Droughtmaster Society Annual Report 2022

Shelly Hawkins, Herbertvale

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TRANSFORMATIONAL STRATEGY

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• Financial management - planning and strategy, 5 year corporate financial model

• Data capture and utilisation

• Establish sponsorships and partnerships

• Society sponsored sale reviews

• Engagement and alignment with industry stakeholders

• Enhanced working relationship with industry stakeholders

• Up-weighting of Society events and sponsored sales

• Recognised for industry leadership and breed excellence

• Industry and Society knowledge backed by data validation

• Recognised brand throughout the supply chain

• Markets available for export

• Best practice performance against industry benchmarks

• Improved YOY visitation of Society sponsored events & sales

• Superior and sustainable financial performance & management

• Superior recognition of breed excellence

• High class operational efficiency

• Superior recognition in both domestic and International markets

• Superior brand awareness

PRESIDENT’S REPORT

Dear Members,

The Board is pleased to present the Annual Report for the Droughtmaster Stud Breeders’ Society for the financial year ended 31 March 2022.

This Annual Report sets out the results for what was an extremely active and successful year for the Society, punctuated by COVID lockdowns, border closures, and natural disasters.

At the outset, I would like to acknowledge the efforts of my fellow Board members, our Chief Executive Officer, Company Secretary, staff and volunteers for their perseverance, patience and commitment to delivery. Many of the activities undertaken by the Society over the reported period were highly reliant on our Committees, volunteers and staff. At a time when we are all experiencing increasing demands on our time, our staff and volunteers continued to shine and provide wonderful contributions to ensure the success of the Society’s calendar of events.

Todd Heyman | President

Back in September 2019, the Society asked our members about the direction they would like the breed to take –and from that the Society drafted and followed its Strategic Plan “The Road Ahead”, which set out a broad range of activities aimed at growing, promoting and future-proofing the breed.

The results of this Annual Report are a demonstration of the benefits of setting and following this Strategic Plan. Of particular note, over the reporting period bull sale results were the strongest ever and the breed saw the highest increase in membership and inventory since 2007. These results were driven in part by seasonal factors with an improvement in some key areas –

PRESIDENT’S REPORT

however, they were also driven by strong confidence in the breed and the brand.

Spurred by this growth, and with a positive mindset, the Society has committed to even more growth – setting an ambitious target of having 37,000 registered females on the herdbook by 2024 (about 31,376 today) and achieving a growth in membership up to 750 members across Australia by 2024 (637 today).

By far, the Society’s biggest commitment over the reported period was BEEF21. We are proud to say that the Droughtmaster breed once again presented the single largest breed display at BEEF, and dominated the Commercial cattle competition. It is considered that the Droughtmaster Precinct stood above all others in showcasing the breed and bringing its membership together at one of the major promotional events in the beef industry.

Operating Result

The net profit of the Society amounted to $72,160 – and the Society’s cash reserves have grown to ensure the Society is in a strong financial position. A number of items of note include:

• Funding our future activities – the strong result for the Society in the reported period has allowed the Society to future proof and make provisions for a number of key future activities. These include:

– Beef Australia – Breed Marketing 2024 – the Society is in a position to put aside a significant fund for its commitment to the BEEF24 event;

Single Step – Genetic Improvement –the Society is in a position to direct a $50,000 provision towards a genotyping strategy to assist in the implementation

of single-step genomic evaluation for the Droughtmaster breed; and 60th Anniversary – Breed Celebration - the Society is in a position to direct a $25,000 provision towards its 60th Anniversary schedule of events.

• Diversification of income - Leading into the 2020-21 year, members may remember that no increase was applied to membership fees, inventory fees and the breed promotional levy on the basis that many members had experienced several, successive drought affected seasons. Fees for the 2021-22 financial year were increased by 5% with an increase in the promotional levy also. The circumstances prompting this change were compelling. In order to provide the services, marketing, promotion and events that our members rely on, and so that we may continue to be relevant and evolve to remain competitive in the beef industry, the Society took meaningful steps to maintain our revenue against our costs. To that end, we engaged a multipronged effort to increase our sources of support. The inventory and promotional levy rate adjustments were only two of several such initiatives. Others included:

– Partnerships – the Chief Executive, the Board and office staff have worked hard toward partnerships that have delivered significant nonmembership derived revenue and/ or in-kind contributions that have delivered mutually beneficial promotion of the Society and our partners.

Admin fee for service – the Society also implemented a fee for service based approach toward the processing of DNA tests. This decision reflected the fact that the workload around DNA

PRESIDENT’S REPORT

processing had increased 6 fold for the office since 2014. This fee assists in funding additional resourcing toward this activity, including improvements to the Droughtmaster ABRI module to streamline herdbook administration.

• BIN Steer Research - For some years, the financial position of the Society has benefitted from the BIN Steer Research and Development project. Via the BIN Steer project the Society purchases young steers to gather data to predict traits to improve genetic reproduction of the Droughtmaster breed, then processes and sells the steers whilst again receiving valuable data. The 2021-22 results saw the Society reduce its reliance on the unpredictable and unbudgeted costs and returns of the BIN Steer project. This notwithstanding, the BIN Steer project did deliver a significant contribution to the Society’s final financial result.

The focus activities of the Society over the 2021-22 financial year included:

• Overseeing the running of all Society Sponsored Sales;

• Establishing the Droughtmaster precinct at BEEF21;

• Managing operational plans and budgets to deliver on key initiatives and to drive growth of the Droughtmaster breed and memberships;

• Continuing to manage deliverables during COVID-19;

• Bovine Johnes and Western Australian market access - making representations to government and industry stakeholders, advocating for a more practical, pragmatic approach to cross border movement for cattle into Western Australia;

• Planning arrangements for the inaugural Droughtmaster Commercial Female Sale;

(CONTINUED)

• commissioning HLB Mann Judd to deliver a high level risk assessment for the Society;

• Planning arrangements for the 60th Anniversary Celebrations for the breed;

• Facilitating the establishment of a Show Advisory Committee for the breed;

• Augmenting communication with the membership via a regular electronic newsletter;

• Distributing to the membership a draft set of revised Rules and Regulations.

As indicated above, the overall position of the Society detailed in the financial statements and this Annual Report should be interpreted by the membership as reflecting the successful implementation of the Society’s Strategic Plan “The Road Ahead”

Finally, 2021-22 was a year of contrasts. Over the course of the reported period, we were all required to overcome our own challenges, as well as those thrown at us. We went from relative freedom, to strict isolation, and then back to some form of “COVID-normal”. At the same time, we saw unparalleled demand for cattle in all sectors, with prices breaking long standing records.

As an organisation, we should all look back proudly over the Society’s collective achievements of the 2021-22 financial year and the increased recognition of your Droughtmaster cattle for their adaptability, sustainability and suitability to the Australian environment – one of Australia’s natural wonders.

Todd Heyman, President on behalf of the Board of Directors

CEO’S REPORT

NEARLY 3 YEARS AGO, the Board implemented a 3-year strategic plan titled “The Road Ahead”, designed to grow the breed and memberships. Pleasingly, this plan has served its purpose and we are now starting to see “green shoots” from the rollout of this plan that has been followed meticulously over the past few years. The highlights section in this Annual Report sets out past and present trends of the Society which have been witnessed over a 5-year period.

As I write this report, “The Road Ahead” is currently in the process of being refreshed and we look forward to sharing the new plan with the members towards the end of 2022 which will highlight the focus for the next 3 years. Part of refreshing this new plan, the Board commissioned Mann Judd to undertake a risk assessment to provide insights into areas of the business that could be improved or required attention. This was a valuable exercise for the Society and some of Mann Judd’s findings will be implemented to strengthen and future proof the business going forward. We are very excited by the future opportunities available to the Society and the breed, and we are keen to build on the foundations that we have put in place over the past 3 years.

The past 12 months have been very rewarding for the Droughtmaster Society and are reflected by the strong results that we have achieved this year. Despite disruptions relating to COVID lockdowns we have been able to deliver our key events, sales and activities across the year. Some key areas that I would like to highlight are addressed below.

| Chief Executive Officer

Strong Financials

The 2021/2022 financially results have been very solid. We delivered both a healthy net profit and cash reserves have increased substantially leaving the Society in a strong financial position.

Membership Growth

Similar to last year, new memberships continue to grow and in 2021/22 it has been significant. Pleasingly, member resignations have also declined significantly and the net gain in memberships over the past couple of years is now trending upwards.

Awareness and Exposure

Brand awareness and exposure has improved dramatically. Focusing on all aspects of the supply chain and utilising multiple marketing channels has opened up growth opportunities for the breed and the Society. Furthermore, having a dedicated resource focusing primarily on marketing and communications has had a significant impact.

Society Sponsored Sales & Events

Systems and process have been upgraded over the past year to streamline the Society’s facilitation of Sponsored Sales and Events. This has had a positive impact on efficiency in the office, and

Simon Gleeson

CEO’S REPORT

how we interact with our members and buyers who participate at these sales. Again, having a dedicated resource to primarily focus on Society Sponsored Sales has been the major difference.

BIN Project

The BIN project has continued to be valuable for the Society, not only with the data that is being collected but also financially while we are experiencing record cattle prices. The project continues to be partly funded by MLA and the data is collected and analysed by AGBU and TBTS. Our reference population continues to grow and we anticipate that our breed will transition to Single Step over the coming year.

Inventory Growth

As a result of good seasons, membership growth and the amnesty on late fees for females over 20 months during this financial year, we have seen an uplift to our female inventory over the course of the year by 10%. Furthermore, continual promotion of the breed and the benefits of utilising Droughtmaster cattle has also been a positive contributor with both existing and new members seeking classification of Droughtmaster females.

Events

The highlight of the year was the Beef Australia Expo which was held in May 21 in Rockhampton. The Droughtmaster breed was the largest exhibitor, and our presence was certainly felt with the marquee that the Society made available to members and the general public. This event really showcased the commitment, dedication and camaraderie of our members and

it certainly was an event to celebrate and promote the breed. We are really looking forward to Beef Australia 2024.

Challenges

One of the major challenges for the Society over the past year has been the rise in the cost of goods and services along with the reliability of supply of materials that we utilise in our workplace. We continue to look at ways to mitigate these rising costs and supply issues and we are not expecting any relief from this in the short term.

Finally, it has been an eventful year and we would not have been possible to undertake all the activities without the support of the numerous volunteers who generously contribute their time and wisdom to support the Society’s activities. I thank all our member volunteers who represent the various committees for your commitment, our sponsors and corporate partners and our key stakeholders for their support and assistance over the past year. I would also like to thank the Board, led by Todd Heyman, Michele Gallagher our Company Secretary for all their support during the year and lastly, I would like to sincerely thank my team, Leigh, Ali, Leah and Jacinta for their commitment and dedication during the year. It has been a busy but enjoyable year and we look forward to continually supporting our members as we all strive to grow and promote this wonderful breed.

Simon Gleeson Chief Executive Officer

REGISTRAR’S REPORT

AS IS EVIDENT in this report, the 2021/2022 has been a very successful year on many accounts for the Droughtmaster Society and I am very proud to be a part of this small team in this wonderful office that continues to punch well above its weight.

In the past 12 months we have welcomed many new members into the Society all of whom have their own unique Droughtmaster plans and dreams. Some are brand new to the cattle industry, some are rediscovering previous family connections and others are veterans of the industry but are just so damn pleased with their herd quality they are keen to bring these genetics onto the Herd Book. To all of you I say “Welcome”.

We have sadly lost members who have passed and I look forward to honoring their memory at the various 60th Celebrations planned throughout the year. We have also seen some members take advantage of the booming agricultural industry and are selling up entirely, enabling them to put their feet up and enjoy the next chapter of their lives and I would like to thank them for their support, dedication, and hard work.

The Board initiative of implementing an Amnesty on late penalties for female

registrations has been wholeheartedly embraced by our members with the female Herd Book continuing to experience strong growth. The amnesty has also made it financially viable for our members to register or reactivate females to take advantage of the strong demand for the valuable Droughtmaster Female.

To all our volunteer Classifiers who fill such a very important role for the Society, I would like to sincerely thank you. This role is not just one of inspector but is also a role of mentor, adviser, encourager and quite often the person at the end of the help line. I pass on the Classifiers List to enquirers with great pride knowing that they will be in good hands.

Finally, I would like to acknowledge Simon our CEO and Leigh, Ali and Jacinta - together we make up “The Office”. I am continually amazed at what we as a collective manage to achieve and I personally salute them for their efforts in helping make Droughtmaster Australia the breed that is very much on the move.

Leah Wall

Registrar and Member Services

SALES AND EVENTS REPORT

DROUGHTMASTER BULLS and stud females were sold through 22 stand-alone sales during the 2021/2022 year. Off the back of good seasons, high cattle prices and targeted marketing campaigns, averages and clearance rates were up across the board. We congratulate all our members on the outstanding results which have been achieved by the breed and it is great to see demand for Droughtmaster cattle continually lifting across these sales.

In 2021, the Society implemented online forms for Society Sponsored Sales with respect to processing number and pedigree nominations. Internally this has been a game changer in the way data is collected and stored for these sales which has not only resulted in a significant reduction of paper usage within the office but also in terms of office efficiency. The online process allows us to record the date when entries were received and sends a receipt of the form upon submission.

Since the first online submission form was introduced for the 2021 Droughtmaster National Bull Sale, these forms have continually been upgraded prior to each sale which has enabled us to streamline processes even further. The online forms have also been used to upload the sale photos and videos to the online selling platforms, namely Elite Livestock Auctions and Stocklive simultaneously, making the process much more accurate and efficient.

In conjunction with Stocklive we initiated an upgrade with the online auction selling platform to include a link to the ABRI pedigree for each lot, enabling buyers to view the lot for sale via the online bidding platform and also via ABRI if further pedigree or BREEDPLAN information was required.

Online advertising, bidding and viewing is certainly one area of all sales which has really expanded. We are reaching a much broader audience prior to the sale which has not only been witnessed on sale days but we have also experienced increased growth of buyers now purchasing online. By way of example, the National Droughtmaster Bull sale YouTube channel featuring the National Bull Sale TV ad and 2021 sale lots had over 11,000 views. Across all Society Sponsored Sale YouTube channels we had over 15,000 views. The online catalogues for Society Sponsored Sales were viewed over 7,000 times and there was increased demand for the National Female Sale this year requiring additional copies of printed catalogues compared to past years.

Unfortunately, the Gatton Futurity was cancelled in 2022 along with many shows due to COVID restrictions, however we look forward to the Droughtmaster Feature Event later in the year.

Leigh Eleison Sales & Events Manager

Vendors Ed and Cliff Mylrea and Sasha Smith, Needmor Droughtmasters, with (kneeling) selling agent Josh Heck, GDL, and buyers Gayle and Mac Shann, Lamont stud, Clermont, and their $150,000 purchase, Needmor Hyatt (P). Photo courtesy Hayley Kennedy, Queensland Country Life.

MARKETING REPORT

A MARKETING STRATEGY was established at the beginning of the financial year in line with the Droughtmaster Australia Strategic Plan. The aim of the marketing plan is to promote the attributes and benefits of Droughtmaster to the supply chain to encourage greater producer awareness of the breed and drive favourable buying decisions, with a focus on growth markets, and to support the Society’s goals to increase membership and inventory.

The plan has involved adopting a more integrated marketing approach, with an increased digital presence being a key focus, and delivering strategic campaigns throughout the year. Several videos were produced to reinforce our key marketing messages and promote the natural attributes of the Droughtmaster breed and are part of the latest marketing tools produced by Droughtmaster Australia. Additionally, we have developed and executed consistent advertising assets and PR in trade publications in line with our brand to drive breed recognition and awareness, in line with the strategic plan. These assets are part of broader campaigns to promote the advantage of the breed to users across the supply chain.

Another marketing goal is to increase breed promotion at key industry events, and this was accomplished successfully at the Beef Australia 2021 event in Rockhampton. The Droughtmaster display exceeded expectations and over the course of the expo we had a stream of visitors through the marquee, and we hosted four events

which were well supported and enjoyed by all. We successfully created an environment where members could gather and socialise, and provided a networking opportunity for our producers, their clients, sponsors and industry contacts. In addition, our display delivered key messages in line with our strategic plan. We could not have delivered such an outstanding presence without the support and assistance of the Beef 2021 Droughtmaster Committee. There have been many events over the course of the year that have been well supported by Droughtmaster staff and members and created the opportunity ‘fly the flag’. We would like to extend our gratitude for our members who are on the ground, spreading the word, and who are actively promoting the breed on social media platforms and in other areas. Special thanks to Jenny Underwood for the invaluable support she provides to the Society in our social media marketing.

An essential element of our marketing strategy is to continuously evaluate our marketing objectives and campaign effectiveness and to ensure efficient use of membership funds.

Droughtmaster are in a strong position to capitalise on favourable market conditions, and we look forward to another exciting year ahead for the breed, with many opportunities to promote Australia’s natural wonder.

Ali Bull

Marketing & Events Executive

DIRECTORS’ REPORT

Droughtmaster Stud Breeders’ Society Limited

For the year ended 31 March 2022

The directors present their report on Droughtmaster Stud Breeders’ Society Limited for the financial year ended 31 March 2022.

1. General information

Information on directors

The names of each person who has been a director during the year and to the date of this report are:

Names Appointed/Resigned

Angus McCormack

Anna Hicks

Bronwyn Betts

Clint Gartrell

Term Ended 6 August 2021

Jack Stewart-Moore Term Ended 6 August 2021

Jeff Williams Term Ended 6 August 2021

Ken McKenzie

Roger Underwood Resigned 1 March 2022

Todd Heyman

Will Haviland

Alex Power Appointed 6 August 2021

Kellie Williams Appointed 1 March 2022

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

Principal activities

The principal activity of Droughtmaster Stud Breeders’ Society Limited during the financial year was promotion and recording of Droughtmaster breed of cattle.

No significant changes in the nature of the Company’s activity occurred during the financial year.

Short term objectives

The Company’s short term objectives are to:

• Promote, develop and protect the breed and the brand, identify activities that will further increase breed participation; and

• Enhance membership of the Breed Society by delivering more efficient services, benefits and value.

Long term objectives

The Company’s long term objectives are to:

• To be recognised nationally throughout the entire supply chain (paddock to plate) as a breed that was developed in Australia to suit the Australian environment for its resilience and exceptional meat quality.

Strategy for achieving the objectives

To achieve these objectives, the Company has adopted the following strategies:

• The traditional functions of the Droughtmaster Society will always remain core, however we must continue to be relevant and evolve to remain competitive in the beef industry.

How principal activities assisted in achieving the objectives

The principal activities assisted the Company in achieving its objectives by:

• Promotion & marketing;

• Embrace technology;

• Retain & recruit members;

• Cultural reset & unity;

• Sponsors & corporate partners;

• Operational efficiency; and

• Financial management.

Performance measures

The following measures are used within the Company to monitor performance:

• Member retention & growth through improved communications, benefits and value;

• Brand awareness through improved marketing and promotion;

• Improved data capture and utilisation;

• Up weighting in Society activities, events and sponsored sales;

• Genetic improvement and breed excellence, protect breed integrity;

• Increased partnerships and sponsorships;

• Operational efficiency and financial management; and

• Advancement in technology.

Members’ guarantee

Droughtmaster Stud Breeders’ Society Limited is a company limited by guarantee. In the event of, and for the purpose of winding up of the company, the amount capable of being called up from each member and any person or association who ceased to be a member in the year prior to the winding up, is limited to $20 for members that are corporations and $20 for all other members, subject to the provisions of the company’s constitution.

At 31 March 2022 the collective liability of members was $12,740 (2021: $11,960).

2. Other items Future developments and results

Likely developments in the operations of the Company and the expected results of those operations in future financial years have not been included in this report as the inclusion of such information is likely to result in unreasonable prejudice to the Company.

Meetings of directors

During the financial year, 9 meetings of directors (including committees of directors) were held. Attendances by each director during the year were as follows:

Directors’ Meetings

Number eligible to attend

Number attended

Angus McCormack 9 9

Anna Hicks 9 5

Bronwyn Betts 9 9

Clint Gartrell 3 3

Jack Stewart-Moore 3 3

Jeff Williams 3 2

Ken McKenzie 9 9

Roger Underwood 8 8

Todd Heyman 9 9 Will Haviland 9 8

Alex Power 6 5

Kellie Williams 2 2

Auditor’s independence declaration

The lead auditor’s independence declaration in accordance with section 307C of the Corporations Act 2001, for the year ended 31 March 2022 has been received and can be found on page 5 of the financial report.

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

Director

Todd Heyman, Director

Dated 29 June 2022

AUDITOR’S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE CORPORATIONS ACT 2001 TO THE DIRECTORS OF DROUGHTMASTER STUD BREEDERS’ SOCIETY LIMITED

I declare that, to the best of my knowledge and belief, during the year ended 31 March 2022, there have been: (i) no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and (ii) no contraventions of any applicable code of professional conduct in relation to the audit.

INDEPENDENT AUDIT SERVICES Chartered Accountants

Jiahui

(Jeremiah) Thum

Director

Brisbane, QLD

Dated this 29th day of June 2022

Angus McCormack,

STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

Droughtmaster Stud Breeders’ Society Limited

For the year ended 31 March 2022

Note 2022 $ 2021 $

Revenue 4 1,542,984 1,102,244

Finance income 5 70 5,513 Other income 4 111,750 47,231

Employee benefits expense 6 (502,842) (489,016)

Depreciation and amortisation expense 6 (7,744) (25,044)

Cost of Sales 6 (575,198) (349,516)

BIN Research Project Expenses (164,327) (87,795)

Other operating expenses (332,530) (195,709) Other expenses - (1,201) Finance expenses 5 (3) -

Surplus before income tax 72,160 6,707

Income tax expense -Surplus from continuing operations 72,160 6,707

SURPLUS FOR THE YEAR 72,160 6,707

Other comprehensive income, net of income tax

Items that will not be reclassified subsequently to profit or loss - -

Items that will be reclassified to profit or loss when specific conditions are met - -

TOTAL COMPREHENSIVE INCOME FOR THE YEAR 72,160 6,707

STATEMENT OF FINANCIAL POSITION

Droughtmaster Stud Breeders’ Society Limited

As at 31 March 2022

Note 2022 $ 2021 $

ASSETS

CURRENT ASSETS

Cash and cash equivalents 7 775,557 582,775

Trade and other receivables 8 92,439 31,561 Inventories 9 167,878 209,202 Other assets 12 671 3,287

TOTAL CURRENT ASSETS 1,036,545 826,825

NON CURRENT ASSETS

Property, plant and equipment 11 762,866 766,135

TOTAL NON CURRENT ASSETS 762,866 766,135

TOTAL ASSETS 1,799,411 1,592,960

LIABILITIES

CURRENT LIABILITIES

Trade and other payables 13 103,825 50,748 Contract liabilities 10 30,159 13,490 Short term provisions 14 195,000 140,386 Employee benefits 15 67,087 64,858

TOTAL CURRENT LIABILITIES 396,071 269,482

NON CURRENT LIABILITIES Employee benefits 15 13,377 5,675 TOTAL NON CURRENT LIABILITIES 13,377 5,675

TOTAL LIABILITIES 409,448 275,157

NET ASSETS 1,389,963 1,317,803

EQUITY

Reserves (1,052) (1,052) Retained earnings 1,391,015 1,318,855

TOTAL EQUITY 1,389,963 1,317,803

STATEMENT OF CHANGES IN EQUITY

Droughtmaster Stud Breeders’ Society Limited

For the year ended 31 March 2022

2022

Retained Earnings $

Asset Revaluation Surplus $ Total $

Balance at 1 April 2021 1,318,855 (1,052) 1,317,803 Surplus for the year 72,160 - 72,160

Total other comprehensive income for the period - -Balance at 31 March 2022 1,391,015 (1,052) 1,389,963

2021

Balance at 1 April 2020 1,312,148 (1,052) 1,311,096 Surplus for the year 6,707 - 6,707

Total other comprehensive income for the period - -Balance at 31 March 2021 1,318,855 (1,052) 1,317,803

STATEMENT OF CASH FLOWS

Droughtmaster Stud Breeders’ Society Limited

For the year ended 31 March 2022

CASH FLOWS FROM OPERATING ACTIVITIES:

Note 2022 $ 2021 $

Receipts from customers and government 1,614,631 1,481,916

Payments to suppliers and employees (1,417,444) (1,297,704)

Interest received 70 5,513

Net cash provided by/(used in) operating activities 197,257 189,725

CASH FLOWS FROM INVESTING ACTIVITIES:

Proceeds from sale of investment - 12,800

Purchase of property, plant and equipment (net) (4,475) (4,755)

Net cash provided by/(used in) investing activities (4,475) 8,045

CASH FLOWS FROM FINANCING ACTIVITIES:

Net increase/(decrease) in cash and cash equivalents held 192,782 197,770

Cash and cash equivalents at beginning of year 582,775 385,005

Cash and cash equivalents at end of financial year 7 775,557 582,775

NOTES TO THE FINANCIAL STATEMENTS

Droughtmaster Stud Breeders’ Society Limited

For the year ended 31 March 2022

The financial report covers Droughtmaster Stud Breeders’ Society Limited as an individual entity.

Droughtmaster Stud Breeders’ Society Limited is a not-for-profit Company limited by guarantee, incorporated and domiciled in Australia.

The functional and presentation currency of Droughtmaster Stud Breeders’ Society Limited is Australian dollars.

Comparatives are consistent with prior years, unless otherwise stated.

1 Basis of Preparation

The financial statements are general purpose financial statements that have been prepared in accordance with the Australian Accounting Standards – Simplified Disclosures and the Corporations Act 2001

The financial statements have been prepared on an accruals basis and are based on historical costs modified, where applicable, by the measurement at fair value of selected non-current assets, financial assets and financial liabilities.

Significant accounting policies adopted in the preparation of these financial statements are presented below and are consistent with prior reporting periods unless otherwise stated.

2

Summary of Significant Accounting Policies

(a) Revenue and other income

Revenue from contracts with customers

The core principle of AASB 15 is that revenue is recognised on a basis that reflects the transfer of promised goods or services to customers at an amount that reflects the consideration the Company expects to receive in exchange for those goods or services.

Generally the timing of the payment for sale of goods and rendering of services corresponds closely to the timing of satisfaction of the performance obligations, however where there is a difference, it will result in the recognition of a receivable, contract asset or contract liability.

None of the revenue streams of the Company have any significant financing terms as there is less than 12 months between receipt of funds and satisfaction of performance obligations.

Specific revenue streams

The revenue recognition policies for the principal revenue streams of the Company are:

Female Inventory Fees

This is a charge for registering females and forms part of annual membership fees. Revenue is recognised at the beginning of the financial year.

DNA Testing Revenue

This is a charge for DNA testing done on cattle for members. Revenue is recognised when testing is performed.

Breed Promotion Fee

This is breed promotion levy charge and forms part of annual membership fees. Revenue is recognised at the beginning of the financial year.

Stud Membership

This forms part of annual membership fees. Revenue is recognised at the beginning of the financial year.

DN – Nomination Fees (National Bull Sale)

Nomination fees are charged in two parts for the National Bull Sale. Number nomination fees (1/2 full nomination fee) are charged out at close of number nominations and the remainder of the fee, Pedigree nomination fee, are charged out at the close of pedigree nominations.

BIN Research Project

This is sale of research livestock. Revenue is recognised when a livestock is sold.

Statement of financial position balances relating to revenue recognition

Contract assets and liabilities

Where the amounts billed to customers are based on the achievement of various milestones established in the contract, the amounts recognised as revenue in a given period do not necessarily coincide with the amounts billed to or certified by the customer.

When a performance obligation is satisfied by transferring a promised good or service to the customer before the customer pays consideration or the before payment is due, the Company presents the contract as a contract asset, unless the Company’s rights to that amount of consideration are unconditional, in which case the Company recognises a receivable.

When an amount of consideration is received from a customer prior to the entity transferring a good or service to the customer, the Company presents the contract as a contract liability.

Contract cost assets

The Company recognises assets relating to the costs of obtaining a contract and the costs incurred to fulfil a contract or set up / mobilisation costs that are directly related to the contract provided they will be recovered through performance of the contract.

Costs to obtain a contract

Costs to obtain a contract are only capitalised when they are directly related to a contract and it is probable that they will be recovered in the future. Costs incurred that would have been incurred regardless of whether the contract was won are expensed, unless those costs are explicitly chargeable to the customer in any case (whether or not the contract is won).

The capitalised costs are amortised on a straight line basis over the expected life of the contract.

Set up / mobilisation costs

Costs required to set up the contract, including mobilisation costs, are capitalised provided that it is probable that they will be recovered in the future and that they do not include expenses that would normally have been incurred by the Company if the contract had not been obtained. They are recognised as an expense on the basis of the proportion of actual output to estimated output under each contract. If the above conditions are not met, these costs are taken directly to profit or loss as incurred.

Costs to fulfil a contract

Where costs are incurred to fulfil a contract, they are accounted for under the relevant accounting standard (if appropriate), otherwise if the costs relate directly to a contract, the costs generate or enhance resources of the Company that will be used to satisfy performance obligations in the future and the costs are expected to be recovered then they are capitalised as contract costs assets and released to the profit or loss on an systematic basis consistent with the transfer to the customer of the goods or services to which the asset relates.

Provisions relating to contracts with customers

There are no provisions relating to contracts with customers identified during the year.

Financing component of contracts with customers

There are no significant financing component of contracts with customers identified during the year.

Other income

Other income is recognised on an accruals basis when the Company is entitled to it.

(b) Income Tax

The Company is exempt from income tax under Division 50 of the Income Tax Assessment Act 1997

(c) Goods and services tax (GST)

Revenue, expenses and assets are recognised net of the amount of goods and services tax (GST), except where the amount of GST incurred is not recoverable from the Australian Taxation Office (ATO).

Receivables and payable are stated inclusive of GST.

Cash flows in the statement of cash flows are included 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 is classified as operating cash flows.

(d) Inventories

Inventories are measured at the lower of cost and net realisable value.

Inventories acquired at no cost, or for nominal consideration are valued at the current replacement cost as at the date of acquisition, which is the deemed cost.

(e) Property, plant and equipment

Each class of property, plant and equipment is carried at cost or fair value less, where applicable, any accumulated depreciation and impairment.

Items of property, plant and equipment acquired for significantly less than fair value have been recorded at the acquisition date fair value.

Land and buildings

Land and buildings are measured using the cost model.

Plant and equipment

Plant and equipment are measured using the cost model.

Depreciation

Property, plant and equipment, excluding freehold land, is depreciated on a straight line basis over the asset’s useful life to the Company, commencing when the asset is ready for use.

The depreciation rates used for each class of depreciable asset are shown below:

Fixed asset class

At the end of each annual reporting period, the depreciation method, useful life and residual value of each asset is reviewed. Any revisions are accounted for prospectively as a change in estimate.

(f) Financial instruments

Financial instruments are recognised initially on the date that the Company becomes party to the contractual provisions of the instrument.

On initial recognition, all financial instruments are measured at fair value plus transaction costs (except for instruments measured at fair value through profit or loss where transaction costs are expensed as incurred).

Financial assets

All recognised financial assets are subsequently measured in their entirety at either amortised cost or fair value, depending on the classification of the financial assets.

Classification

On initial recognition, the Company classifies its financial assets into the following categories, those measured at:

• amortised cost

• fair value through profit or loss – FVTPL (Not applicable)

• fair value through other comprehensive income equity instrument (FVOCI – equity) (Not applicable)

• fair value through other comprehensive income debt investments (FVOCI – debt) (Not applicable)

Financial assets are not reclassified subsequent to their initial recognition unless the Company changes its business model for managing financial assets.

Amortised cost

The Company’s financial assets measured at amortised cost comprise trade and other receivables and cash and cash equivalents in the statement of financial position.

Subsequent to initial recognition, these assets are carried at amortised cost using the effective interest rate method less provision for impairment.

Interest income, foreign exchange gains or losses and impairment are recognised in profit or loss. Gain or loss on derecognition is recognised in profit or loss.

Impairment of financial assets

Impairment of financial assets is recognised on an expected credit loss (ECL) basis for the following assets:

• financial assets measured at amortised cost

• debt investments measured at FVOCI (Not applicable)

When determining whether the credit risk of a financial assets has increased significant since initial recognition and when estimating ECL, the Company considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis based on the Company’s historical experience and informed credit assessment and including forward looking information.

The Company uses the presumption that an asset which is more than 30 days past due has seen a significant increase in credit risk.

The Company uses the presumption that a financial asset is in default when:

• the other party is unlikely to pay its credit obligations to the Company in full, without recourse to the Company to actions such as realising security (if any is held); or

• the financial assets is more than 90 days past due.

Credit losses are measured as the present value of the difference between the cash flows due to the

Company in accordance with the contract and the cash flows expected to be received. This is applied using a probability weighted approach.

Trade receivables

Impairment of trade receivables have been determined using the simplified approach in AASB 9 which uses an estimation of lifetime expected credit losses. The Company has determined the probability of nonpayment of the receivable and multiplied this by the amount of the expected loss arising from default.

The amount of the impairment is recorded in a separate allowance account with the loss being recognised in finance expense. Once the receivable is determined to be uncollectable then the gross carrying amount is written off against the associated allowance.

Where the Company renegotiates the terms of trade receivables due from certain customers, the new expected cash flows are discounted at the original effective interest rate and any resulting difference to the carrying value is recognised in profit or loss.

Other financial assets measured at amortised cost

Impairment of other financial assets measured at amortised cost are determined using the expected credit loss model in AASB 9. On initial recognition of the asset, an estimate of the expected credit losses for the next 12 months is recognised. Where the asset has experienced significant increase in credit risk then the lifetime losses are estimated and recognised.

Financial liabilities

The Company measures all financial liabilities initially at fair value less transaction costs, subsequently financial liabilities are measured at amortised cost using the effective interest rate method.

The financial liabilities of the Company comprise trade payables only.

(g) Impairment of non financial assets

At the end of each reporting period the Company determines whether there is evidence of an impairment indicator for non financial assets.

Where an indicator exists and regardless for indefinite life intangible assets and intangible assets not yet available for use, the recoverable amount of the asset is estimated.

Where assets do not operate independently of other assets, the recoverable amount of the relevant cash generating unit (CGU) is estimated.

The recoverable amount of an asset or CGU is the higher of the fair value less costs of disposal and the value in use. Value in use is the present value of the future cash flows expected to be derived from an asset or cash-generating unit.

Where the recoverable amount is less than the carrying amount, an impairment loss is recognised in profit or loss.

Reversal indicators are considered in subsequent periods for all assets which have suffered an impairment loss.

(h) Cash and cash equivalents

Cash and cash equivalents comprises cash on hand, demand deposits and short term investments which are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value.

(i) Employee benefits

Provision is made for the Company’s liability for employee benefits, those benefits that are expected to be wholly settled within one year have been measured at the amounts expected to be paid when the liability is settled.

Employee benefits expected to be settled more than one year after the end of the reporting period have been measured at the present value of the estimated future cash outflows to be made for those benefits. In determining the liability, consideration is given to employee wage increases and the probability that the employee may satisfy vesting requirements. Cashflows are discounted using market yields on high quality corporate bond rates incorporating bonds rated AAA or AA by credit agencies, with terms to maturity that match the expected timing of cashflows. Changes in the measurement of the liability are recognised in profit or loss.

Defined contribution schemes

Obligations for contributions to defined contribution superannuation plans are recognised as an employee benefit expense in profit or loss in the periods in which services are provided by employees.

(j) Provisions

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

Provisions are measured at the present value of management’s best estimate of the outflow required to settle the obligation at the end of the reporting period. The discount rate used is a pre tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The

4 Revenue and Other Income

increase in the provision due to the unwinding of the discount is taken to finance costs in the statement of profit or loss and other comprehensive income.

3 Critical Accounting Estimates and Judgments

The directors make estimates and judgements during the preparation of these financial statements regarding assumptions about current and future events affecting transactions and balances.

These estimates and judgements are based on the best information available at the time of preparing the financial statements, however as additional information is known then the actual results may differ from the estimates.

The significant estimates and judgements made have been described below.

Key estimates – impairment of property, plant and equipment

The Company assesses impairment at the end of each reporting period by evaluating conditions specific to the Company that may be indicative of impairment triggers. Recoverable amounts of relevant assets are reassessed using value-in-use calculations which incorporate various key assumptions.

There are no indicators of impairment during the year.

Key estimates – provisions

As described in the accounting policies, provisions are measured at management’s best estimate of the expenditure required to settle the obligation at the end of the reporting period. These estimates are made taking into account a range of possible outcomes and will vary as further information is obtained.

Key estimates – receivables

The receivables at reporting date have been reviewed to determine whether there is any objective evidence that any of the receivables are impaired. An impairment provision is included for any receivable where the entire balance is not considered collectible. The impairment provision is based on the best information at the reporting date.

Revenue from continuing operations 2022 $ 2021 $

Revenue from contracts with customers (AASB 15)

At a point in time sale of goods 1,283 951 provision of services 1,541,701 1,001,293 1,542,984 1,002,244

Revenue recognised on receipt (not enforceable or no sufficiently specific performance obligations - AASB 1058)

cash flow boost - 100,000 - 100,000

Total Revenue 1,542,984 1,102,244

2022 $ 2021 $

Other Income other income 111,750 43,486 net gain on disposal of property, plant and equipment - 3,745 111,750 47,231

Total Revenue and Other Income 1,654,734 1,149,475

5 Finance Income and Expenses

Finance income 2022 $ 2021 $

Interest income

- Assets measured at amortised cost 70 5,513 Total finance income 70 5,513

Finance expenses 2022 $ 2021 $ Foreign currency loss on financial assets and liabilities 3 Total finance expenses 3

6 Result for the Year

The result for the year includes the following specific expenses: 2022 $ 2021 $

Cost of Sales 575,198 349,516 Other expenses: Employee benefits expense 502,842 489,016 Depreciation expense 7,744 25,044

7 Cash and Cash Equivalents 2022 $ 2021 $ Cash at bank and in hand 775,557 582,775 775,557 582,775

9 Inventories

CURRENT

2022 $ 2021 $

At cost: Merchandise - 12,276

BIN Livestock on Hand 167,878 196,926 167,878 209,202 167,878 209,202

Write downs of inventories to net realisable value during the year were $12,726 (2021: $15,000).

10 Contract Balances

Contract assets and liabilities

The Company has recognised the following contract assets and liabilities from contracts with customers: 2022 $ 2021 $

CURRENT Contract liabilities (i) 30,159 13,490 Total current contract liabilities 30,159 13,490 (i) Represents grant payments made for a specific purpose and unspent as well as members advanced payments received as at 31 March 2022

11 Property, plant and equipment

Buildings

2022 $ 2021 $

At cost 806,547 806,547

Accumulated depreciation (84,546) (84,546) Total buildings 722,001 722,001 Total land and buildings 722,001 722,001

PLANT AND EQUIPMENT

Plant and equipment

At cost 41,145 99,638

Accumulated depreciation (23,141) (78,588) Total plant and equipment 18,004 21,050

Office equipment

At cost 29,115 24,822

Accumulated depreciation (22,101) (20,476)

Total office equipment 7,014 4,346

Software

At cost 42,500 42,500

Accumulated depreciation (38,896) (39,832) Total Software 3,604 2,668

Website Development

At cost 28,465 28,465

Accumulated depreciation (16,222) (12,395)

Total Website Development 12,243 16,070

Total plant and equipment 40,865 44,134

Total property, plant and equipment 762,866 766,135

(a) Movements in Carrying Amounts

Movement in the carrying amounts for each class of property, plant and equipment between the beginning and the end of the current financial year:

Buildings $

Plant and Equipment $ Office Equipment $ Software $

Year ended 31 March 2022

Balance at the beginning of year 722,001 21,050 4,346 2,668 Additions - 315 4,293Depreciation expense - (3,361) (1,625)Other changes, movements - - - 936 Balance at the end of the year 722,001 18,004 7,014 3,604

Website Development Total

Year ended 31 March 2022

Balance at the beginning of year 16,070 766,135 Additions - 4,608 Depreciation expense (3,827) (8,813) Other changes, movements - 936 Balance at the end of the year 12,243 762,866

12 Other non financial assets

CURRENT

2022 $ 2021 $

Prepayments 671Other asset - 3,287 671 3,287

13 Trade and Other Payables

CURRENT

2022 $ 2021 $

Trade payables 62,177 29,413 GST payable 20,349 (28)

Sundry payables and accrued expenses 19,763 17,145

Other payables 1,536 4,218 103,825 50,748

Trade and other payables are unsecured, non interest bearing and are normally settled within 30 days. The carrying value of trade and other payables is considered a reasonable approximation of fair value due to the short-term nature of the balances.

14 Provisions

CURRENT

2022 $ 2021 $

Provision Beef Aust Expo 2024 120,000 82,605

Provision Sales Development Fund - 15,328

Provision Market Development - 42,453

Provision Single Step Genetic Improvement 50,000Provision 60th Anniversary Celebration 25,000195,000 140,386

Provision Beef Aust Expo 2024 $

Provision Single Step Genetic Improvement $

Provision 60th Anniversary Celebration $ Total $

Current

Opening balance at 1 April 2021 82,605 - - 82,605

Additional provisions 120,000 50,000 25,000 195,000

Provisions used (82,605) - - (82,605)

Balance at 31 March 2022 120,000 50,000 25,000 195,000

Provision – Beef Aust Expo 2024

The Company had incurred a significant amount for organising the Beef Aust Expo 2021. As a result, the Directors have decided to provide an estimate for Beef Aust Expo 2024. The estimate is based on the actual cost incurred for the 2021 event.

Provision – Single Step Genetic Improvement

This will include key genetics in the reference population so that a larger number of animals within the breed will be eligible to be analysed in Single Step BREEDPLAN.

Provision – 60th Anniversary Celebration

The Company is planning to celebrate its 60th anniversary in 2022/2023 financial year. The Directors have estimated the cost of holding this event in 2022 and approved the budget in the Board minutes.

15 Employee Benefits

Current liabilities

2022 $ 2021 $

Long service leave 21,249 24,290

Annual leave 45,838 40,568 67,087 64,858

2022 $ 2021 $

Non current liabilities

Long service leave 13,377 5,675 13,377 5,675

16

Financial Risk Management

Financial assets

2022 $ 2021 $

Held at amortised cost Cash and cash equivalents 775,557 582,775 Trade and other receivables 92,439 31,561 Fair value through profit or loss (FVTPL)

Total financial assets 867,996 614,336

Financial liabilities

Financial liabilities measured at amortised cost 62,177 29,413

Total financial liabilities 62,177 29,413

17 Members’ Guarantee

The Company is incorporated under the Corporations Act 2001 and is a Company limited by guarantee. If the Company is wound up, the constitution states that each member is required to contribute a maximum of $20 each towards meeting any outstanding obligations of the Company. At 31 March 2022 the number of members was 637 (2021: 598).

18

The

Key Management Personnel Disclosures

19 Auditors’ Remuneration

2022 $ 2021 $

Remuneration of the auditor for: auditing the financial statements 6,000 4,000 preparation of financial statements - 4,000

Total 6,000 8,000

20 Contingencies

In the opinion of the Directors, the Company did not have any contingencies at 31 March 2022 (31 March 2021: None).

21 Related Parties

(a) The Company’s main related parties are as follows:

Key management personnel – refer to Note 18.

Other related parties include close family members of key management personnel and entities that are controlled or significantly influenced by those key management personnel or their close family members.

(b) Transactions with related parties

There are no transactions with related parties during the year.

(c) Loans to/from related parties

There are no loans to/ from related parties during the year.

22 Events after the end of the Reporting Period

The financial report was authorised for issue on 29 June 2022 by the Board of Directors. No matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the Company, the results of those operations or the state of affairs of the Company in future financial years.

23 Statutory Information

The registered office and principal place of business of the company is: Droughtmaster Stud Breeders’ Society Limited 40 Thorn Street IPSWICH QLD 4305

2020/21 $

2019/20 $

2018/19 $

2017/18 $

2016/17 $

$964,161

$1,002,398

$1,021,220

$982,239

$899,498

Total Income

$1,059,275

$964,015

$950,151

$947,237

$1,284,821 Total Operating Expenses

$871,484

($95,114)

$38,383

$71,069

$35,002

$1,288,373 Operating Profit (Loss)

$28,014

$0

$27,456

$119,126

$0

($3,552) Extraodinary Items

$0

$0

$20,000

$20,000

$20,000

$12,725 Appropriations

$40,000

($95,114)

($9,073)

($68,057)

$15,002

$117,219 Gross Profit (Loss)

($11,986)

$3,032

$157,483

$63,414

$121,486

($133,496) Non-Operating Items BIN Research Project

$48,150

$100,000

$0

$0

$0

$205,656 Govt Cashflow Boost

$0

($1,211)

$72,160

$6,707

($19,474)

$8,479

$128,936

$3,836

$27,359

$0 Other

$163,847

$0

$36,164

$0 Net Profit (Loss)

$582,775

$350,000

$205,000

$375,224

$319,446

$196,926

$91,959

$242,484

$202,809

$775,557 Value of BIN Steer Inventory

$120,024

$766,135

$800,435

$409,448

$807,271

$804,706

$167,878 Property

$439,028

$259,802

$281,246

$803,098

$311,045

$762,866 Liabilities Total Current & Non-Current Liabilities

$275,157 FINANCIAL REPORT 34 droughtmaster.com.au • ANNUAL REPORT 2022

Droughtmaster Stud Breeders’ Society Limited

For the year ended 31 March 2022

Directors’ Declaration

The directors of the Company declare that:

1. The financial statements and notes, as set out on pages 6 to 26, are in accordance with the Corporations Act 2001 and:

a. comply with Australian Accounting Standards – Simplified Disclosure Standard; and

b. give a true and fair view of the financial position as at 31 March 2022 and of the performance for the year ended on that date of the Company.

2. In the directors’ opinion, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

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

McCormack, Director Todd Heyman, Director

INDEPENDENT AUDIT REPORT TO THE MEMBERS OF DROUGHTMASTER STUD BREEDERS’ SOCIETY LIMITED

Droughtmaster Stud Breeders’ Society Limited

For the year ended 31 March 2022

Report on the Audit of the Financial Report

Qualified Opinion

We have audited the financial report of Droughtmaster Stud Breeders’ Society Limited (the Company), which comprises the statement of financial position as at 31 March 2022, the statement of profit or loss and other comprehensive income, the statement of changes in equity and the statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and the directors’ declaration.

In our opinion, except for the effects of the matter described in the Basis for Qualified Opinion section of our report, the accompanying financial report of the Company is in accordance with the Corporations Act 2001, including:

(i) giving a true and fair view of the Company’s financial position as at 31 March 2022 and of its financial performance for the year ended; and (ii) complying with Australian Accounting Standards – Simplified Disclosures and the Corporations Regulations 2001

Basis for Qualified Opinion

Opening Balances

We were appointed as auditors for the financial year ended 31 March 2022. We have not reviewed or audited the opening balances as at 1 April 2021. As a result, we have qualified on the opening balances.

We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Company in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics

Angus

for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.

We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s report.

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

Responsibilities of Directors 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 – Simplified Disclosures 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 gives a true and fair view and is free from material misstatement, whether due to fraud or error.

In preparing the financial report, the directors are responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.

Auditor’s Responsibilities for the Audit of the Financial Report

Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial report.

As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures

responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit 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 Company’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.

• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation.

We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.

INDEPENDENT AUDIT SERVICES

Chartered Accountants

Jiahui (Jeremiah) Thum Director

Brisbane, QLD Dated this 29th day of June 2022