Mackay Sugar Co-operative Association Limited

Annual Report 1999-2000

Mackay Sugar

The Mackay Sugar Co-opera t i ve Association Limited, formed in 1988, is Queensland’s largestp r i vate company and produces more than 20 percent of Au s t ra l i a ’s raw sugar at its fourM a c k ay mills. Through a 25 percent interest in Sugar Au s t ralia Pty Ltd and the New Ze a l a n dSugar Company it is also a major participant in sugar refining and marketing in Au s t ralia andNew Ze a l a n d .

D i r e c t o r sG R (Graham) Davies, ChairmanC E (Eddie) Westcott, Deputy ChairmanT V (Tom) DeguaraI W (Ian) DonaldsonI L (Ian) Fra s e rW T (Bill) HobbsM F D (Malcolm) Pra t tB B W (Barry) SheedyM A (Albert) Vo l ke r

M a n a g e m e n tR J (Ron) Sw i n d e l l s

Chief Exe c u t i ve OfficerJ S (John) Po l l o c k ,

Manager FinanceP J (Peter) Gill

G e n e ral CounselD W (Doug) Neville

Manager Cane SupplyJ H (John) King

Manager Factory Opera t i o n sJ E (Jim) McLaughlin

Manager Technology & Planning

Notice of MeetingNotice is hereby given that the 13thAnnual General Meeting of the MackaySugar Co-opera t i ve AssociationLimited will be held in the MackayEntertainment Centre, Gordon Street,M a c k ay on Thursday 30th Nove m b e r2000, commencing at 9.00 a.m.

C o n t e n t sO ve r v i e w . . . . . . . . 1C h a i r m a n ’s Re p o r t . . . . . . . . 2Chief Exe c u t i ve Comment . . . . . . . . 2Sugar Manufacture . . . . . . . . 4Sugar Re f i n i n g . . . . . . . . 9S i x-year Pe r f o r m a n c e . . . . . . . . 1 0Directors’ Re p o r t . . . . . . . . 1 1Concise Financial Re p o r t . . . . . . . . 1 7Directors’ Statement . . . . . . . . 2 1Au d i t o r’s Re p o r t . . . . . . . . 2 2Notable Eve n t s . . . . . . . . 2 3G l o s s a r y . . . . . . . . 2 4

Corporate OfficePeak Downs Highway,Racecourse, via MackayPO Box 5720,M a c k ay Mail Centre,Queensland 4741Au s t ra l i a

Phone (07) 4953 8200Facsimile (07) 4953 8340

A u d i t o r sBennett Pa r t n e r s

Corporate SolicitorsMcCullough Ro b e r t s o nS B Wright, Wright & Condie

B a n k e r sNational Au s t ralia BankQueensland Treasury Corpora t i o nABN AMRO Au s t ralia LtdRabo Au s t ralia Ltd

Overview

Sugar Production• Cane Crop — 14.8 percent

Less-than-expected yields saw the 8 million tonnes cane inprospect deteriorate to an actual production of 6.628 milliontonnes (7.776 in 1998/99).

• Sugar Content — 11.4 percentReasonable growing conditions and a dry harvest saw sugarcontent improve to 13.50 CCS (12.12 in 1998/99).

• Sugar Production — 5.3 percentThe resulting sugar production was a disappointing 915 597tonnes IPS, which was some 51 000 tonnes less than in1998/99 and 161 000 tonnes less than Mackay Sugar’s1997/98 record production.

Financial Performance• Milling Revenue — 30.8 percent

The reduced sugar production combined with a $97.60 fall inthe sugar price to $254.50 and poor returns for molasses,resulted in a reduction of $107.1 million in sugar millingr e venue, from $347.2 million in 1998/99 to $240.1 million.

• Operating Loss — $7.1 millionDespite extensive cost cutting and other economies, thissubstantial reduction in revenue resulted in a profit reve r s a lof $26.24 million and the Association’s first operating losssince 1991/92 when poor sugar prices and droughtcombined to also severely reduce income.

Future Prospects• Further Loss Next Year

Although the world market sugar price has recentlyi m p r oved, the necessary forward selling of the currents e a s o n ’s production at very low prices will probably result ina final sugar price for the current season of approx i m a t e l y$255 per tonne IPS sugar. Indications are that this priceapplied to the approximately 4.7 million tonne current canecrop will reduce revenue to about $155 million, which couldresult in the Association suffering an estimated $31 millionloss for financial year 2000/01.

Annual Report 1999/00

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96/97 97/98 98/99 99/00 00/01

Cane Milled(Million Tonnes)

96/97 97/98 98/99 99/00 00/01

Sugar Produced(‘000 Tonnes IPS)

96/97 97/98 98/99 99/00 00/01

Average Sugar Price($/Tonne IPS)

96/97 97/98 98/99 99/00 00/01

Sugar Milling Revenue($ Million)

96/97 97/98 98/99 99/00 00/01

Operating Profit($ Million)

From the Chairman’s Desk

The establishment of a Mackay Sugar web siteover the next two years will enable somer e a r rangement of traditional field officer duties.

The increasing number of growers with computerand e-mail facilities will enable much of theinformation previously communicated to growersvia field officers to be available instantly with thisnew technology.

The structural change in the world sugar marke tmeans that prices are only likely to fluctuate inthe 6 to 12 cents per pound price range in thef u t u r e .

This changed price environment in which thesugar industry finds itself means that ourapproach to the business must be different.

The influence of Brazil on the world sugar marke tis almost singularly responsible for this.

The fact that their crop is down for the currentproduction year should not be taken as a signthat they have backed off.

S i m p l y, they have suffered the consequences ofdrought but they will bounce back with renewedv i g o u r.

With an improvement in sugar reve n u eindicated, the next twelve months offers theQueensland industry an opportunity to ‘draw abreath’ as it were.

This follows Bra z i l ’s deflationary influence on theworld sugar price during the past two ye a r swhen they harvested crops of 311.5 milliontonnes in 1999 following on from a record cropof 313.5 million tonnes in 1998.

The loss recorded by Mackay Sugarfor the year under review againemphasises the impact of a poorcrop on Mackay Sugar’s financials t a t e m e n t s .

It is obvious that Mackay Sugarneeds to be better insulated againstthe vagaries of crop, climate andp r i c e .

The Board of Mackay Sugar plans to achieve thiso b j e c t i ve by the continuation of cost reductionp r o g rams within the mills and giving closec o n s i d e ration to investments that wouldcontribute to a steady earnings stream forM a c k ay Sugar.

Both measures will help counteract the low- p r i c ec ycles in the raw sugar business.

The positioning of Mackay Sugar as one of thew o r l d ’s lowest cost raw sugar producers is aprimary goal of the Board.

The success of a Voluntary Redundancy and EarlyRetirement package offered to all Mackay Sugarpersonnel towards the end of the 2000 crushingseason will continue our reduction in costs.

Further reduction in operational personnel hadalready been achieved. An example of this is theintroduction of single shift supervision in ourfactories, now in place at three of the four sites.

The rapid development and uptake of newtechnology will offer further opera t i o n a lstreamlining opportunities both within thefactories and in our field opera t i o n s .

US President Harry Truman isreported to have remarked “Idon't give ‘em hell; I just tell thetruth and they think it’s hell”.

In a sense, these words capturethe situation that confronts theQueensland raw sugar industry atthe present moment.

For many years, we prided ourselves on ourinternational competitiveness and on being aworld leader in the production and marke t i n gof high quality raw sugar.

H o w e ve r, at the 2000 Au s t ralian SugarC o nvention, it was stated that our industryhad slipped from being a world market leaderand innovator to being a follower.

As well, a recent study commissioned by theSugar Research and Development Corpora t i o nr e -affirmed that Brazil is a very low cost sugarproducer and that a world price of eight tonine cents per pound would be sufficient toinduce Brazilians to plant more sugar cane.

And they can — B ra z i l ’s National Commissionof Agriculture recently reported that Bra z i l ' sfarmers could produce 400 million tonnes ofcane by 2005 given suitable market conditionsfor alcohol and sugar.

S o, our marketing and our production costsare under attack and one competitor is now adominant force in the world raw sugar market.

Of course, it’s not just about marketing andcosts. The regulatory framework in which anindustry operates also makes a difference.H o w e ve r, this is largely of academic interestonly to our industry because the vast majorityof our raw sugar is sold on the world marke t .

Well, what do we in Mackay Sugar do aboutthis situation? There is no need to panic butdoing nothing is not an option. As I stated inthe July edition of the Mackay SugarN e w s l e t t e r :

• we need to lower our cost of productionacross the whole value chain, from canegrowing and harvesting to milling and raw2

Chief Executive’s Comment

Chairman’s Report

3

It has given us a brief opportunity to implementsome of these operational changes and mostimportantly further reduce our costs.

Part of this process for Mackay Sugar means thatwe will simply not be undertaking all of the roleswe have in the past.

While this continuing cost cutting strategy by theBoard will take Mackay Sugar some of the wayt o wards securing the company ’s future it is notthe complete solution.

This is the reason why investment options mustalso be considered.

Restructuring of ED & F Man’s business hasmeant that their 25 percent share of our joint-venture refining business could becomeavailable. As indicated at our half-ye a r l ymeeting, if this were to occur Mackay Sugarwould look very closely at securing this share.

Reacting to the 2000 season crop failure, theBoard approved a Plant Loan scheme to assistshareholders in the massive task of replacing theQ124 va r i e ty of cane.

More than $6 million in loan funds have alreadybeen approved for distribution to shareholders toassist with the extra cash costs of planting. TheBoard subsequently approved an extension ofthe scheme for a further ye a r.

I indicated at the beginning of this comment thatreliable cane crops were vital to Mackay Sugar’sbusiness health. In an address to the Au s t ra l i a nSugar Convention in May this year I said that acrop of eight million tonnes with a sugar price of

$250 and an exchange rate of 64 cents wouldd e l i ver a break even outcome for Mackay Sugar.

I added that for business sustainability, a growthcomponent was needed and therefore theave rage annual throughput of our factoriesneeded to be moving towards three milliont o n n e s .

Taking into account the need for futureexpansion and some obvious geogra p h i c a lc o n s t raints in some areas, this ‘towards threemillion tonnes’ crop scenario per mill suggestedthat, in the long term, the Queensland industryis probably only capable of sustaining 17 or 18m i l l s .

The big challenge for Mackay Sugar, and in factthe entire sugar industry is to accept thatchanges of this magnitude have to be made toremain viable and that the time for change isn o w !

sugar transport. In order to compete withB razil, we need to question why and howwe do things and then develop moreefficient ways to do them.

• we need to increase revenue both byexpanding our core sugar business and bypursuing va l u e -adding opportunities.

An important pre-cursor to this process is thatwe need “ownership” of the need for changefrom all the stakeholders in our business.

Our objective has to be to position MackaySugar and the Mackay sugar industry as oneof the world’s lowest cost sustainable sugarproducers. We also have to play our part inhelping the Queensland industry to regain itsmantle of being the world’s best raw sugari n d u s t r y.

We will need to invest in research andd e velopment and technology that will help toi m p r ove our sugar quality and reduce ourcosts. We will need to invest to improve theq u a n t i ty and quality of our earnings streams.

We will need to invest to continually improvethe skill levels of our most valuable resource,the people who are employed by MackayS u g a r.

This type of change will become a normal partof our daily business activities, so we mustalso develop the “soft” skills to properlymanage change. This might seem like a tallorder but the hard facts are that the worldd o e s n ’t owe us a living and that the world isgoing to change with or without us.

While the sugar industry of the future is goingto be the epitomy of “lean and mean”, it won’tbe “hell” if we accept the challenge that liesbefore us.

G raham Davies, Chairman.

Ron Swindells, Chief Exe c u t i ve .

Sugar Manufacture

Disappointing HarvestWith good growing conditions leading up to the 1999 harvest, it was estimated that almosteight million tonnes of cane would be available for processing during the season and, inanticipation of this, the season commenced on 7 June — the earliest start of a cane harve s tin Mackay for over twenty ye a r s .

H o w e ve r, very shortly after operations commenced, it became apparent that the cane stoodover from the previous season — almost one million tonnes — was of very poor quality andthat the growth of much of the remainder had been affected by a combination of w a t e rlogging, soil compaction, pests and diseases.

C o n s e q u e n t l y, only 6.628 million tonnes of cane was processed by Mackay Sugar’s fourfactories during the 19.3 week season which concluded on 21 October. The ave rage caneyield of 81.1 tonnes per hectare was 24.1 percent down on that of the previous year and isa clear indication of just how much the 1999 crop was impeded by the wet weather/soilcompaction effects of the 1998 harve s t .

Sugar ProductionDespite the poor quality of the standover cane, good weather throughout the season resultedin a general improvement in the sugar content of the whole crop to 13.5 CCS, but still belowthe 10-year ave rage of 13.9. The 1999 result was still a most welcome 11.4 percenti m p r ovement on the 12.1 CCS of 1998, one of the lowest on record.

This improved sugar content resulted in 915 597 tonnes of IPS sugar being produced whichwas some 51 000 less than the previous season and 161 000 less than the record productionin the 1997 season. The disappointing sugar yield per hectare of only 10.95 tonnes was 15.5percent less than in 1998 and more than 26 percent down on the 14.86 tonnes sugar perhectare record yield achieved during the 1994 harve s t .

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S e a s o n 1 9 9 9 1 9 9 8 C h a n g e(Financial Year) ( 1 9 9 9 - 0 0 ) ( 1 9 9 8 - 9 9 )

P r o d u c t i o nTonnes cane milled 6 627 533 7 776 198 - 1 4 . 8 %Sugar content - CCS ( i ) 1 3 . 5 0 1 2 . 1 2 + 1 1 . 4 %Tonnes sugar produced - IPS ( i i ) 915 597 967 176 - 5 . 3 %

Field PerformanceCane production area (ha) ( i i i ) 97 301 96 858 + 0 . 5 %Cane area harvested ( h a ) 81 683 72 728 + 1 2 . 3 %Tonnes cane/ha 8 1 . 1 4 1 0 6 . 9 2 - 2 4 . 1 %Tonnes sugar/ha ( i v ) 1 0 . 9 5 1 2 . 9 6 - 1 5 . 5 %% Crop harvested green 8 5 . 6 9 8 8 . 4 0 - 3 . 1 %

Factory PerformanceMilling ra t e (tonnes cane/hr) 2 281 2 396 - 4 . 8 %Milling loss - in bagasse ( v ) 4 . 0 1 3 . 8 5 + 4 . 2 %(% sugar) - in mud ( v i ) 0 . 5 5 0 . 5 9 - 6 . 8 %

- in molasses ( v i i ) 7 . 1 0 7 . 3 8 - 3 . 8 %Time loss - cane supply stops 2 5 8 0 0 - 9 6 . 9 %( h o u r s ) - factory stops 1 9 2 1 6 1 + 1 9 . 3 %

- industrial stops 5 7 0

Operational Performance

(i) CCS (Commercial Cane Sugar) is a measure of the percentage of cane sugar recoverable as pure sugar.(ii) IPS (International Pol Scale) is a measure of the commercial value of raw sugar.(iii) Cane Production Area (Assignment) is the particular area within a grower’s land description from which he is entitled to supply

cane to a mill.(iv) Sugar Yield expressed as tonnes CCS.(v) Bagasse is the residue remaining after the extraction of juice in one or more mills in a sugar mill.(vi) Mud is the residue discharged from mud filters after clarification of cane juice.(vii) Molasses is a by-product of the sugar milling and refining processes. It is a brown viscous syrup and is used for stockfeed and

fermentation purposes.

Sugar Manufacture

Crushing Rate & Lost TimeThe Mackay Sugar crushing rate of 2 281 tonnes cane per hour was almost five percentdown on the record 2 396 tonnes per hour achieved during the 1998 season. The poorq u a l i ty of the standover cane was the primary contributor to this loss in crushing ra t ethrough the fouling of process heating equipment and the slowing down of thecrystallization process.

Although seve ral days were lost at each factory through industrial stoppages, a pleasingfeature of the season was the very substantial reduction in the time lost through lackof cane supply to a little more than a day at each location. Of course this was the directresult of the exceptional harvest weather experienced throughout the season.

While the ‘factory stops’ ave raged eight days, eleven days lost at Farleigh Mill late inthe season through the shredder gearbox failure spoiled an otherwise good ye a r.Racecourse Mill recorded the lowest planned and unplanned lost time of 5.05 percent,while Marian Mill’s 6.22 percent performance was its best since continuous crushingo p e rations commenced in 1991.

Factory EfficiencyThe variable fibre resulting from the mixed quality of the cane supply made milling controlvery difficult. This factor resulted in a reduction in the ave rage milling efficiency reported bythe four factories with sugar lost in bagasse increasing by 4.2 percent over that for 1998.

G i ven the drier harvest conditions during the season, the sugar lost in mud improved byalmost seven percent. Howeve r, an internaltechnical audit of the mud filter stations at the fourfactories identified a number of plant ando p e rational inefficiencies. These have beencorrected and this should lead to improve dperformance under all conditions.

M o l a s s e sA direct consequence of the processing of the lowp u r i ty standover cane was an increase in molassesproduction by some three percent to 210 0 0 0tonnes.

Of this production, 78 500 tonnes was exportedthrough Au s t ralian Molasses Trading, while thebalance was sold on contract to CSR DistilleriesSarina and to Port Curtis Dairy Ltd suppliers, andas spot sales to shareholders, graziers and othere n d - u s e r s .

Sugar QualityThe 1999 season was the second year of the Queensland Sugar Corpora t i o n ’s (nowQueensland Sugar Ltd) enhanced sugar quality program which increased discounts for poorq u a l i ty sugar and pays premiums for high quality sugar.

Despite the difficult ye a r, Mackay Sugar’s sugar quality performance continued to improvewith 56.6 percent of Pleystowe production being of premium quality. Howeve r, high dextra nl e vels associated with poor quality standover cane, particularly at Farleigh and Marian Millsimpacted on the ove rall quality performance at those factories.

1999 Season ‘Positives’While the 1999 harvest season was disappointing in many respects, the difficult year alsoproduced a number of ‘positives’ for the Association.

For example, the centralised management of the cane supply function established last ye a ras part of Mackay Sugar’s management restructure, proved invaluable during the lengthyshredder breakdown at Farleigh towards the end of the season. The new integrated systemenabled traffic and field staff from all factories to re-organise cane supply to minimise timelost both in the field and in the factory with some 70 000 tonnes of Farleigh cane beingredirected to other factories over a ten-day period. 5

Senior day analyst Melita Sleep at the can fibre machine in the Racecourselaboratory. More than 400 analyses of both fibre and dry matter have beencarried out at Racecourse this season as part of the calibration and validationwork on NIR equipment installed this year.

95/96 96/97 97/98 98/99 99/00

Green Cane Harvest(% of Crop)

The proportion of caneharvested green fell as growersreverted to burning to assistwith the harvesting of theheavily lodged standover crop.

Sugar Manufacture

(1999 Season ‘Positives’ cont.)

A l s o, in the very tight financial situation prevailing, the Factory Operations Group — a n o t h e rproduct of the management restructure — was able to focus on and prioritise the capital andmaintenance expenditure programs that provided best returns to the Association as a whole,rather than to individual factories.

While far from exhaustive of the season’s ‘positive s ’, these simple examples again serve toi l l u s t rate the benefits that can flow from adopting a single mill area approach with thef l e x i b i l i ty to freely transfer cane between factories and remain operational during wetweather and/or breakdown periods.

Future DevelopmentsThe immediate aim is for Mackay Sugar to operate along the lines of a ‘single factory withf i ve milling trains’ rather than as four separate milling entities, and some further stepst o wards this end taken during the current year include:

• the establishment of ‘Cane Pay Central’ at Pleystowe Mill;

• the further co-ordination and re-organisation of cane supply to best utilise millingc a p a c i ty, i.e. ensure that factories neither run out of cane nor have ove r- s u p p l y, thusreducing cut-to-crush delays;

• the better utilisation of resources such as bin fleets, locomotives, rail maintenanceequipment etc., with the focus being from a company perspective rather than that of anindividual factory;

• the transfer of bagasse between factories to reduce Mackay Sugar’s expenditure onsupplementary fuel.

Cost Savings EssentialWith most pundits predicting that sugar industriesw o r l d -wide will need to ‘tighten their belts’ to remainviable in the longer term, the Association will continueto seek cost savings through optimum use of its canet ransport and sugar milling resources.

O p e rational areas that offer potential savings includethe road/rail cane transfer station at North Eton which,during the 2000 season, will transfer about 70 0 0 0tonnes of road-transport cane grown in the BlueMountain and Nebo areas to Mackay Sugar’s canera i l way system. In its present form this station couldhandle up to 430 000 tonnes cane from this new canegrowing area. If this area is developed throughh o r i zontal expansion, the increased throughput wouldgreatly assist the Association to further offset fixe dprocessing costs.

Another move that could benefit both Mackay Sugar andits shareholders is the consolidation of the four separa t eCane Production Area registers into a single mill area

register for cane supply, analysis and payment purposes. While this cost- s aving conceptp r oved to be unachievable for the 2000 season, there was sufficient support from growersfor the Association to again pursue this change for 2001.

6

Bryan Bradshaw, process attendant at the Racecourse refinery involved inthe latter stages of construction work on the new DC Raw refining facilitythat was commissioned in February this year.

Sugar Manufacture

Planning AheadUnder the terms of the Sugar Industry Act 1999, four-member Negotiating Teams comprising two members eachappointed by the relevant Mill Suppliers Committee andm i l l o w n e r, are required to undertake specified tasks relativeto the future operations of the canegrowing area.

In view of the importance of these issues and to facilitate theo p e rations of these Negotiating Teams, joint MackayS u g a r / M a c k ay CA N E G R O W E R S working parties have beenestablished to:

• d e ve l o p, appraise and report on options the Mackay sugarindustry may adopt to increase cane production;

• d e velop the form of the Collective Cane Supply &Processing Agreement to apply for years 2001 through2 0 0 4 ;

• d e velop a Cane Quality Program for years 2001 through2004; and

• d e velop a Cane Analysis Program and appropriate reviewmechanisms to apply for years 2001 through 2004.

While all of these tasks are important to the future well-beingand profitability of the Association and its shareholders, thed e velopment of an expansion mechanism acceptable to allparties is doubly important because of the reduction in theunit cost of milling brought about by increased canet h r o u g h p u t .

The Association is currently working closely with MackayCA N E G R O W E R S on these tasks which are expected to befinalised late in November 2000.

The WorkforceM a c k ay Sugar and its people experienced a difficult year in the face of global sugaroversupply and falling prices.

The ability of the Company to successfully face the future challenges in the global sugarindustry depends to a large extent on management and employees working together as at e a m .

To this end, the achievement of our stated goals for the Mackay Sugar workplace and ourpeople continues to be a high priority.

These goals include:

• P r oviding a safe and healthy workplace;

• Maximising productivity through multi-skilling, effective work practices and people management;

• H aving a skilled and satisfied workforce;a n d

• H aving a work environment free fromd i s c r i m i n a t i o n .

Increased emphasis is being placed oncommunication with our workforce bysupervisors at the ‘shop floor’ level and bym a n a g e m e n t .

7

Marian cane railway engineering employee Keith Green carried theOlympic flame into Mackay. Keith won his place in the relay after arandom ballot of 427 members of Mackay Sugar’s EmployeeSuperannuation Fund.

Mackay Sugar personnel with 35 years’ service are inducted annually into the35-year club. Pictured at this year’s gathering are from left: Harold Smith,David Jensen, Jim McNichol, Viv Vincent, Kevin Sehl, Bob Duval, Norm Geeand Kevin Hoey.

Sugar Manufacture

(The Workforce cont.)

This is targeted at assisting all personnel to obtain a better understanding of the Companyand the market in which it opera t e s .

In pursuit of reduced costs, maintenance expenditure levels were reduced and the numberof operating positions reviewed.

Training continued to be directed towards the enhancement of employee skills in theworkplace to assist our cost reduction stra t e g y.

M a c k ay Sugar’s policy of training apprentices has continued with 68 full time apprenticescurrently employed including two adult apprentices.

Workplace Health & SafetyDuring the year under review Mackay Sugar’s lost time injury frequency rate (LTIFR) fellm a r g i n a l l y. Howeve r, the seve r i ty rate decreased by some 40 percent. Encoura g i n gperformance over the last six months of the financial year has resulted in the injuryfrequency rates trending significantly downwards.

Further improvement in safety performance is still the goal. Action plans based oncompliance and internal audits conducted by the Association in the latter part of 1999h ave resulted in sections of the business achieving record periods of consecutivel o s t-t i m e-i n j u r y-free day s .

Emphasis will continue on the recently reinforced hazard reduction program and theapplication of risk management principles for all areas of opera t i o n .

I m p r ovement of safety management has continued across all Mackay Sugar sites byimplementing common fully-documented safe work systems. Employee training andparticipation will continue through the structured workgroup meeting process and the safeb e h aviour invo l vement progra m .

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Members of the Farleigh Mill Safety Committee (from left) Joe Bezzina, Claude Pozzetti, Andrew Perna, Mike Harpley and Paul Bonney show off the ChiefExecutive’s Award for Best Safety Performance for the year. Farleigh improved from last position in 1999 to take this sought-after award for the firsttime. Improvement of safety management continues across all Mackay Sugar sites with the implementation this year of common fully-documented safework systems.

95/96 96/97 97/98 98/99 99/00

Injury Frequency Rate(Lost time injuries permillion hours worked)

This improvement in the losttime injury frequency rate(LTIFR) for 1999/00 does nottruly reflect the 64 percentdownward trend of the last halfof the year.

Sugar Refining

P r o f i tThe strong profit improvement in the second year of the Sugar Au s t ralia/New Zealand Sugarjoint ventures totally vindicates the decision to merge Mackay Refined Sugars and CSRrefining interests. Results are ahead of pre-merger projections and making a significantcontribution to Mackay Sugar’s 1999/00 bottom line.

Domestic MarketsRefining sales volumes and profits grew in both Au s t ralia and New Zealand reflecting highervolume and margin on sales to food and beve rage customers, healthy margins on retail sales,and improved productivity in refining and packaging. White sugar sales exceeded 825 0 0 0t o n n e s .

With eight of the top ten food and beve rage customers now being multi-nationals opera t i n gacross broader geographic regions, Sugar Au s t ralia and New Zealand Sugar are urgentlybuilding appropriate business, sales and distribution systems to service these increasinglydemanding and sophisticated regional customers.

A growing consumer interest in the quality of the food they eat has resulted in thesecustomers requiring sugar of the highest quality standards. These demands must be met tomaintain and/or improve market share.

BIBO ExportsA world-wide surplus of white sugar and low sugar prices made the bulk white sugar exportm a r ket highly competitive. Export sales via the BIBO refined sugar ship ‘MV Pioneer’ weredown in both volume and margin. However a further five export shipments of bulk whitesugar during the year increased total export sales for the joint venture to over 200 000t o n n e s .

New FacilitiesDuring the year retail packaging facilities were commissioned at Mackay Port to supply retailproduct to the Queensland and export markets. In addition, a food-grade raw sugar facilitycommenced production in February at Racecourse Re f i n e r y.

In New Zealand the retail packaging and warehouse automation projects have beencompleted, and blending facilities have been installed to support the growing sugar- b l e n dbusiness — particularly the export of sugar/milk powder blends to Japan.

Looking to the FutureWith the Sugar Au s t ralia and New Zealand joint ventures proving to be cost effective andh aving established a sound reputation with customers, focus in the short term will be onfurther streamlining operations, development of employee skills and the identification andd e velopment of new business opportunities.

Despite there being concern about, for example, the lack of growth in demand for sugar, thea d verse impact of higher raw sugar prices and market globalisation, the Board andmanagement believe the Au s t ralia/New Zealand refining businesses are well placed to meetthese and other challenges and are confident they will continue to return quality earnings.

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Twenty-five kilogram bags of raw sugar travel along the new bagging line at Sugar Australia’s Mackay Port facility. SinceFebruary the food-grade raw sugar has been produced at the Racecourse refinery.

Six-year Financial Performance

10Following one of the longest wet seasons on record Teemburra Dam overflowed the spillway in the early part of the year.Mackay Sugar contributed more than $11 million to the construction of the dam that was completed in 1996. 290 MackaySugar shareholders are able to access irrigation water made available from the dam’s storage.

*Note: The financial comparatives for the years from 1 July 1994 to 30 June 1998 include the results of the refinery joint ventures.Due to a change in accounting requirements the refinery joint venture financial results have been excluded from a numberof the comparatives for the years ended 30 June 1999 and 30 June 2000.

(i) CCS/Commercial Cane Sugar is the percentage of sugar canerecoverable as raw sugar.

(ii) IPS: International Pol Scale, a measure of the commercialvalue of raw sugar.

(iii) Operating profit before additional price paid for cane and Income Tax.

Production *1999/00 *1998/99 1997/98 1996/97 1995/96 1994/95Tonnes cane milled 6 627 533 7 776 198 7 443 172 7 511 435 6 953 836 6 936 775Sugar content - CCS (i) 13.50 12.12 14.28 13.85 13.52 14.59Tonnes sugar produced - IPS (ii) 915 597 967 167 1 076 672 1 068 287 962 859 1 046 358

Profit & Loss ($’000)Operating revenue 253 708 355 229 453 578 448 906 444 454 466 397Net interest 4 255 3 954 4 613 2 170 685 1 874Depreciation 16 479 17 740 13 869 12 570 12 002 11 490Operating profit (iii) (7 104) 19 132 22 571 21 121 25 003 53 839Retained earnings 195 176 202 280 193 148 185 583 179 278 172 435

Balance Sheet ($’000)Current assets 46 791 73 748 108 139 87 358 94 734 86 135Non-current assets 440 061 448 935 435 750 314 100 286 954 289 350Total assets 486 852 522 683 543 889 401 458 381 688 375 485Current liabilities 69 460 112 057 121 272 97 525 86 710 94 676Non-current liabilities 52 590 38 719 59 842 32 339 29 689 22 363Total liabilities 122 050 150 776 181 114 129 864 116 399 117 039Total members’ equity 364 802 371 907 362 775 271 594 265 289 258 446

Capital Expenditure ($’000)Expenditure 18 686 21 613 53 122 40 892 16 859 20 610

RatiosNet interest cover (times) (0.67) 5.84 5.89 10.73 37.50 29.73Return on members’ equity (1.95)% 5.14% 6.22% 7.78% 9.42% 20.83%Net debt : members’ equit y 20.74% 15.37% 20.91% 17.67% 9.91% 7.72%Current assets : current liabilities 0.67 0.66 0.89 0.90 1.09 0.91Members’ equity : total assets 0.75 0.71 0.67 0.68 0.70 0.69Total assets : total liabilities 3.99 3.47 3.00 3.09 3.28 3.21

Directors’ Report

The Directors present their report and the financial statements of the Mackay SugarC o - o p e ra t i ve Association Limited for the year ended 30 June 2000.

In terms of the Cooperatives Act 1997 (Qld), the Association has complied with therequirements of the Corporations Law in the presentation of this report and the associatedfinancial statements.

D i r e c t o r sThe names and profiles of Directors in office from 1 July 1999 to the date of this report follow.A record of Board Meeting attendances during the year under review is set out on page 12.

G R (Graham) Davies, ChairmanElected Director and Chairman since incorporation of Mackay Sugar Co-opera t i ve AssociationLtd in 1988. Cane and cattle producer with wide experience in sugar industry organisationalmatters. Chairman Mackay Sugar Manufacturers Association. Director of Sugar Au s t ralia PtyLtd, New Zealand Sugar Company Ltd, Queensland Sugar Ltd and Mackay Port Au t h o r i ty.

C E (Eddie) Westcott, Deputy ChairmanElected Director since incorporation and Deputy Chairman since 1992. Cane producer formore than 30 years with wide experience in co-opera t i ve sugar milling matters. Director ofC o - o p e ra t i ve Fe d e ration of Queensland. Member of Pioneer Valley Water Board.

T V (Tom) DeguaraElected Director since incorporation. Cane producer for some 40 years with wide experiencein co-opera t i ve sugar milling matters. Director of Rodney Industries and Member of EtonIrrigation Area Water Advisory Committee.

I W (Ian) Donaldson FICAIndependent Director since incorporation. Chairman of Hall Chadwick Queensland (CharteredAccountants), First Mortgage Corp Aust Ltd, Brooklyn Park Olive Groves Ltd, Au s t ralian Green& Gold Ltd, City Pacific Ltd, the Leukaemia Foundation of Au s t ralia, and a Director of manyother companies.

I L (Ian) Fraser FCPAIndependent Director appointed in February 1999. Recently appointed Chief Exe c u t i ve Officerof Arthur Yates & Co. Varied sugar and general industry background including CEO PioneerSugar Mills Ltd, Clyde Industries Ltd, and Managing Director TNT Au s t ralia Pty Ltd. Directorof Sugar Research and Development Corporation, Environmental Re c overy Services Ltd andMedibank Private Ltd.

W T (Bill) HobbsElected Director since 1992. Cane producer for nearly 40 years with wide experience in sugarindustry organisational matters. Chairman Upper Pioneer River Improvement Trust andmember of the Integrated Water Catchment Committee for the Pioneer Va l l e y.

M F D (Malcolm) PrattElected Director since 1991. Cane producer for some 35 years with broad experience in sugarindustry and regional water resources organisational matters. Member of Mackay Re g i o n a lWater Resources Committee.

B B (Barry) SheedyElected Director since 1996. Varied sugar industry experience including management of theFarleigh Co-opera t i ve Sugar Milling Association Ltd and Manager Finance & Administration ofM a c k ay Sugar. Millers’ representative on the Mackay Cane Protection and Productivity Boardand a Mackay City Councillor.

M A (Albert) VolkerElected Director since incorporation. Cane producer for nearly 35 years with wide experiencein co-opera t i ve sugar milling matters. Millers’ representative on and Deputy Chairman of theM a c k ay Cane Protection and Productivity Board. Member Mackay Regional Water Re s o u r c e sC o m m i t t e e .

11

Primary Activities of the AssociationThe primary activities of the co-opera t i ve are:

( a ) to acquire, transport and process sugar cane to produce raw sugar, raw sugar productsand by-products and to manufacture, transport, store, market and distribute thoseproducts and by- p r o d u c t s ;

( b ) to manufacture, transport, store, market and distribute refined sugar, syrups, rawsugar for human consumption and similar products and by-products; and

( c ) to produce, market and distribute electricity and other va l u e -added commoditiesthrough the use of products and by-products arising from the activities in (a) and/or(b) above .

There were no significant changes in the nature of the Association’s primary activities duringthe financial ye a r.

Review of OperationsA detailed review of the operations of the Association during the year under review, and theresults of these operations, are included in the Sugar Manufacture section of this report(pages 4-8).

Despite early predictions that the cane crop would be eight million tonnes, the processing ofalmost a million tonnes of cane stood-over from the wet 1998 harvest and the effect ofs e vere soil compaction on the development of that crop, resulted in only 6.628 million tonnescane being processed.

Although stand-over cane was of very poor quality, good weather throughout the season sawa general improvement in the sugar content of the whole crop to 13.50 CCS (12.12 in1998/99). The factories performed well considering the poor quality of the stand-over caneand produced 915 597 tonnes IPS sugar (967 167 in 1998/99).

Operating ResultThe reduction in cane harvested and sugar output contributed to a decline in opera t i n gr e venue to $253.7 million ($355.2 million in 1998/99). A profit turnaround of $26.24 millionresulted in a $7.104 million loss for the ye a r, the first for the Association since 1991/92 whenpoor sugar prices and drought combined to similarly reduce income.

Over Award PaymentsBecause of the $7.1 million operating loss no over award payments were approved for the1999 season.

Changes in State of AffairsThere was no significant change in the state of affairs of the Association other than thoseadvised in other sections of this report to shareholders, or in the accounts or in the notest h e r e t o.

After Balance Date EventsIn the opinion of Directors, no matteror circumstance other than thefinancial impact of the vastly reducedcane crop referred to in othersections of this report, has arisen inthe interval between the end of thefinancial year and the date of thisreport which has significantlyaffected, or may significantly affect,the operation of the Association, theresults of those operations, or thestate of affairs of the Association insubsequent financial ye a r s .

Directors’ Report

12

Regular Meetings Special MeetingsDirector

Held Attended Held Attended

G R Davies 12 10 4 3

C E Westcott 12 11 4 4

T V Deguara 12 12 4 4

I W Donaldson 12 12 4 4

I L Fraser 12 10 4 4

W T Hobbs 12 12 4 3

M F D Pratt 12 12 4 4

B B W Sheedy 12 12 4 4

M A Volker 12 12 4 4

Board Meeting Attendance

Directors’ Report

Future DevelopmentsThe Board continues to explore ideas and projects to advance the Association. Howeve r, untila ny such idea becomes a firm commercial proposal, untimely and early disclosure couldresult in unreasonable prejudice to the Association.

Environmental IssuesM a c k ay Sugar is subject to environmental regulations under various State and Fe d e ral law sprimarily relating to emissions to air and discharges to water and land.

H aving been granted a single environmental authority (licence) for all of Mackay Sugar’ssites, the Association is currently fulfilling a request from the Environmental ProtectionAu t h o r i ty (EPA) for an environmental impact investigation into Mackay Sugar’s emissions anddischarges. Consultants are currently working with Association staff on these inve s t i g a t i o n s ,and a report is expected to be submitted to the EPA in November this ye a r.

In light of the substantial downturn in cane crop and sugar price and their impact on MackayS u g a r’s financial situation, the EPA’s three-year Environmental Management Plan (EMP) forthe boiler stacks at Farleigh, Marian and Pleystowe mills has been extended to five years. Aspart of this EMP the Association completed a developmental conversion of the dry dustcollectors to wet separators on one of Pleystowe’s boilers.

E nvironmental action plans for stormwater and waste management, flammable andcombustible goods storage, and environmental audits are in place. During the past year andas part of a continuing review of environmental issues likely to impact on Mackay Sugar,m a ny of these plans were reviewed and updated to meet changing standards. Also thecomputerised Integrated Environmental Management System (IEMS) was further deve l o p e dby adding environmental action plans to the database.

During the year under review, Mackay Sugar has complied with all relevant env i r o n m e n t a llegislation relating to emissions to air, and discharges to water and land.

13The Board of Directors of Mackay Sugar guides and monitors the business and affairs of the Co-operative on behalf of allshareholders. It meets eleven times during the year at approximately monthly intervals. Further meetings are added as andwhen necessary.

Directors’ Report

Corporate GovernanceThe Board of Directors of Mackay Sugar is responsible for the corporate governance of theAssociation and the following statement outlines the principal governance practices in placeduring the financial year under review.

(a) Board of DirectorsIn accordance with the rules of the Association the Board is comprised of nine non-exe c u t i veDirectors, seven of whom are elected by shareholders and two “. . . with special skills, whoseservices are considered to be of benefit to the Association . . .” appointed by the electedB o a r d .

Elected Directors serve on the Board for three years, with elections being held in eachc o n s e c u t i ve year of each three year period for the two directors, two directors, and threedirectors respectively who shall have been longest in office. Elections are conducted at eachAnnual General Meeting.

(b) Board ResponsibilitiesThe Board guides and monitors the business and affairs of Mackay Sugar on behalf of allshareholders ensuring it is run in a proper manner. It is responsible to shareholders for:

• the ove rall performance of Mackay Sugar and the charting of its direction and objective s ;

• d e veloping the strategies and policy guidelines to achieve these objective s ;

• monitoring key performance indicators of the business;

• maintaining a high standard for accountability for all activities of Mackay Sugar includingcompliance with laws and ethical behav i o u r ;

• ensuring that risks are identified and that appropriate risk management procedures arein place; and

• protecting shareholders' interests and making sure they are kept fully informed.

In fulfilling this role the Board oversees compliance with the requirements of the regulatorsand ensures that appropriate risk management and associated internal controls are in place.The Board may delegate authority to management, but not responsibility.

Current practice calls for the Board to meet eleven times during the year at approx i m a t e l ymonthly intervals. This may be varied by the Directors who can also add other meetings whendeemed necessary.

(c) Board CommitteesAlthough the Board generally operates as a whole across the range of its responsibilities,Directors also serve on one or more of the seven committees set up to support the Board inits work and to provide a more detailed focus for its governance responsibilities.

The role of these committees is to consider in advance or in more detail, matterssubsequently addressed by the whole Board.

14

Growers collecting cane plants from the Mackay Cane Protection & Productivity Board ‘Clean Cane Plot’ at Victoria Plains. Toencourage growers to accelerate the replacement of ‘Orange Rust’ infected Q124, Mackay Sugar has approved a plantingloan scheme that assists with the costs of extra planting by growers. The major features of the scheme are 4 percentinterest planting loans for disease-resistant cane, with repayments to be made in July 2002 and 2003.

Directors’ Report

The membership of these committees as at 30 June 2000 and a brief description of theirr e s p e c t i ve roles follows. Where appropriate the committees also have senior management asm e m b e r s .

• The Audit Committee is comprised of Messrs IW Donaldson, W T Hobbs, M F D Pratt and C EWestcott and assists the Board in fulfilling itsfinancial responsibilities relating to the genera laccounting practices of the Association. Thecommittee serves as an independent ando b j e c t i ve party to review the financialinformation presented by Mackay Sugar toshareholders, regulators and the general publicand determines the adequacy of theA s s o c i a t i o n ’s operating, accounting and auditc o n t r o l s .

• The Finance Committee establishes corpora t eg overnance of the Association’s financialfunctions not covered by the Audit Committee.With Messrs G R Davies and C E Westcott asDirector members, this committee reviewso p e rating and capital budgets prior tosubmission to the Board and monitors MackayS u g a r’s ove rall financial position regarding net debt, borrowing and interest rates. Long-term planning responsibilities include ensuring financial forecasts are consistent with theS t rategic Plan, and that sufficient funding is available to meet Association needs.

• The Compliance Committee which has Messrs T V Deguara, I L Fra s e r, B B Sheedy andM A Vo l ker as members has been established to help Mackay Sugar identify laws andregulations which apply to the Association, and to develop processes to ensurecompliance with these laws and regulations.

• The Corporate Structure Committee has Messrs T V Deguara, I W Donaldson, M F DP ratt and M A Vo l ker as members. This committee is charged with investigation of changeswhich would ensure that the structure of the Association remains appropriate to changingc i r c u m s t a n c e s .

• The Remuneration Committee, which has Messrs G R Davies and C E Westcott asmembers, reviews remuneration policies and procedures and establishes staff salaryp a c k a g e s .

• The Water Conservation Committee includes Messrs M F D Pratt, B B Sheedy and M AVo l ker as Director members and aims to increase supplies of affordable irrigation wa t e rfor the Mackay Sugar area.

• The Annual Report Committee comprises Messrs M F D Pratt, B B Sheedy and C EWestcott and is responsible for the production and legislative compliance of this report.

(d) Risk Management

In order to ensure that key business and financial risks which could affect Mackay Sugar aree f f e c t i vely managed, the Association has in place a management program for Mackay Sugar’speople, processes and property. A senior management working group advises the Board onall aspects of risk management.

(e) Management StructureThe management of the Association, its operations and administration, is delegated by theBoard to the Chief Exe c u t i ve, who is supported by senior exe c u t i ve staff.

This team operates within an agreed framework of strategic plans, budgets, targets,standards and policies approved by the Board which maintains appropriate services,procedures and internal mechanisms to ensure that management and employees actefficiently and in the best interests of shareholders.

15

Mackay Sugar shareholders collect allocations of clean plants from the MackayCane Protection and Productivity Board’s Victoria Plains plot. Senior productivityadvisor Mick McKenzie is discussing the newly-released Q190 variety withMirani grower John Hunn.

Directors’ Report

(f) Code of EthicsM a c k ay Sugar is committed to maintaining the highest ethical standards in all of itso p e rations. Directors and employees are expected to act with the utmost integrity ando b j e c t i v i ty to maintain the Association's reputation.

Indemnification of OfficersThe Association has paid premiums to insure Directors and Officers against liabilities for costsand expenses incurred by them in defending any legal proceedings arising out of theirconduct while acting for the Association, other than conduct involving a wilful breach of dutyin relation to the Association.

Rounding of AmountsThe Association has applied the relief available to it in Au s t ralian Securities Investment ClassOrder 98/100 and, accordingly, amounts in this report and associated financial statementsh ave been rounded to the nearest thousand dollars where appropriate.

G R Dav i e s C E We s t c o t tC h a i r m a n D e p u ty Chairman

Signed at Mackay on behalf of the Board this twenty-eighth day of September 2000.

16

Although one year later than planned, the new high-level bridge across Cattle Creek at Gargett was opened for traffic andcane railway operations in May. Mackay Sugar contributed more than $1 million to the construction of this bridge.

Concise Financial Report

Discussion & AnalysisThe financial statements and disclosures in the following concise financial report have beend e r i ved from the 2000 Financial Report of Mackay Sugar Co-opera t i ve Association Limited. Ac o py of the full financial report and auditor’s report will be sent to any member, free ofcharge, upon request. This discussion and analysis is provided to assist members tounderstand the concise financial report.

Profit & Loss StatementThe operating loss before income tax and additional price for cane for 1999/2000 was $7.1million. This was $26.24 million below the previous ye a r’s result.

A significant milling loss was incurred as a result of the collapse in sugar prices and adisappointing crop of only 6.628 million tonnes, down 14.8 percent on the previous ye a r.

The refining business continued its strong profit growth and is now fully recovered. Thisr e c overy was achieved more quickly than forecast and to a level of profit greater thananticipated when Mackay Refined Sugars and CSR Ltd merged their refining operations in1 9 9 8 .

R e v e n u eThe collapse in world sugar prices impacted severely on the price received for raw sugar. Theprice paid by the Queensland Sugar Corporation (now Queensland Sugar Ltd) for the 1999crop was $254.50, which was 27.7 percent lower than the ave rage price of $352.10 for theprevious season.

As a result of a smaller crop and lower sugar price, operating revenue was down $101.5million to $253.7 million. Due to changes in accounting standards, operating revenue nolonger includes Mackay Sugar’s 25 percent share in the Sugar Au s t ralia joint ve n t u r e .

C o s t sMill operating costs were significantly reduced. The reduction in crop and shortening ofseason length reduced the operating and maintenance costs during the crushing season. Theprevious season was also adversely affected by the wet 1998 crush and the resulting extracosts were not incurred in the 1999 season. In response to lower prices and crops,maintenance expenditure in the non crush was reduced.

Balance SheetThe balance sheet is significantly different from the published results of the previous year dueto changes to accounting standards which resulted in Sugar Au s t ralia no longer beingconsolidated into the balance sheet. Last ye a r’s figures have been adjusted to reflect the newr e q u i r e m e n t s .

Assets reduced by $35.8 million to $486.9 million, mainly due to a reduction in cash.Liabilities reduced by $28.7 million to $122.1 million primarily because of the payout of thebonus accrued in last ye a r’s accounts, and reduced borrowing.

Cash Flow Cash provided from operating activities decreased by $34.1 million to a deficit of $0.2 milliondue mainly to a decrease in profit. Capital expenditure reduced by $2.9 million to $18.7million. No borrowing for asset purchases was drawn down during the ye a r. The onlym ovement from financing activities was a $9.4 million reduction in Interest Bearing Deposits.The end result was that cash on hand reduced by $27.9 million to $23.0 million.

Net Debt increased by $18.5 million to $75.7 million. The ratio Net Debt : Members’ Equityincreased to 20.7 percent.

17

Concise Financial Report

Profit and Loss Statementfor the year ended 30 June 2000

2 0 0 0 1 9 9 9$ ' 0 0 0 $ ' 0 0 0

O p e rating profit (loss) before income taxand additional price for cane (see Note 2) (7 104) 19 132Less: additional price for cane - 10 000

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Operating Profit (Loss) before income tax (7 104) 9 132Income tax attributable to operating profit - -

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Operating profit (loss) after income taxand additional price for cane (7 104) 9 132

Retained earnings at the beginning of thefinancial ye a r 202 280 193 148

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Total available for appropriation 195 176 202 280- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

RETAINED EARNINGS at 30 June 2000 195 176 202 280- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

The accompanying notes form part of this concise financial report.

18

Concise Financial Report

Balance Sheetas at 30 June 2000

2 0 0 0 1 9 9 9$ ' 0 0 0 $ ' 0 0 0

A S S E T SCurrent AssetsC a s h 22 972 50 885Re c e i va b l e s 13 308 11 018I nve n t o r i e s 10 463 11 829O t h e r 4 8 1 6

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Total Current Assets 46 791 73 748- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Non-Current AssetsRe c e i va b l e s 3 7 6 7 5 0P r o p e r ty, plant and equipment 369 417 367 996I nve s t m e n t s 68 256 77 692I n t a n g i b l e s 2 012 2 497

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Total Non-Current Assets 440 061 448 935- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

TOTAL ASSETS 486 852 522 683- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

L I A B I L I T I E SCurrent LiabilitiesAccounts paya b l e 12 974 31 850B o r r o w i n g s 52 629 76 033P r ov i s i o n s 3 857 4 174

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Total Current Liabilities 69 460 112 057- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Non-Current LiabilitiesAccounts paya b l e 2 5 0 5 0 0B o r r o w i n g s 46 000 32 000P r ov i s i o n s 6 340 6 219

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Total Non-Current Liabilities 52 590 38 719- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

TOTAL LIABILITIES 122 050 150 776- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

NET ASSETS 364 802 371 907- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

MEMBERS' FUNDSShare capital 1 1Asset revaluation reserve 169 625 169 626Retained earnings 195 176 202 280

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

TOTAL MEMBERS' EQUITY 364 802 371 907- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

The accompanying notes form part of this concise financial report.

19

Concise Financial Report

Statement of Cashflowsfor the year ended 30 June 2000

2 0 0 0 1 9 9 9$ ' 0 0 0 $ ' 0 0 0I n f l o w s I n f l o w s

( O u t f l o w s ) ( O u t f l o w s )

Cash flow from operating activities

Receipts from sugar sales and other sales 238 127 353 903Payments to members for cane supplied (170 022) (218 880)Payments to suppliers and employe e s (84 575) (101 437)Distributions received from associated entities 19 546 3 518Interest receive d 2 534 3 909Other reve n u e 1 020 7 7 4Interest paid (6 789) (7 863)

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Net cash provided by operating activities (159) 33 924- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Cash flow from investing activities

Payments for property, plant and equipment (18 686) (21 613)Proceeds on sale of property, plant and equipment 3 3 6 2 8 7

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Net cash used in investing activities (18 350) (21 326)- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Cash flow from financing activities

Re p ayment of borrowings - (14 000)Increase (Decrease) in unsecured deposits (9 404) 7 3 2

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Net cash provided by financing activities (9 404) (13 268)- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Net increase (decrease) in cash held (27 913) ( 6 7 0 )Cash at beginning of ye a r 50 885 51 555

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Cash at end of year 22 972 50 885- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

The accompanying notes form part of this concise financial report.

20

Concise Financial Report

Notes to and forming part of the Concise Financial Report for the year ended 30 June 2000

Note 1: Basis of preparation of the Concise Financial Report

The concise financial report has been prepared in accordance with Accounting StandardA ASB1039. The financial statements, specific disclosures and other information included in theconcise financial report are derived from and are consistent with the full financial report ofM a c k ay Sugar Co-opera t i ve Association Limited. The concise financial report cannot be expectedto provide as detailed an understanding of the financial performance, financial position andfinancing and investing activities of the coopera t i ve as the full financial report. The accountingpolicies have been consistently applied and are consistent with the prior year except that SugarAu s t ralia has been equity accounted as required by AASB 1006 and not consolidated into thebalance sheet.

Note 2: R e v e n u e

O p e rating profit before income tax and additional price for cane is generated by thiso p e rating revenue:

2 0 0 0 1 9 9 9$ ’ 0 0 0 $ ’ 0 0 0

Operating RevenueS a l e s 240 044 347 100Interest received - other 2 534 3 909Share of associated companies operating profit 3 138 2 351Share of Joint Ventures operating profit 6 972 1 095Other reve n u e 1 020 7 7 4

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

253 708 355 229

Non-operating RevenueProceeds on sale of non-current assets 3 3 6 2 8 8

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

254 044 355 517- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Directors’ Declaration

In the opinion of the directors of Mackay Sugar Co-opera t i ve Association Limited:

( a ) The financial statements and notes are in accordance with the Cooperatives Act 1997, theC o o p e ra t i ves Regulation 1997 and the Rules of the Co-opera t i ve, including:

( i ) giving a true and fair view of the financial position of the Co-opera t i ve as at 30 June 2000 andof its performance, as represented by the results of its operations and cashflows, for the ye a rended on that date in accord with the basis of accounting described in Note 1; and

( i i ) complying with Accounting Standards including the applicable provisions of Chapter 2M.3 of theC o r p o rations Law; and

( b ) there are reasonable grounds to believe that the Co-opera t i ve will be able to pay its debts as andwhen they become due and paya b l e .

Dated this twenty-eighth day of September, 2000.

Signed in accordance with a resolution of the directors.

G R Dav i e s I W DonaldsonD i r e c t o r D i r e c t o r

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Auditor’s Report

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28 September, 2000

Independent Audit Report to the Members ofMackay Sugar Co-operative Association Limited

Scope

We have audited the financial report, being the Directors’ Declaration, Profit and Loss Statement, BalanceSheet, Statement of Cash Flows and Notes to and forming part of the Financial Statements of Mackay SugarCo-operative Association Ltd for the financial year ended 30 June 2000. The Association’s Directors areresponsible for the financial report. We have conducted an independent audit of this financial report in orderto express an opinion on it to the members of the Association.

Our audit has been conducted in accordance with Australian Auditing Standards to provide reasonableassurance that the financial report is free of material misstatement. Our procedures included examination,on a test basis, of evidence supporting the amounts and other disclosures in the financial report, and theevaluation of accounting policies and significant accounting estimates. These procedures have beenundertaken to form an opinion whether, in all material respects, the financial report is presented fairly inaccordance with Accounting Standards and other mandatory professional reporting requirements andstatutory requirements, so as to present a view which is consistent with our understanding of the Association’sfinancial position and performance as represented by the results of their operations and their cash flows.

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

Audit Opinion

In our opinion, the financial report of Mackay Sugar Co-operative Association Ltd is properly drawn up:( a ) so as to give a true and fair view of the Co-operative’s financial position as at 30 June 2000 and of their

financial performance for the financial year ended on that date;( b ) in accordance with the provisions of the Cooperatives Act 1997 and Cooperatives Regulation 1997

including applicable provisions of Chapter 2M.3 of the Corporations Law;( c ) in accordance with the Rules of the Co-operative; and( d ) in accordance with Accounting Standards and other mandatory professional reporting requirements.

BENNETT PARTNERS DARRYL CAMILLERIPartner

P a rt n e r s :D a rryl CamilleriDavid Wa t t sChris Sammut

Bennett Partn ersChartered Accountants

First Floor, 122 Wood Street P.O. Box 92, Mackay. 4740Phone: (07) 4951 1455 Fax: (07) 4951 4824

e-mail: enquiries@bennettpartners.com.au website: www. b e n n e t t p a r t n e r s . c o m . a u

Notable Events

The past year has been dominated by a series of wide reaching changes andd e velopments that have impacted on the Au s t ralian Sugar Industry and MackayS u g a r. Many of these have been outcomes of the Industry Review that tookplace in 1997, but some significant happenings commercially, both here andoverseas have also had wide reaching repercussions for the local industry orh ave the potential to impact in the future.

September 1999The Board of CSR announce their intention to separate the Company ’s sugar interests.

November 1999The Sugar Industry Act 1999 r e c e i ves Royal Assent; New localised decision makingp r ovided for in the Act sees Mackay Sugar and CA N E G R O W E R S negotiate their first CaneSupply Agreement. Terms of Reference are drawn up and working parties formed toprogress expansion arrangements, sugar quality agreements and cane analysismatters for the 2001 season.

November 1999The World Trade Organisation meets in Seattle; Au s t ralia is instrumental along withB razil in the formation of the Global Alliance for Sugar Trade Re f o r m .

December 1999Sugar Industry Regulations 1999 passed through Pa r l i a m e n t .

December 1999Primary Industry Bodies Reform Bill is tabled; When enacted the CA N E G R O W E R S

organisation loses its statutory right to collect a levy and becomes an organisationfunded on a voluntary basis - issues for Mackay Sugar included debate over whetherauthorities were needed to collect membership subscriptions on behalf of CA N E G R O W E R S.

June 2000Tate and Lyle sell Bundaberg Sugar to Belgian family company Finasucre.

June 2000Full implementation of raw sugar quality scheme for the Queensland sugar industry isannounced; Provided stringent quality parameters are met, sugar produced by MackaySugar has an opportunity to attract a five - d o l l a r- p e r-tonne premium. Fo l l o w i n gp r o t racted discussions with CA N E G R O W E R S a scheme that provides for some sharing ofa ny proceeds is implemented for the 2000 season.

July 2000Introduction of the GST; In terms of change and time allocated, perhaps the majorcommercial issue for Mackay Sugar during the past ye a r. Major changes to cane pay sand debtors/creditors commercial systems required to provide for the new tax.

August 2000Queensland Sugar Limited (QSL) is formed to replace the Queensland SugarC o r p o ration; The Board of the new company has a strong industry base including fourmiller members, four grower members, three independent Directors (one of whom isChairman) and a Managing Director (Mackay Sugar’s chairman of directors Gra h a mD avies is appointed a Director of the new body).

August 2000Sugar Terminals Limited (STL) which was registered in 1998 commences opera t i o n s .Bulk sugar terminal assets were transferred to STL on August 2. As part of the changegrowers and millers received a total of 360 million shares in the new entity — M a c k aySugar receives just over 26 million shares and shareholders receive a total ofa p p r oximately 52 million shares. The shares will be able to be traded on a closedm a r ket between those industry participants qualified to hold shares.

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Glossary

B a g a s s e

The residue after extraction of juices from cane in one or more mills in a sugar mill.

B I B O

BIBO is the bulk in/bulk or bag out transport and handling of white sugar by purpose-builtrefined sugar ships. The MV Pioneer is the only such carrier servicing the Au s t ralian sugari n d u s t r y.

C a n e

The raw material delivered to a sugar mill by a farmer for processing into raw sugar andm o l a s s e s .

Cane Production Area (Assignment)

A cane production area entitles a grower to enter a supply agreement with a particularmillowner for the supply of cane grown on a particular number of hectares situated withinthe boundaries of land of a particular description.

C C S

Commercial Cane Sugar or CCS is a measure of the percentage of sugar cane recove ra b l eas pure sugar. Each delivery of a farmer’s cane is sampled and analysed to determine itsCCS content.

Direct Consumption Raw Sugar/DC Raws

DC sugar is raw sugar produced to food grade standards for marketing direct toc u s t o m e r s .

IPS/International Pol Scale

IPS is a measure of the commercial value of raw sugar.

Lost Time Injury Frequency Rate (LTIFR)

The number of lost time injuries sustained for each one million manhours worke d .

M o l a s s e s

Molasses is a by-product of the sugar milling process. It is a brown viscous syrup and isused for stockfeed and fermentation purposes.

Mud/Mill Mud

Mud/mill mud is the residue discharged from the mud filters in a sugar mill after theclarification of cane juice.

P o l a r i s a t i o n / P o l

The sucrose content of sugar. Sugar of 98 degrees pol would contain about 98 percents u c r o s e .

Raw Sugar

Raw sugar is the straw coloured impure crystalline sugar produced by a sugar mill. Itusually contains 98-99 percent sucrose and is not considered fit for human consumption.

Refined Sugar/White Sugar

Refined or white sugar is produced by the further processing of raw sugar to food-gra d estandards and contains almost 100 percent sucrose. Refined sugar is the property of therefiner and is marketed direct to customers.

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Mackay Sugar Co-operative Association LimitedABN 12 057 463 671

Corporate OfficePeak Downs Highway,

Racecourse, via MackayPO Box 5720,

M a c k ay Mail Centre,Queensland. 4741 Au s t ra l i a

Phone (07) 4953 8200Facsimile (07) 4953 8340

Farleigh MillFarleigh/Miclere Road, Farleigh, via Mackay

PMB 2 Mackay, Queensland. 4740Phone (07) 4953 8400

Facsimile (07) 4953 8410

Marian MillEungella Road, Marian, via Mackay

Post Office Marian, Queensland. 4753Phone (07) 4953 8700

Facsimile (07) 4953 8790

Pleystowe MillEungella Road, Pleystowe, via Mackay

Post Office Pleystowe, Queensland. 4741Phone (07) 4953 8500

Facsimile (07) 4953 8504

Racecourse Mill & RefineryPeak Downs Highway, Racecourse, via Mackay

PO Box 5554, Mackay Mail Centre,Queensland. 4741

Phone (07) 4953 8300Facsimile (07) 4953 8350

Design/Edit: Jim Crane & Reg Price • Production: Clear Logic • Principal Photography: Daryl Wright & Mackay Sugar • Printing: Payne Print