parent entity or its subsidiaries.

		Consolidated	Consolidated	Consolidated	Consolidated	Consolidated	Consolidated	Consolidated	Consolidated	Consolidated
		Goodwill		Brand		Permanent		Total
		$’000		Names*		Water Rights		$’000
				$’000		$’000
16. INTANGIBLES (NON-CURRENT)
Year ended 30 June 2011
Opening net book amount		25,995		2,905		10,236		39,136
Acquired through business combinations		-		-		7,825		7,825
Closing net book amount		25,995		2,905		**18,061 **		**46,961 **
Year ended 30 June 2012
Opening net book amount		25,995		2,905		18,061		46,961
Disposal of permanent water rights		-		-		(10,778)		(10,778)
Closing net book amount		25,995		2,905		7,283		36,183

• Brand name assets relate to the “Lucky” brand, which has been assessed as having an indefinite useful life. This assessment is based on the Lucky brand having been sold in the market place for over 50 years, being a market leader in the cooking nuts category and remaining a heritage brand.

(a) Impairment tests for goodwill and brand names

Goodwill is allocated to the consolidated entity’s cash-generating units (CGU) identified according to operating segment. The total value of goodwill relates to the Food Products CGU. The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use cash flow forecasts based on financial projections by management covering a five-year period assuming a 10% growth rate based on projected crop increases and other growth rates based on past performance and its expectations for the future. These do not exceed the long-term growth rate for the business in which the Food Products Division operates in. A pre-tax weighted average cost of capital of 13% (2011:13%) has been used to discount the cash flow projections.

(b) Impact of possible changes to key assumptions

The recoverable amount of the goodwill in the Food Products Division exceeds the carrying amount of goodwill at 30 June 2012. If a pre-tax discount rate of 14% was used instead of 13% the recoverable amount of the goodwill in the Food Products Division would still exceed the carrying amount of goodwill at 30 June 2012.

(c) Permanent water rights

The value of permanent water rights relates to the Almond Division Cash Generating Unit (CGU) and is an integral part of land and irrigation infrastructures required to grow almond orchards. The fair value of permanent water rights is supported by the tradeable market value, which at current market prices is in excess of book value.

59

Select Harvests Limited

Annual Financial Report

30 June 2012

Notes to the Financial Statements

	Notes	Consolidated	Consolidated
		2012	2011
		$’000	$’000
17. TRADE AND OTHER PAYABLES (CURRENT)
Trade creditors		13,075	12,443
Other creditors and accruals		12,290	14,278
		25,365	26,721
18. INTEREST BEARING LIABILITIES (CURRENT)
Secured
Bank overdraft		995	1,458
Working capital facility		24,500	15,000
Total secured current borrowings		25,495	16,458

(a) Security

Details of the security relating to each of the secured liabilities and further information on the bank overdrafts and bank facilities are set out in Note 21.

(b) Interest rate risk exposures

Details of the consolidated entity’s exposure to interest rate changes on borrowings are set out in Note 2.

	Notes	Consolidated	Consolidated
		2012	2011
		$’000	$’000
19. PROVISIONS (CURRENT)
Employee benefits		2,691	3,196
		**2,691 **	3,196
20. TRADE AND OTHER PAYABLES (NON-CURRENT)
Interestrate cap payable		-	137
		-	**137 **
21. INTEREST BEARING LIABILITIES (NON-CURRENT)
Term debt facility		42,500	50,000
Acquisition facility		-	14,000
		42,500	64,000

60

Select Harvests Limited

Annual Financial Report

30 June 2012

Notes to the Financial Statements

Assets pledged as security

The bank overdraft and facilities of the parent entity and subsidiaries are secured by the following:

• (i). A registered mortgage debenture is held as security over all the assets and undertakings of Select Harvests Limited and the entities of the wholly owned group.

• (ii). A deed of cross guarantee exists between the entities of the wholly owned group.

The carrying amounts of assets pledged as security for current and non-current borrowings are:

	Notes	Consolidated	Consolidated
		2012	2011
		$’000	$’000
Current
Floating charge
Cash and cash equivalents		1,061	7,398
Receivables		37,398	39,565
Inventories		36,644	37,618
Current tax receivables		1,458	6,299
Derivative financial instruments		375	348
Total current assets pledged as security		76,936	91,228
Non-current
Floating charge
Prepayments		1,047	1,283
Property, plant and equipment		90,970	116,523
Biological assets – almond trees		74,171	49,585
Permanent water rights		7,283	18,061
Total non-current assets pledged as security		173,471	185,452
Total assets pledged as security		**250,407 **	276,680

Financing arrangements

The consolidated entity and the Company have bank overdraft facilities available to the extent of USD 3,000,000 (2011: USD 3,000,000).

The consolidated entity and the company have a debt facility available to the extent of $115,000,000 as at 30 June 2012 (2011: $115,000,000). As outlined in note 28, on 22 August 2012 a review of the company’s debt facility agreement with the NAB was completed with the total debt facility being reduced to $95,000,000 as a result. As at 30 June 2012 the consolidated entity and company have utilised $67,000,000 (2011: $79,000,000) of the total facility. The split between current and non-current liabilities has been based on the repayment requirements under the terms of the debt facility.

The current interest rates at balance date are 5.76% on the debt facility, and 0.92% on the United States dollar bank overdraft facility.

A number of covenants and financial undertakings are associated with the company banking facilities, all of which have been met during the period and as at 30 June 2012.

61

Select Harvests Limited

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30 June 2012

Notes to the Financial Statements

	Notes	Notes	Consolidated	Consolidated
			2012	2011
			$’000	$’000
22. DEFERRED TAX LIABILITIES (NON CURRENT)
The balance comprises temporary differences attributable to:
Amounts recognised in profit and loss
Inventory			1,679	1,542
Assets at cost			28,268	28,748
Accruals and provisions			10	(1,515)
Intangibles			871	871
			30,828	29,646
Amounts recognised directly in OCI
Cash flow hedges			153	(18)
Amounts recognised directly in equity
Equity raising costs			(632)	(791)
Total deferred tax liabilities			30,349	28,837
Carry forward tax losses			(9,178)	(3,714)
Net deferred tax liabilities			21,171	25,123
Movements:
Opening balance 1 July			25,123	16,302
Prior period over provision			1,655	4,183
Charged/(credited) to income statement			(387)	5,585
Business combination			-	3,540
Charged/(credited) to equity			244	(773)
Carryforward tax losses			(5,464)	(3,714)
Closingbalance at 30 June			21,171	25,123
23. PROVISIONS (NON CURRENT)
Employee entitlements			**937 **	**1,051 **
(a) Aggregate employee entitlements liability
Includingcurrent liabilities in Note 19)			3,628	4,218
(b) Number of full time employees at year end			571	633

62

Select Harvests Limited

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30 June 2012

Notes to the Financial Statements

	Notes	Consolidated	Consolidated
		2012	2011
		$’000	$’000
24. CONTRIBUTED EQUITY
(a) Issued and paid up capital
Ordinary shares fully paid		95,957	95,066
		**95,957 **	95,066

( b) Movements in shares on issue

(b) Movements in shares on issue	(b) Movements in shares on issue
		2012		2011
		Number of		Number of
		Shares	$’000	Shares	$’000
Beginning of the financial year		56,226,960	95,066	39,761,768	47,470
Issued during the year
 Dividend reinvestment plan		585,739	891	559,917	1,748
 Rights issue		-	-	15,905,275	45,848
End of financial year		56,812,699	**95,957 **	56,226,960	95,066

(c) Performance Rights

Long Term Incentive Plan

The company offered employee participation in short term and long term incentive schemes as part of the remuneration packages for the employees. Both the short term and long term schemes involve payments up to an agreed proportion of the total fixed remuneration of the employee, with relevant proportions based on market relativity of employees with equivalent responsibilities.

The long term scheme involves the issue of performance rights to the employee, under the Long Term Incentive Plan. During or since the end of the financial year, no performance rights (2011: no options) have vested under this plan (refer Note 35 and Directors' Report for further details). The market value of ordinary Select Harvests Limited shares closed at $1.30 on 30 June 2012 ($1.84 on 30 June 2011).

(d) Ordinary shares

Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the company in proportion to the number of and amounts paid on the shares held.

On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote.

(e) Capital risk management

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

In order to maintain or adjust the capital structure, the group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

63

Select Harvests Limited

Annual Financial Report

30 June 2012

Notes to the Financial Statements

	Notes	Consolidated	Consolidated
		2012	2011
		$’000	$’000
25. RESERVES AND RETAINED PROFITS
Capital reserve	25(a)	3,270	3,270
Cash flow hedge reserve		(444)	(43)
	25(a)
Asset revaluation reserve		7,645	7,645
	25(a)
Options reserve		-	329
	25(a)
		10,471	11,201
Retained profits	25(c)	**53,901 **	62,548
(a) Movements Capital reserve
Balance at beginning of year		3,270	3,270
Balance at end of year		3,270	3,270
Cash flow hedge reserve
Balance at beginning of year		(43)	(222)
Fair value movement in interest rate swap		(664)	-
Fair value movement in interest rate cap		7	315
Fair value movement in foreign currency
dealings arising during the year		256	(136)
Balance at end of year		(444)	(43)
Asset revaluation reserve
Balance at beginning of year		7,645	7,645
Balance at end of year		7,645	7,645
Options reserve
Balance at beginning of year		328	633
Option expense		-	(305)
Transfer to retained earnings		(328)	-
Balance at end of year		-	328

(b) Nature and purpose of reserves

(i) Capital reserve

The capital reserve was previously used to isolate realised capital profits from disposal of non-current assets.

(ii) Asset revaluation reserve

The asset revaluation reserve was used to record increments and decrements in the value of non-current assets. This revaluation reserve is no longer in use given assets are now recorded at cost. This is in line with accounting policies within note 1.

(iii) Options reserve

The options reserve is used to recognise the fair value of options granted and expensed but not exercised.

64

Select Harvests Limited

Annual Financial Report

30 June 2012

Notes to the Financial Statements

(iv) Cash flow hedge reserve

The cash flow hedge reserve is used to record gains or losses on the fair value movements in the interest rate cap and foreign currency contracts in a cash flow hedge that are recognised directly in equity.

	Notes	Consolidated	Consolidated
		2012	2011
		$’000	$’000
(c) Retained profits
Balance at the beginning of year (i)		62,548	54,824
Profit/(loss) attributable to members of Select
Harvests Limited		(4,469)	17,674
Total available for appropriation Dividends paid		58,079 (4,506)	72,498 (9,950)
Transfer from reserves		328	-
Balance at end ofyear		53,901	62,548

(i) Refer to Note 1 (a)

26. RECONCILIATON OF THE NET PROFIT AFTER INCOME TAX TO THE NET CASH FLOWS FROM OPERATING ACTIVITIES

Net profit/(loss)		(4,469)	17,674
Non-cash items
Depreciation and amortisation		6,113	5,212
Biological asset fair value adjustment Impairment of property, plant and equipment Discount on acquisition Net gain on sale of assets		(2,508) 24,908 - (3,787)	(2,397) - (6,511) -
Changes in assets and liabilities
(Increase) / decrease in trade receivables		3,118	(1,663)
(Increase) in inventory		(2,819)	(3,269)
(Increase) / decrease in other assets		2,575	(920)
Increase / (decrease) in trade and other
payables		(1,352)	(13,283)
(Increase) / decrease in income tax
receivable		4,841	(2,928)
Increase / (decrease) in deferred tax liability		(3,970)	11,785
(Increase) in deferred tax assets		-	(3,714)
Increase in employee entitlements		(619)	561
Net cash flow from operatingactivities		**22,031 **	547

Non cash financing activities

During the current year the company issued $890,813 of new equity as part of the Dividend Reinvestment Plan.

65

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30 June 2012

Notes to the Financial Statements

		Notes	Consolidated	Consolidated
			2012		2011
			$’000		$’000
27. EXPENDITURE COMMITMENTS
Lease commitments – Group company as	lessee

Commitments in relation to leases contracted for at the reporting date but not recognised as liabilities, payable:

	Notes	Consolidated	Consolidated
		2012	2011
		$’000	$’000
27. EXPENDITURE COMMITMENTS
Lease commitments – Group company as lessee
Commitments in relation to leases contracted for at the reporting date but not recog
Within one year		9,412	15,203
Later than one year but not later than five
years		33,173	33,413
Laterthan five years		98,484	99,537
		141,069	148,153
(i) Operating leases (non cancellable):
Minimum lease payments
 Not later than one year		3,411	9,408
 Later than one year and not later
than five years		7,473	8,402
 Later than five years		7,569	8,952
 Aggregate lease expenditure
contracted for at reporting date		18,453	26,762

Operating lease payments are for rental of premises, farming and factory equipment.

(ii) Almond orchard leases:
Minimum lease payments
 Not later than one year		6,001	5,795
 Later than one year and not later
than five years		25,700	25,012
 Later than five years		90,915	90,584
Aggregate lease expenditure contracted for
at reporting date		122,616	121,391

The almond orchard leases comprises the lease of a 512 acre almond orchard and a 1,002 acre lease from Sandhurst Trustees Limited in which the consolidated entity has the right to harvest the almonds from the trees owned by the lessor for the term of the agreement. The company also has first right of refusal to purchase the properties in the event that the lessor wished to sell. Other leases within the consolidated entity have renewal and first right of refusal clauses. There is also a 20 year lease of 3,100 acres at Hillston with Rural Funds Management.

66

Select Harvests Limited

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30 June 2012

Notes to the Financial Statements

28. EVENTS OCCURING AFTER BALANCE DATE

On 31 August 2012, the Directors declared a final dividend of 3 cents per share in relation to the financial year ended 30 June 2012 to be paid on 22 October 2012.

On 22 August 2012 a review of the company’s debt facility agreement with the NAB was completed with the total debt facility being reduced from $115,000,000 to $95,000,000 as a result.

There has been no other matter or circumstance, which has arisen since 30 June 2012 that has significantly affected or may significantly affect:

• a) the operations, in financial years subsequent to 30 June 2012, of the consolidated entity, or

• b) the results of those operations, or

• c) the state of affairs, in financial years subsequent to 30 June 2012, of the consolidated entity.

29. EARNINGS PER SHARE

The following reflects the income and share data used in the calculations of basic and diluted earnings per share:

share:	share:
		Consolidated
		2012	2011
		$’000	$’000
Profit/(loss) attributable to equity holders of
the company used in calculating basic
earnings per share		(4,469)	17,674
Diluted earnings per share:
Profit/(loss) attributable to equity holders of
the company used in calculating diluted
earnings per share		(4,469)	17,674
		Number of shares
		2012	2011
Weighted average number of ordinary
shares used in calculating basic earnings per
share		56,429,488	52,462,405
Effect of dilutive securities:
Adjusted weighted average number of
ordinary shares used in calculating diluted
earnings per share		56,429,488	52,462,405

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Select Harvests Limited

Annual Financial Report

30 June 2012

Notes to the Financial Statements

30. REMUNERATION OF DIRECTORS AND KEY MANAGEMENT PERSONNEL

(a) Directors

The following persons were directors of Select Harvests Limited during the financial year:

• (i) Chairman – non-executive

• M Iwaniw

• J C Leonard*

• (ii) Executive director

• J Bird, Managing Director**

• (iii) Non-executive directors

• F Grimwade

• R M Herron

M Carroll

• Retired 1 June 2012 ** Retired 1 March 2012. Paul Thompson was appointed Managing Director 9 July 2012

(b) Other key management personnel

The following persons also had authority and responsibility for planning, directing, and controlling the continuing activities of the consolidated entity, directly or indirectly, during the financial year:

Name	**Position **	**Employer **
P Chambers	Chief Financial Officer & Company Secretary	Select Harvests Limited
M Graham	Manager Sales & Marketing	Select Harvests Food Products Pty Ltd
L Van Driel	Group Trading Manager	Select Harvests Food Products Pty Ltd
T Millen	Group Horticultural & Farm Operations Manager	Select Harvests Limited
P Ross	Operations Manager, Almond Division	Select Harvests Limited

	Notes	Consolidated	Consolidated
		2012	2011
		$	$
(c) Key management personnel compensation
Short term employment benefits		2,495,566	2,677,279
Termination benefits		686,745	-
Long service leave		13,729	31,415
Share based payments		-	(230,827)
		3,196,041	2,477,867

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30 June 2012

Notes to the Financial Statements

(d) Equity instrument disclosures relating to key management personnel

Number of options/performance rights held by directors and key management personnel

The movement during the financial year in the number of options/performance rights over ordinary shares in the company held, directly or indirectly, by each director and member of key management personnel is as follows:

2012	Held at 1July 2011 Granted as Compensation Lapsed	Held at 30 June 2012 Unvested at 30 June 2012
Directors J Bird Key Management Personnel* P Chambers M Graham L Van Driel T Millen P Ross	539,784 - (539,784) 136,426 173,880 (136,426) 41,320 167,940 (41,320) 116,214 - (116,214) 117,685 151,740 (117,685) 126,757 162,180 (126,757)	- - 173,880 173,880 167,940 167,940 - - 151,740 151,740 162,180 162,180

• Retired 1 March 2012

2011	Held at	Granted as		Held at	Unvested at
	1July 2010	**Compensation **	Lapsed	30 June 2011	30 June 2011
Directors
J Bird	450,982	191,927	(103,125)	539,784	539,784
Key Management Personnel
K Martin (Group Operations
Manager)	108,881	45,811	(154,692)	-	-
T Millen	96,635	41,320	(20,270)	117,685	117,685
L Van Driel	95,164	41,320	(20,270)	116,214	116,214
P Chambers	114,271	48,506	(26,351)	136,426	136,426
M Graham	-	41,320	-	41,320	41,320
P Ross	81,408	45,349	-	126,757	126,757

No performance rights held by directors or key management personnel are vested but not exercisable.

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Select Harvests Limited

Annual Financial Report

30 June 2012

Notes to the Financial Statements

Number of shares held by directors and key management personnel

The movement during the financial year in the number of ordinary shares of the company held, directly or indirectly, by each director and key management personnel, including their personally related entities, is as follows:

2012	Held at	Received on		Other – DRP, sales
	1 July 2011	exercise		& purchases	Total
Directors – Non-executive
J C Leonard*	947,099	-		-	947,099
R M Herron	40,672	-		1,293	41,965
M Carroll	-	-		-	-
F Grimwade	30,000	-		70,000	100,000
M Iwaniw	3,000	-		97,000	100,000
Directors – Executive
J Bird**	645,005	-		-	645,005
Key Management Personnel
M Graham	-		-	-	-
T Millen	45,444		-	-	45,444
L Van Driel	-		-	-	-
P Chambers	8,000		-	14,000	22,000
P Ross	-		-	-	-

• Retired 1 June 2012. Total number of shares shown is as at retirement.

** Retired 1 March 2012. Total number of shares shown is as at retirement.

2011	Held at	Received on		Other – DRP, sales
	1July 2010	exercise		& purchases	**Total **
Directors – Non-executive
M A Fremder*	5,835,234	-		-	5,835,234
J C Leonard	663,668	-		283,431	947,099
R M Herron	18,772	-		21,900	40,672
M Carroll	-	-		-	-
F Grimwade**	-	-		30,000	30,000
M Iwaniw***	-	-		3,000	3,000
Directors – Executive
J Bird	619,522		-	25,483	645,005
Key Management Personnel
M Graham	-		-	-	-
T Millen	45,444		-	-	45,444
L Van Driel	-		-	-	-
P Chambers	-		-	8,000	8,000
P Ross	-		-	-	-
* Retired 27 October 2010

• ** Commenced 27 July 2010

• *** Commenced 27 June 2011

(e) Other transactions with directors and key management personnel

Transactions with directors and key management personnel that require disclosure in accordance with AASB 124 for the year ended 30 June 2012 are detailed in Note 32.

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Select Harvests Limited

Annual Financial Report

30 June 2012

Notes to the Financial Statements

31. REMUNERATION OF AUDITORS

Audit and other assurance services Audit and review of financial statements Other assurance services Total remuneration for audit and other assurance services Taxation services Tax compliance services Tax consulting Total remuneration for taxation services Total remuneration of PricewaterhouseCoopers	2012 2011 236,750 192,450 60,000 25,000
	296,750 217,450
	41,500 98,530 548,247 9,000
	589,747 107,530
	886,497 324,980

32. RELATED PARTY DISCLOSURES

(a) Parent entity

The parent entity within the consolidated entity is Select Harvests Limited.

(b) Subsidiaries

Interests in subsidiaries are set out in Note 34.

(c) Key management personnel

Disclosures relating to key management personnel are set out in Note 30.

(d) Director related entity transactions

Services

Select Harvests Limited has an Almond Orchard Management Agreement with Almas Almonds Pty Ltd, a company which manages the Almas Almonds Partnership in which Mr J C Leonard has an indirect interest. Under the terms of the agreement, Select Harvests Limited is developing and shall manage 1,782 acres of almond orchard on a fee basis for Almas Almonds Pty Ltd.

In addition, Select Harvests Limited will process and sell the entire production of the orchard for the entire 30 year life of the orchard. The consolidated entity received an amount of $6,739,958 (2011: $6,409,370) up until 1 June 2012 when the entity ceased to be a related party, in relation to the above contract. The agreements are under normal terms and conditions no more favourable than those which it is reasonable to expect the entity would have adopted if dealing with the director or director related entity at arms length in the same circumstances.

During the financial year the company entered into foreign exchange contracts on behalf of Almas Pty Limited, under conditions which pass costs and benefits to the related parties under normal commercial terms.

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Select Harvests Limited

Annual Financial Report

30 June 2012

Notes to the Financial Statements

33. SEGMENT INFORMATION

Segment products and locations

The segment reporting reflects the way information is reported internally to the Chief Executive Officer.

The consolidated entity has the following business segments:

• The food products division processes, markets, and distributes edible nuts, dried fruits, seeds, and a range of natural health foods.

• The almond operation is split into two segments:

• Company Orchards - the growing, processing and sale of almonds to the food industry from company owned almond orchards; and

• Managed Orchards - the sale of a range of management services to external owners of almond orchards, including orchard development, tree supply, farm management, land rental and irrigation infrastructure, and the sale of almonds on behalf of external investors.

The consolidated entity operates predominantly within the geographical area of Australia.

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30 June 2012

Notes to the Financial Statements

The segment information provided to the Chief Executive Officer is referenced in the following table:

	($'000) Food Products	($'000) Food Products	($'000) Managed Orchards Almond Division	($'000) Managed Orchards Almond Division	($'000) Company Orchards Almond Division	($'000) Company Orchards Almond Division	($'000) Total Almond Division	($'000) Total Almond Division	($'000) Eliminations and Corporate	($'000) Eliminations and Corporate	($'000) Consolidated Entity	($'000) Consolidated Entity
	2012	2011	2012	2011	2012	2011	2012	2011	2012	2011	2012	2011
Revenue Total revenue from external customers Intersegment revenue Total segment revenue	137,094 -	134,978 -	95,445 -	104,800 -	14,227 9,888	8,538 6,594	109,672 9,888	113,338 6,594	- (9,888)	- (6,594)	246,766 -	248,316 -
	137,094	134,978	95,445	104,800	24,115	15,132	119,560	119,932	(9,888)	(6,594)	246,766	248,316
Other revenue	-	-	-	792	4,314	465	4,314	1,257	242	385	4,556	1,642
Total revenue	137,094	134,978	95,445	105,592	28,429	15,597	123,874	121,189	(9,646)	(6,209)	251,322	249,958
			9,332	11,644	(12,883)
EBIT	6,027	3,709				9,819	(3,551)	21,463	(4,971)	(3,310)	(2,495)	21,862
Interest received Finance costs expensed Profit before income tax	- -	- -	- -	- -	- -	- -	- -	- -	241 (6,489)	385 (3,774)	241 (6,489)	385 (3,774)
	6,027	3,709	9,332	11,644	(12,883)	9,819	(3,551)	21,463	(11,219)	(6,699)	(8,743)	18,473
Segment assets(excluding intercompany debts)	67,852 11,799 277 679	69,486					211,830 42,908 27,923 5,334	225,027	(374) 64,270 135 100	11,067	279,308	305,580
Segment liabilities(excluding intercompany debts)		10,436 418						43,255 33,725		83,074	118,977	136,765
Acquisition of non-current segment assets										48	28,335	34,191
Depreciation and amortisation of segment assets		724						4,340		148	6,113	5,212

Assets and liabilities in the almond division are managed and reported at the total almond division level.

2012 Managed orchards EBIT includes a $4.9m impairment loss in relation to almond processing assets.

2012 Company orchards EBIT includes a $20.0m impairment loss in relation to the Company’s Western Australian orchards.

2011 Company orchards EBIT includes a $8.3m discount arising from the acquisitions of established orchards, and $776k in transaction costs. Sales to major customers include Olam 33%, Coles 17% and Woolworths 12% of total sales.

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Select Harvests Limited

Annual Financial Report

30 June 2012

Notes to the Financial Statements

34. CONTROLLED ENTITIES

	Country of Incorporation	Percentage Owned(%)	Percentage Owned(%)
		2012	2011
Parent Entity: Select Harvests Limited (i) Australia 100 100 Subsidiaries of Select Harvests Limited: Kyndalyn Park Pty Ltd (i) Australia 100 100 Select Harvests Food Products Pty Ltd (i) Australia 100 100 Meriram Pty Ltd (i) Australia 100 100 Kibley Pty Ltd (i) Australia 100 100

(i) Members of extended closed group

35. EMPLOYEE BENEFITS

Long Term Incentive Plan

The Group offers executive directors and senior executives the opportunity to participate in the long term incentive plan (LTI Plan) involving the issue of performance rights to the employee under the LTI Plan. The LTI Plan provides for the offer of a parcel of performance rights with a three year life to participating employees on an annual basis. One third of the rights vest in each year, with half of the rights vesting upon achievement of earnings per share (EPS) growth targets and the other half vesting upon achievement of total shareholder return (TSR) targets. The EPS growth targets are based on the average growth of the company’s EPS over the three years prior to vesting. The TSR targets are measured based on the company’s average TSR compared to the TSR of a peer group of ASX listed companies over the three years prior to vesting. The performance targets and vesting proportions are as follows:

	Measure	Proportion of Rights to Vest
	EPS
	Below 5% growth	Nil
	5% growth	25%
	5.1%-6.9% growth	Pro rata vesting
	7% or higher growth	50%
	TSR
	Below the 60~~th~~percentile*	Nil
	60~~th~~percentile*	25%
	61~~st~~ –74~~th~~percentile*	Pro rata vesting
	At orabove75~~th~~ percentile*	50%

• Of the peer group of ASX listed companies

The assessed fair value at grant date is determined using a Black-Scholes option pricing model that takes into account the term of the rights, the impact of dilution, the share price at offer date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the right.

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30 June 2012

Notes to the Financial Statements

35. EMPLOYEE BENEFITS (continued)

Summary of options/performance rights over unissued ordinary shares

Details of options/performance rights over unissued ordinary shares at the beginning and ending of the reporting date and movements during the year are set out below:

2012

Grant date	Expiry date	Exercise Price	Balance at start of the year	Granted during the year	Forfeited during the year	Exercised during the year	Balance at end of the year	Balance at end of the year	Proceeds received	Shares issued	Fair value per share	Fair value aggregate
			Number	Number	Number	Number	On Issue	Vested	$	Number	$	$
20/09/2008 31/10/2011 $5.15 324,879 - (324,879) - - - - - - - 28/09/2009 29/10/2012 $2.83 392,672 - (392,672) - - - - - - - 27/09/2010 28/10/2013 $3.27 409,741 - (409,741) - - - - - - - 29/06/2012 29/06/2015 - - 655,740 - - 655,740 - - - - -

2011

Grant date	Expiry date	Exercise Price	Balance at start of the year	Granted during the year	Forfeited during the year	Exercised during the year	Balance at end of the year	Balance at end of the year	Proceeds received	Shares issued	Fair value per share	Fair value aggregate
			Number	Number	Number	Number	On Issue	Vested	$	Number	$	$
27/08/2007 31/10/2010 $9.74 210,379 - (210,379) - - - - - - - 20/09/2008 31/10/2011 $5.15 362,379 - (37,500) - 324,879 - - - - - 28/09/2009 29/10/2012 $2.83 438,208 - (45,536) - 392,672 - - - - - 27/09/2010 28/10/2013 $3.27 - 455,552 (45,811) - 409,741 - - - - -
Weighted Average Exercise Price $5.10 $3.27 $7.43 - $3.66

Weighted Average Exercise Price

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Select Harvests Limited

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30 June 2012

Notes to the Financial Statements

35. EMPLOYEE BENEFITS (continued)

The amounts recognised in the financial statements of the consolidated entity in relation to executive share options exercised during the financial year were:

		Consolidated	Consolidated
		2012	2011
		$	$
Issued and Paid up Capital		-	-

(b) Expenses arising from share-based payment transactions

Total expenses arising from share-based payment transactions recognised during the period as part of employee benefit expense were as follows:

		Consolidated	Consolidated
		2012	2011
		$	$
Performance rights/options granted under
employee optionplan		-	(305,000)
		-	(305,000)

36. CONTINGENT LIABILITIES

Cross guarantees given by the entities comprising the consolidated entity are detailed in Note 37.

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Select Harvests Limited

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30 June 2012

Notes to the Financial Statements

37. Parent entity financial information

(a) Summary financial information

The individual financial statements for the parent entity show the following aggregate amounts:

	2012 2011
Balance Sheet	$’ 000 $’ 000
Current Assets Total Assets Current Liabilities Total Liabilities Shareholders’ Equity Issued capital Reserves Capital reserve Cash flow hedge reserve Options reserve Retained profits Profit or Loss for the year Total comprehensive income	1,726 19,266 329,885 308,226 19,768 17,987 226,249 206,887 95,957 95,066 3,270 3,270 (444) (43) 121 329 4,732 2,717
	103,636 101,339
	2,015 1,842
	1,614 2,021

(b) Tax consolidation legislation

Select Harvests Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation as of 1 July 2003. The accounting policy in relation to this legislation is set out in Note 1(m). On adoption of the tax consolidation legislation, the entities in the tax consolidated group entered into a tax sharing agreement which limits the joint and several liability of the wholly-owned entities in the case of a default by the head entity, Select Harvests Limited.

The entities have also entered into a tax funding agreement under which the wholly-owned entities fully compensate Select Harvests Limited for any current tax payable assumed and are compensated by Select Harvests Limited for any current tax receivable and deferred tax assets relating to unused tax losses or unused tax credits that are transferred to Select Harvests Limited under the tax consolidation legislation. The funding amounts are determined by reference to the amounts recognised in the wholly-owned entities’ financial statements.

The amounts receivable / payable under the tax funding agreement are due upon receipt of the funding advice from the head entity, which is issued as soon as practicable after the end of each financial year. The head entity may also require payment of interim funding amounts to assist with its obligations to pay tax instalments. The funding amounts are recognised as current intercompany receivables or payables.

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Select Harvests Limited

Annual Financial Report

30 June 2012

Notes to the Financial Statements

(c) Guarantees entered into by parent entity

Each entity within the consolidated group has entered into a cross deed of financial guarantee in respect of bank overdrafts and loans of the group.

Loans are made by Select Harvests Limited to controlled entities under normal terms and conditions.

78

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Independent auditor’s report to the members of Select Harvests Limited

Report on the financial report

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

Directors’ responsibility for the financial report

The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error. In Note1, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements , that the financial statements comply with International Financial Reporting Standards .

Auditor’s responsibility

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

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

Our procedures include reading the other information in the Annual Report to determine whether it contains any material inconsistencies with the financial report.

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

PricewaterhouseCoopers, ABN 52 780 433 757

Freshwater Place, 2 Southbank Boulevard, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001 T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au

Liability limited by a scheme approved under Professional Standards Legislation.

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Independence

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

Auditor’s opinion

In our opinion:

• (a) the financial report of Select Harvests Limited is in accordance with the Corporations Act 2001 , including:

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

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

• (b) the financial report and notes also comply with International Financial Reporting Standards as disclosed in Note 1.

Report on the Remuneration Report

We have audited the remuneration report included in the directors’ report for the year ended 30 June 2012. The directors of the company are responsible for the preparation and presentation of the remuneration report in accordance with section 300A of the Corporations Act 2001 . Our responsibility is to express an opinion on the remuneration report, based on our audit conducted in accordance with Australian Auditing Standards.

Auditor’s opinion

In our opinion, the remuneration report of Select Harvests Limited for the year ended 30 June 2012 complies with section 300A of the Corporations Act 2001 .

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PricewaterhouseCoopers

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John O’Donoghue Partner

Melbourne 31 August 2012

Select Harvests Limited

Annual Financial Report

30 June 2012

Directors' Declaration

In the directors’ opinion:

• (a) the financial statements and Notes set out on pages 2 to 78 are in accordance with the Corporations Act 2001, including:

• (i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and

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

• (b) there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable; and

• (c) at the date of this declaration, there are reasonable grounds to believe that the members of the extended closed group identified in note 34 will be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed of cross guarantee described in note 37.

Note 1(a) confirms that the financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board.

The directors have been given the declarations by the Managing Director and Chief Financial Officer required under section 295A of the Corporations Act 2001.

This declaration is made in accordance with a resolution of the directors.

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M Iwaniw Chairman

Melbourne, 31 August 2012

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Select Harvests Limited

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30 June 2012

ASX additional information

Additional information required by the Australian Stock Exchange Limited and not shown elsewhere in this report is as follows. The information is current as at 31 July 2012.

(a) Distribution of equity securities

The number of shareholders, by size of holding, in each class of share is:

NUMBER OF ORDINARY SHARES	NUMBER OFSHAREHOLDERS
1 to 1,000	1,026
1,001 to 5,000	1,239
5,001 to 10,000	482
10,001 to 100,000	569
100,001 and over	43

The number of shareholders holding less than a marketable parcel of shares is:

NUMBER OF ORDINARY SHARES	NUMBER OFSHAREHOLDERS
72,888	457

(b) Twenty largest shareholders

The names of the twenty largest holders of quoted shares are:

		NUMBER OF	PERCENTAGE
		SHARES	OFSHARES
1	Thorney Investments	6,200,190	10.9
2	Fidelity Mgt & Research	5,529,973	9.7
3	Credit Suisse Asset Mgt	2,384,000	4.2
4	Deutsche Bank Private Wealth Mgt	2,261,754	4.0
5	Deutsche Asset Mgt Americas	2,149,246	3.8
6	Mr Maxwell Fremder	1,936,671	3.4
7	Dimensional Fund Advisors	1,591,703	2.8
8	Myer Family Company	1,578,215	2.8
9	Wilson Asset Mgt	1,558,209	2.7
10	Mr Curt Leonard	947,099	1.7
11	Hadley Family	881,844	1.6
12	Hayberry Investments	727,421	1.3
13	Mr Rodney M Fitzroy	579,244	1.0
14	Mr Petrus Middendorp	541,878	1.0
15	Realindex Investments	500,318	0.9
16	Mr & Mrs Franklyn R Brazil	500,000	0.9
17	Mr William M Matthes	500,000	0.9
18	Mr & Mrs Gabriel M Ripka	286,000	0.5
19	Mr John O Lawless	285,000	0.5
20	Mr Anton K Middendorp	280,945	0.5

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ASX additional information

(c) Substantial shareholders

The names of substantial shareholders are:

	NUMBER OFSHARES
Thorney Investments	6,200,190
Fidelity Mgt & Research	5,529,973

(d) Voting rights

All ordinary shares (whether fully paid or not) carry one vote per share without restriction.

The Company is listed on the Australian Stock Exchange. The home exchange is Melbourne.

83