McGUIGAN SIMEON WINES LIMITED - Nepenthe · Note 1: Summary of accounting policies 51 Note 2:...

McGUIGAN SIMEON WINES LIMITED :: ANNUAL REPORT 2006

McG

UIG

AN

SIME

ON

WIN

ES LIM

ITED

::A

NN

UA

L RE

PO

RT 2

006

ACN 052 179 932

AC

N 052 179 932

Head Offi ce

Level 2

170 Greenhill Road

Parkside SA 5063

T 08 8172 8333

F 08 8357 8544

Sydney Offi ce

Building D

13 Joynton Avenue

Zetland NSW 2017

T 02 8345 6377

F 02 8345 6366

Registered Offi ce

Level 2

170 Greenhill Road

Parkside SA 5063

T 08 8172 8333

F 08 8357 8544

Company Secretary

Michael Noack

Chief Financial Offi cer

Michael Noack

Auditors

Deloitte Touche Tohmatsu

Grosvenor Place

225 George Street

Sydney NSW 2000

Bankers

National Australia Bank

500 Bourke Street

Melbourne VIC 3000

Share Register

Computershare Registry

Services Pty Ltd

115 Grenfell Street

Adelaide SA 5000

T 08 8236 2300

F 08 8236 2305

Hermitage Road Winery

Hermitage Road

Pokolbin NSW 2320

T 02 4998 7521

F 02 4998 7796

Hunter Valley Administration

Cnr Broke & McDonalds Roads

Pokolbin NSW 2320

T 02 4998 7400

F 02 4998 7401

Tempus Two Winery


Pokolbin NSW 2320

T 02 4993 3900

F 02 4993 3988

Yaldara Winery

Hermann Thumm Drive

Lyndoch SA 5351

T 08 8524 0200

F 08 8524 0240

Austvin Loxton Cellars

Bookpurnong Road

T 08 8584 7236

F 08 8584 6376

Buronga Hill Winery

Silver City Highway

Buronga NSW 2739

T 03 5022 5100

F 03 5022 5135

Merbein Packaging

Whiting Road

Merbein VIC 3505

T 03 5021 9303

F 03 5021 6490

www.mswl.com.au

ACN 052 179 932

Board of Directors 01

Chairman’s Report 04

Chief Executive Offi cer’s Report 06

Global Marketing Director’s Report 10

Company Profi le 11

Export Profi le 17

Corporate Governance Statement 21

Shareholders’ Information 28

Directors Report 30

Declaration of Independence 43

Independent Audit Report 44

Directors’ Declaration 45

Financials 46

Income Statement 47

Balance Sheet 48

Statement of Recognised Income & Expense 49

Cashfl ow Statement 50

Notes to Financial Statements 51

Note 1: Summary of accounting policies 51

Note 2: (Loss)/profi t from operations 58

Note 3: Income taxes 59

Note 4: Key management personnel

compensation 62

Note 5: Executive share option plan 67

Note 6: Remuneration of auditors 69

Note 7: Current trade and other receivables 70

Note 8: Current inventories 70

Note 9: Current fi nancial assets 70

Note 10: Other current assets 71

Note 11: Non current assets held for sale 71

Note 12: Non current receivables 71

Note 13: Non current inventories 71

Note 14: Investments accounted for using

the equity method 72

Note 15: Other non current investments 73

Note 16: Biological assets 73

Note 17: Property, plant and equipment 74

Note 18: Goodwill 76

Note 19: Other intangible assets 77

Note 20: Non current fi nancial assets 77

Note 21: Other non current assets 77

Note 22: Assets pledged as security 77

Note 23: Current trade and other payables 78

Note 24: Current borrowings 78

Note 25: Current provisions 78

Note 26: Other current liabilities 78

Note 27: Non current payables 78

Note 28: Non current borrowings 78

Note 29: Non current provisions 79

Note 30: Provisions 79

Note 31: Non hedged foreign currency balance 79

Note 32: Issued capital 80

Note 33: Reserves 80

Note 34: Accumulated losses/retained earnings 80

Note 35: Earnings per share 81

Note 36: Dividends 81

Note 37: Leases 82

Note 38: Contingent liabilities 83

Note 39: Controlled entities 83

Note 40: Segment information 84

Note 41: Related party and specifi ed

directors and executive disclosures 85

Note 42: Subsequent events 88

Note 43: Notes to the statement of cashfl ow 88

Note 44: Financial instruments 89

Note 45: Impacts of adopting Australian

equivalents to IFRS management

of the transition A-IFRS 91

CONTENTS

01 ::

030201

Brian J McGuigan AM – Age 64

Over 46 years experience in the wine

industry, in viticulture, winemaking,

sales and marketing. The founder

and Managing Director of MSWL

until February 2006. Prior to that,

the founder and Managing Director

of Wyndham Estate Wines Limited

from 1970 to 1991 when the company

was acquired by Pernot Ricard.

He is currently Chairman of the

Newcastle Mater Misericordiae

Hospital, Deputy Chairman of Tower

Estate Wines Pty Ltd, a Director of

the Hunter Wine Country Private

Irrigation District and a Director of the

Winemakers Federation of Australia.

Ian D Ferrier AM, CA – Age 66

Fellow of The Institute of Chartered

Accountants in Australia and a

Founding Partner of Ferrier Hodgson,

one of Australia’s leading fi rms

of insolvency administrators and

reconstruction accountants. In this

capacity, he has gained extensive

experience in the management and

administration of both private and

public companies at all levels.

He is presently Chairman of Australian

Oil Limited, Invocare Limited and

a Director of Macquarie Goodman

Group and Reckon Limited.

David S Clarke AO BEc (Hons), Hon DscEcon (Syd), MBA (Harv) – Age 64

Executive Chairman of Macquarie

Bank Limited. Chairman of Macquarie

CountryWide Management Limited,

Macquarie Goodman Group,

Macquarie Offi ce Management Limited,

Macquarie ProLogis Management

Limited, the Wine Committee of the

Royal Agricultural Society of NSW,

the Sydney Advisory Board of the

Salvation Army, the Opera Australia

Capital Fund and the Sydney University

Football Club Foundation. Member of

the Investment Advisory Committee

of the Australian Olympic Foundation,

the Council of the Royal Agricultural

Society of NSW, the Harvard Business

School Asia Advisory Committee, the

Seoul International Business Advisory

Council and an honorary life member

of the Financial Markets Foundation for

Children. Governor of the Australian

Ireland Fund, Vice President of the

Sydney University Cricket Club and a

Director of The Clayton Utz Foundation.

BOARD OF DIRECTORS :: McGUIGAN SIMEON WINES LIMITED

:: 02McGUIGAN SIMEON WINES LIMITED :: BOARD OF DIRECTORS

Nicholas Greiner AC, BEc (Hons (Syd), MBA (Harv) – Age 59

Former Premier and Treasurer of

New South Wales 1988-92. Currently

Chairman of Bilfi nger Berger Australia

and Bradken Limited, Deputy Chairman

of Stockland Group and a Director of

QBE Insurance Group Limited and a

number of other private companies.

04

Perry R Gunner, BAg, Sc (Adel), Grad Dip. Bus Admin (Adel) – Age 59

Over 30 years experience in the Wine

Industry. Formerly Chairman and Chief

Executive Offi cer of Orlando Wyndham

Group Pty Ltd and Chairman of So

Natural Foods Ltd and ABB Grain Ltd.

05

Christopher L Harris, BEc (Adel), FCPA, FAICD – Age 59

Formerly CEO and Group Managing

Director of FH Faulding & Co. Ltd.

Chairman of Argo Investments Limited

and EvoGenix Limited and a Director

of Adelaide Brighton Limited, United

Water International Pty Limited and

J.M. Financial Group Ltd.

06

The Australian wine industry is probably facing the most challenging time in its history, with the oversupply of grapes showing no sign of easing.

As a consequence of our exposure to the bulk wine market, where prices have fallen dramatically, our

results were signifi cantly impacted. We generated a loss for the fi rst time in our history due to an after

tax stock write-down of $29 million. Additionally, we were unable to pay a dividend in the second half of

the year. The highlight in our results was the positive cash-fl ow of $32.9 million. This enabled us to pay

down debt by $23 million demonstrating that our company is fi nancially strong and can ride through

these diffi cult market conditions.

2006 Company PerformanceThe trends from previous years continued in 2006 with the problems caused by oversupply compounded

by further consolidation in the Australian retail environment:

:: A third large crush of 1.85 million tonnes in 2006 added to the surplus of wine in Australia:: The value of the Australian dollar remains high, impacting on the competitiveness of our exports :: The major retailers in Australia are continuing their expansion, placing pressure on our margins as

terms are standardised and costs are passed back to suppliers

I said in previous annual reports that during adversity, the strong get stronger.

I still believe that McGuigan Simeon has the right long term strategy and our

business will come out of this downturn as a stronger company.

Export sales grew by 17%, with sales in the United Kingdom up 69%. Additionally,

we are achieving our stated objective of growing our branded business with case

sales of our branded product 14% above last year.

Our ability to grow in this market is reliant on McGuigan Simeon remaining the low cost producer.

This continues to be a priority for the board and the management team.

During the year, Dane Hudson joined as CEO, replacing Brian McGuigan. The board feels that the

transition has been smooth and that Dane’s background and skill set complement the business needs.

On behalf of the Board, I would like to record our appreciation of Brian McGuigan’s efforts over the last

13 years as CEO. Although he is leaving at a diffi cult time, he has set the company up for future success.

McGuigan Simeon Wines Ltd is a company that has the scale and diversity to keep it fi nancially strong in

a diffi cult market. It is a winemaker with a strong focus on meeting customer requirements. It is market

driven, with strong customer relationships and brand expertise. Above all we have a skilled management

team who along with everyone in the company remain focused on delivering long term shareholder value.

The highlight in our results was the positive cash-fl ow

of $32.9 million.

David Clarke AO Chairman

CHAIRMAN’S REPORT :: DAVID CLARKE AO :: 04

:: 06

When I assumed responsibility from Brian McGuigan in March the challenges were clearly laid out for me, as were the opportunities. Although this has been a turbulent time for me to join the Australian wine industry, I feel confi dent about the future of McGuigan Simeon Wines.

The oversupply delivered by three large vintages is the cause of the majority of the industry’s issues.

The rough estimate is that there is now close to one billion litres of excess wine in Australia. Unfortunately

this problem will take a few more years to resolve as the industry’s excess stocks are reduced.

Our decision to reduce the value of our inventory by $29 million after tax was

diffi cult, but the right thing to do. This puts us in a better position to meet the

market price and to sell our excess product over the next 12 months.

Much has also been communicated about the challenging retail environment,

which has been driven by industry consolidation. McGuigan Simeon is well

positioned to compete due to our relationships with all the retailers and our

low cost producer status.

Our Strengths and OpportunitiesDespite the diffi cult conditions, McGuigan Simeon has four clear strengths that will enable us to grow

even during these challenging times:

01 Our international business is strong and poised for further growth. The United Kingdom is our

largest market, but as you can see from the chart below we have opportunities to grow our market

share around the world. Given its importance, we have dedicated a number of pages later in this

report to highlighting our Export business and the further opportunities that exist.

CHIEF EXECUTIVE OFFICER’S REPORT :: DANE HUDSON

McGuigan Simeonis well positioned

to compete due to ourrelationships with all

the retailers and our low cost producer status.

0 5 10 15

MSWL Share by Market MSWL Share of Australian Wine Market

MSWL Share of AustralianCrush (Excluding

Contract Wine Making)

Opportunity

United Kingdom 15%

North America 5%

Continental Europe 5%

New Zealand 6%

Asia / Other 2%

07 ::

02 In Australia we have broad distribution across the major supermarkets and throughout the

independent liquor trade. This has been achieved through the strength of our brands such as

McGuigan, Miranda and Tempus Two, and through the skills of our local sales team. Although we

have had success I am confi dent the future is even brighter. The chart below highlights that we have

solid market share in the bottled market below $10 in price, but we have low share in the $10 to $20

price range. We are currently undertaking a strategic review of our product portfolio, as there is an

opportunity to re-position some of our brands and take them to the next level.

Retail Price Point Range Core Bottled Products Approx MSWL Share of Price Segment

Below $10 Black Label 9%

Somerton

Passion Pop

$10 – 20 Bin Range 1%

Earth’s Portrait

High Country

Tempus Varietals

03 A major historic strength of McGuigan Simeon is our low cost producer status. This ensures we can

meet the aggressive prices required in today’s market and will enable us to remain one of the largest

contract wine makers in the country. I can assure you that maintaining this cost leadership position is

a continuing priority.

04 Our fi nal and probably biggest strength is our committed and talented team. Brian McGuigan

engendered a passion for the company and the products. That passion, combined with experience

and capability ensures we are one of the more nimble and responsive Australian wine companies.

The creativity and expertise which is contributed by our people every day is a source of great

pride for me.

In summary, opportunities exist in both the Export and Australian markets which we will leverage through

innovative marketing, remaining the low cost producer and utilising our experienced team’s capabilities.

Although the next two years will be challenging as the Australian wine glut is resolved, I am confi dent

that our outlook is positive. I and everyone at MSWL look forward to working with all our partners with

the goal of delivering improved fi nancial results for our shareholders.

DANE HUDSON :: CHIEF EXECUTIVE OFFICER’S REPORT

Dane Hudson Chief Executive Offi cer

0 50 100 150 200 250 300 350 400

Total Revenue ($)

2003 292.6 million

2004 323.4 million

2005 363.7 million

2006 360.8 million

0 10 20 30 40 50 60 70 80

EBITDA ($)

2003 66.3 million

2004 74.2 million

2005 67.5 million

2006 45.2 million

0 5 10 15 20 25

Dividends Paid (cents)

2003 20.0

2004 23.5

2005 23.5

2006 5.0

-10 -5 0 5 10 15 20 25 30 35

Cash Flow from Operating Activities ($)

2003 -10.0 million

2004 5.8 million

2005 2.1 million

2006 32.9 million

Key Financial Performance

:: 10

In a year that many in the wine industry are happy to see the endof, we have continued to grow our brands through a combinationof innovative marketing strategies for wines that people reallywant to drink.

We have streamlined our efforts in sales and marketing, focusing on three core brands: McGuigan

Black Label, Sunnyvale and Tempus Two. The strategy has paid off, with positive sales increases in

new markets for each of the respective brands.

McGuigan Black Label continues to evolve as we target new, younger markets and respond to the

pressure that an increasingly competitive market has placed on the brand. The addition of Rosé

exceeded expectations. Importantly the brand awareness amongst a younger wine drinking audience

is continuing to grow thanks to a number of targeted sponsorships, a series of high profi le in-store

tastings and the successful “Uncork the Cash” campaign. I am certain that this continued focus will

ensure that we are able to reverse the negative growth that has been recently experienced.

Sunnyvale sales have skyrocketed by 30% this year - the result of a new pricing strategy which we

are confi dent will continue to grow its market share.

Tempus Two marked its 9th vintage this year, and we move into our

10th anniversary year with a solid range across three proven price points:

Varietal ($12), Copper ($20) and Pewter ($30). The introduction of the Copper Range

was the major marketing activity of the year, with a concentrated public relations

campaign generating instant trade and media acceptance. The Copper activities

also reinvigorated interest in the entire Tempus Two range with key opinion leaders.

We have also cemented ourselves as a truly international brand by cracking the US

market in March this year.

Where we go from here is being carefully planned and driven by what the market is telling us. We are in

the midst of an intense market research project that covers all of our brands, from which we will develop

new strategies to be rolled out over the next 12 months.

On a personal note, I am delighted to have been given the opportunity to expand my role in marketing

to the world stage, taking on the markets of USA, UK and Asia as Global Marketing Director. As General

Manager of Icon Brands, I have spent the past 18 months working with what I consider to be Australia’s best

sales and marketing teams. I move on from that role with the goal to build our brands around the world.

Where we gofrom here is beingcarefully planned

and driven bywhat the market

is telling us.

GLOBAL MARKETING DIRECTOR’S REPORT :: LISA McGUIGAN

Lisa McGuigan Global Marketing Director

11 ::

McGuigan Simeon Wines Limited is the largest listed pure wine company in Australia. The Company is a fully integrated wine company with interests in vineyards, wine production, packaging, marketing and distribution.

Operating IncomeThe following key activities create for the Company a diversifi ed earnings base:

:: Domestic Sales – Branded:: Domestic Sales – Bulk Wine and Contract Processing:: Export Sales – Branded:: Export Sales – Bulk in Bottled and Bulk Wine:: Austfl avour – Wine Concentrate:: Vineyard Income – Owned and Leased Vineyards:: Vineyard Income – Development and Management

Domestic Sales – Branded

The formation of Icon Brands in 2001, a wholly owned distribution company, created the necessary

platform to boost sales penetration into all sectors. Icon employs a skilled and motivated sales team

with the appropriate distribution and administrative staff, providing excellent market coverage and

customer support. With the acquisition of Miranda Wines in 2003, the Company now has a full range

of domestic wine products.

From its relatively small share in market percentage, the necessary infrastructure is in place in terms of

product range, sales coverage and distribution support to permit Icon to increase its market penetration

in the years to come. Icon’s strategy is to cater for and take advantage of consolidation of retailers.

Domestic Sales – Bulk Wine and Contract Processing

The Company is the largest seller of bulk wine in Australia. The business is based on long term supply

contracts to some major Australian wine companies, providing an element of security of income for

this business.

Export Sales – Branded

The Company focuses its branded export sales business on the major export markets of United

Kingdom, Continental Europe, North America and New Zealand.

COMPANY PROFILE :: MSWL

:: 12

Export Sales – Contract Winemaking (bulk in bottled and bulk wine)This division is one of Australia’s largest exporters of wine in volume terms. Most sales in the UK are

for supermarket buyers’ own brands, either bottled in the target market or bottled in Australia.

In the USA this year most sales were to a major wine company which imports bulk wine for packaging

in the US. These types of product exposure and customer relationship allow company owned brands

to be developed in a complementary manner.

Vineyard Income – Owned and Leased VineyardsThe Company leases 2,677 hectares of vineyards from third parties, and owns 862 hectares of vineyards,

with all of the vineyards being managed by the Company. This allows greater supply security for wine

sales and greater stability in grape costs.

Vineyard Income – Development and ManagementOver the past decade the Company has built a geographic spread of managed vineyards designed to

deliver high quality grapes at low unit prices, with ownership usually vested in a third party in order to

prioritise capital towards brand marketing and inventory.

During the year the Company continued developing the Del Rios Vineyard (940ha).

Income is derived as manager and/or developer, usually on a cost plus basis, and provides a steady

income stream. This area of the business allows management control to be exercised over a proportion

of our own winemaking.

MSWL :: COMPANY PROFILE

13 ::

Company AssetsThe Company is committed to being at the leading edge of vineyard and winery technology. From this

base of excellence it is our commitment to continue world best practice, ensuring we deliver a service

to all customers in excess of their expectations.

Wineries

The Company’s wineries fall into two distinct categories – the large production based wineries and the

brand-linked wineries.

Production Wineries

Buronga Hill Winery near Mildura, Victoria, crushed 133,000 tonnes of grapes in 2006, in line with 2005.

Most of the grapes are purchased from contracted third party growers. This modern and effi cient winery

uses the latest winemaking technology and has one of the lowest unit costs of production in the world.

Due to its large scale batch processing confi guration, most of Buronga Hill’s output is sold to contract

winemaking customers, both domestically and overseas.

Loxton Winery is located in the heart of South Australia’s Murray Valley. In vintage 2006 the winery

crushed 87,000 tonnes of grapes, in line with 2005. A large proportion of the throughput comes from

Company owned or managed vineyards. As such, and due to smaller tank confi gurations, the Loxton

winery plays an important role in preparing and blending wines for own brand bottled sales.

Brand Linked Wineries

McGuigan Cellars located in the Hunter Valley, NSW, has a capacity of 5,000 tonnes, and is used primarily

for local Hunter fruit crushing, winemaking, maturation and bottling of premium branded products.

Yaldara Winery is situated in the Barossa Valley, SA. At 10,000 tonnes capacity this winery processes

small batch local fruit, the resultant wine being used in blends of higher priced bottled product.

Tempus Two Winery focuses solely on super premium winemaking for the Pewter label, as well

as providing the home and infrastructure for the whole range of Tempus Two wines, its imagery

and its focus.

COMPANY PROFILE :: MSWL

:: 14

Vineyards

The Company owns 862 hectares of vineyards, located in the Riverland, Cowra and Barossa Valley

regions. The Company also leases 2,677 hectares of vineyards.

Additionally, the Company has recently completed the development of 940 hectares of vineyards

located near Swan Hill, Victoria. This vineyard is being fi nanced by a third party.

Austfl avour is located at the Loxton winery, and is primarily a grape concentrating business.

De-alcoholisation of wine and the production of wine aromas are also functions of this division.

Merbein is a bottling and warehousing operation that MSWL acquired in 2005. It is located in Merbein

near Mildura in Victoria. Included is a winery with 17 million litres bulk wine storage capability.

The bottling operation has a capacity in excess of 4 million cases per annum. This facility is

strategically located near the Buronga Hill winery and is now in full production.

Cellar Door

Cellar door sales continue to play a vital role in brand exposure. The Company’s well established

McGuigan Cellars in the Hunter Valley is one of the most visited cellar door facilities in the world.

The recently refurbished Yaldara Barossa facility and the Tempus Two Winery in the Hunter will

provide further brand exposure for our products.

MSWL :: COMPANY PROFILE

15 :: COMPANY PROFILE :: MSWL

:: 16MSWL :: COMPANY PROFILE

Our export business continued with a solidyear of growth in 2006, following the previous year’s excellent performance and demonstrating the strong potential ahead. We are focusing on maximising opportunities in new markets, as well as building on our strengths in existing markets.

We will continue to grow through refi ning and extending the product

range, enabling our consumers to trade up to more premium products

and extending the diversity of products suitable to each market.

We have established strong distribution relationships and will work

to build on these as well as exploring and developing new trading

opportunities to realise our export potential.

North America

Biggest Growth Opportunity

The North American market is MSWL’s biggest area of potential

growth. We have recently expanded our export team to give the

North American market greater focus and are currently developing

new trading relationships.

Our business in the North American market is dominated by

Black Swan, a brand that is owned and distributed by E & J Gallo

Winery, but a product produced by MSWL. In 2005/06, a total volume

of 1.2 million cases were sold in the US.

Tempus Two Off to a Good Start

A new importer was appointed during the last year and they have

made a positive start, with over 30 distributors now selling the brand.

The importer is planning to expand the portfolio available, increasing

the number of products from 2 to 5 by the end of the year. Initial sales

fi gures are promising and a strengthened offer will help realise the

brand’s potential.

Future Opportunities

Over the next 12 months we will be signifi cantly increasing our focus on

this market to seize a greater share of the Australian wine market, which

is a total of 265 million litres.

17 :: EXPORT PROFILE :: MSWL

:: 18

UK, Ireland & Europe

Stable Team Delivers Growth

The success in the United Kingdom and Europe has been very strong

with bottled sales topping two million cases this year, an increase of

24% over the previous year. This growth has been driven by excellent

distribution through the UK multiple supermarkets including two of

the largest supermarkets (Tesco & Sainsbury’s) and the leading wine

specialist (Majestic).

Good Market Share and More to Come

The UK is a fi ercely competitive market but we have outperformed in

terms of total share of Australian wine sales. The strategy in the UK and

Europe is to continue growing the branded sales while maintaining our

competitive edge in the own label and exclusive label market. Branded

sales have grown by nearly 100% from 531,000 cases last year to 1.05

million cases this year.

High Performance Brands

The United Kingdom has proven to be a tremendous market with

strong relationships across most retailers and the independent sector.

Highlights include Calloway Crossing, which sells over half a million

cases through Tesco each year and is now the 17th largest selling

supermarket brand in the UK. Another highlight is McGuigan Black

Label with over 275,000 cases sold across England, Ireland, Scotland and

Wales. McGuigan Black Label launched in Ireland in 1993 and is now the

country’s biggest selling red with over 150,000 cases sold last year.

Off Licence News Wine Report 2006

McGuigan wines was the fastest growing wine brand in the supermarkets

and wine specialist retailers during the year, debuting in the Top 100

Brands at number 27 (OLN Wine Report 2006). We expect to continue

to outperform total Australian market growth, currently at 4% for the

last 12 months.

Supermarket Label Brands

McGuigan Estate, McGuigan Signature and McGuigan Selection are

bespoke retailer brands launched in the UK over the last 18 months.

These wines have allowed us to maximise listing opportunities and at

the same time develop a much stronger co-ordinated branded

presence for McGuigan in the UK and Ireland.

MSWL :: EXPORT PROFILE

19 ::

McGuigan Gold

Importantly, we achieved the 4th National supermarket listing for McGuigan Gold during the year. This is

a major achievement, being the fi rst time a McGuigan brand has had such broad distribution in the UK

multiple supermarket trade. Gold will continue to be a key focus and component of our marketing plans.

Bibendum Distributing Tempus Two

Bibendum Wine Limited was appointed in January as trade distributor for Tempus Two in the UK.

Long recognised as a leading on-trade distributor in the UK, Bibendum has already had success,

placing Tempus Two in some top London restaurants including Gordon Ramsay at Claridges and

China Tang at the Dorchester Hotel.

Bibendum is also distributing Tempus Two to a wide range of independent liquor stores across

the UK. A recent AC Neilson survey showed that Tempus Two sales have grown by over 50% in

the last 12 months in the UK and continued growth is expected.

Volumes up across 10 Countries

Outside of UK and Ireland, European sales have increased by over 100% in the last year. Countries now

stocking McGuigan wines include Denmark, Belgium, France, Sweden, Russia, Finland, Luxemburg,

Holland, Estonia, and Iceland, as we have benefi ted from developing new distribution routes.

European Highlights

In Finland around 50,000 cases of MSWL wine were sold since November last year, with Crocodile Rock

Cabernet Merlot now the second biggest selling Australian Red wine in Finland. Recently, Bin 3000

Merlot was named “Red Wine of the Year” at the Finland national Wine Show.

EXPORT PROFILE :: MSWL

:: 20

Asia

An Emerging Region for MSWL

Sales in Asia are relatively small at the moment but we are building relationships across the region.

Sales grew by 25% during the year and the number of enquiries received, continues to be strong.

Targeting China and Japan

We expect to see these emerging markets becoming major contributors to our export fi gures over the

next 2-3 years. We are targeting several markets in particular, such as China and Japan where growth

prospects are the largest.

We appointed seven new distributors into China during the year, taking our sales relationship to twelve

customers, covering various provinces. We expect that our sales will increase as momentum for our

brands build. There are also several Own Label and Bulk Wine opportunities available and we expect

to grow our sales in this important area too.

Leveraging Existing Relationships

We are using existing relationships in other markets with contacts into the Asia region to build our sales

and market coverage. Our strong relationship with Tesco is opening doors in other markets around the

world and we recently sent our fi rst containers of product into their stores in South Korea and Japan.

New Zealand

Pricing Competition

New Zealand has historically been a successful market for MSWL but has been infl uenced by the

same competitive factors as the Australian wine industry. As a consequence we have lost market

share with Black Label and Miranda. We are working with our distributor to develop marketing

and promotional plans in order to turn around the performance. The market in New Zealand has

changed and we are altering our strategy accordingly, in conjunction with our distributor.

MSWL :: EXPORT PROFILE

21 ::

The Directors are responsible for the corporate governance practices of the Company. This statement sets out the main corporate governance practices of the Company which the Directors, Management and Employees of the Company are required to follow. As at the date of this report, the Company’s corporate governance practices have complied with the “Principles of Good Corporate Governance and Best Practice Recommendations” published by the Corporate Governance Council of the Australian Stock Exchange.

Corporate Governance is the system or process by which a company is directed or controlled. It is

concerned with the manner in which the Directors ensure that an organisation’s systems and processes are

properly controlled and functioning effectively and that management is complying with the policies and

directives of the Board. Corporate Governance structures provide a controlled process for risks taken by

a company to be subjected to accountability and control systems commensurate with the risks involved.

Board of DirectorsBoard information contained in this Corporate Governance Statement and the Board Charter can be

found at www.mswl.com.au.

The primary responsibilities of the Board include:

:: The establishment of the long term goals of the Company and strategic plans to achieve those goals;:: Ensuring that the Company has implemented adequate systems of internal controls and codes of

conduct together with appropriate monitoring of compliance activities; and:: Provision of strategic guidance for the Company and oversight of management of the Company

including ensuring that systems are in place to facilitate the effective management of the principal

risks of the Company; and:: Appointing and overseeing the Chief Executive Offi cer and ratifying the appointments of the

Chief Financial Offi cer and the Company Secretary; and :: The review and adoption of annual budgets for the fi nancial performance of the Company and

monitoring the results on a monthly basis; and :: Establishment of proper succession plans for management of the Company.

Composition and Criteria of Board MembershipThe criteria for Board membership is to create a balanced and informed Board to assist the Company

in making decisions relating to all corporate matters. New Directors are nominated by existing Board

Members and invited to become members on the basis of a majority vote of Directors. Consideration

is given to Directors’ experience and qualifi cations with a view to ensuring effectiveness and an

appropriate balance of skills.

CORPORATE GOVERNANCE STATEMENT :: MSWL

:: 22

The Board is to comprise of a majority of non-executive Directors where the Chairman of the Board

is also a non-executive Director and hence not the Chief Executive Offi cer (Managing Director).

Non-executive Directors are appointed for an indefi nite period on terms and conditions voted on from

time to time. With the exception of the Chairman all non-executive Directors are appointed on the

same terms and conditions. No Director, other than the Chief Executive Offi cer (Managing Director),

shall hold offi ce for any longer than three years without submitting themselves for re-election.

The skills, experience and expertise of each Director is detailed in this Annual Report.

Board Independence

The Board currently consists of:

David S Clarke Chairman Independent Non Executive

Dane B Hudson Chief Executive Offi cer Non Independent Executive

Brian J McGuigan Non Independent Executive

Ian D Ferrier Independent Non Executive

Nicholas F Greiner Independent Non Executive

Perry R Gunner Non Independent Non Executive

Christopher L Harris Independent Non Executive

There are several tests that are applied in determining the independence of each Director.

An independent Director must:

:: Not be a substantial shareholder of the Company;:: Not have been employed in an executive capacity within the Company in the last three years;:: Not have acted as a material professional adviser or consultant, or a material supplier or

contractor to the Company within the last three years. :: Not have been associated with or employed by another entity in which the Company has

a material fi nancial relationship, where material signifi es greater than 5%.:: Not have served on the Board for a length of time that would be considered to materially

affect the Director’s ability to act in the best interest of the Company.

Since the 2002 merger with Simeon Wines Limited the remaining Directors have refocused on the

merged Company. It is this refocusing on the Company, with a different profi le from either of the

original companies, that permits each Director’s tenure to effectively begin from 1 July 2002.

Current length of time on the Board is therefore not considered to materially affect a Director’s

capacity to act in the best interests of the Company.

:: Be free from any interest or business which could be perceived as having a material effect

on the Company, or the best interests of the Company.

MSWL :: CORPORATE GOVERNANCE STATEMENT

23 ::

Each non-executive Director was considered to be free of any relationship that could possibly interfere

with the Director acting in the best interests of the Company. Accordingly, a majority of the Board is

considered independent.

Board and Executive Performance EvaluationThe Board undertakes a peer assessment review of the performance of Directors at its annual ‘think tank’

in December of each year. A formal performance evaluation of Board members was not conducted in

the reporting period although the Chairman continuously assesses Board performance.

The Chief Executive Offi cer reviews performance of key executives continuously on an informal basis

(by assessing achievements against budgets and other goals and key performance indicators) and at

least once in each year on a formal basis with a face to face performance review.

These reviews are conducted generally in accordance with the guidelines set out in the Board

Performance Measurement Paper which is available at www.mswl.com.au.

Relationship with Management The management of the Company is conducted by the Chief Executive Offi cer. The Chief Executive

Offi cer is accountable to the Board for all authority delegated to executive management. The roles of

Chairman and Chief Executive Offi cer are separate.

The division of responsibilities between the Board and management is set out in the Board Charter

available at www.mswl.com.au.

Independent Professional AdviceWith the prior approval of the Chairman, each Director has the right to seek independent legal

and other professional advice at the Company’s expense concerning any aspect of the Company’s

operations or undertakings in order to fulfi ll their duties and responsibilities as Directors.

CommitteesThe Board has established three separate committees of Directors, namely the Audit Committee, the

Remuneration and Nomination Committee and the Occupational Health and Safety and Environment

Committee. Each committee has a dedicated Terms of Reference and Committee Charter which can be

viewed at www.mswl.com.au.


:: 24

Audit Committee (incorporating corporate governance)The Audit Committee consists of three independent non-executive Directors.

The current members of the Audit Committee are:

:: Ian D Ferrier (Chairman):: Nicholas F Greiner:: Christopher L Harris

The nomination and review of existing audit arrangements is undertaken by the Audit Committee.

The Audit Committee addresses issues surrounding the integrity of fi nancial information presented

to the Board and shareholders, including the review of external auditor engagements and internal

fi nancial reporting policies and controls.

The Audit Committee is responsible for reviewing the consistency of the Company’s internal

audit policies on a year to year basis as well as their compliance with relevant accounting standards

and legislation.

The Audit Committee also advises the Board and makes recommendations in relation to policy and

procedures and application of principles of Corporate Governance. The Committee addresses issues

of proper Corporate Governance procedures and practices in order to ensure that the Company

maintains the highest integrity and best practice with respect to such matters.

The Audit Committee generally invites the Chief Financial Offi cer and (on suitable occasions) external

auditors to attend Audit Committee meetings.

The Chief Financial offi cer and Chief Executive Offi cer state in writing to the Board that the Company’s

fi nancial reports present a true and fair value in all material respects of the Company’s fi nancial condition

and operational results and are in accordance with relevant accounting standards. The integrity of the

reports is founded on a system of sound risk management and internal compliance and control.

Remuneration and Nomination Committee The Remuneration and Nomination Committee consists of three independent non-executive Directors.

The current members of the Remuneration and Nomination Committee are:

:: David S Clarke (Chairman):: Ian D Ferrier:: Nicholas F Greiner

The procedure for establishing and reviewing remuneration for senior executives and non-executive

members of the Board is undertaken by the Nomination and Remuneration Committee.

The determination of actual remuneration of non-executive Directors is done by shareholders in

general meeting.

Particulars concerning Directors’ and Executives’ remuneration and the Company’s executive and

employee share option plan are set out in notes to the fi nancial statements.


25 ::

The criteria for selection of Board Members are determined by, and the recommendation of Board

Members is carried out by, the Nomination and Remuneration Committee. Consideration is given to the

Director’s experience and qualifi cations with a view to ensuring effectiveness and an appropriate balance

of skills. A regular review of the structure, size and composition of the Board is also to be undertaken by

the Nomination and Remuneration Committee as well as recommendations as to Board succession plans.

The Company’s Remuneration Policy, available at www.mswl.com.au, describes the Company’s

remuneration policies and the rationale behind them. As indicated in the Remuneration Policy,

there is clear delineation between the manner in which non-executive directors are remunerated and

the remuneration of executives of the Company. Non-executive directors are paid their remuneration

almost entirely as ordinary shares in the Company. Executives are paid primarily by cash salary

(and in some cases, with performance bonuses and share options as well).

For more information on the Company’s remuneration policies, see the Remuneration Report within

this Annual Report.

Company-issued options for executives are given subject to the McGuigan Simeon Wines Executive

and Senior Employees Option Scheme which received approval of the shareholders of the Company on

11 November 1997. For further information regarding Executive remuneration through options see the

Remuneration Report in this Annual Report and the ASX Corporate Governance Guidelines - MSWL’s

Position at www.mswl.com.au.

Occupational Health and Safety and Environment Committee The Occupational Health and Safety and Environment Committee (“OH&S Committee”) consists of two

non-executive Directors. The current members of the OH&S Committee are:

:: Perry R Gunner (Chairman):: Christopher L Harris

The occupational health and safety related duties of the OH&S Committee include:

:: Establishment and supervision of broad policies on matters of occupational health and safety

including ensuring documented management systems are established; and:: Establishment of occupational health and safety responsibilities for employees and all levels

of management; and:: Evaluation of the Company’s occupational health and safety performance on a regular basis; and:: Protection of workplace safety to the greatest extent including ensuring that all relevant

legislation is complied with.


:: 26

The environmentally related duties of the OH&S Committee include:

:: Establishment and supervision of broad policies on matters of environmental compliance and

protection of the environment generally; and:: Keeping up to date with the environmental issues facing the Company and the industry generally; and:: Establishment of management responsibility for environmental matters and evaluation of the

Company’s environmental performance and progress.

The OH&S Committee generally invites the Chief Executive Offi cer, Company Secretary, Group

Production Manager and National Vineyard Manager to its meetings.

Risk ManagementThe Board identifi es and discusses areas of signifi cant business risk. The Board ensures processes

are in place to manage those risks and reviews those arrangements at monthly Board meetings.

The Board ensures that appropriate insurance programmes for the Company are also in place to provide

insurance cover in areas of the business assessed as appropriate for cover having regard for all of the

relevant circumstances.

Formal risk analysis and management of material risks to the company’s operations include formal

HACCP Australian Food safety accreditation programmes on vineyards and at wineries and bottling

plants and the implementation of an OH&S and audit committee as described in this report.

The Company’s Risk Oversight and Management Policy can be viewed at www.mswl.com.au.

Code of ConductThe Board and management ensure that the business processes of the Company are at all times

conducted according to sound ethical and legal principles. The Board has established a formal Ethics

and General Conduct Code in this regard which can be viewed at www.mswl.com.au.

The Code deals with issues including confi dentiality, fair dealing, corporate fi duciary duties, care and

diligence as well as the action to be taken in the event of failure to comply with the Code.

The Company has also implemented a Confi dentiality Policy relating to matters including amongst

others the non-disclosure of business affairs, trade secrets and customer information. This Policy is

available at www.mswl.com.au.

Shareholders and Continuous DisclosureThe Board has primary responsibility to the shareholders as owners of the Company. Shareholders also

play a key direct role in the Company’s Governance by electing the Directors of the Company at the

Annual General Meeting.

Shareholders and the market generally receive information from the Company through distribution of

the Annual Report, the Half Yearly Report, the Chairman’s and Chief Executive Offi cer’s addresses to the

Annual General Meeting and through the release of announcements from time to time in compliance


27 ::

with the Company’s responsibilities to make continuous disclosure under the Australian Stock Exchange

Listing Rules and the Corporations Act 2001.

The company has implemented a Continuous Disclosure Policy and a Communications with

Shareholders and other Stakeholders Strategy both of which are available at www.mswl.com.au.

Material shareholder information is also available on the Company’s website.

The Company’s external auditor attends the Annual General Meeting of the Company and is available

to answer questions from shareholders about the conduct of the audit and the preparation and content

of the Audit Report.

Directors Trading in McGuigan Simeon SharesThe Company has implemented a share trading policy as set out in the Corporate Governance

Statement available at www.mswl.com.au

The policy requires that directors and their associates neither buy nor sell shares when they possess

inside information nor engage in short term selling of Company shares. Directors and Offi cers are

to notify the Board in advance of any intended material transactions involving the Company’s shares.

Directors and Offi cers (and their associates) are also not permitted to trade in Company shares within

one month of the:

:: Release of the annual fi nancial reports; and :: Release of the half yearly fi nancial reports; and the:: Annual General Meeting.

Director Related TransactionsThe Company has implemented a policy on Director Related Transactions as part of its Corporate

Governance Statement available at www.mswl.com.au.

The policy mandates that all Director-related transactions be recorded in a register. Any material

transactions (where total value of transactions for an individual Director exceed $10,000 per annum)

are then reviewed by the Chairman to ensure that no potential confl ict of interest exists and that such

transactions are made on an arm’s-length commercial basis. The Chairman of the Audit Committee, with

assistance from the Company Secretary and External Auditors, will be asked to verify the validity of

the transactions and report to the Board.

All Company corporate Governance charters, policies and procedures are publicly available.

The details to source this information can be located on the McGuigan Simeon Wines Limited

website – www.mswl.com.au.


:: 28MSWL :: SHAREHOLDERS’ INFORMATION

The shareholders’ information set out below was applicable at 6th September, 2006.

Shareholders

Distribution of Shareholders

Analysis of shareholders of fully paid ordinary shares by size of holding:-

NUMBER OF SHARES NUMBER OF SHAREHOLDERS

1 – 1,000 3,463

1,001 – 5,000 5,276

5,001 – 10,000 1,144

10,001 – 100,000 718

100,001 – over 47

10,648

The percentage of the total holding of the twenty largest holders of Ordinary Shares was 64%.

Substantial ShareholdersThe names of substantial shareholders who have notifi ed the Company in accordance with section

671B of the Corporations Law are:-

NAME ORDINARY SHARES

Brandes Investment Partners, L.P. 13,420,000

Maple Brown Abbott 11,313,068

Schroder Investment Management Australia Limited 11,280,630

FMR Corp and FIL 10,971,775

State Teachers Retirement System of Ohio 6,045,000

Morgan Stanley Investment Management 5,947,593

Voting RightsThe voting rights attached to the shares are as follows:-

On a show of hands, every member present in person or by proxy shall have one vote and

upon a poll each share shall have one vote.

Other InformationShareholders enquiries should be addressed to McGuigan Simeon Wines’ Company Secretary

on (08) 8172 8333 or the Company’s Share Registry, Computershare Investor Services Pty Ltd

on 1300 556 161 (within Australia) or 61 3 9415 4000 (outside Australia).

29 ::

Change of AddressShareholders who have changed their address should advise the Company’s Share Registry in writing.

Direct Credit of DividendsDividends may be paid directly to a shareholder’s nominated Australian bank or building society

account. A form for this purpose is available from the Company’s Share Registry on request.

Removal from Annual Report Mailing ListShareholders who do not wish to receive an Annual Report should advise the

Company Share Registry in writing.

20 Largest ShareholdersThe names of the 20 largest holders of Ordinary Shares are as follows:-

NUMBER OF ORDINARY % OF LISTEDSHARES HELD SHARES HELD SHARES

1. JP Morgan Nominees Australia Limited 15,922,791 13.26

2. Westpac Custodian Nominees Limited 14,555,123 12.12

3. National Nominees Limited 13,974,061 11.63

4. RBC Global Services Australia Nominees Pty Limited 11,997,790 9.99

5. Citicorp Nominees Pty Limited 5,082,859 4.23

6. ANZ Nominees Limited 4,259,301 3.55

7. Cogent Nominees Pty Limited 2,217,944 1.85

8. Queensland Investment Corporation 1,541,765 1.28

9. E & J Gallo Winery 1,489,000 1.24

10. Argo Investments Limited 1,098,906 0.91

11. Questor Financial Services Limited 997,460 0.83

12. Warbont Nominees Pty Ltd 549,615 0.46

13. Leatrice Pty Limited 459,000 0.38

14. Mr. George Hampton Andrew 450,000 0.37

15. Fleet Nominees Pty Limited 424,358 0.97

16. Milton Corporation Limited 403,383 0.34

17. Starmay Superannuation Pty Limited 388,192 0.32

18. HSBC Custody Nominees (Australia) Limited 386,208 0.32

19. Leebrook Global Investments Limited 385,000 0.32

20. Irrewarra Investments Pty Ltd 332,237 0.28

Total of Top 20 Shareholders 76,914,993 64.06

Total number of shares 120,059,059 100.00

SHAREHOLDERS’ INFORMATION :: MSWL

The Directors of McGuigan Simeon Wines Limited submit herewith the annual fi nancial report for the fi nancial year ended 30 June 2006. In order to comply with the provisions of the Corporations Act 2001, the Directors Report as follows:

DirectorsThe names and particulars of the Directors of the Company during or since the end of the fi nancial year are:

David S Clarke AO B. Ec (Hons), Hon D. Sc. Econ (Syd), MBA (Harv), Age 64

(Chairman) Director since 20 November 1991

Executive Chairman of Macquarie Bank Limited. Chairman of Macquarie Country Wide Management Limited,

Macquarie Goodman Group, Macquarie Offi ce Management Limited, Macquarie ProLogis Management

Limited, the Wine Committee of the Royal Agricultural Society of NSW, the Sydney Advisory Board of the

Salvation Army, the Opera Australia Capital Fund and the Sydney University Football Club Foundation.

Member of the Investment Advisory Committee of the Australian Olympic Foundation, the Council of the Royal

Agricultural Society of NSW, the Harvard Business School Asia Advisory Committee, the Seoul International

Business Advisory Council and an honorary life member of the Financial Markets Foundation for Children.

Governor of the Australian Ireland Fund, Vice President of the Sydney University Cricket Club and a Director

of The Clayton Utz Foundation.

Dane B Hudson, B.E. (Chem) Hons, MBA, Age 44

(Chief Executive Offi cer) Director since 22 February 2006

Dane Hudson joins McGuigan Simeon Wines Ltd from Yum Brands Inc (formerly PepsiCo Restaurants) in Dallas

Texas where he was Senior Vice President and International Chief Finance, Development and Procurement

Offi cer for the business outside of the US. Educated at the University of Sydney, where he received an honours

degree in Chemical Engineering, and at Columbia Business School in New York, where he was awarded an

MBA with majors in Finance and Management of Organisations. Dane has previously worked with Visy Board

Pty Ltd and Booz Allen and Hamilton before leaving the fi rm in 1994 to join the PepsiCo Group in its Restaurant

division (Pizza Hut and KFC).

Brian J McGuigan AM, Age 64

(Executive Director) Director since 20 November 1991

Over 46 years experience in the wine industry, in viticulture, winemaking, sales and marketing. The founder

and Managing Director of MSWL until February 2006. Prior to that, the founder and Managing Director of

Wyndham Estate Wines Limited from 1970 to 1991 when the company was acquired by Pernot Ricard. He is

currently Chairman of the Newcastle Mater Misericordiae Hospital, Deputy Chairman of Tower Estate Wines

Pty Ltd, a Director of the Hunter Wine Country Private Irrigation District and a Director of the Winemakers

Federation of Australia.

MSWL :: DIRECTORS’ REPORT :: 30

Ian D Ferrier AM, CA, Age 66

(Non-executive - Chairman of the Audit Committee) Director since 20 November 1991

Fellow of The Institute of Chartered Accountants in Australia and a Founding Partner of Ferrier Hodgson, one

of Australia’s leading fi rms of insolvency administrators and reconstruction accountants. In this capacity, he has

gained extensive experience in the management and administration of both private and public companies

at all levels. He is presently Chairman of Australian Oil Limited, Invocare Limited and a Director of Macquarie

Goodman Group and Reckon Limited.

Nicholas F Greiner AC, B. Ec (Hons) (Syd), MBA (Harv), Age 59

(Non-executive) Director since 11 September 1992

Former Premier and Treasurer of New South Wales 1988-92. Currently Chairman of Bilfi nger Berger Australia

and Bradken Limited, Deputy Chairman of Stockland Group and a Director of QBE Insurance Group Limited

and a number of other private companies.

Perry R Gunner B. Ag. Sc.(Adel) Grad. Dep. Bus. Admin (Adel) Age 59

(Non-executive) Director since 28 June 2002

Over 30 years experience in the WineIndustry. Formerly Chairman and Chief Executive Offi cer of Orlando

Wyndham Group Pty Ltd and Chairman of So Natural Foods Ltd and ABB Grain Ltd.

Christopher L Harris B. Ec (Adel), FCPA, FAICD Age 59

(Non-executive) Director since 28 June 2002.

Formerly CEO and Group Managing Director of FH Faulding & Co. Ltd. Chairman of Argo Investments Limited

and EvoGenix Limited, and a Director of Adelaide Brighton Limited, United Water International Pty Limited

and J.M. Financial Group Ltd.

31 :: DIRECTORS’ REPORT :: MSWL

Directorships of other listed companiesDirectorships of other listed companies held by Directors in the 3 years immediately before the end of the

fi nancial year are as follows:

NAME COMPANY PERIOD OF DIRECTORSHIP

David S Clarke Macquarie Bank Limited Since 1985

Macquarie Offi ce Trust Since 2000

Macquarie ProLogis Trust Since 2002

Macquarie Goodman Group Since 2000

Macquarie CountryWide Trust Since 2000

Ian D Ferrier Invocare Limited Since 2001

Macquarie Goodman Group Since 2003

Reckon Limited Since 2004

Australian Oil Company Limited Since 2005

Christopher L Harris Argo Investments Limited Since 1994

Adelaide Bank Limited From 1994-2003

Adelaide Brighton Limited Since 1995

EvoGenix Limited Since 2004

Perry R Gunner ABB Grain Limited Since 2004

So Natural Foods Limited Since 2003

Nicholas F Greiner Bradken Limited Since 2004

Stockland Corporation Limited Since 1992

QBE Insurance Group Limited Since 1992


Company Secretary

Michael H Noack (appointed 23 November 2005)

B Accountancy (University of South Australia), Fellow of ASCPA, Graduate Diploma in Systems Analysis

(University of South Australia) and Fellow of the Chartered Secretaries Australia. Michael has been with

McGuigan Simeon Wines Limited since the merger in 2002 and was previously Chief Financial Offi cer and

Company Secretary of Simeon Wines Limited. Currently in the role of Company Secretary, Michael has been

the Chief Financial Offi cer since 2002.

Andrew S White (resigned 23 November 2005)

B Arts (Sydney University), B Law (Sydney University), Member of NSW Law Society. Andrew commenced

employment with McGuigan Simeon Wines Limited in 2002 as Company Secretary and also spent 12 months

as General Manager of our Griffi th operations. Andrew’s previous experience was as a solicitor practicing in the

areas of property, wine/liquor and the environment.

Principal Activities

The consolidated entity’s principal activities in the course of the fi nancial year were wine making, wine

marketing, vineyard management and development.

Changes in State of Affairs

During the fi nancial year there was no signifi cant change in the state of affairs of the consolidated entity other

than that referred to in the fi nancial statements or notes thereto.

Environmental Regulations

The consolidated entity holds licences issued by the Environmental Protection Authorities in various states

which specify limits associated with the discharge of the winery operations. There have been no signifi cant

known breaches of the licence conditions.

Future Developments

Disclosure of information regarding likely developments in the operations of the consolidated entity in future

fi nancial years and the expected results of these operations is likely to result in unreasonable prejudice to the

consolidated entity. Accordingly, this information has not been disclosed in this report.

Review of operationsThis report is to be read in conjunction with other reports issued contemporaneously.

Operational Review:: EBITA (excluding inventory write down) decreased by 40% to $34.4 million due to reduced margins in all

divisions resulting from oversupply, retail consolidation and severe competition.

Sales:: Double digit volume growth to 187.1 million litres, up 10% on the previous year with signifi cant increase in

export volumes and contract processing.


:: Domestic volumes fell 6% to 74.0 million litres. The Australian retail environment is extremely competitive

with wine companies fi ghting to clear stocks on the domestic bulk wine market. The brand market was

characterised by discounting and cleanskins. Continuing retail consolidation has further pressured margins.:: Contract processing increased 27% to 36.4 million litres due to the establishment of further processing

agreements.

Export:: Export volumes improved 21% to 76.7 million litres and underpinned McGuigan’s result (before inventory

write down).:: Sales into the UK were up 69% to $145.8 million based on strong brand growth into major retail outlets.

Bottled growth was up 100%.:: Sales into the US were down by 50% to $25 million, partly as a result of a change from bottled to bulk supply

arrangements for Black Swan.:: Sales into Europe and Asia were below last year due mainly to reduced volumes of bulk wine shipments.:: Sales into New Zealand were also lower due to a reduction in bulk wine sales and as a result of the

competitive market.:: Australian dollar strength increased export attractiveness of producers from other countries including USA,

South Africa and South America.

Dividends

In respect of the fi nancial year ended 30 June 2005, as detailed in the Directors’ Report for that fi nancial year, a

fi nal dividend of 13.25 cents per share was paid to the holders of fully paid ordinary shares on 22nd November

2005. This dividend was franked to 100% at the 30% corporate income tax rate. In respect of the fi nancial year

ended 30 June 2006, an interim dividend of 5.00 cents per share was paid to the holders of fully paid ordinary

shares on 27 March 2006. This dividend was franked to 100% at the 30% corporate income tax rate. In respect

of the fi nancial year ended 30 June 2006, there will be no fi nal dividend.

Share Options

During and since the end of the fi nancial year, an aggregate of 495,544 share options were granted to Directors

and Executives over issued shares by the Company:

DIRECTORS AND NUMBER OF EXERCISE NUMBER OF ORDINARYEXECUTIVES OPTIONS GRANTED ISSUING ENTITY PRICE SHARES UNDER OPTION

Dane B Hudson 150,000 McGuigan Simeon Wines Ltd 3.10 150,000

260,000 McGuigan Simeon Wines Ltd 4.00 260,000

Neil McGuigan 85,544 McGuigan Simeon Wines Ltd 4.36 85,544

There were no share options granted to Directors or Executives over unissued shares by the company.


Executive and Employee Share Option Plans

During and since the end of the fi nancial year the Company did not grant any share options over unissued

ordinary shares to Executives and employees of the Company. 144,000 shares were issued during or since the

end of the fi nancial year as a result of the exercise of options under the Executive and Employee Share Option

Plans. The amount paid for the exercise of the options is detailed in note 6 of the attached fi nancial statements.

The difference between the market price of the company’s shares, at the date the options were issued, and

the exercise price of the option, is not recognised in the fi nancial statements except for the purpose of

determining Directors’ and Executives’ remuneration in notes to the fi nancial statements.

During and since the end of the year the Company granted 85,544 share options over issued ordinary shares to

Executives and employees of the Company. There were no options over issued shares as at 30th June 2005 and

there were no options over issued shares exercised during the year.

In accordance with the provisions of the Company’s share option plans, as at the date of this report, Executives

and employees are entitled to purchase an aggregate of 1,653,000 ordinary shares of McGuigan Simeon Wines

Limited at an issue price of; $2.890 (175,000 shares expiring 6 October 2005); $3.487 (323,500 shares expiring 25

September 2006) and $4.072 (1,155,000 shares expiring 2 September 2008). The holders of such options do not

have the right, by virtue of the options, to participate in any share issue of the Company.

Further details of the non-executive Directors’ share scheme and the Executive and senior employee option

scheme are disclosed in notes 4 and 5 to the fi nancial statements.

Share options issued prior to 1 July 2003 cannot be exercised within the fi rst three years and are subject to the

Company meeting a performance hurdle. The performance hurdle is that the relevant tranche of options can

only be exercised if, at the time of exercise, the Company’s average annual return on average shareholders’

equity for the previous two fi nancial years is at or above the 55th percentile of the corresponding fi gures for all

companies in the ASX All Ordinaries Index. Share options issued after 1 July 2003 cannot be exercised within

the fi rst two years.

For the purpose of the disclosure ‘Executive’ is defi ned as an individual who is responsible for strategic

planning, management and performance of a division or function and reports directly to the

Chief Executive Offi cer.

Directors’ Meetings

The following table sets out the number of Directors’ meetings (including meetings of Committees of

Directors) held during the fi nancial year and the number of meetings attended by each Director (while they

were a Director or Committee Member).

During the fi nancial year the company held 13 Board Meetings, 3 Audit Committee Meetings,

and 1 Remuneration Committee meeting.


DIRECTORS MEETINGS ATTENDED AUDITS ATTENDED REMUNERATIONS ATTENDED

David S Clarke 13 - 1

Dane B Hudson* 6 1 1

Brian J McGuigan 12 2 -

Ian D Ferrier 13 3 1

Nicholas F Greiner 10 2 -

Perry R Gunner 13 - -

Christopher L Harris 13 3 -

Total Meetings Held 13 3 1

* Director since 22nd February 2006.

An Occupational Health, Safety and Environment Committee meeting was held on 20th September 2006.

Directors’ Shareholdings

The following table sets out each Director’s relevant interest in shares and options in shares of the Company as

at the date of this report.

FULLY PAID ORDINARY SHARES EXECUTIVE SHARE OPTIONS

David S Clarke 908,000 -

Dane B Hudson 50,000 410,000

Brian J McGuigan 297,670 -

Ian D Ferrier 384,622 -

Christopher L Harris 104,719 -

Perry R Gunner 236,420 -

Nicholas F Greiner 348,379 -

Directors’ and Executives’ Remuneration

The Remuneration Committee reviews the remuneration packages of all Directors and Executive Offi cers on an

annual basis and makes recommendations to the Board.


Remuneration Report

Directors and Executive Details

The Directors of McGuigan Simeon Wines Limited during the year were:

:: David S Clarke (Chairman, Non-executive)

:: Dane B Hudson (Chief Executive Offi cer)

:: Brian J McGuigan (Executive)

:: Ian D Ferrier (Non-executive)

:: Nicholas F Greiner (Non-executive)

:: Perry R Gunner (Non-executive)

:: Christopher L Harris (Non-executive)

The Group Executives of McGuigan Simeon Wines Limited during the year were:

:: Paul Schaafsma (General Manager, UK and Europe)

:: Neil McGuigan (General Manager Production and Wine Supply)

:: Michael Noack (Company Secretary - appointed 23 November 2005 and Chief Financial Offi cer)

:: Julie Thomas (Group Administration Manager)

:: Lisa McGuigan (Global Marketing Director - appointed April 2006)

Non-executive Directors receive remuneration partly in cash with the balance payable by the issue of shares

in lieu of cash under the non-executive Directors’ share scheme (“Scheme”). All shares issued were under the

terms of the scheme and the following sets out the details.

SHARES SUBJECT TO SHARES NOT SUBJECT TONON-EXECUTIVE DIRECTORS PERFORMANCE HURDLE PERFORMANCE HURDLE

David S Clarke - 22,000

Ian D Ferrier - 11,000

Nicholas F Greiner - 11,000

Perry R Gunner - 11,000

Christopher L Harris - 11,000

The total value of shares included in remuneration for the year is calculated in accordance with Accounting

Standard AASB 2 Share Based Payments.

Shares not subject to the performance hurdle were issued on 14 August 2006. These shares were issued as

remuneration for the year ended 30 June 2006.

The performance hurdle requires that the relevant tranche of shares are only issued if, at the time of issue, the

Company’s average annual return on an average shareholders’ equity for the previous two fi nancial years is at

or above the 60th percentile of the corresponding fi gures for all companies in the ASX All Ordinaries Index.

For the year ended 30 June 2006 this performance hurdle was not met and therefore no shares will be issued.

The Board reviews the level of fees from time to time, and sets individual non-executive Directors fees based

on the levels of fees or comparable listed companies in the appropriate parts of the world.


All Executives and Executive Directors are remunerated on a salary package basis including motor vehicle and

superannuation. Additionally as from September 2005 (effective year ending 30 June 2006), all senior executives

are entitled to a bonus of between 10-20% on the achievement of pre-determined key performance criteria.

Remuneration packages are reviewed with due regard to performance and other relevant factors.

Remuneration packages contain the following key elements:

a) Primary benefi ts - salary/fees, bonuses and non monetary benefi ts including the provision of motor vehicles

and health benefi ts;

b) Post-employment benefi ts - including superannuation and prescribed retirement benefi ts;

c) Share based payments - shares and share options granted under the Executive Share Option Plan as

disclosed in note 5 to the fi nancial statements; and

d) Other benefi ts - formal contracts are linked to the McGuigan Simeon Wines Limited standard condition

of employment. Certain executives have termination provisions which require payment of compensation

under certain conditions:

:: 12 months total remuneration (no contract expiry date)

– Chief Executive Offi cer

– Company Secretary / CFO

– Global Marketing Director

– General Manager - UK / Europe

:: 12 months or balance of contract period (up to 31 December 2009)

– General Manager, Production and Wine Supply


Directors

The following table discloses the remuneration of the Directors of the Company:

REMUNE- ADJUST- ADJUST- RATION MENT MENT FOR POST SHARE PER FOR PERFOR- NET

EMPLOY- BASED PROFIT SHARE MANCE REMUNE-2006 SHORT TERM MENT PAYMENTS(1) & LOSS PRICE(3) SHARES(4) RATION(5)

Salary Bonus Non - Super - Cash Equity Equity Equity

& Fees Monetary annuation Settled Settled(2) Settled Settled

$ $ $ $ $ $ $ $ $ $

David S Clarke 1,000 - - 13,128 - 124,608 138,736 (53,900) (20,768) 64,068

Dane B Hudson( 6) 241,733 112,500 - 4,873 33,121 - 392,227 - - 392,227

Brian J McGuigan 150,000 - 40,000 13,500 - 203,500 - - 203,500

Ian D Ferrier 1,000 - - 6,609 - 62,309 69,918 (26,950) (10,389) 32,579

Nicholas F Greiner 1,000 - - 6,609 - 62,309 69,918 (26,950) (10,389) 32,579

Christopher L Harris 1,000 - - 6,609 - 62,309 69,918 (26,950) (10,389) 32,579

Perry R Gunner 1,000 - - 6,609 - 62,309 69,918 (26,950) (10,389) 32,579

396,733 112,500 40,000 57,937 33,121 373,844 1,014,135 (161,700) (62,324) 790,111

(1) The total value of options included in remuneration for the year is calculated in accordance with Accounting

Standard AASB 2 “Share Based Payments”.

(2) The calculation of the Equity Settled fi gures is based on AASB2 “Share Based Payments” in which:

– the value of each share is calculated using the share price on the date of shareholder approval of the

Non-Executive Directors remuneration (November 2003). The share price on that date was $4.72; and

– the value of shares subject to the market performance hurdles are included even though the performance

hurdles have not been met and subsequently those shares have not been issued.

(3) This represents an adjustment to the Equity Settled Share Based Payments, being the difference between

the share price ($4.72) at the date the shareholders approved the remuneration and the share price ($2.27)

at the date the shares vested.

(4) This represents an adjustment to the Equity Settled Share Based Payments, being the value of

performance shares approved by the shareholders which ultimately did not vest as the performance

hurdles were not achieved.

(5) This represents the actual value of remuneration received by the Directors after adjusting for the actual

shares received and the share price at vesting date as detailed in (3) and (4) above.

(6) Commenced as a director from 22 February 2006.


Executives

The following table discloses the remuneration of the 5 highest remunerated executives’ of the company and

the consolidated entity.

SHARE BASED OTHER 2006 PRIMARY POST EMPLOYMENT PAYMENTS BENEFITS TOTAL

Salary Bonus Non - Super - Prescribed Other Cash Equity & Fees Monetary annuation Benefi ts Settled Settled $ $ $ $ $ $ $ $ $ $

Paul Schaafsma(1, 2) 386,641 29,617 254,720 37,933 59,641 - - 2,250 - 770,802

Neil McGuigan(1, 2) 347,500 45,000 24,000 36,000 - - - 19,924 - 472,424

Michael Noack(1, 2) 254,842 27,500 58,000 22,936 - - - 4,500 - 367,778

Julie Thomas(1, 2) 171,250 18,000 79,088 38,943 - - - - - 307,281

Lisa McGuigan(1, 2) 232,667 18,880 13,104 20,940 - - - 2,250 - 287,841

Total 1,392,900 138,997 428,912 156,752 59,641 - - 28,924 - 2,206,126

(1) The total value of options included in remuneration for the year is calculated in accordance with

Accounting Standard AASB 2 “Share Based Payments”.

(2) Non-monetary items includes the provision of a motor vehicle, rent, travel, health benefi ts (where applicable)

and fringe benefi ts tax as appropriate.


Value of Options Issued to Directors and Executives

The following table discloses the value of options granted, exercised or lapsed during the year.

TOTAL VALUE VALUATION OPTIONS OPTIONS OPTIONS OF OPTIONS OPTIONS TOTAL GRANTED EXERCISED LAPSED VALUE GRANTED, INCLUDED IN REMUNERATION VALUE AT VALUE AT AT TIME EXERCISED REMUNERATION THAT CONSISTS GRANT DATE EXERCISE DATE OF LAPSE AND LAPSED(ii) FOR THE YEAR(iii) OF OPTIONS2006 $ $ $ $ $ %

Paul Schaafsma - - - - 2,250 0.3

Neil McGuigan 57,500 - - - 19,924 4.0

Mike Noack - - - - 4,500 1.2

Lisa McGuigan - - - - 2,250 0.8

Julie Thomas(i) - 199,000 - 199,000 - -

(i) Options exercised during the year were granted on the 25 September 2001.

(ii) The total value of options granted, exercised and lapsed is calculated based on the following:

- Fair value of the option at grant date multiplied by the number of options granted during the year; plus

- Fair value of the option at the time it is exercised multiplied by the number of options exercised

during the year.

- Fair value of the option at the time of lapse multiplied by the number of options lapsed during the year.

(iii) The total value of shares included in remuneration for the year is calculated in accordance with

Accounting Standard AASB 2 “Share Based Payments”.

Non-Audit Services

The Directors are satisfi ed that the provision of non-audit services, during the year, by the auditor (or by

another person or fi rm on the auditor’s behalf) is compatible with the general standard of independence for

auditors imposed by the Corporations Act 2001. The Audit Committee, in conjunction with the Chief Financial

Offi cer, assesses the provision of non-audit services by the auditors to ensure that the auditor independence

requirements of the Corporation Act 2001 in relation to the audit are met.

Details of amounts paid or payable to the auditor for non-audit services provided during the year by the

auditor are outlined in note 6 to the fi nancial statements. The auditors independence declaration is included

on page 43.



Auditors Independence Declaration

Indemnifi cation of offi cers and auditors

During the fi nancial year, the Company paid a premium in respect of a contract insuring the Directors of the

Company (as named previously), the Company Secretary and all Executive Offi cers of the Company and of any

related Body Corporate against a liability incurred as a Director, Secretary or Executive offi cer to the extent

permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the

liability and the amount of the premium. The Company has not otherwise, during or since the fi nancial year,

indemnifi ed or agreed to indemnify an offi cer or auditor of the Company or of any related body corporate

against a liability incurred as such an offi cer or auditor.

Rounding Off of Amounts

The Company is a company of the kind referred to in ASIC Class Order 98/0100, dated 10 July 1998, and

in accordance with that Class Order amounts in the Directors’ Report and the Financial Report have been

rounded off to the nearest thousand dollars.

Subsequent Events

There are no matters or circumstances, other than that referred to in the fi nancial statements or notes thereto,

that have arisen since the end of the fi nancial year, that have signifi cantly affected, or may signifi cantly

affect, the operations of the consolidated entity, the results of those operations, or the state of affairs of the

consolidated entity in future fi nancial years.

Signed in accordance with a resolution of the Directors made pursuant to section 298(2) of the Corporations

Act 2001.

On behalf of the Directors

David Stuart Clarke AO

Director, 27 September 2006

The Board of DirectorsMcGuigan Simeon Wines LimitedLevel 2, 170 Greenhill RoadParkside SA 5063

27 September 2006

Dear Board Members

McGuigan Simeon Wines Limited

In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence to the directors of McGuigan Simeon Wines Limited.

As lead audit partner for the audit of the fi nancial statements of McGuigan Simeon Wines Limited for the fi nancial year ended 30 June 2006, I declare that to the best of my knowledge and belief, there have been no contraventions of:

(i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and

(ii) any applicable code of professional conduct in relation to the audit.

Yours sincerely

Rod Smith, Partner Chartered AccountantsDeloitte Touche Tohmatsu

Deloitte Touche TohmatsuABN 74 490 121 060

Grosvenor Place225 George StreetSydney NSW 2000PO Box N250 Grosvenor PlaceSydney NSW 1217 Australia

DX 10307SSETel: +61 (0) 2 9322 7000Fax: +61 (0) 2 9322 7001www.deloitte.com.au

43 :: DECLARATION OF INDEPENDENCE :: MSWL

Deloitte Touche TohmatsuABN 74 490 121 060

Grosvenor Place225 George StreetSydney NSW 2000PO Box N250 Grosvenor PlaceSydney NSW 1217 Australia

DX 10307SSETel: +61 (0) 2 9322 7000Fax: +61 (0) 2 9322 7001www.deloitte.com.au

Independent audit report to the members of

McGuigan Simeon Wines Limited

Scope

The fi nancial report and directors’ responsibility

The fi nancial report comprises the balance sheet, income statement, cash fl ow statement, statement of recognised income and expense, a summary of signifi cant accounting policies and other explanatory notes and the directors’ declaration for both McGuigan Simeon Wines Limited (“the company”) and the consolidated entity, for the fi nancial year ended 30 June 2006 as set out on pages 10 to 54. The consolidated entity comprises the company and the entities it controlled at the year’s end or from time to time during the fi nancial year.

The directors of the company are responsible for the preparation and true and fair presentation of the fi nancial report in accordance with Accounting Standards in Australia and the Corporations Act 2001. This includes responsibility for the maintenance of adequate fi nancial records and internal controls that are designed to prevent and detect fraud and error, and for the accounting policies and accounting estimates inherent in the fi nancial report.

Audit approach

We have conducted an independent audit of the fi nancial report in order to express an opinion on it to the members of the company. Our audit has been conducted in accordance with Australian Auditing Standards to provide reasonable assurance whether the fi nancial report is free of material misstatement. The nature of an audit is infl uenced by factors such as the use of professional judgement, selective testing, the inherent limitations of internal controls, and the availability of persuasive rather than conclusive evidence. Therefore, an audit cannot guarantee that all material misstatements have been detected.

We performed procedures to form an opinion whether, in all material respects, the fi nancial report is presented fairly in accordance with Accounting Standards in Australia and the Corporations Act 2001 so as to present a view which is consistent with our understanding of the company’s and the consolidated entity’s fi nancial position, and performance as represented by the results of their operations, their changes in equity and their cash fl ows.

Our procedures included examination, on a test basis, of evidence supporting the amounts and other disclosures in the fi nancial report, and the evaluation of accounting policies and signifi cant accounting estimates made by the directors.

While we considered the effectiveness of management’s internal controls over fi nancial reporting when determining the nature and extent of our procedures, our audit was not designed to provide assurance on internal controls.

The audit opinion expressed in this report has been formed on the above basis.

Audit Opinion

In our opinion, the fi nancial report of McGuigan Simeon Wines Limited is in accordance with the Corporations Act 2001, including:

(a) giving a true and fair view of the company’s and consolidated entity’s fi nancial position as at 30 June 2006 and of their performance for the year ended on that date; and

(b) complying with Accounting Standards in Australia and the Corporations Regulations 2001.

DELOITTE TOUCHE TOHMATSU

Rod Smith, PartnerChartered AccountantsSydney, 27 September 2006

MSWL :: INDEPENDENT AUDIT REPORT :: 44

The Directors declare that:

(a) 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;

(b) In the Directors’ opinion, the attached Financial Statements and notes thereto are in accordance with the

Corporations Act 2001, including compliance with accounting standards and giving true and fair view of the

fi nancial position and performance of the consolidated entity; and

(c) The Directors’ have been given the declarations required by s.295A of the Corporations Act 2001.

At the date of this declaration, the Company is within the class of companies affected by ASIC class order

98/1418. The nature of the deed of cross guarantee is such that each company which is party to the deed

guarantees to each creditor payment in full of any debt in accordance with the deed of cross guarantee.

In the Director’s opinion, there are reasonable grounds to believe that the Company and the companies to

which the ASIC class order applies, as detailed in Note 39 to the Financial Statements will, as a group, be able

to meet any obligations or liabilities to which they are or may become, subject by virtue of the deed of cross

guarantee.

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

On behalf of the Directors

David Stuart Clarke AO

Director, 27 September 2006

45 :: DIRECTORS’ DECLARATION :: MSWL

FINANCIALS

NOTE CONSOLIDATED COMPANY

2006 2005 2006 2005$’000 $’000 $’000 $’000

Revenue 2 360,826 363,700 174,554 146,857

Cost of sales (292,429) (272,589) (145,856) (112,708)

Gross Profi t 68,397 91,111 28,698 34,149

Gains/(losses) arising from changes in fair value less estimate

of point-of-sale costs of grapes picked during the fi nancial year 1,311 4,050 119 (200)

Other income 2 3,430 2,986 29,955 34,695

Distribution expenses (11,304) (10,187) (11,304) (4,554)

Marketing/selling expenses (17,713) (21,289) (2,958) (8,572)

Administration expenses (8,851) (8,379) (8,563) (9,377)

Share of net profi t/(losses) of associates accounted for using the equity method 53 (21) 53 (36)

Finance costs (11,188) (10,152) (11,122) (9,271)

Write down of bulk wine 2 (41,550) (1,969) (6,340) -

Write down of non-current other investments 2 - - (40,000) -

(Loss)/Profi t/before income tax 2 (17,415) 46,150 (21,462) 36,834

Income tax benefi t/(expense) 3 5,869 (11,182) 2,945 (1,981)

(Loss)/Profi t attributable to members of the parent entity 34 (11,546) 34,968 (18,517) 34,853

Earnings Per Share:

Basic (cents per share) after inventory write down 35 (9.9) 31.3

Diluted (cents per share) after inventory write down 35 (9.8) 30.8

Notes to the fi nancial statements are included on pages 51 to 95

47 :: INCOME STATEMENT :: FOR THE FINANCIAL YEAR ENDED 30 JUNE 2006


2006 2005 2006 2005$’000 $’000 $’000 $’000

Current Asset

Cash and cash equivalents 6,118 12,728 8,500 2,039

Trade and other receivables 7 98,679 120,698 277,842 311,839

Inventories 8 195,016 223,461 43,675 8,101

Other fi nancial assets 9 1,156 1,156 1,156 -

Other 10 4,893 6,499 3,972 5,488

305,862 364,542 335,145 327,467

Non-current assets classifi ed as held for sale 11 13,511 12,194 - -

Total Current Assets 319,373 376,736 335,145 327,467

Non-Current Assets

Receivables 12 3,906 3,593 - -

Inventories 13 55,204 60,018 3,846 5,649

Investments accounted for using the equity method 14 2,110 2,150 2,213 2,306

Other investments 15 842 897 166,881 206,781

Biological assets 16 30,261 31,206 - -

Property, plant and equipment 17 128,834 135,202 29,731 31,365

Goodwill 18 47,711 47,611 - -

Other intangible assets 19 3,220 3,476 - -

Deferred tax assets 3 11,760 11,971 11,760 11,971

Other fi nancial assets 20 2,756 3,827 2,756 -

Other 21 1,439 1,376 - 3

Total Non-Current Assets 288,043 301,327 217,187 258,075

Total Assets 607,416 678,063 552,332 585,542

Current Liabilities

Trade and other payables 23 86,244 101,157 48,750 22,017

Borrowings 24 1,040 1,232 372 557

Current tax liabilities 3 95 11,528 95 11,528

Provisions 25 6,157 5,918 4,957 564

Other 26 10,066 4,985 800 1,209

Total Current Liabilities 103,602 124,820 54,974 35,875

Non-Current Liabilities

Payables 27 - 5,770 - 5,720

Borrowings 28 147,553 176,690 142,096 168,324

Deferred tax liabilities 3 15,290 18,236 15,290 18,236

Provisions 29 1,492 2,367 637 380

Total Non-Current Liabilities 164,335 203,063 158,023 192,660

Total Liabilities 267,937 327,883 212,997 228,535

Net Assets 339,479 350,180 339,335 357,007

Equity

Issued capital 32 375,935 354,258 375,935 354,258

Reserves 33 1,727 1,571 1,727 1,571

(Accumulated losses)/retained earnings 34 (38,183) (5,649) (38,327) 1,178

Total Equity 339,479 350,180 339,335 357,007


FOR THE FINANCIAL YEAR ENDED 30 JUNE 2006 :: BALANCE SHEET :: 48


2006 2005 2006 2005$’000 $’000 $’000 $’000

Net (loss) recognised directly in equity (261) - (261) -

(Loss)/profi t for the period (11,285) 34,968 (18,256) 34,853

Total recognised income and expense for the period

(attributable to equity holders of the parent) (11,546) 34,968 (18,517) 34,853


49 :: STATEMENT OF RECOGNISED INCOME AND EXPENSE :: FOR THE FINANCIAL YEAR ENDED 30 JUNE 2006


2006 2005 2006 2005$’000 $’000 $’000 $’000

Cash fl ows from operating activities

Receipts from customers 399,393 378,901 200,299 158,345

Payments to suppliers and employees (347,683) (359,379) (141,118) (157,836)

Interest and other costs of fi nance paid (10,457) (9,341) (10,401) (9,486)

Income tax paid (8,357) (8,083) (8,357) (4,962)

Net cash provided by/(used in) operating activities 43 (d) 32,896 2,098 40,423 (13,939)

Cash fl ows from investing activities

Payments for property, plant and equipment (16,676) (22,211) (8,229) (10,624)

Proceeds from sale of property, plant & equipment 3,272 5,318 25 1,025

Interest and bill discounts received 485 425 378 327

Contribution to equity accounted investment - (306) - (306)

Other 53 44 - -

Net cash used in investing activities (12,866) (16,730) (7,826) (9,578)

Cash fl ows from fi nancing activities

Proceeds from issue of equity securities 32 10,169 9,941 10,169 9,941

Dividends paid 43 (c) (9,741) (17,189) (9,741) (17,189)

Proceeds from borrowings 975 39,174 60 39,100

Repayment of borrowings (28,043) (3,560) (26,624) (1,748)

Amounts advanced to related parties - - - (5,136)

Net cash (used in)/provided by fi nancing activities (26,640) 28,366 (26,136) 24,968

Net (decrease)/increase in cash and cash equivalents (6,610) 13,734 6,461 1,451

Cash and cash equivalents at the beginning of the fi nancial year 12,728 (1,006) 2,039 588

Cash and cash equivalents at the end of the fi nancial year 43 (a) 6,118 12,728 8,500 2,039


FOR THE FINANCIAL YEAR ENDED 30 JUNE 2006 :: CASHFLOW STATEMENT :: 50

51 :: NOTES TO THE FINANCIAL STATEMENTS :: FOR THE FINANCIAL YEAR ENDED 30 JUNE 2006

Note 1: Summary of accounting policies

Statement of complianceThe fi nancial report is a general purpose fi nancial report which has been prepared in accordance with the Corporations Act 2001, Accounting

Standards and Urgent Issues Group Interpretations, and complies with other requirements of the law. Accounting Standards include Australian

equivalents to International Financial Reporting Standards (‘A-IFRS’). Compliance with the A-IFRS ensures that the consolidated fi nancial

statements and notes of the consolidated entity comply with International Financial Reporting Standards (‘IFRS’). The parent entity fi nancial

statements and notes also comply with IFRS except for the disclosure requirements in IAS 32 ‘Financial Instruments: Disclosure and Presentation’

as the Australian equivalent Accounting Standard, AASB 132 ‘Financial Instruments: Disclosure and Presentation’ does not require such

disclosures to be presented by the parent entity where its separate fi nancial statements are presented together with the consolidated fi nancial

statements of the consolidated entity.

The fi nancial statements were authorised for issue by directors on 20th September 2006.

Basis of preparationThe fi nancial report has been prepared on the basis of historical cost, except for the revaluation of certain non-current assets and fi nancial

instruments. Cost is based on the fair values of the consideration given in exchange for assets.

In the application of A-IFRS management is required to make judgments, estimates and assumptions about carrying values of assets and

liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and

various other factors that are believed to be reasonable under the circumstance, the results of which form the basis of making the judgments.

Actual results may differ from these estimates

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period

in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects

both current and future periods.

Judgments made by management in the application of A-IFRS that have signifi cant effects on the fi nancial statements and estimates with a

signifi cant risk of material adjustments in the next year are disclosed, where applicable, in the relevant notes to the fi nancial statements.

Accounting policies are selected and applied in a manner which ensures that the resulting fi nancial information satisfi es the concepts of

relevance and reliability, thereby ensuring that the substance of the underlying transactions or other events is reported.

The consolidated entity changed its accounting policies on 1 July 2005 to comply with A-IFRS. The transition to A-IFRS is accounted for in

accordance with Accounting Standard AASB 1 ‘First-time Adoption of Australian Equivalents to International Financial Reporting Standards’,

with 1 July 2004 as the date of transition. An explanation of how the transition from superseded policies to A-IFRS has affected the company’s

and consolidated entity’s fi nancial position, fi nancial performance and cash fl ows is discussed in note 45.

The accounting policies set out below have been applied in preparing the fi nancial statements for the year ended 30 June 2006, the comparative

information presented in these fi nancial statements for the year ended 30 June 2005, and in the preparation of the opening A-IFRS balance sheet

at 1 July 2004, the consolidated entity’s date of transition.

Signifi cant accounting policies:Accounting policies are selected and applied in a manner that ensure that the resulting fi nancial information satisfi es the concepts of relevance

and reliability, thereby ensuring that the substance of the underlying transactions and other events is reported.

The following signifi cant accounting policies have been adopted in the preparation and presentation of the fi nancial report:

(a) Acquisition of assetsAssets acquired are recorded at the cost of acquisition, being the purchase consideration determined as at the date of acquisition plus

costs incidental to the acquisition.

(b) BorrowingsBorrowings are recorded initially at fair value, net of transaction costs. Subsequent to initial recognition, borrowings are measured

at amortised cost with any difference between the initial recognised amount and the redemption value being recognised in profi t

and loss over the period of the borrowing using the effective interest rate method.

(c) Cash and cash equivalentsCash and cash equivalents comprise cash on hand, cash in banks and investments in money market instruments, net of outstanding bank

overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the balance sheet.

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2006 :: NOTES TO THE FINANCIAL STATEMENTS :: 52

(d) Derivative fi nancial instrumentsThe consolidated entity enters into a variety of derivative fi nancial instruments to manage its exposure to interest rate and foreign exchange

rate risk, including forward foreign exchange contracts and interest rate swaps.

Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their

fair value at each reporting date. The resulting gain or loss is recognised in profi t or loss immediately unless the derivative is designated

and effective as a hedging instrument, in which event, the timing of the recognition in profi t or loss depends on the nature of the hedge

relationship. The consolidated entity designates certain derivatives as either hedges of the fair value of recognised assets or liabilities or fi rm

commitments (fair value hedges), or hedges of highly probable forecast transactions (cash fl ow hedges).

Cash fl ow hedge

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash fl ow hedges are deferred in equity.

The gain or loss relating to the ineffective portion is recognised immediately in profi t or loss.

Amounts deferred in equity are recycled in profi t or loss in the periods when the hedged item is recognised in profi t or loss. However, when

the forecast transaction that is hedged results in the recognition of a non-fi nancial asset or a non-fi nancial liability, the gains and losses

previously deferred in equity are transferred from equity and included in the initial measurement of the cost of the asset or liability.

Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifi es for

hedge accounting. At that time, any cumulative gain or loss deferred in equity at that time remains in equity and is recognised when the

forecast transaction is ultimately recognised in profi t or loss. When a forecast transaction is no longer expected to occur, the cumulative

gain or loss that was deferred in equity is recognised immediately in profi t or loss.

(e) Employee benefi tsProvision is made for benefi ts accruing to employees in respect of wages and salaries, annual leave and long service leave when it is

probable that settlement will be required and they are capable of being measured reliably.

Provisions made in respect of employee benefi ts expected to be settled within 12 months, are measured at their nominal values using the

remuneration rate expected to apply at the time of settlement.

Provisions made in respect of employee benefi ts which are not expected to be settled within 12 months are measured as the present value of

the estimated future cash outfl ows to be made by the consolidated entity in respect of services provided by employees up to reporting date.

Defi ned contribution plans

Contributions to defi ned contribution superannuation plans are expensed when incurred.

(f) Financial assetsInvestments are recognised and derecognised on trade date where purchase or sale of an investment is under a contract whose terms

require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value, net

of transaction costs.

Subsequent to initial recognition, investments in associates are accounted for under the equity method in the consolidated fi nancial

statements and at cost in the separate fi nancial statements of the parent.

Other fi nancial assets are classifi ed into the following specifi ed categories: fi nancial assets ‘at fair value through profi t or loss’, ‘held-to-

maturity’ investments, ‘available-for-sale’ fi nancial assets, and ‘loans and receivables’. The classifi cation depends on the nature and purpose

of the fi nancial assets and is determined at the time of initial recognition.

Available-for-sale fi nancial assets

Certain shares held by the consolidated entity are classifi ed as being available-for-sale and are stated at fair value less impairment. Gains

and losses arising from changes in fair value are recognised directly in the available-for-sale revaluation reserve, until the investment is

disposed of or is determined to be impaired, at which time the cumulative gain or loss previously recognised in the available-for-sale

revaluation reserve is included in profi t or loss for the period.

Loans and receivables

Trade receivables, loans, and other receivables are recorded at amortised cost less impairment. Trade credits are recorded at the net

present value of expected future cash fl ows.


(g) Financial instruments issued by the company

Debt and equity instruments

Debt and equity instruments are classifi ed as either liabilities or as equity in accordance with the substance of the contractual arrangement.

Transaction costs relating to debt instruments are expensed as incurred.

Transaction costs on the issue of equity instruments

Transaction costs arising on the issue of equity instruments are recognised directly in equity as a reduction of the proceeds of the equity

instruments to which the costs relate. Transaction costs are the costs that are incurred directly in connection with the issue of those equity

instruments and which would not have been incurred had those instruments not been issued.

Interest and dividends

Interest and dividends are classifi ed as expenses or as distributions of profi t consistent with the balance sheet classifi cation of the related

debt or equity instruments or component parts of compound instruments.

(h) Foreign currency

Foreign currency transactions

All foreign currency transactions during the fi nancial year are brought to account using the exchange rate in effect at the date of the

transaction. Foreign currency monetary items at reporting date are translated at the exchange rate existing at reporting date. Non-monetary

assets and liabilities carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when

the fair value was determined.

Foreign operations

On consolidation, the assets and liabilities of the consolidated entity’s overseas operations are translated at exchange rates prevailing at

the reporting date. Income and expense items are translated at the average exchange rates for the period unless exchange rates fl uctuate

signifi cantly. Exchange differences arising, if any, are recognised in the foreign currency translation reserve, and recognised in profi t or loss

on disposal of the foreign operation.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity on or after the date of transition to A-IFRS are treated as

assets and liabilities of the foreign entity and translated at exchange rates prevailing at the reporting date. Goodwill arising on acquisitions

before the date of transition to A-IFRS is treated as an Australian dollar denominated asset.

(i) GoodwillGoodwill, representing the excess of the cost of acquisition over the fair value of the identifi able assets, liabilities and contingent liabilities

acquired, is recognised as an asset and not amortised, but tested for impairment annually and whenever there is an indication that the

goodwill may be impaired. Any impairment is recognised immediately in profi t or loss and is not subsequently reversed.

(j) Goods and services tax Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except:

i. where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as part of the cost of acquisition of

an asset or as part of an item of expense; or

ii. for receivables and payables which are recognised inclusive of GST.

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

Cash fl ows are included in the cash fl ow statement on a gross basis. The GST component of cash fl ows arising from investing and fi nancing

activities which is recoverable from, or payable to, the taxation authority is classifi ed as operating cash fl ows.

(k) Biological AssetsBiological assets (grapes and vines) are measured at fair value less estimated point-of-sale costs. Gains or losses from a change in fair value

less estimated point-of-sale costs are included in the Income Statement.

The net market values of the vines owned by the Company have been determined in accordance with a directors’ valuation of owned

vineyards, based on reference to the current market value of similar properties recently exchanged in the open market, performed at the

reporting date.

Grapes extracted from vines owned or fi nance-leased by the Company are measured at fair value, net of the costs of extraction and point-

of-sale costs. The extracted produce is disclosed as operating revenue and at the same time increases inventory. The revenue from the sale

of grapes prior to the end of the fi nancial year is treated as a reduction in value of the picked grapes.


(l) Impairment of assetsAt each reporting date, the consolidated entity reviews the carrying amounts of its tangible and intangible assets to determine whether

there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the

asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash fl ows that are

independent from other assets, the consolidated entity estimates the recoverable amount of the cash-generating unit to which the asset

belongs.

Goodwill, intangible assets with indefi nite useful lives and intangible assets not yet available for use are tested for impairment annually

and whenever there is an indication that the asset may be impaired. An impairment of goodwill is not subsequently reversed.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash fl ows

are discounted to their present value using a pre-tax discount rate that refl ects current market assessments of the time value of money and

the risks specifi c to the asset for which the estimates of future cash fl ows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the

asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised in profi t or loss immediately, unless the

relevant asset is carried at fair value, in which case the impairment loss is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised

estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that

would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an

impairment loss is recognised in profi t or loss immediately, unless the relevant asset is carried at fair value, in which case the reversal of the

impairment loss is treated as a revaluation increase.

(m) Income tax

Current tax

Current tax is calculated by reference to the amount of income taxes payable or recoverable in respect of the taxable profi t or tax loss for

the period. It is calculated using tax rates and tax laws that have been enacted or substantively enacted by reporting date. Current tax for

current and prior periods is recognised as a liability (or asset) to the extent that it is unpaid (or refundable).

Deferred tax

Deferred tax is accounted for using the comprehensive balance sheet liability method in respect of temporary differences arising from

differences between the carrying amount of assets and liabilities in the fi nancial statements and the corresponding tax base of those items.

In principle, deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised to the extent that

it is probable that suffi cient taxable amounts will be available against which deductible temporary differences or unused tax losses and tax

offsets can be utilised. However, deferred tax assets and liabilities are not recognised if the temporary differences giving rise to them arise

from the initial recognition of assets and liabilities (other than as a result of a business combination) which affects neither taxable income nor

accounting profi t. Furthermore, a deferred tax liability is not recognised in relation to taxable temporary differences arising from goodwill.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, branches, associates and

joint ventures except where the consolidated entity is able to control the reversal of the temporary differences and it is probable that

the temporary differences will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences

associated with these investments and interests are only recognised to the extent that it is probable that there will be suffi cient taxable

profi ts against which to utilise the benefi ts of the temporary differences and they are expected to reverse in the foreseeable future.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period(s) when the asset and liability

giving rise to them are realised or settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by reporting

date. The measurement of deferred tax liabilities and assets refl ects the tax consequences that would follow from the manner in which the

consolidated entity expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.

Current and deferred tax for the period

Current and deferred tax is recognised as an expense or income in the income statement, except when it relates to items credited or

debited directly to equity, in which case the deferred tax is also recognised directly in equity, or where it arises from the initial accounting for

a business combination, in which case it is taken into account in the determination of goodwill or excess.

Tax consolidation

The company and all its wholly-owned Australian resident entities are part of a tax-consolidated group under Australian taxation law.

McGuigan Simeon Wines Limited is the head entity in the tax-consolidated group.

Entities within the tax-consolidated group have entered into a tax funding arrangement and a tax-sharing agreement with the head entity.

Under the terms of the tax funding arrangement, McGuigan Simeon Wines Limited and each of the entities in the tax-consolidated group

has agreed to pay a tax equivalent payment to or from the head entity, based on the current tax liability or current tax asset of the entity.

(n) Intangible assets

Brand names

Brand names are recorded at cost less accumulated amortisation and impairment. Amortisation is charged on a straight line basis over their

estimated useful lives of 20 years. The estimated useful life and amortisation method is reviewed at the end of each annual reporting period.

Intangible assets acquired in a business combination

All potential intangible assets acquired in a business combination are identifi ed and recognised separately from goodwill where they satisfy

the defi nition of an intangible asset and their fair value can be measured reliably.

(o) Interest-bearing liabilitiesBank loans, bank overdrafts and other loans are recorded at an amount equal to the net proceeds received. Interest expense is recognised

on an effective yield basis.

(p) InventoriesInventories are valued at the lower of cost and net realisable value. Costs, including an appropriate portion of fi xed and variable overhead

expenses, are assigned to inventory on hand by the method most appropriate to each particular class of inventory, with the majority being

valued on a fi rst in fi rst out basis. Net realisable value represents the estimated selling price less all estimated costs of completion and costs

to be incurred in marketing, selling and distribution.

(q) InvestmentsInvestments in controlled entities are recorded at cost in the separate fi nancial statements of the parent entity. Investments in associates

have been accounted for under the equity method in the consolidated fi nancial statements and the cost method in the Company fi nancial

statements. Other investments are recorded at cost.

Dividends are recognised on a receivable basis. Interest and revenue is recognised on a time proportionate basis that takes into account

the effective yield on the fi nancial assets.

(r) Leased assetsLeases are classifi ed as fi nance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the

lessee. All other leases are classifi ed as operating leases.

Rental income from operating leases is recognised on a straight line basis over the term of the relevant lease.

Consolidated entity as lessee

Assets held under fi nance leases are initially recognised at their fair value or, if lower, at amounts equal to the present value of the minimum

lease payments, each determined at the inception of the lease. The corresponding liability to the lessor is included in the balance sheet as

a fi nance lease obligation.

Lease payments are apportioned between fi nance charges and reduction of the lease obligation so as to achieve a constant rate of interest

on the remaining balance of the liability. Finance charges are charged directly against income, unless they are directly attributable to

qualifying assets, in which case they are capitalised in accordance with the consolidated entity’s general policy on borrowing costs. Refer

to note 1(b).

Finance leased assets are amortised on a straight line basis over the estimated useful life of the asset.

Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another systematic basis

is more representative of the time pattern in which economic benefi ts from the leased asset are consumed.



(s) Non-current assets held for sale Non-current assets classifi ed as held for sale are measured at the lower of carrying amount and fair value less costs to sell.

Non-current assets and disposal groups are classifi ed as held for sale if their carrying amount will be recovered through a sale transaction

rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset (or disposal

group) is available for immediate sale in its present condition. The sale of the asset (or disposal group) is expected to be completed within

one year from the date of classifi cation.

(t) PayablesTrade payables and other accounts payable are recognised when the consolidated entity becomes obliged to make future payments

resulting from the purchase of goods and services.

(u) Principles of consolidationThe consolidated fi nancial statements are prepared by combining the fi nancial statements of all the entities that comprise the consolidated

entity, being the company (the parent entity) and its subsidiaries as defi ned in Accounting Standard AASB 127 ‘Consolidated and Separate

Financial Statements’. Consistent accounting policies are employed in the preparation and presentation of the consolidated fi nancial

statements.

On acquisition, the assets, liabilities and contingent liabilities of a subsidiary are measured at their fair values at the date of acquisition.

Any excess of the cost of acquisition over the fair values of the identifi able net assets acquired is recognised as goodwill. If, after

reassessment, the fair values of the identifi able net assets acquired exceeds the cost of acquisition, the defi ciency is credited to profi t and

loss in the period of acquisition.

The interest of minority shareholders is stated at the minority’s proportion of the fair values of the assets and liabilities recognised.

The consolidated fi nancial statements include the information and results of each subsidiary from the date on which the company obtains

control and until such time as the company ceases to control such entity.

In preparing the consolidated fi nancial statements, all intercompany balances and transactions, and unrealised profi ts arising within the

consolidated entity are eliminated in full.

(v) Property, plant and equipmentLand and buildings are measured at cost. Cost includes expenditure that is directly attributable to the acquisition of the item. In the event

that settlement of all or part of the purchase consideration is deferred, cost is determined by discounting the amounts payable in the future

to their present value as at the date of acquisition.

Plant and equipment, leasehold improvements and equipment under fi nance lease are stated at cost less accumulated depreciation and

impairment. Cost includes expenditure that is directly attributable to the acquisition of the item. In the event that settlement of all or part of

the purchase consideration is deferred, cost is determined by discounting the amounts payable in the future to their present value as at the

date of acquisition.

Depreciation is provided on property, plant and equipment, including freehold buildings but excluding land. Depreciation is calculated

on a straight line basis so as to write off the net cost or other revalued amount of each asset over its expected useful life to its estimated

residual value. Leasehold improvements are depreciated over the period of the lease or estimated useful life, whichever is the shorter,

using the straight line method. The estimated useful lives, residual values and depreciation method is reviewed at the end of each annual

reporting period.

The following estimated useful lives are used in the calculation of depreciation:

:: Buildings 50 years:: Vineyard improvements 15-20 years:: Vineyard improvement under lease 15-20 years:: Plant and equipment 5-15 years:: Equipment fi nance lease 5-15 years:: Stainless steel tanks 25-33 years

(w) ProvisionsProvisions are recognised when the consolidated entity has a present obligation, the future sacrifi ce of economic benefi ts is probable, and

the amount of the provision can be measured reliably.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at reporting date,

taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cashfl ows estimated to

settle the present obligation, its carrying amount is the present value of those cashfl ows.

When some or all of the economic benefi ts required to settle a provision are expected to be recovered from a third party, the receivable is

recognised as an asset if it is virtually certain that recovery will be received and the amount of the receivable can be measured reliably.

An onerous contract is considered to exist where the consolidated entity has a contract under which the unavoidable cost of meeting the

contractual obligations exceed the economic benefi ts estimated to be received. Present obligations arising under onerous contracts are

recognised as a provision to the extent that the present obligation exceeds the economic benefi ts estimated to be received.

(x) Revenue recognition

Sale of goods

Revenue from the sale of goods is recognised when the consolidated entity has transferred to the buyer the signifi cant risks and rewards of

ownership of the goods.

Rendering of vineyard development contract services

Revenue from a contract to provide services is recognised by reference to the stage or completion of the contract.

Vineyard development/management contracts

Revenue from cost plus development contracts is recognised by reference to the recoverable costs incurred during the fi nancial year plus

the percentage of fees earned. Percentage of fees earned is measured by the proportion that costs incurred to date relate to the estimated

total cost of the stage of the contract. Where a loss is expected to occur it is recognised immediately. Revenue from vineyard management

contracts is recognised based on a percentage of fees earned.

Contract processing

Revenue from contract processing is recognised based on the percentage of winemaking process completed.

Dividend and interest revenue

Dividend revenue is recognised on a receivable basis. Interest revenue is recognised on a time proportionate basis that takes into account

the effective yield on the fi nancial asset.

(y) Share-based paymentsEquity-settled share-based payments granted after 7 November 2002 that were unvested as of 1 July 2005, are measured at fair value at the

date of grant. Fair value is measured by using the Black-Scholes valuation model. The expected life used in the model has been adjusted,

based on management’s best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations.

The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting

period, based on the consolidated entity’s estimate of shares that will eventually vest.

For cash-settled share-based payments, a liability equal to the portion of the goods or services received is recognised at the current fair

value determined at each reporting date.

(z) Comparative information – fi nancial instrumentsAASB 132 and 139 were adopted on 1st July 2004. The impact of changes in relation to comparative information upon adoption

was not material.


Note 2: (Loss)/profi t from operations

CONSOLIDATED COMPANY

2006 2005 2006 2005$’000 $’000 $’000 $’000

(a) Revenue

Revenue from the sale of goods 322,220 320,422 156,789 122,408

Revenue from contract processing 13,420 11,451 259 229

Revenue from rendering vineyard contract services 19,153 25,824 17,506 24,220

Lease revenue 6,033 6,003 - -

Total sales revenue 360,826 363,700 174,554 146,857

Other income

Interest 1,177 1,129 378 327

Rent - other 765 - - -

Dividends - wholly owned controlled entities - - 29,000 33,000

Dividends - other entities - 69 - 69

Other 1,488 1,788 577 1,299

Total other income 3,430 2,986 29,955 34,695

(b) Profi t/(loss) before income tax

Profi t before income tax has been arrived at after crediting/(charging) the following gains and losses from continuing operations:

Gain/(loss) on disposal of property, plant and equipment (156) (579) 25 (2,962)

Net foreign exchange gains/(losses) 442 (395) (192) (497)

Profi t/(loss) before income tax has been arrived at after charging the following expenses. The line items below combine amounts

attributable to continuing operations:

Cost of Sales 292,429 272,589 145,856 112,708

Write down of inventory to net realisable value 41,550 1,969 6,340 -

Write down on non-current investment in subsidiary - - 40,000 -

Finance costs:

Interest on loans 10,662 9,230 10,662 8,466

Other interest expense 526 922 460 805

11,188 10,152 11,122 9,271

Net bad debt and doubtful debts (168) 2,361 (814) 2,361

Depreciation of non-current assets 10,862 10,104 2,372 1,458

Amortisation of non-current assets 256 254 - -

11,118 10,358 2,372 1,458

Operating lease rental expenses (minimum lease payments) 21,882 19,855 13,634 15,413

Write down of investment 44 - 44 -

Write down of non-current receivables - 442 - -

Employee benefi t expense:

Share based payments:

Equity settled share-based payments 416 1,052 416 1,052

Cash settled share-based payments 56 - 56 -

472 1,052 472 1,052

Termination benefi ts 190 142 93 101

Other employee benefi ts 33,036 35,883 12,030 10,029

33,698 37,077 12,595 11,182


Note 3: Income taxes


2006 2005 2006 2005$’000 $’000 $’000 $’000

(a) Income tax recognised in profi t or loss

Tax expense/(income) comprises:

Current tax expense/(benefi t) (5,186) 12,010 (2,883) 2,068

Adjustments recognised in the current year in relation to the

current tax of prior years (683) (828)(i) (62) (87)

Total tax expense/(benefi t) (5,869) 11,182 (2,945) 1,981

The prima facie income tax expense on pre-tax accounting

profi t from operations reconciles to the income tax expense

in the fi nancial statements as follows:

Profi t/(Loss) from operations (17,415) 46,150 (21,462) 36,834

Income tax expense/(benefi t) calculated at 30% (5,225) 13,845 (6,439) 11,050

Non-deductible amortisation 77 116 - -

Depreciation (617) (593) - -

Share based payments 125 316 125 -

Non-assessable income (dividends from wholly owned entities

in tax consolidated group) - - (8,700) (9,900)

Non-deductible expenses 974 521 135 65

Write down of non-current investments in subsidiary - - 12,000 -

Equity share of associates profi ts/losses (16) 9 - -

Impact of adopting tax consolidation - 674 - -

Capital (profi t)/loss adjustment on vineyard sales (504) (1,207) (10) 364

Initial recognition of deferred tax balances of subsidiaries

on implementation of the tax consolidation system - (1,643) - (1,643)

Consideration paid or payable to subsidiaries in respect

of transferred tax balances - - - 1,643

Net income tax expenses arising under tax sharing

agreements with subsidiaries in the tax consolidated group - - 2,484 1,395

Current and deferred taxes relating to transactions, events and

balances of wholly-owned subsidiaries in the tax consolidated group - - (2,484) (1,395)

Other - (28) 6 489

(5,186) 12,010 (2,883) 2,068

(Over)/under provision of income tax in previous year (683) (828)(i) (62) (87)

(5,869) 11,182 (2,945) 1,981

The tax rate used in the above reconciliation is the corporate tax rate of 30% payable by Australian corporate entities on taxable profi ts

under Australian tax law. There has been no change in the corporate tax rate when compared with the previous reporting period.

(i) During the preparation of the fi nancial statements, the company identifi ed a temporary difference which has been incorrectly accounted

for in a prior period and has been subsequently adjusted. The impact of this adjustment is to increase accumulated losses by $2,317,000

at 30th June 2005 ($847,000 at 1st July 2004) and increase deferred tax liability by $2,317,000 at 30th June 2005 ($847,000 1st July 2004).


Note 3: Income taxes (continued)


2006 2005 2006 2005$’000 $’000 $’000 $’000

(b) Current tax assets and liabilities

Current tax payables:

Income tax payable attributable to:

Parent entity 12 1,862 12 1,862

Entities in the tax-consolidated group 83 9,666 83 9,666

95 11,528 95 11,528

(c) Deferred tax balances

Deferred tax assets comprise:

Tax losses - revenue 2,992 899 2,992 899

Tax losses - capital 1,657 1,869 1,657 1,869

Temporary differences 7,111 9,203 7,111 9,203

11,760 11,971 11,760 11,971

Deferred tax liabilities comprise:

Temporary differences 15,290 18,236 15,290 18,236

(d) Taxable and deductible temporary differences arise from the following:

CONSOLIDATED

Opening Charged Charged Acquisitions/ Closing Balance to Income to Equity Disposals Balance $’000 $’000 $’000 $’000 $’000 2006

Gross deferred tax liabilities:

Work in progress (4,779) (2,093) - - (6,872)

Property, plant & equipment (6,855) 668 - - (6,187)

Intangible assets (1,333) 367 - - (966)

Inventories (2,951) 2,090 - - (861)

Other (2,318) 1,914 - - (404)

(18,236) 2,946 - - (15,290)

Gross deferred tax assets:

Property, plant & equipment 93 2 - - 95

Provisions & accruals 6,153 (1,246) - - 4,907

Deferred income 444 (182) - - 262

Other 2,513 (666) - - 1,847

9,203 (2,092) - - 7,111

2005

Gross deferred tax liabilities:

Work in progress (5,011) 232 - - (4,779)

Property, plant & equipment (8,201) 1,346 - - (6,855)

Intangible assets (1,424) 91 - - (1,333)

Inventories (2,951) - - - (2,951)

Other (1,894) (424) - - (2,318)

(19,481) 1,245 (18,236)



(d) Taxable and deductible temporary differences arise from the following (continued):

CONSOLIDATED

Opening Charged Charged Acquisitions/ Closing Balance to Income to Equity Disposals Balance $’000 $’000 $’000 $’000 $’000


Property, plant & equipment 2,773 (2,680) - - 93

Provisions & accruals 5,553 600 - - 6,153

Deferred income 284 160 - - 444

Other 3,086 (573) - - 2,513

11,696 (2,493) - - 9,203

COMPANY

Opening Charged Charged Acquisitions/ Closing Balance to Income to Equity Disposals Balance

$’000 $’000 $’000 $’000 $’000

2006 Gross deferred tax liabilities:

Work in progress (195) (2,384) - - (2,579)

Property, plant & equipment - - - - -

Intangible assets - - - - -

Inventories (2,951) 2,090 - - (861)

Subsidiary balances (15,027) 3,284 - - (11,743)

Other (63) (44) - - (107)

(18,236) 2,946 - - (15,290)


Property, plant & equipment 93 (90) - - 3

Provisions & accruals 1,392 1,751 - - 3,143

Deferred income - - - - -

Subsidiary balances 7,718 (3,753) - - 3,965

Other - - - - -

9,203 (2,092) - - 7,111

2005 Gross deferred tax liabilities:

Work in progress (135) (60) - - (195)

Property, plant & equipment - - - - -

Intangible assets - - - - -

Inventories (2,951) - - - (2,951)

Subsidiary balances (15,480) 453 - - (15,027)

Other (915) 852 - - (63)

(19,481) 1,245 - - (18,236)


Property, plant & equipment 73 20 - - 93

Provisions & accruals 1,204 188 - - 1,392

Deferred income - - - - -

Subsidiary balances 10,411 (2,693) - - 7,718

Other 8 (8) - - -

11,696 (2,493) - - 9,203



Tax ConsolidationRelevance of tax consolidation to the consolidated entity

The company and its wholly-owned Australian resident entities have formed a tax-consolidated group with effect from 1 July 2003 and are

therefore taxed as a single entity from that date. The head entity within the tax-consolidated group is McGuigan Simeon Wines Limited.

The members of the tax-consolidated group are those included within the cross guarantee as identifi ed in note 39.

Nature of tax funding arrangements and tax sharing agreements

Entities within the tax-consolidated group have entered into a tax funding arrangement and a tax-sharing agreement with the head entity. Under

the terms of the tax funding arrangement, McGuigan Simeon Wines Limited and each of the entities in the tax-consolidated group has agreed

to pay a tax equivalent payment to or from the head entity, based on the current tax liability or current tax asset of the entity. Such amounts are

refl ected in amounts receivable from or payable to other entities in the tax-consolidated group.

The tax sharing agreement entered into between members of the tax- consolidated group provides for the determination of the allocation or

income tax liabilities between the entities should the head entity default on its tax payment obligations. No amounts have been recognised in

the fi nancial statements in respect of this agreement as payment of any amounts under the tax sharing agreement is considered remote.

Note 4: Key Management personnel compensation

The key management personnel of McGuigan Simeon Wines Limited during the year were:David S Clarke (Chairman – non-executive director) Michael Noack (Chief Financial Offi cer & Company Secretary)

Dane B Hudson (Chief Executive Offi cer) Neil McGuigan (General Manager Production and Wine Supply)

Christopher L Harris (non-executive director) Paul Schaafsma (Export Sales Manager - United Kingdom)

Nicholas F Greiner (non-executive director) Lisa McGuigan (General Manager – Icon Brands)

Perry R Gunner (non-executive director) Craig Thomas (Export Sales Manager - Australia)

Brian J McGuigan (Executive Director) Julie Thomas (Group Administration Manager)

Ian D Ferrier (non-executive director) Richard Byllaardt (National Vineyard Manager)

Andrew White (Company Secretary – resigned 23rd November 2005)

Remuneration CommitteeThe remuneration committee reviews the remuneration packages of all specifi ed directors and specifi ed executives on an annual basis and

makes recommendations to the board. Remuneration packages are reviewed and determined with due regard to current market rates and are

benchmarked against comparable industry salaries.

Executive RemunerationThe Executives remuneration packages have two components:

1. Base remuneration

2. Short term incentives

3. Long term incentives

Base RemunerationThis component is not performance linked and generally consists of salary, motor vehicle and post employment superannuation entitlement

(where applicable). The base amount is reviewed annually by the Remuneration Committee. Any adjustments made during the year will either be

as a result of market rate changes in order for the Company to remain competitive or to refl ect any changes in level of responsibility in the event

the Executive’s role has broadened.

Short Term IncentivesObjectives and performance indicators are determined annually by the Chief Executive Offi cer (CEO) following consultation with each Executive.

The maximum amount of bonus payable in respect of the fi nancial year is determined by the CEO and the Remuneration Committee.

For the purpose of determining any bonus entitlement, each Executive’s performance is assessed against the set objectives and performance

indicators by the CEO. The objectives and performance indicators relate to specifi c duties of each executive and Company performance.

Non-executive directors receive remuneration part in cash with the balance payable by the issue of bonus shares in lieu of cash under the non-

executive directors’ share scheme (“Scheme”). All shares issued were under the terms of the scheme and the following sets out the details for 2006.


Note 4: Key management personnel compensation (continued)

SHARES SUBJECT TO SHARES NOT SUBJECT NON-EXECUTIVE DIRECTORS PERFORMANCE HURDLE TO PERFORMANCE HURDLE

David S Clarke - 22,000

Nicholas F Greiner - 11,000

Ian D Ferrier - 11,000

Perry R Gunner - 11,000

Christopher L Harris - 11,000

The total market value of these shares at the date of issue was $147,840. 33,000 shares subject to the performance hurdle were not issued during

the fi nancial year as the performance hurdle for the year ended 30 June 2005 was not met.

Shares not subject to the performance hurdle were issued on 14 August 2006. These shares were issued as remuneration for the year ended

30 June 2006.

The performance hurdle requires that the relevant tranche of shares are only issued if, at the time of issue, the Company’s average annual return

on an average shareholders’ equity for the previous two fi nancial years is at or above the 60th percentile of the corresponding fi gures for all

companies in the ASX All Ordinaries Index.

Long Term IncentivesShare options issued to Directors and Executives are considered long term incentives. Specifi c Details of the share options issued are contained

in Note 5.

Directors Share OptionsThere were no share options exercised by directors during the fi nancial year. There were no directors share options at 30 June 2005.

410,000 share options were issued to Dane Hudson during the year. These options operate as follows:

:: MSWL has agreed to contribute $298,087 to the trustee of the McGuigan Simeon Wines Limited Executive Option Acquisition Plan (“Plan”) to

acquire call options over ordinary shares in MSWL from Macquarie Bank Limited and under which Mr Hudson has rights to call for the delivery

of those shares as described below.

:: The right to procure that the trustee of the Plan exercises (a) a call option over 150,000 issued ordinary shares in MSWL at an exercise price of

$3.10 per MSWL share and (b) a call option over 260,000 issued ordinary shares in MSWL at an exercise price of $4.00 per MSWL share, each

such call option to be exercisable between 13 February 2009 and 30 December 2011 and subject to a performance hurdle which is satisfi ed

if, for 2 consecutive fi nancial years between the acquisition of the option and its expiry on 30 December 2011, MSWL’s return on average

shareholder’s equity is equal to or above the 60th percentile of the corresponding fi gures for all companies in the ASX All Ordinaries Index.

There were no other directors share options on issue at 30 June 2006.

The aggregate compensation of the key management personnel of the consolidated entity and the company is set out below:


2006 2005 2006 2005

$ $ $ $

Short-term employee benefi ts 3,434,379 2,681,881 3,434,379 2,681,881

Post-employment benefi ts 334,466 226,607 334,466 226,607

Other long-term benefi t 71,045 108,000 71,045 108,000

Termination benefi ts - 87,434 - 87,434

3,839,890 3,103,922 3,839,890 3,103,922




SHARE BASED OTHER 2006 PRIMARY POST EMPLOYMENT PAYMENTS BENEFITS TOTAL

Salary Bonus Non - Super - Prescribed Other Cash Equity

& Fees Monetary annuation Benefi ts Settled Settled

$ $ $ $ $ $ $ $ $ $

David S Clarke(1) 1,000 - - 13,128 - - - 124,608 - 138,736

Ian D Ferrier(3) 1,000 - - 6,609 - - - 62,309 - 69,918

Nicholas F Greiner(3) 1,000 - - 6,609 - - - 62,309 - 69,918

Chris L Harris(3) 1,000 - - 6,609 - - - 62,309 - 69,918

Perry R Gunner(3) 1,000 - - 6,609 - - - 62,309 - 69,918

Dane B Hudson(2,4) 241,733 112,500 - 4,873 - - 33,121 - - 392,227

Brian J McGuigan(5) 150,000 - 40,000 13,500 - - - - 203,500

Paul Schaafsma(2,5) 386,641 29,617 254,720 37,933 59,641 - - 2,250 - 770,802

Neil McGuigan(2,5) 347,500 45,000 24,000 36,000 - - 19,924 - - 472,424

Michael Noack(2,5) 254,842 27,500 58,000 22,936 - - - 4,500 - 367,778

Julie Thomas(2,5) 171,250 18,000 79,088 38,943 - - - - - 307,281

Lisa McGuigan(2,5) 232,667 18,880 13,104 20,940 - - - 2,250 - 287,841

Richard Byllaardt(2,5) 172,483 15,600 28,500 36,452 - - - 2,250 - 255,285

Craig Thomas(2,5) 175,250 18,000 25,900 15,818 - - - 2,250 - 237,218

Richard Byllaardt(2,5) 172,483 15,600 28,500 36,452 - - - 2,250 - 255,285

Andrew White(2,5,6) 104,760 - 10,000 7,866 - - - 4,500 - 127,126

2,242,126 285,097 533,312 274,825 59,641 - 53,045 391,844 - 3,839,890

(1) Includes shares subject to performance hurdle to the value of $20,768. Despite these shares not being issued during 2006, AASB2 requires

this value to be included.(2) The total value of options included in remuneration for the year is calculated in accordance with Accounting Standard AASB2 “Share Based

Payments”.:: The fair value of the options is determined at grant date using the Black-Scholes model, and are included in remuneration on a

proportionate basis from grant date to vesting date.(3) Includes shares subject to performance hurdle to the value of $10,384. Despite these shares not being issued during 2006, AASB2 requires this

value to be included as remuneration.(4) Commenced 22 February 2006.(5) Non-monetary items includes the provision of a motor vehicle, rent, travel, health benefi ts (where applicable) and fringe benefi ts

tax as appropriate.(6) Resigned 23 November 2005.



OTHER 2005 PRIMARY POST EMPLOYMENT EQUITY BENEFITS TOTAL

Salary Bonus Non - Super - Prescribed Other Cash Equity & Fees Monetary annuation Benefi ts Settled Settled $ $ $ $ $ $ $ $ $ $

David S Clarke 1,000 - - 14,791 - - - 144,870 - 160,661

Ian D Ferrier 1,000 - - 7,400 - - - 72,435 - 80,835

Nicholas F Greiner 1,000 - - 7,400 - - - 72,435 - 80,835

Chris L Harris 1,000 - - 7,400 - - - 72,435 - 80,835

Perry R Gunner 1,000 - - 7,400 - - - 72,435 - 80,835

Brian J McGuigan(6) 150,000 - 40,000 13,500 - - - - 78,484(1) 281,984

Paul Schaafsma(5, 6) 311,829 - 26,500 28,065 - - - 13,500 - 379,894

Andrew White(5, 6) 212,588 - 26,080 19,133 - - - 27,000 - 284,801

Lisa McGuigan(4, 5, 6) 216,000 - 5,000 20,929 - - - 13,500 16,539 271,968

Neil McGuigan(2, 5, 6) 205,341 29,166 21,273 14,182 - - - - - 269,962

Michael Noack(5, 6) 194,052 - 28,000 17,465 - - - 27,000 - 266,517

Richard Byllaardt(5, 6) 175,100 - 18,500 34,959 - - - 13,500 - 242,059

Julie Thomas(5, 6) 152,250 - 63,360 13,703 - - - - - 229,313

Craig Thomas(5, 6) 154,500 23,175 17,200 13,905 - - - 13,500 - 221,280

David Thompson(3, 6) 70,834 - 7,500 6,375 - - - - 87,434 172,143

1,847,494 52,341 253,413 226,607 - - - 542,610 182,457 3,103,922

(1) Other benefi ts relate to accommodation whilst living away from home.(2) Commenced 29 November 2004.(3) Services terminated by mutual agreement 29 November 2004. Other benefi t is the fi nal payment in relation to services rendered.(4) Other benefi t relates to cash payment of annual leave entitlement. (5) The total value of options included in remuneration for the year is calculated in accordance with Accounting Standard AASB2

“Share Based Payments”.(6) Non-monetary items includes the provision of a motor vehicle, rent, travel, health benefi ts (where applicable) and fringe benefi ts

tax as appropriate.


Service AgreementsRemuneration and other terms of employment for directors and executives are formalised in service agreements or letters of appointment.

Termination benefi ts disclosed below do not apply in cases of misconduct or other specifi ed circumstances.

Dane B Hudson

(i) Term of agreement – no specifi ed term.

(ii) Remuneration is comprised of base salary, superannuation, short term incentive bonus ($150,000 minimum in 2006/2007 and capped at

$300,000 per annum thereafter), share options (to the value of $250,000 per annum) as per note 5 subject to achievement of targets as set

by the board.

(iii) If Mr. Hudson’s employment is terminated by the company, the company must pay Mr. Hudson the equivalent of one year’s total

remuneration.

Brian J. McGuigan

(i) Term of agreement - no specifi ed term.

(ii) Remuneration includes the provision of a motor vehicle and rental assistance.

(iii) Termination - no termination benefi t specifi ed above normal statutory entitlements.

Paul Schaafsma


(ii) Remuneration includes provision of a motor vehicle, rental assistance, relocation costs and entitlement to a bonus subject to certain key

performance criteria.

(iii) If Mr Schaafsma’s employment is terminated by the company, the company must pay Mr Schaafsma the equivalent of one year’s total

remuneration.

Lisa McGuigan


(ii) Remuneration includes provision of a motor vehicle and entitlement to a bonus subject to certain key performance criteria.

(iii) If Ms McGuigan’s employment is terminated by the company, the company must pay Ms McGuigan the equivalent of one year’s total

remuneration.

Michael Noack


(ii) Remuneration includes life/trauma insurance, a motor vehicle and an entitlement to a bonus subject to certain key performance criteria.

(iii) If Mr Noack’s employment is terminated by the company, the company must pay Mr Noack the equivalent of one year’s total remuneration.

Neil McGuigan

(i) Term of agreement - 5 years commencing 29 November 2004.

(ii) Remuneration includes the provision of a motor vehicle and an entitlement to a bonus subject to certain key performance criteria.

(iii) Mr McGuigan is entitled to the granting of share options over issued shares of the company to the value of $57,500 per annum (see note 5).

(iv) If Mr McGuigan’s employment is terminated by the Company, the Company must pay Mr McGuigan the higher of the balance of his contract

term or one years base remuneration.

Richard Byllaardt


(ii) Remuneration includes the provision of a motor vehicle and entitlement to a bonus subject to certain key performance criteria.

(iii) Termination - no termination benefi t specifi ed above normal statutory entitlements.

Julie Thomas


(ii) Remuneration includes the provision of a motor vehicle, rental assistance and a bonus subject to certain key performance criteria.

(iii) Termination - no termination benefi t specifi ed above normal statutory requirements.

Craig Thomas


(ii) Remuneration includes the provision of a motor vehicle and is reviewed annually and a bonus subject to certain key performance criteria.

(iii) If Mr Thomas’s employment is terminated by the company, the company must pay Mr Thomas the equivalent of one half of his total

annual remuneration.


Note 5: Executive share option plan

The Company has an executive and senior employee option scheme which allows for the granting of share options over unissued shares of the

company. The company also issues share options under the McGuigan Simeon Wines Limited Executive Option Acquisition Plan (“Plan”). These

options are granted over issued shares of the company.

Executive and Senior Employee Option Scheme (“Scheme”).In accordance with the provisions of the scheme as approved by the shareholders at the Annual General Meeting on 11 November 1997,

options have been issued to a number of executives and senior employees of the Company and 1,459,000 remain as unissued ordinary shares

as at 30 June 2006.

Options were offered to eligible employees at an exercise price equivalent to the current market price. The market price is determined as being

the average of the last sale price for the Company shares over the fi ve trading days preceding the day of the offer.

The consideration for each parcel of options is $1.00. Each option is entitled to one share upon exercise. The options are issued for a term not

exceeding fi ve years from the date of issue.

Share options issued prior to 1 July 2003 cannot be exercised within the fi rst three years and are subject to the Company meeting a performance

hurdle. The performance hurdle is that the relevant tranche of options can only be exercised if, at the time of exercise, the Company’s average

annual return on average shareholders’ equity for the previous two fi nancial years is at or above the 55th percentile of the corresponding fi gures

for all companies in the ASX All Ordinaries Index. Share options issued after 1 July 2003 cannot be exercised within the fi rst two years and are not

subject to performance hurdles.

Executive share options carry no rights to dividends and no voting rights.

WEIGHTED AVERAGE

NUMBER EXERCISE PRICE

2006 2005 2006 2005 $ $

Balance at the beginning of the fi nancial year (i) 1,653,000 1,829,000 3.83 3.79

Granted during the fi nancial year (ii) - - - -

Exercised during the fi nancial year (iii) (144,000) (176,000) 2.97 3.39

Lapsed during the fi nancial year (iv) (50,000) - 2.89 -

Balance at the end of the fi nancial year (v) 1,459,000 1,653,000 3.95 3.83

(i) Balance at the Beginning of the Financial Year

2006 OPTIONS - SERIES NO. GRANT DATE EXPIRY/EXERCISE DATE EXERCISE PRICE $

(1) Issued 6 October 2000 175,000 06/10/00 06/10/05 2.890

(2) Issued 25 September 2001 323,000 25/09/01 25/09/06 3.487

(3) Issued 2 September 2003 1,155,000 02/09/03 02/09/08 4.072

1,653,000

2005 OPTIONS - SERIES NO. GRANT DATE EXPIRY/EXERCISE DATE EXERCISE PRICE $

(1) Issued 6 October 2000 212,500 06/10/00 06/10/05 2.890

(2) Issued 25 September 2001 451,500 25/09/01 25/09/06 3.487

(3) Issued 2 September 2003(a) 1,165,000 02/09/03 02/09/08 4.072

1,829,000

(a) Fair value of these options at grant date was $1.08 per option.


Note 5: Executive share option plan (continued)

(ii) Granted During the Financial Year

2006 OPTIONS - SERIES NO. GRANT DATE EXPIRY/EXERCISE DATE EXERCISE PRICE $ FAIR VALUE RECEIVED $

Nil - - - - -

2005 OPTIONS - SERIES NO. GRANT DATE EXPIRY/EXERCISE DATE EXERCISE PRICE $ FAIR VALUE RECEIVED $

Nil - - - - -

(iii) Exercised During the Financial Year

NO. OF FAIR VALUE OPTIONS GRANT EXERCISE EXPIRY EXERCISE NO. OF CONSIDERATION OF SHARES AT2006 OPTIONS - SERIES EXCERCISED DATE DATE DATE PRICE $ SHARES RECEIVED $ DATE OF ISSUE $

(1) Issued 6 October 2000 125,000 06/10/00 04/08/05 06/10/05 2.890 125,000 361,250 497,500

(2) Issued 25 September 2001 6,500 25/09/01 22/07/05 25/09/06 3.487 6,500 22,866 26,325


144,000 144,000 427,704 573,575

2005 OPTIONS - SERIES

(1) Issued 6 October 2000 37,500 06/10/00 30/11/04 06/10/05 2.890 37,500 108,375 197,625


5,000 25/09/01 11/10/04 25/09/06 3.487 5,000 17,435 26,350

20,000 25/09/01 14/10/04 25/09/06 3.487 20,000 69,740 105,000

2,000 25/09/01 13/10/04 25/09/06 3.487 2,000 6,974 10,360

25,000 25/09/01 19/10/04 25/09/06 3.487 25,000 87,175 128,250

2,000 25/09/01 30/11/04 25/09/06 3.487 2,000 6,974 10,540

7,500 25/09/01 29/12/04 25/09/06 3.487 7,500 26,153 41,100

4,000 25/09/01 10/02/05 25/09/06 3.487 4,000 13,948 24,280

23,000 25/09/01 10/03/05 25/09/06 3.487 23,000 80,201 128,800


176,000 176,000 597,175 931,505

The fair value of shares at the date of issue is measured as the market value at close of trade on the date of their issue.

(iv) Lapsed During the Financial Year

2006 OPTIONS - SERIES NO. GRANT DATE EXPIRY DATE

(1) Issued 6 October 2000 50,000 06/10/00 06/10/05

2005 OPTIONS - SERIES NO. GRANT DATE EXPIRY DATE

Nil - - -

(v) Balance at End of Financial Year

EXERCISE2006 OPTIONS - SERIES NO. VESTED NO. UNVESTED NO. GRANT DATE EXPIRY DATE PRICE $

(2) Issued 25 September 2001 304,000 304,000 - 25/09/01 25/09/06 3.487

(3) Issued 2 September 2003 1,155,000 1,155,000 - 02/09/03 02/09/08 4.072

1,459,000 1,459,000


Note 5: Executive share option plan (Continued)

EXERCISE2005 OPTIONS - SERIES NO. VESTED NO. UNVESTED NO. GRANT DATE EXPIRY DATE PRICE $

(1) Issued 6 October 2000 175,000 175,000 - 06/10/00 06/10/05 2.890

(2) Issued 25 September 2001 323,000 323,000 - 25/09/01 25/09/06 3.487

(3) Issued 2 September 2003 1,155,000 - 1,155,000 02/09/03 02/09/08 4.072

1,653,000 498,000 1,155,000

Executive share options carry no rights to dividends and no voting rights.

In accordance with the terms of the executive share option scheme, options may be exercised at any time from the date on which they vest to

the date of their expiry.

McGuigan Simeon Wines Limited Executive Option Acquisition Plan (“Plan”)

This plan allows for the issue of share options over issued shares of the company.

During the year 85,544 share options over issued shares were issued to executives of the company. The operation of these options is as follows:

:: McGuigan Simeon Wines Limited has agreed to contribute to the trustee of the McGuigan Simeon Wines Limited Executive Option

Acquisition Plan (“Plan”) to acquire call options over ordinary shares in MSWL from Macquarie Bank Limited and under which the executive

has rights to call for the delivery of those shares as described below. The Company paid $57,500 for these rights and this is considered the

fair value. The right to procure that the trustee of the Plan exercises a call option over 85,544 issued ordinary shares in MSWL at an exercise

price of $4.36 per MSWL share each such call option to be exercisable between 13 May 2007 and 13 May 2009 and subject to a performance

hurdle which is satisfi ed if, for 2 consecutive fi nancial years between the acquisition of the option and its expiry, MSWL’s return on average

shareholder’s equity is equal to or above the 60th percentile of the corresponding fi gures for all companies in the ASX All Ordinaries Index.

:: The share price risk is borne by Macquarie Bank Limited and McGuigan Simeon Wines Limited bears no residual risk in relation to share

price movements.

Note 6: Remuneration of auditors


2006 2005 2006 2005

$ $ $ $

(a) Auditor of the parent company

Audit or review of fi nancial report 275,000 234,000 275,000 234,000

Other services – accounting advice 184,217 80,700 184,217 80,700

Other services – taxation advice 98,100 111,550 98,100 111,550

Other services – taxation compliance 134,100 171,920 134,100 171,920

691,417 598,170 691,417 598,170

(b) Other Auditors

Auditing the fi nancial report - 20,000 - -

The auditor of McGuigan Simeon Wines Limited is Deloitte Touche Tohmatsu.


Note 7: Current trade and other receivables


2006 2005 2006 2005$’000 $’000 $’000 $’000

Trade receivables(1) 99,915 120,565 43,857 66,155

Allowance for doubtful debts (1,500) (1,668) (1,341) (527)

98,415 118,897 42,516 65,628

Other receivables

Goods and services tax (GST) and WET recoverable 74 1,257 - -

Receivable from controlled entities - - 235,252 245,806

Other 190 544 74 405

98,679 120,698 277,842 311,839

(1) The average credit period on sales of goods is 112 days. An allowance has been made for estimated irrecoverable amounts from the sale of

goods, determined by reference to past default experience and an analysis of specifi c debtors at year end.

Note 8: Current inventories

Bulk wine:

At cost 124,465 156,220 14,237 7,431

At net realisable value 20,049 18,118 1,289 -

Other stores:

At cost 4,181 2,648 3,401 -

Work in progress:

At cost 21,856 15,991 8,597 650

Bottled wine:

At net realisable value 1,093 - 1,093 -

At cost 23,372 30,484 15,058 20

195,016 223,461 43,675 8,101


Note 9: Current fi nancial assets


2006 2005 2006 2005$’000 $’000 $’000 $’000

Trade Credits (i) 1,156 1,156 1,156 -

(i) Classifi ed as held for trading

Note 10: Other current assets

Prepayments 4,893 6,499 3,972 5,488

Note 11: Non current assets held for sale

Property, Plant and Equipment (i) 13,511 12,194 - -

(i) Asset held for sale in the next 12 months.

Note 12: Non current receivables

Interest bearing loans advanced to:

Other entities 2,358 2,358 - -

Austvin Vineyards 1997 Project (i) 1,548 1,235 - -

3,906 3,593 - -

(i) Austvin Vineyards Limited is the manager of this project with loans held by Austvin Finance Pty Ltd. The loan relates to amounts advanced

to investors in the project to be recouped from the sale of grapes in the future.

Note 13: Non current inventories

At cost:

Bulk wine 53,916 58,525 2,996 5,649

Bottled wine 1,288 1,493 850 -

55,204 60,018 3,846 5,649


Note 14: Investments accounted for using the equity method

INVESTMENT IN ASSOCIATE CONSOLIDATED COMPANY

2006 2005 2006 2005

$’000 $’000 $’000 $’000

Investment in associate 2,110 2,150 2,213 2,306

(a) Interest in associate

COUNTY OF NAME OF ENTITY OWNERSHIP IN INTEREST PRINCIPAL ACTIVITY INCORPORATION

2006 2005 % %

Mangoola Vineyards Pty Ltd 45 45 Vineyard Investor Australia

Tempus Two Pty Limited 50 50 Winery Ownership Australia

CONSOLIDATED COMPANYNAME OF ENTITY CARRYING AMOUNT CARRYING AMOUNT

2006 2005 2006 2005

$’000 $’000 $’000 $’000

Mangoola Vineyards Pty Ltd - - - -

Tempus Two Pty Limited 2,110 2,150 2,213 2,306

2,110 2,150 2,213 2,306

(b) Movement in Investments in Associates


2006 2005 2006 2005

$’000 $’000 $’000 $’000

Equity accounted amount of investment at the beginning of the fi nancial year. 2,150 1,865 2,306 2,000

Acquisition of interests in associates - 306 - 306

Write down of investment (44) - (44) -

Return of investment (49) - (49) -

Share of profi t/(loss) from ordinary activities before income tax expenses 76 (30) - -

Share of income tax benefi t/(expense) related to ordinary activities (23) 9 - -

Equity accounted amount of investment at the end of the fi nancial year. 2,110 2,150 2,213 2,306

The company does not consider it has control or the capacity to control the day to day management decisions or the strategic direction of these

entities.

(c) Summarised fi nancial position of associates

Current assets 380 382

Non-current assets 9,009 9,255

Total assets 9,389 9,637

Current liabilities 5,080 5,336

Net assets 4,309 4,301

Revenue 3,195 2,860

Net profi t/(loss) 106 (42)

(d) Share of retained earnings attributable to associates

Retained profi ts/(accumulated losses)

At the beginning of the fi nancial year (156) (135)

At the end of the fi nancial year (103) (156)


Note 15: Other non current investments


2006 2005 2006 2005$’000 $’000 $’000 $’000

Shares in unlisted companies at fair value 842 897 542 542

Shares in wholly-owned controlled entities at recoverable amount - - 166,339 206,239

842 897 166,881 206,781

Note 16: Biological assets

Net market value of vines at beginning of year 31,206 32,889

Vines disposed during the year (945) (1,683)

Net market value at end of year 30,261 31,206

(a) Impact on Income Statement

The profi t before income tax included in the Consolidated Income Statement resulting from the movement in market value of biological

assets is $1,311,000 (2005: $4,050,000); Company $119,000 (2005: $200,000 loss).

(b) Physical quantity of vines

Number of vines owned 1,595,072 1,672,250

Acres owned 2,163 2,256

Number of grapes crushed - owned vineyards (tonnes) 21,769 23,958

(c) Nature of asset

McGuigan Simeon Wines Limited owns vineyards in several regions across Australia (primarily the Sunraysia, Riverland and Cowra regions).

There are two resulting biological assets:

(i) grapes (consumable biological asset)

(ii) vines (bear biological asset)

(d) Signifi cant assumptions

Signifi cant assumptions made in determining the net market value of the vines are:

(i) 100% of the vines are currently mature and will be productive for periods up to 15 years per vine;

(ii) the expected price of the vines is constant in real terms, based on average prices throughout the current year;

(iii) the costs expected to arise throughout the life of the vines are constant in real terms, based on average costs throughout the year;

(iv) infl ation will continue at the current rate;

Signifi cant assumptions made in determining the net market value of grapes picked are:

(i) grapes crushed valued at management forecast of market price.

(ii) costs are those costs incurred in the 12 months preceding harvest.


Note 17: Property, plant and equipment


2006 2005 2006 2005

$’000 $’000 $’000 $’000

(a) Vineyard Improvements

at cost 12,648 12,587 1,036 1,044

accumulated depreciation (3,570) (2,968) (213) (187)

9,078 9,619 823 857

Vineyard Improvements under lease (from third party)

at cost 417 664 - -

accumulated amortisation (71) (85) - -

346 579 - -

Freehold Land

at cost 25,523 27,143 3,441 3,404

Buildings

at cost 21,536 16,524 13,758 10,752

accumulated depreciation (3,532) (2,269) (1,080) (672)

18,004 14,255 12,678 10,080

Plant and equipment under lease

at cost 2,341 1,148 - -

accumulated amortisation (326) (179) - -

2,015 969 - -

Plant and equipment

at cost 130,992 132,166 22,257 24,562

accumulated depreciation (57,124) (49,529) (9,468) (7,538)

73,868 82,637 12,789 17,024

Total Property, Plant and Equipment

at cost 193,457 190,232 40,492 39,762

accumulated depreciation and amortisation (64,623) (55,030) (10,761) (8,397)

128,834 135,202 29,731 31,365


Note 17: Property, plant and equipment (continued)


2006 2005 2006 2005$’000 $’000 $’000 $’000

(b) Reconciliations Vineyard Improvements

carrying amount at beginning of the fi nancial year 9,619 10,157 857 796

additions 60 85 - 85

depreciation (601) (623) (34) (24)

9,078 9,619 823 857

Vineyard Improvements under lease (from third party)

carrying amount at beginning of fi nancial year 579 1,129 - -

amortisation (18) (60) - -

disposals (215) (490) - -

346 579 - -

Freehold land

carrying amount at beginning of the fi nancial year 27,143 31,946 3,404 2,494

additions 549 910 37 910

disposals (929) (3,976) - -

transfer to current assets - (1,737) - -

ransfer to other category (1,240) - - -

25,523 27,143 3,441 3,404

Buildings


additions 107 7,079 24 7,079

disposals - - - -

depreciation (636) (339) (340) (71)

transfer to current assets 124 (4,762) - -

transfer from other category 4,154 - 2,914 -

18,004 14,255 12,678 10,080

Plant and equipment under lease

carrying amount at beginning of the fi nancial year 969 1,046 - -

addition 1,193 - - -

depreciation (147) (77) - -

2,015 969 - -

Plant and equipment


additions 5,802 19,481 677 14,670

disposals (1,356) (1,095) - (976)

depreciation (9,461) (9,005) (1,998) (1,363)

transfer to current assets (840) (4,874) - -

transfer to other category (2,914) - (2,914) -

73,868 82,637 12,789 17,024


Note 17: Property, plant and equipment (continued)


2006 2005 2006 2005

$’000 $’000 $’000 $’000

Aggregate depreciation allocated, whether recognised as an expense or

capitalised as part of the carrying amount of other assets during the year:

Buildings 635 339 340 71

Vineyard improvements 601 623 34 24

Vineyard improvements under lease (from third party) 18 60 - -

Plant and equipment 9,461 9,005 1,998 1,363

Plant and equipment under lease 147 77 - -

10,862 10,104 2,372 1,458

Note 18: Goodwill

Gross carrying amount:

Balance at beginning of fi nancial year 47,611 47,611 - -

Additional payment during the year 100 - - -

Balance at end of fi nancial year 47,711 47,611 - -

Net book value:

At the beginning of the fi nancial year 47,611 47,611 - -

At the end of the fi nancial year 47,711 47,611 - -

Allocation of goodwill to cash-generating units

Goodwill has been allocated for impairment testing purposes to 5 individual cash generating units as follows:

Individual cash-generating units

- Buronga Hill Winery

- Austvin Loxton Winery

- Yaldara Barossa Winery

- MSWL Europe

- Miranda Wines Group

Buronga Hill Winery 21,771 21,771

Austvin Loxton Winery 17,850 17,850

Yaldara Barossa Winery 4,468 4,468

MSWL Europe 2,621 2,621

Miranda Wines Group 1,001 901

The recoverable amount of cash-generating unit is determined based on a value in use calculation which uses cash fl ow forecasts based on

2007 fi nancial budgets approved by management and 2008 and 2009 cash fl ow projections and a discount rate of 9.7% p.a. (2005: 9.2% p.a.).

Management believes that any reasonably possible change in the key assumptions on which recoverable amount is based would not cause the

carrying amount of the individual cash-generating units to exceed its recoverable amount.


Note 18: Goodwill (continued)

The key assumptions used in the value in use calculation for Buronga Hill Winery, Austvin Loxton Winery and Yaldara Barossa Winery

are as follows:

Working Capital: Working capital levels used in future years are in line with levels as at 30th June, 2006.

Revenue: Revenue is forecast to increase at 3% per annum from 1st July, 2007.

Gross Margin: Gross margin rates are forecast to continue at levels consistent with the 2006/2007 budget.

Terminal Growth Rate: A terminal growth rate of 2% (2005: 2%) has been applied.

The Company has performed sensitivity analysis on the value in use calculation. Reducing revenue and terminal growth rates to 0% does not

cause the associated goodwill to be impaired. Similarly, as there is suffi cient head-room in the value in use calculation, small increases in the

discount rate (up to 2 percentage points) do not cause the goodwill to be impaired.

The MSWL Europe and Miranda Wines Group value in use calculations assume revenues and profi ts from these operations will continue at levels

achieved in 2004/2005 and 2005/2006.

Note 19: Other intangible assets


2006 2005 2006 2005

$’000 $’000 $’000 $’000

Brand Names:

Balance at 1 July 5,098 5,098 - -

Balance at 30 June 5,098 5,098 - -

Accumulated amortisation:

Balance at 1 July (1,622) (1,368) - -

Amortisation expense (256) (254) - -

Balance at 30 June (1,878) (1,622) - -

Net book value 3,220 3,476 - -

Note 20: Non current fi nancial assets

Trade credits 2,756 3,827 2,756 -

Note 21: Other non current assets

Security deposit 1,439 1,376 - 3

Note 22: Assets pledged as security

In accordance with the security arrangements of liabilities, as disclosed in notes 24 and 28 to the fi nancial statements, effectively all assets (except

goodwill and deferred tax assets) of the consolidated entity have been covered by a negative pledge with the lending institutions, with the

exception of assets under hire purchase leased assets.


Note 23: Current trade and other payables


2006 2005 2006 2005

$’000 $’000 $’000 $’000

Trade payables(i) 67,158 87,804 30,855 14,525

Goods and services tax (GST) payable 2,610 - 2,625 -

Amounts payable to wholly owned subsidiary - - 3,794 -

Other accounts payable and accruals 16,476 13,353 11,476 7,492

86,244 101,157 48,750 22,017

(i) The average credit period on purchase of goods is 66 days. The consolidated entity has fi nancial risk management policies in place to ensure

that all payables are paid within the credit timeframe.

Note 24: Current borrowings

Secured:

Hire purchase (note 28 (ii)) 363 557 363 557

Finance lease liabilities (note 28 (iii)) 677 675 9 -

1,040 1,232 372 557

Note 25: Current provisions

Directors retirement benefi t (note 30) 452 452 - -

Onerous grape contracts (note 30) 697 2,455 - -

Employee benefi ts 5,008 3,011 4,957 564

6,157 5,918 4,957 564

Note 26: Other current liabilities

Income in advance 9,810 4,887 615 1,131

Other 256 98 185 78

10,066 4,985 800 1,209

Note 27: Non current payables

Other loans - 5,770 - 5,720

Note 28: Non current borrowings

Unsecured:

Commercial Bills (i) 142,000 168,000 142,000 168,000

Secured:

Hire purchase (ii) 49 324 49 324

Finance lease liabilities (iii) 5,504 8,366 47 -

147,553 176,690 142,096 168,324

(i) The bank overdraft and commercial bills are subject to an interlocking guarantee and indemnity to National Australia Bank bank overdraft

commercial bills (non-current)(ii) Secured by assets subject to the hire purchase agreement.(iii) Secured by assets subject to the fi nancial lease.


Note 29: Non-current provisions


2006 2005 2006 2005

$’000 $’000 $’000 $’000

Employee benefi ts 637 2,367 637 380

Onerous grape contracts (note 30) 855 - - -

1,492 2,367 637 380

Note 30: Provisions

Onerous DirectorsGrape Retirement

Contracts (i) Benefi t (ii)

Balance at 30 June 2005 2,455 452

Reductions arising from payments/other sacrifi ces

of future economic benefi ts (903) -

Balance at 30 June 2006 1,552 452

Current 697 452

Non-current 855 -

Balance as at 30 June 2006 1,552 452

(i) The provision for onerous contracts represents the present value of the future grape payment that the consolidated entity is presently

obligated to make in respect of onerous grape purchase contracts under non-cancellable grape agreements, less the estimate market value

of these grapes. The estimate may vary as a result of changes in the market. The unexpired term of the agreements range from 1 to 3 years.

(ii) The provision for Directors’ Retirement represents the present value of the directors’ best estimate of the costs likely to be incurred as a result

of either termination, resignation or retirement of directors.

Note 31: Non hedged foreign currency balance

The Australian dollar equivalent of foreign currency balances included in the fi nancial statements which are not effectively hedged are as follows:

Canadian dollars - Current receivables $492,937 (2005 - $393,000); GB Pounds - Current receivables $4,481,521 (2005 - $4,011,000);

and Euro’s - Current receivables $1,785,418 (2005 - $883,000).


Note 32: Issued capital


2006 2005 2006 2005$’000 $’000 $’000 $’000

Fully paid ordinary shares 375,935 354,258 375,935 354,258

2006 2006 2005 2005$’000 Number $’000 Number

Fully paid ordinary share capital

Beginning of fi nancial year 354,258 113,588,205 334,834 109,499,186

Issued during the year

Non-executive share scheme - 66,000 - 128,000

Dividend re-investment plan 11,247 3,335,909 9,483 1,858,747

Underwriting agreement 9,741 2,924,945 9,389 1,920,772

Share options exercised (note 5) 428 144,000 597 176,000

Share issue costs - - (45) -

Transfer from reserves 261 - - -

Other - - - 5,500

End of fi nancial year 375,935 120,059,059 354,258 113,588,205

Changes to the Corporations Law abolished the authorised capital and par value concept in relation to share capital from 1 July 1998. Therefore,

the company does not have a limited amount of authorised capital and issued shares do not have a par value.

Note 33: Reserves


2006 2005 2006 2005$’000 $’000 $’000 $’000

Employee equity-settled benefi ts(i) 1,727 1,571 1,727 1,571

Employee equity-settled benefi ts:

Balance at beginning of fi nancial year 1,571 519 1,571 519

Transfer to issued capital (261) - (261) -

Share based payments 417 1,052 417 1,052

Balance at end of fi nancial year 1,727 1,571 1,727 1,571

(i) Reserve relates to the fair value of share based payments provided to directors and employees of the company.

Note 34: (Accumulated losses)/Retained earnings

Balance at beginning of fi nancial year (5,649) (13,945) 1,178 (7,003)

Dividends provided for or paid (note 36) (20,988) (26,672) (20,988) (26,672)

Net (Loss)/Profi t (11,546) 34,968 (18,517) 34,853

Balance at end of fi nancial year (38,183) (5,649) (38,327) 1,178


Note 35: Earnings per share

CONSOLIDATED

2006 2005 Cents Cents per share per share

Basic earnings per share (after inventory write down) (9.9) 31.3

Basic earnings per share (before inventory write down) 15.0 32.5

Diluted earnings per share (after inventory write down) (9.9) 30.8

Diluted earnings per share (before inventory write down) 14.8 32.0

CONSOLIDATED

2006 2005 $’000 $’000

Net (loss)/profi t (11,546) 34,968

Net profi t before inventory write down 17,540 36,346

CONSOLIDATED

2006 2005 ’000 ’000 Numbers Numbers of shares of shares

Weighted average number of ordinary shares used in calculating basic earnings per share 116,960 111,764

Effect of dilutive securities:

Share options 1,485 1,695

Adjusted weighted average number of ordinary shares used in calculating diluted earnings per share 118,445 113,459

The potential ordinary shares are not considered dilutive as their effect is to reduce the loss per share.

Note 36: Dividends

COMPANY 2006 TOTAL COMPANY 2005 TOTAL

Cents $’000 Cents $’000 per share per share

Fully paid ordinary shares:

Interim dividend – franked to 30% 5.00 5,909 10.25 11,572

Final dividend – franked to 30% 13.25 15,079 13.75 15,100

20,988 26,672

Adjusted franking account balance at 30% (tax paid basis) 15,424 16,046


Note 37: Leases

(a) Non-cancellable operating leasesThe consolidated entity leases the following assets under normal economic terms. All operating lease contracts contain market review clauses

in the event the consolidated entity exercises its option to renew.

- Vineyards

- Warehouses

- Cellar doors

- Winery equipment

The following sets out the commitments to future lease payments relating to operating leases that have not been disclosed in the fi nancial

statements as a liability.


2006 2005 2006 2005

$’000 $’000 $’000 $’000

- not longer than 1 year 18,297 18,591 14,512 14,628

- longer than 1 year and not longer than 5 years 71,620 75,599 59,351 62,064

- longer than 5 years 71,780 84,967 71,780 83,284

161,697 179,157 145,643 159,976

(b) Finance leases Finance leases relate to vineyard’s with a lease term of up to 15 years.

MINIMUM FUTURE LEASE PAYMENTS PRESENT VALUE OF MINIMUM FUTURE LEASE PAYMENT

CONSOLIDATED COMPANY CONSOLIDATED COMPANY

2006 2005 2006 2005 2006 2005 2006 2005

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

No Later than 1 year 1,094 1,473 15 - 676 891 10 -

Later than 1 year and not later than 5 years 2,631 3,433 57 - 838 582 46 -

Later than 5 years 6,199 10,619 - - 4,667 7,568 - -

Minimum lease payments* 9,924 15,525 72 - 6,181 9,041 56 -

Less future fi nance changes (3,743) (6,484) (16) - - - - -

Present value of minimum lease payments 6,181 9,041 56 - 6,181 9,041 56 -

Current Interest bearing liabilities (note 24) 677 675 9 -

Non-Current Interest bearing liabilities (note 28) 5,504 8,366 47 -

6,181 9,041 56 -

*minimum lease payments include the aggregate of all lease payments and any guaranteed residual.


Note 38: Contingent liabilities

The Company has foreign exchange hedge contracts with plateau calls , shout options or fi xed rates. As at 30/6/06 all foreign currency contracts have been accounted for as per AASB 1012 “Foreign Currency Translation”, and therefore no contingent liability exists.

The fair value of the contracts upon adoption of AASB1012 was not material.

As detailed in note 39, the company has entered into a deed of cross guarantee with certain wholly-owned controlled entities. The amount disclosed as a contingent liability $54,940,000 (2005: $110,552,979) represents total liabilities of the group of companies party to that class order less the liabilities of the company. The extent to which an outfl ow of funds will be required is dependent on the future operations of the entities that are party to the deed of cross guarantee being more or less favourable than currently expected. The deed of cross guarantee will continue to operate indefi nitely.

An entity in the consolidated entity is a defendant in a legal claim involving the alleged breach of a distribution agreement. The directors believe, based on legal advice and the information available to date, that the action can be successfully defended and therefore no material losses will be incurred.

Note 39: Controlled entities

NAME OF ENTITY COUNTRY OF INCORPORATION OWNERSHIP INTEREST (%)

Parent Entity 2006 2005

McGuigan Simeon Wines Limited Australia

Controlled Entity

Simeon Wines Limited(1) Australia 100 100

Vintners Australia Pty Limited(1) Australia 100 100

Barossa Valley Wine Company Pty Limited(1) Australia 100 100

Riverland Vineyards Pty Limited(1) Australia 100 100

Coldridge Vineyards Pty Limited(1) Australia 100 100

Australian Vintage Limited(1) Australia 100 100

Mourquong Pty Limited(1) Australia 100 100

Buronga Hill Pty Limited(1) Australia 100 100

Austvin Vineyards Limited(1) Australia 100 100

Austvin Finance Pty Limited(1) Australia 100 100

Austvin Management Pty Limited(1) Australia 100 100

Australian Flavours Pty Limited(1) Australia 100 100

Austvin Holdings Pty Limited(1) Australia 100 100

Harvest Wine Company Pty Limited(1) Australia 100 100

Budrove Pty Limited(1) Australia 100 100

Limestone Coast Wines Pty Limited(1) Australia 100 100

Icon Brands Pty Limited(1) Australia 100 100

Botany Creek Wines Pty Limited(1) Australia 100 100

Miranda Wines Pty Limited(1) Australia 100 100

Miranda Wines Leasing Pty Limited(1) Australia 100 100

Barossa Rovalley Estates Pty Limited(1) Australia 100 100

Miranda Family Investments Pty Limited(1) Australia 100 100

Miranda Wines (Purchasing) Pty Limited(1) Australia 100 100

Miranda Wines (Europe) Limited United Kingdom 100 100

Miranda Wines Holdings Limited(1) Australia 100 100

McGuigan Simeon Wines (Europe) Limited United Kingdom 100 100

(1) These wholly-owned controlled entities have entered into a deed of cross guarantee with McGuigan Simeon Wines Limited pursuant to ASIC Class Order 98/1418 and are relieved from the requirement to prepare and lodge an audited fi nancial report. As a condition of this class order, McGuigan Simeon Wines Limited has guaranteed to pay any defi ciency in the event of winding up of any of it’s controlled entities. The controlled entities have also given a similar guarantee in the event McGuigan Simeon Wines Limited is wound up.

Total assets and liabilities of companies included in the cross guarantee is equivalent to that included in the consolidated balance sheet on page 48 of this report.


Note 40: Segment information

Business Segments

Segments Revenue, Results, Assets and Liabilities

REVENUE RESULTS ASSETS LIABILITIES

2006 2005 2006 2005 2006 2005 2006 2005

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Bottled wine(1) 167,290 147,390 8,171 17,151 92,629 94,949 23,235 33,724

Bulk wine and processing(2) 168,350 184,483 (18,923) 29,449 425,656 491,872 55,054 71,740

Vineyards 25,186 31,827 3,082 8,224 67,860 76,395 20,257 19,897

Unallocated* - - (9,745) (8,674) 21,271 14,847 169,391 202,522

Total 360,826 363,700 (17,415) 46,150 607,416 678,063 267,937 327,883

Income tax benefi t/(expense) 5,869 (11,182)

Net Profi t (11,546) 34,968

* unallocated results include interest expense.

* unallocated assets include tax related assets.

* unallocated liabilities includes commercial bill facilities utilised in the whole business and tax related liabilities

* the bottled wine division assets include the carrying value of the equity accounted investment in an associate amounting to $2.1 million.

(1) Whilst sales in the bottled division are up, the margin has been impaired by:

:: $2,005,000 relating to inventory write down;:: Lapping of $2.0 million in profi t from higher margin one off sales in 2005;:: a reduction in margins in the domestic branded business; and:: increased export sales but at a low margin.

(2) Includes $39,545,000 relating to inventory write down.

Other Segmental Information

ACQUISITION DEPN. & AMORT. OTHER SHARE OF CARRYING OF SEGMENT OF SEGMENT NON-CASH ASSOCIATES OF EQUITY ASSETS ASSETS EXPENSES PROFIT/(LOSS) INVESTMENT

2006 2005 2006 2005 2006 2005 2006 2005 2006 2005

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Bottled wine 980 22,429 1,415 315 - - 53 (21) 2,110 2,150

Bulk wine and processing 5,364 4,394 8,925 9,449 - - - - - -

Vineyards - - - - - - - - - -

Unallocated 1,316 599 778 594 - - - - - -

Total 7,660 27,422 11,118 10,358 - - 53 (21) 2,110 2,150


Note 40: Segment information (continued)

Geographical Segments

ACQUISITION OF REVENUE FROM CUSTOMERS SEGMENT ASSETS SEGMENT ASSETS

2006 2005 2006 2005 2006 2005 $’000 $’000 $’000 $’000 $’000 $’000

Australia 162,480 194,623 548,756 614,508 7,660 27,422

United Kingdom 145,813 86,509 38,270 33,339 - -

North America 25,018 49,629 9,161 20,657 - -

Europe 13,627 15,365 3,565 2,868 - -

New Zealand 7,473 10,524 2,343 3,064 - -

Other 6,415 7,050 5,321 3,627 - -

360,826 363,700 607,416 678,063 7,660 27,422

Products and Services within each Business Segment

Bottled Wine :: Sale of bottled wine throughout Australia and overseas.

Bulk Wine & processing :: Sale of bulk wine and bulk in bottle throughout Australia and overseas.

Vineyards :: Contract management and development of vineyards.:: Profi t on owned vineyards.

Note 41: Related party and specifi ed directors and executive disclosures

(a) Equity interests in related parties

Details of the percentage of ordinary shares held in controlled entities are disclosed in note 39 to the fi nancial statements.

Equity interests in associates

Details of the percentage of ordinary shares held in associates are disclosed in note 14 to the fi nancial statements

(b) Key management personnel remuneration

Details of key management personnel directors’ and specifi c executives’ remuneration are disclosed in note 4 to the fi nancial statements.

(c) Key management personnel equity holdings

Fully paid ordinary shares issued by McGuigan Simeon Wines Limited and held by key management personnel are as follows:

GRANTED AS RECEIVED ON BALANCE AT REMUNERATION EXERCISE OF NET OTHER BALANCE AT BALANCE HELD2006 1/7/05 NO. NO. OPTIONS NO. CHANGE NO. 30/6/06 NO. NOMINALLY NO.

David S Clarke 864,000 22,000 - - 886,000 -

Dane B Hudson - - - 50,000 50,000

Brian J McGuigan 8,547,670 - - (8,250,000) 297,670 -

Ian D Ferrier 362,622 11,000 - - 373,622 -

Nicholas S Greiner 325,879 11,000 - 500 337,379 -

Chris L Harris 80,205 11,000 - 2,514 93,719 -

Perry R Gunner 208,978 11,000 - 5,442 225,420 -

Paul Schaafsma - - - - - -

Andrew White - - - - - -

Lisa McGuigan 212,230 - - (112,230) 100,000 -

Michael Noack 1,875 - - - 1,875 -

Richard Byllaardt 50,583 - - (50,583) - -

Neil McGuigan 18,500 - - (18,500) - -

Julie Thomas 27,946 - 50,000 - 77,946 -

Craig Thomas 140 - - 110 250 -

10,700,628 66,000 50,000 (8,372,747) 2,443,881 -


Note 41: Related party and specifi ed directors and executive disclosures (continued)

GRANTED AS RECEIVED ON BALANCE AT REMUNERATION EXERCISE OF NET OTHER BALANCE AT BALANCE HELD2005 1/7/04 NO. NO. OPTIONS NO. CHANGE NO. 30/6/05 NO. NOMINALLY NO.

David S Clarke 831,000 33,000 - - 864,000 -

Brian J McGuigan 8,547,670 - - - 8,547,670 -

Ian D Ferrier 419,643 16,500 - (73,521) 362,622 -

Nicholas S Greiner 309,879 16,500 - (500) 325,879 -

Chris L Harris 48,462 16,500 - 15,243 80,205 -

Perry R Gunner 167,318 16,500 - 25,160 208,978 -

Paul Schaafsma - - - - - -

Andrew White - - - - - -

Lisa McGuigan 212,230 - - - 212,230 -

Michael Noack 1,875 - - - 1,875 -

Richard Byllaardt 35,000 - 20,000 (4,417) 50,583 -

Neil McGuigan - - - 18,500 18,500 -

Julie Thomas 50,000 - - (22,054) 27,946 -

Craig Thomas 140 - - - 140 -

David Thompson - - - - - -

10,623,217 99,000 20,000 (41,589) 10,700,628 -

Share options issued by McGuigan Simeon Wines and held by key management personnel are as follows:

OPTIONS BAL. VESTED VESTED VESTED BAL. @ GRANTED AS OTHER BAL. @ VESTED @ BUT NOT AND DURING 1/7/05 RENUMERATION EXERCISED CHANGE 30/06/06 30/06/06 EXERCIS- EXERCIS- THE YEAR2006 NO. NO. NO. NO. NO. NO. ABLE NO. ABLE NO. NO.

Dane Hudson - 410,000 - - 410,000 - - - -

Paul Schaafsma 35,000 - - - 35,000 35,000 - 35,000 25,000

Andrew White 50,000 - - (50,000) - - - - -

Lisa McGuigan 25,000 - - - 25,000 25,000 - 25,000 25,000

Michael Noack 50,000 - - - 50,000 50,000 - 50,000 50,000

Richard Byllaardt 25,000 - - - 25,000 25,000 - 25,000 25,000

Neil McGuigan - 85,544 - - 85,544 - - - -

Julie Thomas 100,000 - (50,000) - 50,000 50,000 - 50,000 -

Craig Thomas 25,000 - - - 25,000 25,000 - 25,000 25,000

310,000 495,844 (50,000) (50,000) 705,544 210,000 - 210,000 150,000


Note 41: Related party and specifi ed directors and executive disclosures (continued) OPTIONS

BAL. VESTED VESTED VESTED BAL. @ GRANTED AS OTHER BAL. @ VESTED @ BUT NOT AND DURING 1/7/05 RENUMERATION EXERCISED CHANGE 30/06/06 30/06/06 EXERCIS- EXERCIS- THE YEAR2006 NO. NO. NO. NO. NO. NO. ABLE NO. ABLE NO. NO.

Paul Schaafsma 35,000 - - - 35,000 10,000 - 10,000 10,000

Andrew White 50,000 - - - 50,000 - - - -

Lisa McGuigan 25,000 - - - 25,000 - - - -

Michael Noack 50,000 - - - 50,000 - - - -

Richard Byllaardt 45,000 - (20,000) - 25,000 - - - -

Neil McGuigan - - - - - - - - -

Julie Thomas 100,000 - - - 100,000 100,000 - 100,000 50,000

Craig Thomas 25,000 - - - 25,000 - - - -

David Thompson 25,000 - - (25,000) - - - - -

355,000 - (20,000) (25,000) 310,000 110,000 - 110,000 60,000

All executive share options issued to executives during the fi nancial year were made in accordance with the provisions of the executive share

option plan.

Each executive share option converts into 1 ordinary share of McGuigan Simeon Wines Limited on exercise. During the fi nancial year, 50,000

options were exercised by directors and executives for 50,000 ordinary shares in McGuigan Simeon Wines Limited. The exercise price on each

option was $2.89. No amounts remain unpaid on the options exercised during the fi nancial year at year end.

No options were issued to specifi c executives during the year ended 30 June 2006.

Further details of the options granted during the year are contained in note 6 to the fi nancial statements. All ordinary shares issued to the

directors during the fi nancial year were made in accordance with the provisions of the non-executive directors’ share scheme. These shares

were issued as bonus shares as part of the remuneration under the non-executive director share scheme. Further information is set out in the

Directors’ report.

(d) Other transactions with directors (i) During the year ended 30 June 2006, a company associated with David Clarke, Poole’s Rock Wines Pty Limited, sold to the Company

wine to the value of $16,196 (2005: $52,054) at normal wholesale rates. The company sold concentrate to Poole’s Rock Wines Pty Limited

to the value of $878 (2005: $965) at normal commercial rates.

(ii) Fay McGuigan (associate of Brian McGuigan) has a minority interest in an entity which paid $319,459 (2005: $370,990) to the Company

for the provision of viticultural services at Barmera and Bordertown. Fruit from both vineyards was purchased by the Company from the

entity for $393,838 (2005: $259,116) on the same terms and conditions as other investors in that project.

(iii) During the year ended 30 June 2006, the Company has managed the Spring Mountain Vineyard of Nicholas Greiner on a contract

basis in which McGuigan Simeon Wines Limited charges for all the non-capital expenses related to the operation of the vineyard.

The expenses incurred totalled $312,416 (2005: $279,913) and an amount of $178,000 (2005: $165,042) was paid for the purchase of the

grapes from Nicholas Greiner’s vineyard during the 2006 year calculated at normal commercial rates. As of 30th June 2006 $390,586

(2005: $224,928) is payable to the company in relation to the above transactions.

(iv) During the fi nancial year, McGuigan Simeon Wines Limited was charged for contract processing of wine by the controlled entity

Tempus Two Pty Ltd on normal commercial terms.

(v) Lisa McGuigan (associate of Brian McGuigan) has a minority interest in an entity which paid $79,150 (2005: $108,743) to the Company for

the provision of viticultural services at Bordertown. Fruit from the Bordertown vineyard was purchased by the Company from the entity

for $148,135 (2005: $75,499) on the same terms and conditions as other investors in that project.

(e) Transactions within the wholly-owned group Amounts which are non-trade receivables from wholly-owned controlled entities are disclosed in note 7.

(f) Parent Entity The ultimate parent company in the wholly-owned group is McGuigan Simeon Wines Limited.


Note 42: Subsequent events

There have been no other matters or circumstances, other than that referred to in the fi nancial statements or notes thereto, that have arisen since

the end of the fi nancial year, that have signifi cantly affected, or may signifi cantly affect, the operations of the consolidated entity, the results of

those operations, or the state of affairs of the consolidated entity in future fi nancial years

Note 43: Notes to the statement of cash fl ow

(a) Reconciliation of cashFor the purposes of the cash fl ow statement, cash and cash equivalents includes cash on hand and in banks and investments in money

market instruments, net of outstanding bank overdrafts. Cash and cash equivalents at the end of the fi nancial year as shown in the cash fl ow

statement is reconciled to the related items in the Balance Sheet as follows:


2006 2005 2006 2005

$’000 $’000 $’000 $’000

Cash 6,118 12,728 8,500 2,039

(b) Financing Facilities Unsecured bank overdraft facility, reviewed annually and payable at call:

Amount Used - - - -

Amount Unused 5,000 5,000 5,000 5,000

5,000 5,000 5,000 5,000

Unsecured revolving lease facility:

Amount Used 139 473 139 473

Amount Unused 1,861 1,527 1,861 1,527

2,000 2,000 2,000 2,000

Bank Guarantee/Surrender facility:

Amount Used 4,546 3,026 4,546 3,026

Amount Unused 3,454 974 3,454 974

8,000 4,000 8,000 4,000

Unsecured bill acceptance facility, reviewed annually:

Amount Used 142,000 168,000 142,000 168,000

Amount Unused 48,000 7,000 48,000 7,000

190,000 175,000 190,000 175,000

(c) Non-cash fi nancing and investing activitiesUnder the Dividend Reinvestment Plan, shares to the value of $11,247,050 (2005: $9,483,000) were issued during the fi nancial year for no

consideration. A winery and production facility was purchased during 2005. As part of this purchase, a fi nance facility was established with

the vendor.


Note 43: Notes to the statement of cash fl ow (continued)

(d) Reconciliation of profi t/(loss) from ordinary activities after related income tax to net cash fl ows from operating activities


2006 2005 2006 2005

$’000 $’000 $’000 $’000

(Loss)/profi t from ordinary activities after income tax (11,546) 34,968 (18,517) 34,853

Depreciation and amortisation of non-current assets 11,118 10,358 2,372 1,458

Loss/(Profi t) on sale of non-current assets 156 579 (25) 2,962

Decrement from write down of non-current assets - 442 40,000 -

Bad and doubtful debts (168) 2,361 814 2,361

Share of associates loss (53) 21 - -

Unrealised foreign exchange losses (442) 395 192 497

Dividends received from wholly controlled entities - - (29,000) (33,000)

Write down of investment 44 - 44 -

Write down of inventory 41,550 1,969 6,340 -

Changes in net assets and liabilities, net of effects from

acquisition and disposal of businesses

(Increase)/Decrease in assets

trade and other receivables 22,019 5,836 68,615 (12,347)

inventories (8,291) (34,460) (33,771) (1,511)

other current assets 1,606 (4,336) 1,516 (3,195)

other non-current assets 1,098 (6,384) (2,753) (2,491)

Increase/(Decrease) in liabilities

current trade and other payables (14,913) (11,372) 26,733 363

current provisions (11,194) 1,370 (7,040) 2,508

other 3,416 (2,135) (14,725) (5,332)

non-current provisions (1,504) 2,486 (372) (1,065)

Net cash provided by/(used in) operating activities 32,896 2,098 40,423 (13,939)

Note 44: Financial instruments

Foreign exchange risk The consolidated entity has exposure to foreign exchange fl uctuations in respect of sales to overseas countries. The board monitors foreign

exchange rates and regularly reviews our foreign currency exposure. At 30 June 2006 the Company held US dollar foreign exchange contracts to

the value of USD 1,268,000 (2005: USD 2,922,371), NZD Nil (2005: 1,208,179) and GBP Nil pounds (2005: GBP 455,992) that mature progressively

through to June 2007. The average exchange rate for US dollars under contract is .7028.


Note 44: Financial instruments (continued)

FIXED INTERESTFINANCIAL INSTRUMENTS RATE MATURING IN

FLOATING 1 YEAR OVER 1 TO NON- TOTAL WEIGHTED INTEREST OR LESS 5 YEARS INTEREST CARRYING AVERAGE RATE BEARING AMOUNT AS PER EFFECTIVE BALANCE SHEET INTEREST RATE

2006 2005 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

(i) Financial assets Cash 6,170 12,711 - - 18 17 6,188 12,728 5.25 4.75

Receivables – non current

- Other entities - - - - 2,358 2,358 2,358 2,358 7.00 7.00

- Austvin Vineyards 1997 Project - - - - 1,548 1,235 1,548 1,235 11.00 11,00

Total fi nancial assets 6,170 12,711 - - 3,906 3,593 18 17 10,094 16,321 - -

(ii) Financial liabilities Commercial Bills (note 28) 22,000 48,000 20,000 - 100,000 120,000 - - 142,000 168,000 5.74 5.71

Total fi nancial liabilities 22,000 48,000 20,000 - 100,000 120,000 - - 142,000 168,000 - -

The consolidated entity’s exposure to interest rate risks and the effective interest rates of fi nancial liabilities, both recognised and unrecognised

at the balance date, are as follows: At balance date, the company had fi ve interest rate swap agreements with a notional amount of $120 million.

(i) $25 million on which it pays 5.99% interest and receives the Bank Bill Swap Rate (BBSW) on the notional amount (2005: $25m). This swap

agreement expires in September 2010.

(ii) $20 million on which it pays 5.68% interest and receives the BBSW calculated on the notional amount (2005: $20m).

This swap agreement expires in August 2007.

(iii) $20 million on which it pays 5.64% interest and receives BBSW calculated on the notional amount (2005: $20m).

This swap agreement expires in February 2011.

(iv) $20 million on which it pays 5.04% interest and receives BBSW calculated on the notional amount (2005: $20m).

This swap agreement expires in February 2007.

(v) $35 million on which it pays 6.19% interest and receives BBSW calculated on the notional amount (2005: $35m).

This swap agreement expires in November 2008.

All other fi nancial assets and fi nancial liabilities are non-interest bearing. The swap is used to protect part of the bank facility from exposure to

increasing interest rates. The swap in place covers 81% (2005: 71%) of the total borrowings as at 30 June 2006.

Liquidity risk managementThe consolidated entity manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities by

continuously monitoring forecast and actual cash fl ows and matching the maturity profi les of fi nancial assets and liabilities.

Fair value of fi nancial instrumentsThe fair values and net fair values of fi nancial assets and liabilities are determined as follows:

:: The fair value of fi nancial assets and fi nancial liabilities with standard terms and conditions and trade on active liquid markets are determined

with reference to quoted market prices; and

:: The fair value of derivative instruments, included in hedging assets and liabilities, are calculated using quoted prices. Where such prices are

not available use is made of discounted cash fl ow analysis using the applicable yield curve for the duration of the instruments.

The directors consider that the carrying value of the fi nancial instruments approximate their fair value.

Credit riskThe maximum exposure to credit risk arises from the accounts receivable recorded on the balance sheet. The Company has a policy of only

dealing with credit worthy customers. Some sales are also covered by an insurance policy.


Note 45: Impacts of adopting Australian equivalents to IFRS management of the transition A-IFRS

Impacts of the adoption of Australian equivalents to IFRS The consolidated entity changed its accounting policies on 1 July 2005 to comply with Australian equivalents to International Financial Reporting

Standards (‘A-IFRS’). The transition to A-IFRS is accounted for in accordance with Accounting Standard AASB 1 ‘First-time Adoption of Australian

Equivalents to International Financial Reporting Standards’, with 1 July 2004 as at the date of transition.

An explanation of how the transition for superseded policies to A-IFRS has affected the company and consolidated entity’s fi nancial position,

fi nancial performance and cash fl ows is set out in the following tables and the notes that accompany the tables.

Proforma Income Statement for the year ended 30th June 2005


Note AGAAP A-IFRS A-IFRS AGAAP A-IFRS A-IFRS Actual* Impact Actual* Impact $’000 $’000 $’000 $’000 $’000 $’000

Revenue e 368,050 (4,350) 363,700 151,207 (4,350) 146,857

Cost of sales (276,939) 4,350 (272,589) (117,058) 4,350 (112,708)

Gross Profi t 91,111 - 91,111 34,149 - 34,149

Net market value of grapes picked during the year i 4,732 (682) 4,050 (926) 726 (200)

Proceeds from disposal of assets e 5,318 (5,318) - 5,071 (5,071) -

Written down value of assets disposed e (5,897) 5,897 - (8,033) 8,033 -

Other Revenue from ordinary activities 2,986 - 2,986 34,695 - 34,695

Distribution expenses (10,187) - (10,187) (4,554) - (4,554)

Marketing/Selling expenses (21,289) - (21,289) (8,572) - (8,572)

Administration expenses c, f, j (9,520) 1,141 (8,379) (5,379) (3,998) (9,377)

Share of net losses of associates using the equity method (21) - (21) (36) - (36)

Borrowing costs (10,152) - (10,152) (9,271) - (9,271)

Write down of bulk wine (1,969) - (1,969) - - -

Profi t from ordinary activities before income tax expense 45,112 1,038 46,150 37,144 (310) 36,834

Income tax expense relating to ordinary activities g (10,687) (495) (11,182) (1,758) (223) (1,981)

Net Profi t 34,425 543 34,968 35,386 (533) 34,853

*Reported fi nancial performance for the year ended 30th June 2005.


Balance Sheet as at 1st July 2004



Current

Cash and cash equivalents 2,654 - 2,654 588 - 588

Trade and other receivables l 126,534 - 126,534 251,454 4,708 256,162

Inventories 199,812 - 199,812 6,165 - 6,165

Non-current assets held for sale - - - - - -

Financial assets - - - - - -

Other 3,319 - 3,319 2,293 - 2,293

Total Current Assets 332,319 - 332,319 260,500 4,708 265,208

Non-Current Assets

Receivables k 8,251 (4,658) 3,593 - - -

Inventories 51,176 - 51,176 5,348 - 5,348

Investments accounted for using the equity method 1,865 - 1,865 2,000 - 2,000

Other investments 939 - 939 206,781 - 206,781

Biological assets 32,889 - 32,889 - - -

Property, plant and equipment 134,685 - 134,685 11,055 - 11,055

Intangible assets c 52,357 (1,019) 51,338 - - -

Deferred tax assets g 9,218 4,707 13,925 9,218 4,707 13,925

Financial assets - - - - - -

Other 1,307 - 1,307 - - -

Total Non-Current Assets 292,687 (970) 291,717 234,402 4,707 239,109

Total Assets 625,006 (970) 624,036 494,902 9,415 504,317

Current Liabilities

Trade and other payables 105,529 - 105,529 14,654 - 14,654

Borrowings 6,004 - 6,004 1,130 - 1,130

Current tax liabilities 9,037 - 9,037 9,037 - 9,037

Provisions 7,124 - 7,124 563 - 563

Other 7,610 - 7,610 - - -

Total Current Liabilities 135,304 - 135,304 25,384 - 25,384


Payables 380 - 380 738 - 738

Borrowings 145,383 - 145,383 130,076 - 130,076

Deferred tax liabilities g 10,066 9,415 19,481 10,066 9,415 19,481

Provisions 2,079 - 2,079 288 - 288

Total Non-Current Liabilities 157,908 9,415 167,323 141,168 9,415 150,583

Total Liabilities 293,212 9,415 302,627 166,552 9,415 175,967

Net Assets 331,794 (10,385) 321,409 328,350 - 328,350

Contributed Equity 334,834 - 334,834 334,834 - 334,834

Reserves f - 519 519 - 519 519

Retained earnings/accumulated losses) g, h (3,040) (10,904) (13,944) (6,484) (519) (7,003)

Total Equity 331,794 (10,385) 321,409 328,350 - 328,350

*Reported fi nancial position for the year ended 30th June 2004.


Statement of Financial Position for the year ended 30th June 2005



Current

Cash and cash equivalents 12,728 - 12,728 2,039 - 2,039

Trade and other receivables l 120,698 - 120,698 306,859 4,980 311,839

Inventories i 224,143 (682) 223,461 7,375 726 8,101

Non-current assets held for sale 12,194 - 12,194 - - -

Financial assets 1,156 - 1,156 - - -

Other 6,499 - 6,499 5,488 - 5,488

Total Current Assets 377,418 (682) 376,736 321,761 5,706 327,467

Non-Current Assets

Receivables k 8,251 (4,658) 3,593 - - -

Inventories 60,018 - 60,018 5,649 - 5,649

Investments accounted for using the equity method 2,150 - 2,150 2,306 - 2,306

Other investments 897 - 897 206,781 - 206,781

Biological assets 31,206 - 31,206 - - -

Property, plant and equipment 135,202 - 135,202 31,365 - 31,365

Intangible assets c 49,420 1,667 51,087 - - -

Deferred tax assets g 11,706 265 11,971 11,706 265 11,971

Financial assets 3,827 - 3,827 - - -

Other 1,376 - 1,376 3 - 3

Total Non-Current Assets 304,053 (2,726) 301,327 257,810 265 258,075

Total Assets 681,471 (3,408) 678,063 579,571 5,971 585,542

Current Liabilities

Trade and other payables 101,157 - 101,157 22,017 - 22,017

Borrowings 1,232 - 1,232 557 - 557

Current tax liabilities 11,528 - 11,528 11,528 - 11,528

Provisions j 6,003 (85) 5,918 580 (16) 564

Other 4,985 - 4,985 1,209 - 1,209

Total Current Liabilities 124,905 (85) 124,820 35,891 (16) 35,875


Payables 5,770 - 5,770 5,720 - 5,720

Borrowings 176,690 - 176,690 168,324 - 168,324

Deferred tax liabilities g 12,768 5,468 18,236 12,768 5,468 18,236

Provisions 2,367 - 2,367 380 - 380

Total Non-Current Liabilities 197,595 5,468 203,063 187,192 5,468 192,660

Total Liabilities 322,500 5,383 327,883 223,083 5,452 228,535

Net Assets 358,971 (8,791) 350,180 356,488 519 357,007

Contributed Equity 354,258 - 354,258 354,258 - 354,258

Reserves f - 1,571 1,571 - 1,571 1,571

Retained earnings/(accumulated losses) g, h 4,713 (10,362) (5,649) 2,230 (1,052) 1,178

Total Equity 358,971 (8,791) 350,180 356,488 519 357,007

*Reported fi nancial position for the year ended 30th June 2005.


Explanatory notes to the proforma fi nancial statementsThe following explanatory notes relate to the proforma fi nancial statements above and describe, for signifi cant items, the differences between

the accounting policies under A-IFRS and the current treatment of those items under Australian GAAP (“AGAAP”):

(a) Business combinations

On initial adoption of A-IFRS the directors have elected not to restate business combinations that occurred before 1st July 2004. Accordingly,

the impacts of the adoption of A-IFRS on the fi nancial report associated with past business combinations will be limited to the recognition of

additional deferred tax assets and deferred tax liabilities and cessation of goodwill amortisation.

(b) Financial instruments

There is no material impact on the comparative period upon adopting AASB 132 ‘Financial Instruments: Disclosure and Presentation’ and

AASB 139 ‘Financial Instruments’ Recognition and Measurement’.

(c) Goodwill and intangible assets

Under A-IFRS, goodwill is not subject to amortisation, but must be tested for impairment annually and whenever there is an indication

that goodwill may be impaired. As a result, amortisation expense decreased by $2,686,000 (Company: Nil) for the fi nancial year ended

30 June 2005.

Under A-IFRS, other intangible assets such as brand names and non-current receivables are required to be tested for impairment.

Consequently, other intangibles have been reduced by $1,019,000 (Company: $Nil) at 30th June 2004 and other non-current receivables

have been reduced by $4,658,000 (Company: $Nil) at 30th June 2004.

(d) Property, plant and equipment

On initial adoption of A-IFRS, the directors elected to deem the carrying values (historic costs) of plant and equipment at 1 July 2004 to be

cost for accounting purposes, as permitted by the fi rst-time adoption provisions in AASB 1 ‘First-time Adoption of Australian Equivalents to

International Financial Reporting Standards’. Consequently, adoption of A-IFRS has not resulted in any adjustments.

(e) Re-classifi cation in Income Statement

Although not impacting the net profi t of the company and the consolidated entity, the adoption of A-IFRS has resulted in a number of

transactions being recorded on a “net” rather than a “gross” basis. This has resulted in $4,350,000 being removed from revenue and cost

of sales in both the consolidated entity and the parent entity. In addition, the adoption of A-IFRS results in the reclassifi cation of proceeds

from sale of non-current assets from “revenue from ordinary activities” to other income and expense items in the income statement. As a

consequence, proceeds from the disposal of assets and the written down value of assets sold, have both been removed and revenue has

decreased by $579,000 (Company: $2,962,000) and other administration expenses have increased by $579,000 (Company: $2,962,000).

(f) Share-based payments

Equity-settled share based payments in respect of equity instruments issued after 7 November 2002 that were unvested as at 1 January

2005 have been measured at fair value at grant date. The fair value determined at grant date of equity-settled share-based payments has

been expensed on a straight-line basis over the vesting period, based on the estimated number of equity instruments that will vest. As a

consequence, contributed equity has increased by $1,571,671 (Company $1,571,671). Additional employee benefi t expense of $1,052,275

(Company $1,052,275) has been recognised in the income statement for the fi nancial year ended 30 June 2005 and retained earnings at

1st July 2004 has reduced by $519,396 (Company $519,396).

(g) Income tax

Under A-IFRS, tax balances are determined using a ‘balance sheet’ approach, which signifi cantly differs from the previous methodology.

Changes in deferred tax assets and deferred tax liabilities arise as a consequence of the different method of measurement, including

increases in deferred tax assets and deferred tax liabilities arising as a consequence of the recognition of deferred taxes associated with

fair value adjustments in relation to business combinations, revaluations of land and buildings and investments in associates. Under A-IFRS,

the criteria for recognition of carried forward tax losses is ‘probable’ as compared to the present ‘virtually certain’ test.

The cumulative impact on the consolidated and company balance sheet at 30 June 2005 of the different methodology to be applied was to

increase deferred tax assets by $265,000 and to increase deferred tax liabilities by $5,468,000. The cumulative impact on the consolidated

balance sheet at 1st July 2004 of the different methodology was to increase deferred tax assets by $4,707,000 (Company: $4,707,000) and

deferred tax liabilities by $9,415,000 (Company $9,415,000). The impact on the consolidated income statement for the fi nancial year ended

30 June 2005 is an increase in tax expense of $673,712 (Company: $218,000). This adjustment together with the tax impact of (i) and (j) gives

rise to a net increase in tax expense of $494,595 (Company: $223,000).


The effect of the above adjustments on the deferred tax balances are as follows:


01/07/04 30/06/05 01/07/04 30/06/05

$’000 $’000 $’000 $’000

Deferred tax not recognised under previous GAAP 56 (564) 56 (564)

Annual leave provisions - (26) - (26)

Prior year tax base adjustment property, plant and equipment (4,764) (4,818) - -

Tax balances adjusted under tax sharing arrangement - - (4,764) (4,818)

Biological assets - 205 - 205

Net decrease in deferred tax balances (4,708) (5,203) (4,708) (5,203)

During the preparation of the fi nancial statements, the company identifi ed a temporary difference which had been incorrectly accounted

for in a prior period and has been subsequently adjusted. The impact of this adjustment is to increase accumulated losses by $2,317,000

at 30th June 2005 ($847,000 at 1st July 2004) and increase deferred liability by $2,317,000 at 30th June 2006 ($847,000 at 1st July 2004).

(h) Retained earnings

Adjustments required on fi rst-time adoption (on 1st July 2004) of A-IFRS are recognised directly in retained earnings as the date of transition

to A-IFRS. The cumulative effect of these adjustments for the consolidated entity was a decrease in retained earnings of $10,904,000.

(Company $519,000).


01/07/04 30/06/05 01/07/04 30/06/05

$’000 $’000 $’000 $’000

Goodwill no longer amortised - 2,635 - -

Share based payments (519) (1,571) (519) (1,571)

Annual leave provisions - 59 - 11

Brand names (1,018) (967) - -

Receivables (4,658) (4,658) - -

Grapes received from leased vineyards - (477) - 508

Adjustments to tax balances (4,708) (5,384) - -

Other (1) 1 - -

(10,904) (10,362) (519) (1,052)

(i) Agriculture

Under A-IFRS, grapes received from vineyards which are leased are recognised in stock at cost of production. Previously they were recognised

at market value. As a consequence, revenue and profi t before income tax have decreased by $682,352 (Company: increase $726,189).

(j) Annual Leave

Under A-IFRS the non-current portion of annual leave is discounted to the net present value based on the prevailing government bond rate.

The adjustment to net profi t for the year ended 30 June 2005 was $84,962 (Company: $16,415) before applicable income tax.

(k) Non-current receivables

Under A-IFRS, non-current receivables are required to be measured on a discounted net present value basis. As a consequence, non-current

receivables were reduced by $4,658,000 at 1st July 2004 (Company: $Nil).

(l) Trade and other receivables

Adjustments to tax balances in the subsidiaries resulting from A-IFRS must be passed to the parent entity as set out in the tax sharing

agreement. The resulting effect is to increase current trade and other receivables in the Company by $4,980,000 at 30th June 2005 ($4,708,000

at 1st July 2004).

Head Offi ce

Level 2

170 Greenhill Road

Parkside SA 5063

T 08 8172 8333

F 08 8357 8544

Sydney Offi ce

Building D

13 Joynton Avenue

Zetland NSW 2017

T 02 8345 6377

F 02 8345 6366

Registered Offi ce

Level 2

170 Greenhill Road

Parkside SA 5063

T 08 8172 8333

F 08 8357 8544

Company Secretary

Michael Noack

Chief Financial Offi cer

Michael Noack

Auditors

Deloitte Touche Tohmatsu

Grosvenor Place

225 George Street

Sydney NSW 2000

Bankers

National Australia Bank

500 Bourke Street

Melbourne VIC 3000

Share Register

Computershare Registry

Services Pty Ltd

115 Grenfell Street

Adelaide SA 5000

T 08 8236 2300

F 08 8236 2305

Hermitage Road Winery

Hermitage Road

Pokolbin NSW 2320

T 02 4998 7521

F 02 4998 7796

Hunter Valley Administration


Pokolbin NSW 2320

T 02 4998 7400

F 02 4998 7401

Tempus Two Winery


Pokolbin NSW 2320

T 02 4993 3900

F 02 4993 3988

Yaldara Winery

Hermann Thumm Drive

Lyndoch SA 5351

T 08 8524 0200

F 08 8524 0240

Austvin Loxton Cellars

Bookpurnong Road

T 08 8584 7236

F 08 8584 6376

Buronga Hill Winery

Silver City Highway

Buronga NSW 2739

T 03 5022 5100

F 03 5022 5135

Merbein Packaging

Whiting Road

Merbein VIC 3505

T 03 5021 9303

F 03 5021 6490

www.mswl.com.au

ACN 052 179 932

McGUIGAN SIMEON WINES LIMITED :: ANNUAL REPORT 2006

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ACN 052 179 932

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McGUIGAN SIMEON WINES LIMITED - Nepenthe · Note 1: Summary of accounting policies 51 Note 2:...

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