Beyond International Annual Report 2015

Plain-text annual report

Beyond international AnnuAl RepoRt Chasing Monsters 2 contents 4 Chairman’s report 6 managing DireCtor’s report 12 Corporate governanCe 20 BoarD of DireCtors 21 DireCtors’ report 35 auDitor’s inDepenDenCe DeClaration 36 finanCial statements 80 DireCtors’ DeClaration 81 inDepenDent auDitor’s report 83 shareholDer information 85 Corporate DireCtory 2015 BEYOND INTERNATIONAL ANNUAL REPORT 3 Beyond InternatIonal AnnuAl RepoRt 2015chairman’s report On behalf of the Directors of Beyond International Ltd (ASX code: BYI) I am pleased to highlight some of the main issues and achievements that occupied the Director’s attention during the last financial year to 30th June 2015 particularly those that may effect future growth and expectations. Mr Mikael Borglund deals with the 2015 operational financial results of each of our four divisions in his Managing Director’s Report, Overall 2014-15 financial year was a busy year for Beyond with major changes in all divisions driven partly by changing market conditions, new technology and the emergence of major new content distribution platforms in key markets. These trends are expected to accelerate and have already significantly changed the traditional business models for Beyond’s in house content production and are extending to the distribution businesses of Beyond Distribution and Beyond Home Entertainment. The critical mass achieved in streaming video on demand (SVOD) by Netflix, Amazon, Hulu and others initially in the USA and spreading rapidly to other major markets has disrupted many established regulatory regimes, geographical boundaries and industry rules and practices that have operated in some countries since the introduction of free-to-air television. These changes present great challenges and opportunities for content producers and aggregators particularly those like Beyond with established international networks and expertise operating in major markets. On the other hand the increased competition and uncertainty caused partly by the sheer scale of new technological changes and new business models with reserves of capital that are not concerned with profitability has challenged many of Beyond’s traditional clients in most markets. Your Directors expect this restructuring in Beyond’s major markets to continue for some time. The Directors believe these new circumstances will provide opportunities for each of Beyond’s operating divisions to break out from its historical levels of activity. We are looking for opportunities to grow each of the divisions, internally, by joint- venture and by acquisition. Table 1 is a 10 year summary of some key performance indicators of Beyond International and is prepared to assist shareholders to put annual results in perspective. The Directors currently expect the 2015-16 EBIT and NPAT to improve over 2014-15 however it is too early in the financial year to be accurate or reliable so Directors will comment further on progress when the Half Yearly results to 31st December, 2015 are released to the ASX in late February, 2016. The Directors have announced a 2015 Final Dividend of 5 cents per share to be paid on 16th October 2015 to all shareholders registered on 18th September, 2015. This follows an Interim Dividend of 5 cents per share paid on 20th April, 2015 making a total of 10 cents per share for the 2014-15 financial year. Directors expect to maintain the Interim and Final Dividend at this level in 2015-16. The Directors thank all the individuals who have contributed to the continued success of Beyond. We are very aware of the increasing challenges that dealing daily in multiple time zones, languages and regulatory regimes present and value the knowledge, commitment and courtesy that is usual within Beyond. For and on Behalf of the Board, Ian Ingram 8th September, 2015. BeyonD international limiteD ten year results eBit $000’s net profit $000’s eps (Cents per share) nta per share total equity $000’s return on equity DiviDenDs (Cents per share) 4,818 6,524 7,483 5,047 6,205 8,178 10,190 10,841 8,837 7,870 3,100 4,340 4,992 4,280 4,939 5,099 8,463 9,273 7,975 5,885 5.26 7.27 8.36 7.28 8.40 8.67 14.39 15.12 13.00 9.59 41.32 45.61 43.03 42.40 42.63 45.22 48.33 59.00 64.58 64.28 26,702 28,705 28,220 28,964 30,384 31,377 11.61% 15.12% 17.69% 14.78% 16.26% 16.25% 36,249 23.35% 42,074 22.04% 45,639 17.47% 3.00 4.00 5.00 5.00 6.00 6.00 6.00 7.00 9.00 45,490 12.94% 10.00 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 4 CHAIRMAN’S REPORT 2015Highway Thru Hell 5 Beyond InternatIonal AnnuAl RepoRt 2015managing Director’s report finanCial performanCe for the 12 month perioD to 30th June 2015 • Operating revenue increased by 1.6% to $91,172,000; • Net profit after tax and before outside equity interests decreased 26.6% to $5,885,000; • Earnings per share has decreased by 26.2% to 9.59 cents; • EBIT for the period has decreased by 28.3% to $5,964,000; • Net cash flows from operating activities decreased by 8.7% to $8,135,000 from $8,907,000; • Net cash reduced by $582,000 to $10,403,000 and the Company has no bank debt. fy 2015 $ 000’s fy 2014 $ 000’s varianCe $ $ 000’s varianCe % Operating Revenue Expense Operating EBIT Non-operating Items Additional Amortisation Restructuring Costs EBIT Net Interest Income Profit Before Tax Tax Expense Profit After Tax OEI Net Profit EPS (Cents per Share) Dividends per Share (cents) NTA 91,172 89,772 1,400 (83,302) (80,935) 7,870 8,837 (2,367) (967) (1,906) – (1,906) – 5,964 49 6,013 (128) 5,885 – 5,885 9.59 10.00 64.28 (516) 8,321 228 8,549 (537) 8,012 (37) 7,975 13.00 9.00 64.58 1.6% 2.9% (10.9%) – – (28.3%) (78.5%) (29.7%) (76.1%) (26.6%) 516 (2,357) (179) (2,536) 409 (2,128) 37 (100.0%) (2,091) (3.41) 1.00 (0.30) (26.2%) (26.2%) 11.1% (0.5%) 6 MANAGING DIRECTOR’S REPORT 2015 revieW of operations By segment for the finanCial year enDeD 30th June 2015 Revenue Productions & Copyright Home Entertainment Distribution Digital Marketing Total Revenue OPERATING EBIT Productions & Copyright Home Entertainment Distribution Digital Marketing Corporate 7Beyond Joint Venture Foreign Exchange Gain / (Loss) Operating EBIT Non Operating Items Home Entertainment Digital Marketing Copyright EBIT NMF – Not a meaningful figure fy 2015 $ 000’s fy 2014 $ 000’s varianCe $ $ 000’s varianCe % 33,270 22,463 22,612 12,828 91,172 9,360 1,827 2,420 132 (5,818) (560) 509 7,870 – – (1,906) 5,964 31,494 24,606 23,080 10,592 89,772 9,423 2,395 3,171 (531) (5,938) (239) 556 8,837 (398) (118) – 8,321 1,776 (2,143) (468) 2,236 1,400 (63) (568) (751) 663 120 (321) (47) (967) 398 118 (1,906) (2,357) 5.6% (8.7%) (2.0%) 21.1% 1.6% (0.7%) (23.7%) (23.7%) NMF 2.0% NMF (8.4%) (10.9%) 100.0% 100.0% – (28.3%) Minuscule 7 Beyond InternatIonal AnnuAl RepoRt 20151. television proDuCtions anD Copyright segment Segment revenue increased by $1,776,000 or 5.7% to $33,270,000 compared to the prior year. The number of programmes in production at any point in time is subject to the commissioning process, and the timing of commissions is outside the Company’s control. In the financial year ended 30 June 2015, the Company experienced an increase in the number of projects in production. During the 2015 financial year, over 206 hours of television commenced production, with 38 hours commissioned by US broadcasters. The segment EBIT of $9,360,000 was 0.5% lower than the $9,423,000 reported in the 2014 financial year. The decline in EBIT was due to a review of the carrying value of capitalised production costs, with additional amortisation of $1,895,000 recognised in the financial year. Copyright income (included in total segment revenue above) increased slightly by $28,000 to $6,242,000 compared to FY2014. US broadcast commissions produced during the period include returning series Deadly Women series 9, Facing Evil 6 and the 11th season of MythBusters. New titles include Self Shot Survival, Shark Island, Exodus and a number of pilots for the 7Beyond joint venture that were fully funded by US broadcasters. Australian program commissions during the period included Blood & Thunder: The Sound of Alberts, Deep Water 2, Santos Tour Down Under, Dazzle or Die, Fanshaw & Crudnut, and season 8 and season 9 of Selling Houses Australia. The 12 months to June has seen a rapid increase in the penetration of video on demand platforms in a number of important territories throughout the world. As noted in the Chairman’s report this development is causing disruption to the traditional free to air and cable tv program commissioning models. Companies such as Netflix, Hulu, Amazon and Youtube are bringing with them both challenges and opportunities for the production business. Additional program commissioning opportunities are emerging with the new media platforms – including a demand for programming aimed at children and teens. The demand for high-end animation is increasing as a result of the video on demand platforms focusing on the children’s market as a subscription driver. Beyond is well placed to capitalize on this market segment, with two animation series currently in production. The strategic focus for the coming 12 months includes: • targeting buyers who value our ability to co-produce and co-finance; • strengthening relationships with “new media” outlets; • capitalizing on strong relationships with existing clients and within our proven genre strengths; and • early adoption of new technology to gain market leadership and reputation. This includes the production of Ultra High Definition (4k) content as well as Virtual Reality content to augment linear content production. 2. home entertainment segment (Bhe) Revenue decreased by 9% to $22,463,000 (2014: $24,606,000) compared to the corresponding 12-month period. The segment EBIT (including non- operating items) decreased by 23.7% to $1,827,000 compared to $2,395,000 in the 2014 year. To counter this decrease, BHE has broadened its digital distribution channels, to complement its physical media business, and is now an accredited content ingestion partner for local and international territories with Netflix, Apple iTunes and Google Play. The BHE digital business achieved revenues of $1.1m in FY15 which was a 220% increase on the corresponding 12-month period. In 2015 BHE performed strongly within its strategic market categories. The business continues to gain market share in its target genres and as at 30th June 2015 holds: • Number one market share in sport; • Number one market share in stand up comedy; • Number one market share in factual television; • Number two market share in documentary content (up from #3 last year); and • Number four market share in children’s (down from #3 last year). BHE was successful in acquiring and launching market leading content in 2015 including two television series Australia: The Story of Us and Catching Milat, both broadcast on the Seven Network and a collector’s gift set from Australia’s number one stand-up comedian Carl Barron. To complement the existing portfolio of content, BHE will launch Carl Barron’s first feature film Manny Lewis and two significant drama series which will be broadcast on the Seven Network in 2015/16: 800 Words starring Erik Thomson (Packed to the Rafters) with Bridie Carter (McLeod’s Daughters) and Peter Allen – Not The Boy Next Door starring Joel Jackson (Deadline Gallipoli), Sigrid Thornton (Underbelly: The Golden Mile, SeaChange) and Rebecca Gibney (Packed to the Rafters, Winter). Both series are expected to be high rating event programming in Seven’s schedule. In August 2015, BHE acquired a new key licensor in the AFL. The AFL will complement and grow significantly the company’s already impressive sports label which includes: NRL, NBA, V8 Supercars (including Bathurst), ESPN, UFC, A-League, and Wimbledon. 3. DistriBution tv anD film segment Revenue reduced by $468,000 or 2% to $22,612,000 compared to the corresponding 2014 period. Period EBIT declined 24% to $2,420,000 compared to $3,171,000 in the corresponding 2014 period. Lower EBIT was a result of higher costs increased as a result of re- allocating costs previously attributed to corporate, particularly in relation to accounting and administration services ($218,000), the impact of a declining Australian dollar against the British pound ($90,000) and an increase in provisions against distribution guarantees ($150,000). Third party programs are primarily sourced from independent producers in the US, UK and Canada. Product focus continues to be factual series, documentaries, family and children’s programs as there is a steady demand for these genres from broadcasters throughout the world. With the proliferation of media platforms – both over the air, cable and on the web – channels are becoming increasingly focused on specific audience demographics when acquiring content. 8 MANAGING DIRECTOR’S REPORT 2015 During the year significant sales for third party producers were achieved for Highway Thru Hell, Love It or List It, Airshow and BBQ Crawl and both MythBusters and Deadly Women from Beyond Productions. The share of revenue by third party produced programmes continues to rise with a large volume of new episodes of existing series; third party revenue is now at 58% – a 4% point rise on 2014. Traditional cable broadcasters are still strong worldwide and this combined with the growth of Video on Demand (OTT) platforms will have a positive impact on revenues in this division in the future. This year has also seen a return to quality genre specific factual programming at many of the networks, which will benefit Beyond’s distribution activities as the quality of third party programmes increases. With the increase in quality there will be more of an international market for these factual programming. Consolidation within the industry has increased in 2015, with independent production companies being acquired by major distributors/producers. There has been significant corporate activity in the sector including the acquisition of All3Media by Discovery Communications and the Endemol, Shine and Core merger. There are now fewer medium sized independent producers/distributors active in the international market than at any time in the modern era – and this is an advantage to the medium sized entities in attracting new product and customers as these companies offer an alternative to the dominance of the handful of large entities that dominate the international content business. 4. Digital marketing segment Full year revenues for BeyondD were $12,828,000 21% up on last year’s total of $10,592,000. The operating result for the 12 months was a profit of $132,000 against an operating loss of $649,000 for the corresponding period last year. The year was underpinned by a consistent flow of digital production revenues from key clients in Australia and an improvement in the search consulting business in New Zealand. Both the Australian and New Zealand search operations refocused their search operations into a new service offering around conversion rate optimization. This enabled the business to secure new clients as well as retain existing clients. The lead generation and performance media section of BeyondD had a more difficult year. The market in these offerings is very competitive and continues to be subject to competitive undercutting which negatively impacts profitability Management continue to implement initiatives to increase digital inventory and publisher partnerships to improve lead generation revenues. At the end of the 2015 financial year management decided to bring the two divisions of the digital business closer together with the establishment of a unified performance media offering. A Head of Performance Media was hired and charged with this unification process. A secondary aim of this decision is that it will enable the business to better attract and retain quality staff. The business continues to work closely with other divisions in the Beyond group. Websites were produced for Beyond Productions’ feature films and the Home Entertainment and Distribution divisions were serviced in the maintenance and production of digital assets. With the continued vigilance on cost structure and expected continued success of the production and consulting business, management expects that the business will continue the improvement in profitability that was shown in FY 14/15 in the coming 12 months. 5. 7BeyonD Joint venture The 7Beyond joint venture started operations in September 2013 and FY2015 was the first full year of operations. The Group’s share of operating costs to June 2015 was $560,000. The venture had a number of projects in development during the year, with one, My Dream Lottery Home, being commissioned by HGTV in the United States. The joint venture has a deep slate of projects in development and is actively working with US broadcasters to develop and produce new programs for the US market. 9 Beyond InternatIonal AnnuAl RepoRt 2015NRL 10 MANAGING DIRECTOR’S REPORT 2015 foreign exChange – impaCt on results The Group has significant exposure to foreign exchange fluctuations in the television production and distribution operating segments with over 40% of Group revenues derived from overseas. In the normal course, the company hedges production costs denominated in US$. Foreign currency contracts entered into by the distribution segment are generally not hedged. business segments in the 2014 and 2015 reporting periods. There continued to be volatility in the currency markets during the reporting period, with the Australian dollar ranging from a high of $0.938 to a low of $0.772 against the US dollar. This volatility is reflected in the different The total foreign exchange gain for FY2015 is $509,240 (2014: gain $556,149). This gain is allocated to the operating segments as follows: item segment June 2015 June 2014 movement $ movement % Realised Gain/(Loss). Distribution/TV 353,904 (181,235) Unrealised Gain/(Loss) Distribution/TV Mark to market revaluation of Currency Hedges (Loss) Other* Unrealised Gain Other Other Gain total fx (gain) / loss 87,098 (86,798) 112,447 42,588 509,239 96,969 330,120 277,931 32,364 556,149 535,139 (9,871) (416,917) (165,484) 10,224 (57,133) 295% 10% 126% 60% (32%) (10%) * The Australian dollar expense component of US dollar denominated production contracts are hedged when the contracts are entered into. DiviDenD The Directors have determined to maintain the 2015 (financial year) Final Dividend at 5 cents (unfranked) per share. Shareholders registered on the books on 18 September 2015 will be entitled to this dividend, which will be paid on 16 October 2015. A 5 cent per share (unfranked) 2015 Interim Dividend was paid on 17 April 2015 making the total dividend for the 2015 financial year 10 cents per share (unfranked). Mikael Borglund CEO & Managing Director 27 August 2015 11 Beyond InternatIonal AnnuAl RepoRt 2015 corporate governance statement Love It Or List It UK 12 CORPORATE GOvERNANCE STATEMENT 2015 beyond international limited and its controlled entities abn 65 003 174 409 corporate Governance statement, 30 June 2015 This Corporate Governance Statement of Beyond International Limited (the ‘company’) has been prepared in accordance with the 3rd Edition of the Australian Securities Exchange’s (‘ASX’) Corporate Governance Principles and Recommendations of the ASX Corporate Governance Council (‘ASX Principles and Recommendations’). The company’s ASX Appendix 4G, which is a checklist cross-referencing the ASX Principles and Recommendations to the relevant disclosures in either this statement, our website or Annual Report, is contained on our website at http://www.beyond.com.au/corporate/corporate-governance. This statement has been approved by the company’s Board of Directors (‘Board’) and is current as at 27 August 2015. The ASX Principles and Recommendations and the company’s response as to how and whether it follows those recommendations are set out below. prinCiple 1: lay soliD founDations for management anD oversight reCommenDation 1.1 – a listeD entity shoulD DisClose: (a) the respeCtive roles anD responsiBilities of its BoarD anD management; anD (B) those matters expressly reserveD to the BoarD anD those DelegateD to management. The Board is ultimately accountable for the performance of the company and provides leadership and sets the strategic objectives of the company. It appoints all senior executives and assesses their performance on at least an annual basis. It is responsible for overseeing all corporate reporting systems, remuneration frameworks, governance issues, and stakeholder communications. Decisions reserved for the Board relate to those that have a fundamental impact on the company, such as material acquisitions and takeovers, dividends and buybacks, material profits upgrades and downgrades, and significant closures. Management is responsible for implementing Board strategy, day-to-day operational aspects, and ensuring that all risks and performance issues are brought the Boards attention. They must operate within the risk and authorisation parameters set by the Board. reCommenDation 1.2 – a listeD entity shoulD: (a) unDertake appropriate CheCks Before appointing a person, or putting forWarD to seCurity holDers a CanDiDate for eleCtion, as a DireCtor; anD (B) proviDe seCurity holDers With all material information in its possession relevant to a DeCision on Whether or not to eleCt or re-eleCt a DireCtor. The company undertakes comprehensive reference checks prior to appointing a director, or putting that person forward as a candidate to ensure that person is competent, experienced, and would not be impaired in any way from undertaking the duties of director. The company provides relevant information to shareholders for their consideration about the attributes of candidates together with whether the Board supports the appointment or re-election. reCommenDation 1.3 – a listeD entity shoulD have a Written agreement With eaCh DireCtor anD senior exeCutive setting out the terms of their appointment. The terms of the appointment of a non-executive director, executive directors and senior executives are agreed upon and set out in writing at the time of appointment. reCommenDation 1.4 – the Company seCretary of a listeD entity shoulD Be aCCountaBle DireCtly to the BoarD, through the Chair, on all matters to Do With the proper funCtioning of the BoarD. The Company Secretary reports directly to the Board through the Chairman and is accessible to all directors. reCommenDation 1.5 – a listeD entity shoulD (a) have a Diversity poliCy WhiCh inCluDes requirements for the BoarD or a relevant Committee of the BoarD to set measuraBle oBJeCtives for aChieving genDer Diversity anD to assess annually Both the oBJeCtives anD the entity’s progress in aChieving them; (B) DisClose that poliCy or a summary of it; anD (C) DisClose as at the enD of eaCh reporting perioD the measuraBle oBJeCtives for aChieving genDer Diversity set By the BoarD or a relevant Committee of the BoarD in aCCorDanCe With the entity’s Diversity poliCy anD its progress toWarDs aChieving them, anD either: (1) the respeCtive proportions of men anD Women on the BoarD, in senior exeCutive positions anD aCross the Whole organisation (inCluDing hoW the entity has DefineD “senior exeCutive” for these purposes); or (2) if the entity is a “relevant employer” unDer the WorkplaCe genDer equality aCt, the entity’s most reCent “genDer equality inDiCators”, as DefineD in anD puBlisheD unDer that aCt. The company does not have a formal diversity policy. The company however undertakes to assess an individual’s credentials on their merit, with complete objectivity and 13 Beyond InternatIonal AnnuAl RepoRt 2015without bias so that the company may attract, appoint and retain the best people to work within the company where all persons have equal opportunity. prinCiple 2: struCture the BoarD to aDD value As at the date of this report, 51% of the organisation were women (49% men); and 56% of senior executive positions were occupied by women (44% men). For this purpose, the Board defines a senior executive as a person who makes, or participates in the making of, decisions that affect the whole or a substantial part of the business or has the capacity to affect significantly the company’s financial standing. This therefore includes all senior management and senior executive designated positions as well as senior specialised professionals. No entity within the consolidated entity is a ‘relevant employer’ for the purposes of the Workplace Gender Equality Act 2012 and therefore no Gender Equality Indicators to be disclosed. reCommenDation 1.6 – a listeD entity shoulD (a) have anD DisClose a proCess for perioDiCally evaluating the performanCe of the BoarD, its Committees anD inDiviDual DireCtors; anD (B) DisClose, in relation to eaCh reporting perioD, Whether a performanCe evaluation Was unDertaken in the reporting perioD in aCCorDanCe With that proCess. The company does not currently have a formal process for evaluating the performance of the Board, its committees or individual directors. The Board conducts an introspective annual discussion of its performance on a collective basis to identify general aspects of its performance that could be improved upon, and such analysis includes the roles played by each Board member. Such reviews therefore encapsulate collective discussion around the performance of individual Board members, their roles on specific projects during the financial year, and where relevant, how their role could be modified or suggestions for individual development or performance improvement for the future. Until such time as the company expands to justify an expansion of Board members, the Board is of the current opinion that such performance evaluation is suitable for the company. reCommenDation 1.7 – a listeD entity shoulD (a) have anD DisClose a proCess for perioDiCally evaluating the performanCe of its senior exeCutives; anD (B) DisClose, in relation to eaCh reporting perioD, Whether a performanCe evaluation Was unDertaken in the reporting perioD in aCCorDanCe With that proCess. The Board conducts an annual performance assessment of the CEO against agreed performance measures determined at the start of the year. The CEO undertakes the same assessments of senior executives. In assessing the performance of the individual, the review includes consideration of the senior executive’s function, individual targets, group targets, and the overall performance of the company. Such reviews are conducted during the first quarter of a new financial year. reCommenDation 2.1 – the BoarD of a listeD entity shoulD: (a) have a nomination Committee WhiCh: (1) has at least three memBers, a maJority of Whom are inDepenDent DireCtors; anD (2) is ChaireD By an inDepenDent DireCtor, anD DisClose: (3) the Charter of the Committee; (4) the memBers of the Committee; anD (5) as at the enD of eaCh reporting perioD, the numBer of times the Committee met throughout the perioD anD the inDiviDual attenDanCes of the memBers at those meetings; or (B) if it Does not have a nomination Committee, DisClose that faCt anD the proCesses it employs to aDDress BoarD suCCession issues anD to ensure that the BoarD has the appropriate BalanCe of skills, knoWleDge, experienCe, inDepenDenCe anD Diversity to enaBle it to DisCharge its Duties anD responsiBilities effeCtively. The Board does not maintain a Nomination Committee as it is considered that the current size of the Board does not warrant the formal establishment of a separate committee. The Board therefore performs the function of such a committee which includes the identification of skills and competencies required for the Board and related committees, as well as nomination, selection and performance evaluation of non-executive directors. The Board does not actively manage succession planning and instead relies upon the Board’s extensive networking capabilities and/or executive recruitment firms to identify appropriate candidates when a Board vacancy occurs or when a vacancy is otherwise envisaged. Attributes of candidates put forward will be considered for ‘best-fit’ to the needs of the Board which are assessed at the time of the vacancy. reCommenDation 2.2 – a listeD entity shoulD have anD DisClose a BoarD skills matrix setting out the mix of skills anD Diversity that the BoarD Currently has or is looking to aChieve in its memBership. The Board’s skills matrix indicates the mix of skills, experience and expertise that are considered necessary at Board level for optimal performance of the Board. The matrix reflects the Board’s objective to have an appropriate mix of industry and professional experience including skills such as leadership, governance, strategy, finance, risk, IT, HR, policy development, international business and customer relationship. External consultants may be brought in with specialist knowledge to address areas where this is an attribute deficiency in the Board. 14 CORPORATE GOvERNANCE STATEMENT 2015 reCommenDation 2.3 – a listeD entity shoulD DisClose: (a) the names of the DireCtors ConsiDereD By the BoarD to Be inDepenDent DireCtors; (B) if a DireCtor has an interest, position, assoCiation or relationship of the type DesCriBeD in Box 2.3 But the BoarD is of the opinion that it Does not Compromise the inDepenDenCe of the DireCtor, the nature of the interest, position, assoCiation or relationship in question anD an explanation of Why the BoarD is of that opinion; anD (C) the length of serviCe of eaCh DireCtor. Details of the Board of directors, their appointment dated, length of service as independence status is as follows: DireCtor’s name Date appointeD Ian Robertson 27 September 2005 length of serviCe at reporting Date 9 years status inDepenDenCe status Independent Non- executive The Board may determine that a director is independent notwithstanding the existence of an interest, position, association or relationship of the kind identified in the examples listed under Recommendation 2.3 of the ASX Principles and Recommendations. reCommenDation 2.4 – a maJority of the BoarD of a listeD entity shoulD Be inDepenDent DireCtors. There are currently 4 members on the company’s Board. Having regard to the company’s response to Recommendation 2.3 above, the majority of the Board are not independent. The Board considers that the company is reliant upon the business relationships and interests that it has with the non-independent directors in order to achieve its objectives at this time. Until such time as the company is of a size that warrants the appointment of additional non- executive and independent directors, the Board is of the view that the absence of a majority of independent directors is not an impediment to its operations, shareholders or other stakeholders reCommenDation 2.5 – the Chair of the BoarD of a listeD entity shoulD Be an inDepenDent DireCtor anD, in partiCular, shoulD not Be the same person as the Ceo of the entity. The roles of the Chair of the Board and Chief Executive Officer are separate. Ian Ingram is Chair of the Board and is not considered to be an independent director of the company. Mikael Borglund is the CEO. The Board acknowledges the ASX Recommendation that the Chair of the Board be an independent director, however the Board has formed the view that Mr Ingram is the most appropriate person to lead the Board given his experience and skills. reCommenDation 2.6 – a listeD entity shoulD have a program for inDuCting neW DireCtors anD proviDe appropriate professional Development opportunities for DireCtors to Develop anD maintain the skills anD knoWleDge neeDeD to perform their role as DireCtors effeCtively. New directors undertake an induction program coordinated by the Company Secretary that briefs and informs the director on all relevant aspects of the company’s operations and background. A director development program is also available to ensure that directors can enhance their skills and remain abreast of important developments. prinCiple 3: aCt ethiCally anD responsiBly Recommendation 3.1 – A listed entity should: (a) have a code of conduct for its directors, senior executives and employees; and (b) disclose that code or a summary of it. The company maintains a code of conduct for its directors, senior executives and employees. In summary, the code requires that each person act honestly, in good faith and in the best interests of the company; exercise a duty of care; use the powers of office in the best interests of the company and not for personal gain, declare any conflict of interest; safeguard company’s assets and information and undertake any action that may jeopardise the reputation of company. That code is available on the company’s website. prinCiple 4: safeguarD integrity in Corporate reporting reCommenDation 4.1 – the BoarD of a listeD entity shoulD: (a) have an auDit Committee WhiCh: (1) has at least three memBers, all of Whom are non-exeCutive DireCtors anD a maJority of Whom are inDepenDent DireCtors; anD (2) is ChaireD By an inDepenDent DireCtor, Who is not the Chair of the BoarD, anD DisClose: (3) the Charter of the Committee; (4) the relevant qualifiCations anD experienCe of the memBers of the Committee; anD (5) in relation to eaCh reporting perioD, the numBer of times the Committee met throughout the perioD anD the inDiviDual attenDanCes of the memBers at those meetings; or (B) if it Does not have an auDit Committee, DisClose that faCt anD the proCesses it employs that inDepenDently verify anD safeguarD the integrity of its Corporate reporting, inCluDing the proCesses for the appointment anD removal of the external auDitor anD the rotation of the auDit engagement partner. 15 Beyond InternatIonal AnnuAl RepoRt 2015The Board maintains a combined Audit and Risk Committee, the members of which are:- DireCtor’s name Anthony Lee – Chair exeCutive status inDepenDenCe status Non-Executive Not independent Ian Ingram Non-Executive Not independent The majority of the Committee members and the Chair are not independent. The current size of the Board does not allow for this recommendation to be met. obligations. Where any such person is of any doubt as to whether they possess information that could be classified as market sensitive, they are required to notify the Company Secretary immediately in the first instance. The Company Secretary is required to consult with the CEO in relation to matters brought to his or her attention for potential announcement. Generally, the CEO is ultimately responsible for decisions relating to the making of market announcements. The Board is required to authorise announcements of significance to the company. No member of the company shall disclose market sensitive information to any person unless they have received acknowledgement from the ASX that the information has been released to the market. Details of the qualifications and experience of the members of the Committee is detailed in the ‘Information of directors’ section of the Directors’ report. prinCiple 6: respeCt the rights of seCurity holDers The Charter of the Committee is available at the company’s website. The number of Committee meetings held and attended by each member is disclosed in the ‘Meetings of directors’ section of the Directors’ report. reCommenDation 4.2 – the BoarD of a listeD entity shoulD, Before it approves the entity’s finanCial statements for a finanCial perioD, reCeive from its Ceo anD Cfo a DeClaration that, in their opinion, the finanCial reCorDs of the entity have Been properly maintaineD anD that the finanCial statements Comply With the appropriate aCCounting stanDarDs anD give a true anD fair vieW of the finanCial position anD performanCe of the entity anD that the opinion has Been formeD on the Basis of a sounD system of risk management anD internal Control WhiCh is operating effeCtively. For the financial year ended 30 June 2015 and the half-year ended 31 December 2014, the company’s CEO and CFO provided the Board with the required declarations. reCommenDation 4.3 – a listeD entity that has an agm shoulD ensure that its external auDitor attenDs its agm anD is availaBle to ansWer questions from seCurity holDers relevant to the auDit. The audit engagement partner attends the AGM and is available to answer shareholder questions from shareholders relevant to the audit. prinCiple 5: make timely anD BalanCeD DisClosure reCommenDation 5.1 – a listeD entity shoulD (a) have a Written poliCy for Complying With its Continuous DisClosure oBligations unDer the listing rules; anD (B) DisClose that poliCy or a summary of it. The company maintains a written policy that outlines the responsibilities relating to the directors, officers and employees in complying with the company’s disclosure reCommenDation 6.1 – a listeD entity shoulD proviDe information aBout itself anD its governanCe to investors via its WeBsite. The company maintains information in relation to governance documents, directors and senior executives, Board and committee charters, annual reports, ASX announcements and contact details on the company’s website. reCommenDations 6.2 anD 6.3 A listed entity should design and implement an investor relations program to facilitate effective two-way communication with investors (6.2). A listed entity should disclose the policies and processes it has in place to facilitate and encourage participation at meetings of security holders (6.3). In order for the investors to gain a greater understanding of the company’s business and activities, the company schedules regular interactions between the CEO, CFO and/ or Managing Director where it engages with institutional and private investors, analysts and the financial media. These meetings are not held within a four week blackout period in advance of the release of interim or full-year results. The company encourages shareholders to attend its AGM and to send in questions prior to the AGM so that they may be responded to during the meeting. It also encourages ad hoc enquiry via email which are responded to. Written transcripts of the meeting are made available on the company’s website. Recommendation 6.4 – A listed entity should give security holders the option to receive communications from, and send communications to, the entity and its security registry electronically. The company engages its share registry to manage the majority of communications with shareholders. Shareholders are encouraged to receive correspondence from the company electronically, thereby facilitating a more effective, efficient and environmentally friendly communication mechanism with shareholders. Shareholders not already receiving information electronically can elect to do so through the share registry, Computershare Australia Limited at https://www-au.computershare.com/investor/?gcc=au. 16 CORPORATE GOvERNANCE STATEMENT 2015 prinCiple 7: reCognise anD manage risk reCommenDations 7.1 & 7.2 The board of a listed entity should: (a) have a committee or committees to oversee risk, each of which: (1) has at least three members, a majority of whom are independent directors; and (2) is chaired by an independent director, and disclose: (3) the charter of the committee; (4) the members of the committee; and (5) as at the end of each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at those meetings; or (b) if it does not have a risk committee or committees that satisfy (a) above, disclose that fact and the processes it employs for overseeing the entity’s risk management framework (7.1). The board or a committee of the board should: (a) review the entity’s risk management framework at least annually to satisfy itself that it continues to be sound; and (b) disclose, in relation to each reporting period, whether such a review has taken place (7.2). The Board maintains a combined Audit and Risk Committee. The members of the Committee are detailed in Recommendation 4.2 above. The charter of the Risk Committee can be found on the company’s website. The Audit and Risk Committee reviews the company’s risk management framework annually to ensure that it is still suitable to the company’s operations and objectives and that the company is operating within the risk parameters set by the Board. As a consequence of the last review undertaken for the year ended 30 June 2015, there were no significant recommendations made. The Board acknowledges that it has not followed the ASX Recommendations in relation to the number of members and independence due to the size of the Board. The company maintains internal controls which assist in managing enterprise risk, and these are reviewed as part of the scope of the external audit, with the auditor providing the Board with commentary on their effectiveness and the need for any additional controls. The Managing Director and CEO are responsible for monitoring operational risk, ensuring all relevant insurances are in place, and ensuring that all regulatory and compliance obligations of the company are satisfied. reCommenDation 7.3 – a listeD entity shoulD DisClose: (a) if it has an internal auDit funCtion, hoW the funCtion is struCtureD anD What role it performs; or (B) if it Does not have an internal auDit funCtion, that faCt anD the proCesses it employs for evaluating anD Continually improving the effeCtiveness of its risk management anD internal Control proCesses. The company does not have a dedicated internal audit function. The responsibility for risk management and internal controls lies with both the Managing Director and CFO who continually monitor the company’s internal and external risk environment. Necessary action is taken to protect the integrity of the company’s books and records including by way of design and implementation of internal controls, and to ensure operational efficiencies, mitigation of risks, and safeguard of company assets. reCommenDation 7.4 – a listeD entity shoulD DisClose Whether it has any material exposure to eConomiC, environmental anD soCial sustainaBility risks anD, if it Does, hoW it manages or intenDs to manage those risks. Refer to the company’s Annual Report for disclosures relating to the company’s material business risks (including any material exposure to economic, environmental or social sustainability risks). Refer to commentary at Recommendations 7.1 and 7.2 for information on the company’s risk management framework. prinCiple 8: remunerate fairly anD responsiBly reCommenDation 8.1 – the BoarD of a listeD entity shoulD: (a) have a remuneration Committee WhiCh: (1) has at least three memBers, a maJority of Whom are inDepenDent DireCtors; anD (2) is ChaireD By an inDepenDent DireCtor, anD DisClose: (3) the Charter of the Committee; (4) the memBers of the Committee; anD (5) as at the enD of eaCh reporting perioD, the numBer of times the Committee met throughout the perioD anD the inDiviDual attenDanCes of the memBers at those meetings; or (B) if it Does not have a remuneration Committee, DisClose that faCt anD the proCesses it employs for setting the level anD Composition of remuneration for DireCtors anD senior exeCutives anD ensuring that suCh remuneration is appropriate anD not exCessive. The Board maintains a combined Nomination and Remuneration Committee. The members of the Committee are detailed below. DireCtor’s name exeCutive status inDepenDenCe status Ian Robertson – Chair Anthony Lee – Chair Non-Executive Independent Non-Executive Not independent Ian Ingram Non-Executive Not independent Details of the qualifications and experience of the members of the Committee is detailed in the ‘Information of directors’ section of the Directors’ report. The Remuneration Committee oversees remuneration policy and monitors remuneration outcomes to promote the interests of shareholders by rewarding, motivating and retaining employees. The committee’s charter sets out the roles and responsibilities, composition and structure of the Committee and is available on the company’s website. The number of Committee meetings held and attended by each member is disclosed in the ‘Meetings of directors’ section of the Directors’ report. 17 Beyond InternatIonal AnnuAl RepoRt 2015 The Dengineers 18 CORPORATE GOvERNANCE STATEMENT 2015 The Board acknowledges that it has not followed the ASX Recommendations in relation to the number of members and independence due to the size of the Board. reCommenDation 8.2 – a listeD entity shoulD separately DisClose its poliCies anD praCtiCes regarDing the remuneration of non-exeCutive DireCtors anD the remuneration of exeCutive DireCtors anD other senior exeCutives. Non-executive directors are remunerated by way of cash fees, superannuation contributions and non-cash benefits in lieu of fees. The level of remuneration reflects the anticipated time commitments and responsibilities of the position. Performance based incentives are not available to non-executive directors. Executive directors and other senior executives are remunerated using combinations of fixed and performance based remuneration. Fees and salaries are set at levels reflecting market rates and performance based remuneration is linked directly to specific performance targets that are aligned to both short and long term objectives. Further details in relation to the company’s remuneration policies are contained in the Remuneration Report, within the Directors’ report. reCommenDation 8.3 – a listeD entity WhiCh has an equity-BaseD remuneration sCheme shoulD: (a) have a poliCy on Whether partiCipants are permitteD to enter into transaCtions (Whether through the use of Derivatives or otherWise) WhiCh limit the eConomiC risk of partiCipating in the sCheme; anD (B) DisClose that poliCy or a summary of it The use of derivatives or other hedging arrangements for unvested securities of the company or vested securities of the company which are subject to escrow arrangements is prohibited. Where a director or other senior executive uses derivatives or other hedging arrangements over vested securities of the company, this will be disclosed. 19 Beyond InternatIonal AnnuAl RepoRt 2015boarD of Directors mikael BorglunD managing DireCtor anD Ceo BBus, Ca A founding director of Beyond International in 1984, Mikael Borglund became Managing Director of the Beyond International Limited Group of companies in 1991 having been responsible for production, international sales and finance. During an outstanding career in the film and television industry Mikael has executive produced a number of Australian award winning feature films including Kiss Or Kill (1996), Lantana (2001), and James Cameron’s Deepsea Challenge (2014). Mikael has been Executive Producer of hundreds of hours of television for broadcasters around the globe. His credits include a number of internationally successful shows including, MythBusters, Stingers, Good Guys/Bad Guys, Halifax Fp, Atlas: Australia, South Side Story, Damage Control and the animated series Beat Bugs. A highly regarded member of the Australian film and television industry, Mikael was elected to the council of the Screen Producers Association of Australia (SPAA) in 1994, and appointed to the Board of the Australian Film Institute in 1997 – 2005. ian roBertson non-exeCutive DireCtor llB, BCom, faiCD Ian Robertson is a corporate and media lawyer who heads the media and entertainment practice of national law firm, Holding Redlich. He is also the managing partner of the firm’s Sydney office. He has worked in and for the media and entertainment industries for most of his career, including in the 1980’s as the in-house counsel for David Syme & Co Limited, publisher of the The Age newspaper, and as a senior executive of the video, post-production and facilities company, AAV Australia. He became a partner of Holding Redlich in Melbourne in 1990 and established the firm’s Sydney office in 1994. He is also the deputy chair of the peak Australian Government film agency, Screen Australia and president of the board of the Victorian Government film agency, Film Victoria. His former appointments include board member of the Australian Broadcasting Authority, director and chair of Ausfilm, director and deputy chair of Film Australia Limited, and director of the predecessor agency to Film Victoria, Cinemedia. Mr Robertson is a Fellow of the Australian Institute of Company Directors. ian ingram Chairman Ba, BsC (eCon) (hons), Barrister at laW Mr Ingram was the founding Chairman of Beyond International Limited when it was formed in September 1986 and is currently the Non Executive Chairman. During his tenure, Beyond has emerged as one of the world’s leading film and television production, sales and distribution organisations. anthony hsien pin lee non-exeCutive DireCtor B.a. prinCeton university neW Jersey usa, mBa the Chinese university of hong kong Mr Lee is a private investor and a Director of Aberon Pty Limited, his investment company. Prior to moving to Sydney from Hong Kong in 1987, Mr Lee was a corporate finance executive with a leading British merchant bank. 20 BOARD Of DIRECTORS 2015 Directors’ report your DireCtors present their report on the Company anD its ControlleD entities (“ConsoliDateD entity” or “group”) for the finanCial year enDeD 30 June 2015. 1. DireCtors The names of Directors in office at any time during or since the end of the financial year are; IAN INGRAM Non-Executive Chairman MIkAEl BORGluND Managing Director ANThONy lEE Non-Executive Director IAN ROBERTSON Non-Executive Director Directors have been in office since the start of the financial year to the date of this report unless otherwise stated. 2. Company seCretary The following person held the position of Company Secretary during and at the end of the financial year: Mr. Paul Wylie, joined Beyond on the 7 November 2013 and was appointed Company Secretary on 7 November 2013. Mr. Wylie is also the General Manager of Finance for the Group. 3. prinCipal aCtivities of the group The principal activities of the group during the financial year were television program production, international sales of television programs and feature films, home entertainment and digital marketing. There was no significant change in the nature of those activities during the financial year. 4. operating results The consolidated profit attributable to members of the Company for the financial year was $5,885,000 (2014: $7,975,000). 5. DiviDenDs An interim 2015 dividend of 5 cents per share was paid in April 2015 and the Company will pay a final 2015 dividend of 5 cents per share in October 2015. This brings the total dividend for the 2015 year to 10 cents per share. 6. revieW of operations Revenue from operations for the year has increased by 1.6% from $89,772,000 to $91,172,000 with operating expenses increasing by $2,367,000 or 2.9% year on year. In addition the Group incurred additional amortisation of copyright assets of $1,906,000. Net profit after tax is $5,885,000 for the 2015 financial year – a decrease of 27% over the 2014 financial year. Net cash flow from operating activities was $8,135,000 (2014: $8,907,000) with the final 2014 and interim 2015 dividend totalling $6,522,778 being paid during the period. television proDuCtion anD Copyright segment Television production revenue increased by $1,776,000 or 5.6% to $33,270,000. In 2015 the net “copyright income” from the further exploitation of the programs by Beyond Distribution is $6,248,000 compared to $6,213,000 in 2014, an increase of 0.6%. home entertainment segment (Bhe) Revenue decreased by 8.7% to $22,463,000 (2014: $24,606,000) compared to the corresponding 12-month period. The segment EBIT has decreased by 23.7% to $1,827,000 (2014: $2,395,000) compared to the corresponding 12-month period. In 2015 BHE performed strongly within its strategic market categories. The business continues to gain market share in its target genres and as at 30th June 2015 holds:- • Number one market share in sport; • Number one market share in stand up comedy; • Number one market share in factual television; • Number two market share in documentary content (up from #3 last year); and • Number four market share in children’s (down from #3 last year). Segment EBIT for the 12-month period decreased 0.7% to $9,360,000 (2014: $9,423,000). The result for the 2014 financial year includes restructuring costs of $398,000. The television series’ produced for the US market during the year includes returning titles MythBusters (series 10 and 11), Deadly Women (series 9), and Facing Evil (series 6). New commissions in the year include Self Shot Survival, Shark Island, Exodus and a number of pilots for 7Beyond fully funded by US broadcasters. Australian program commissions during the period include Blood & Thunder: The Sound of Alberts, Deep Water 2, Santos Tour Down Under, Dazzle or Die, Fanshaw & Crudnut, and season 8 and season 9 of Selling Houses Australia. In the 2015 financial year 37% of total segment revenues were transacted in US dollars (2014: 46%). The 7Beyond joint venture began operating in late 2013, and the result for the current year includes a 50% share of net operating costs of $560,000. The venture has received a commission from HGTV for My Dream Lottery Home. tv anD film DistriBution segment (BeyonD DistriBution) Segment revenue has decreased by $468,000 or 2% to $22,612,000 compared to the corresponding 12 month period (2014: $23,080,000). The segment EBIT for the twelve months decreased by 23.7% to $2,420,000 from $3,171,000 in 2014. Increases in costs were due to a realignment of costs, particularly in relation to accounting services, and an increase in provisions against distribution advances. During the current period 71% of total segment revenues are denominated in US$ (2014: 71%). During the year successful sales were achieved for in house produced series’, which include MythBusters and Deadly Women. The most successful third party products sold were Highway Thru Hell, Love It Or List It, Income Property and BBQ Crawl. 21 Beyond InternatIonal AnnuAl RepoRt 2015Deadly Women 22 DIRECTORS’ REPORT 2015 Digital marketing segment (BeyonDD) Segment revenue has increased by $2,236,000 or 21% to $12,828,000 compared to the corresponding 12 month period (2014: $10,592,000). The segment EBIT for the twelve months increased to a profit of $132,000 from a loss of $649,000 in 2014. The result for 2014 includes $118,000 of restructuring costs. The year was underpinned by a consistent flow of digital production revenues from key clients in Australia and an improvement in the search consulting business in New Zealand. Both the Australian and New Zealand search operations refocused their search operations into a new service offering around conversion rate optimization. This enabled the business to secure new clients as well as retain existing clients. 7. signifiCant Changes in the state of affairs There were no significant changes in the state of affairs of the Group during the financial year ended 30 June 2015. 8. matters suBsequent to the enD of the finanCial year On 27 August 2015 the company declared a final dividend of 5 cents per share to be paid in October 2015. With the exception of dividends there are no subsequent events to declare. 9. likely Developments anD expeCteD results of operations The Beyond International Group of companies delivered another strong result for the 12 months to 30 June 2015 despite a difficult global economic climate. All four operating segments are facing competitive pressures and technological challenges. The television production and distribution segments operate in an international environment and are subject to economic fluctuations that occur in the different markets in which they operate. Although the company has successfully traded in these markets for over twenty five years it is difficult to predict how these various economies will perform over the short term. Beyond has continued to strengthen its balance sheet to ensure the company is positioned to create and acquire media content that will be exploited through both traditional media outlets and new delivery platforms. Over the next twelve months the Company’s focus will be to further strengthen the financial performance in all operating segments of the Group in order to generate surplus cash to pay dividends, invest in working capital, and new content. Beyond is also actively seeking and assessing strategic acquisition opportunities in both core business and the digital media sector. 23 Beyond InternatIonal AnnuAl RepoRt 201510. information on DireCtors & Company seCretary DireCtor qualifiCations & experienCe speCial responsiBilities DireCtors’ interests in shares of BeyonD international limiteD I INgRAM BA, Bsc(Econ), Honours Barrister at Law Chairman of Winchester Investments Group Pty Ltd and Sealion Media Ltd as well as Chairman of various private venture capital and investment companies. Member of the Board since 1986 Chairman, member of the Audit Committee, member of the Remuneration Committee, and Chairman of the Nomination Committee. 17,452,571 direct/indirect M BORgLUNd B.Bus, CA Extensive management & finance experience. Former member of the board of the Australian Film Institute. Member of the Board since 1990 A LEE BA, MBA Director of Aberon Pty Ltd, a private investment company, a substantial shareholder in the company. Member of the Board since 1990 IAN ROBERTsON LL.B. BComm, FAICD A media and corporate lawyer who heads the media and entertainment practice of national law firm Holding Redlich and is the Managing Partner of the firm’s Sydney office. He is President of the Board of the Victorian Government screen agency Film Victoria. His former appointments include Deputy Chair Screen Australia. Member of the Board since 2006 PAUL WyLIE BA Acctg, CPA Extensive media finance experience with over 30 years in broadcast and subscription television and television production industries. Company Secretary roles for a number of entities during this period Managing Director, CEO and member of the Nomination Committee. 3,150,949 direct/indirect Non-Executive Director, Chairman of the Audit Committee, member of the Remuneration Committee, and member of the Nomination Committee. 5,474,997 direct/indirect Non-Executive Director, Chairman of the Remuneration Committee and member of the Nomination Committee. 110,000 direct/indirect General Manager, Finance Company Secretary 2,000 Indirect The particulars of Directors’ interests in shares are as at the date of this report. 24 DIRECTORS’ REPORT 2015 11. DireCtors’ meetings The numbers of meetings of the Company’s Board of Directors and of each Committee held during the financial year ended 30 June 2015, and the number of meetings attended by each Director was: BoarD of DireCtors meetings auDit Committee meetings remuneration Committee meetings nomination Committee meetings Director I Ingram M Borglund A Lee I Robertson number eligible to attend number attended number eligible to attend number attended number eligible to attend number attended number eligible to attend number attended 8 8 8 8 8 8 8 8 2 - 2 - 2 - 2 - 2 - 2 2 2 - 2 2 2 2 2 2 2 2 2 2 Pokemon 25 Beyond InternatIonal AnnuAl RepoRt 201512. inDemnifiCation anD insuranCe of DireCtors anD offiCers The Company has entered into agreements to indemnify all Directors of the Company named in section 1 of this report, and current and former executive officers of the Group, against all liabilities to persons (other than the Company or a related body corporate) which arise out of the performance of their normal duties as Director or executive officer, unless the liability relates to conduct involving a lack of good faith. The Group has agreed to indemnify the Directors and executive officers against all costs and expenses incurred in defending an action that falls within the scope of the indemnity and any resulting payments. The Group paid insurance premiums totalling $24,877 in respect of Directors’ and officers’ liability insurance. The policy does not specify the premium of individual Directors and executive officers. The directors’ and officers’ liability insurance provides cover against all costs and expenses involved in defending legal actions, and any resulting payments arising from a liability to persons (other than the Company or a related body corporate) incurred in their position as Director or executive officer, unless the conduct involves a wilful breach of duty or an improper use of inside information or position to gain advantage. 13. remuneration report a) remuneration poliCy The broad approach by the Group to remuneration is to ensure that remuneration packages: • properly reflect individual’s duties and responsibilities; • are competitive in attracting, retaining and motivating staff of the highest quality; and • uphold the interests of shareholders. The remuneration policies adopted are considered to have contributed to the growth of the Group’s profits and shareholder benefit by aligning remuneration with the performance of the Group. B) remuneration approaCh – non-exeCutive DireCtors Non-Executive Directors are remunerated from a maximum aggregate amount of $350,000 per annum. Current rates effective 1 October 2013 paid to Non-Executive Directors are: Chairman $188,025 p.a. Non-Executive Director $50,000 p.a. Additional Duties Chairman of a board committee $10,000 p.a. Member of a board committee $5,000 p.a. The Board’s policy is to remunerate Non-Executive Directors at market rates from comparable companies having regard to the time commitments and responsibilities assumed. There are no termination payments to Non-Executive Directors on retirement from office other than payments relating to their accrued superannuation entitlements. 26 DIRECTORS’ REPORT 2015 C) ContraCtual arrangements – key management personnel name position Duration of Contract period of notice to terminate the Contract M Borglund Managing Director No fixed term Either party may terminate on twelve months notice J Luscombe General Manager – Productions & Senior Vice President No fixed term Either party may terminate on twelve months notice P Tehan T McGee General Manager – Legal & Business Affairs General Manager – Business Development No fixed term One month notice given by either party No fixed term One month notice given by either party M Murphy General Manager – Distribution No fixed term Three months notice given by either party P Wylie General Manager – Finance & Company Secretary P Maddison J Ward General Manager – Home Entertainment General Manager – Digital Marketing No fixed term Three months notice given by either party No fixed term One month notice given by either party No fixed term Three months notice given by either party The contracts referred to are currently on foot and variously part performed as to the duration of them. The contracts are terminable by the Company in the event of serious misconduct or non-rectified breach. Only remuneration that is due but unpaid up to the date of termination and normal statutory benefits will be paid in these circumstances. Australia: The Story Of Us 27 Beyond InternatIonal AnnuAl RepoRt 2015D) key management personnel remuneration The Board undertakes an annual review of its performance and the performance of the Board Committees against goals set at the start of the financial year. Any performance related bonuses are available to executives of the Company and thus no bonuses are payable to Non-Executive Directors. Any performance related bonuses will be based on the divisional net profit before tax exceeding the annual budget approved by the Board prior to the commencement of the relevant financial year by a minimum percentage, and achieving pre-agreed KPI’s. Details of the nature and the remuneration of each Director of Beyond International Limited and each of the seven executives with the greatest authority for the strategic direction and management of the Company and the Group are set out in the following tables. DireCtors of BeyonD international limiteD 2015 name salary & fees Bonus non- monetary Benefits post-employment Benefits (superannuation) share BaseD payments other long term Benefits (leave) total share BaseD payments % of total M Borglund $719,234 I Ingram $188,025 A Lee $54,795 I Robertson $54,795 total $1,016,849 - - - - - - - - - - $18,783 $12,628 - $5,205 $5,205 - - - - - - - $750,645 0% $188,025 0% $60,000 0% $60,000 0% $29,193 $12,628 - $1,058,670 0% Mikael Borglund’s bonus as a percentage of his salary and fees is 0% (2014: 0%). The bonus calculation is based on the Group’s net profit before tax against budget. 2014 name salary & fees Bonus non- monetary Benefits post-employment Benefits (superannuation) share BaseD payments other long term Benefits (leave) total share BaseD payments % of total M Borglund $699,274 I Ingram $195,804 A Lee $54,920 I Robertson $54,920 total $1,004,918 - - - - - - - - - - $17,775 $25,286 - $5,080 $5,080 - - - - - - - $742,335 0% $195,804 0% $60,000 0% $60,000 0% $27,935 $25,286 - $1,058,139 0% Mr Borglund is the only Executive Director employed by Beyond International Limited. During the 2015 financial year the Group did not exceed the budget by the set criteria and as such Mikael Borglund was not entitled to a performance bonus. For the 2014 financial year the Group did not exceed the budget by the set criteria and as such Mikael Borglund was not entitled to a performance bonus. 28 DIRECTORS’ REPORT 2015 exeCutive offiCers’ remuneration 2014 name salary & fees Bonus J Luscombe $547,450 $670,145 P Wylie T McGee $224,899 $268,845 - - M Murphy $259,714 $45,011 P Tehan $205,447 P Maddison $329,171 - - - J Ward ToTal 2015 name $199,999 $2,035,525 $715,156 salary & fees Bonus non- mone- tary Benefits post- employment Benefits (super- annuation) other long term Benefits (leave) total termin- ation Benefits share BaseD pay- ments share BaseD payments % of total - - - - - - - - $18,783 $29,215 $18,783 $(2,470) $18,783 $16,849 - $4,339 $18,783 $12,854 $18,783 $4,924 $18,783 $7,569 $112,698 $73,280 - - - - - - - - - $1,265,593 0% - $241,212 - $304,477 - $309,064 - $237,084 - $352,878 - $226,351 0% 0% 0% 0% 0% 0% - $2,936,659 0% non- mone- tary Benefits post- employment Benefits (super- annuation) other long term Benefits (leave) total termin- ation Benefits share BaseD pay- ments share BaseD payments % of total J Luscombe $531,879 $595,429 P Wylie $141,308 T McGee $230,768 M Murphy $251,279 R Milne P Tehan $182,766 $198,241 P Maddison $321,103 - - - - - - J Ward J Ostler ToTal $170,000 $25,736 $231,919 - $2,259,263 $621,165 - - - - - - - - - - $17,775 $15,087 $11,486 - $17,775 $(13,477) - $1,806 $6,714 - $17,775 $13,003 $17,775 ($1,459) $17,775 $(1,101) - - - - - - - - - $1,160,170 - $152,794 - $235,066 - $253,085 - $189,480 - $229,019 - $337,419 - $212,410 $13,331 - $109,545 - $354,795 0% 0% 0% 0% 0% 0% 0% 0% 0% $120,406 $13,859 $109,545 - $3,124,238 0% John Luscombe’s bonus as a percentage of his salary and fees is 122% (2014: 112%). The bonus calculation is based on the financial performance of programs created and produced, and divisional net profit before tax performance to budget. Michael Murphy’s bonus as a % of his salary and fees is 17.3% (2014: 0%). The bonus is based on earnings before foreign exchange, interest and income tax against budget for the 2013/14 financial year. This bonus was paid in the 2015 financial year. James Ward’s bonus as a % of his salary and fees is 0% (2014: 13.7%). The bonus calculation is based on revenues written during the year. During the 2015 financial year, the Group did not exceed the budget by the set criteria or for the individual divisions. As such no executives, other than John Luscombe and Michael Murphy were entitled to a performance bonus. Both have been received and are detailed above. In the 2014 financial year the budget criteria was not met and consequently those executives other than John Luscombe and James Ward were not entitled to this bonus. 29 Beyond InternatIonal AnnuAl RepoRt 2015Catching Milat 30 DIRECTORS’ REPORT 2015 exeCutive offiCers’ shareholDings 2014 speCifieD exeCutives J Luscombe T McGee P Wylie P Tehan P Maddison M Murphy J Ward total 2014 speCifieD exeCutives J Luscombe T McGee F Crago R Milne P Wylie P Tehan P Maddison M Murphy J Ostler J Ward total BalanCe 1.07.14 reCeiveD as remuneration options exerCiseD net Change other* BalanCe 30.06.15 273,478 75,000 2,000 75,000 75,000 - - 475,478 - - - - - - - - - - - - - - - - - - - - - - - - BalanCe 1.07.12 reCeiveD as remuneration options exerCiseD net Change other* 273,478 75,000 125,000 150,000 - 75,000 75,000 - - - 773,478 - - - - - - - - - - - - - - - - - - - - - - - - (125,000) (150,000) 2,000 - (25,000) - - - 273,478 75,000 2,000 75,000 50,000 - - 475,478 BalanCe 30.06.13 273,478 75,000 - - 2,000 75,000 50,000 - - - * The net change from the opening balance represents sale or purchase of shares during the year. (298,000) 475,478 My Little Pony 31 Beyond InternatIonal AnnuAl RepoRt 2015transaCtions With other relateD parties J Luscombe is a director of Ryzara Pty Ltd. The company has received payments for services rendered by J Luscombe during the year. These fees are included as part of the Executive Remuneration disclosed in Note 26 and the Director’s Report. K Borglund (M Borglund’s daughter) is the owner of Idylic Interiors. Idylic Interiors provided refurbishment services to the organisation, with a total value of $0 (2014: $17,358) during the financial year. M Borglund was a director of Wight Expedition Films Pty Ltd (Resigned 14/10/14). Beyond International Limited has provided services – including executive producer, production, production accountancy and administration services – to Wight Expedition Films Pty Ltd. An amount of $0 (2014: $90,000) was recognised in the accounts during the financial year. voting anD Comments maDe at the Company’s 2014 annual general meeting (agm) The company received 100% of “for” votes in relation to its remuneration report for the year ended 30 June 2014. The company did not receive any specific feedback at the AGM regarding its remuneration policy. BeyonD international employee share plan The Board has adopted an employee share plan (note 23) under which employees and Directors of the Group may subscribe for shares in the Company using funds loaned to them by the Group. The Board has also adopted a share plan on substantially the same terms for consultants of the Group (Consultant Plan). The purpose of the Employee Share Plan is to: • assist in the retention and motivation of employees and Directors of the Group by providing them with a greater opportunity to participate as shareholders in the success of the group; and • create a culture of share ownership amongst the employees of the Group. The employee share plan was approved by shareholders at the Company’s extraordinary general meeting on 12th April 2006. 2,587,500 shares have been issued under the Employee Share Plan to eligible employees and Directors and the Group has entered into loan agreements with participants to provide the funds necessary to subscribe for those shares. Shares have been issued in accordance with the Employee Share Plan rules. Under the Employee Share Plan rules the Board of the Group has the power to decide which full time or permanent part-time employees and Directors of the Group will participate in the Employee Share Plan and the number of shares offered to each participant. The number of shares offered to be issued under the Employee Share Plan and Consultants Plan in a five year period must not exceed 5% of the total number of issued shares at the time of the offer, disregarding certain share issues. The shares granted under the Employee Share Plan may be subject to any restrictions the Board considers appropriate and the Board may implement any procedure the Board considers appropriate to restrict the disposal of shares acquired under the Employee Share Plan. The Board also has the power to vary or terminate the Employee Share Plan at any time, subject to the ASX Listing Rules and the Corporations Act 2001. Below are the key financial indicators for the previous five years. eBit 000s net profit 000s eps (Cents per share) nta per share 2011 2012 2013 2014 2015 8,178 10,190 10,841 8,837 5,964 5,099 8,463 9,273 7,975 5,885 8.67 14.39 15.12 13.00 9.59 45.22 48.33 59.00 64.58 64.28 total equity 000s 31,377 36,249 42,074 45,639 45,490 return on equity DiviDenDs (Cents per share) 16.25% 23.35% 22.04% 17.47% 12.94% 6.00 6.00 7.00 9.00 10.00 This concludes the remuneration report that has been audited. 32 DIRECTORS’ REPORT 2015 MythBusters 33 Beyond InternatIonal AnnuAl RepoRt 201521. auDitors inDepenDenCe DeClaration A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is included on page 27 of the Directors’ Report. 22. auDitor Details BDO East Coast Partnership continues in office in accordance with section 327 of the Corporations Act 2001. This report is made in accordance with a resolution of the Board of Directors. For and on behalf of the Board Mikael Borglund Managing Director 27 August 2014 Sydney 14. total numBer of employees 19. proCeeDings on Behalf of Company The total number of fulltime equivalent employees employed by the Group at 30 June 2015 was 137 as compared with 151 at 30 June 2014. 15. shares unDer option At the date of this report, there are no un-issued ordinary shares of Beyond International Limited under option. No person has applied for leave of court to bring proceedings on behalf of the Company or intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings. The Company was not a party to any such proceedings during the year. 16. shares reDeemeD unDer the employee share plan 125,000 shares have been redeemed from the Beyond International Limited employee share plan during or since the end of the financial year. No further shares have been approved by the Board of Directors under this plan. 17. environmental regulations The Group has assessed whether there are any particular or significant environmental regulations which apply to it and has determined that there are none. 18. rounDing of amounts The Group is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investment Commission, relating to the “rounding off” of amounts in the report. Amounts in the financial report have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, to the nearest dollar. 20. non auDit serviCes During the year BDO, the Company’s auditor, delivered tax services and performed audits in relation to non- statutory submissions. The following fees for non-audit services were paid/payable to the external auditors during the year ended 30 June 2015: Tax compliance services $32,575 When considering BDO to provide additional services the Board considers the non-audit services provided to ensure it is satisfied that the provision of these non-audit services by the auditor is compatible with, and will not compromise the auditor independence requirements of the Corporations Act 2001. In particular it ensures that: • All non-audit services are reviewed and approved by the Audit Committee prior to commencement to ensure they do not adversely affect the integrity and objectivity of the auditor; and • Non-audit services provided do not undermine the general principles relating to audit independence, as they would not involve reviewing or auditing the auditor’s own work, acting in a management or decision making capacity for the Company, acting as an advocate for the Company, or jointly sharing risks and rewards. 34 DIRECTORS’ REPORT 2015 aUDitor’s inDepenDence DecLaration Tel: +61 2 9251 4100 Fax: +61 2 9240 9821 www.bdo.com.au Level 11, 1 Margaret St Sydney NSW 2000 Australia DECLARATION OF INDEPENDENCE BY CRAIG MAXWELL TO THE DIRECTORS OF BEYOND INTERNATIONAL LIMITED As lead auditor of Beyond International Limited for the year ended 30 June 2015, I declare that, to the best of my knowledge and belief, there have been: 1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and 2. No contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of Beyond International Limited and the entities it controlled during the year. Craig Maxwell Partner BDO East Coast Partnership Sydney, 27 August 2015 BDO East Coast Partnership ABN 83 236 985 726 is a member of a national association of independent entities which are all members of BDO (Australia) Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO East Coast Partnership and BDO (Australia) Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation, other than for the acts or omissions of financial services licensees. 27 35 Beyond InternatIonal AnnuAl RepoRt 2015 financiaL statements 36 fINANCIAL STATEMENTS 2015 Prison Songs 37 Beyond InternatIonal AnnuAl RepoRt 2015statement of profit or loss anD other Comprehensive inCome for the year enDeD 30 June 2015 notes ConsoliDateD entity 2014 $000's 89,772 2015 $000’s 91,172 Revenue from continuing operations Other income Royalty expense Production costs Home entertainment direct costs Digital marketing direct costs Administration costs Employee benefits expense Finance costs Provisions Depreciation and amortisation expense Share of loss of joint venture accounted for using the equity method Profit before income tax Income tax expense Profit after income tax for the year 3 (a) 3 (a) 3 (b) 3 (b) 14 4 (b) 4 (a) Other comprehensive income Items that may be reclassified subsequently to profit or loss: Changes in the fair value of available-for-sale financial assets 10 (a) Foreign currency translation Other comprehensive income for the year, net of tax Total comprehensive income for the year Profit is attributable to: Owners of Beyond International Limited Non-controlling interest Total comprehensive income for the year is attributable to: Owners of Beyond International Limited Non-controlling interest Earnings per share attributable to the owners of Beyond International ltd Basic and diluted earnings per share Dividends per share (cents) 5 20 The above Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes. 851 869 17,036 17,629 25,726 22,892 7,787 8,329 8,901 6,834 6,240 7,270 14,575 14,549 49 1,589 3,546 560 21 1,204 3,127 239 6,013 8,549 (128) 5,885 (537) 8,012 (4) 12 8 1 1 2 5,893 8,014 5,885 7,975 – 37 5,885 8,012 5,893 7,977 – 37 5,893 8,014 Cents Cents 9.59 13.00 10.00 9.00 38 fINANCIAL STATEMENTS 2015 statement of finanCial position as at 30 June 2015 notes ConsoliDateD entity 2014 $000's 2015 $000's assets Current assets Cash and cash equivalents Trade and other receivables Financial assets Inventories Other current assets total Current assets non-Current assets Trade and other receivables Investments accounted for using the equity method Financial assets Property plant and equipment Intangible assets Deferred tax assets Other non-current assets total non-Current assets total assets liaBilities Current liaBilities Trade and other payables Financial liabilities Employee benefits Current tax liabilities Other current liabilities total Current liaBilities non-Current liaBilities Deferred tax liabilities Employee benefits Other non-current liabilities total non-Current liaBilities total liaBilities net assets equity Issued capital Reserves Retained earnings 6 7 10(b) 8 9 7 14 10(a) 11 12 4(c) 9 13 10(b) 15 4(d) 16 4(c) 15 16 17 18 10,403 10,985 29,603 27,218 – – 3,069 3,441 16,770 17,768 59,845 59,412 1,831 3,318 – 4 82 8 1,850 1,890 6,062 6,028 3,437 3,449 518 347 13,703 15,122 73,548 74,534 6,025 5,995 91 5 2,902 2,768 134 – 10,946 11,608 20,097 20,376 6,663 7,288 588 710 614 617 7,961 8,520 28,058 28,896 45,490 45,639 33,867 33,775 (103) (111) 11,727 11,976 total equity The above Statement of Financial Position should be read in conjunction with the accompanying notes. 45,490 45,639 39 Beyond InternatIonal AnnuAl RepoRt 2015statement of Changes in equity for the year enDeD 30 June 2015 reserves retaineD earnings $000's non- Controlling interests $000's total $000's ConsoliDateD entity Balance at 1 July 2014 Profit for the year Other comprehensive income for the year, net of tax Total comprehensive income for the year Transactions with owners in their capacity as owners: Dividends paid or provided for Employee share plan issueD Capital $000's 33,775 – – – – 92 (111) 11,976 45,639 – 8 8 5,885 5,885 – 8 5,885 5,893 – (6,134) (6,134) – – 92 Balance at 30 June 2015 33,867 (103) 11,727 45,490 total equity $000's 45,639 5,885 8 5,893 (6,134) 92 45,490 – – – – – – – Balance at 1 July 2013 33,315 (113) Profit for the year Other comprehensive income for the year, net of tax Total comprehensive income for the year Transactions with owners in their capacity as owners: Dividends paid or provided for Transfer of non-controlling interest reserve Employee share plan Balance at 30 June 2014 – – – – – 460 33,775 – 2 2 – – 9,114 7,975 – 42,316 7,975 2 (242) 42,074 37 – 8,012 2 7,975 7,977 37 8,014 – (4,906) (4,906) – (4,906) (205) (205) 205 – – 460 (111) 11,976 45,639 – – 460 45,639 The above Statement of Changes in Equity should be read in conjunction with the accompanying notes. 40 fINANCIAL STATEMENTS 2015 statement of Cash floWs for the year enDeD 30 June 2015 notes ConsoliDateD entity 2014 $000's 2015 $000’s Cash floWs from operating aCtivities Receipts from customers Payments to suppliers and employees Interest received Finance costs paid Income tax paid 90,391 86,709 (81,859) (77,030) 184 (49) 249 (21) (532) (1,000) Net cash from by operating activities 6(b) 8,135 8,907 Cash floWs from investing aCtivities Purchase of property, plant and equipment Investment in websites and databases Distribution guarantees paid Distribution guarantees recouped Prepaid royalties Prepaid royalties recouped Proceeds from sale of property, plant and equipment Payment for investments & joint venture Investment in development projects Net cash flows used in investing activities Cash floWs from finanCing aCtivities Proceeds from share issue Dividend paid Net cash flows used in financing activities Net (decrease)/increase in cash held Cash and cash equivalents at the beginning of the financial year (899) (1,497) (706) (701) (2,285) (1,705) 1,605 1,617 (2,427) (4,591) 3,084 3,715 (1) (303) (356) 151 (320) (548) (2,286) (3,879) 23 92 459 (6,523) (4,628) (6,431) (4,169) (582) 859 10,985 10,126 Cash and cash equivalents at the end of the financial year 6(a) 10,403 10,985 The above Statement of Cash Flows should be read in conjunction with the accompanying notes. 41 Beyond InternatIonal AnnuAl RepoRt 2015notes to the financiaL statements for the year enDeD 30 jUne 2014 1. summary of signifiCant aCCounting poliCies The financial report of Beyond International Limited for the year ended 30 June 2015 was authorised for issue in accordance with a resolution of the Board of Directors on 27th August 2015. Beyond International Limited is a company limited by shares, incorporated and domiciled in Australia and whose shares are publicly traded on the Australian Securities Exchange. The financial report covers the consolidated entity of Beyond International Limited and its controlled entities (“the Consolidated Entity” and/or “the group”). (a) statement of ComplianCe The financial report is a general purpose financial report that has been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001, as appropriate for profit oriented entities. The financial report has been prepared on an accruals basis and is based on historical costs, except where stated. The Consolidated Entity has not adopted a policy of revaluing its non-current assets on a regular basis. Non-current assets are revalued from time to time as considered appropriate by the directors and are not stated at amounts in excess of their recoverable amounts. Australian Accounting Standards set out accounting policies that the AASB has concluded would result in a financial report containing relevant and reliable information about transactions, events and conditions to which they apply. Compliance with Australian Accounting Standards ensures that the financial statements and notes also comply with International Financial Reporting Standards, as issued by the International Accounting Standards Board (IASB). Material accounting policies adopted in the preparation of this financial report are presented below. They have been consistently applied unless otherwise stated. In the current year, the Consolidated Entity has adopted all of the new and revised Standards and Interpretations issued by the AASB that are relevant to its operations and effective for the current annual reporting period. The adoption of the revised Standards and Interpretations has had no material impact on the recognition and measurement criteria, only minor changes to some of the disclosure within the financial statements. The following Australian Accounting Standards have been issued or amended and are applicable to aasB amenDment AASB 9 AASB 9 'Financial Instruments' affeCteD stanDarD(s) effeCt of Change in aCCounting poliCy appliCation Date of stanDarD appliCation Date for group 1 January 2018 1 July 2018 1 January 2017 1 July 2017 1 January 2016 1 July 2016 1 January 2016 1 July 2016 The potential effect of the initial application of the expected Standard has been considered by the Directors, and they do not believe it will have a material impact on the financial statements. Due to the recent release of this standard, the entity has not yet made a detailed assessment of the impact of this standard. The potential effect of the initial application of the expected Standard has been considered by the Directors, and they do not believe it will have a material impact on the financial statements. The potential effect of the initial application of the expected Standard has been considered by the Directors, and they do not believe it will have a material impact on the financial statements. AASB 15 AASB 15 'Revenue from Contracts with Customers' AASB 2014-4 Amendments to Australian Accounting Standards – Clarification of Acceptable Methods of Depreciation and Amortisation AASB 2014-3 Amendments to Australian Accounting Standards – Accounting for Acquisitions of Interests in Joint Operations AASB 2015-2 Amendments to Australian Accounting Standards – Disclosure Initiative: Amendments to AASB 101 These amendments affect presentation and disclosures only. Therefore on first time adoption of these amendments on 1 July 2016, comparatives will need to be restated in line with presentation and note ordering. 1 January 2016 1 July 2016 42 NOTES TO THE fINANCIAL STATEMENTS 2015 notes to the financiaL statements for the year enDeD 30 jUne 2014 the Consolidated Entity but are not yet effective. They have not been adopted in preparation of the financial statements at reporting date. This list is not complete however it represents the key standards applicable to the Consolidated Entity. (B) Basis of ConsoliDation The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Beyond International Limited (‘company’ or ‘parent entity’) as at 30 June 2015 and the results of all subsidiaries for the year then ended. Beyond International Limited and its subsidiaries together are referred to in these financial statements as “the consolidated entity” and/or “the Group”. Subsidiaries are all those entities over which the consolidated entity has control. The consolidated entity controls an entity when the consolidated entity is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the consolidated entity. They are de-consolidated from the date that control ceases. Intercompany transactions, balances and unrealised gains on transactions between entities in the consolidated entity are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the consolidated entity. The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest, without the loss of control, is accounted for as an equity transaction, where the difference between the consideration transferred and the book value of the share of the non-controlling interest acquired is recognised directly in equity attributable to the parent. Non-controlling interest in the results and equity of subsidiaries are shown separately in the statement of profit or loss and other comprehensive income, statement of financial position and statement of changes in equity of the consolidated entity. Losses incurred by the consolidated entity are attributed to the non-controlling interest in full, even if that results in a deficit balance. Where the consolidated entity loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and non-controlling interest in the subsidiary together with any cumulative translation differences recognised in equity. The consolidated entity recognises the fair value of the consideration received and the fair value of any investment retained together with any gain or loss in profit or loss. A list of controlled entities is contained in note 24 to the financial statements. Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity. (C) inCome tax The income tax expense for the year comprises current income tax expense and deferred tax expense. Current income tax expense charged to the profit or loss is the tax payable on taxable income calculated using applicable income tax rates enacted, or substantially enacted, as at the reporting date. Current tax liabilities (assets) are therefore measured at the amounts expected to be paid to (or recovered from) the relevant tax authority. Deferred tax expense reflects movements in deferred tax asset and deferred tax liability balances during the year as well as unused tax losses. Deferred tax assets and liabilities are ascertained based on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets also arise where amounts have been fully expensed but future deductions are available. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss. Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates enacted or substantively enacted at the reporting date. Their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability. Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised. Tax consolidation Beyond International Limited and its wholly-owned Australian subsidiaries have formed an income tax consolidated group under the tax consolidation regime. Each entity in the group recognises its own deferred tax assets and liabilities, except for any deferred tax assets resulting from unused tax losses and tax credits, which are immediately assumed by the head entity, being Beyond International Limited. The current tax liability for each group entity is then subsequently assumed by the parent entity. The tax consolidated group has entered into a tax funding arrangement whereby each company in the group contributes to the income tax payable by the group in proportion to their contribution to the group’s taxable income. Pursuant to the funding arrangement, transfers of tax losses or tax liabilities are assumed by the head entity through intercompany loans. (D) gooDs anD serviCes tax (gst) “Revenues, expenses and assets are recognised net of the amount of GST, except when the GST incurred on a purchase of goods and services is not recoverable from the taxation authority. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable. Receivables and payables in the Statement of Financial Position are shown inclusive of GST. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the Statement of Financial Position. Cash flows are presented in the Statement of Cash Flows on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority are classified as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority. (e) revenue reCognition Revenue from operating activities represents revenue earned from the sale and licensing of the Consolidated Entity’s products and services, net of returns and trade allowances. Other revenue from outside the operating 43 Beyond InternatIonal AnnuAl RepoRt 2015activities includes interest income on short term investments, proceeds from sale of plant and equipment and net gains on foreign currency transactions. Revenue is recognised to the extent that it is probable that the economic benefit will flow to the Consolidated Entity and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised: • Revenue from Australian and international television production contracts is recognised using the percentage of completion method. • Revenues from international television and feature film licensing contracts are recognised when the programming is able to be delivered and a licence agreement is signed by both parties. • When the contract outcome cannot be estimated reliably, revenue is recognised only to the extent of the expenses recognised that are recoverable. • Royalty revenue within the Distribution and Film divisions is recognised when received. • Revenues from the sale of DVD inventory is recognised at the time the goods are dispatched, apart from consignment arrangements where revenue is recognised upon sale to the end customer. • Rending of services revenue from a digital marketing contract to provide services is recognised by reference to the stage of completion of the project. Other digital marketing revenue is recognised when it is received or when the right to receive payment is established. Where amounts are invoiced before revenue is earned, a deferred revenue liability is brought to account. (f) BorroWing Costs Borrowing costs are recognised as an expense when incurred. Borrowing costs include: • Interest on bank overdraft and short-term and long-term borrowings; and • Finance lease charges. (g) Cash anD Cash equivalents Cash and short-term deposits in the Statement of Financial Position comprise cash at bank and in hand and short term deposits with an original maturity of three months or less. For the purposes of the Statement of Cash Flows, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts. (h) reCeivaBles Trade receivables are recognised and carried at original invoice amount less an allowance for any uncollectable amounts or impairment. The following specific recognition criteria must also be met before a receivable is recognised: • Production debtors – receivables are recognised as they are due for settlement, within a term of no more than 30 days. • Licensing debtors – receivable is recognised once a licence agreement is signed by both parties and the programme is able to be delivered. Payment terms are usually based upon signature, delivery and acceptance. In certain contracts instalment payments may extend over the term of the licence agreement. A provision for doubtful debts is raised when there is objective evidence that the Consolidated Entity will not be able to collect the debts based on a review of all outstanding amounts at the reporting date. Bad debts are written off when they are identified. (i) inventories Inventories are measured at the lower of cost and net realisable value. Inventories represent stock TV footage and DVD stock at cost. As the footage is used it will be included within the production cost of the programme. Inventories sold on consignment remain in the financial statements as stock on hand until sold to the end customer. Costs are assigned to an individual item of inventory on the basis of weighed average costs. (J) investments Investments have been brought to account as follows: Interests in subsidiary companies and trusts • The Company’s interests in listed and un-listed companies and trusts are brought to account at cost and dividends and other distributions are recognised in the Statement of Profit or Loss and Other Comprehensive Income when receivable. Controlled entities are accounted for in the consolidated financial statements as set out in note 1 (B). • Where, in the opinion of the Directors, there has been a diminution in the value of an investment, the carrying amount of the investment is written down to its recoverable amount. (k) CapitaliseD proDuCtion Costs Television production costs are capitalised and amortised against future sales revenue. Forecast sales revenues are reviewed regularly and the amortisation rate is adjusted to reflect the estimates of future licensing revenue of each production. Where doubt exists as to the ability to recover the expenditure from future sales, the amounts in doubt are provided for in the year in which the assessment is made. Capitalised production costs are disclosed in the accounts net of any cash progress payments received on projects. Where such progress payments exceed these costs the net amounts are disclosed as deferred revenue. (l) CapitaliseD Development Costs Costs of developing new programme concepts, which the Directors believe are probable of being recovered from future revenues, are capitalised. Capitalised costs are costed into the production or are written off in the event that the programme does not proceed. These costs are classified as current assets as the costs of developing new programmes are expected to be realised within one year. (m) DistriBution aDvanCes anD prepaiD royalties Distribution advances for television and feature film distribution rights, and prepaid royalties for the DVD rights, are capitalised at cost as paid, and recouped from future sales on cash receipt. Where doubt exists as to the ability to recover the expenditure from future sales, the amounts in doubt are provided for in the year in which the assessment is made. (n) leases A distinction is made between finance leases which effectively transfer from the lessor to the lessee substantially all the risks and benefits incidental to 44 NOTES TO THE fINANCIAL STATEMENTS 2015 ownership of leased non current assets, and operating leases under which the lessor effectively retains substantially all such risks and benefits. Where property, plant and equipment is acquired by means of finance leases, the present value of the minimum lease payments is recognised as an asset at the beginning of the lease term and amortised on a straight line basis over the expected useful life of the leased asset. A corresponding liability is also established and each lease payment is allocated between the liability and finance charge. Operating lease payments are charged to the Statement of Profit or Loss and Other Comprehensive Income on a straight line basis. (o) property, plant anD equipment Property, plant and equipment are measured at cost. Depreciation and Amortisation Depreciation on property, plant and equipment is calculated on a straight line basis to write off the net cost over its expected useful life to the Consolidated Entity. Estimates of the remaining useful lives are made on a regular basis for all assets, with annual reassessment for major items. The expected useful lives are as follows: • Plant equipment & leasehold improvements: 2 – 15 years The assets’ residual values, useful lives and amortisation methods are reviewed, and adjusted if appropriate, at each financial year end. Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are included in the Statement of Profit or Loss and Other Comprehensive Income. (p) intangiBle assets Goodwill Goodwill acquired and goodwill on consolidation are initially recorded at the amount by which the purchase price for a business or for an ownership interest in a controlled entity exceeds the fair value attributed to its net assets at date of acquisition. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill on acquisition of associates is included in investments in associates. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. the reporting date and are measured at the amounts expected to be paid when the liabilities are settled. Patents and licenses Other long-term employee benefits Patents and trademarks are recognised at cost of acquisition. Patents and trademarks have a finite life and are carried at cost less any accumulated amortisation and any impairment losses. Patents and trademarks are amortised over their useful life, which is 20 years. Websites and Databases Websites and Databases are recognised at cost. Websites and Databases are amortised over their useful life, which is 4 years. (q) impairment of assets At each reporting date, the group reviews the carrying values of its tangible and intangible assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, is compared to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to the Statement of Profit or Loss and Other Comprehensive Income. Where it is not possible to estimate the recoverable amount of an individual asset, the group estimates the recoverable amount of the cash-generating unit to which the asset belongs. (r) traDe anD other payaBles These amounts represent liabilities for goods and services provided to the Consolidated Entity prior to the end of the financial year and which are unpaid. These amounts are unsecured and are usually paid within 30 days of recognition. (s) proDuCer share payaBles These amounts represent the amounts due to producers contracted for payment as royalties upon receipt of licensing sales. (t) employee Benefits Short-term employee benefits Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected to be settled within 12 months of the reporting date are recognised in current liabilities in respect of employees’ services up to The liability for long service leave not expected to be settled within 12 months of the reporting date are recognised in non-current liabilities, provided there is an unconditional right to defer settlement of the liability. The liability is measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows. Defined contribution superannuation expense Contributions to defined contribution superannuation plans are expensed in the period in which they are incurred. (u) share-BaseD payment transaCtions Equity settled transactions: The group provides benefits to employees of the group in the form of share-based payments, whereby employees render services in exchange for shares or rights over shares (equity- settled transactions). There is currently one plan in place to provide these benefits: the Employee Share Loan Plan. The cost of these equity-settled transactions with employees is measured by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined using the market value of a share on the date which they are granted. The cost of equity-settled transactions is recognised in the Statement of Profit or Loss and Other Comprehensive Income over the vesting period. The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects: • (i) the extent to which the vesting period has expired; and • (ii) the group’s best estimate of the number of equity instruments that will ultimately vest. 45 Beyond InternatIonal AnnuAl RepoRt 2015(v) BorroWings Loans and borrowings are recorded at their principal amounts. Subsequently they are measured at amortised cost using the effective interest method. (W) foreign CurrenCy translation Transactions denominated in a foreign currency are converted to Australian currency at the exchange rate at the date of the transaction. Foreign currency receivables and payables at the reporting date are translated at exchange rates at the reporting date. Exchange gains and losses are brought to account in determining the profit or loss for the year. Exchange gains and losses arising on forward foreign exchange contracts entered into as hedges of specific commitments are deferred and included in the determination of the amounts at which the transactions are brought to account. Specific hedging is undertaken in order to avoid or minimise possible adverse financial effects of movements in foreign exchange rates. If the hedging transaction is terminated prior to its maturity date and the hedged transaction is still expected to occur, deferral of any gains and losses which arose prior to termination continues, and those gains and losses are included in the measurement of the hedged transaction. In those circumstances where a hedging transaction is terminated prior to maturity because the hedged transaction is no longer expected to occur, any previous deferred gains or losses are recognised in the Statement of Profit or Loss and Other Comprehensive Income at the date of termination. All exchange gains and losses relating to other hedge transactions are brought to account in the Statement of Financial Position in the same period as the exchange differences on the items covered by the hedge transactions. Costs on such contracts are expensed as incurred. Exchange gains and losses on the other hedge transactions entered into as hedges of general commitments are brought to account in the Statement of Profit or Loss and Other Comprehensive Income in the financial year in which the exchange rate changes. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Assets and liabilities of overseas controlled entities and branches are translated at exchange rates existing at the reporting date and the exchange gain or loss arising on translation is carried directly to a foreign currency translation reserve. (x) foreign CurrenCy transaCtions anD BalanCes Functional and presentation currency The functional currency of each of the group’s entities is measured using the currency of the primary economic environment in which that entity operates. The consolidated financial statements are presented in Australian dollars which is the Company’s functional and presentation currency. Transaction and balances Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the year-end exchange rate. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non- monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined. Exchange differences arising on the translation of monetary items are recognised in the Statement of Profit or Loss and Other Comprehensive Income. (y) availaBle-for-sale finanCial assets Shares held in a listed entity are classified as being available-for-sale. These assets were initially recorded at cost and at each reporting date are revalued to fair value. Gains and losses arising from changes in fair value are recognised directly in the investments revaluation reserve unless there is a prolonged or significant decline, upon which the loss is recognised in the Statement of Profit or Loss and Other Comprehensive Income. The classification of items within this category depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. (Z) Derivative finanCial instruments The Consolidated Entity enters into forward foreign exchange agreements and foreign currency options on production contracts in order to manage its exposure to foreign exchange rate risks. Exchange contracts are brought to account as explained in note 1(W). (aa) issueD Capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. (aB) earnings per share Basic earnings per share is calculated as net profit attributable to members of the parent, adjusted to exclude any costs of servicing equity (other than dividends) and preference share dividends, divided by the weighted average number of ordinary shares, adjusted for any bonus element. Diluted earnings per share is calculated as net profit attributable to members of the parent, adjusted for: • costs of servicing equity (other than dividends) and preference share dividends; • the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses; and • other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary shares; divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element. (aC) Comparative figures When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year. (aD) rounDing of amounts The Consolidated Entity has applied the relief available to it under ASIC Class Order 98/100 and accordingly, amounts in the financial report and Directors’ report have been rounded off to the nearest $1,000, or in certain cases, the nearest dollar. (ae) fair value measurement When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly 46 NOTES TO THE fINANCIAL STATEMENTS 2015 transaction between market participants at the measurement date; and assumes that the transaction will take place either: in the principal market; or in the absence of a principal market, in the most advantageous market. Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, assuming they act in their economic best interest. For non-financial assets, the fair value measurement is based on its highest and best use. Valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, are used, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. Assets and liabilities measured at fair value are classified, into three levels, using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. Classifications are reviewed each reporting date and transfers between levels are determined based on a reassessment of the lowest level input that is significant to the fair value measurement. For recurring and non-recurring fair value measurements, external valuers may be used when internal expertise is either not available or when the valuation is deemed to be significant. External valuers are selected based on market knowledge and reputation. Where there is a significant change in fair value of an asset or liability from one period to another, an analysis is undertaken, which includes a verification of the major inputs applied in the latest valuation and a comparison, where applicable, with external sources of data. (af) CritiCal aCCounting estimates anD JuDgments The Directors evaluate estimates and judgments incorporated into the financial report based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the group. Sections within this financial report whereby estimates and judgments have a material impact are as follows: • the recoverability of Distribution Advances and Prepaid Royalties in Note 9 has been assessed using an estimate of future sales for the respective titles; • the recoverability of Capitalised Development Costs in Note 9 is assessed based on a judgment as to whether each program will proceed in the forthcoming year(s); • Capitalised Production Costs in Note 9 are calculated using an estimate of future sales on a specified title. The recoverability of this asset is assessed based on a judgment as to whether the initial estimated sales will be reached; • Goodwill and other intangible assets are assessed annually based on an estimate of the value-in-use of the cash generating units to which goodwill and other intangible assets have been allocated. The value-in-use calculation requires the Consolidated Entity to estimate the future cash flows expected to arise from the cash-generating unit. The calculation also uses an estimated growth rate, and a discount rate in order to calculate present value. Details of these estimated rates are provided in Note 12. • Deferred tax assets are recognised for deductible temporary differences and brought forward income tax losses only if the consolidated entity considers it is probable that future taxable amounts will be available to utilise those temporary differences and losses. (ag) parent entity information These financial statements present the results of the Consolidated Entity only. Supplementary information about the parent entity is disclosed in Note 28. (ah) Joint ventures A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement. Investments in joint ventures are accounted for using the equity method. Under the equity method, the share of the profits or losses of the joint venture is recognised in profit or loss and the share of the movements in equity is recognised in other comprehensive income. Investments in joint ventures are carried in the statement of financial position at cost plus post-acquisition changes in the consolidated entity’s share of net assets of the joint venture. Goodwill relating to the joint venture is included in the carrying amount of the investment and is neither amortised nor individually tested for impairment. Income earned from joint venture entities reduces the carrying amount of the investment. A liability is recognised in other creditors and accruals when the losses generated by the joint venture exceed the amount invested into it. 47 Beyond InternatIonal AnnuAl RepoRt 20152. operating segments Corporate benefit/(expense) Europe Management has determined the operating segments based on the reports reviewed by the Board that are used to make strategic decisions. The Board considers the business on a global basis in the following four operating divisions: TV production and copyright Production of television programming and ownership of television product copyright. Film and Television distribution International distribution of television programmes and feature films. home Entertainment Distribution in Australia and New Zealand of DVDs. Digital Marketing Online search optimisation, website creation, development and performance and online media sales in Australia and New Zealand. Operating Segment REVENUE Includes the parent entity, centralised administrative support services to the group comprising legal and business affairs, finance and human resources, in addition to internet development. None of these activities constitute a separately reportable business segment. Geographical segments Although the Consolidated Entity’s divisions are managed on a global basis they operate in four main geographical areas: Australia The home country of the parent entity. The areas of operation include all core business segments. North America A portion of the group’s production, film and television sales are generated from North America, with production offices in Los Angeles. Substantial film and television distribution proceeds are derived from European markets. The group’s head office for multinational activities is located in Dublin. This office is responsible for production and development, and for the acquisition and international sales of all television programmes and feature films. The Dublin office manages the direct sales and marketing activities of the office located in London, which represents the second overseas sales office base. Rest of World The Rest of World comprises all other territories from which film and television distribution income is derived including the Middle East, Asia, and Latin America. tV prOductiOn & cOpyright Film & teleViSiOn diStributiOn hOme entertainment digital marketing inter Segment eliminatiOnS cOnSOlidatiOn 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 $000'S $000'S $000'S $000'S $000'S $000'S $000'S $000'S $000'S $000'S $000'S $000'S External revenues excluding fx, interest 33,270 31,494 22,612 23,080 22,463 24,606 12,828 10,592 Other income Other segments (b) Total revenue Result before fx, interest and D&A Depreciation & amortisation Impairment of assets – – – – 4,868 6,016 – 78 – 130 – 20 – – – 313 – 426 (5,279) 38,136 37,510 22,690 23,210 22,483 24,606 13,141 11,018 (5,279) 8,915 2,021 – 10,625 2,436 3,186 2,437 2,874 1,441 – 16 – 15 – 610 – 877 – 848 716 – 132 (9) 640 – (649) – – – – Result before interest, fx & other unallocated expenses 6,894 9,184 2,420 3,171 1,827 1,997 Net interest income Foreign exchange gain Corporate expenses Profit before income tax Income tax expense Profit after income tax Non-controlling interest loss Profit for the year – – (6,571) (6,571) – – – – 91,172 89,772 – – – – 91,172 89,772 14,636 16,676 3,364 2,973 – – 11,273 13,703 49 509 228 556 (5,818) (5,938) 6,013 (128) 5,885 – 5,885 8,549 (537) 8,012 (37) 7,975 48 NOTES TO THE fINANCIAL STATEMENTS 2015 Operating Segment ASSETS Segment assets Deferred tax assets and other non-current assets Corporate assets Total assets LIABILITIES Segment liabilities Deferred tax liabilities Corporate liabilities Total liabilities Other Capital expenditure Other non cash expenses Impairment of assets tV prOductiOn & cOpyright Film & teleViSiOn diStributiOn hOme entertainment digital marketing inter Segment eliminatiOnS cOnSOlidatiOn 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 $000'S $000'S $000'S $000'S $000'S $000'S $000'S $000'S $000'S $000'S $000'S $000'S 86,573 86,103 128,969 125,057 26,372 25,377 5,518 4,412 (206,096) (197,855) 41,336 43,094 3,437 3,449 28,775 27,991 73,548 74,534 22,656 17,331 160,158 157,233 11,860 11,942 6,089 5,163 (183,931) (176,614) 16,832 15,055 6,663 4,563 7,288 6,553 28,058 28,896 280 332 – 296 670 – 2 567 – 34 451 – 617 867 – – – – – 54 – 26 42 – – – – 899 953 – 1,223 1,163 – – – geographiCal information segment revenues from external Customers Carrying amount of segment assets aCquisition of non Current segment assets Australia North America Europe Rest of World 2015 $000's 54,709 19,500 9,356 7,606 91,172 2014 $000's 50,088 23,896 6,499 9,289 2015 $000's 66,215 (1,340) 5,579 3,094 2014 $000's 63,310 960 6,414 3,850 2015 $000's 787 111 1 – 2014 $000's 1,164 24 34 1 89,772 73,548 74,534 899 1,223 Notes to and forming part of the segment information (a) aCCounting poliCies Segment revenues, expenses, assets and liabilities are those that are directly attributable to a segment and the relevant portion that can be allocated to the segment on a reasonable basis. Segment assets include all assets used by a segment and consist primarily of operating cash, receivables, inventories, capitalised production and development costs, investments, distribution advances, inventories, property, plant and equipment and goodwill and other intangible assets, net of any related provisions. While most of these assets can be directly attributable to individual segments, the carrying amounts of certain assets used jointly by segments are allocated based on reasonable estimates of usage. Segment liabilities consist primarily of trade and other creditors, producers share payable, bills of exchange and employee entitlements. (B) other segments Segment revenues, expenses and results include transfers between segments. Such transfers are priced on an “arm’s length” basis and are eliminated on consolidation. (C) maJor Customers Included in total revenues is revenue from customers in excess of 10% of total revenue individually. Total revenues relating to these customers are $19m (2014: $26m) within the TV Production & Copyright and Film & Television distribution segments, $9m (2014: $12m) within the Home Entertainment segment and $1.6m (2014: $1.3m) within the Digital Marketing segment. 49 Beyond InternatIonal AnnuAl RepoRt 20153. revenues anD expenses Revenue and other income Revenue Sales revenue Dividend Royalty revenue Rental revenue Other income Realised/unrealised foreign currency translation gains (note 3(b)) Management service fees External interest Gain on the sale of fixed assets Total Revenue and other income Profit before tax includes the following: Bad and doubtful debts – Trade receivables written off / (recovered) during the period – Trade receivables movement in provision (Note 7) Provision for non recovery of advances Projects in development written off Rental expense on operating leases – Minimum lease payments Finance costs – External loss on disposal of asset Depreciation and amortisation – Tangible assets (note 11) – Intangible assets (note 12) – Other assets (Note 9) Foreign exchange gain Fair value decrease/(increase) in derivative financial instruments Other realised/unrealised foreign currency translation gains Auditors' Remuneration Remuneration of the auditor of the parent entity and its controlled entities for: – Audit or review of the financial report – Other assurance services – Tax compliance services Remuneration of network firms for: – Tax compliance services Remuneration of other auditors of subsidiaries for: – Audit or review of the financial report – Other assurance services – Tax compliance services ConsoliDateD entity 2014 $000's 2015 $000's 88,926 – 1,580 665 88,141 – 974 658 91,172 89,772 509 158 184 – 92,023 556 35 249 29 90,642 44 40 1,096 248 10 24 626 306 2,548 2,662 49 1 960 671 1,915 3,546 87 (596) (509) 2015 $ 21 – 1,124 671 1,331 3,127 (330) (226) (556) 2014 $ 307,000 24,000 32,575 50,337 339,000 35,960 33,985 20,967 55,416 12,240 14,094 54,034 1,578 8,985 NOTES TO THE fINANCIAL STATEMENTS 2015 (a) (b) (c) 50 4. inCome tax expense ConsoliDateD entity 2014 $000's 2015 $000's (a) The components of tax expense comprise: Current income tax Deferred income tax Adjustments in respect of current income tax of previous years Income tax expense reported in the Statement of Profit or Loss and Other Comprehensive Income (b) The prima facie tax on profit from ordinary activities before income tax is reconciled to the income tax expense as follows: Profit before income tax Prima facie tax payable on profit from ordinary activities before income tax at 30% (2014: 30%) Less: Tax effect of : – Other non-assesable/deductible items Less: Tax effect of : – Adjustments in respect of current income tax of previous years – Withholding tax losses written off from prior years – Effect of lower tax rate on overseas income – Other Income tax expense The applicable weighted average effective tax rates are as follows: (c) Deferred Tax Deferred tax assets Deferred tax assets comprise: Provisions and accruals Deferred tax assets attributable to tax losses Deferred tax assets expected to be recovered within 12 months Deferred tax assets expected to be recovered after more than 12 months Deferred tax liabilities Deferred tax liabilities comprises: Distribution guarantees and unrecouped program expenses Capitalised production costs and other expenses Deferred tax liabilities expected to be recovered within 12 months Deferred tax liabilities expected to be recovered after more than 12 months 607 748 (693) 215 128 (142) (69) 537 6,013 8,549 1,804 2,565 (938) (783) 866 1,782 (122) 337 (69) – (1,029) (1,243) 77 128 2% 67 536 6% 2,158 1,279 2,126 1,323 3,437 3,449 2,149 1,288 2,431 1,018 3,437 3,449 4,964 1,699 6,663 6,235 428 5,316 1,972 7,288 6,839 449 6,663 7,288 Deferred tax liabilities for Beyond TV Properties Bermuda and Beyond Film Properties Bermuda totaling $801,943 (2014: $795,519) have not been recognised due to the existence of tax losses not brought to account. Movement in deferred tax assets & deferred tax liabilities has gone through the Statement of Profit or Loss and Other Comprehensive Income. 51 Beyond InternatIonal AnnuAl RepoRt 20154. inCome tax expense (continued) (d) Liabilities Current Income tax ConsoliDateD entity 2014 $000's 2015 $000's 134 – The above is a current provision for income tax payable by the parent and subsidiaries of the Consolidated Entity. (e) Tax Consolidation Beyond International Limited and its wholly owned Australian subsidiaries have formed an income tax consolidated group under the tax consolidated regime. Each entity in the group recognises its own current and deferred tax assets, except for any deferred tax assets resulting from unused tax losses and tax credits, which are immediately assumed by the head entity, being Beyond International Limited. The current tax liability for each group entity is then subsequently assumed by the parent entity. The tax consolidated group has entered into a tax funding arrangement whereby each company in the group contributes to the income tax payable by the group in proportion to their contribution to the group's taxable income. Pursuant to the funding arrangement, transfers of tax losses or tax liabilities are assumed by the head entity through intercompany loans. 5. earnings per share Basic and diluted earnings per share: Diluted earnings per share: ConsoliDateD entity 2014 Cents per share 2015 Cents per share 9.59 9.33 13.00 12.49 The following reflects the income and share data used in the basic and diluted earnings per share computations Net profit attributable to ordinary equity holders (used in calculating basic earning and diluted per share) ConsoliDateD entity 2014 2015 $000's 5,885 $000's 7,975 Net profit attributable to ordinary equity holders (used in calculating diluted earning per share) 5,885 7,975 Weighted average number of ordinary shares in calculating basic earnings and diluted per share Number Number Effect of dilution: Employee Share Plan (note 23) 61,336,968 61,336,968 1,760,000 2,537,500 Weighted average number of ordinary shares adjusted for the effect of dilution 63,096,968 63,874,468 52 NOTES TO THE fINANCIAL STATEMENTS 2015 6. Cash floW information Cash at bank and in hand The average effective interest rate on cash at bank was 1.62% (2014: 1.73%) ConsoliDateD entity 2014 2015 $000's 10,403 $000's 10,985 (a) Reconciliation of Cash For the purposes of the Statement of Cash Flows, cash and cash equivalent comprise the following at 30 June: Cash at bank and in hand 10,403 10,985 (b) Reconciliation of cash flows from operations with net profit after income tax Profit after income tax Adjustment for non-cash flow in profit: Depreciation and amortisation Net gain on sale of non-current assets Share of Joint venture operation Unrealised foreign exchange (gain)/loss Changes in assets and liabilities, net of the effects of business acquisitions: (Increase)/decrease in trade and other receivables Decrease/(increase) in inventory (Increase)/decrease in other assets Decrease/(increase) in deferred tax assets Increase/(decrease) in trade and other creditors (Increase)/decrease in deferred income tax liability Increase/(decrease) in other liabilities Increase/(decrease) in provisions Cash flow from operations (c) Disclosure of financing facilities Details of credit standby arrangements and loan facilities are included in note 14. 5,885 8,012 3,546 1 560 3,127 (29) 239 (509) (407) (1,403) 374 8 778 (466) (2,961) 12 (959) 1,431 (1,034) (625) (804) 134 819 1,388 (74) 8,135 8,907 53 Beyond InternatIonal AnnuAl RepoRt 20156. Cash floW information (continued) (c) Financing facilities available At reporting date, the following financing facilities had been negotiated and were available Secured multi option facility Used at reporting date * Unused at reporting date Total facility ConsoliDateD entity 2014 2015 $000's $000's 625 1,765 2,390 764 1,626 2,390 * The amount of the facility used at reporting date is for bank guarantees on various building leases held by the Group The multi option facility may be drawn at any time and may be terminated by the bank on demand. The interest rate on the facility is the commercial base rate (8.30% at 30 June 2015). The facility is secured by certain covenants on the Consolidated Entity that these financial conditions are met – a) That earnings before interest, tax, depreciation and amortisation will exceed 1 x total group facility b) Receivables must remain over $8,000,000 at all times c) Minimum capital adequacy rate of 50% Secured credit card facilities Used at reporting date Unused at reporting date Total facility Secured equipment loan facility Used at reporting date Unused at reporting date Total facility – 245 245 – 500 500 – 245 245 – 500 500 The interest rate on the facility is determined on usage as at the time. As no facility is being used no rate is applicable. Amount of Assets Pledged as Security Fixed and floating charge over assets Total assets pledged as security 73,548 74,534 73,548 74,534 54 NOTES TO THE fINANCIAL STATEMENTS 2015 7. traDe anD other reCeivaBles Current Trade receivables (i) Provision for impairment of receivables Non-current Trade receivables (i) ConsoliDateD entity 2014 2015 $000's $000's 31,948 29,524 (2,345) (2,306) 29,603 29,603 27,218 27,218 1,831 1,831 3,318 3,318 (i) Credit terms for the Consolidated Entity's receivables vary between individual divisions. Distribution, Films and Productions debtors are generally due based on milestones achieved. Debtors within other divisions have credit terms ranging from 30 to 90 days. An allowance has been made for estimated irrecoverable trade receivable amounts arising from the past sale of goods and rendering of services, based on an assessment of individual debtors and the likelihood of recoverability. For Distribution & Films debtors, the Consolidated Entity provides fully for receivables over 360 days, with the exception of specific identifiable receivables which are still considered recoverable. Distribution and Film debtors consist largely of television networks, many of which are government owned, or are listed entities whose published annual reports indicate they continue to be credit-worthy. Debtors within other divisions, including the Beyond D business unit, are provided for on a specific basis based on an assessment of recoverability. Home Entertainment debtors largely consist of multi-national retail chains, many of which are listed and whose published annual reports indicate they continue to be credit-worthy. Included in the Consolidated Entity's trade receivables balance are debtors with a carrying amount of $3.1m (2014: $3.4m) which are past due between 0 and 180 days at the reporting date. Included in the Consolidated Entity's trade receivables balance are debtors with a carrying amount of $0.2m (2014: $0) which are past due more than 180 days at the reporting date. Ageing of debtors Not past due Past due 0-90 days Past due 91-180 days Past due 180+ days Reconciliation of provision for impairment of receivables Opening balance Additional provision recognised Utilised Closing balance ConsoliDateD entity 2015 $000's 2014 $000’s Gross Provision Gross Provision 28,126 2,877 – – 227 (18) 27,177 3,222 186 – – (50) 2,549 (2,327) 2,256 (2,256) 33,779 (2,345) 32,841 (2,306) ConsoliDateD entity 2014 2015 $000's $000's (2,306) (2,282) (55) 16 (28) 4 (2,345) (2,306) 55 Beyond InternatIonal AnnuAl RepoRt 2015 8. inventories Current DVD Stock – raw material at cost DVD Stock – finished goods at net realisable value Stock footage – at cost 9. other assets Current Capitalised development costs Less: deferred revenue Distribution advances Accumulated ammortisation of distribution advances (i) Prepaid royalties Capitalised production costs Prepayments Non-current Distribution advances Accumulated ammortisation of distribution advances (i) ConsoliDateD entity 2014 2015 $000's $000's 381 2,651 37 3,069 828 2,566 47 3,441 ConsoliDateD entity 2014 2015 $000's $000's 1,659 (909) 750 1,567 (750) 817 5,387 4,871 (3,878) (3,456) 1,509 1,415 6,577 7,346 7,085 849 7,934 7,623 567 8,190 16,770 17,768 1,241 (723) 518 1,033 (686) 347 (i) Distribution advances and capitalised production costs are monitored on a title by title basis. The provision detailed above is included within the depreciation and amortisation expense disclosed in the Statement of Profit or Loss and Other Comprehensive Income. 56 NOTES TO THE fINANCIAL STATEMENTS 2015 10. finanCial assets & finanCial liaBilities Available-for-sale financial assets Derivative financial liabilities (a) Available-for-sale financial (non current) Listed investments: Shares – at fair value (i) (b) Derivative financial liabilities (current) notes ConsoliDateD entity 2014 2015 $000's 4 (91) (87) $000's 8 (5) 3 4 8 Foreign currency forward contracts – at fair value 25 (91) (5) (i) In 2008, the Consolidated Entity purchased 10% of the ordinary share capital of Motive Television Plc. The shares have been revalued at year end to the closing share price at 30 June 2015, and losses including the revaluation to Australian dollar, totaling $4,119 (2014: $1,635 gain) have been recognised in Other Comprehensive Income. Fair value of financial instruments measured on a recurring basis The financial instruments recognised and disclosed at fair value in the Statement of Financial Position have been analysed and classified using a fair value hierarchy reflecting the significance of the inputs used in making the measurements. The fair value hierarchy consists of the following levels: quoted prices in active markets for identical assets or liabilities (Level 1); inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices) (Level 2); and inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level 3). Financial assets and financial liabilities: Available-for-sale financial assets: - listed investments Financial liabilities at fair value through profit or loss: - derivative instruments ConsoliDateD entity ConsoliDateD entity 2015 2014 level 1 level 2 $000's $000's total level 1 level 2 $000's $000's $000's total $000's 4 – 4 – 4 (91) (91) (91) (87) 8 – 8 – 8 (5) (5) (5) 3 During the 2015 financial period, the Consolidated Entity had nil value of Level 3 financial assets and financial liabilities (2014: nil). Included within Level 1 of the hierarchy are listed investments. The fair values of these financial assets have been based on the closing quoted bid prices at reporting date, excluding transaction costs. There has been no change in the valuation technique used in the current or previous reporting period. Included within Level 2 of the hierarchy are derivatives not traded in an active market (foreign currency forward contracts). The fair values of these derivatives are determined using valuation techniques which uses only observable market data relevant to the hedged position. There has been no change in the valuation technique used in the current or previous reporting period. During the current and previous reporting periods, there were no transfers between levels. 57 Beyond InternatIonal AnnuAl RepoRt 2015 10. finanCial assets & finanCial liaBilities (continued) Fair value of financial instruments not measured at fair value on a recurring basis The following financial instruments are not measured at fair value in the statement of financial position. These had the following fair values: NON-CuRRENT ASSETS Trade and other receivables NON-CuRRENT lIABIlITIES Other non-current liabilities ConsoliDateD entity ConsoliDateD entity 2015 2014 Carrying amount $000's fair value $000's Carrying amount $000's fair value $000's 1,831 1,831 1,695 1,695 3,318 3,318 3,072 3,072 710 710 658 658 617 617 571 571 The fair values of the trade and other receivables and other non-current liabilities above are included in the level 2 category and have been determined in accordance with generally accepted pricing models based on a discounted cash flow analysis, with the most significant input being a discount of 8% to determine fair value Due to their short-term nature, the carrying amounts of cash and cash equivalents, current trade and other receivables, current trade and other payables are assumed to approximate their fair value. Refer to note 25 for further information on financial instruments. 58 NOTES TO THE fINANCIAL STATEMENTS 2015 11. property, plant anD equipment ConsoliDateD entity year ended 30 June 2015 Balance at 1 July 2014 Additions Disposal Depreciation charge for the year Exchange adjustment Carrying amount at 30 June 2015 As at 1 July 2014 Cost Accumulated depreciation and impairment Net carrying amount As at 30 June 2015 Cost Accumulated depreciation and impairment Net carrying amount year ended 30 June 2014 Balance at 1 July 2013 Additions Disposal Depreciation charge for the year Exchange adjustment Carrying amount at 30 June 2014 As at 1 July 2013 Cost Accumulated depreciation and impairment Net carrying amount As at 30 June 2014 Cost Accumulated depreciation and impairment Net carrying amount plant & equipment $000's $000's leaseD mv & equipment $000's $000's 1,890 899 (3) (960) 24 1,850 12,739 (10,849) 1,890 13,645 (11,795) 1,850 1,619 1,482 (122) (1,088) (1) 1,890 – – – – – – 385 (385) – 385 (385) – 36 – – (36) – – total $000's $000's 1,890 899 (3) (960) 24 1,850 13,124 (11,234) 1,890 14,030 (12,180) 1,850 1,655 1,482 (122) (1,124) (1) 1,890 12,252 (10,633) 1,619 385 12,637 (349) (10,982) 36 1,655 12,739 (10,849) 1,890 385 (385) – 13,124 (11,234) 1,890 59 Beyond InternatIonal AnnuAl RepoRt 201512. intangiBle assets Patents and Licenses – at cost Less: Accumulated amortisation Websites and Databases – at cost Less: Accumulated amortisation Goodwill – at cost Accumulated amortisation and impairment Less: Impairment ConsoliDateD entity 2014 $000's 232 2015 $000's 232 (81) 150 (77) 155 3,312 2,606 (1,999) (1,333) 1,312 5,250 – (650) 4,600 6,062 1,273 5,250 (650) 4,600 6,028 Reconciliations Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below: Balance at 30 June 2013 Additions Amortisation expense Balance at 30 June 2014 Additions Amortisation expense gooDWill $'000 4,600 WeBsites anD DataBases $'000 1,122 – – 4,600 – – 702 (551) 1,273 706 (666) ConsoliDateD entity patents anD liCenses $'000 160 total $'000 5,882 – (5) 155 – (5) 702 (556) 6,028 706 (671) Balance at 30 June 2015 4,600 1,312 150 6,062 Intangible assets, other than goodwill, have finite useful lives. Patents and licenses have been assessed as having a finite life and are amortised using the straight line method over 20 years. Websites and Databases have been assessed as having a finite life of 4 years and are amortised using the straight line method. The current amortisation charges for intangible assets are included under depreciation and amortisation expense per the Statement of Profit or Loss and Other Comprehensive Income. Goodwill is assessed as having has an infinite life subject to an annual impairment review. If an impairment indication arises, the recoverable amount is estimated and an impairment loss is recognised to the extent that the recoverable amount is lower than the carrying amount. 60 NOTES TO THE fINANCIAL STATEMENTS 2015 12. intangiBle assets (continued) Impairment Disclosure There were no impairment losses recognised by the consolidated entity in respect of the current financial year (2014: nil). The following assumptions were used in the value-in-use calculations: groWth rate 2014 2015 DisCount rate 2014 2015 Beyond D business All other businesses 5% 5% 2% 5 – 10% 15% 10% 15% 10 – 12% Historical performance of the relevant businesses show the above growth rates to be reasonable. Sensitivity – Digital Marketing Division As disclosed in Note 1 (AF) the directors have made judgements and estimates in respect of impairment testing of goodwill. Should these judgements and estimates not occur the resulting goodwill may vary in carrying amount. The sensitivities are as follows: a. If the growth rate decreased by up to 15%, with all other assumptions remaining constant, impairment of goodwill would still not be required. b. If the discount rate increased up to 18% , with all other assumptions remaining constant, impairment of goodwill would still not be required. Management believes that other reasonable changes in the key assumptions on which the recoverable amount of the digital marketing division goodwill is based would not cause the cash-generating unit's carrying amount to exceed its recoverable amount. If there are negative changes in the key assumptions on which the recoverable amount of goodwill is based, this would result in a further impairment of the digital marketing division goodwill. 13. traDe anD other payaBles Current (unsecured) Trade payables (i) Other creditors and accruals Employee benefits ConsoliDateD entity 2014 $000's 2015 $000's 3,364 2,661 – 3,257 2,738 – 6,025 5,995 (i) Credit terms on trade payables vary between business units and range from 7 days to 90 days. Contractual maturities of trade and other payables have been disclosed in Note 25. 61 Beyond InternatIonal AnnuAl RepoRt 201514. investments aCCounteD for using the equity methoD Investment in joint venture ConsoliDateD entity 2014 2015 $000's – – $000's 82 82 Interests in joint ventures are accounted for using the equity method of accounting. Information relating to the consolidated entity's joint venture is set out below: name 7Beyond Media Rights Ltd prinCipal plaCe of Business / Country of inCorporation United States of America / Ireland summariseD finanCial information Summarised statement of financial position Cash and cash equivalents Other current assets Non-current assets Total assets Current financial liabilities (excluding trade and other payables and provisions) Other current liabilities Non-current financial liabilities (excluding trade and other payables and provisions) Total liabilities Net assets Summarised statement of profit or loss and other comprehensive income Revenue Other revenue Production costs Administration costs Net foreign exchange loss Loss before income tax Income tax benefit Loss after income tax Total comprehensive income oWnership interest 2014 2015 % 50% % 50% 7BeyonD meDia rights ltD 2015 $000's 2014 $000's 736 110 179 62 170 105 1,025 337 595 743 34 6 167 – 1,372 173 (347) 164 1,086 20 (1,966) (179) (240) (1,279) 160 (1,119) (1,119) – – (378) (82) (18) (478) – (478) (478) 62 NOTES TO THE fINANCIAL STATEMENTS 2015 14. investments aCCounteD for using the equity methoD (continued) Reconciliation of the consolidated entity's carrying amount Opening carrying amount Investment in joint venture Share of loss after income tax Closing carrying amount The above amount has been accounted for in accordance with Note 1 (AH). Contingent liabilities There are no contingent liabilities provided for. Commitments There are no outstanding commitments at reporting date. 15. employee Benefits Current Provision for annual leave and long service leave Non-current Provision for long service leave Total employee benefits ConsoliDateD entity 2014 $000's 2015 $000's 82 302 (560) (176) – 321 (239) 82 – – – – ConsoliDateD entity 2014 $000's 2015 $000's 2,902 2,902 2,768 2,768 588 588 614 614 3,490 3,382 The current provision for employee benefits includes accrued annual leave and long service leave. For long service leave it covers all unconditional entitlements where employees have completed the required period of service. The entire amount of the annual leave provision is presented as current, since the consolidated entity does not have an unconditional right to defer settlement for any of these obligations. However, based on past experience, the consolidated entity does not expect all employees to take the full amount of accrued leave or require payment within the next 12 months. The following amounts reflect leave that is not expected to be taken or paid within the next 12 months. Annual leave obligations accounted for as current and expected to be settled after 12 months 481 481 470 470 63 Beyond InternatIonal AnnuAl RepoRt 201516. other liaBilities Current unsecured liabilities Deferred revenue GST payable Producer share payable Other Non-current unsecured liabilities Producer share payable Other 17. issueD Capital (a) Share Capital ConsoliDateD entity 2014 $000's 2015 $000's 3,419 195 7,332 – 2,307 247 9,041 13 10,946 11,608 710 – 710 617 – 617 61,336,968 ordinary shares – fully paid (2014: 61,336,968) 33,867 33,775 The company has authorised capital amounting to 100,000,000 ordinary shares of no par value. Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the company in proportion to the number of and amounts paid on the shares held. On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote. (b) Share Options On 1 May 1998 at an extraordinary general meeting shareholders approved the establishment of the Beyond Employee Share Option Plan. Under the plan any options on issue are cancellable at the Directors discretion upon an option holder ceasing to be an employee. (c) Employee Share Plan On 21 April 2006, a total of 962,500 shares were issued under the employee plan to eligible employees and directors, and the company has entered into limited non-recourse loan agreements with participants to provide the funds necessary to subscribe for those shares. Shares were issued in accordance with the Employee Plan rules (refer note 23). On 7 December 2009 and 11 March 2010, a total of 1,625,000 shares were issued under the employee plan to eligible employees and directors, and the company has entered into limited non-recourse loan agreements with participants to provide the funds necessary to subscribe for those shares. Shares were issued in accordance with the Employee Plan rules (refer note 23). 64 NOTES TO THE fINANCIAL STATEMENTS 2015 18. reserves Employee Share Plan Benefit Reserve The employee share plan benefit reserve records items recognised as expenses on valuation of employee share options. Investment Revaluation Reserve The investment revaluation reserve records unrealised share price and foreign exchange gains and losses on the available-for-sale financial instruments in Note 10(a). Foreign Currency Translation Reserve The foreign currency translation reserve records the variance between converting the Statement of Financial Position at closing spot rate and the Statement of Profit or Loss and Other Comprehensive Income at average rate for Magna Home Entertainment NZ Limited and Beyond D (NZ) Limited which have a functional currency of New Zealand Dollars (NZD). 19. non-Controlling interest Interest in: Accumulated losses Transfers ConsoliDateD entity 2014 $000's 2015 $000's – – – (205) 205 – During the 2014 financial year, the Group acquired the remaining 49% of Beyond Screen Productions Pty Ltd for $49, increasing its interest to 100%. An amount of $205,000 (being the proportionate share of the carrying amount of the net liabilities of the non-controlling interest at the date of acquisition) was transferred to retained earnings. 20. DiviDenDs Distributions paid Interim unfranked ordinary dividend of five cents per share totalling $3,066,848 (2014: four cents) 3,067 2,453 On 27th August 2015, the directors declared a final unfranked dividend of five cents per share, totaling $3,066,848 (2014: five cents per share totaling $3,066,848). Net franking credits available based on a tax rate of 30% (2014: 30%) 3,067 577 3,067 577 The above amounts represent the balance of the franking account as at the end of the financial year, adjusted for: (a) franking credits that will arise from the payment of the current tax liability (b) franking debits that will arise from the payment of dividends recognised as a liability at the reporting date (c) franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date (d) franking credits that may be prevented from being distributed in subsequent financial years 21. Contingent assets anD liaBilities The consolidated entity had no contingent assets as at 30 June 2015 (2014: nil). The consolidated entity has given bank guarantees as at 30 June 2015 of $605,166 (2014: $1,344,287) to various landlords. 65 Beyond InternatIonal AnnuAl RepoRt 2015 22. Commitments ConsoliDateD entity 2014 $000's 2015 $000's (i) OPERATING lEASE PAyABlE COMMITMENTS Total lease expenditure contracted at reporting date but not recognised in the financial statements: Payable no later than one year Payable later than one, not later than five years Payable later than five years 2,003 2,568 – 2,281 3,409 – 4,571 5,690 Operating lease commitments includes contracted amounts for various offices and plant and equipment under non-cancellable operating leases expiring within one to five years with, in some cases, options to extend. The leases have various escalation clauses. On renewal, the terms of the leases are renegotiated. (ii) DISTRIBuTION GuARANTEE COMMITMENTS In the course of the Consolidated Entity's feature film, television and Home Entertainment businesses, commitments to pay distribution guarantees and advances of minimum proceeds from sales have been made to producers at reporting date but not recognised in the financial statements: Not later than one year Distribution Guarantee Home Entertainment Advances Later than one year but not later than five years Distribution Guarantee Home Entertainment Advances Later than five years Home Entertainment Advances 1,477 2,722 1,224 2,401 301 76 – 428 – – 4,576 4,053 The above commitments to pay distribution guarantees have been entered into in the normal course of business. (iii) OPERATING lEASE RECEIVABlE COMMITMENTS Total lease receipts contracted at reporting date but not recognised in the financial statements: Receivable no later than one year Receivable later than one, not later than five years Receivable later than five years 477 – – 645 430 – 477 1,075 Operating lease commitment relates to the sub lease of part of the Brisbane office with a lease term of 20 months. The lease commenced in September 2013 and will not be renewed. 66 NOTES TO THE fINANCIAL STATEMENTS 2015 23. share BaseD payments General Employee Share loan Plan "The Board has adopted an employee share plan under which employees and Directors of the Consolidated Entity may subscribe for shares in the Company using funds loaned to them by the Consolidated Entity. The Board has also adopted a share plan on substantially the same terms for consultants of the Consolidated Entity (Consultant Plan). The purpose of the Employee Plan is to: (a) assist in the retention and motivation of employees and Directors of the Consolidated Entity by providing them with a greater opportunity to participate as shareholders in the success of the Consolidated Entity; and (b) create a culture of share ownership amongst the employees of the Consolidated Entity. There have been three issues of shares under the Employee Share plan as follows: – On 12 April 2006, 962,500 shares were issued under the Employee Plan to eligible employees and Directors of Beyond International Limited and its controlled entities. 700,000 of these shares remain redeemable at 30 June 2015. – On 7 December 2009, 300,000 shares were issued under the Employee Plan to eligible employees and Directors of Beyond International Limited and it's controlled entities. All of these shares remain redeemable at 30 June 2015. – On 11 March 2010, 1,325,000 shares were issued under the Employee Plan to eligible employees and Directors of Beyond International Limited and it's controlled entities. 835,000 of these shares remain redeemable at 30 June 2015. In all cases the company entered into limited non-recourse loan agreements to provide participants the funds necessary to subscribe for those shares. Shares were issued in accordance with the Employee Plan rules. The loans were made based on the greater of market value of the shares on allotment date and $0.645 (Dec 09 – 2010 plan), $0.75 (Mar 10 – 2010 plan) & $0.60 (2006 plan). As the loans are non-recourse, the value of the loans are not recognised as an asset, and the corresponding share value is not recorded in equity. The total of the Plan Shares are included in Issued Capital at note 17(a). Notwithstanding any other provision of the Plan, each Participant has a legal and beneficial interest in the Shares issued to him or her and is at all times absolutely entitled to those Plan Shares, except that any dealings with those Shares by the Participant may be restricted in accordance with the plan rules. Plan Shares rank equally with all existing Shares from the date of issue in respect of all rights issues, bonus issues, dividends and other distributions to, or entitlements of, holders of existing Shares where the record date for such corporate actions is after the relevant Plan Shares are issued. On termination, the Participant may elect to pay the loan or transfer all of their Plan Shares back to the Company, subject to requirements of the Corporations Act. If the Participant transfers the shares back to the Company, the Company may: i) transfer the Plan Shares for the issue price to a person nominated by the Company; or ii) procure a broker to sell all or any of the Plan Shares on-market. Share movements in the plan as follows: Outstanding at the beginning of year Redemption of shares under the employee share plan Exercisable at year end numBer of shares 1,885,000 (125,000) 1,760,000 Change in equity value $000's 92 The Plan Shares issued as part of the 2010 Plan required that Participants could only deal with the shares on a pro-rata basis for a 3 year period. During this period, the Company accounted for the Plan Shares as if they were options. The grant fair value of the shares was amortised across the vesting period as follows: vesting perioD 11 March 2010 to 30 June 2010 amortisation $ 15,587 Financial year ending 30 June 2011 Financial year ending 30 June 2012 Financial year ending 30 June 2013 66,718 66,718 47,602 67 Beyond InternatIonal AnnuAl RepoRt 2015 23. share BaseD payments (continued) The grant fair value of the 2010 plan was calculated by using the Black Scholes option pricing model applying the following inputs: Weighted average exercise price Weighted average life of the option Underlying share price Expected share price volatility (i) Risk free interest rate Expected dividend rate Weighted average fair value price $0.75 3 $0.75 30% 5.00% 6.00% $0.10 (i) Expected share price volatility has been estimated based on the historical volatility of the Company's share price. 24. ControlleD entities (a) Controlled entities consolidated name of entity ultimate parent entity Beyond International Limited Controlled entities of Beyond International limited: Beyond Films Limited Beyond Television Group Pty Ltd Beyond Television Pty Ltd Beyond Entertainment Pty Ltd Beyond Simpson le Mesurier Pty Ltd Liberty & Beyond Pty Ltd Beyond Imagination Pty Ltd Beyond Miall Kershaw Pty Ltd Pacific & Beyond Pty Ltd Beyond Screen Productions Pty Ltd Beyond Home Entertainment Pty Ltd Beyond Entertainment Holdings Limited Beyond D Pty Ltd Beyond West Pty Ltd Controlled entities of Beyond Entertainment Pty ltd: Mullion Creek and Beyond (partnership) Equus Film Productions Pty Ltd BTVUS Pty Ltd Controlled entities of liberty & Beyond Pty ltd: Country of formation or inCorporation BeyonD international limiteD DireCt interest in orDinary shares 2015 % 2014 % Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Ireland Australia Australia Australia Australia Australia 100 100 26 100 51 51 51 51 51 100 100 100 100 100 51 51 100 100 100 26 100 51 51 51 51 51 100 100 100 100 100 51 51 0 Liberty & Beyond Productions Pty Ltd Australia 100 100 68 NOTES TO THE fINANCIAL STATEMENTS 2015 24. ControlleD entities (continued) Controlled entities of Beyond Television Group Pty ltd: Beyond Television Pty Ltd Controlled entities of Beyond Television Pty ltd: Beyond Properties Pty Ltd Beyond Productions Pty Ltd Beyond Distribution Pty Ltd Controlled entities of Beyond Properties Pty ltd: Beyond Pty Ltd Beyond International Group Inc The Two Thousand Unit Trust * Australia 74 74 Australia Australia Australia Australia USA Australia 100 100 100 100 100 100 100 100 100 100 100 100 * The corporate trustee of the trust is Beyond Properties Pty Ltd. Controlled entities of Beyond International Group Inc: Beyond Productions Inc name of entity Controlled entities of Beyond Simpson le Mesurier Pty ltd: Beyond Simpson le Mesurier Productions Pty Ltd BSLM Productions Pty Ltd Something in the Air Pty Ltd Something in the Air 2 Pty Ltd Beagle Productions Pty Ltd Stingers 3 Pty Ltd Stingers 4 Pty Ltd Stingers 5 Pty Ltd Halifax 5 Pty Ltd Halifax 6 Pty Ltd Controlled entities of Beyond Entertainment holdings limited Beyond Entertainment Limited Beyond Films Limited Controlled entities of Beyond Entertainment limited Beyond Finance (BOC) Inc. (refer note 25(b)) Beyond Finance (MERC) Inc (refer note 25(b)) Controlled entities of Beyond Distribution Pty limited Beyond TV Properties Bermuda USA 100 100 Country of formation or inCorporation interest in orDinary shares 2015 % 2014 % Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Ireland Ireland USA USA 100 100 100 100 100 100 100 100 100 100 100 100 0 0 100 100 100 100 100 100 100 100 100 100 100 100 0 0 Bermuda 100 100 69 Beyond InternatIonal AnnuAl RepoRt 201524. ControlleD entities (continued) name of entity Controlled entities of Beyond Films limited Country of formation or inCorporation interest in orDinary shares 2015 % 2014 % Beyond Film Properties Bermuda Bermuda 100 100 Controlled entities of Beyond home Entertainment Pty limited Magna Home Entertainment Pty Ltd Australia 100 100 Controlled entities of Magna home Entertainment Pty limited Magna Home Entertainment (NZ) Limited New Zealand 100 100 Controlled entities of Beyond D Pty ltd Beyond D (NZ) Ltd Entity controlled jointly by Beyond TV Properties Bermuda and Beyond Films Properties Bermuda New Zealand 100 100 Beyond International Services Limited United Kingdom 100 100 Controlled entities of BTVuS Pty ltd B U.S.A. Holdings, Inc. Controlled entities of B u.S.A. holdings, Inc Move It or List It, Inc 25. finanCial instruments (i) Capital Risk Management USA USA 100 100 0 0 The Consolidated Entity manages its capital to ensure that entities in the group will be able to continue as a going concern while maximising the return to stakeholders. The Consolidated Entity’s strategy remains unchanged from 2014. The capital structure of the group consists of cash and equity attributable to the equity holders of the parent entity, comprising issued capital, reserves and retained earnings. The Consolidated Entity operates globally, primarily through subsidiary companies established in the markets in which the group trades. The consolidated entity is subject to certain financing arrangements covenants and meeting these are given priority in all capital risk management decisions. For further details on events of default on these financing arrangements, refer to note 6(c). Operating cash flows are used to make the routine outflows of tax and dividends. (ii) Market Risk The Consolidated Entity’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates (refer note 25 (iii)). (iii) Foreign Currency Risk Management The Consolidated Entity undertakes certain transactions denominated in foreign currencies, hence exposures to exchange rate fluctuations arise. Derivative financial instruments are used by the Consolidated Entity to hedge exposure to exchange rate risk associated with foreign currency trade receivables. Mark-to-market gains on derivative financial instruments used by the economic entity are recognised in the financial statements. Transactions for hedging purposes are undertaken without the use of collateral as only reputable institutions with sound financial positions are dealt with. 70 NOTES TO THE fINANCIAL STATEMENTS 2015 25. finanCial instruments (continued) Foreign currency sensitivity analysis The Consolidated Entity is mainly exposed to US dollars (USD), Euro (EUR), Great British Pound (GBP) and New Zealand Dollars (NZD). The carrying amount of the foreign currency denominated financial assets and liabilities at the reporting date is as follows: ConsoliDateD entity US Dollars Euro Great British Pound New Zealand Dollars Other finanCial assets $000's 10,314 2015 finanCial liaBilities $000's 93 finanCial assets $000's 10,185 2014 finanCial liaBilities $000's 315 1,837 1,923 914 102 15,090 55 142 1,011 30 1,331 962 1,504 705 171 13,527 101 67 655 – 1,138 The following table details the Consolidated Entity's sensitivity to a 10% increase and decrease in the Australian dollar against the relevant foreign currencies. A sensitivity rate of 10% is considered reasonable based on exchange rate fluctuations over the past 12 months. The sensitivity analysis includes only outstanding foreign currency financial assets and liabilities and adjusts their translation at the period end for a 10% change in foreign currency rates. ConsoliDateD entity Profit/(loss) Other reserves 10% inCrease $000's (980) 2015 10% DeCrease $000's 1,228 10% inCrease $000's (936) – – (1) (980) 1,228 (937) 2014 10% DeCrease $000's 1,143 1 1,144 71 Beyond InternatIonal AnnuAl RepoRt 201525. finanCial instruments (continued) Forward foreign exchange contracts It is the policy of the Consolidated Entity to enter into forward foreign exchange contracts to cover specific production foreign currency receipts. The Consolidated Entity does not enter into derivative financial instruments for speculative purposes. The following table details the forward foreign currency contracts outstanding as at the reporting date. ConsoliDateD entity Outstanding Contracts Sell USD Less than 3 months 3 to 6 months Longer than 6 months Gains or losses from forward exchange contracts Unrealised gains Unrealised losses (iv) Interest Rate Risk Management average exChange rate 2015 average exChange rate 2014 prinCipal amount 2015 $000's prinCipal amount 2014 $000's 0.8130 0.7954 0.9427 0.9403 0.9312 1,300 520 – 1,820 – 91 91 1,362 602 326 2,290 – 5 5 The Consolidated Entity's exposure to interest rate risk is minimal. The group does not have significant borrowings in the current or prior periods. At 30 June 2015 there are no borrowings attached to variable interest rates. The Consolidated Entity's exposures to interest rates on financial assets and financial liabilities are detailed in the liquidity risk management section of this note, per below. Interest rate sensitivity analysis The sensitivity analysis below have been determined based on the exposure to interest rates at the reporting date and the stipulated change taking place at the beginning of the financial year and held constant throughout the reporting period. A sensitivity analysis of 50 basis points is considered reasonable based on interest rate fluctuations over the past 12 months. At reporting date, if interest rates had been 50 points higher or lower and all other variables were held constant, net interest received from cash held by the Consolidated Entity would increase or decrease by $39,536 (2014: $46,667). (v) liquidity Risk Management Ultimate responsibility for liquidity risk management rests with the Board of Directors, who have built an appropriate liquidity risk management framework for the management of the Consolidated Entity's short, medium and long-term funding and liquidity management requirements. This framework is not formally documented. The Consolidated Entity manages liquidity risk by maintaining adequate reserves and banking facilities by continuously monitoring forecast and actual cash flows. Included in note 6(c) is a listing of additional undrawn facilities that the Consolidated Entity has at its disposal to further reduce liquidity risk. 72 NOTES TO THE fINANCIAL STATEMENTS 2015 25. finanCial instruments (continued) liquidity and interest risk tables The following tables detail the Consolidated Entity's remaining contractual maturity for it's financial liabilities. ConsoliDateD entity notes average interest rate % less than 6 months $000's 6 months to 1 year 5+ 1 to 5 years years $000's $000's $000's total outfloWs $000's Carrying amount $000's 2015 Financial liabilities Trade & other payables 13 Financial derivatives 10 Producer share payable 16 Other payables 16 Total financial liabilities 2014 Financial liabilities Trade & other payables 13 Financial derivatives 10 Producer share payable 16 Other payables 16 Total financial liabilities (vi) Credit Risk Exposures – – – – – – – – 6,025 91 – – – – 3,666 3,666 710 195 – – 9,977 3,666 710 5,995 5 4,522 260 – – – – 4,519 617 – – 10,782 4,519 617 – – – – – – – – – – 6,025 6,025 91 91 8,042 8,042 195 195 14,354 14,354 5,995 5,995 5 9,658 260 15,918 5 9,658 260 15,918 Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Consolidated Entity. The consolidated entity has adopted a policy of only dealing with creditworthy counterparties as a means of mitigating the risk of financial loss from defaults. This information is supplied by credit rating agencies and, if not available, the Consolidated Entity uses publicly available financial information to assess the credit-worthiness. Trade receivables consist of a large number of customers, spread across diverse geographical areas. Ongoing reviews are conducted of accounts receivable balances. The Consolidated Entity does not have significant credit risk exposure to any single counterparty. The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies. The credit risk on financial assets of the Consolidated Entity which are recognised on the Statement of Financial Position is generally the carrying amount, net of any provisions for doubtful debts. (vii) Price Risk The Consolidated Entity is marginally exposed to equity price risk arising from the equity investments classified as available-for-sale assets in Note 10(a). Equity investments are held for strategic rather than trading purposes. The Consolidated Entity does not actively trade in this investment. (viii) Equity price sensitivity analysis The sensitivity analysis below have been determined based on the exposure to equity price risks at the reporting date and the stipulated change taking place at the reporting date. A sensitivity analysis of 20 percent is considered reasonable based on movements in equity markets over the last twelve months. At reporting date, if the relevant equity price had been 20 percent higher or lower and all other variables were held constant, the Consolidated Entity's reserves would increase or decrease by $838 (2014: $1,661), as a result of changes in fair value of available-for-sale shares. 73 Beyond InternatIonal AnnuAl RepoRt 201525. finanCial instruments (continued) (ix) Net Fair Value of Financial Instruments The net fair value of cash and cash equivalents and non-interest bearing monetary financial assets and liabilities approximates their carrying values. A discount rate of 8% (2014: 8%) has been applied to all non-current receivables & borrowings to determine fair value. The net fair value of other monetary financial assets and liabilities is based upon market prices where a market exists or by discounting the expected future cash flows by the current interest rates for assets and liabilities with similar risk profiles. For forward exchange contracts the net fair value is taken to be the unrealised gain or loss as at the date of the report calculated by reference to the current forward rates for similar contracts. Financial assets Cash and cash equivalents Loans and receivables Available for sale Financial liabilities, at amortised cost Trade and other payables Other payables Financial derivatives Producer share payable Carrying amount 2014 $000's 2015 $000's net fair value 2015 $000's 2014 $000's 10,403 10,985 10,403 10,985 31,434 30,536 31,299 30,290 4 8 4 8 41,841 41,529 41,706 41,283 6,025 5,995 6,025 5,995 195 91 8,042 14,354 260 5 9,658 15,917 195 91 260 5 7,990 9,612 14,301 15,872 74 NOTES TO THE fINANCIAL STATEMENTS 2015 26. key management personnel Compensation Directors The following persons were directors of Beyond International Limited during the financial year: Chairman Ian Ingram Executive directors Mikael Borglund – Managing Director Non-executive directors Anthony Lee Ian Robertson Executives (other than directors) with the greatest authority for strategic direction and management The following persons were the seven executives with the greatest authority for the strategic directions and management of the Consolidated Entity ("specified executives") during the financial year. Name Position Employer J Luscombe General Manager – Productions & Executive Vice President Beyond Television Group Pty Limited T McGee General Manager – Business Development Beyond Television Group Pty Limited M Murphy General Manager – Distribution Beyond Entertainment Limited P Wylie General Manager – Finance & Company Secretary Beyond Television Group Pty Limited P Tehan General Manager – Legal & Business Affairs Beyond Television Group Pty Limited P Maddison General Manager – Home Entertainment Beyond Home Entertainment Pty Limited J Ward General Manager – Beyond D Beyond D Pty Limited Information on key management personnel compensation is disclosed below and in the Directors' Report. (ii) REMuNERATION The aggregate compensation made to directors and other members of key management personnel of the consolidated entity is set out below: Short-term employee benefits Post-employment benefits Long-term benefits Share-based payments ConsoliDateD entity 2015 $ 3,767,639 141,893 85,910 – 2014 $ 3,994,891 148,341 – – 3,995,442 4,143,232 75 Beyond InternatIonal AnnuAl RepoRt 201526. key management personnel Compensation (continued) (iii) ShAREhOlDINGS Number of Shares held by Directors and Specified Executives, including their personally related parties parent entity DireCtors M Borglund I Ingram A Lee I Robertson Total BALANcE 1.07.14 3,150,949 16,176,716 5,474,997 110,000 24,912,662 2015 REcEIvEd As remuneration – OPTIONs exerCiseD – NET chANgE OThER * – BalanCe 30.6.15 3,150,949 – – – – – – – – 1,275,855 17,452,571 – – 5,474,997 110,000 1,275,855 26,188,517 speCifieD exeCutives BalanCe 1.07.14 273,478 J Luscombe REcEIvEd As remuneration – OPTIONs exerCiseD – NET chANgE OThER * – T McGee P Wylie P Tehan P Maddison M Murphy J Ward Total 75,000 2,000 75,000 50,000 – – 475,478 – – – – – – – – – – – – – – – – – – – – – BalanCe 30.6.54 273,478 75,000 2,000 75,000 50,000 – – 475,478 parent entity DireCtors M Borglund I Ingram ** A Lee I Robertson Total BalanCe 1.07.13 3,509,101 16,154,716 5,474,997 110,000 25,248,814 2014 REcEIvEd As remuneration – OPTIONs exerCiseD – NET chANgE OThER * (358,152) BalanCe 30.6.14 3,150,949 – – – – – – – – 22,000 16,176,716 – – 5,474,997 110,000 (336,152) 24,912,662 speCifieD exeCutives BalanCe 1.07.13 273,478 J Luscombe REcEIvEd As remuneration – OPTIONs exerCiseD – NET chANgE OThER * – BalanCe 30.6.14 273,478 T McGee F Crago R Milne P Wylie P Tehan P Maddison M Murphy J Ostler J Ward Total 75,000 125,000 150,000 – 75,000 75,000 – – – 773,478 – – – – – – – – – – – – – – – – – – – – – 75,000 (125,000) (150,000) 2,000 – (25,000) – – – – – 2,000 75,000 50,000 – – – (298,000) 475,478 * Net Change Other refers to shares purchased or sold during the financial year. ** I Ingram opening balance has been restated to include Family members. 76 NOTES TO THE fINANCIAL STATEMENTS 2015 27. relateD parties (i) CONTROllING ENTITIES Beyond International Limited is the ultimate parent entity in the wholly-owned group comprising the Company and its wholly-owned controlled entities which are disclosed in note 24. (ii) kEy MANAGEMENT PERSONNEl Disclosures relating to key management personnel are set out in note 26 and the remuneration report in the directors' report. loans to key management personnel There were no outstanding loans as at 30 June 2015 or at any point during the year (2014: nil). Equity transactions with directors and their director-related entities The aggregate number of equity instruments acquired or disposed of by directors of the Consolidated Entity and their director-related entities during the year were: Acquisitions Disposals Ordinary shares Ordinary shares 2015 ConsoliDateD entity 2014 numBer – 1,275,855 – (336,152) The aggregate number of equity instruments held by directors of the Consolidated Entity and their director- related entities at balance date were: Issuing entity Class of equity instruments numBer Beyond International Limited Ordinary shares 26,188,517 24,912,662 Options over ordinary shares – – Other transactions with directors of the Company and controlled entities and their director-related entities The following directors and their director related entities provided executive producer services to entities in the Consolidated Entity. ConsoliDateD entity 2014 $ 2015 $ Directors Denis Spencer Director related entity Beyond Screen Productions Pty Ltd – 24,000 All transactions are on normal terms and conditions and in the ordinary course of business. The aggregate amounts recognised in respect of each of the above transactions with directors of entities in the Consolidated Entity and their director-related entities: Transaction type Executive producer services – 24,000 77 Beyond InternatIonal AnnuAl RepoRt 201527. relateD parties (continued) (iii) TRANSACTIONS WITh ENTITIES IN ThE WhOlly-OWNED GROuP Beyond International Limited is the ultimate parent entity in the wholly-owned group comprising the Company and its wholly-owned controlled entities. The Company advanced and repaid loans, received loans, provided management services, received dividends and charged rent to other entities in the wholly-owned group during the current and previous financial years. With the exception of loans advanced free of interest to wholly-owned subsidiaries, these transactions were on commercial terms and conditions. Such loans are repayable on demand. (iv) TRANSACTIONS WITh OThER RElATED PARTIES ConsoliDateD entity 2014 2015 $ $ The aggregate amounts recognised in respect of the following types of transactions and each class of related party involved were: Transaction type Class of other related party Legal services (Holding Redlich) Associates 52,833 6,388 The above transactions were made on commercial terms and conditions, at market rates. J Luscombe is a director of Ryzara Pty Ltd. The company has received payments for services rendered by J Luscombe during the year. These fees are included as part of the Executive Remuneration disclosed in Note 26 and the Directors Report. K Borglund (M Borglund's daughter) is the owner of Idylic Interiors. Idylic Interiors provided refurbishment services to the organisation, with a total value of $0 (2014: $17,358) during the financial year. M Borglund was a director of Wight Expedition Films Pty Ltd (Resigned – 14/10/14). Beyond International Limited provided services in 2014 – including executive producer, production, production accountancy and administration services – to Wight Expedition Films Pty Ltd. Amount of the services provided to Wight Expedition Films date which has been recognised in the financial year ConsoliDateD entity 2014 $ 2015 $ – 90,000 Beyond Entertainment Limited, a subsidiary of the parent company, holds 50% of the shares in 7Beyond Media Rights Limited (refer to note 14). At 30 June 2015 Beyond Entertainment Limited had a liability of $176,415 (2014: $nil) owing to 7Beyond Media Rights Limited. This liability relates to funding provided for operating costs in 7Beyond Media Rights Limited and has been disclosed in Note 14. Beyond Productions Inc, another subsidiary of the parent company, had an amount of $510,638 (2014: payable of $57,155) owing from 7Beyond Media Rights Limited at 30 June 2015. This amount relates to production services provided by Beyond Productions Inc on behalf of 7Beyond Media Rights Limited and has been included in Receivables (Note 7). Beyond Entertainment Limited charged 7Beyond Media Rights Limited a management fee of $158,331 (2014: $34,940) for the provision of accounting and administration services. The management fee has been disclosed as Other income in Note 3(a). (v) TRANSACTIONS WIThIN ThE WhOlly OWNED GROuP Due to the nature of the operations of the Consolidated Entity, normal operating transactions take place between subsidiaries within the group. These are all at arms length and are eliminated on consolidation. 78 NOTES TO THE fINANCIAL STATEMENTS 2015 28. parent entity The following information relates to the parent entity Beyond International Limited. The information presented has been prepared using accounting policies that are consistent with those presented in Note 1. Statement of financial position Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Contributed equity Reserves Accumulated losses Total equity Profit for the year Other comprehensive income Total comprehensive income for the year Contingent Assets and liabilities parent entity 2015 $000's 10,567 9,953 20,520 497 – 497 33,867 341 (14,185) 20,023 6,187 – 6,187 2014 $000's 10,261 9,643 19,904 781 – 781 33,774 341 (14,992) 19,123 4,769 – 4,769 The parent entity has given a bank guarantee as at 30 June 2015 of $579,416 (2014: $579,416) to its landlord. Capital Commitments – Operating lease Commitments Total lease expenditure contracted at reporting date but not recognised in the financial statements: Payable no later than one year Payable later than one, not later than five years Payable later than five years 29. suBsequent events (i) DiviDenD 671 1,413 – 2,084 648 2,084 – 2,732 Final dividend declared as detailed in Note 20. With the exception of the dividends, there are no subsequent events to disclose. 30. Company Details The registered office & principal place of business of the company is: Beyond International Limited 109 Reserve Road Artarmon, NSW 2064 Australia 79 Beyond InternatIonal AnnuAl RepoRt 2015BEYOND INTERNATIONAL LIMITED AND ITS CONTROLLED ENTITIES ABN 65 003 174 409 DIRECTORS’ DEClARATION In the directors’ opinion: • the attached financial statements and notes thereto comply with the Corporations Act 2001, the Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; • the attached financial statements and notes thereto comply with International Financial Reporting Standards as issued by the International Accounting Standards Board as described in note 1 to the financial statements; • the attached financial statements and notes thereto give a true and fair view of the consolidated entity’s financial position as at 30 June 2015 and of its performance for the financial year ended on that date; • there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable; and The directors have been given the declarations required by Section 295A of the Corporations Act 2001. Signed in accordance with a resolution of the directors made pursuant to section 295(5) of the Corporations Act 2001. On behalf of the directors Mikael Borglund Managing Director 27 August 2015 Sydney 80 DIRECTORS’ DECLARATION 2015 Tel: +61 2 9251 4100 Fax: +61 2 9240 9821 www.bdo.com.au Level 11, 1 Margaret St Sydney NSW 2000 Australia INDEPENDENT AUDITOR’S REPORT To the members of Beyond International Limited Report on the Financial Report We have audited the accompanying financial report of Beyond International Limited, which comprises the consolidated statement of financial position as at 30 June 2015, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration of the consolidated entity comprising the company and the entities it controlled at the year’s end or from time to time during the financial year. Directors’ Responsibility for the Financial Report The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In Note 1(A), the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements comply with International Financial Reporting Standards. Auditor’s Responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance about whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the company’s preparation of the financial report that gives a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. BDO East Coast Partnership ABN 83 236 985 726 is a member of a national association of independent entities which are all members of BDO (Australia) Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO East Coast Partnership and BDO (Australia) Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation, other than for the acts or omissions of financial services licensees. 72 81 Beyond InternatIonal AnnuAl RepoRt 2015 Independence In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of Beyond International Limited, would be in the same terms if given to the directors as at the time of this auditor’s report. Opinion In our opinion: (a) the financial report of Beyond International Limited is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2015 and of its performance for the year ended on that date; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and (b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 1(A). Report on the Remuneration Report We have audited the Remuneration Report included in the directors’ report for the year ended 30 June 2015. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Opinion In our opinion, the Remuneration Report of Beyond International Limited for the year ended 30 June 2015 complies with section 300A of the Corporations Act 2001. BDO East Coast Partnership Craig Maxwell Partner Sydney, 27 August 2015 73 2 82 INDEPENDENT AUDITOR’S REPORT 2015 sharehoLDer information rank holDer units % of issueD Capital 11,948,422 11,338,888 5,600,182 3,442,000 2,671,683 2,531,111 2,416,224 2,228,044 1,921,083 1,757,862 1,581,751 1,211,770 1,200,000 1,012,500 614,700 559,016 546,820 450,000 425,990 419,031 53,877,077 7,459,891 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 FREMANTLEMEDIA OVERSEAS LIMITED SEALION MEDIA LIMITED NATIONAL NOMINEES LIMITED WINCHESTER INVESTMENTS GROUP PTY LIMITED MR IAN INGRAM WILVESTOR LIMITED WILGRIST NOMINEES LIMITED MS YUN CHUN MARIE CHRISTINE LEE AXPHON PTY LIMITED CLIPPER HOLDINGS LTD NOMITOR LIMITED MR MIKAEL JOHN BORGLUND DRESDNER FAMILY SUPERANNUATION FUND PEARL FINANCE LIMITED ALLAN DALE HOLDINGS PTY LTD SOURCE INCORPORATED DIXSON TRUST PTY LIMITED LSW INVESTMENTS PTY LIMITED MS IRENE YUN LIEN LEE 20 DEBOURS PTY LIMITED Totals: Top 20 holders of ISSuED CAPITAl Total Remaining holders Balance DISTRIBuTION OF EQuITy SECuRITIES range 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 – 9,999,999,999 Total total holDers 223 238 96 134 31 722 There were 136 holders of less than a marketable parcel of shares. 19.48% 18.49% 9.18% 7.33% 4.82% 4.13% 3.94% 3.63% 3.13% 2.58% 1.98% 1.96% 1.65% 0.91% 0.89% 0.73% 0.69% 0.68% 0.55% 0.54% 87.84% 12.16% 83 Beyond InternatIonal AnnuAl RepoRt 2015Dance Moms 84 CORPORATE DIRECTORY 2015 corporate Directory DireCtors Ian Ingram Chairman of Directors 109 Reserve Road Artarmon NSW 2064 Mikael Borglund Managing Director 109 Reserve Road Artarmon NSW 2064 Anthony lee Non-Executive Director 109 Reserve Road Artarmon NSW 2064 Ian Robertson Non-Executive Director 109 Reserve Road Artarmon NSW 2064 offiCers Mikael Borglund Chief Executive Officer Paul Wylie Company Secretary offiCes Bankers Sydney 109 Reserve Road Artarmon NSW 2064 Australia Telephone: +61 (0) 2 9437 2000 Facsimile: +61 (0) 2 9437 2181 www.beyond.com.au Brisbane 701 Macarthur Avenue Central Eagle Farm QLD 4009 Australia Telephone: +61 (0) 7 3267 9888 Facsimile: +61 (0) 7 3267 1116 Dublin 78 Merrion Square South Dublin 2 Ireland Telephone: +353 (0) 1 614 6270 Facsimile: +353 (0) 1 639 4944 london 3rd Floor, 167 Wardour Street London, W1F 8WP, United Kingdom Telephone: +44 (0) 20 7323 3444 Facsimile: +44 (0) 20 7580 6479 auDitor / aCCountant / aDvisors BDO East Coast Partnership Chartered Accountants Level 11, 1 Margaret Street Sydney NSW 2000 St George Bank Level 12, 55 Market Street Sydney NSW 2000 Bank of Ireland Colvill House Talbot Street Dublin 1 Ireland soliCitors Addisons Level 12, 60 Carrington Street Sydney NSW 2000 holding Redlich Level 65, MLC Centre 19 Martin Place Sydney NSW 2000 Gaines, Solomon law Group llP 1901 Avenue of the Stars Suite 1100 Los Angeles, California 90067 United States of America share registry Computershare Investor Services Pty ltd Level 3, 60 Carrington Street Sydney NSW 2000 Telephone: 1300 855 080 Blood + Thunder: The Sound of Alberts 85 Beyond InternatIonal AnnuAl RepoRt 2015this page intentionally left Blank 86 this page intentionally left Blank 87 Beyond InternatIonal AnnuAl RepoRt 2015 Beyond International Annual Report www.beyond.com.au

Continue reading text version or see original annual report in PDF format above