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Fed Square Pty Ltd ACN 085 731 479

Fed Square Pty Ltd

Annual Report

For the year ended 30 June 2014


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TABLE OF CONTENTS CHAIR’S STATEMENT ....................................................................................................................................... 2

CHIEF EXECUTIVE OFFICER’S REPORT ON OPERATIONS......................................................................... 4

PERFORMANCE INDICATORS 2013-14......................................................................................................... 19

STATEMENT OF CORPORATE GOVERNANCE............................................................................................ 20

DIRECTORS’ REPORT .................................................................................................................................... 24

AUDITOR-GENERAL’S INDEPENDENCE DECLARATION ............................................................................ 26

BALANCE SHEET AS AT 30 JUNE 2014 ........................................................................................................ 28

CASH FLOW STATEMENT FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014 ........................................ 29

STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014 ................... 30

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 ................................ 31

DIRECTORS’ DECLARATION ......................................................................................................................... 56

INDEPENDENT AUDITOR’S REPORT ............................................................................................................ 57


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CHAIR’S STATEMENT

On behalf of the Board it is my pleasure to present the Chair's Report as part of the 2014-2015 Fed Square Pty Ltd Annual Report. Our vision for Fed Square of being internationally recognised as Melbourne’s inspirational public place, remains front of mind in the programming and planning of our events and activities. To this end, we regularly review the program and tenancy offerings in the context of all that the physical surroundings of Fed Square offers. The events program continues to deliver exciting activities across the precinct and this year we have hosted, supported or produced more than 2,000 events and activities in our public spaces with 90 per cent of these being free to the public. We have been pleased to estimate at more than 10 million the number of community and international visitations to these events and to Fed Square. Fed Square is consistently in the top three Victorian attractions for domestic and international visitors to Victoria and currently ranks first for domestic visitors and second for international visitors. Sixty-five per cent of Victorians indicate they have been to Fed Square. The vibrant program of activities, across the spectrum of civic, community and cultural interests, has included exhibitions, festivals, gatherings, concerts and sporting events. Acclaimed highlights include White Night Melbourne, the Super Bowl live site, the annual Light in Winter Festival featuring Asif Khan's international commission, Radiant Lines, and Melbourne Festival's Opening Event, Tanderrum and Creation. The Creative Program has delivered a number of commissions including school holiday programming with ‘Ants’ by Polyglot Theatre, JUMP by Stuart Semple, Wedhus Gembel with Snuff Puppets and Electric Puppet by Georgie Pinn. We welcomed the launch of the Wonderment Walk earlier in the year. It is gratifying to the whole team to achieve high levels of visitor, tenant and client satisfaction. Our onsite cultural partners have delivered a range of contemporary exhibitions bringing with them strong levels of visitation.


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In addition to the inspiring permanent collections at NGV: Ian Potter Centre, this year's many offerings, including Melbourne Now and Mix Tape 1980s, brought delight to their many visitors as did ACMI's Exhibitions of Hollywood Costumes and DreamWorks. Glass Art found particular creative expression in the competition for the inaugural Kirra Illuminating Glass Art award. Our collaboration with Deakin University in the Deakin Edge continues to prosper and has hosted a range of musical, intellectual, cultural, commercial and innovative activities. The first naturalisation ceremony took place there this year as did many challenging and inspiring orations, readings, performances and competitions. The rising use of social media has seen our media exposure continue to grow with more than 15,000 positive media mentions, comprising more than 4,000 print, radio and television items within Australia, 10,000 items online from National media outlets and 1,200 items online from international outlets. Our online digital time capsule, Federation Story, now houses more than 450 personal stories with several projects undertaken this year to build narratives around particular themes such as ANZAC Day. We welcomed additional narratives of the contributions of the Mayors and the Architects of Victoria to our great State. The opportunity arose during the year to enhance the Top of the Square through construction of a golden hexagonal shaped structure, architecturally designed to improve connections between the Square and the Atrium and enhance visitor experience. Financial results for the period include a net result before depreciation and amortisation of $5,345,969 with the surplus partially being applied to appropriate asset enhancement and repayment of loans with Treasury Corporation Victoria. Certain essential asset replacement works were also able to be undertaken during the year to preserve and enhance our services for the community with nearly $4 million in specific funding from the Government of Victoria. Fed Square is a special place with a special spirit and the Fed Square Board and team are indebted to our key stakeholders in ensuring its ongoing success. We thank especially the State Government of Victoria and in particular, Minister Louise Asher and Treasurer Michael O'Brien for their ongoing encouragement and support. Particular thanks are due to the Boards of National Gallery of Victoria, Australian Centre for the Moving Image and Special Broadcasting Service for their continuing commitment to Fed Square. Finally, I would especially like to thank both my fellow Board members: Louise Staley, Kathy Wilson and Laura Anderson for their dedication and expertise, and also the enthusiastic and energetic staff, led by our CEO Chris Brooks; all of whom combine to make Fed Square such a vibrant and compelling place. Louise Staley will be retiring as a Director in September 2014 and we thank her for her contribution over the last three years. We look forward to welcoming the new Director, Jane Hume, at that time. I commend this Annual Report to all who support and inspire us.

............................................................. CATHERINE WALTER AM CHAIR


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CHIEF EXECUTIVE OFFICER’S REPORT ON OPERATIONS The vision of Fed Square is to be internationally recognised as Melbourne’s inspirational public place. Our vision, together with the Fed Square Charter, sets the strategic direction for the operations of Fed Square. In presenting my first report as Chief Executive of Fed Square Pty Ltd (FSPL), I am pleased to detail continuing outstanding success across all areas of operation including:

• High visitation and satisfaction levels • The extensive and diverse program of activities • The progress of our environmental sustainability program • Great media exposure locally, national and internationally • Strong financial results

This year’s report assesses our performance against the 2013-16 Corporate Plan which detailed our strategic objectives and our priorities for the 2013/14 financial year. In that year, our six core objectives were –

• Great Place – enhance our position as a place leader and continue to develop Fed Square as Melbourne’s primary meeting place within the broader recreational precinct

• Great Staff – be considered an ‘employer of choice’ by developing and supporting a motivated workforce that operates as a cohesive customer focused team

• Great Delivery – be known as a ‘can do’ organisation, because of the quality and timeliness of

service delivery and processes that address the needs of partners and clients

• Great Business Practice – continue to advance a sustainable business, through attention to ‘best practice’, commercial, asset, risk management and governance programs

• Great Visitor Experience – refine and refresh all aspects of the unique Fed Square experience, to ensure it continues to be embraced by the community

• Great Reputation – be regarded locally, nationally and internationally, as an urban success story

Since opening in 2002, Fed Square has become a much loved asset by the people of Melbourne and a leading example of place making. The number of visitations and the volume and diversity of the program have far exceeded original expectations and as a public space, FSPL is continually conscious of the ever changing business and social landscape in which it operates. Our focus is now on setting a strategic direction for the next decade, which builds on the results of the last eleven years. With Melbourne’s population, particularly its inner city population, expected to grow significantly through to 2025, Federation Square as a public space will face increased expectations from the community to continue to be the heartbeat of Melbourne and a destination for Melburnians and visitors alike.


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Our 2014-17 Corporate Plan will outline seven Strategic Pathways, each designed to support progress towards our vision. These Pathways will focus on the following major initiatives –

Program: In order to continue to meet and exceed the visitor experiences, we will review and enhance our programming to identify areas of opportunity and seek to identify joint projects which leverage the strengths of FSPL, our assets and technology. Tenancies: We will review, develop and implement a tenancy strategy that supports the future growth of FSPL to ensure great visitor experiences, financial returns and leading tenancy management practices. Business Effectiveness: In order to identify efficiencies, enhance revenue opportunities and improve our operations, we will develop an integrated approach to our information communications technology and management systems, and enhance the capture and use of visitor insights to better inform our decision-making. Asset Management: To ensure we are focused and prepared for the long-term management of our asset, we will develop a long term asset replacement and funding program, consolidate our sustainability program and safeguard our staff, visitors and our reputation by continuing to focus on our occupational health and safety management system. Next Horizon: To take advantage of new and emerging opportunities, we will develop options for new sources of revenue, drive precinct growth through the Riverside Development and other opportunities in proximity to Federation Square, and seek to establish opportunities for a technology hub. Communications and Sponsorship: In growing and enhancing our brand, we will drive local and international brand awareness and engagement, develop our online experiences, explore the benefits of a loyalty program and improve management of stakeholders and customers. People and Capacity: In ensuring we are well equipped to deliver for the community and our shareholder, we will review our organisational structure, capability and resources, and design and deliver engagement, talent identification and training and development programs to ensure we have the right people for the future. The development of the strategy outlined in the 2014-17 Corporate Plan has come from linking our brand, vision, goals and measures, within a framework that will set the direction for FSPL for the next decade and enable FSPL to develop rolling three year Corporate Plans and one year Business Plans.


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THE YEAR AT A GLANCE


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GREAT PLACE One of our primary focuses is ensuring Fed Square is Melbourne’s inspirational public place and enhancing our position as a “place leader”. For the year, we again achieved high levels of visits, reaching an estimated 10.29 million. This level of engagement by our visitors indicates strong support for Fed Square, but to ensure this level of visits is maintained, we will need to continue to deliver a program and facilities that support the vision for Fed Square. In the last year our ‘perceptions’ survey indicated that 65 per cent of Victorians say they have visited Federation Square. 71 per cent of Victorians also say that Federation Square is Melbourne’s major focal point with 73 per cent agreeing there is an interesting program of activities. As always, we have been pleased to work with colleagues in Australia and around the world to share expertise and experiences around place making at events such as:

• Place Leaders Association • Gold Coast Cultural Precinct • RMIT Public Places • Place Capital Conference • Connected Cities in Montreal • Biennia International Symposium for Electronic Art • Lumiere Durham UK ‘Arts Means Business’ international Conference • Australian Centre for Event Management • Social Media for the Public Sector

Safety and presentation standards continue to be critical to public enjoyment of the precinct and it is pleasing to note 100 per cent satisfaction with the cleanliness of the site (77 per cent extremely satisfied), 100 per cent satisfaction with safety and security (76 per cent extremely satisfied) and satisfaction with amenities 96 per cent (54 per cent extremely satisfied). The Emergency Management Manual has recently been updated to reflect the updated standard and we continue our active participation in onsite and city programs to maintain safety and security. This includes co-operation with Victoria Police and emergency services and ongoing involvement in the Flinders Street and Fed Square Transport Security Precinct and the Mass Gatherings Network.

A range of projects have been completed to maintain and improve the effective functioning of the site including:

• Upper square canopy to improve visitor comfort and linkages to the Atrium • Improvements to plant and maintenance access to staff and contractors • Upgrade to the external stage in the main Square • Upgrades to electrical power across the site for event activations • Upgrade of LED lighting technology throughout the Atrium • Improvements to the greasy waste sewer system • Extension of our rain/storm water tank collection system • Replacement of the PA system in the Deakin Edge

GREAT STAFF The activities at Fed Square are supported by an outstanding team who deliver the program, maintain the asset and deliver corporate support to the company. The staff at Fed Square have high levels of engagement as they deliver the services of Fed Square to the community.


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During the year, the Fed Square team: • Participated in the Victorian Public Sector Commission People Matter Survey with strong

engagement results • Revised the Privacy Policy to align with amended legislation • Implemented the Protected Disclosure Policy to replace the Whistleblower’s Policy in response to

revised legislation • Finalised the Business Continuity Plan and rolled it out across the organisation with significant focus

on awareness, training and testing through a series of desktop scenarios • Continued our strong focus on Risk Management with an emphasis on continuous improvement with

all activities across the site • Implemented a new accounting system (EBMS) to provide full integration with the management of

events • Tendered and finalised the car park management agreement, resulting in operating efficiencies and

cost savings • Improved governance with an extensive review of delegations, matters reserved for the Board and

Board reporting • Upgraded the main server and transitioned to Windows 2012 • Developed an IT Disaster Recovery Plan after the implementation of major IT changes • Upgraded the core firewall to dual firewalls to provide redundant configuration

More and more staff are getting behind the annual Light in Winter creative public program with a tradition of staff volunteering evolving. Staff self nominate to support the events team during key events and by default receive invaluable exposure to operations they are not routinely exposed to.

Staff have completed performance management work plans successfully achieved targets and are actively involved in the Corporate Planning process, Disability Action Group, Sustainability Action Group, OH&S Committee and Christmas Social Committee. Staff have also contributed to the community beyond their roles by continuing to support the Red Cross Blood Bank with quarterly donations and participating staff are to be congratulated for their efforts.

It is a pleasure to see staff acknowledged by both their peers and industry through awards. FSPL awards for outstanding work and contribution were made to Oanh Tran, Victor Anastasiadis and Kendyl Rossi for their alignment with objectives and values. Kelli Keating and Matt Jones received our Service Excellence Awards and it was a pleasure to see Casey Bonacci, Event Coordinator, awarded the Victorian Young Achiever of the Year from Meetings and Events Australia.

Training has been provided for all staff in mandated areas with specific role or career development activities being undertaken as relevant. Specific training included:

Marketing and Program Operations Corporate Services • EBMS Ungerboeck training • Manual handling • Professional development • Writing for the web • Mentoring • Recruitment

• Emergency management • EWIS/FIP operations • Elevated work platform

licensing • Breathing apparatus • Facilities management • Certificate IV in Workplace

Assessment • Professional development • Contract law • Asset management • High performance teams

• Risk management professional development

• Handling employee complaints and grievances

• Business continuity planning • Information systems and

multimedia infrastructure developments

• Recruitment • EBMS Ungerboeck training • Professional development • Difficult conversations • Business writing


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GREAT DELIVERY This year, 2,255 events and activities have been delivered and 90 per cent have been free to the public. It has been great to see that visitor satisfaction with the overall Fed Square experience is extremely high at 99 per cent (52 per cent extremely satisfied) with satisfaction with staff in general across the precinct also at a magnificent 98 per cent (68 per cent extremely satisfied).

As part of our great delivery, we continue to offer a dynamic, multiplatform ‘What’s On’. Information has remained a priority as has the provision of detailed and accessible public information on Fed Square’s history, form, institutions and activities. This year has seen visitor satisfaction with the provision of information about Fed Square and events at Fed Square at 98 per cent and 90 per cent respectively. A strong presence has been retained in key tourism publications including, Official Visitor’s Guide, Official Visitor’s Guide Mandarin, Welcome to Australia, Welcome to Victoria, Cruise Ship Arrivals Guide, SkyBus, Official Visitor’s Map, Where Magazine, Melbourne Convention and Exhibition Centre (MCEC) map and Safari Pete’s Backpackers’ Guide. Printed materials have been distributed extensively to venues throughout Melbourne; including the Melbourne Visitor Centre, Skybus and the Airport Visitor Centre. Signage has been extended to provide information about onsite activities, products and services. In 2013-14, Fed Square’s online community grew significantly. This is pleasing given recent additions to the human resource applied to monitoring and facilitating online communication and information. This included a 23 per cent uplift in unique website visitors. Social media has been widely activated with Fed Square’s Facebook community growing to more than 32,305 and Twitter to more than 20,228. We now have over 1,488 followers on LinkedIn and an average of 300 visits per month on Fed Square’s creative blog, Squared Produce. Social media has been used to deepen connection with communities which was highlighted with the DIY Shrine project. This project engaged the general public to be spokespeople on small vimeo clips allowing them to share their opinion with friends and family and feel connected to The Light in Winter theme creating an enduring online artefact on the Fed Square Vimeo Channel. Free Guided Tours have remained popular with a mix of domestic and international visitors, particularly from New South Wales, Adelaide, Germany, USA, and Canada. Partnerships have been furthered with the Melbourne Convention Bureau (MCB) and the Melbourne Convention and Exhibition Centre (MCEC) to attract business events delegates with pilot initiatives rolled out for the World Aids Conference, World Diabetes Congress and International Congress of Paediatrics.


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FSPL is in the second year of its allocated funding for Capital Asset Replacement and Renewal works from the State Government. A number of asset replacement projects have been completed to ensure the site remains in good working condition, and some of these works include the replacement of:

• External stair nosings across the site to maintain safety • Car park entry/exit and pay machines • The Building automation system • Security systems including access control and CCTV systems • Two main chiller units • Various upgrades to lifts across site • Vibration joints on hydraulic, mechanical and fire services systems

Across the site, 1,902 planned maintenance activities were completed and 1,045 reactive maintenance items were addressed.

The multimedia production effort has been furthered, extending the life and narrative of creative projects and memorable moments onsite. Short films have been produced for Radiant Lines by Asif Kahn, School Holidays programs, health and wellbeing and creative projects.

Service Excellence Service excellence continued to be emphasised as a key driver of success across the precinct with the majority of tenants and all service delivery partners participating in the Service Excellence Program. Providing tenants an independent assessment of their service and product offering is central to this program as is measuring performance against the Fed Square Service Excellence Standards. The resulting ‘evidence base’ is being used in different ways across the precinct. It has assisted three tenants in their decision making related to introducing different service styles and it is being used as a management incentive tool by a growing number.

It was pleasing to see precinct-wide participation in the Fed Square Service Excellence Program and our Hospitality tenants embraced the Service Excellence Program and the mystery shopping survey initiative. These findings were used to drive service and performance

GREAT BUSINESS PRACTICE Financial Results FSPL’s financial results for the year ended 30 June 2014 highlight the continued commitment by the company to adopt sustainable financial practices and operate within the revenues derived from its commercial operations on site. In 2013-2014 FSPL recorded a positive net result before depreciation of $5,345,969 (2012-13 $4,578,486). Operating revenue is up $1,288,784 or 5.23 per cent to $25,915,970. Revenue and expenditure (before interest and depreciation) over the past five years is shown below.

The company’s Balance Sheet remains strong, with current assets of $20,637,033 relative to current liabilities of $7,446,348. Net assets total $473,610,566.


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Total liabilities at 30 June 2014 were $23,106,017, which represents a decrease of $3,818,056 over the year. The strength of the company’s Balance Sheet led to the Board approving an additional repayment during the year of $500,000 off the company’s long term loan with Treasury Corporation of Victoria (TCV) over and above the fixed repayment schedule. This reduced the TCV loan balances, which are scheduled to be repaid in 2019, to $16,822,607 (2012-2013: $20,786,229). Partnerships Our business model continues to evolve as we seek opportunities to enhance and improve our service delivery effectiveness. Working with our partners across the cultural and sporting precincts will allow us to continue to deliver better outcomes for Fed Square.

As always, a range of strong partnerships has underpinned our good performance. We are delighted to have furthered our partnership with Deakin University and The Deakin Edge continues to grow in recognition and has become a key asset of Fed Square. The partnership has extended beyond the agreed format to bring mutual benefits to both organisations including an intern program and creative student showcases.

Melbourne Convention Bureau continues as a key partner, enabling attraction of business and conference travellers.

Tourism Victoria remains a critical partner and through its recommendation, we have been delighted to provide famils to international audiences and leverage campaigns such as the Remote Control Tourist. On Tourism Victoria’s behalf, Fed Square has also hosted a number of national and international media opportunities.

We were particularly pleased with the uplift in partnerships for The Light in Winter, which included major partnerships with Corporate Vision Australia, ACG, Ikon Services Australia and VicHealth. The Melbourne Visitor Centre at Federation Square is a key supporter and we have been working together to create a central departure point at Fed Square for city walking tours. Marketing Plan The Marketing Plan continues to focus on yield – spend, time and repeat visitation, particularly across the key target markets of City Workers, City Residents, Day Trippers, Free -Timers and Tourists. It has been gratifying to see visitation continuing to be strong at 10.29 million for 2013/14. Repeat Visitation is at 83 per cent and we are pleased to see the average spend uplift to $19, up from $17 last year. Fed Square enhanced our brand attributes, positioning Fed Square as ‘where Melbourne happens’. This highlights Fed Square’s role in connecting people to each other, the site, projects and events. It explores the experiences and stories that are personal, shared, connected and inspiring. It demonstrates that Fed Square engages, connects, contributes to and recharges everyone who visits. Further refinement of event risk management and Permits to Work in regards to temporary structures has been delivered this term, with the development of the Fed Square Temporary Structures Guidelines. As the challenge of managing risk and compliance increases, detailed analysis of all procedures has been undertaken to enable optimisation in event delivery and customer service outcomes. A maintained focus on food and beverage through the “Think Food Plan” has continued, with a targeted publicity campaign supporting the reputation of Fed Square as a place to eat. Fed Square continues to be positioned as a place to eat and drink through advertising, posters and media efforts.


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Risk Management A sharp focus on risk management was maintained with an emphasis on continuous improvement with all activities across the site. Continuous improvement of our OH&S management system is a feature of our activities due to the nature of the physical site and the extent of public and tenant activity. The OH&S Management System went through a full internal review. In addition, OH&S training for relevant staff has been completed including the development of a range of on-line training modules including:

• Traffic Management • OH&S general awareness • Hazard management • Safe handling of chemicals • Sun protection

There were 155 OH&S Incident Reports for the 2013-14 financial year, which was below the target of 199 and 368 security incidents which was below the previous year of 403. The Business Continuity Plan was finalised and rolled out across the organisation with significant focus on awareness, training and testing through a series of desktop scenarios.

Insurance Attestation Standing Direction of the Minister for Finance 4.5.5.1 – Insurance (May 2012) states that Public Sector Agencies are required to insure with VMIA under the Victorian Managed Insurance Authority Act 1996 and meet specific requirements under the Standing Direction. FSPL meets the requirements of Standing Direction 4.5.5.1 necessary to make the attestation in this Annual Report. I, Chris Brooks, Chief Executive Officer, certify that Fed Square Pty Ltd has complied with Ministerial Direction 4.5.5.1 – Insurance.

Tenancies The performance of tenants continues to be a major focus both in terms of providing a high quality offer to visitors and as a critical component of financial outcomes for the company. A variety of internal and external factors are continuing to challenge tenants, particularly the food and beverage businesses. Despite these, a number of tenants have reinvested in their businesses through refurbishment projects. The Directors of Riverland have significantly increased their investment in the precinct, establishing Pilgrim Bar, following the reassignment of the Riverside Terrace Vaults 15-19 lease. This is a good indicator of the commercial attractiveness of the precinct to seasoned hospitality operators. The Sovereign Hotel Group refurbished Taxi Dining Room, launching Taxi Kitchen with a more market- accessible and relevant menu and service style. Discussions with Sovereign are continuing around refurbishment and rebrand plans for their Feddish tenancy. Beer DeLuxe underwent internal and external refurbishment. Refurbishment works of a smaller scale were completed at Time Out and Zinc. ACMI completely refitted its retail outlet, resulting in uplifted sales. Micro-tenant, Mama Gozleme, commenced trading along River Terrace and Mr Burger food truck visits the site on designated days. The burgeoning success of these two micro-tenancies at Fed Square mirrors the local and international food truck trend. Tenancies continue to be routinely supported by way of tourism marketing and advertising and connections with Melbourne’s major festivals.


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Directional and tenant directory signage was installed to improve access and linkages to Fed Wharf and its tenancies. Tenants continued to be kept abreast of events at Federation Square via the following communication channels:

• Fed Square Staff News – twice weekly update which details the next week’s events

• Monthly event listings – emailed at the end of the month for the next month

• Major event updates – emailed quarterly major event details for the next 6 to 8 months

• Tailored and regular Familiarisation Forums

• Tenant Business Briefing – bi-annual briefing for senior tenant representatives

Tenants continue to demonstrate their commitment to the precinct by participating in the Fed Square Service Excellence Program. Over 400 staff and their friends and family participated in a ‘Fed Square Get Together’ to experience ACMI first hand. ACMI generously supported this initiative with complimentary entrance to the DreamWorks exhibition. Sustainability Working towards our target of carbon neutrality in gas and electricity consumption and the achievement of other sustainability goals is a major focus. It is pleasing to report that in the period we reduced:

• Electricity consumption by 2.2 per cent compared to the 2012-13 year • Central plant gas consumption by 2.5 per cent compared to the 2012-13 year • Water consumption remained constant compared to the 2012-13 year

Work also continued on the Energy Performance Contract under the Greener Government Building Program, with the majority of the works being implemented including a Bio Gas Plant. The final stage of these works is to complete the installation of a cogeneration plant. These works are expected to be completed in 2014-15. The tables below provide an overview of major utilities/services usage for the 2013 calendar year compared to 2012, 2011 and 2010 and the baseline year of 2006 and show a consistent reduction in usage across the site, even when taking into consideration the increase in visitor numbers over this period.

Utility / Service Years

2006 Baseline

2010 2011 2012 2013 Benefit Achieved (2013 to 2006)

General Waste (tonnes) 776 627 602 582 572 Reduced 204 t Recycled Material (tonnes) 384 609 550 716 620 Increased 238 t Electricity (Mega Watts) 8,500 8,948 8,731 7,656 6,485 Decreased 2,015 MW Central Plant Gas (Giga Joules) 40,607 45,829 41,798 34,123 29,682 Decreased 10,925 GJ

Water (kilo Litres) 78,646 67,974 64,747 58,943 57,191 Decreased 21,455 kL Net Carbon Footprint (tonnes) 15,769 9,456 9,095 2,623 804 Decreased 14,965 t


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Utility / Service

Years

2006 Baseline

2010 2011 2012 2013 Benefit Achieved (2013 to 2006)

Visitor numbers 7,834,970 8,572,418 9,783,419 10,027,420 10,415,276

Increased 2,580,306 visitors

General Waste (Kg / Visitor) 0.099 0.073 0.062 0.058 0.055

Decreased 0.044 Kg/visitor

Recycled Material (Kg / Visitor) 0.049 0.071 0.056 0.071 0.059

Increased 0.010 Kg/visitor

Electricity (Kw / Visitor) 1.085 1.044 0.89 0.76 0.62 Decreased 0.462 Kw/visitor

Central Plant Gas (MJ / Visitor) 5.2 5.3 4.3 3.4 2.8

Reduced 2.333 MJ/visitor

Water (Litres / Visitor) 10.0 7.9 6.6 5.9 5.5 Reduced 4.5 lt/visitor

Net Carbon Footprint (Kg / Visitor) 2.0 1.1 0.9 0.3 0.1

Reduced 1.9 Kg/visitor

GREAT VISITOR EXPERIENCE Refining and refreshing all aspects of the unique Fed Square experience is both our commitment and a key to delivering on our vision. There have been active collaborations and partnerships with ACMI and the NGV. This year the Multimedia Program has continued to evolve based on the combination of servicing third party clients, producing a weekly schedule of integrated, unique local and international content, and pro-actively establishing curatorial and commissioning relationships with a range of national and international partners. Successful screen partnerships this term have included Pause Festival, Freeplay, Ethno Tekh, Distributed Empire, and Virgin Australia Melbourne Fashion Festival (VAMFF). Ambient program solutions have been enhanced to ensure the screens are vibrant and dynamic every day. Examples of these include NITV, Australian Teachers of Media, The Public Studio, Queensland University of Technology shared programming partnerships, Streaming Museum, and Artbox. International relationships have been fostered to also realise screen outcomes for example with Simon Wilkinson (UK), the Connecting Cities network (Europe), Half Cut Tea (New York), Asialink and Experimenta. Big Screen film seasons have been delivered with Melbourne International Film Festival, Czech and Slovak Film Festival, Experimenta, and Human Rights Art and Film Festival. The Regular Events Program comprises initiatives owned and produced by Fed Square to meet particular business/program requirements and includes a variety of programming across two streams: Boutique Industry Development and Community/Wellbeing.


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The Boutique Industry Development portfolio has continued the transition of the Regional Wine Showcase and Microbrewery Program into the new Flavour Exchange initiative comprising highly successful seasonal showcases of regional produce. A Books and Literature focus including a Weekly Book Market has been sustained with Poetry, Live Illustrations and the Book Club attracting good patronage. In the Community and Wellbeing portfolio, fortnightly ‘Feel Young’ Chinese seniors dance continues as does a monthly Classics Concert Series which has featured various performers such as Melbourne Youth Music Orchestra and the Victorian College of the Arts Secondary School. Busking has endured and the monthly Fed Square Car Club Showcase has been sustained. Tai Chi, Health Quigong and Refresh Your Mind Meditation all occur weekly and the Laughter Club continues fortnightly. Pop Up Chess is regularly available across the Square as are crochet, fitness and dance (belly, salsa and Zumba) sessions. Fed Square Live has brought music to the stage regularly on a Thursday evening throughout the warmer months. The Creative Program has again delivered The Light in Winter along with a range of other high impact installations. This year’s Light in Winter featured the campfire burning during the month of June, animated by a diverse group of Indigenous artists. The major international commission was Asif Khan’s Radiant Lines and Anachron; a collaboration between Indonesia’s Papermoon Puppet Theatre and Melbourne’s Cake Industries. Community participation was strengthened with over 30 groups actively engaged across Dusk, Solstice and the VicHealth funded Square of Light project. Each night at dusk, musicians including the Asylum Seeker Resource Centre with composer Stephen Falk, Stephanie Kabanyana Kanyandekwe, Amplified Elephants presented by The Click Clack Project and percussionist Diokno Pasilan activated Radiant Lines with Melbourne’s Federation Handbells. The very popular Solstice Celebration event attracted a record audience with over 8,000 visits and showcased a diverse program of music, performance and installation relating to the theme of Shrines. The Deakin Edge held a rehearsed reading of Tim Winton’s ‘Shrine’ delivered in partnership with Deakin University, as well as a forum around remembering Melbourne, in partnership with Melbourne Conversations. We are pleased to see both strong visitation throughout The Light in Winter with 450,000 visits and strong media valued at an estimated $1.9 million. Media highlights included:

• TV coverage included ABC News 24, ABC 1 News, Network 10 News, Channel Nine Postcards and Channel 31 Living Melbourne

• Radio coverage included 774 ABC Melbourne Conversations with Jon Faine, ABC Local Radio VIC News, 3RRR FM The Architects, SBS Radio Hindi, Punjabi and Dari

• Print included Melbourne Magazine, Sunday Age, Victorian Leader Network, The Age Arts and Entertainment, Time Out Magazine, Qantas Magazine, Melbourne’s Child, Beat Magazine, Herald Sun, The Senior, The Australian Arts and Entertainment

• Online coverage included Wallpaper Magazine, IndesArts Review, Time Out Melbourne, Dezeen Magazine, Broadsheet Melbourne, Design Boom, Vogue Australia, The Age, Sydney Morning Herald, Brisbane Times, Canberra Times and The Australian

Other highlight Creative Program initiatives during the year included Bounce by Stuart Semple, In the Pines by These are the Projects We Do Together, Run for Your Life by Gillie and Marc, Beyond the Bright Black Edge of Nowhere by Simon Wilkinson, and the Pause Festival. Creative partnerships have enabled great artistic outcomes with (including but not limited to) the Arts Participation Incubator, ARUP Penguin Pool, Liquid Architecture, Words With Melbourne - Deakin API, State Trustees, Clare McCracken, Chamber Made Opera, Freeplay Independent Gaming, Pop Up Playground, Virgin Australia Melbourne Fashion Festival, Festival of Live Art and Next Wave Festival.


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As always, strong third party programming has continued with Fed Square providing $1.99 million in discounting support to community groups to enable their activations. There have been 24 multicultural festivals, 44 National Day flag raisings and 165 major events (over 2,000 visits) including state-wide festivals such as those for Small Business, Seniors Week, Comedy Festival, Writers Festival, Sustainability and Fair Trade. Live sites have continued to evolve with the usual substantial AFL and Australian Open presence, as well as the Super Bowl live site. We undertook extensive programming to support those with barriers to access (including World Down Syndrome Day, Parkinson’s and Scope walks, ADEC and ARTability) and we worked proactively with disadvantaged groups (such as The Choir of Hope and Inspiration who continue their strong and ongoing residency, Human Rights Arts and Film Festival and The Song Room for multiple activations). We have been delighted to support numerous Indigenous initiatives including the biennial Melbourne Indigenous Arts Festival, Djilpin Arts NT, and Reconciliation week activities. There was an extensive program of Ideas, Discourse and Debate primarily in The Deakin Edge featuring 194 separate forums and events, including Melbourne Conversations, Conversations with the Archbishop Series, Wheeler Centre discussions and initiatives such as the Big Pitch and Melbourne Writers Festival keynotes. The Atrium, our spectacular glass gallery and gateway to NGV Australia and The Deakin Edge, has consolidated as a bustling salon and market environment, with a focus on Australian art, community expression, design, culture and quality food and beverage experiences. In addition to the Regular Program of Books, Health and Wellbeing activations and Flavour Exchange, other programming has included the Melbourne Prize for Music, Melbourne Festival Kids Weekend, MarkIt, and many community gallery exhibitions. Fed Ed, our education program around Civics and Citizenship and Australian History, has continued with over 3,500 students through the core program and partner initiatives. Federation Story, our online digital time capsule now houses 458 personal stories. Several projects were undertaken this year to increase the number of stories and build narratives around pertinent themes with highlights including:

• Mayors of Victoria • Marysville Support Campaign • Australian Institute of Architects collaboration • Art Rooms of Victoria • ANZAC stories

GREAT REPUTATION We continue to work systematically to ensure Fed Square is regarded locally, nationally and internationally as an urban success story that benefits both Melbourne and Victoria. It is most pleasing to have a 99 per cent positive media sentiment and this has been supported with great coverage. Deeper engagement across local media has been a particular priority this year, with three front pages achieved along with over 500 regional placements. Wider specialist media has also been a feature this year with articles published about our commitment to accessibility and best practice in place making. Fed Square’s achievements have also been presented in facility management, architecture and academic publications and various state wide and national awards have been received including:

• Coates Hire Best Community Event Finalist, Australian Event Awards • Victorian YMEA Future Leader winner


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Tourism media and industry familiarisations have been strong with many major visits including from India, Korea and Singapore. We are delighted to have been featured by international tourism media organisations, with highlights including:

• MasterChef (broadcast in India) • Long Lost Family, UK • Kusinero Cinta (Malaysian drama series) • Come Alive in Melbourne (India Media) • Trans TV Wisata Kulina, Indonesia • Star Plus TV, India • NDTV, India • KBS Correspondent Field Report • Media Corp, Singapore • Michaela’s Map, Brazil • Good Food Network, UK

Positioning Fed Square as a hallmark for Melbourne and Victoria has been consolidated through ongoing collaboration with key industry partners – MCB, MCEC, Meeting and Events Australia, City of Melbourne, Destination Melbourne, Victorian Tourism Industry Council, Tourism Australia and Tourism Victoria and examples include the front covers of:

• Official Visitor Map • Cruise Arrivals Guide • Chinese Visitor Guide

Building our connections with the Chinese community has been furthered through Chinese New Year programming, famils, advertising in Chinese publications and facilitating international filming on site. We continue to strengthen our connection with the Indian community, through the annual Diwali Community Festival, the Indian Film Festival and visits from Indian media. There have been many formal filming hires and hundreds of media filming moments including live broadcasts with:

• Channel 10 ( Weather, Wakeup and The Project) • Channel 7 (The Morning Show and Sunrise) • Channel 9 ( News) • 3AW broadcasts • SBS link ups

We are very grateful for our media colleagues in helping us position Fed Square as the heartbeat of Melbourne. The cumulative impact of these activities has seen in the period: • 65 per cent of Victorians saying they have visited Fed Square • 71 per cent of Victorians saying that Fed Square is Melbourne’s major focal point • 73 per cent of Victorians agreeing that Fed Square has been embraced since opening • 69 per cent of Victorians agreeing that Fed Square helps attract interstate and overseas visitors • 73 per cent of Victorians agreeing there is always something going on at Fed Square • 82 per cent of Victorians agreeing that Fed Square is great for Melbourne • 80 per cent of Victorians agreeing that Fed Square is a public space where culturally diverse activities

occur


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I am grateful to the staff and Boards of the Special Broadcasting Service, the Australian Centre for the Moving Image, Melbourne Visitor Centre and the National Gallery of Victoria for their contribution to the success of the precinct. To all our tenants, thank you for your continued support and for ensuring high levels of customer service are delivered, strengthening the Fed Square Brand and Vision. I would also like to thank our many contractors who provide valuable services across a broad range of functions. I am particularly grateful to Corporate Vision Australia, Ikon Cleaning Services, ACG Security and Wilson Parking for their commitment to Fed Square. Thank you to the State Government of Victoria, our Minister The Hon. Louise Asher and departmental officers for their advice and support. Thanks to the City of Melbourne and its many officers and departments along with all of our collaborators and partners for their work on many projects and events. In the year we were thrilled to have the support of a number of project partners whose in kind and financial support enabled The Light In Winter program. Particularly we thank Corporate Vision Australia, Ikon Cleaning Services, ACG Security, Quality Event Hire, Horner Recruitment, City of Melbourne and VicHealth, along with many other collaborators who enabled a wonderful Light in Winter season in 2014. It has been a great pleasure to consolidate our naming rights partnership with Deakin University for The Deakin Edge. The relationship has matured into a multilayered collaboration. We thank all of our Deakin colleagues and look forward to our great partnership continuing. Thank you to the Board for its ongoing guidance and support, allowing Fed Square to deliver on its vision. To the management and staff, thank you for continuing to make Fed Square an inspirational public place. It is your hard work and dedication which underpins our success. Fed Square has built a unique brand since its inception that is now recognised both nationally and internationally. Continuing to build on the value of the brand will enable Fed Square to further develop from a cultural and community aspect and allow greater opportunity for this iconic public space to deliver great visitor experiences.

............................................................. CHRIS BROOKS CHIEF EXECUTIVE OFFICER


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PERFORMANCE INDICATORS 2013-14

Target Actuals

Great Place

Visitor comfort indicated by their assessment of:

Cleaning 95% 100%

Security 95% 100%

Amenities 95% 96%

Visitation equal to or above the previous year 100% 99%

Sociability – percentage of visitors using Federation Square as a meeting place 25% 11%

Great Staff

Performance of Fed Square Pty Ltd team in achieving defined role objectives 100% 100%

“Overall Job Satisfaction” measured through the People Matter Survey >85% 90%

Fed Square Pty Ltd is an “Employer of Choice” as measured through the annual People Matter Survey

>95% 93%

Great Delivery

Tenant Satisfaction >90% 100%

Event Client Satisfaction >95% 99%

Visitor Satisfaction with their overall service experience 100% 99%

Visitor Satisfaction with the service provided by staff across Federation Square 95% 98%

Great Business Practice

Liquidity Ratios Current 2.91 2.78

Quick 2.91 2.45

Interest Cover - EBITD 4.43 5.40

Profit before depreciation and borrowing costs ‘000s 5,327 (1) 6,566

Profit before depreciation ‘000s 4,125 (1) 5,346

Risk Management – VMIA Risk Management Framework Quality Review Advanced Advanced (2)

Significant OH&S Incidents (per 1,000 visits) ≤0.022 0.015

Significant Security and Risk Incidents (per 1,000 visits) ≤0.045 0.0369

Net total carbon emissions(3) zero 804 tonnes

Great Visitor Experience

Number of events and activities 1,500 2,255

Federation Square visitors who recommend it as a good place to visit >95% 98%

Visitation rates to cultural attractions (compared to the prior year) >90% 111%

Great Reputation

Recognised as a culturally diverse public space (4) >90% 95%

Percentage of Victorians that agree with the statement that Federation Square is now Melbourne’s major central community focal point (4)

95% 88%

Federation Square in “Top 3” most attractions in Victoria in terms of international and interstate visitors to Victoria

Top 3 Top 1 and 2

Attracting International visitors >25% 19%

High level of positive sentiment expressed in print media >90% 99% Notes: (1) Excludes 3.948 million State Government asset replacement funding that is treated as contributing capital (2) Advanced is the highest score given by VMIA in its most recent review at May 2012. (3) Carbon emissions are measured per calendar year (4) Source: Fed Square annual Victorians’ perceptions survey (computer assisted telephone interviewing)


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STATEMENT OF CORPORATE GOVERNANCE The Directors of Fed Square Pty Ltd are committed to the highest standard of corporate governance and acknowledge the need for continued maintenance of governance practice and ethical conduct by all Directors and employees. Accordingly, they have ensured that systems and procedures are in place to provide appropriate assurance that the company undertakes its activities and functions in accordance with: • All legal requirements • The best interests of shareholders • An environment that meets relevant standards; and • A manner that is responsible to all stakeholders and the wider community

Objects and Powers of the Company The objects of the company are those set out in the Fed Square Pty Ltd Constitution and Federation Square Civic and Cultural Charter and include without limitation:- (a) to occupy the site known as Federation Square (b) to use, refurbish, maintain, improve, develop, lease, licence, manage, operate and modify all or any part

of Federation Square (c) in relation to any part of Federation Square, to carry on any or all of:

(i) the businesses of owners, operators, mangers, licensors, lessors or occupiers of: (1) galleries, exhibition centres, libraries, art and craft centres and museums (2) car parks (3) theatres, cinemas and cinema based entertainment facilities, radio, television and other

multi-media studios, outdoor video screens and video/LED signage (4) restaurants, cafes, taverns, hotels, food and drink premises (including, without limitation,

take-away food and drink premises), liquor vendors, shops, convenience restaurants and convenience shops, and nightclubs

(5) function centres, conference centres and reception centres (6) retail outlets, shops and stores (including, without limitation those required for service

industries and including, without limitation, cash dispensing machines, ticketing machines and tourist and other information services providing machines)

(7) offices (8) amusement parlours and gaming and gambling premises (9) indoor recreation facilities (10) visitor and tourist information services and other visitor and tourist services

(ii) live performances, entertainment, carnivals, circuses, community or public events, (both indoor and outdoor), festivals, exhibitions and performances

(iii) places of assembly for religious and cultural activities, entertainment or meetings; and (iv) markets

Duties of Directors The duties of Directors include: • Duty to act honestly in good faith in the best interests of the corporation and for a proper purpose • Duty to act with care and diligence • Duty to avoid conflict in the position of a director and/or any interest that a director may have • Duties which prohibit the misuse of information obtained by directors; and • Duties which prohibit a director from taking for oneself the company’s opportunities


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Responsibilities of the Board The primary responsibilities of the Board include: • Establishing the company’s vision, mission, values and ethical standards • Ensuring the company’s long term viability and enhancing the financial position • Formulating and overseeing implementation of corporate strategy • Approving the business plan, budget and corporate policies • Agreeing key performance indicators (KPIs) • Monitoring/assessing performance of the company, the Board itself, management and major projects • Overseeing the risk management framework and monitoring business risks • Appointing and appraising the performance of the Chief Executive Officer • Requiring and monitoring legal and regulatory compliance • Approving annual accounts, annual report and other public documents • Ensuring an effective system of internal controls exists; and • Delegating an appropriate level of authority to management

Board Committees The Board has established one permanent Committee, this being the Audit Committee. Committee decisions become recommendations for submission to the Board for resolution. Risk Management The company recognises the need for pro-active risk management procedures and during the year reviewed the Risk Management Policy and Strategy and procedures to monitor progress with proposed plans. Risks are identified, assessed and treated in accordance with the principles contained in Australia/New Zealand Risk Management Standard AS/NZS ISO 31000:2009. The risk management program is designed to provide a structured approach to business planning, improve operational performance, encourage pro-active management and protect assets, people, finance and property. Attestation In accordance with the Victorian Government’s Risk Management Framework developed by the Department of Treasury and Finance, I, Catherine Mary Walter, certify that Fed Square Pty Ltd has risk management processes in place consistent with the Australian/New Zealand Risk Management Standard and an internal control system is in place that enables the executive to understand, manage and satisfactorily control risk exposures. The Board verifies this assurance and that the risk profile of Fed Square Pty Ltd was critically reviewed in the last 12 months.



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Audit Committee The company has established an Audit Committee to advise the Board in relation to matters falling into the following broad areas: • Financial reporting and accounting policies • Internal audit and internal controls • Governance • State Government’s Financial Management Compliance Framework; and • Compliance with Australian equivalents of International Financial Reporting Standards

The Audit Committee meets as required and makes recommendations to the Board on specific issues. The members of the Committee during the year ended 30 June 2014 were Louise Staley (Chair), Catherine Walter AM, Kathleen Wilson, Laura Anderson and John Lee as a co-opted member. Financial Management Compliance Framework In June 2003 the Victorian State Government launched the Whole of Government “Financial Management Compliance Framework” to promote responsible financial management in the Victorian public sector and assist public sector agencies meet their obligations and monitor their overall performance in financial management. A fundamental element of the Financial Management Compliance Framework is the Standing Directions issued from time to time by the Minister for Finance. The standing directions are issued under the provisions of the Financial Management Act 1994 and are designed to supplement the Act by prescribing mandatory procedures for the Victorian public sector. Whilst Fed Square Pty Ltd is not subject to the provisions of the Financial Management Act 1994, the company is implementing the requirements of the Financial Management Compliance Framework on a voluntary basis. Internal Audit The company engaged Grant Thornton (Vic) Pty Ltd as the Internal Auditor to assist in evaluating the company’s internal controls. Grant Thornton P/L developed an annual audit plan, having due regard to the company’s risk management program, and implementation of proposed audit activities is now underway. Compliance with the Protected Disclosure Act 2012 Fed Square Pty Ltd (FSPL) does not tolerate improper conduct by employees, nor the taking of reprisals against those who come forward to disclose such conduct. FSPL is committed to ensuring transparency and accountability in its administrative and management practices, and supports the making of disclosures that reveal corrupt conduct, conduct involving a substantial mismanagement of public resources, or conduct involving a substantial risk to public health and safety or the environment. FSPL is committed to the protection of persons who make disclosures from any detrimental action in reprisal for making a disclosure or for cooperating in the investigation of a disclosure. The Protected Disclosure Act 2012 seeks to encourage and assist people to make disclosures of improper conduct by public officers and public bodies, provides protections for people who make disclosures and provides for the confidentiality of the content of disclosures and the persons who make them.


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Making Disclosures FSPL is not a body to which a protected disclosure can be made under the Protected Disclosure Act 2012. Such disclosures must be made to:

Independent Broad-based Anti-corruption Commission (IBAC). Level 1, North Tower, 459 Collins Street Melbourne, VIC 3001 Phone: 1300 735 135 Mail: IBAC, GPO Box 24234, Melbourne, VIC 3000 Internet: www.ibac.vic.gov.au

The IBAC website contains a secure email disclosure process.

Protecting persons who make disclosures FSPL has established procedures to protect persons who make, or who co-operate in the investigation of, protected disclosures, from detrimental action that might be taken against them. Those procedures can be accessed at www.fedsquare.com/information/ or a copy obtained from the Manager - Corporate Services.

http://www.fedsquare.com/information/


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DIRECTORS’ REPORT The Directors of Fed Square Pty Ltd present their report on the financial statements of the company for the year ended 30 June 2014. Directors The Directors in office during the period and at 30 June 2014 unless otherwise stated were:

Ms Catherine Mary Walter (Chair)

Ms Louise Eileen Staley

Ms Kathleen Sarah Wilson

Ms Laura Benton Casteel Anderson (appointed 23 September 2013)

Ownership of Fed Square Pty Ltd Fed Square Pty Ltd is a company wholly owned by State Trustees Limited as custodian trustee on behalf of the State of Victoria. The share is held pursuant to the State Investment Trust Deed and the Treasurer is the Minister responsible for the state holding in Fed Square Pty Ltd under the Deed. Principal Activities The principal activity of Fed Square Pty Ltd continues to be the management of Federation Square. Results of Operations 2014 2013

$ $ Net result before depreciation and amortisation 5,345,969 4,578,486

Depreciation and amortisation (11,657,614) (11,522,476)

Net result

(6,311,645)

(6,943,990)

Dividends No dividends have been proposed or paid during the year (2012-2013: Nil). Changes in State of Affairs There was no material change in the State of Affairs during the year. Environmental Regulations No significant environmental regulations apply that are likely to have an unexpected material effect on the operations or financial results of Fed Square Pty Ltd. Subsequent Events There were no subsequent events after balance date expected to have a material effect on the financial statements of Fed Square Pty Ltd that are not otherwise disclosed in the financial statements and notes.


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Directors’ Meetings The number of Directors’ meetings and number of meetings attended by each of the Directors of the company during the financial year were: MEETINGS MEETINGS DIRECTOR HELD* ATTENDED Ms Catherine Walter (Chair) 8 8 Ms Louise Staley 8 8 Ms Kathleen Wilson 8 8 Ms Laura Anderson 6 5 *Reflects the number of meetings held during the time the Director held office during the year. Audit Committee Meetings The number of Audit Committee meetings and number of meetings attended by each of the committee members during the financial year were: MEETINGS MEETINGS HELD* ATTENDED Ms Louise Staley (Chair) 4 4 Ms Catherine Walter 4 4 Ms Kathleen Wilson 4 4 Ms Laura Anderson 3 3 Mr John Lee (co-opted member) 4 4 *Reflects the number of meetings held during the time the committee member was a member of the Audit Committee during the year. Directors’ Benefits Directors’ benefits are set out in notes 19 and 21 to the financial statements. Insurance of Directors and Officers During the financial year $23,952 was paid by the company to the Victorian Managed Insurance Authority for Directors’ and Officers’ Liability insurance premiums and recorded as an expense in the Comprehensive operating statement (2012-2013: $34,218). The insurance provides cover for Directors and Officers of Fed Square Pty Ltd against certain personal liabilities that they may incur by reason of their duties as Directors and Officers. Signed in accordance with a resolution of the Directors at Melbourne on 10th September 2014.



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AUDITOR-GENERAL’S INDEPENDENCE DECLARATION


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COMPREHENSIVE OPERATING STATEMENT FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014 Notes 2014 2013 $ $ Operating revenue 2 25,347,585 23,966,769 Interest revenue 568,385 660,417 Total revenue from transactions 25,915,970 24,627,186 Borrowing costs (1,220,362) (1,395,549) Employee entitlements (4,495,571) (4,375,229) Event expenses (3,492,779) (3,044,177) Site operating expenses 3(a) (7,713,960) (7,758,655) Other expenses 3(b) (3,932,896) (3,287,806) Depreciation and amortisation 7 (11,657,614) (11,522,476) Total expenses from transactions (32,513,182) (31,383,892) Net operating result from transactions (6,597,212) (6,756,706)

Other economic flows included in net result

Gain on disposal of non-financial assets 340,729 6,550 Net loss from revaluation of long service liability (55,162) (193,834) Total other economic flows included in net result 285,567 (187,284) Net result 12 (6,311,645) (6,943,990)

Other comprehensive income

Revaluation of property, plant and equipment 7 - - Other comprehensive income for the period - -

Total comprehensive result for the period (6,311,645) (6,943,990)

The Comprehensive operating statement should be read in conjunction with the accompanying notes.


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BALANCE SHEET AS AT 30 JUNE 2014 Notes 2014 2013 $ $ Current Assets Cash and deposits 17(a) 17,744,608 20,531,362 Receivables 6 2,016,049 752,636 Prepayments 876,376 256,442

Total Current Assets 20,637,033 21,540,440 Non-Current Assets Property, plant and equipment 7 476,079,550 481,357,844

Total Non-Current Assets 476,079,550 481,357,844

Total Assets 496,716,583 502,898,284

Current Liabilities

Payables 8 2,536,786 2,286,509 Borrowings 10 4,256,887 3,484,021 Provisions 9 652,675 626,347

Total Current Liabilities 7,446,348 6,396,877 Non-Current Liabilities Borrowings 10 15,472,412 20,401,661 Provisions 9 187,257 125,535

Total Non-Current Liabilities 15,659,669 20,527,196

Total Liabilities 23,106,017 26,924,073

Net Assets 473,610,566 475,974,211

Equity Contributed capital 11 439,888,508 435,940,508 Accumulated deficit 12 (55,643,445) (49,331,800) Asset revaluation surplus 13 89,365,503 89,365,503

Total Equity 473,610,566 475,974,211

The Balance sheet should be read in conjunction with the accompanying notes.


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CASH FLOW STATEMENT FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014 Notes 2014 2013 $ $ Cash Flows from operating activities Receipts from customers (incl. GST) 28,295,623 27,779,176 Interest received 573,510 842,843 Payments to employees (4,476,465) (4,327,150) Payments to suppliers (incl. GST) (17,607,371) (17,174,689) GST paid to Australian Taxation Office (1,165,890) (727,263) Interest paid on loans (1,288,820) (1,414,033)

Net cash flows from operating activities 17(b) 4,330,587 4,978,884 Cash Flows from investing activities Proceeds from sale of non-current assets 39,544 25,683 Payments for buildings & improvements (5,428,658) (848,181) Payments for plant & equipment (1,519,845) (2,488,430) Net cash flows from investing activities (6,908,959) (3,310,928) Cash Flows from financing activities Proceeds from Government appropriation 3,948,000 - Proceeds from Government advance Repayment of borrowings

- (4,105,612)

1,274,230 (3,079,029)

Repayment of finance leases (50,770) (56,583) Net cash flows from financing activities (208,382) (1,861,382) Net increase/(decrease) in cash and cash equivalents

(2,786,754) (193,426)

Cash and cash equivalents at the beginning of the year

20,531,362 20,724,788

Cash and cash equivalents at the end of the year 17(a)

17,744,608

20,531,362

The Cash flow statement should be read in conjunction with the accompanying notes.


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STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 30 JUNE 2014 Contributed

capital Assets revaluation

surplus Accumulated

deficit Total

$ $ $ $

Balance at 1 July 2012 435,940,508 89,365,503 (42,387,810) 482,918,201

Net result for the year - - (6,943,990) (6,943,990)

Revaluation of freehold land - - - -

Revaluation of buildings - - - -

Other comprehensive income for the year - - - -

Balance at 30 June 2013 435,940,508 89,365,503 (49,331,800) 475,974,211

Net result for the year - - (6,311,645) (6,311,645)

Revaluation of freehold land - - - -

Revaluation of buildings - - - -

Capital appropriation 3,948,000 - - 3,948,000

Other comprehensive income for the year - - - -

Balance at 30 June 2014 439,888,508 89,365,503 (55,643,445) 473,610,566

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


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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 1. STATEMENT OF SIGNIFICANT ACCOUNT POLICIES These financial statements are audited general purpose financial statements which have been

prepared in accordance with the Corporations Act 2001 and applicable Australian Accounting Standards (AAS) which include Interpretations, issued by the Australian Accounting Standards Board (AASB) and comply with other requirements of the law.

The financial statements were authorised for issue by the Directors of Fed Square Pty Ltd on 10th

September 2014. The significant policies which have been adopted in the preparation of this financial report are:

a. Basis of preparation

The financial report has been prepared on the basis of historical cost, except for non-financial physical assets and financial instruments, which are measured at fair value. Cost is based on the fair values of the consideration given in exchange for assets. Consistent with AASB 13 Fair Value Measurement, the company determines the policies and procedures for fair value measurements. All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:-

• Level 1 – Quoted (unadjusted) market prices in active markets for identical assets or liabilities

• Level 2 – Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable; and

• Level 3 – Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

For the purpose of fair value disclosures, the company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above. In addition, the company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period. The accrual basis of accounting has been applied in the preparation of these financial statements whereby assets, liabilities, equity, revenue and expenses are recognised in the reporting period to which they relate, regardless of when cash is received or paid. In the application of accounting standards, 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 judgments.


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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 accounting standards that have significant effects on the financial statements and estimates with a significant risk of material adjustments in the next year are disclosed, where applicable, in the relevant notes to the financial statements. Accounting policies are selected and applied in a manner which ensures that the resulting financial information satisfies the concepts of relevance and reliability, thereby ensuring that the substance of the underlying transactions or other events is reported. The accounting policies set out below have been applied in preparing the financial statements for the year ended 30 June 2014 and the comparative information presented in these financial statements for the year ended 30 June 2013.

b. Scope and presentation of financial statements

Comprehensive operating statement The Comprehensive operating statement comprises of three components, being ‘net operating result from transactions’, ‘other economic flows included in net result’, as well as ‘other comprehensive income’. The sum of the former two represents the net result. Balance sheet Assets and liabilities are presented in liquidity order. Current and non-current assets and liabilities (non-current being those assets or liabilities expected to be recovered or settled more than 12 months after the reporting period) are disclosed in the notes, where relevant. Cash flow statement Cash flows are classified according to whether or not they arise from operating, investing or financing activities. This classification is consistent with requirements under AASB 107 Statement of cash flows. Statement of changes in equity The Statement of changes in equity presents reconciliations of non-owner and owner changes in equity from opening balances at the beginning of the reporting period to the closing balances at the end of the reporting period. Currency All amounts are presented in Australian dollars, unless otherwise noted. Rounding Amounts in the financial statements have been rounded to the nearest $1 unless otherwise stated.

c. Revenue recognition Revenues are measured at the fair value of the consideration received or receivable, net of any goods and services tax payable to the Australian Taxation Office. Goods or services received without consideration are recognised in the Comprehensive operating statement as resources received free of charge. Revenue is recognised for the main business activities as follows:-


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Car parking revenue Revenue from car parking fees and charges is recognised in the period in which the service is provided. Event revenue Revenue from event fees and charges is recognised in the period in which the service is provided. Tenancy rents and charges Revenue in the form of tenancy rents and outgoings derived from operating leases on premises at Federation Square is recognised in the period in which the service is provided. Sponsorship and grants Sponsorship revenue is recognised in the period in which the right to receive the revenue exists under each specific agreement. Grants are recognised as income when the company gains control of the underlying assets. Where grants are reciprocal, income is recognised as performance occurs under the grant. Non-reciprocal grants are recognised as income when the grant is received or receivable. Conditional grants may be reciprocal or non-reciprocal depending on the terms of the grant. Interest revenue Interest revenue is recognised as it accrues, taking into account the effective yield on the financial asset. Sale of non-current assets The gross proceeds from the sale of non-current assets are included as revenue at the date control of the asset passes to the buyer, which is usually when an unconditional contract of sale is signed.

d. Borrowing costs

Borrowing costs include interest, amortisation of discounts or premiums relating to borrowings and amortisation of ancillary costs incurred in connection with arrangements for borrowings. Borrowing costs are expensed in the period in which they relate.

e. Employee entitlements Provision is made for benefits accruing to employees in respect of wages and salaries, annual leave and long service leave for services rendered to the reporting date.

Wages, salaries, annual leave and sick leave Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave, are all recognised in the provision for employee entitlements as ‘current liabilities’, because the company does not have an unconditional right to defer settlements of these liabilities Depending on the expectation of the timing of settlement, liabilities for wages and salaries, annual leave and sick leave are measured at:- • undiscounted value – if the company expects to wholly settle within 12 months; or

• present value – if the company does not expect to wholly settle within 12 months.


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Long service leave Liability for long service leave (LSL) is recognised in the provision for employee entitlements. Unconditional LSL is disclosed in the notes to the financial statements as a current liability even where the company does not expect to settle the liability within 12 months because it will not have the unconditional right to defer the settlement of the entitlement should an employee take leave within 12 months. The components of this current LSL liability are measured at:-

• undiscounted value - of the department expects to wholly settle within 12 months; and

• present value - if the company does not expect to wholly settle within 12 months.

Conditional LSL is disclosed as a non-current liability. There is an unconditional right to defer the settlement of the entitlement until the employee has completed the requisite years of service. This non-current LSL liability is measured at present value. Any gain or loss following revaluation of the present value of non-current LSL liability is recognised as a transaction, except to the extent that a gain or loss arises due to changes in government bond interest rates for which it is then recognised as an other economic flow.

On-costs Provisions for on-costs such as payroll tax, workers compensation and superannuation are recognised separately from the provision for employee benefits.

Superannuation All superannuation contributions are expensed when incurred.

f. Expenses from transactions

Event, site operating and other expenses are recognised as they are incurred and reported in the financial year to which they relate.

g. Goods and services tax Revenues, expenses and physical assets are recognised net of goods and services tax (GST), except where the amount of GST incurred is not recoverable from the Australian Taxation Office (ATO). In these circumstances, the GST is recognised as either a part of the cost of the asset or as part of the expense incurred. Receivables and payables are stated inclusive of GST. The net amount of GST recoverable from, or payable to, the ATO is included as a current asset or current liability in the Balance sheet. Cash flows from operating activities are included in the Cash flow statement on a gross basis, inclusive of GST. The GST components of cash flows from investing activities and financing activities, that are payable to or recoverable from the ATO, are presented as operating cash flows.

h. Income tax The company is exempt from income tax pursuant to Section 24 AM of the Income Tax Assessment Act 1936.


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i. Leased assets

Fed Square Pty Ltd as lessee Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. Assets held under finance 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 finance lease obligation. Lease payments are apportioned between finance 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 entity’s policy on borrowing costs. 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 benefits from the leased asset are consumed. Fed Square Pty Ltd as lessor Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are recognised as an expense in the period in which they are incurred.

j. Provisions A provision is recognised when there is a legal, equitable or constructive obligation as a result of a past event and it is probable that an outflow of economic benefit will be required to settle the obligation, the timing or amount of which is uncertain. If the effect is material, a provision is determined by discounting the expected future cash flows (adjusted for expected future risks) required to settle the obligation that reflects the current market assessment of the time value of money and the risks specific to the liability, being risk free rates on government bonds most closely matching the expected future payments. When some or all of the economic benefit required to settle a provision is expected to be recovered from a third party, the recovery receivable is recognised as an asset when it is probable that the recovery will be received and is measured on a basis consistent with the measurement of the related provision. In the Balance sheet, a provision is recognised net of the recovery receivable when the entity:- has a legally recognised right to set-off the recovery receivable and the provision;

intends to settle on a net basis, or to realise the asset and settle the provision simultaneously.

In the Comprehensive operating statement, an expense recognised in respect of a provision is presented net of recovery.


36

k. Property, plant and equipment

All non-financial physical assets are measured initially at cost and subsequently revalued at fair value less accumulated depreciation and impairment. The fair value of plant and equipment and equipment under finance lease is determined by reference to the asset’s depreciated replacement cost. Cost includes expenditure that is directly attributable to the acquisition of the item. The fair value of land and buildings is determined on the basis of an independent valuation by external valuation experts. The fair values are recognised in the financial statements and are reviewed at the end of each reporting period to ensure that the carrying value of land and buildings is not materially different from their fair values. Revaluation Revaluation increments are credited directly to equity in the asset revaluation reserve, except that, to the extent that an increment reverses a revaluation decrement in respect of that class of asset previously recognised as an expense in the net result, the increment is recognised as income in determining the net result. Revaluation decrements are recognised immediately as expenses in the net result, except that, to the extent that a credit balance exists in the revaluation reserve in respect of the same class of assets, they are debited to the asset revaluation reserve. Revaluation increases and revaluation decreases relating to individual assets within a class of property, plant and equipment are offset against one another within that class but are not offset in respect of assets in different classes.

Depreciation and amortisation 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. The estimated useful lives, residual values and depreciation method is reviewed at the end of each annual reporting period. Items costing less than $5,000 are written off in the year of purchase.

The following estimated useful lives are used in the calculation of depreciation:

Category Life Buildings and improvements 5 - 100 years Plant and equipment 2 - 50 years

The cost of tenancy fit-outs provided under lease arrangements are amortised over the initial term of the relevant lease.

l. Impairment of non-financial assets At each reporting date, the company reviews the carrying amounts of its 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).


37

Recoverable amount is the higher of fair value less costs to sell and value in use. Value in use is determined by the ‘depreciated replacement cost’, which is the current replacement cost of the asset less, where applicable, accumulated depreciation calculated on the basis of such cost to reflect the already consumed or expired future economic benefits of the asset. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss. Where an impairment loss subsequently reverses, the carrying amount of the asset 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 in prior years. A reversal of an impairment loss is recognised immediately in profit or loss.

m. Financial assets and liabilities

i. Cash and deposits

Cash includes cash on hand, deposits held and cash equivalents, which are highly liquid investments with short periods to maturity and readily convertible into cash on hand. They are subject to an insignificant risk of changes in value.

ii. Borrowings

Loans are recognised when issued at the amount of the net proceeds received. Interest is recognised in the Comprehensive operating statement on an effective yield basis.

iii. Receivables

Trade receivables are generally settled within 30 days and are carried at amounts due. The ability to collect debts is assessed at year end and specific provision is made for any doubtful amounts.

iv. Payables

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

v. Net fair value of financial assets and liabilities

Monetary financial assets and financial liabilities not readily traded in an organised financial market are determined by valuing them at the present value of contractual future cash flows on amount due from customers (reduced for expected credit losses) or due to suppliers. Cash flows are discounted using standard valuation techniques at the applicable on-market yield having regard to the timing of the cash flows. The carrying amounts of bank term deposits, receivables, payables, loans and employee entitlements approximate net fair value.

n. Prepayments

Prepayments represent payments in advance of receipt of goods or services or that part of expenditure made in one accounting period covering a term extending beyond that period.


38

o. New accounting standards and interpretations

Subsequent to the 2012-2013 reporting period, the following new and revised Standards have been adopted in the current period with their financial impact detailed below. AASB 13 Fair value measurement AASB 13 establishes a single source of guidance for all fair value measurements. AASB 13 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under Australian Accounting Standards when fair value is required or permitted. The company has considered the specific requirements relating to highest and best use, valuation premise, and principal (or most advantageous) market. The methods, assumptions, processes and procedures for determining fair value were reviewed and the assessment has not materially changed the fair values recognised. However, AASB 13 has predominately impacted the disclosures of the company. It requires specific disclosures about fair value measurements and disclosures of fair values, some of which replace disclosure requirements in other standards, including AASB 7 Financial Instruments: Disclosures. The disclosure requirements of AASB 13 apply prospectively and need not be applied in comparative information before first application. Consequently, the 2012-13 comparatives of these disclosures have not been provided, except for financial instruments of which the fair value disclosures are required under AASB 7 Financial Instruments: Disclosures. AASB 119 Employee benefits In 2013-14, the company has applied AASB 119 Employee benefits (September 2011, as amended) and the related consequential amendments for the first time. The revised AASB 119 changes the accounting for defined benefit plans and termination benefits. The most significant changes relates to the accounting for changes in defined benefit obligation and plan assets. As all payments by the company are to accumulation plans changes in defined benefit obligations and plan assets will have no impact. The revised standard also changes the definition of short-term employee benefits. These were previously benefits that were expected to be settled within twelve months after the end of the reporting period in which the employees render the related service, however, short-term employee benefits are now defined as benefits expected to be settled wholly within twelve months after the end of the reporting period in which the employees render the related service. As a result accrued annual leave balances which were previously classified by the company as short-term employee benefits may no longer meet this definition and may now be classified as long-term employee benefits. The change in classification will not materially alter the annual leave provision. Consequently the 2012-13 comprehensive result, liability and equity comparatives have not been restated. Australian Accounting Standards issued that are not yet effective Other new accounting standards and interpretations have been published that are not mandatory for the 30 June 2014 reporting period. The Department of Treasury and Finance assesses the impact of these new standards and advises Government departments and related entities of their applicability and early adoption where applicable.


39

As at 30 June 2014 a number of standards and interpretations had been issued but were not mandatory for the financial year ended 30 June 2014. Whilst, these accounting standards and interpretations may have an impact on future reporting periods, the extent of their impact is considered not to warrant further disclosures. The company has not, and does not intend to, adopt these standards early.


40

Notes 2014 2013 $ $ 2. OPERATING REVENUE

Tenancy rents and charges 16,355,571 15,850,281 Car parking 4,335,620 3,994,878 Events 3,622,043 3,202,762 Sponsorship and grants 937,562 864,177 Other revenue 96,789 54,671 Total operating revenue 25,347,585 23,966,769

3. EXPENSES (a) Site operating expenses Building and tenant consultants 217,452 390,768 Car park operations 807,754 689,516 Cleaning 1,676,603 1,696,265 Maintenance 2,087,766 2,059,359 Placemaking - 2,653 Security 1,495,941 1,464,705 Utilities 1,428,444 1,455,389 Total site operating expenses 7,713,960 7,758,655

(b) Other expenses Administration and accounting 541,188 456,074 Bad and Doubtful debts 6 4,354 (83,662) Information and communications technology 474,471 336,421 Insurance 630,775 637,462 Legal 172,758 117,637 Motor vehicles 25,829 38,915 Promotional expenses 500,399 631,110 Statutory rates and taxes 1,108,488 836,048 Tenancy expenses 474,634 317,801 Total other expenses 3,932,896 3,287,806

4. AUDITORS’ REMUNERATION

Amounts paid or due and payable to the Victorian Auditor-General’s Office for audit of the financial statements

28,500

26,795

5. DIVIDENDS

There was no provision for dividends or dividends paid for the year (2012-2013: Nil).


41

6. RECEIVABLES Notes 2014 2013 $ $

Trade receivables 432,651 481,112 Provision for doubtful debts - - Net trade receivables 432,651 481,112 Insurance receivable 1,347,229 - GST receivable 81,028 - Accrued income 155,141 271,524 Total receivables 2,016,049 752,636

The average credit period on sales of goods and rendering of services is 30 days. An allowance has been made for estimated irrecoverable receivable amounts arising from past sale of goods or rendering of services. The company has provided for receivables based on the estimated irrecoverable amounts determined by reference to past default experience.

Movement in allowance for doubtful debts 2014 2013 $ $

Balance at beginning of year - (96,116) Amounts credited during the year - 91,543 Impairment losses recognised on receivables 4,354 - Amounts written off as uncollectable (4,354) 4,573 Balance at end of year - -

Ageing of impaired receivables 2014 2013

$ $ Current - - 30 – 60 days - - 60 – 90 days - - Greater than 90 days - - Total - -

In determining the recoverability of a receivable, the company considers any change in the credit quality of the receivable from the date credit was initially granted up to the reporting date. The concentration of credit risk is limited due to the customer base being diverse and unrelated. Accordingly, the Directors believe there is no further credit provision required in excess of the allowance for doubtful debts.


42

7. PROPERTY, PLANT AND EQUIPMENT

Freehold land

A valuation was undertaken by Urbis Valuations Pty Ltd on behalf of the Valuer-General Victoria (ref: 210B-A00797) effective as at 30 June 2011. The Urbis valuation is based on:- - the property is situated in the ‘Capital City 1’ zone, which is a highly sought after property zone; - the highest and best use based on the zoning and location of Federation Square is for a

medium/high density residential development site; - the site is well located, being opposite the river and close to public transport linkages; - it is a large site and discount for size should apply; - the central portion of the land (air rights) being ascribed a value equal to 5percent of the

surrounding land values The carrying amount following the revaluation at 30 June 2011 of freehold land is $121,462,000.

Buildings and improvements

A valuation was undertaken by Napier and Blakeley Pty Ltd on behalf of the Valuer-General Victoria effective as at 30 June 2011. The fair value ascribed by Napier and Blakeley Pty Ltd for the carrying amount of buildings and improvements, as represented by the depreciated replacement cost, at 30 June 2011 is $372,997,000. Additions to buildings and improvements acquired since 1st July 2012 are recorded at cost, which represents fair value.

Notes 2014 2013 $ $ Freehold land – fair value 121,462,000 121,462,000 Buildings and improvements At fair value 451,153,921 445,451,096 Accumulated depreciation (102,526,733) (91,832,612) 348,627,188 353,618,484

Plant and equipment At fair value 12,232,652 15,669,154 Accumulated depreciation (6,896,945) (10,070,030) 5,335,707 5,599,124 Tenancy fit-outs At fair value 861,678 2,462,115 Accumulated amortisation (265,234) (1,891,403) 596,444 570,712 Plant and equipment under finance lease 103,500 157,649 Less: Accumulated depreciation (45,289) (50,125) 58,211 107,524

Total property, plant and equipment 476,079,550 481,357,844


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Reconciliations of the carrying amounts of each class of property, plant and equipment at the beginning of the current financial year are set out below.

Freehold

Land Buildings and improvements

Plant and equipment

Tenancy fit-outs

Plant and equipment

under lease

Total property, plant and

equipment $ $ $ $ $ $

Carrying amount at 1 July 2012

121,462,000

363,513,440

4,402,313

21,037

123,815

489,522,605

Additions - 848,181 1,826,320 662,110 40,234 3,376,845 Disposals - - - - (19,130) (19,130) Reallocations - - - - - - Revaluation - - - - - - Depreciation and amortisation - (10,743,137) (629,509) (112,435) (37,395) (11,522,476) Carrying amount at 1 July 2013

121,462,000

353,618,484

5,599,124

570,712

107,524

481,357,844

Additions - 5,428,658 1,295,154 199,568 25,123 6,948,503 Disposals - (523,915) - - (45,267) (569,182) Reallocations 878,700 (878,700) - Revaluation - - - - - - Depreciation and amortisation - (10,774,739) (679,871) (173,836) (29,169) (11,657,615) Carrying amount at 30 June 2014

121,462,000

348,627,188

5,335,707

596,444

58,211

476,079,550

Fair value measurement hierarchy for assets as at 30 June 2014

The fair value of the freehold land was determined based on the market comparable approach that reflects transaction prices for vacant land and development sites in Melbourne’s Central Business District and surrounding areas. The fair value of buildings was determined using the cost approach that reflects the cost to reconstruct the property to a ‘modern equivalent’ standard. Details of the property, plant and equipment and information about the fair value hierarchy as at 30 June 2014 are as follows:-

Level 1 Level 2 Level 3 Fair value as at 30/06/14

$ $ $ $

Freehold land - 121,462,000 - 121,462,000 Buildings - - 348,627,188 348,627,188 Plant and equipment - - 5,335,707 5,335,707 Tenancy fit-outs - - 596,444 596,444


44

Description of significant unobservable inputs to Level 3 valuations

Valuation technique Significant

unobservable inputs

Sensitivity of fair value measurement to changes in significant unobservable inputs

Buildings Depreciated replacement cost

Direct cost per square

metre

Useful life

A significant increase or decrease in direct cost per square metre adjustment would result

in a significantly higher or lower fair value

A significant increase or decrease in the estimated useful life of the asset would result

in a significantly higher or lower valuation Plant and equipment

Depreciated replacement cost

Cost per unit

Useful life

A significant increase or decrease in cost per unit would result in a significantly higher or

lower fair value


in a significantly higher or lower valuation Tenancy fit-outs

Amortised replacement cost

Cost per unit

Useful life

A significant increase or decrease in cost per unit would result in a significantly higher or

lower fair value


in a significantly higher or lower valuation Notes 2014 2013 8. PAYABLES $ $

Creditors 2,132,683 1,814,668 GST payable - 39,103 Advances 154,040 168,893 Salaries and associated costs 250,063 263,845 Total payables 2,536,786 2,286,509

9. PROVISIONS

Current Employee entitlements 638,673 609,105 Fringe benefits tax 14,002 17,242 652,675 626,347

Non-Current

Employee entitlements 187,257 125,535


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10. BORROWINGS Notes 2014 2013

$ $ Loans 19,671,027 23,776,639 Lease liability 14 58,272 109,043 19,729,299 23,885,682

Current liability 4,256,887 3,484,021 Non-current liability 15,472,412 20,401,661 19,729,299 23,885,682

Loans of $16,822,607 (2012-2013: $20,786,229) are provided by the Treasury Corporation of Victoria in the form of fixed interest annuities and are secured by a guarantee from the Treasurer of Victoria. The loans will be fully repaid in 2019. Interest free advances totalling $2,848,420 (2012-2013: $2,990,410) are provided by the Department of State Development, Business and Innovation and are repayable by 2022. Lease liabilities represent motor vehicles leased from Vic Fleet, a unit of the Victorian Department of Treasury and Finance. The motor vehicles provide security under the terms of the lease.

11. CONTRIBUTED CAPITAL

Fed Square Pty Ltd is a company wholly owned by State Trustees Limited as custodian trustee on behalf of the State of Victoria. The share is held pursuant to the State Investment Trust Deed and the Treasurer of Victoria is the Minister responsible for the State Holding in Fed Square Pty Ltd under the Deed. The allocation statement dated 27 June 2003 approved by the Minister for Finance required Fed Square Pty Ltd to record the value of assets transferred to the company in 2002-2003 as a capital injection by the State Government as owners. The total amount of the contributed capital of $435,940,507 comprised $373,440,507 for buildings and improvements, plant and equipment, and $62,500,000 for land. The transfer was effective from 30 June 2003 and is in accordance with the Department of Treasury and Finance ‘Accounting and Financial Reporting Bulletin No.39 – Accounting for Contributed Capital’. Contributed capital during the year represents a capital appropriation of $3,948,000 by the State Government of Victoria as owners to assist the company with asset maintenance and capital replacement requirements.

Notes 2014 2013 $ $

Issued and paid-up capital (1 share @ $1 ea.) 1 1 Capital appropriation 3,948,000 - Contributed capital at beginning of financial year 435,940,507 435,940,507

Total contributed capital 439,888,508 435,940,508


46

12. ACCUMULATED DEFICIT Notes 2014 2013

$ $

Accumulated deficit at beginning of financial year (49,331,800) (42,387,810) Net result (6,311,645) (6,943,990) Accumulated deficit at end of financial year (55,643,445) (49,331,800)

13. ASSET REVALUATION SURPLUS

Balance at beginning of financial year 89,365,503 89,365,503 Revaluation increments/(decrements) - - Balance at end of financial year 89,365,503 89,365,503

14. LEASES

Finance leases (Fed Square Pty Ltd as lessee) Finance lease liabilities payable: - not later than one year 41,552 61,515 - later than one year and not later than five years 19,071 54,613 Minimum lease payments 60,623 116,128 Less: future finance charges (2,351) (7,085) Recognised as a lease liability 1(i), 10 58,272 109,043

Operating leases (Fed Square Pty Ltd as lessor) Operating leases relate to premises owned by Fed Square Pty Ltd from which the company derives rental income. Non-cancellable operating lease receivables: - not later than one year 15,843,517 15,426,112 - later than one year and not later than five years 43,419,639 51,608,847 - later than five years 42,298,623 46,552,830

1(i) 101,561,779 113,587,789

15. EMPLOYEE SUPERANNUATION FUNDS

Fed Square Pty Ltd contributes to superannuation at the minimum rate required by the Superannuation Guarantee (Administration) Act 1992. Each employee (including Directors) is able to nominate a complying fund in accordance with the Act. Additional contributions are optional at the discretion of employees. During the year a total of $403,093 (2012-2013: $345,606) was paid or payable by the company to the various funds.


47

As at 30 June 2014 there was no amount owing to superannuation funds not brought to account (2012-2013: Nil). Fed Square Pty Ltd employed 48 full time equivalent employees as at 30 June 2014 (2012-2013: 47). All superannuation payments are paid to accumulation funds.

16. SUBSEQUENT EVENTS There were no subsequent events after balance date expected to have a material effect on the financial statements of Fed Square Pty Ltd that are not otherwise disclosed in the financial statements and notes.

17. CASH AND DEPOSITS

(a) Reconciliation of cash

For the purposes of the Cash flow statement, cash includes cash on hand, cash at bank and short term deposits. Cash as at the end of the financial year as shown in the Cash flow statement is reconciled to the related items in the Balance sheet as follows:

Notes 2014 2013 $ $

Cash on hand and at bank 294,490 643,786 Term deposits 17,450,118 19,887,576 Cash and cash equivalents as shown on the Cash flow statement

17,744,608

20,531,362

(b) Reconciliation of loss from ordinary activities to net cash provided by operating activities:

Net deficit

(6,311,645)

(6,943,990)

Adjustments for non-cash items:

- Depreciation and amortisation 11,657,614 11,522,476 - Increase/(Decrease) in Provision for doubtful

debts 4,354 (83,662)

- (Gain) / Loss on disposal of assets (340,729) (6,550) Net cash inflows from operating activities before changes in assets and liabilities

5,009,594

4,488,274

Changes in assets and liabilities

(Increase) / Decrease in receivables (397,400) 1,578,560 (Increase) / Decrease in prepayments (619,934) (204,933) Increase / (Decrease) in payables 250,277 (1,090,842) Increase / (Decrease) in provisions 88,050 207,825

Net cash flows from operating activities 4,330,587 4,978,884


48

18. FINANCIAL INSTRUMENTS Interest rate exposure of financial instruments 30 June 2014 Weighted

Average Interest Rate

Interest rate exposure Carrying amount

Note Fixed

Interest Rate

Variable Interest

Rate

Non-Interest Bearing

percent $ $ $ $ Financial Assets Cash and deposits 17(a) 2.48 17,450,118 294,490 - 17,744,608 Receivables 6 - - - 2,016,049 2,016,049 17,450,118 294,490 2,016,049 19,760,657 Financial Liabilities Payables 8 - - - 2,536,786 2,536,786 Lease liabilities 10 5.83 58,272 - - 58,272 Loans 10 5.33 16,822,607 - 2,848,420 19,671,027 16,880,879 - 5,385,206 22,266,085 30 June 2013 Weighted

Average Interest Rate

Interest rate exposure Carrying amount

Note Fixed

Interest Rate

Variable Interest

Rate

Non-Interest Bearing

percent $ $ $ $ Financial Assets Cash and deposits 17(a) 2.78 19,887,576 643,786 - 20,531,362 Receivables 6 - - - 752,636 752,636 19,887,576 643,786 752,636 21,283,998 Financial Liabilities Payables 8 - - - 2,286,509 2,286,509 Lease liabilities 10 6.56 109,043 - - 109,043 Loans 10 5.42 20,786,229 - 2,990,410 23,776,639 20,895,272 - 5,276,919 26,172,191


49

18. FINANCIAL INSTRUMENTS (continued) Aging analysis of contractual financial assets Past due but not impaired

30 June 2014 Carrying amount

Not past due and not

impaired

Less than 1 month

1 – 3 months

3 months – 1 year

$ $ $ $ $ Receivables

Sale of goods and services 432,651 294,717 47,619 32,295 58,020 Insurance receivable 1,347,229 - 1,157,735 189,494 - Accrued investment income 6,474 6,474 - - - Other contractual financial assets Cash and deposits

17,744,608

17,744,608

-

-

-

Total

19,530,962

18,045,799

1,205,354

221,789

58,020

Past due but not impaired


Not past due and not impaired

Less than 1 month

1 – 3 months

3 months – 1 year

$ $ $ $ $ Receivables

Sale of goods and services 481,112 314,616 41,176 113,372 11,948 Accrued investment income Other contractual financial assets

11,191 11,191 - - -

Cash and deposits 20,531,362 20,531,362 - - - Total

21,023,665

20,857,169

41,176

113,372

11,948


50

18. FINANCIAL INSTRUMENTS (continued) Categorisation of financial instruments

30 June 2014 Contractual financial assets

– loans and receivables

Contractual financial

liabilities at amortised cost

Total

Contractual financial assets $ $ $ Cash and deposits 17,744,608 - 17,744,608 Receivables Sale of goods and services 432,651 - 432,651 Insurance receivable 1,347,229 - 1,347,229 Accrued investment income 6,474 - 6,474 Prepayments 876,376 - 876,376 Total contractual financial assets 20,407,338 - 20,407,338 Contractual financial liabilities Payables Supplies and services - 2,132,683 2,132,683 Other payables - - - Borrowings Lease liabilities - 58,272 58,272 Loans - 19,671,027 19,671,027 Total contractual financial liabilities - 21,861,982 21,861,982

30 June 2013 Contractual financial assets

– loans and receivables

Contractual financial

liabilities at amortised cost

Total

Contractual financial assets $ $ $ Cash and deposits 20,531,362 - 20,531,362 Receivables Sale of goods and services 481,112 - 481,112 Accrued investment income 11,191 - 11,191 Prepayments 256,442 - 256,442 Total contractual financial assets 21,280,107 - 21,280,107 Contractual financial liabilities Payables Supplies and services - 1,768,075 1,768,075 Other payables - 46,593 46,593 Borrowings Lease liabilities - 109,043 109,043 Loans - 23,776,639 23,776,639 Total contractual financial liabilities - 25,700,350 25,700,350


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18. FINANCIAL INSTRUMENTS (continued) Maturity analysis of contractual financial liabilities


Nominal amount

Less than 1 month

1 – 3 months

3 months – 1 year

1 – 5 years

5 + years

$ $ $ $ $ $ $ Payables

Supplies and services

2,132,683 2,132,683 2,132,683 - - - -

Other payables - - - - - - - Borrowings Lease liabilities 58,272 60,623 - - 41,484 19,139 - Loans 19,671,027 19,671,027 - - 4,216,944 15,454,083 - Total

21,861,982

21,864,333

2,132,683

-

4,258,428

15,473,222

-


Nominal amount

Less than 1 month

1 – 3 months

3 months – 1 year

1 – 5 years

5 + years

$ $ $ $ $ $ $ Payables

Supplies and services

1,768,075 1,768,075 1,666,516 38,654 62,905 - -

Other payables 46,593 46,593 46,593 - - - - Borrowings Lease liabilities 109,043 116,128 - - 63,089 53,039 - Loans 23,776,639 23,776,639 204,701 - 3,426,355 17,655,681 2,489,902 Total

25,700,350

25,707,435

1,917,810

38,654

3,552,349

17,708,720

2,489,902

(a) Credit risk exposures The credit risk on financial assets that have been recognised on the Balance sheet, is the carrying amount, net of any provision for doubtful debts. The carrying amount on the Balance sheet represents the company’s maximum exposure to credit risk for receivables. Credit risk refers to the risk that a counter party will default on its contractual obligations resulting in financial loss to the company. The company has a policy of only providing material credit to creditworthy counterparties and obtaining industry standard security over leases in the form of bank guarantees or cash advances. The company’s exposure and the credit worthiness of counterparties is continually monitored.


52

Activities that give rise to credit risk are the granting of credit to customers and tenants at Federation Square. The company does not have any significant exposure to a single counterparty and trade receivables comprise a large number of diverse customers with differing characteristics. The credit risk on liquid funds is limited because the counterparties are banks or Government agencies with high credit ratings. Included in the company’s receivables balance are receivables with a carrying amount of $137,934 (2012-13: $166,496) which are past due at the reporting date for which the company has not provided for as there has not been a significant change in credit quality and the amounts are still considered recoverable. The company holds security in the form of bank guarantees amounting to $88,627 (2012-13: $149,203) against these balances. The average age of these receivables is 127 days (2012-13: 86 days).

30 June 2014 Financial

institutions Triple A credit

rating

Financial institutions

Double A- credit rating

Other unknown

credit rating

Total

$ $ $ Cash and deposits - 294,490 - 294,490 Investments and other financial assets 17,450,118 - 2,016,049 19,466,167 Total contractual financial assets

17,450,118 294,490 2,016,049 19,760,657

30 June 2013 Financial

institutions Triple A credit

rating

Financial institutions

Double A- credit rating

Other unknown

credit rating

Total

$ $ $ Cash and deposits - 643,786 - 643,786 Investments and other financial assets 19,887,576 - 752,636 20,640,212 Total contractual financial assets

19,887,576 643,786 752,636 21,283,998

(b) Financial risk management

The company has an immaterial exposure to financial risk from market risk (including currency risk and price risk), credit risk, liquidity risk and interest rate risk. The company does not use derivative financial instruments to hedge against risk exposures nor for speculative purposes. Financial risks are reported to the Board at each meeting.


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(c) Interest rate risk exposures

The company’s exposure to interest rate risk and the effective weighted average interest rate for classes of financial assets and financial liabilities is set out above. There is no interest rate risk associated with loans as all borrowings are made at either fixed rates of interest from Treasury Corporation Victoria or interest free from the Department of State Development, Business and Innovation. The following sensitivity analysis has been determined on the exposure to variable interest rates at the reporting date. If variable interest rates had been 50 basis points higher or lower and all other variables were held constant, the company’s deficit would decrease by $107,463 (2012-2013: $101,378) and increase by $107,547 (2012-2013: $101,456) respectively. This is mainly attributable to the company’s return on investments held in the form of cash assets.

(d) Foreign currency exposure The company has no exposure to foreign currency risk as at 30 June 2014 and has insignificant risk of exposure in the course of conducting its operations.

(e) Liquidity risk exposure The company has no significant exposure to liquidity risk. The table above details the company’s remaining contractual maturity for its financial liabilities. The tables have been prepared based on the undiscounted cash flows of financial liabilities based on the earliest date on which the company can be required to pay.

(f) Net fair values of financial assets and liabilities The fair values and net fair values of financial instrument assets and liabilities are determined as follows: • Level 1 – the fair value of financial instruments with standard terms and conditions and

traded in active liquid markets are determined with reference to quoted market prices;

• Level 2 – the fair value is determined using inputs other than quoted prices that are observable for the financial asset or liability, either directly or indirectly; and

• Level 3 – the fair value is determined in accordance with generally accepted pricing models based on discounted cash flow analysis using unobservable market inputs.

Fed Square Pty Ltd considers that the carrying amount of financial instrument assets and liabilities recorded in the financial statements to be a fair approximation of their fair values, because of the short-term nature of the financial instruments and the expectation that they will be paid in full. Valuation approach The carrying amounts of financial assets and financial liabilities on the Balance sheet approximate fair value. All financial assets and financial liabilities are level 1.


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19. REMUNERATION OF DIRECTORS

Income bands Total remuneration Base remuneration 2014 2013 2014 2013 No. No. No. No. $0 - $19,999 0 1 0 1 $20,000 - $29,999 3 3 3 3 $50,000 - $59,999 0 1 0 1 $60,000 - $69,999 1 0 1 0 Total number of directors 4 5 4 5 Total amount $138,989 $139,148 $138,989 $139,148

Directors’ income includes superannuation but not insurance premiums of $23,952 (2012-2013: $34,218) paid by the company in respect of Directors’ and Officers’ Liabilities.

20. EXECUTIVE REMUNERATION

Income bands Total remuneration Base remuneration 2014 2013 2014 2013 No. No. No. No. $120,000 - $129,999 - - 1 - $130,000 - $139,999 1 - 1 - $170,000 - $179,999 1 2 - 2 $180,000 - $189,999 2 - 2 - $200,000 - $209,999 - 1 - 1 $220,000 - $229,999 1 - 1 - $290,000 - $299,999 - - 1 $340,000 - $349,999 1 - - Total number of executives 5 4 5 4 Total annualised employee equivalent

4 4 4 4

Total amount $896,927 $910,178 $855,265 $864,676

21. RELATED PARTY DISCLOSURES (a) Names of Directors

The Directors of Fed Square Pty Ltd during the period and at 30 June 2014 unless otherwise stated were:

Ms Catherine Mary Walter (Chair) Ms Louise Eileen Staley Ms Kathleen Sarah Wilson Ms Laura Benton Casteel Anderson (appointed 23 September 2013)


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(b) Transactions with Directors and director-related entities

There were no transactions made with Directors (or Director related entities) except for payments made for performing the functions of Director - refer note 19 (2012-2013: Nil). As at the 30 June 2014 there exists no contingent or actual liabilities of Fed Square Pty Ltd for termination benefits under service agreements to Directors or persons who take part in the management of Fed Square Pty Ltd. No loans were made to Directors during the year (2012-2013: Nil).

(c) Other related parties All other transactions with related entities are at arm’s length. Fed Square Pty Ltd deals with a number of State Government departments in the course of conducting its operations.

22. CAPITAL COMMITMENTS

2014 2013 $ $ Plant and Equipment Payable not longer than one year 4,349,249 3,825,118 Other Commitments Payable not longer than one year - 1,830,254 Total commitments for expenditure (exclusive of GST) $4,349,249 $5,655,372

23. CONTINGENT LIABILITIES AND ASSETS

In the course of conducting its ordinary business, Fed Square Pty Ltd is at risk from claims arising from incidents occurring at Federation Square. These may take the form of public liability claims from people who are injured whilst visiting the site or legal claims from disputes with tenants or venue hirers. In the company’s opinion, the financial risk from such claims is low. There are no known contingent assets at balance date.

24. EX-GRATIA EXPENSES

2014 2013 $ $ Payment to university for architectural services 5,000 - and supplies provided by the university and students Total ex-gratia expenses (exclusive of GST) $5,000 -

(i) Includes ex-gratia expenses greater than or equal to $5,000 or those considered material in

nature (ii) These ex-gratia expenses have been recognised in the Comprehensive operating statement

under Administration expenses


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DIRECTORS’ DECLARATION The Directors declare that: (a) the financial statements and associated notes comply with the Accounting Standards, the Corporations

Regulations 2001 and other mandatory professional reporting requirements; (b) the financial statements and notes give a true and fair view of the company’s financial position as at 30

June 2014 and of its performance, as represented by the results of its operations and its cash flows, for the year ended 30 June 2014;

(c) in the Directors’ opinion:

(i) the financial statements and notes are in accordance with the Corporations Act 2001, and (ii) there are reasonable grounds to believe that the company will be able to pay its debts as and

when they become due and payable. (d) at the date of signing these statements the Directors are not aware of any circumstances that would

render any particulars included in these statements misleading or inaccurate. This statement is made in accordance with a resolution of the Directors. Melbourne 10th September 2014



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INDEPENDENT AUDITOR’S REPORT


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Fed Square Pty Ltd ACN 085 731 479 - Amazon S3 · Fed Square Pty Ltd ACN 085 731 479 5 Our 201417...

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