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Review and Outlook FY11 5 6 10 12 14 16 18 20 22 24 26 28 30 32 33 34 35 38 40 42 44 46 KPMG International Chairman s Message Review and Outlook Corporate Citizenship Property & Demographics Australia China Practice Financial Services Government Climate Change & Sustainability Infrastructure Healthcare Energy & Natural Resources Private Enterprise Advisory Transactions & Restructuring Risk Consulting Management Consulting Audit Tax Governance and Board National Executive Committee Insights Contacts Review and Outlook FY11 3 Our Values WE LEAD BY EXAMPLE KPMG published our Transparency Report Audit Quality in Focus a first report of its kind from an accounting firm in Australia KPMG ranked the world s second most attractive employer behind Google (Universum) WE RESPECT THE INDIVIDUAL Employer of Choice for Women (Equal Opportunity in the Workplace Agency) Leading employer for lesbian gay bisexual and transgender people (Australian Workplace Equality Index) WE WORK TOGETHER Partnered with the University of Sydney China Studies Centre to create business intelligence reports for engaging with China Announced new mentorship program with Monash University to support students to commercialise ideas WE SEEK THE FACTS AND PROVIDE INSIGHT Published Australia & China Future Partnerships 2011 Published Delivering Australian Prosperity to 2020 KPMG announced Audit Firm of the Year CFO Dealbook Awards 2011 WE ARE OPEN AND HONEST IN OUR COMMUNICATION KPMG s Reconciliation Action Plan (refreshed this year) was the first by a major accounting firm to be endorsed by Reconciliation Australia WE ARE COMMITTED TO OUR COMMUNITIES AND THE ENVIRONMENT KPMG member firms exceeded our global emission reduction target 15 204 hours of honorary work undertaken by KPMG Australia people this year supporting 113 not for profit organisations . . . ABOVE ALL WE ACT WITH INTEGRITY. 2011 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ) a Swiss entity. All rights reserved. The KPMG name logo and cutting through complexity are registered trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. 4 Review and Outlook FY11 Taking Australia to the world Michael Andrew Chairman KPMG International. KPMG will now be the first of the Big 4 accounting firms to have its chairman headquartered outside Europe or the United States reflecting the fundamental shift in power wealth and population from the West to East. The move also demonstrates our agility and flexibility in responding to the needs of our clients and changing market conditions. Last year KPMG endorsed our global vision for the firm. Our global strategy is well suited to the changing times. It identifies seven growth priority areas including China government and infrastructure healthcare financial services management consulting international tax and high growth markets. These growth areas span sectors functions and geographies with a corresponding set of workstreams enabling the execution of our strategy. Together we believe execution of this strategy will provide a US 7 billion revenue benefit to the global network of firms. Already we have made great progress in implementing our strategy. In just one year we have set up global Centres of Excellence in areas such as Islamic finance China and Justice and Security. We ve made strategic acquisitions in management consulting such as EquaTerra (a global company with expertise in IT and In recent months I ve had the opportunity to meet with the CEOs and Chairs of some of our largest global clients. All are facing considerable challenges dealing with a rapidly changing and increasingly complex world. Changes in technology in regulation financial markets emerging markets demographics and an increased frequency of high risk or black swan events mean now more than ever our clients need an independent adviser to help them cut through complexity. It is for these reasons that our brand promise cutting through complexity resonates with every CEO and CFO I have talked with. Our clients need advice on how to mitigate their risk and execute their business plans in markets they might not be familiar with. We also aim to be the best firm to work with for our people. This means being an employer of choice of offering our people real and meaningful career opportunities through more streamlined global mobility diverse teams and a non-hierarchical firm of high performing people who work together with our clients. I am very proud of everything KPMG in Australia has achieved and know I leave it in great hands with Peter Nash and Geoff Wilson. The way our Asia Pacific region works together is the envy of the rest of the world. We are very well placed to work with our clients so we all capitalise on the opportunities in our region. I look forward to continuing my relationship with the Australian firm and watching its development from a new perspective. Review and Outlook FY11 5 2011 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ) a Swiss entity. All rights reserved. The KPMG name logo and cutting through complexity are registered trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. In June I was elected Global Chairman of KPMG relocating to Hong Kong in October to take up the appointment. It is an honour and privilege to serve a firm I am so passionate about and that has offered me so many wonderful opportunities. It is also a credit to the strength of the Australian firm and the respect it attracts globally. business process transformation) as well as the BDO practice in Brazil and PwC tax in India. Peter Nash CHAIRMAN Building the best We re in fast-changing and challenging times. The Australian economy has experienced robust demand for commodities and largescale investment in the resources sector. There s a growing gap between the resources and non-resources sectors of the economy. Both consumers and business are cautious. Severe weather events an extremely strong currency falling productivity muscular growth among our Asian trading partners and a resurgence of global financial market instability result in businesses and governments being faced with a myriad of new risks as well as new opportunities. As the year drew to a close worries about European and US sovereign creditworthiness dominated. A sentiment of uncertainty has been overshadowing a number of positives specific to Australia s economy a stable and sound banking system a healthy financial system terms of trade at an historic high a comparatively solid jobs market and a bright long-term outlook for our largest trading partner China. A strong financial performance FY11 year was a successful and strong one for KPMG with the firm exceeding our revenue forecast and maintaining profitability. KPMG Australia generated earnings of 1.064 billion for the 12 months to 30 June 2011 up 11.1 percent from the previous year. A number of critical and related factors drove the strong result global capability which allowed us to bring the best knowledge and experts from KPMG worldwide to our clients outperformance by our Advisory practice our targeted investment focus around Energy & Natural Resources Financial Services Health Infrastructure and Government and continued delivery on client service teamwork innovation and excellence. Highlights of our FY11 performance included RobustdemandforAdvisoryservices Our market-leading Advisory practice made a significant contribution to the firm s growth generating a 22.3 percent rise in revenue from the previous year. All three Advisory service 2011 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ) a Swiss entity. All rights reserved. The KPMG name logo and cutting through complexity are registered trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. 6 Review and Outlook FY11 Geoff Wilson CEO firm to work with groups Transactions & Restructuring Management Consulting Risk Consulting experienced growth despite a challenging environment for transactions. Revenuegrowthwasachievedacross Advisory TaxandAuditdivisions For the first time Advisory was our largest business in Australia contributing 44 percent to overall firm revenue Tax contributed 21 percent and Audit contributed 35 percent. China a priority We took a key strategic step of reinforcing our commitment to maximising business opportunities from China for our clients. China is a priority for KPMG globally and in Australia and we believe its importance to the global economy will only increase. Geoff has assumed stewardship of the firm s China Practice in Australia. KPMG s Global China Practice is a network of 41 China Practices worldwide outside of China and KPMG Australia is a top three China Practice across KPMG s international network. Clients turn to us precisely because we are able to help them capitalise on and realise the business opportunities arising from China s growth. Delivering more value to our clients A key catalyst for success was enhancement of the way we deliver value to our clients through what we term OneKPMG. As you ll see demonstrated by real examples in this review collaborations of our top industry market and technical experts globally regionally and within Australia are focused on delivering solutions to our clients. The creation of new innovative services is a fundamental part of what we do. In March we launched our Investment Consulting business filling a need for the provision of and support to superannuation funds with their direct investments into infrastructure real estate and private equity. Our Actuaries practice became fully integrated into KPMG further enhancing our value proposition to clients. 2011 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ) a Swiss entity. All rights reserved. The KPMG name logo and cutting through complexity are registered trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. Review and Outlook FY11 7 Peter Nash CHAIRMAN KPMG Australia FY11 Financial Results KPMG Australia exceeded its revenue forecast in 2010-11 and maintained profitability. The firm generated earnings of 1 064 billion for the 12 months to 30 June 2011 up 11.1 percent from the previous year. Critical Factors 2011 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ) a Swiss entity. All rights reserved. The KPMG name logo and cutting through complexity are registered trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. A number of critical and related factors drove the strong result global capability which allowed us to bring the best knowledge and experts from KPMG worldwide to our clients particular outperformance by our Advisory practice. All three Advisory service groups Risk Consulting Management Consulting Transactions & Restructuring experienced growth despite a challenging environment for transactions our targeted investment focus around Energy & Natural Resources Financial Services Health Infrastructure and Government a strong China focus for Australia our dedication to client service teamwork innovation and excellence. 2011 1 064m 2010 958m Advisory 386m y Advisor 473m Audit 374m 11.1% G GROWT 22.3% ROWTH Audit 377m Tax 198m H WTH 0.8% GRO Tax 214m ROWTH Report AuditQualityinFocus the first from a major accounting firm in Australia. This report articulates what audit quality means to us and includes real indicators of how our work can be measured. Publicly endorsed by the Institute of Chartered Accountants in Australia (ICAA) it sets a benchmark to openly discuss audit quality. The TransparencyReport was key to KPMG being recognised as Audit Firm of the Year in the CFO Dealbook Awards 2011. We invigorated discussion of the risks business and governments face to continued economic growth and national prosperity and identified potential solutions. Our report DeliveringAustralianProsperity to2020 brought together 12 of our leading industry experts to examine the way business and governments respond to challenges identify emerging opportunities and provide a way forward for our clients government and the Australian community. We made great strides towards improving the environmental performance of our business. 8.1% G Our new Transformation Services practice offers a holistic review of Finance IT and HR services for clients undergoing major business transformation. Our proprietary Top Down Estimating Model reviews an entire project including costs often overlooked at the beginning of an engagement. KPMG is the only major accounting firm to offer accredited Lean Business Improvement training with qualified experts delivering this in Australia while maximising customer value. Lean ensures that every process and part of a business offers value to the whole business. Clients already benefiting from this new service include large financial services organisations and government departments. Maintaining momentum through initiative and leadership During the course of the year we delivered on our promise to take a leadership role in meeting the challenges of the future for our business and our economy. In November we published our Transparency 8 Review and Outlook FY11 Geoff Wilson CEO Revenue Revenue growth was achieved across Advisory Tax and Audit divisions. For the first time Advisory was our largest business in Australia contributing 44 percent to overall firm revenue Tax contributed 21 percent and Audit contributed 35 percent. QR CODES These matrix barcodes contain encoded information such as text URL or other data. How to use them 1. Use a mobile device with an integrated camera of at least two megapixels. 5 AUDIT 3 % g Includin 389 GRA g Includin DUATES S TNER 395 PAR Our people Staff numbers grew by just over 10 percent during the year to 5 379 full time employees nationally including 395 partners and a strong intake of 389 graduates. Delivering Australian Prosperity to 2020 KPMG International achieved a 29 percent reduction in net emissions per full-time equivalent employee over the three-year period from its 2007 baseline of 25 percent. In Australia KPMG achieved a reduction of net emissions of 33 percent from its 2007 baseline. In addition at a global level KPMG has been ranked second (behind Google) for two consecutive years in Universum s 2011 index of The World s Most Attractive Employers . Universum a global talent consultant develops a global index of the top 50 most attractive employers and this year s rankings were based on polls of almost 83 000 business students from the world s top academic institutions in 12 economies. We believe that building a stronger focus on diversity and inclusion will hold part of the solution to the continued success of KPMG and are particularly focused on the advancement of women ethnicity and flexibility. During the year two women Liz Forsyth and Michelle Hinchliffe were appointed to the Board of KPMG Australia. These accomplished partners will further broaden debate and perspective for the firm. Earlier this year Geoff established KPMG s Diversity Leadership Board. Geoff chairs the board and has led a national series of roundtable discussions to further enrich the firm s diversity agenda. We have a focus on participation and acceleration of women to senior leadership roles. Other programs are directed at attracting and retaining a diverse community of people that reflect the needs of our clients and future clients and our ability to operate most effectively in Asia. KPMG was the first Big 4 firm to offer up to 18 weeks parental leave accessible regardless of gender. Our people our success At the heart of our firm s strategy is an aspiration to be the best firm to work with for our people and our clients. Both are vital to our business. We believe an inclusive environment that prioritises the recruitment development and Lean Methodology aims to maximise customer value throughout the whole supply chain while minimising waste. Lean creates more value for customers with fewer resources. Review and Outlook FY11 9 2011 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ) a Swiss entity. All rights reserved. The KPMG name logo and cutting through complexity are registered trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. VISORY AD 44% TAX 21% 5 P3O7E9S LYE EM 2. Download a QR reader application from one of the various app stores (dependent on your device). 3. Take a picture of the QR code using the app. 4. The QR reader will take you directly to the encoded data or website. For a QR code to work your phone must be connected to the internet. Peter Nash CHAIRMAN retention of the best people is the key to achieving our goal of being the best firm. The best professionals from the largest pool mean more ideas diverse opinions better client solutions and strong financial performance. Investing in the leaders of the future our graduates is paramount. This year we developed an online recruitment strategy actively using social media platforms such as Grad Connection LODE YouTube UniMail Facebook and blogs to attract and engage potential graduate recruits. Learning at KPMG forms part of our cycle of continuous improvement and is led by the KPMG Business School. During the year our people undertook over 20 000 hours of training. The Chartered Accountants Program operates in-house. Our people have dedicated tutors training materials facilitated training sessions practice exams and access to KPMG-only online resources. We are the only Big 4 firm to provide this level of support in-house and results show our people are consistently ahead of the average national pass rate. Corporate Citizenship We are particularly proud of our values based culture at KPMG. We share these values with many of our clients and they form an important part of our relationship with them. We use our expertise to tackle real world issues such as climate change greater access to education and Indigenous economic development. Our people contributed an estimated 10 million of honorary work during the year applying their skills and expertise through professional engagements secondments volunteering and mentoring across a range of community organisations. As the first major accounting firm to launch a ReconciliationActionPlan(RAP) we understand the importance of our leaders demonstrating their commitment to reconciliation while actively involving the whole firm. This year we reported on our RAP and strengthened our commitment to Indigenous communities through business leadership cultural awareness and Indigenous employment. We introduced new education scholarships conducted intensive cultural awareness training with our leadership signed significant business contracts with Indigenous suppliers worth almost 1 million and seconded more people to work in partnership with Indigenous businesses to address economic development. Global Green Initiative KPMG launched the Global Green Initiative (GGI) in 2008 to support our commitment to reduce our environmental impacts a global net emission reduction target of 25 percent per fulltime employee by 2010. More than 40 KPMG member firms representing 85 percent of full-time equivalent personnel actively participate in the program. Global emissions have reduced by 29 percent and Australian emissions by 33 percent during the year. With the success in surpassing the initial program targets the KPMG Global Board has approved a new ambition for Phase II of the GGI seeking a further 15 percent reduction in net emissions per full-time employee by 2015 using a 2010 baseline. To achieve this goal KPMG member firms will maintain their focus on building efficiency and sustainable procurement as well as leveraging the insight from KPMG Climate Change & Sustainability professionals. In Australia our Environmental Policy Statement reaffirms our commitment to the environment by increasinginvestmentinenergyefficiency and video conferencing to help reduce our emissions profile increasingresourcesfocusedonmanaging the firm s environmental response including strengthening our management systems and analytics continuingtopurchasecarbonoffsetsfor flight related emissions. 2011 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ) a Swiss entity. All rights reserved. The KPMG name logo and cutting through complexity are registered trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. It s a really complex and challenging world. If we can build a stronger focus on diversity I am confident that will hold part of the solution to the continued success of KPMG. Comments from Liz Forsyth who together with Michelle Hinchliffe are two senior women recently appointed to KPMG Australia s Board. 10 Review and Outlook FY11 Geoff Wilson CEO State-based community partners PROGRAM DAY BIG CITY CITY BIG HOPE FOR OPE FOR OFOF PROGRAM DAY BBQ BBQ NATIONALFOR FOR OAKTREE NATIONAL THE LORD LOR OAKTREE THE CHILDREN THE HILDREN THE RECYCLING WEEK MAYOR S RECYCLING WEEK MAYOR S FOUNDATION AUSTRALIA S FOUNDATION AUSTRALIA S JUVENILE JUVENILE DIABETESTREES CONSERVATION BIGGEST RED SHIELD DIABETESTREES CONSERVATION BIGGEST RED SHIE THE SMITH FAMILY THE SMITH FAMILY CLEAN CLEAN UP UP HEART HEART INDIGENOUS INDIGENOUS FOUNDATION MEN EMPLOYMENT AUSTRALIA BRISBANE S EMPLOYMENT AUSTRALIA UNDATION MEN NATIONAL NATIONAL BRISBANE S THE THE CORA CORA BARCLAY BARCLAY CENTRE CENTRE WALK TO WORK DAY FOR ST VINCENT GOLD DAY CHILDREN S FOR ST VINCENT GOLD COAST COAST DAY CHILDREN S DE PAUL SOCIETY CYCLE CHALLENGE RESEARCH DE PAUL SOCIETY CYCLE CHALLENGE RESEARCH THE THE INSTITUTE NT THUNDER NT THUNDER INSTITUTE TREE DAY TREE DAY HANDICAP HANDICAP PERSONS PERSONS WORLD WORLD OCEANS DAY OCEANS DAY ASSOCIATION ASSOCIATION WILSON HTM YOUTH YOUTH FOCUS FOCUS WILSON HTM RIDE TO CEO SLEEPOUT BRISBANE TO RIDE TO CEO SLEEPOUT BRISBANE TO WORK WORK MURDOCH MURDOCH ST JOHN ST JOHN OF GOD OF GOD FOUNDATION FOUNDATION HORIZON HOUSE HORIZON HOUSE PROJECT PROJECT TIWI COLLEGE TIWI COLLEGE AUTISM AUTISM NORTHERN NORTHERN TERRITORY TERRITORY PICNIC BY THE LAGOON FOR THE CEREBRAL PALSY ASSOCIATION PICNIC BY THE LAGOON FOR THE CEREBRAL PALSY ASSOCIATION WALK TO WORK DAY COMMUNITY TR COMMUNITY TRUST RESEARCH COMMUNITY RESEARCH COMMUNITY FOUNDATION VISION FOUNDATION VISION YOUTH YOUTH RIDE RIDE FOR FOR MORNING MORNING TEA TEA VOLUNTEERS SHINE FOR KIDS BUSINE VOLUNTEERS SHINE FOR KIDS BUSINESS APPE APPEAL CATHERINE HOUSE AUSTRALIA SYDNEY RELAY AUSTRALIA SYDNEY RELAY FOR LIFE FOR LIFE CHILDREN S CATHERINE HOUSE SPASTIC CHILDREN S CEREBRAL PALSY ALLIANCE ALLIANCE CEREBRAL PALSY SPASTIC CENTRES OF CENTRES OF SOUTH AUSTRALIA SOUTH AUSTRALIA HOSPITAL HOSPITAL TIME FOR KIDS VARIETY VARIETY CLUB CLUB FITTED OF SA OF SA FOR WORK WHITE LION HEART KIDS SA THE JOHNNY THE JOHNNY WARREN WARREN FOOTBALL FOOTBALL POLICE & COM POLICE & COMMUNITY FOUNDATION FOUNDATION YOUTH CLUBS YOUTH CL FITTED TIME FOR KIDS WHITE AUSTRALIAN JEANS FOR AUSTRALIAN JEANS FOR LION SA MELBOURNE MELBOURNE MELBOURNE MELBOURNE COMMUNITY CHILDRENS COMMUNITY CHILDRENS FOUNDATION RESEARCH FOUNDATION RESEARCH AUSTRALIA FOR WORK AUSTRALIA GREENING GREENING FY12 prospects and priorities We re off to a good start in 2011-2012 achieving year-on-year growth to date. Our outlook is confident regarding our business and our clients. We have a focus on global reach and capacity sustainable growth and clear investment priorities. We recognise the potential for strong growth in advisory work. Almost 50 percent of our revenues in 2011-12 are expected to be driven by our Advisory division. Within our Tax division areas our clients will need advice on include Carbon Pricing Mechanism Resource Taxation and Global Transfer Pricing Services. Within our Audit division areas our clients will need advice on include directors seeking greater assurance continuing movement towards integrated reporting standards by 2013 and the changing global regulatory environment. We will maintain a strong commitment to broadening our skill sets and capabilities in Energy & Natural Resources (oil and gas and mining) Financial Services Health Infrastructure and Government. We are also prepared for a more cautious business environment in the short-term given the volatility although there remains an underlying confidence about longer-term economic and business prospects. HEART RED CROSS GENES DAY RED CROSS GENES DAY KIDS INSTITUTE INSTITUTE RED CROSS RED CROSS COMMON GROUND TASMANIA Among the priorities for our clients in the current year are opportunities for cost reduction higher productivity and greater efficiency. Business finance and IT system transformations are also high on the agenda. We continue to explore opportunities for growth for our clients and ourselves. We are better equipped than ever before to drive business opportunities with fast-growing China. With our people and the impressive leadership in all of our business divisions we have a wealth of resources we can draw on to provide a service of the highest quality and consistency to our clients. There has never been a more exciting time to work with KPMG Australia. COMMON GROUND TASMANIA Reconciliation Action Plan 2011 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ) a Swiss entity. All rights reserved. The KPMG name logo and cutting through complexity are registered trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. Review and Outlook FY11 11 Bernard Salt PROPERTY & DEMOGRAPHICS There is an argument to say that the 20th century did not end in the year 2000 but rolled forward to the global financial crisis of 2008. Thereafter a new century and a new Australia emerged. China replaced Japan as the nation s leading export market. The number of outbound tourists from Australia exceeded for the first time the number of inbound visitors. The drought broke internet retail sales blossomed and a new way of working called fly-in fly-out (FIFO) re-organised the way Australians saw the interior. 2011 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ) a Swiss entity. All rights reserved. The KPMG name logo and cutting through complexity are registered trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. aspects of mining the delivery of skill and of capturing the opportunity to deliver prosperity. Other issues shaped the national consciousness. Terrorism receded but boat people advanced. First the population soared towards a Big Australia then it retreated as migration from India and other nations slowed. And amidst this turmoil this change of direction business has a mandate to forge ahead. The Property & Demographics Advisory group within Management Consulting has been especially active in scoping the market for skilled labour for the mining industry. Where is the talent and in what quantities The talk of the new decade was not so much around terms like seachange but around most Mapping Australia What is FIFO AustraliahasaFIFOzone.FIFOreferstofly-inflyoutminerswhoarerecastingthewayAustralia engageswithitsinterior. Itisoftendiscussed butpoorlyquantified.One ofthemostimportantdatasetstoemerge inthe middleofnextyear fromthe2011censuswillbe quantificationoftheFIFOphenomenon. FIFO an evolving trend Upto1950 numeroussmallminingcommunities servicedbypoorroadsandnarrowgaugerail. 1950sto1980s residentialworkforcelivingin remoteminingtowns. 1980stopresent increasingadoptionofFIFOto maintaincompetitionandreducecostsi. The skills gap Where do they come from WesternAustralianworkerscomeprimarilyfrom Perthandregionalcentreswithestablishedflight connection. QueenslandworkerscomefromBrisbane southernQueenslandandlargerregionaltownsof NorthQueenslandandFarNorthQueensland. DIDO(drive-indrive-out)workerscomefromareas withinamanageabledrivingdistance. SkillsAustraliaprojectionsnowsuggestthatverystrongemploymentgrowthwillcontinue intheresourcessector withemploymentinminingoperationsprojectedtorisefrom 187 700personsinNovember2010 to270 600personsin2016 ariseofalmost83 000 personsor44percent.Additionally19 000replacementworkerswillbeneeded overthefiveyearsfrom2011ii. x1 000retiringworkers x1 000newworkers x1 000workers FIFO WEST Infrastructure Reliableinfrastructureisessential. Airportswithdirectflightsinto miningareas.Roadsthatarerobust and safe to take commuting workersandincreasedconstruction andminingtraffic. from Perth 80% 10% 5% Perth The advent of the donga Prefabricatedhouses(calleddongas) aredelivereddirectlyintomining regions and clustered together into workervillages. from interstate from overseasiii ChamberofMineralsandEnergyWA 2005 SkillsAustralia June2011. ChamberofMineralsandEnergyWA 2010. iv ABS NationalAccounts 5206.0 June2011. v ABS InternationalTradeinGoodsand Services 5368.0 July2011. vi MineralsCouncilofAustralia October2011. ii iii i 12 Review and Outlook FY11 2011 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ) a Swiss entity. All rights reserved. The KPMG name logo and cutting through complexity are registered trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. Councils and government departments on the other hand are interested in the social and demographic impact of FIFO on local communities. What is the impact of 1 000 FIFO workers on the demand for services and facilities in a Bowen Basin community Other clients are looking for market positioning. An AFL club looking to stake its claim over the fast-growing western suburbs of Melbourne commissioned the Property & Demographics Advisory group to prepare a report and to project its findings to the broader media. The same sort of project was completed for a university looking to make its mark and to connect with a new and expanding market. The most common question asked by the more than 100 businesses that engage the group each year is what will our customers and workers look like in 10 years The Property & Demographics Advisory group is a forward-thinking evidence-based team with private sector market credibility expertise in demographic and census analysis and media projection and connectivity. They together with the insights from Bernard Salt provide the insight and or market positioning that your organisation needs to survive and thrive in the turbulent times of the 2010s. The FIFO demographic Darwin Isaac FIFO EAST FIFO CENTRAL There are 19 800 dongas in Isaac thought to accommodate 25 000 FIFO workers coming and going. During the next 12 months six new mines will open in the municipality. Brisbane The Minerals Industry Themineralssectorisforecasttocontribute9 percentofGDPin2010-11iv and 122.5Bor56 percentofAustralia sexportrevenuesin2010-12v. Intermsofoutput themineralsindustryproduced 54percentoftotalgoodsandservicesexports in2010( 138B)andcontributed 700 000per employeetotheeconomyvi. Sydney Adelaide Canberra FIFO workers are counted by the Australian Bureau of Statistics at their usual place of residence so it is difficult to determine just how many commute every week. Melbourne In 2010 theMinerals Industry produced of total goods & services exports 54% Hobart Review and Outlook FY11 13 AUSTRALIA CHINA PRACTICE A 2011 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ) a Swiss entity. All rights reserved. The KPMG name logo and cutting through complexity are registered trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. China s economic development plans are driving the country on a global quest for acquiring resources and expertise well outside the historical focus on raw materials and commodities. For example significant opportunities are emerging for Australia in the clean energy sector as China embarks on a long-term policy commitment to increase the use of clean energy . Australia&China FuturePartnerships2011 publishedbyKPMGandtheUniversityofSydneyChinaStudiesCentre KPMG s Global China Practice is a network of 41 countries providing high quality consistent services to China inbound and outbound investors globally. In Australia KPMG s dedicated China Practice acts as a priority gateway advising on investment transactions between Australia and China. Australia s China Practice was recognised as a top-three China practice across KPMG s international firm network and made a member of the Global China Executive. As a reflection of our commitment to maximising opportunities from China for our clients KPMG Australia s CEO Geoff Wilson has assumed stewardship of the firm s China priority in Australia. China is Australia s largest trading partner and will remain so for the foreseeable future. The investment relationship especially the movement of investment flows from China to Australia is becoming increasingly important for both countries. It is likely that China will shape our economic future and prosperity more than any other country. Our China Practice in Australia has grown significantly. We continue to win roles on China-related activities and clients as well as build our profile and reputation in the market place KPMGadvisedmanyChineseinbound clients on major transactions such as Sinopec MCC and Guangdong Nuclear. KPMGassistedmanyChineseclientson post-investment integration and management initiatives such as PetroChina (Arrow Energy) CNOOC and ICBC. China wake up call for The Review and Outlook FY11 14 Dabancheng wind farm in China s Xinjiang province is one of Asia s largest wind farms. KPMG is well-positioned as a leading adviser to Australian clients seeking to advance their China business. Services include advising federal and state government on developing China strategies IPO advisory for Hong Kong Stock Exchange transactions and broader investing in China. Our China Practice in Australia undertook a number of important strategic initiatives during the year KPMGenteredintoastrategicpartnership with the University of Sydney China Studies Centre to collaborate in developing and publishing thought leadership relevant to Australia and China trade and investment. This is one of the first partnerships of this kind. The first report Australia&China Future Partnerships2011 received significant domestic and international exposure and support. DougFerguson aKPMGpartnerwho has worked in China for the past 12 years as a transactions services and restructuring specialist was appointed Head of KPMG s Australia China Practice. KPMGpresentedattheAustralianInstitute of Company Directors (AICD) Conference in Beijing where more than 400 directors of Australian companies participated. KPMGhostedandmetwithseniorChina political and business leaders in Australia throughout the year including Chinese Vice President Xi Jinping and Vice Premier Li Keqiang. Partners have also played a lead role in external organisations such as the Australia China Business Council the premier organisation promoting trade and investment between Australia and China where our China Practice partners were Presidents in three state branches. Australian business Review and Outlook FY11 15 2011 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ) a Swiss entity. All rights reserved. The KPMG name logo and cutting through complexity are registered trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. KPMGcontinuedtobuildastrongChinese client base for annuity work including large corporates such as AIMS Group as well as many middle market clients. Threenewseniorsecondeesfrom China in Australia and three new senior secondees from Australia in China were initiated. Michelle Hinchliffe FINANCIAL SERVICES The next five years is about the battle of the balance sheet and this plays JeremyAnderson GlobalChairmanFinancialServices KPMG. right into our territory. The focus for our financial services clients remains on issues such as the changing regulatory landscape cost reduction and capital and liquidity management. The road to continued growth may well require new business models and innovative approaches. Ongoing economic uncertainty throughout Europe and the US and regulators responses to this globally has significantly impacted the Australian landscape manifesting in a large volume of regulation impacting our domestic financial institutions. So how do financial institutions generate value and not simply achieve compliance And how can they coordinate the vast array of actual and potential changes all with different implementation timetables and use these to enhance profitability KPMG s Business Performance Services (BPS) group has worked with banking clients to improve their processes and make productivity gains for their branch and contact centre networks. Through the introduction of the KPMG Lean methodology tailored to meet the strict regulatory requirements of a bank s established process significant improvements in productivity and efficiency are being gained while maximising customer value. For banks and investment management companies with stockmarket returns declining their ability to produce their historic return on equity is becoming more difficult. Banks are challenged with finding new sources of revenue and finding growth in a low demand credit-constrained highly regulated marketplace. With little opportunity for growth through acquisition or mergers they are forced to seek new strategies. We are seeing a trend towards seeking new growth opportunities in Asia Pacific. Recent collaborative research between KPMG in Australia KPMG in China and the University of Sydney China Studies Centre identified numerous complementary advantages for Australian and Chinese banks working together including providing each other with first-hand insights into their home market s competitiveness and regulatory issues. Several aspects of financial reform in China suggest significant long-term consequences and opportunities for Australian banks planning to form alliances with their Chinese counterparts. These include the evolution of the bond market and the Renminbi s internationalisation. Wealth management and insurance are areas of opportunity beyond wholesale banking for Australian financial institutions that can offer the product manufacturing capabilities and knowledge to complement the service offerings of Chinese partners. Conversely Australia is currently a target country for Chinese banks seeking to go global . Chinese banks see Australia as a platform for helping them expand globally including acquisition of experience skills and capabilities. The Federal Assistant Treasurer and Minister for Financial Services and Superannuation Bill Shorten and the NSW Deputy Premier and Minister for Trade and Investment Andrew Stoner recently announced KPMG among a consortium of leading Australian and international universities research and development centres and financial institutions selected to form the Centre for International Finance and Regulation. This appointment will bring significant opportunities for the firm with industry research thought leadership interactions with regulators (including training) providing input into policy debates liaising with industry participants and sponsorship of key local and regional events and forums. In FY11 KPMG s Financial Services group in Australia experienced double-digit revenue growth in a tough year for the industry. Working collaboratively across many KPMG divisions and services and putting teams together that addressed our clients needs reaped benefits for everyone. With global issues shaping and continuing to shape financial services in Australia we increasingly drew on expertise from across our global network of firms. The banking challenge How to a credit constrained highly regulated 2011 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ) a Swiss entity. All rights reserved. The KPMG name logo and cutting through complexity are registered trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. 16 Review and Outlook FY11 Keeping profits flowing Regulatory and political challenges National Consumer Credit Protection Act (NCCPA) Financial Claims Scheme Privacy Future of Financial Advice (FOFA) Basel III Recovery and Resolution Planning Anti Money Laundering Positive Credit Reporting Competitive & Sustainable Banking reforms Foreign Account Tax Compliance (FATCA) Economic conditions Subdued credit growth Interest rate moves Liquidity pressures Asset bubbles 300 0 Other factors Market confidence Demographic changes Investments in technology Capital flows from East to West Use of social media Consumer activism Competition Foreign bank entrants Payment providers Telcos Supermarkets Westpac Branch & Contact Centre Productivity Westpac sought to improve productivity across their branch and contact centres by establishing a Process Excellence Program with the help of KPMG s Business Performance Services practice and Lean methodology. With different brands and operating models they sought to standardise one best way enhance the customer experience and achieve significant capacity savings. KPMG worked in parallel with Westpac s new client team to deliver the change and its benefits and develop the capability of the staff. Considerable time was spent directly in the branch and contact centres listening to customers to understand the type and frequency of customer demands and determine and prioritise the best and most productive solutions. The results achieved considerable savings in the first five months with a subsequent increase in branch revenue. grow profits in and changing market Customers spent less time on calls and in branches and the processes and efficiencies implemented in branches contact centres and back offices made it easier for customers to do business. 2011 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ) a Swiss entity. All rights reserved. The KPMG name logo and cutting through complexity are registered trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. Review and Outlook FY11 17 Mick Allworth GOVERNMENT Australian governments face the ongoing difficulty of delivering increasingly complex policy reform in the face of a myriad of challenges. At a federal level the government faces legislative instability with the hung parliament generating a political environment lacking the certainty business and public administration seek. In the last 12 months a discerning buyer mindset has dominated both state and federal government. This is demonstrated in NSW by very tight fiscal management and a reduction in the size of the administration. With governments running deficits there is a renewed focus by administrations on exploring new ways of generating revenue and cutting public expenditure. Some areas such as health and infrastructure have seen new and innovative funding models introduced as governments attempt to deliver greater outcomes with fewer resources. Healthcare reform through the adoption of a new funding model is currently underway. KPMG s Healthcare practice is a lead adviser to the Department of Health and Ageing in the design and detail of the new funding model. In recognition of our leadership in this area two of our people have been appointed to the boards of the new authorities. Shane Solomon (KPMG Partner in Charge Healthcare) has been appointed chair of the Independent Hospital Pricing Authority and Patricia Faulkner is the chair of the National Health Performance Authority. Governments at both the state and federal level are taking a strong leadership position in the changing model of service delivery across Australia. The movement in public administration from the direct delivery of services to the enablement of the delivery of services is a profound and historic change in the role of government. In family services and health this has seen outsourcing of the delivery of programs once administered by the government to the private and not for profit sector. The new Royal Adelaide Hospital project is a Public Private Partnership between the South Australian Government and the SA Health Partnership consortium. The SA Health Partnership consortium will undertake the financing design construction and operation of the non-clinical services of the 1.8 billion hospital for 35 years while SA Health will continue to operate the hospital Getting a and provide all core clinical services staffing teaching and research. KPMG was engaged to provide income tax GST stamp duty and accounting advisory services to the consortium. This involves meeting the needs of consortium members in devising the required payment profiles over the course of the development to assist in the successful bid. KPMG works with all levels of government to help them respond to policy and service delivery challenges. Our people come from a wide range of expert disciplines. Many are experienced 2011 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ) a Swiss entity. All rights reserved. The KPMG name logo and cutting through complexity are registered trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. 18 Review and Outlook FY11 Warrant Officer Class Two Darrin Free prepares an M777A2 Howitzer round for firing at Puckapunyal range in Victoria. Image courtesy of KPMG client Department of Defence. grip on complexity KPMG worked closely and collaboratively with my core Strategic Logistics Branch Logistics Reform team to develop a credible and accepted business case for Storage and Distribution reform. Their work clearly leveraged commercial best practice identified achievable operational savings and benefits brought the diverse group of stakeholders to agreement and helped produce a case which was accepted as a key component of what is now the Government s Strategic Reform Program. The KPMG team met the demanding timeframes of the project with consistently high quality work and have my strong commendation for a job well done. Air Vice-Marshal Margaret Staib AM CSC Commander Joint Logistics public service professionals and have worked across all levels of government. Our involvement in reform and association with key nation-building and state building projects are a significant achievement for KPMG. Department of Defence Logistics Program The 2009 Defence White Paper agreed to reform Defence s logistics network. To implement this reform Defence established a five-year program to deliver new and enhanced infrastructure and develop the new logistics business model to achieve efficiency and effectiveness gains through improved processes and technology. KPMG is a key strategic partner to Defence. Originally engaged to support the development of the feasibility study and associated business cases KPMG is now engaged as the lead logistics adviser and is assisting Defence across all components of the program. Key to the team s success has been the establishment of a diverse group of logistics asset management organisation design procurement change management communication and project management professionals with both broad sector and client specific experience. 2011 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ) a Swiss entity. All rights reserved. The KPMG name logo and cutting through complexity are registered trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. Review and Outlook FY11 19 Adrian King CLIMATE CHANGE & SUSTAINABILITY KPMG Australia s Climate Change & Sustainability practice has been working with business and governments to prepare them for some fundamental reforms in Australia. On 5 November 2011 legislation was passed which put a price on carbon and climate change was placed firmly on the social business and political agenda. This will impact all Australian organisations with both direct and indirect costs to business impacts on supply chains accounting issues and tax implications. Over the course of the year our Climate Change & Sustainability practice has been working with clients across diverse sectors including energy and natural resources mining food and beverage aviation and shipping to help them prepare by determining their carbon exposure and working with them to take advantage of the carrot and sticks approach outlined in the carbon price mechanism. Various forms of assistance will be available to help smooth the transition to a low carbon economy including research grants and development tax concessions. However organisations need to plan appropriately to maximise their entitlement to the available assistance. Throughout the year clients have placed an emphasis on strong data quality and assurance to help them get it right when it comes to the increasingly important reporting requirements such as the National Greenhouse and Energy Reporting System (NGERS) and the new requirements resulting from the carbon pricing mechanism. We have also seen an increased need from companies for advice on how to reduce emissions and improve their carbon footprint. The need to prepare for the 1 July 2012 commencement of a carbon price will require companies to start preparatory work now. The increasing need for companies and organisations to report on sustainability metrics more generally is also being driven by market demands for reliable information and the desire by businesses to promote and manage reputational risks. The challenges from sustainability-related risks are appearing more frequently on board agendas as well as in investment reports and it s important for companies to understand the sustainability issues that impact them. This isn t just about climate change it also 2011 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ) a Swiss entity. All rights reserved. The KPMG name logo and cutting through complexity are registered trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. Climate change is widely recognised as one of the most serious challenges the world faces with consequences that go far beyond its impact on the environment alone. It is no longer the question of if we have to move into a low-carbon energy future but how we will get there. Yvo de Boer KPMG s Special Global Advisor on Climate Change & Sustainability. Putting the environment on the balance sheet 20 Review and Outlook FY11 includes considerations across food and energy security biodiversity water and community. Issues can arise due to skills shortages and the impacts of immigration policy health and safety carbon policies and supply chain pressures. Leading companies understand how sustainability issues affect their business and are aligning their responses to sustainability with their business and risk strategies to maximise long-term returns for investors. KPMG is a leader in providing advice on sustainability issues to Australian business and we have helped organisations address these key issues to maximise business opportunities and reduce their risks. What is often overlooked is how water access and usage impacts business models valuations and investment opportunities. It s key to planning for growth. Relying on water from rainfall is unpredictable and Australia needs diverse water sources which provide certainty including desalination and recycling. Another major reform is the changes arising from the Murray Darling Basin Plan which will impact businesses and the community throughout the basin. Efficiency in water consumption and building long-term fiscal and planning strategies are vital and KPMG has worked with major businesses to minimise any impacts of the changes. KPMG has provided advice on water policy to the Murray Darling Basin Authority businesses and governments as well as worked on many of the desalination projects across Australia. The increasing importance of sustainabilityrelated risks and the responses of government to these risks will lead to ongoing challenges for most organisations. 2011 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ) a Swiss entity. All rights reserved. The KPMG name logo and cutting through complexity are registered trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. Groundwater salt interception scheme near Buronga NSW. Image courtesy of KPMG client Murray Darling Outlook FY11 21 Review and Basin Authority . Graham Brooke & Julian Vella INFRASTRUCTURE KPMG is a major adviser to the infrastructure sector globally and in Australia. With one of the world s largest and most experienced specialist infrastructure teams we operate in more than 80 countries supporting infrastructure contractors operators investors and government organisations through the lifecycle of infrastructure projects and programs. During the year we assisted with the sale of public infrastructure assets including structuring and executing infrastructure projects especially those involving Public Private Partnerships (PPP). We advised infrastructure owners on improving the operating performance of their businesses assisted infrastructure builders in managing the implementation of infrastructure projects and provided procurement advice fairness audits and valuations. Key projects during the year included Barangaroo Project This is a major commercial development of a 22 hectare site in the Sydney CBD. As government adviser we were responsible for evaluating tenders financial modelling and property feasibility analysis. Sydney International Convention Exhibition and Entertainment Precinct This project involved the redevelopment and expansion of the existing facilities. KPMG was involved in providing financial advice from the initial business case through to the tender process. Sydney Light Rail Extension KPMG was engaged to provide advice on financial operational and negotiation issues with a PPP to expand the existing light rail system by up to 10 kilometres in two stages inner-west and the CBD extension. Australian High Speed Rail This proposed multi-billion project will connect the cities along Australia s east coast. KPMG advised government on available revenues viability and funding. The challenge of developing Australia s 2011 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ) a Swiss entity. All rights reserved. The KPMG name logo and cutting through complexity are registered trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. Light Rail in and Outlook FY11 22 ReviewSydney. Image courtesy of KPMG client Transport for NSW. infrastructure to a level to support a growing population the resources boom and the need to invest in renewable energy to counter the effects of climate change is a strong focus for governments. With an estimated infrastructure deficit of 700 billion it will take a doubling of current expenditure over the next 10 years just to clear the backlog. The need for this scale of infrastructure investment will require the public and private sectors to continue to work in partnership to provide funding skills and other resources. Coming out of the GFC there is a continued appetite for PPPs with both debt and equity funding becoming more available. There is a need for private sector investment in new infrastructure projects. PPPs if properly structured can still deliver value for money for investors. In a globally competitive funding environment with capital flowing both in and out interest in infrastructure investment is not just from Australian institutional investors. Key international funding players include Canadian pension funds who are strong investors in this area with Chinese investors looking for solid opportunities also emerging. In addition to private sector funding and PPPs models of user pays are increasingly discussed but these only go so far and governments are looking at innovative approaches to funding the infrastructure shortfall including selling non-core infrastructure assets and using the money to fund other projects. But the real challenge is making both new and existing projects attractive to investors. The difficulty overseas investors have with some projects is the risk allocation profile. 2011 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ) a Swiss entity. All rights reserved. The KPMG name logo and cutting through complexity are registered trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. In the global bid for funds it s the country putting forward the most commercially sensible compelling proposition that gets the project funding. A combined infrastructure projects pipeline plan prioritised and confirmed on a national and state level would increase Australia s attractiveness to international private capital investors. Infrastructure is not just about schools hospitals and roads. There is a large demand for infrastructure planning and spending in the resources sector although much of this is self-funded. But relatively low unemployment and a skills shortage is exacerbating the problem of building sustainable infrastructure to support the growing minerals and energy industry. KPMG s Infrastructure leadership team are actively participating in the reform process. For example in June the Federal Minister for Infrastructure and Transport Anthony Albanese announced Julian Vella National Leader of the Infrastructure practice as a member of Infrastructure Australia s new Infrastructure Finance Working Group. Graham Brooke Partner in Charge of KPMG s Infrastructure & Projects Group was re-appointed to the Board of peak industry body Infrastructure Partnerships Australia in December. Bridging the infrastructure gap Review and Outlook FY11 23 Shane Solomon HEALTHCARE The National Health Care Reform negotiated between the Commonwealth and the States in June 2011 redefines funding and delivery of healthcare in Australia. Adapting to this strategy is one of the biggest challenges facing the healthcare sector. Under a new model of activity based funding expected to commence 1 July 2012 the Independent Pricing Authority will determine the efficient price of hospital services probably by an averaging of costs over the whole system. A significant number of hospitals are likely to be operating in excess of the efficient price so they will have to improve their efficiency or adjust their finance and expenditure. The National Health Performance Authority will monitor assess and report publicly on the performance of hospitals including sensitive issues surgery and emergency department waiting times the rate of hospital acquired infections and patient falls causing injuries. As the system rolls out hospitals will need to redesign their clinical processes adjusting to new performance targets e.g. four hours maximum wait time in emergency or face significant depletion of their finances. They will also have to respond to the scrutiny of published performance data. KPMG was a key adviser on the design of the reform working with the Department of Health and Ageing on the processes and business model for the two new government authorities. We also assisted in the design of the activity based funding model that helped broker the deal between the States and Commonwealth. A new network of primary care organisations (Medicare Locals) will support health professionals. Aged care is a priority for governments with a directional change towards an integrated care model managing people in their homes and keeping them out of hospital by providing better care in the community. The planned introduction of a new electronic system for managing healthcare in Australia will improve the quality of care increasing efficiency and reducing costs. Access to patient records across hospitals will reduce duplication of proceedures and tests leading to cost efficiencies and better patient outcomes. 2011 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ) a Swiss entity. All rights reserved. The KPMG name logo and cutting through complexity are registered trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. Linda Woollard and Sue Shilbury from RNSH during a coaching session with KPMG s Linda Justin (l to r). In FY11 KPMG won the bid to restructure the Singapore Health System partnering with our KPMG colleagues in Singapore and the UK. We have undertaken a major evaluation of Australian Government projects and designed the model for case mix funding (activity based costing) and whole of health economy projects and restructuring in NSW and Tasmania. RNSH Case Study Releasing the potential of your staff Royal North Shore Hospital (RNSH) turned its emergency access performance around in the space of 20 weeks with the assistance of KPMG and its own staff. Before the mentoring project RNSH had been performing consistently below its peer hospitals. The tertiary-referral hospital was failing to meet state benchmarks in the delivery of efficient service times in its emergency department and there was a sense among staff that significant performance improvement was not achievable. Healthcare health check 24 Review and Outlook FY11 KPMG s brief was two-fold to coach staff to improve performance and to drive the cultural change required to support the necessary redesign to achieve improvement. KPMG coaches worked one-on-one with 18 individuals. They were provided with hospital and department performance and financial data to support their investigations analysis and recommendations. This data was then used to measure outcomes. The coaches provided advice North Shore Ryde Health Service General Manager Sue Shilbury said the most impressive thing about the project for her was the incredible energy that was tapped into with the staff involved. Linkages between the projects meant rather than just the cultural change we were expecting what resulted was a more profound transformational change she said. Watching the change in the staff who participated was one of the best experiences of my career. One of those staff members involved in the project was Linda Woollard Clinical Nurse Consultant for Cardiac Services who found the experience invaluable It taught me a great deal . about how to facilitate culture change Ms Woollard said. As a junior staff member she greatly appreciated the opportunity to be involved. I continue to build on the knowledge I gained and find I can apply it to most aspects of my work she said. The results of the program convinced Ms Shilbury to apply for Department of Health funding and KPMG has been engaged to run similar mentoring programs with other staff throughout the hospital. THE RNSH RESULTS WERE IMPRESSIVE IMPROVED PERFORMANCE IN THE EMERGENCY DEPARTMENT Lengthofstay 15%less Offstretchertime 54%improvement Emergencyaccess 26%improvement 2.4millioninannualisedsavings Review and Outlook FY11 25 2011 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ) a Swiss entity. All rights reserved. The KPMG name logo and cutting through complexity are registered trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. Recognising the need to energise staff and develop their skills to lead the necessary change the RNSH executive engaged KPMG to conduct a leadership program with selected senior clinicians managers. on performance improvement techniques group training education workshops and team building exercises. Michael Bray ENERGY & NATURAL RESOURCES Firing up Australia s North Rankin Platform North West Shelf Project Western Australia. Image courtesy of KPMG client Woodside. Global demand for resources to manage energy security and feed economic growth remained robust in FY11 despite weaker international financial markets. KPMG s global network of specialist Energy & Natural Resources teams played driving roles in project developments and operations for coal gold iron ore and LNG clients in emerging resource regions such as Africa Malaysia Indonesia South America and Russia as well as established markets including the US and Australia. FY11 has been an outstanding year of achievement for many of our ENR clients. Our Australian team supported billion dollar CAPEX projects to manage their costs and risks and deliver on time. We developed effective procurement processes and monitoring improved supply chains across many commodities and operations and improved asset management. We also worked with many companies on workforce planning and responded to the enormous challenge of attracting and retaining the thousands of people required for the more than 200 billion of capital investments into the sector. Our people provided solutions for financing and executing resource accommodation issues conducted economic and financial feasibility studies and assessed and addressed some of the enormous infrastructure challenges facing resources development. KPMG also worked with many businesses to transform business processes measurement and reporting as projects progressed from development through to operation. Importantly KPMG has a key role in realising Integrated Reporting in Australia which is gaining momentum through the International Integrated Reporting Committee globally as well as in our region. Integrated reporting provides significant 2011 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ) a Swiss entity. All rights reserved. The KPMG name logo and cutting through complexity are registered trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. 26 Review and Outlook FY11 We have also been advisers to some of the major transactions in the sector resources InvestigatingAccountantonthe Queensland Government s 4.05 billion Initial Public Offering of QR National. CFO DealBook Awards 2011 IPO of the Year. Leadfinancialadviserroleto Sinosteel on its successful negotiations with Rio Tinto to extend the Channar Iron Ore Joint Venture completed in December 2010. InvestigatingAccountanton Origin Energy s 2.3 billion capital raising following its acquisition of Integral Energy and Country Energy s retail businesses and entering into the GenTrader arrangements with Eraring Energy. Vendorduediligenceassistance for the Queensland Government for its 1. 8 billion disposal of the Abbott Point Coal Terminal. Vendorduediligenceassistance for Griffin Energy and Stanwell Corporation for its divestment of Emu Downs Wind Farm. Duediligenceassistanceand tax structuring services for Sinopec s 1.7 billion acquisition of a 15 percent interest in Australia Pacific in April 2011. Taxadvisoryservicesfor Adani for its acquisition of coal tenements from Linc Energy for 2.7 billion. Taxduediligenceand structuring assistance for Newcrest for its acquisition of Lihir Gold for 9.5 billion and their proposed divestment of certain mining operations to Catalpa Resources. Taxadvisoryservicesforthe 605 million acquisition of Donaldson and Monash Coal by Gloucester Coal. The energy sector is undergoing significant transformation and KPMG has been an active adviser to industry and government this year through our involvement with the Energy Policy Institute (formerly Energy Alliance of Australia). Our work has supported the rapid development of Australia s liquefied natural gas delivery capability the growth of coal seam gas as an energy source the emergence of shale gas in Australia and continued energy sector privatisation. KPMG has also been at the forefront of advising the emerging renewables sector as it responds with further investment from the Cleaner Energy Future measures announced during the year. potential as a tool for facilitating scarce capital to the best energy and resources investment propositions. The introduction of the carbon pricing mechanism MRRT and PRRT regulation requires companies to assess the impact on their current and future investments and prospects and prepare for change. Our tax valuations accounting and advisory teams have supported the policy deliberations with technical advice and developed responses. Asian markets are an important focus for our Australian clients. We work closely with KPMG s international energy and natural resources networks in countries such as China India Japan and Korea to deliver seamless solutions for our clients. During FY11 KPMG provided specialist advice to many Asian and global clients to optimise their investments in the region and navigate the regulatory environment. 2011 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ) a Swiss entity. All rights reserved. The KPMG name logo and cutting through complexity are registered trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. Review and Outlook FY11 27 Peter Siebels PRIVATE ENTERPRISE Two defining issues characterise the ability of privately owned business to grow in the coming year. The first is the availability of capital critical to the growth of this sector to fund innovation and product development. Generally banking relationships are strong and private businesses have met the increased reporting requirements. But without the willingness of banks to lend freely raising funds will be difficult. The second definer is clarity of strategic direction including succession planning and governance structures. In family businesses growth can often be stalled by multigenerational ownership creating conflict around business vision and strategy. This can be further complicated by inadequate governance structures separating family ownership from everyday management. With an ageing demographic of business leaders clarity of the business vision strategy and plan for succession is vital for key stakeholders including employees financiers and the next generation business leaders. A family owned manufacturer to the industrial equipment market was faced with a management and governance issue due to a skills gap within the family. KPMG s Private Enterprise practice reviewed their organisational structure and delegated authorities that led to a restructure of the business including a succession strategy for the family. The engagement grew to incorporate a review of the group from an asset protection and estate planning perspective and increased accountability for management including the CEO. The team also renegotiated their current bank facility resulting in an annual saving to the company in excess of 500 000. Morrison is a fashion business run by husband and wife team Richard Poulson and Kylie Radford. With growth accelerating to eight stores and 2011 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ) a Swiss entity. All rights reserved. The KPMG name logo and cutting through complexity are registered trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. 100 wholesalers the owners sought advisory taxation and accounting expertise from KPMG to establish a strong business foundation as they continued to expand into domestic and international markets. During the year Private Enterprise launched Future Focus an online business assessment tool which analyses and benchmarks the capability of a business across eight critical business areas value creation and future focus strategy and business planning business operations and performance finance and tax structures human resource financial reporting information technology and governance risk and compliance. Designing success for private enterprise KPMG established key strategies for our business... we are now ahead of current issues and can act swiftly if necessary. Richard Poulson Morrison Group 28 Review and Outlook FY11 Images courtesy of KPMG client Morrison Group. We published the fifth KPMGPrivate CompaniesSurvey which is recognised as a strong indicator of private business sentiment across Australia. The survey of 300 private companies revealed that despite strong and optimistic predictions for growth a year earlier business sentiment had softened and many were failing to reach growth targets. There is no doubt private companies are reserved about setting strong growth targets and maintain a focus on cost management but In FY11 KPMG s Private Enterprise practice experienced 10 percent growth in a tough year for the sector. This has been driven by our focus on the journey we take with our clients moving away from wearing a compliance lens and towards gaining a deep understanding of their strategic direction and assisting them to deliver on their business strategy. KPMG s Private Enterprise practice tailors specialist audit tax and advisory services to the unique needs and objectives of each client business drawing on the firm s extensive national and global technical capacity and deep industry knowledge. Review and Outlook FY11 29 2011 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ) a Swiss entity. All rights reserved. The KPMG name logo and cutting through complexity are registered trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. This tool gives a valuable snapshot of business health and future-readiness allowing business owners to clearly identify areas that need focus. the size of these businesses and their simplified business structures make them more adaptable when facing change and faster to react when their environment is threatened. Their focus is maintaining competitive advantage staving off the increasing activity from their competitors. Australia s private companies remain well placed to take advantage of new opportunities if they keep an eye to innovation and create new ways to build market share. Gary Wingrove ADVISORY Robust demand for Advisory services saw KPMG s market-leading practice make a significant contribution to the firm s overall growth. Generating 473 million in revenue a 22.3 percent rise from the previous year Advisory is now our biggest business. Going forward Advisory will continue to be a key area for investment and growth. KPMG has one of the market s largest and most diverse advisory and consulting operations with close to 2 000 employees. Advisory recently renamed two of its three specialist service groups to make it easier to talk with clients and the market in terms familiar to them. Performance & Technology is now Management Consulting Risk & Compliance is now Risk Consulting. While the Transactions & Restructuring name remains unchanged our suite of Corporate Finance services has been broadened. All three Advisory service groups experienced growth during the year RiskConsultingachievedrevenuegrowthof 26 percent driven by governance work major project risk reviews integrated risk management and forensic assignments. ManagementConsultinghasbeenakey investment area for the firm in recent years. Revenues grew by almost 20 percent driven by Financial Services Government Energy & Natural Resources and Healthcare work. Services in greatest demand included cost reduction business efficiency improved 2011 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ) a Swiss entity. All rights reserved. The KPMG name logo and cutting through complexity are registered trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. Image courtesy of KPMG FY11 30 Review and Outlookclient QR National. productivity and IT systems advice. Growth(ninepercent)inourTransactions& Restructuring practice was especially pleasing in a tough transactions environment. Economic sentiment is a central driver in demand for Advisory services. When growth slows businesses seek to drive profits through business improvement and supply chain re-engineering. At the same time boards and management teams look for more rigour in their risk management framework. In volatile markets clients look for advisers who are not just technical experts but have a specific understanding of their business. Historically if a consultant provided advice in acquisition or cost optimisation as long as you had a sound track record that was enough. Now clients look for people that for example understand the mining industry but not just the mining industry generally their specific type of mining whether it is iron ore or diamonds. This level of specialisation is paramount to our clients hence KPMG s focus on sector expertise rather than the general advisory model of the past. These specialist areas include Healthcare Financial Services Energy & Natural Resources Government and Infrastructure with KPMG establishing Global Centres of Excellence where sharing of international experience gives clients greater insight and value. In June 2009 the Queensland Government announced the restructure of key components of the state s infrastructure. KPMG was appointed as the Investigating Accountant for the Initial Public Offering (QR Rail). The complexity of the business and the engagement led to the involvement of more than 300 KPMG people and many divisions including Accounting Advisory Financial Risk Management Mergers & Acquisitions Transaction Services Corporate and Indirect Tax Business Performance Services IT Advisory Economics Infrastructure and Policy. QR National was successfully listed on the Australian Stock Exchange in November 2010. Driving performance Review and Outlook FY11 31 2011 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ) a Swiss entity. All rights reserved. The KPMG name logo and cutting through complexity are registered trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. Gary Wingrove TRANSACTIONS & RESTRUCTURING 2011 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ) a Swiss entity. All rights reserved. The KPMG name logo and cutting through complexity are registered trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. KPMG s Transactions & Restructuring group works with clients to pursue growth opportunities and also solve underperformance issues. Services include Corporate Finance offerings such as mergers and acquisitions (M&A) debt advisory valuations and infrastructure services as well as Transaction Services in the areas of financial due diligence and strategic and commercial intelligence and Restructuring Services. From a Debt Advisory perspective debt refinancing has become much more competitive. The role of independent debt advisors such as KPMG is becoming more significant as we can access diverse sources of funding which can lead to lower financing and refinancing costs. To meet growing business demand we have tripled the size of our Australian Debt Advisory team over the last three years and expect further growth. KPMG has one of the strongest mid-market M&A businesses in Australia with around 65 dedicated staff across the country. Our clients continue to explore opportunities for growth including expanding the nature of trading relationships with China and Asia. Clients are also looking for efficiency opportunities and are considering M&A deals but are being quite discerning. The introduction of the price on carbon and Mineral Resource Rent Tax means that many companies are looking to KPMG to provide valuation advice. As a major adviser to the infrastructure sector we assisted with the sale of public infrastructure assets advised owners on improving operational performance assisted builders manage the implementation of infrastructure projects as well as provided procurement advice. At the top end of town transaction activity is slowing however recent KPMG research outlined in ANewDawn GoodDealsin ChallengingTimes shows that even during tough economic conditions there is value to be had from deals. Critical to realising value is effective strategic due diligence and well thought out thorough and effectively executed integration activities. Many clients are focused on business resilience in anticipation of continued uncertainty. Our Restructuring Services practice assisted to improve their cash flow and balance sheet positions setting them on a path to creating long lasting company value through a combination of strategic operational and financial change. The Queensland floods tested the resilience of many organisations. For many it highlighted the need to have a well-rehearsed business continuity plan. KPMG 32 Reviewcontinues to work with our clients as they rebuild. Image courtesy of KPMG client Department of Defence. worked and and Outlook FY11 James Allt-Graham RISK CONSULTING Risk Consulting s strategic objective is to be advisers to boards and management on optimising risk and turning risk into opportunity. We provide a holistic approach to risk to help our clients risk framework align to their business agenda. We help them to drive change build resilience and enhance outcomes informing thinking from boards to operational management to transform risk to advantage. During FY11 our practice grew by 26 percent driven through work in governance risk management actuarial and forensic assignments as well as internal audit internal control assurance and data analytics. We work across all industries advising Audit Committees Chief Risk Officers and Heads of Risk or Compliance and Regulation to assist them to respond to ongoing market volatility and uncertainty. In particular we are assisting our clients to respond to new and growing regulation that was created in response to the 2008 GFC such as Basel III FATCA and Living Wills. Likewise with the average incidence of fraud at a worrying 1.8 million we are working with our clients to prevent and detect corporate crime. Organisations that are best prepared from a risk point of view have the resilience and agility to move ahead of their competition in uncertain times. The consistent conversation we are having with our clients is the renewed focus on risk mitigation to ensure their organisations are robust compliant with local and global regulatory requirements and agile enough to withstand the constant market changes. This was evidenced through the strong market interest in our AustraliaReport2011 research which distilled the risks and opportunities for the next decade and has become a critical risk planning tool for many of our clients 2011 has seen a significant focus on regulation with the introduction of several global and domestic regulatory requirements as well as increased accountability for directors. The list includes Basel III Dodd Frank National Consumer Credit Protection Privacy Reforms UK Bribery Act and the outcome of the Centro decision to name a few. KPMG s Risk Consulting practice has been working with our clients to ensure that they comply with the requirements meet the highest quality levels of governance but also gain business improvement through the process so they turn risk into value. 2011 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ) a Swiss entity. All rights reserved. The KPMG name logo and cutting through complexity are registered trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. KPMG Fraud Barometer Review and Outlook FY11 33 first half of 2011. John Somerville MANAGEMENT CONSULTING KPMG has done great work developing a social media plan for Westpac... ...the KPMG team produced a comprehensive report for the businesses on how social media can be applied to the business of banking. This was ground breaking work and I relied heavily on KPMG not only to drive the process within Westpac but also to generate and stimulate new thinking. Throughout the process which was commissioned and completed at very short notice I was impressed with the professional approach of KPMG and their focus on the final deliverable. David Bell General Manager Corporate Affairs & Sustainability The Westpac Group supporting our longer established markets in Sydney and Melbourne. We have pursued a strategy of recruiting and retaining leaders with a deep understanding of their industries coupled with strong technical skills Shane Solomon and Sue Williams in Healthcare Daniel Knoll in Banking and James Scott and Chris McLaren in Telecommunications for example. This strategy reinforces the value we bring to clients deep expertise and understanding of the issues they face in the markets in which they operate. We continue to build strong and deep relationships with our clients and respond to their issues quickly and effectively. The experience our team has in their industries enables us to identify key themes within market segments and build our capabilities to respond to these longer-term. This includes supporting clients in emerging business areas such as the Digital Economy. We established the Digital Economy Council with representation from across the firm including both client facing and support divisions. In February 2011 KPMG acquired the global sourcing organisation EquaTerra. This created one of the broadest international sourcing and shared services advisory offerings. Strong links forged with our international colleagues has proved beneficial for Australian clients. The financial environment continues to be unsettled and the Management Consulting team will continue to be agile in responding to our clients changing needs. Our performance over the last year demonstrates that the team can rise to these challenges and provide excellent and innovative service to our clients. FY11 saw KPMG redefine our consulting landscape globally reassessing growth opportunities for our clients and ourselves. Clients told us they expect three things of us to genuinely understand their business to commit to their agenda and to deliver the value we promise. Our successful delivery on these expectations has seen remarkable growth for our business with revenue from the Management Consulting group up by almost 20 percent year-on-year and the team increasing to more than 1 000 full-time people across Australia. Perth Brisbane and Canberra were highly active markets twitter.com kpmgaustralia 2011 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ) a Swiss entity. All rights reserved. The KPMG name logo and cutting through complexity are registered trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. 34 Review and Outlook FY11 Duncan McLennan AUDIT Audit continued to be a significant contributor to the firm generating 35 percent or 377 million in revenues during the year. Sectors with the highest year-on-year growth were Financial Services and Energy & Natural Resources. KPMG audits 32 of the top 100 ASX businesses. We also provided well over 4 million in pro bono audits to not-for-profit organisations. Some recent developments have included a trend towards management and directors seeking greater assurance across a range of data regulatory reviews of the auditing industry with a focus on audit quality and the start of a concerted push towards integrated reporting. Uncertainty domestically and in the global markets is driving Australian business to review their forecasts and breadth of operations. In this dynamic environment the role of the auditor in applying professional scepticism and ensuring quality audits is very important to the stability of capital markets. In times of financial uncertainty some view the audit process through the few headlines associated with a corporate failure and judge the whole profession accordingly. High quality audits don t make the headlines it can be difficult for the users of audit services to determine whether an audit is of high quality because what drives audit quality is a complex set of factors often obscured and hard to measure. At KPMG we are proud of our commitment to quality. Being transparent about what we believe drives a quality audit and how we conduct it reduces the expectations gap and reinforces our commitment to and confidence in the profession. In November 2010 we demonstrated our commitment by publishing our TransparencyReport AuditQualityinFocus the first such report from a Big 4 accounting firm in Australia. Based around our seven drivers of audit quality it demonstrates what audit quality means to us and includes real indicators of how it can be measured. The CFO DealBook 2011 Audit Firm of the Year Award This report is available on our website and is publicly endorsed by the Institute of Chartered Accountants Australia. The excellence of our audit expertise and commitment to clients was also recognised by KPMG being awarded the prestigious CFO DealBook 2011 Audit Firm of the Year award by our industry peers. The CFO DealBook Awards judges said We were impressed with the firm s leadership particularly the publication of their Transparency Report Audit Quality in Focus. One said this sets a benchmark for industry in openness and setting standards for audit practices . Another noted combining the previously three separate groups into one firm focused on cutting through complexity while difficult to bring about will help clients enormously . Review and Outlook FY11 35 2011 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ) a Swiss entity. All rights reserved. The KPMG name logo and cutting through complexity are registered trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. Duncan McLennan AUDIT Our clients continued to face pressures in the post GFC marketplace and this not only re-emphasised the importance of audit quality but also translated to ongoing tightness in the market for audit and related services. Our commitment to assisting our clients navigate the local and international regulatory requirements also sees KPMG partners continue to be active in the broader regulatory and professional community taking a non-partisan and collaborative approach to improving industry standards. One outcome of the GFC has been a questioning of the value of the existing financial statement reporting. One measure being considered to broaden 2011 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ) a Swiss entity. All rights reserved. The KPMG name logo and cutting through complexity are registered trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. Shared values underpin our successful relationship with BHP Billiton Image courtesy of KPMG FY11 36 Review and Outlookclient BHP Billiton. The audit of BHP Billiton company reporting around strategy and value creation is Integrated Reporting. Whether it is historical financial data or forward thinking projections sustainability reporting or risk and control practices integrated reporting in time may see an increased demand for the auditor s skills and expertise providing broader independent assurance. The audit of BHP Billiton demonstrates the global capabilities and reach of KPMG s Audit practice. BHP Billiton operates in more than 100 locations around the world and is comprised of nine Customer Sector Groups (CSGs). Several of BHP Billiton s CSGs would be ASX top 100 companies in their own right and reflect the diverse range of BHP Billiton s products which include petroleum iron ore and base metals. Our global audit team headquartered in Melbourne is configured to match BHP Billiton s CSG structure and involves more than 400 professional staff in countries as diverse as Angola The Netherlands USA Peru and of course Australia. BHP Billiton is listed in Australia the USA and the UK which results in a complex network of financial reporting obligations. We provide audit and assurance services to BHP Billiton to enable them to satisfy the requirements of each of these jurisdictions including assurance over BHP Billiton s internal controls over financial reporting in accordance with the Sarbanes-Oxley Act. KPMG has been the global auditor of BHP Billiton since 2004. Each year we sign in excess of 270 sets of financial statements across the Group as well as the Group financial statements. We are also BHP Billiton s assurance provider for health safety and sustainability reporting. In addition to providing audit and assurance services KPMG also supports BHP Billiton through our specialist teams most significantly in relation to capital markets and merger and acquisition transactions. BHP Billiton has a core set of values which govern every decision and activity undertaken by the Group. These values are based on similar principles and mindsets as those that underpin KPMG s values. We consider this alignment is a key element to the successful relationship we enjoy with BHP Billiton. Review and Outlook FY11 37 2011 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ) a Swiss entity. All rights reserved. The KPMG name logo and cutting through complexity are registered trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. Rosheen Garnon TAX We ve achieved technical changes to no one else can do this KPMG s Tax division had a very successful year with revenues up by over 8 percent to 214 million driven by risk reviews tax audits M&A Tax Advisory Research and Development (R&D) and Global Transfer Pricing Services. We provided tax advisory services to 71 of the top ASX 100 companies and 102 of the Fortune 500 listed companies. As we move into FY12 additional focus areas include Resource Taxation and the Carbon Pricing mechanism. Pressures on government budgets continued to confront our tax system. The Australian Taxation Office (ATO) reinvigorated its revenue collection activity undertaking more risk reviews more audits and more litigation with clients. The Australian Government is seeking broader ways to collect revenue and introduced the Minerals and Resources Rent Tax (MRRT) and a price on carbon . The ATO remains under pressure to contain the cost of administering taxes with taxation efficiency being another key issue for Government. During the year the ATO concluded a number of information transfer agreements and worked jointly with tax authorities around the world particularly in tax havens to undertake tax audits and look at transfer pricing issues. Against this backdrop a key challenge facing business is to have a financial accounting system robust enough to deal with changing information requirements from the ATO. Rather than seeking information from the past the ATO is increasingly seeking information in real time and accounting systems must be able to produce this information quickly. As a result we are having a very different discussion with our clients around their tax profile. We are talking to CFO s and Boards about how they want to position themselves with the ATO and key steps an organisation can take to proactively manage their risk profile governance structures around how organisations make decisions about tax internal controls that support decision making and how businesses capture and record data. With this holistic approach organisations need to implement a risk framework focused on data and controls that integrates with their enterprise risk management 2011 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ) a Swiss entity. All rights reserved. The KPMG name logo and cutting through complexity are registered trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. 38 Review and Outlook FY11 Rosheen Garnon National Managing Partner Tax legislation clients have said system. They must ensure they have a robust strategy to deal with a risk review or audit by the ATO. The changing environment has implications for tax professionals too. It is no longer enough to know tax law we have to have a much broader perspective on how an organisation operates and how their financial management systems work. For example people must understand the impact that specific advice will have on the organisation s income tax provision. In October 2011 the Australian Government held a Tax Forum of over 150 respresentatives to discuss our future tax system. I attended representing KPMG. We believe there is a need to build a strong and enduring consensus for tax reform which ideally would include robust debate on indirect taxes. Critical to achieving successful tax reform is a clear roadmap and preferably a well-resourced consultative independent body to lead that program. With the shift towards Asia as a centre of world economic activity and the need for Australia to compete for global capital and remain an attractive place to invest Australia needs a tax system that supports this changing investment pattern to enhance productivity and economic growth. In our view Australia should concentrate its future tax system on four robust and efficient broad-based taxes comprehensive personal income comprehensive business income broad private consumption and location-based economic rents on natural resources and land. Unless other taxes serve a particular purpose beyond revenue raising all other taxes should ideally be abolished. In June the Australian Government appointed Chris Jordan Chairman of KPMG New South Wales as Chairman of The Board of Taxation. The Board is a non-statutory body established to advise the government on the development and implementation of taxation legislation and the ongoing operation of the tax system. Chris has been a member of the Board since its inception in September 2000 and was previously the Deputy Chairman. At the October Tax Forum the Hon Wayne Swan MP announced Chris Jordan will also chair the Business Tax Working Group. The Group will focus on changes to the tax treatment of business losses and reducing the corporate tax rate among other potential reforms. KPMG Tax Partner Peter Murray was appointed as the President of The Taxation Institute of Australia for 2011. The Taxation Institute is Australia s leading professional association in tax. AXA Asia Pacific Acquisition by AMP Group The merger of AMP and AXA brought together two long-standing industry giants with a fiercely competitive history and culture to create Australia s largest provider of financial advice superannuation personal insurance retail managed funds and retirement income services. The transaction was the largest acquisition in Australia during the year with 14.5 billion equity value. Substantial commercial complexity was evident in a number of areas tripartite negotiations with AXA APH and AXA SA (France) and the disposal of businesses of AXA APH (across the ASPAC region) to AXA SA. These were subject to local regulatory commercial law and taxation issues in each of those jurisdictions. This transaction explored the boundaries of mergers and acquisition tax relief (scrip for scrip roll-over provisions) with the ATO unearthing significant inadequacies in the existing scrip for scrip rollover law. KPMG took an instrumental role working with government to amend the law to both enable the transaction and also benefit future transactions for the whole community. AXA APH was successfully acquired by AMP on 30 March 2011. Review and Outlook FY11 39 2011 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ) a Swiss entity. All rights reserved. The KPMG name logo and cutting through complexity are registered trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. Peter Nash National Chairman Australia Brian Greig Deputy Chairman Partner Financial Services KPMG Australia Governance and Board The Board is the principal governance and oversight body of KPMG Australia. Key responsibilities include overseeing strategy implementation protecting and enhancing the KPMG brand and overseeing management of the firm. Michelle Hinchliffe Partner Audit 2011 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ) a Swiss entity. All rights reserved. The KPMG name logo and cutting through complexity are registered trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. 40 Review and Outlook FY11 Mick Allworth Office Chairman Canberra Andrew Dickinson Partner Financial Services Ken Drover Partner Business Performance Services Liz Forsyth Partner Advisory David Linke Partner Tax Geoff Wilson CEO 2011 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ) a Swiss entity. All rights reserved. The KPMG name logo and cutting through complexity are registered trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. Review and Outlook FY11 41 The National Executive Committee (NEC) is the principal management body of KPMG Australia. The NEC is responsible for driving the financial performance of the business the development and execution of strategy and establishing processes to monitor and enforce policy compliance. NATIONAL EXECUTIVE COMMITTEE MEMBERS Geoff Wilson CEO(Chairman) 2011 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ) a Swiss entity. All rights reserved. The KPMG name logo and cutting through complexity are registered trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. Stephen Carpenter NationalManagingPartner People Performance&Culture Julie Fahey NationalManagingPartner Markets Rosheen Garnon NationalManagingPartner Tax Chris Hall NationalManagingPartner Risk&Regulation Duncan McLennan NationalManagingPartner Audit Peter Siebels NationalManagingPartner PrivateEnterprise John Teer COO Gary Wingrove NationalManagingPartner Advisory Julie Fahey Geoff Wilson Stephen Carpenter 42 Review and Outlook FY11 Rosheen Garnon Peter Siebels Duncan McLennan Gary Wingrove John Teer National Executive Committee Chris Hall Review and Outlook FY11 43 2011 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ) a Swiss entity. All rights reserved. The KPMG name logo and cutting through complexity are registered trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. KPMG insights At KPMG we recognise that Australian businesses face countless challenges. We aim to address many of the complexities that organisations encounter offering useful research and insights with particular focus on topical issues. These are just a small number of our publications. Visit our website to view all our insights. 2011 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ) a Swiss entity. All rights reserved. The KPMG name logo and cutting through complexity are registered trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. kpmg.com.au CHINA STUDIES CENTRE Australia & China Future Partnerships 2011 Australia & China Future Partnerships 2011 AustrAliA Transparency Report Audit Quality in Focus kpmg.com.au Corporate Citizenship 2011 A report for our people kpmg.com.au Contact us E corporatecitizenship kpmg.com.au www.kpmg.com.au Printed on Knight which use Elemental Chlorine Free low environmental impact pulps sources from FsC (Forest stewardship Council) 2011 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG international Cooperative ( KPMG international ) a swiss entity. All rights reserved. Printed in Australia. KPMG and the KPMG logo are registered trademarks of KPMG international. liability limited by a scheme approved under Professional standards legislation. Transparency Report Audit Quality in Focus Corporate Citizenship 2011 A report for our people FINANCIAL SERVICES INSURANCE General Insurance Industry Survey 2011 25th Annual Survey September 2011 kpmg.com.au FORENSIC Fraudsters target quick gains Fraud Barometer Edition 5 kpmg.com.au Fraudsters target quick gains. Fraud Barometer Edition 5 General Insurance Industry Survey 2011 Tax in Focus MRRT introduced into Parliament Major Australian Banks Year End 2011 44 Review and Outlook FY11 Contacts Ronan Gilhawley Partner in Charge Integration Advisory T 61 2 9335 7029 E rgilhawley kpmg.com.au Jonathan Dunlop National Head Transaction Services T 61 2 9335 7633 E jadunlop kpmg.com.au KPMG GLOBAL SURVEY Trevor Allen National Head Mergers & Acquisitions T 61 2 9455 9303 E trevorallen kpmg.com.au Brisbane Peter Hudson Partner Transaction Services T 61 7 3233 9735 E phudson kpmg.com.au Perth Matthew Kelly A new dawn good deals in challenging times kpmg.com.au Partner Transaction Services T 61 8 9263 7104 E mattkelly kpmg.com.au Adelaide John Ranaldo Partner Transaction Services T 61 8 8236 3196 E jranaldo kpmg.com.au KPMG Transaction Services (Australia) Pty Ltd. Australian Financial Services Licence No. 245402. The information contained in this document is of a general nature. It has been prepared to provide you with information only and does not take into account your objectives financial situation or needs. It does not constitute nor should it be regarded in any manner whatsoever as advice and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. It is not intended to take the place of professional advice and you should not take action on specific issues in reliance on the information contained in this document. Before acting or relying on any information you should consider whether it is appropriate for your circumstances having regard to your objectives financial situation or needs and also whether or not any financial product is appropriate for you. To the extent permissible by law KPMG shall not be liable for any errors omissions defects or misrepresentations in the information or for any loss or damage suffered by persons who use or rely on such information (including for reasons of negligence negligent misstatement or otherwise). 2011 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ) a Swiss entity. All rights reserved. Printed in Australia. The KPMG name logo and cutting through complexity are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. September 2011. VICN08334ADV. Australia Report 2011 australia Risks & Opportunities Survey Accounting for Resource Taxation in Australia Mrrt is it an income tax and why does it matter Australia Report 2011 Risks & OppORtunities kpmg.com.au The ADC Forum in collaboration with KPMG Accounting for Resource Taxation in Australia Australia Report 2011 Risks & Opportunities The ADC Forum in collaboration with KPMG Managing the commercial implications of a price on carbon Integrated Reporting Performance insight through Better Business Reporting Issue 1 kpmg.com kpmg.com.au group100.com.au Managing the commercial implications of a price on carbon Integrated Reporting Performance insight through Better Business Reporting Stewards Moving forward moving onward KPMG and Family Business Australia s Family Business Survey 2011 private enterprise Private Companies Survey 2011 kpmg.com.au Private Companies Survey 2011 Stewards Moving forward moving onward Family Business Survey 2011 Review and Outlook FY11 45 2011 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ) a Swiss entity. All rights reserved. The KPMG name logo and cutting through complexity are registered trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. Mapping the tax reform journey A new dawn good deals in challenging times NATIONAL OFFICES Adelaide 151 Pirie Street Adelaide SA 5000 Tel 61 8 8236 3111 Fax 61 8 8236 3299 Brisbane Riparian Plaza Level 16 71 Eagle Street Brisbane Qld 4000 Tel 61 7 3233 3111 Fax 61 7 3233 3100 Canberra 20 Brindabella Circuit Brindabella Business Park Canberra Airport ACT 2609 Tel 61 2 6248 1111 Fax 61 2 6248 1122 Gold Coast 11th Floor Corporate Centre One Cnr Bundall Road & Slatyer Avenue Bundall Qld 4217 Tel 61 7 5577 7555 Fax 61 7 5577 7444 Melbourne 147 Collins Street Melbourne Vic 3000 Tel 61 3 9288 5555 Fax 61 3 9288 6666 Perth 235 St Georges Terrace Perth WA 6000 Tel 61 8 9263 7171 Fax 61 8 9263 7129 Sydney 10 Shelley Street Sydney NSW 2000 Tel 61 2 9335 7000 Fax 61 2 9335 7001 REGIONAL OFFICES Cairns Level 13 Cairns C orporate Tower 15 Lake Street Cairns Qld 4870 Tel 61 7 4046 8888 Fax 61 7 4051 0116 Darwin 18 Smith Street Darwin NT 0800 Tel 61 8 8982 9000 Fax 61 8 8941 0238 Hobart Level 3 100 Melville Street Hobart Tas 70 00 Tel 61 3 6230 4000 Fax 61 3 6230 4050 Launceston 33 George Street Launceston Tas 7250 Tel 61 3 6337 3737 Fax 61 3 6337 3700 Sunshine Coast Level 1 77 The Espl anade Mooloolaba Qld 4557 Tel 61 7 5444 7999 Fax 61 7 5444 7905 Wollongong Level 3 63 Market Street Wollongong NSW 2500 Tel 61 2 4229 2633 Fax 61 2 4226 2273 46 Review and Outlook FY11 The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. 2011 KPMG an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ) a Swiss entity. All rights reserved. The KPMG name logo and cutting through complexity are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation. Creative Direction marin-guzman.com Photography Rob Henderson Arthur Mostead Murray Darling Basin Authority November 2011. NSWPMGAR2011 kpmg.com.au kpmg.com.au