Euroz Limited Annual Report 2011

Plain-text annual report

Annual Report 2011 CONTENTS Corporate Directory Chairman’s Report Managing Director’s Report Euroz Securities Limited Directors’ Proﬁ les Euroz Securities Limited Operating Divisions Westoz Funds Management Euroz Group Community Activities Financial Report 2011 Directors’ Report Auditor’s Independence Declaration Consolidated Income Statement Consolidated Statement of Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Financial Statements Directors’ Declaration Independent Audit Report Corporate Governance Statement Shareholder Information Euroz Securities Limited Contact Details 1 2 4 6 8 9 10 11 12 22 23 24 25 26 27 28 57 58 60 67 68 CORPORATE DIRECTORY Euroz Limited ABN 53 000 364 465 Directors Peter Diamond Executive Chairman Andrew McKenzie Managing Director Jay Hughes Executive Director Doug Young (appointed 8 February 2011) Executive Director Greg Chessell (appointed 8 February 2011) Executive Director Company Secretary Anthony Hewett Principal registered ofﬁ ce and place of business Level 18 Alluvion 58 Mounts Bay Rd Perth Western Australia 6000 Telephone +61 8 9488 1400 Facsimile +61 8 9488 1477 Email info@euroz.com.au Website www.euroz.com.au Share and debenture registers Computershare Investor Services Pty Ltd Level 2 Reserve Bank Building 45 St Georges Terrace PERTH WA 6000 Telephone: 1300 787 575 Auditor PKF Mack & Co Chartered Accountants Level 2 35 Havelock Street WEST PERTH WA 6005 Telephone: +61 8 9322 2798 Bankers Westpac Banking Corporation 109 St Georges Terrace PERTH WA 6000 Securities Exchange Listings Euroz Limited shares are listed on the Australian Securites Exchange (ASX: EZL and EZLO). EUROZ LIMITED Annual Report 2011 1 CHAIRMAN’S REPORT The Directors of Euroz Limited are pleased to announce a pre-tax proﬁ t of $34,409,119 (2010: $33,502,495) and a net proﬁ t after tax of $26,566,040 (2010: $26,331,750). This proﬁ t equates to earnings per share for the ﬁ nancial year to 30 June 2011 on a normalised basis of 18.2 cents. The Directors have declared a ﬁ nal dividend of 15 cents per share (fully franked) in addition to the interim dividend of 3 cents per share fully franked. The increased proﬁ t from last year’s result was pleasing given the continued turbulence encountered in ﬁ nancial markets during the year. This result again reﬂ ects the strong business base that Euroz Limited has achieved in the past eleven years and continues to give us conﬁ dence in our strategy going forward. Euroz Securities Limited has delivered solid returns during an extremely volatile year where the market direction completely reversed on numerous occasions. Our key Research, Institutional Dealing, Retail Dealing and Corporate Finance departments are improving their co-ordinated approach to our clients and the Euroz Group as a whole. Although market conditions were volatile it was pleasing that during the year performance from Westoz Funds Management in terms of returns for investors improved from the previous year. Funds under management as at 30 June 2011 were approximately $286m. The gross investment return for the year was 14.4% for Westoz Investment Company Limited and 26.7% for Ozgrowth Limited. Since inception, both investment companies have returned above average returns. The Directors believe that our funds management strategy will continue to reap beneﬁ ts for shareholders and investors alike in the long term and through all market conditions. Euroz Limited will continue to invest in Westoz Funds Management products and new initiatives. At the date of this report Euroz Limited has invested approximately $52m in Westoz Investment Company Limited and Ozgrowth Limited. The ﬁ nancial year ending 30 June 2011 represented an improvement on the previous year but still provided its challenges with continued market volatility. Since year end market conditions have improved around the globe but as always we remain cautious about predicting outcomes in the short term. A pleasing milestone that was reached during the year was when the Company paid out its ﬁ nal dividend for the year ended 30 June 2011. This represents a total of $130m of fully franked dividends paid to our shareholders over the last eleven years. We are extremely proud of reaching this milestone and hope to maintain our ongoing theme of rewarding shareholders with consistent dividend returns. The Directors believe that our long-term future remains on track and that our expansion initiatives, consistent strategy, and strong balance sheet will provide the group with a solid platform for growth in the medium to long term. The contribution of our employees this year has again been a signiﬁ cant factor in our continued proﬁ tability. Our employees’ motivation is also supported by their strong share ownership in the company which is currently around 50% of Euroz Limited. The Directors would like to thank our three core stakeholders: our shareholders, staff and clients for their support and efforts in what has been a challenging year. Euroz Limited is currently trading proﬁ tably, has no debt and with a strong balance sheet. With our long term growth initiatives, the Euroz Group is in a strong position in the medium and long-term to capitalise on behalf of its shareholders. PETER DIAMOND Executive Chairman 2 EUROZ LIMITED Annual Report 2011 Euroz Limited Proﬁ t Before Tax & Net Proﬁ t After Tax 1H Profit Before Tax 2H Profit Before Tax Net Profit After Tax Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Euroz Limited Dividend History 1H Dividend Per Share 2H Dividend Per Share Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 60 50 40 30 20 10 0 30 25 20 15 10 5 0 Euroz Limited NTA Per Share Cents Per Share Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 100 80 60 40 20 0 n o i l l i m $ e r a h S r e P s t n e C e r a h S r e P s t n e C Westoz Funds Management Pty Ltd Funds Under Management n o i l l i m $ 400 350 300 250 200 150 100 50 0 NTA after unrealised Jun 01 Jun 02 Jun 03 Jun 04 Jun 05 Jun 06 Jun 07 Jun 08 Jun 09 Jun 10 Jun 11 EUROZ LIMITED Annual Report 2011 3 MANAGING DIRECTOR’S REPORT Euroz Limited is a Western Australian focused company that provides highly specialized stockbroking, corporate ﬁ nance and funds management services. The past ﬁ nancial year was again an extremely volatile year for our clients and for our businesses. Despite this volatility our business remained proﬁ table through every single month of the year. Our lower cost structure and strong business platform remain leveraged to the upside and so whilst there were quiet months we also experienced individual months of high proﬁ tability. The net result of the year’s activities was a NPAT of $26.5m which in the context of our 11 years of consecutive proﬁ ts was our second best ever result on this measure. Whilst we rarely comment on our competitors we note that this past ﬁ nancial year has seen unprecedented competition from smaller players pushing up into our space and larger investment banks pushing down. It is our view that we are uniquely positioned with an extremely strong balance sheet and a long track record within our small to mid cap market niche. We foresee that ever increasing regulatory costs, higher general cost structures and stafﬁ ng pressures are already starting to impact these same competitors and the service they can offer to our part of the market. Major ﬁ nancial highlights for the past ﬁ nancial year include: - Payment of 18¢ in fully franked dividends (up 50%) - Normalised net proﬁ t of $25.6m (up 58%) - NTA of 84¢ per share (up 12%) This year our staff numbers have increased from 64 to 70 which further highlights our commitment to our people and the strength of our business model. We have seen numerous promotions across our business and we see the increasingly ﬂ at nature of our organizational structure as a great positive for the Group. Our staff remain our greatest asset and we remain absolutely committed to providing them with a secure, proﬁ table and enjoyable workplace. Euroz Limited Euroz Limited (ASX code: EZL) is the listed holding company for all our businesses, is a major investor in our two Listed Investment Companies (LIC’s) and also invests in its own right. At 30 June 2011 our investments in Westoz Investment Company Limited and Ozgrowth Limited had a combined cost value of $51.3m and a look through NTA value of $65.6m. Euroz Securities Euroz Securities is our stockbroking business that provides highly specialised research, dealing and corporate ﬁ nance services which in turn provides essential deal ﬂ ow and investment opportunities for all parts of our Group. We have further improved the communication and co-operation between departments to ensure a better integrated approach to researching, dealing and raising capital for the companies we support. Highlights of the past year for Euroz Securities include: - ASX turnover of $5.2bn - Consistent innovation in new and existing research coverage - Improved institutional dealing capabilities - Equity capital market raisings of $1.2bn (up 66%) - Incremental expansion of our retail dealing operations 4 EUROZ LIMITED Annual Report 2011 WESTOZ FUNDS MANAGEMENT Westoz Funds Management Westoz Funds Management is responsible for $286m of funds under management at 30 June 2011, which is invested through two Listed Investment Companies; Westoz Investment Company Limited and Ozgrowth Limited. Both companies have enjoyed solid investment returns and paid attractive dividends in the past year. Westoz Investment Company Limited commenced trading on the ASX in September 2009 after 4 years as an unlisted company. Westoz Investment Company Limited reported investment returns for the past year of 14.4% and has paid 11¢ in fully franked dividends for the past year. Ozgrowth Limited has been listed on the ASX since January 2008 and reported investment returns of 26.7% and fully franked dividends of 1.7¢ for the past year. Westoz Investment Company Limited and Ozgrowth Limited have now paid $59m in dividends to shareholders since inception. In summary Perhaps the best overall measure of our performance is by calculating our overall shareholder return. This longer term shareholder return can be demonstrated by looking at the returns from an investment of $10,000 in Euroz Limited in November 2000. We are pleased to report this investment would be worth $107,740 as at 30 June 2011 from a combination of dividends, a bonus option issue and share price performance. Our business exists to service our shareholders, our clients and our staff and as always I would like to thank all of these stakeholders for their contributions and loyalty during the past year. Andrew McKenzie Managing Director Euroz Group Organisational chart as at 30 June 2011 EUROZ LIMITED Annual Report 2011 5 EUROZ SECURITIES LIMITED DIRECTORS’ PROFILES ANDREW CLAYTON Executive Director AUSTEN FRESSON Executive Director DOUGLAS YOUNG Executive Director Andrew is a research analyst specialising in resource companies. He has worked in the stockbroking industry since 1994. Andrew holds a Bachelor of Science (Hons) in Geology, as well as a Diploma in Finance from the Financial Services Institute of Australia (FINSIA). ANDREW MCKENZIE Managing Director Andrew holds a Bachelor of Economics (B. Econ) is an Associate of FINSIA and is a Fellow of the Australian Institute of Company Directors (FAICD). Andrew has worked in the stockbroking industry since 1991. ANTHONY BRITTAIN Executive Director to Anthony is the Chief Operating and Financial Ofﬁ cer. Prior joining Euroz he spent 7 years at a WA stockbroker holding roles including Executive General Manager and Head of Operations. Prior to that Anthony worked in London and Singapore for 7 years with a UK fund manager. Anthony holds a Bachelor of Commerce (UWA), is a member of the Institute of Chartered Accountants (CA), a Certiﬁ ed Information Systems Auditor (CISA), holds a Grad. Diploma in Applied Finance and Investment from FINSIA, is a Graduate of the Australian Institute of Company Directors and is a member (Master Stockbroking) of the Stockbrokers Association of Australia (SAA). Austen has over ten years of mergers, acquisitions and divestitures experience in both the UK and Australia, focused on the upstream oil and gas sector. Austen holds a Bachelor of Law and a Bachelor of Commerce (UWA) . He is a member of the Institute of Chartered Accountants in Australia (CA) and FINSIA (Grad. Diploma in Applied Finance & Investment). BEN LAIRD Executive Director Ben holds a Bachelor of Science degree and a post-graduate Diploma in Finance with FINSIA. He is also a Level 2 candidate for the Chartered Financial Analyst (CFA) program and has been with Euroz since 2001. BRIAN BERESFORD Executive Director Prior to joining Euroz, Brian was a corporate ﬁ nance partner at PwC, which he joined in 2007 when PwC acquired GEM Consulting (GEM). Brian was a director and shareholder of GEM, and had previously worked for Arthur Andersen in London. He has managed capital raisings, and provided advisory services to clients across the resources, mining services, engineering, technology and manufacturing sectors. Brian holds a Masters in Finance from London Business School, and a Bachelor of Commerce and Bachelor of Laws (UWA). Doug is Head of Corporate Finance. He has over 25 years of corporate ﬁ nance experience, covering mergers and acquisitions, debt and equity raisings in domestic and international ﬁ nancial markets, corporate restructuring and other corporate ﬁ nance transactions. He holds a Bachelor of Commerce (UWA), is a graduate in Applied Finance from FINSIA, a Fellow of FINSIA and a Fellow of the Australian Society of Certiﬁ ed Practising Accountants (CPA). GREG CHESSELL Executive Director Greg is Head of Research and is our senior resources analyst. He spent 10 years working as a geologist in WA prior to entering the stockbroking industry in 1995. Greg holds a B.App.Sc. in Geology and a Grad. Dip. Business qualiﬁ cation. GAVIN ALLEN Executive Director Prior to joining Euroz Securities, Gavin was a senior manager in the Corporate Finance division of a major accounting ﬁ rm, specialising in the ﬁ nancial analysis of mergers and acquisitions. Gavin has a Bachelor of Commerce, is a member of the Institute of Chartered Accountants in Australia (CA) and holds a Chartered Financial Analyst (CFA) designation. JAMES MACKIE Executive Director in the James has been working stockbroking since 1998. industry He holds a Bachelor of Commerce in Finance and a Graduate Diploma also in Finance. His role is servicing high net worth investors on the retail desk. 6 EUROZ LIMITED Annual Report 2011 EUROZ SECURITIES LIMITED DIRECTORS’ PROFILES JAY HUGHES Executive Director NICK MCGLEW Executive Director RUSSELL KANE Executive Director is an Jay has worked in stockbroking since 1986, starting his career on the trading Institutional Dealer ﬂ oor. He specialising in promoting Australian stocks to international clients. Jay holds a Graduate Diploma in Applied Finance and Investment from FINSIA. He was recognised as an afﬁ liate of ASX in December 2000 and was admitted in May 2004 as a Practitioner Member (Master Stockbroking) of the SAA. JON BISHOP Executive Director Jon is a resource analyst focused upon both the mining and oil & gas sectors. He has more than 10 years technical and commercial experience within the petroleum and minerals industries. Jon holds a Bachelor of Science (Hons) in Geology, as well as a Graduate Diploma Investment in Applied Finance and from FINSIA. MAURICE ARGENTO Executive Director Maurice has more than 25 experience in corporate advisory and ﬁ nance roles, in Australia and in Europe. Prior to joining Euroz Securities, Maurice was a Partner with PwC and Arthur Andersen and founder and Managing Director of Mainsheet Corporate. His experience spans corporate strategy, mergers and acquisitions, equity raisings and corporate ﬁ nance. Maurice is a Fellow of the Institute of Chartered Accountants (CA) and holds a Bachelor of Commerce. Nick has over 12 years experience in mergers, acquisitions, corporate and commercial law and corporate ﬁ nance with major ﬁ rms in Australia and the United States. He holds a Bachelor in Economics (UWA) and Master of Laws (NYU, Corporate). Russell has worked in the stockbroking industry since 1994. He holds a Bachelor of Business and is responsible for servicing both domestic institutions and high net worth clients, with a particular emphasis on WA based resources and industrials stocks. OLIVER FOSTER Executive Director ROB BLACK Executive Director Oliver is a resource analyst specialising in the oil & gas sector. He worked offshore as a Petroleum Geologist in the North West of Australia & Asia for two and a half years previously. Oliver holds a Bachelor of Science in Geology, as well as a Graduate Diploma in Applied Finance and Investment from FINSIA. PETER DIAMOND Executive Chairman Peter has worked in the stockbroking industry since 1986. He is responsible for dealing with institutional and high net worth clients both domestically and overseas. Peter is also chairman of Westoz Investment Company Limited and Ozgrowth Limited. He holds a Bachelor of Business and is a Member of Certiﬁ ed Practicing Accountants Australia (CPA). RICHARD CALDOW Executive Director Richard holds a Bachelor of Commerce with a double major in Accounting & Finance. Richard has worked as an advisor in the stockbroking industry since 1992 and previously worked in chartered accounting. in the Rob has been working stockbroking since 1995 industry and has spent time based in Sydney, Melbourne and London. Rob is Head of Institutional Dealing and is responsible for servicing domestic and international institutions. Rob holds a Bachelor of Business with majors in Finance and Accounting, and is a Graduate of the Australian Institute of Company Directors. SIMON YEO Executive Director and specialises is Head of Retail Dealing Simon and in servicing high net worth clients and domestic in the institutions. He has been stockbroking industry since 1993. Simon has a Bachelor of Commerce (UWA) and was previously a chartered accountant and member of the Institute of Chartered Accountants (CA). NB. Jon Bishop, Ben Laird, James Mackie and Austen Fresson werer appointed as Executive Directors of Euroz Securities Limited in July 2011. Facing Page Top row L-R: A. Clayton, , A. McKenzie, A. Brittain, A. Fresson, B. Laird Bottom row L-R: B. Beresford, D. Young, G. Chessell, G. Allen, J. Mackie This page Top row L-R: J. Hughes, J. Bishop, M.Argento, N. McGlew, O. Foster Bottom row L-R: P. Diamond, R. Caldow, R. Kane, R. Black, S.Yeo EUROZ LIMITED Annual Report 2011 7 EUROZ SECURITIES LIMITED OPERATING DIVISIONS RETAIL DEALING CORPORATE FINANCE Team of highly experienced and qualiﬁ ed private client advisors (cid:23) Our corporate business is focused on developing strong, long term relationships with our clients (cid:23) (cid:23) (cid:23) Focus on dealing with high net worth individuals Extensive research support - high quality research on WA based resource and industrial companies enable our advisors to provide quality investment and trading advice (cid:23) Specialised broking allows - - Close interaction between research analysts and private client advisors Timely communication of ideas with clients (cid:23) Sophisticated investors are able to participate in many of our corporate capital raisings (cid:23) We pride ourselves on offering a tailored service to our clients based on: - - - Quality research Personalised service Wealth creation (cid:23) Client services - - Exclusive web based research Web based access to portfolios and ledgers (cid:23) Clients are provided with specialised Corporate Advisory services in: - - - - Capital Raisings Mergers and Acquisitions Strategic Planning and Reviews Privatisation and Reconstructions (cid:23) Established track record in raising equity capital via: - - - Initial Public Offerings (IPO) Placements Rights Issues (cid:23) Euroz has raised $1.2bn in new equity this financial year EQUITIES RESEARCH INSTITUTIONAL DEALING (cid:23) (cid:23) Team of six experienced analysts with access to the latest online news and ﬁ nancial information Based on fundamental analysis, strict ﬁ nancial modelling and regular company contact (cid:23) (cid:23) Largest Western Australia institutional dealing desk based in Team of nine institutional dealers with an extensive client base of Australian and International investors (cid:23) Goal: Identify and maximise equity investment opportunities for our clients Approach: Intimate knowledge of the companies we cover Coverage: Broad cross section of mostly WA based industrial & resource companies (cid:23) Research Products - - - - Daily Brieﬁ ng: Overnight market updates Weekly Informer: Compilation of all company reports throughout the preceding week Quarterly and/or Semi-annual Review: Regular in book coverage on midcap companies format Company Reports: Detailed analysis on companies as opportunities emerge (cid:23) Distribution network strength - long standing relationships with major institutional investors in the small to mid cap market (cid:23) Western Australia’s geographic isolation makes it difﬁ cult for institutional investors to maintain close contact with companies based here - investors can rely on our “on the ground” information (cid:23) Institutional dealing team “highly focused” on providing the following services: - - - - - Quality advice and idea generation Efﬁ cient execution Regular company contact Site visits Roadshows 8 EUROZ LIMITED Annual Report 2011 WESTOZ FUNDS MANAGEMENT Westoz Funds Management is responsible for $286m of funds under management at 30 June 2011, which is invested through two Listed Investment Companies; Westoz Investment Company Limited and Ozgrowth Limited. Both companies have enjoyed solid investment returns and paid attractive dividends in the past year. Westoz Investment Company Limited commenced trading on the ASX in September 2009 after 4 years as an unlisted company. Westoz Investment Company Limited reported investment returns for the past year of 14.4% and declared 11¢ in fully franked dividends for the past year. Ozgrowth Limited has been listed on the ASX since January 2008 and reported investment returns of 26.7% and fully franked dividends of 1.4¢ for the past year. Westoz Investment Company Limited and Ozgrowth Limited have now paid $59m in dividends to shareholders since inception. PHILIP REES, CHIEF INVESTMENT OFFICER (WESTOZ FUNDS MANAGEMENT) Mr Philip Rees is Chief Investment Ofﬁ cer of the Manager and is responsible for the operation and development of the Manager’s business. Mr Rees has worked in a range of roles focused on Australian investment markets for the last 24 years. He has previously managed large institutional investment portfolios and developed several early stage investment opportunities until he joined Westoz in April 2005. EUROZ LIMITED Annual Report 2011 9 EUROZ GROUP COMMUNITY ACTIVITIES 2011 has seen the ongoing development of two of the Euroz Group of Companies initiatives; namely the Euroz Charitable Foundation and the Euroz Green Office Initiative. Euroz Charitable Foundation The Euroz Group has been fortunate to have been a beneficiary of strong investment markets and a strong local economy over many years. This prompted us to consider ways in which we could make a contribution to the broader community and as a result the Euroz Charitable Foundation was formed in 2007. The Foundation represents our ongoing commitment to our local community. During the past four and a half years all businesses within the Euroz Group and many of our staff members have made donations to this Foundation. The Foundation’s assets have continued to grow strongly and in the past year we are pleased to have supported the following Western Australian charities; Autism West, Princess Margaret Hospital Foundation, Riding for the Disabled Association of Western Australia, Foodbank and Ngala Community Services, among others. During the year we also donated a forklift to Foodbank which was delivered to them in April. As part of Euroz’ ongoing commitment to community involvement we have a staff volunteer program whereby Euroz staff volunteer their time during office hours assisting particular charities. We recently participated in a busy bee for the Riding for the Disabled Association of Western Australia. Euroz staff are very enthusiastic in their support of such initiatives and consider volunteer experiences such as these very rewarding. We would like to thank all staff for their continued support of the Euroz Charitable Foundation. Euroz staff participating in the Riding for the Disabled Association of Western Australia busy bee. Euroz Green Ofﬁ ce Initiative In recognition of changing business and community attitudes toward increasing environmental responsibility in both the home and office we have formalised some simple environmental policies for the Euroz Group of companies. The Euroz Group of companies seeks to promote an environmentally aware workplace through a series of key objectives. Our move to a new, premium 4.5 star NABERS Energy rated building in early September 2010 is consistent with our green office initiatives and has facilitated the achievement of some of our targets whereby we: • • • • • Aim to increase recycling and reduce waste Aim to reduce the use of power Aim to reduce energy consumption Aim to purchase environmentally friendly products Are educated, engaged and aware of sustainable office management initiatives. This initiative has been strongly supported by members of the Euroz Group of companies since its inception four years ago. 10 EUROZ LIMITED Annual Report 2011 FINANCIAL REPORT 2011 EUROZ LIMITED Annual Report 2011 11 DIRECTORS’ REPORT Your Directors present their report on the consolidated group consisting of Euroz Limited and the entities it controlled at the end of, or during the year ended 30 June 2011. Directors and Executive Disclosures The following persons were Directors of Euroz Limited at any time during or since the end of the ﬁ nancial year and up to the date of this report: EXECUTIVE CHAIRMAN Peter Diamond EXECUTIVE DIRECTORS Andrew McKenzie - Managing Director Jay Hughes – Director Doug Young – Director (appointed 8 February 2011) Greg Chessell – Director (appointed 8 February 2011) Executives with the greatest authority for strategic direction and management The following persons were the executives (other than Directors of the parent entity) with the greatest authority for the strategic direction and management of the consolidated entity (“speciﬁ ed executives”) during the ﬁ nancial year and up to the date of this report: NAME R Caldow S Yeo K Paganin O Foster M Hepburn R Kane A Clayton A Brittan G Allen R Black N McGlew M Argento B Beresford B Laird J Bishop J Mackie A Fresson P Rees D Woods POSITION Director Director Director Director Director Director Director Director Director Director Director Director Director Director Director Director Director Director Director Company Secretary EMPLOYER Euroz Securities Limited Euroz Securities Limited Euroz Securities Limited (resigned 22 July 2010) Euroz Securities Limited Euroz Securities Limited (resigned 8 February 2011) Euroz Securities Limited Euroz Securities Limited Euroz Securities Limited Euroz Securities Limited Euroz Securities Limited Euroz Securities Limited (appointed 1 July 2010) Euroz Securities Limited (appointed 14 February 2011) Euroz Securities Limited (appointed 21 March 2011) Euroz Securities Limited (appointed 5 July 2011) Euroz Securities Limited (appointed 5 July 2011) Euroz Securities Limited (appointed 5 July 2011) Euroz Securities Limited (appointed 6 July 2011) Westoz Funds Management Pty Ltd Westoz Funds Management Pty Ltd (appointed 1 July 2010) Anthony Hewett held the position at the end of the ﬁ nancial year. Anthony was appointed Company Secretary in 2007 and brings to the role more than a decade of experience in Operations, Risk and Compliance having worked for a variety of ﬁ rms in Perth. Principal Activities During the year the principal activities of the Euroz group consisted of: (a) (b) (c) Stockbroking; Corporate Finance; and Funds Management. Review of Results The Directors of Euroz Limited are pleased to announce a consolidated pre tax proﬁ t of $34,409,119 for the year ended 30 June 2011. The consolidated net proﬁ t after tax was $26,566,040 compared with the 2010 year’s consolidated net proﬁ t after tax of $26,331,750. This proﬁ t represents basic earnings per share of 19.38 cents versus 20.07 cents in the 2010 year. 12 EUROZ LIMITED Annual Report 2011 DIRECTORS’ REPORT The Directors have declared a ﬁ nal dividend of 15 cents per share fully franked which, combined with the interim dividend of 3 cent per share, represents a total dividend of 18 cents per share fully franked. Review of operations Stockbroking Principal Trading Funds Management Unallocated revenue Segment revenues 2010 2011 $ $ 40,841,201 49,225,611 13,738,675 9,547,185 10,192,515 9,154,027 11,765,435 9,880,174 Segment results 2011 $ 9,916,246 1,574,237 5,661,366 9,414,191 2010 $ 13,227,400 215,117 6,333,425 6,555,808 77,806,997 76,537,826 26,566,040 26,331,750 These results have been achieved through strong contributions from all divisions of the business. Financial Position The net assets of the consolidated group have in increased from $109,417,413 at 30 June 2010 to $118,518,350 at 30 June 2011. This increase has largely resulted from adjustments to the carrying value of investments. The company’s strong ﬁ nancial performance has enabled it to continue to pay dividends to shareholders during the year while maintaining a healthy working capital ratio. The consolidated group’s working capital, being current assets less current liabilities, has increased from $45,191,982 in 2010 to $45,289,428 in 2011. During the past ﬁ ve years the company has invested in expanding each of its business units to secure its long term success. In particular it has made strategic investments in the investment products of Westoz Funds Management Pty Ltd. The company’s holdings in associated subsidiaries are $26,450,000 as at 30 June 2011. The Directors believe the company is in a strong and stable ﬁ nancial position to expand and grow its current operations. Earnings per share Basic earnings per share Diluted earnings per share Dividends - Euroz Limited Dividends paid or provided for during the ﬁ nancial year were as follows: Interim ordinary dividend of 3 cent (2009 – 2 cents) per fully paid ordinary share was paid on 28 January 2011. Provision for ﬁ nal ordinary dividend for 30 June 2011 of 15 cents (2010 – 10 cents) per fully paid ordinary share paid on 29 July 2011. 2011 Cents 19.38 16.66 2010 Cents 20.07 18.49 2011 $ 2010 $ 4,296,456 2,633,325 21,134,214 13,257,014 25,430,670 15,890,339 Signiﬁ cant changes in the state of affairs There have been no signiﬁ cant changes in the state of affairs of the consolidated group during the year. Share options A total of 4,844,623 options were exercised during the year at an exercise price of $0.75. At the date of this report, there are 6,357,713 unissued ordinary shares of Euroz Limited under option. After balance date events The Directors are not aware of any other matter or circumstance subsequent to 30 June 2011 that has signiﬁ cantly affected, or may signiﬁ cantly affect: (a) the consolidated group’s operations in future ﬁ nancial years; or (b) the results of those operations in future ﬁ nancial years; or (c) the consolidated group’s state of affairs in future ﬁ nancial years. EUROZ LIMITED Annual Report 2011 13 DIRECTORS’ REPORT Likely developments and expected results of operations The Directors are conﬁ dent that a strong balance sheet and established business platforms will support the company in increasingly volatile market conditions. However, it is likely that we will experience increasingly volatile trading conditions in the next ﬁ nancial year. Further information on likely developments in the operations of the consolidated group and the expected results of operations have not been included in this report because the Directors believe it would be likely to result in unreasonable prejudice to the consolidated group. Environmental regulation The consolidated group is not subject to signiﬁ cant environmental regulation in respect of its operations. Information on Directors Information on Directors Particulars of Directors' shares in interests and options of Euroz Limited Director Experience Special responsibilities and qualiﬁ cations P Diamond Chairman Mr Diamond has worked in the stockbroking industry since 1986. Executive Chairman Chairman of Audit Committee Chairman of Remuneration Committee Holds a Bachelor of Business Degree (BBus) and is a member of CPA Australia. A McKenzie Managing Director Mr McKenzie has worked in the stockbroking industry since 1991. Managing Director Member of Audit Committee Member of Remuneration Committee Ordinary Shares 10,000,000 9,928,500 J Hughes Director Mr Hughes has worked in the stockbroking industry since 1986. Holds a Bachelor of Economics Degree, is an Associate of the Financial Services Institute of Australia and is a Fellow of the Australian Institute of Company Directors. Member of the Remuneration Committee 9,928,500 Holds a Graduate Diploma in Applied Finance and Investment from FINSIA. He was recognised as an afﬁ liate of the ASX in December 2000 and was admitted in May 2004 as a Practitioner Member (Master Stockbroking) of the Stockbrokers Association of Australia. Options - - - D Young Director Mr Young has worked in corporate ﬁ nance since 1984. Head of Corporate Finance of our 100% owned subsidiary Euroz Securities Limited. 4,202,001 - He holds a Bachelor of Commerce degree from the University of Western Australia and a Graduate Diploma in Applied Finance from FINSIA, is a Fellow of FINSIA and a Fellow of the Australian Society of Certiﬁ ed Practising Accountants. G Chessell Director Mr Chessell has worked in the stockbroking industry since 1996. Head of Research of our 100% owned subsidiary Euroz Securities Limited and is our senior resources analyst. 3,102,000 - Greg holds a B.App.Sc. degree in geology and a Grad. Dip. Business qualiﬁ cation. 14 EUROZ LIMITED Annual Report 2011 DIRECTORS’ REPORT Meetings of Directors The numbers of meetings of the company’s board of Directors held during the year ended 30 June 2011, and the numbers of meetings attended by each director were: Committee Meetings Directors Meetings Audit Remuneration Number eligible to attend Number attended Number eligible to attend Number attended Number eligible to attend Number attended 13 13 13 5 5 13 9 10 3 5 1 1 N/A N/A N/A 1 1 N/A N/A N/A 12 12 12 N/A N/A 12 12 12 N/A N/A Director Peter Diamond Andrew McKenzie Jay Hughes Greg Chessell Doug Young Remuneration Report (Audited) This Remuneration Report outlines the director and executive remuneration arrangements of the Company and the Group in accordance with the requirements of the Corporations Act 2001 and its regulations. It also provides the remuneration disclosures required by paragraphs Aus 25.4 to Aus 25.7.2 of AASB 124 Related Party Disclosures, which have been transferred to the Remuneration Report in accordance with Corporations Regulation 2M.6.04. For the purposes of this report Key Management Personnel of the group are deﬁ ned as those persons having authority for the strategic management and direction of the group including any director (whether executive or otherwise) of the parent company, and includes the ﬁ ve executives in the parent and the group receiving the highest remuneration. Directors & Executives Remuneration Remuneration packages are set at levels that are intended to attract and retain executives capable of managing the consolidated entity’s operations. The board undertakes regular reviews of its performance and the performance of the board against expectations made at the start of the year. Performance related bonuses are available to executives based on their performance and that of the company. Remuneration Policy The remuneration policy has been tailored to align the interests of shareholders, Directors and executives. There have been three methods applied in achieving this aim, the ﬁ rst being a participation in the proﬁ t share pool, the second being commission and the third being Head of Retail incentive. The company believes this policy to have been effective in increasing shareholder wealth since inception. The following table shows the gross revenue, proﬁ ts and dividends for the last ﬁ ve years for the listed entity, as well as the share price at the end of the respective ﬁ nancial years. 2007 $ Revenue (including net proﬁ t/(loss) of associates) 63,805,598 22,171,176 Net proﬁ t after tax 4.4 Share price at year end 17,500,000 Dividends paid or recommended 2008 $ 121,889,088 41,931,627 4 34,560,000 2009 $ 43,288,071 10,335,056 0.93 9,625,081 2010 $ 76,080,544 26,331,750 1.28 15,890,339 2011 $ 77,806,998 26,566,040 1.62 25,430,670 The objective of the company’s remuneration framework is to ensure reward for performance is competitive and appropriate to the results delivered. The Board / Remuneration Committee ensure that executive rewards satisfy the following key criteria for good reward governance practices: - - - - - competitiveness and reasonableness acceptability to shareholders performance linked transparency capital management. The company has structured an executive remuneration framework that is market competitive and complimentary to the reward strategy of the organisation. Directors’ fees No Directors fees are paid. EUROZ LIMITED Annual Report 2011 15 DIRECTORS’ REPORT Base pay Directors and executives are offered a competitive base and participation in the proﬁ t share pool. Base pay for senior executives is reviewed semi annually by the Remuneration Committee to ensure that executive’s pay is competitive with the market, and is also reviewed upon promotion or additional responsibilities. There is no guarantee of base pay increases ﬁ xed in any senior executive or Directors contracts. Executives are offered a competitive salary that comprises of a base salary inclusive of superannuation and a combination of some of the following, dependant on the terms of the individual employment contract: - - - Participation in the proﬁ t share pool Commission Head of Retail incentive Equity based payments There is no entitlement to equity based remuneration. Commission Executives that do not participate in the proﬁ t share pool are paid either a bonus or commission on the income they have generated for the company. This is calculated on a sliding scale set out in the employment contract. Any salary paid to the employee is deducted from the commission payment. Short term incentives Cash incentives (proﬁ t share) are calculated on 30% of pre tax proﬁ t from Euroz Securities Limited and are payable in December and / or June. Using these criteria ensures reward is only available when value has been created for shareholders. The distribution of the proﬁ t share is leveraged to performance as described below. Proﬁ t share pool The Remuneration Committee determines the allocation of the 30% pre tax proﬁ t on an ongoing basis. In consultation with relevant department heads the committee uses the following informal criteria to assist in the allocation - - - - - - Ability to perform individual tasks within the relevant department Ability to add value and innovate beyond the job standard speciﬁ cations Development of new and existing client relationships Ability to interact with other relevant departments as part of a larger team approach Relevant industry salary benchmarking General requirements to attract and retain staff. The three executives on the Remuneration Committee are also entitled to participate in the proﬁ t share pool. In these circumstances two members assess the performance of the third member. Head of Retail (HOR) incentive The calculation of this payment is based on the net income generated by the members of the Retail Desk and overall management of the Retail Desk. Details of remuneration Details of the nature and amount of each element of the emoluments of each director of Euroz Limited and each of the speciﬁ ed executives of the consolidated entity are set out in the following tables. Executive Directors of Euroz Limited 2011 Short Term Post- employment Name P Diamond A McKenzie J Hughes D Young (appointed 8 Feb ‘11) G Chessell (appointed 8 Feb ‘11) Base salary $ 275,000 275,000 275,000 244,615 229,231 Proﬁ t Share/ bonus $ Other beneﬁ ts $ Super- annuation $ Performance related % Total $ 590,000 590,000 590,000 590,000 590,000 31,225 30,911 28,549 25,891 17,757 25,000 25,000 25,000 50,000 25,000 921,225 920,911 918,549 910,506 861,988 64% 64% 64% 65% 68% TOTAL 1,298,846 2,950,000 134,333 150,000 4,533,179 Current Directors did not receive any Directors fees. 16 EUROZ LIMITED Annual Report 2011 DIRECTORS’ REPORT Executive Directors of Euroz Limited 2010 Name P Diamond A McKenzie J Hughes Total Short Term Proﬁ t Share/ bonus $ 495,000 495,000 495,000 Base salary $ 275,001 275,001 277,127 827,129 1,485,000 Other beneﬁ ts $ 26,909 21,680 20,183 68,772 Post- employment Super- annuation $ 24,999 24,999 22,873 Total $ 821,909 816,680 815,183 Performance related % 60% 61% 61% 72,871 2,453,772 Current Directors did not receive any Directors fees. 2011 Short Term Base salary $ 73,393 73,394 36,878 199,801 146,002 155,803 132,506 155,803 146,083 190,000 185,000 170,447 204,801 98,585 71,200 Proﬁ t Share/ bonus $ - 132,019 Other beneﬁ ts $ 12,825 22,603 Commis- sion $ 261,704 384,615 - 505,334 325,000 348,872 288,872 149,436 288,872 398,498 210,000 300,000 205,000 205,000 190,000 150,000 15,265 16,002 14,766 6,137 13,632 14,988 13,580 13,561 7,775 9,965 4,692 450 - - - - - - - - - - - - - Post- employ’t Super- annuation $ 15,199 15,199 23,216 15,199 24,412 14,611 Total $ 363,121 627,830 565,428 555,265 535,288 474,052 9,193 297,272 14,611 14,173 25,000 25,000 49,553 15,199 6,757 4,293 472,918 573,742 438,580 523,561 432,775 434,965 300,034 225,943 Perform- ance related % 72 82 0 59 65 61 50 61 69 48 57 47 47 63 66 Name R Caldow* S Yeo* K Paganin* O Foster* A Clayton* R Kane* M Hepburn* G Allen * R Black * A Brittain * N McGlew * P Rees** D Woods ** M Argento* B Beresford* TOTAL 2,539,696 3,191,569 171,575 646,319 271,615 6,820,774 * Director of Euroz Securities Limited ** Director of Westoz Funds Management Pty Ltd EUROZ LIMITED Annual Report 2011 17 DIRECTORS’ REPORT Speciﬁ ed executives of the consolidated group 2010 Short Term Post- employ’t Base salary $ 69,130 Proﬁ t Share/ bonus $ Other beneﬁ ts $ Commis- sion $ Super- annuation $ - 18,426 231,601 190,001 495,000 65,720 265,001 240,000 188,275 156,541 146,541 144,595 190,060 146,002 125,001 175,000 195,000 24,000 495,000 495,000 180,000 210,000 190,000 205,000 150,000 220,000 230,000 180,000 200,000 170,084 200,000 8,856 20,602 20,668 24,331 14,604 14,182 17,330 17,160 7,240 13,995 14,263 5,459 6,103 1,687 - 347,375 - - - - - - - - - - - - Perform- ance related % 69 69 78 61 61 44 53 50 52 40 54 58 47 47 52 Total $ 336,300 718,857 477,611 805,669 809,331 409,604 395,184 378,332 393,162 372,240 404,997 394,263 385,459 426,103 386,687 17,143 25,000 19,914 25,000 50,000 26,725 14,461 24,461 26,407 24,940 25,000 24,999 25,000 25,000 14,916 Name R Caldow* G Chessell* S Yeo* K Paganin* D Young* O Foster* A Clayton* R Kane* M Hepburn* A Brittain * G Allen * R Black * N McGlew * P Rees** D Woods ** Total 2,466,951 3,474,000 204,906 578,976 368,966 7,093,799 * Directors of Euroz Securities Limited ** Directo r of Westoz Funds Management Pty Ltd Service Agreements Remuneration and other terms of employment for the Directors and speciﬁ ed executives are formalised in service agreements. Each of these agreements provide for the provision of performance related cash bonuses and other beneﬁ ts. Other major provisions of the agreements relating to remuneration are set out below. Peter Diamond, Chairman • • • Term of contract – ongoing employment contract Base Salary, inclusive of superannuation for the year ended 30 June 2011 of $300,000 (2010 - $300,000) plus proﬁ t share. Payment on termination of employment by the employer, other than for gross misconduct – three months salary. Andrew McKenzie, Managing Director • • • Term of contract – ongoing employment contract Base salary, inclusive of superannuation for the year ended 30 June 2011 of $300,000 (2010 - $300,000) plus proﬁ t share. Payment on termination of employment by the employer, other than for gross misconduct – three months salary. Jay Hughes, Director • • • Term of contract – ongoing employment contract Base salary, inclusive of superannuation for the year ended 30 June 2011 of $300,000 (2010 - $300,000) plus proﬁ t share. Payment on termination of employment by the employer, other than for gross misconduct – three months salary. Greg Chessell, Director Euroz Securities Limited • • • Term of contract – ongoing employment contract Base salary, inclusive of superannuation for the year ended 30 June 2011 of $300,000 (2010 - $215,000) plus proﬁ t share. Payment on termination of employment by the employer, other than for gross misconduct – three months salary. Doug Young, Director Euroz Securities Limited • • • Term of contract – ongoing employment contract Base salary, inclusive of superannuation for the year ended 30 June 2011 $300,000 (2010 - $290,000) plus proﬁ t share. Payment on termination of employment by the employer, other than for gross misconduct – three months salary. Karl Paganin, Director Euroz Securities Limited (resigned 22 July 2010) • Term of contract ongoing employment contract but resigned 22 July 2010. Eligible termination payment of $500,000. 18 EUROZ LIMITED Annual Report 2011 DIRECTORS’ REPORT Richard Caldow, Director Euroz Securities Limited • • • Term of contract – ongoing employment contract Base salary, inclusive of superannuation for the year ended 30 June 2011 of $80,000 (2010 - $80,000) plus commission. Payment on termination of employment by the employer, other than for gross misconduct – commission earned. Simon Yeo, Director Euroz Securities Limited • • Term of contract ongoing employment contract Base salary, inclusive of superannuation for the year ended 30 June 2011 of $80,000 (2010 - $80,000) plus HOR bonus and commission. Payment on termination of employment by the employer, other than for gross misconduct – commission earned. • Oliver Foster, Director Euroz Securities Limited • • • Term of contract – ongoing employment contract Base salary, inclusive of superannuation for the year ended 30 June 2011 of $215,000 (2010 - $215,000) plus proﬁ t share. Payment on termination of employment by the employer, other than for gross misconduct – three months salary. Mark Hepburn, Director Euroz Securities Limited (resigned 8 February 2011) • Term of contract – ongoing employment contract but resigned 8 February 2011. Andrew Clayton, Director Euroz Securities Limited • • • Term of contract – ongoing employment contract Base salary, inclusive of superannuation for the year ended 30 June 2011 of $171,002 (2010 - $171,002) plus proﬁ t share. Payment on termination of employment by the employer, other than for gross misconduct – three months salary. Russell Kane, Director Euroz Securities Limited • • • Term of contract – ongoing employment contract Base salary, inclusive of superannuation for the year ended 30 June 2011 of $171,002 (2010 - $171,002) plus proﬁ t share. Payment on termination of employment by the employer, other than for gross misconduct – three months salary. Anthony Brittain, Director Euroz Securities Limited • • • Term of contract – ongoing employment contract Base salary, inclusive of superannuation for the year ended 30 June 2011 of $215,000 (2010 - $215,000) plus proﬁ t share. Payment on termination of employment by the employer, other than for gross misconduct – three months salary. Gavin Allen, Director Euroz Securities Limited • • • Term of contract – ongoing employment contract Base salary, inclusive of superannuation for the year ended 30 June 2011 of $171,002 (2010 - $171,002) plus proﬁ t share. Payment on termination of employment by the employer, other than for gross misconduct – three months salary. Robert Black, Director Euroz Securities Limited • • • Term of contract – ongoing employment contract Base salary, inclusive of superannuation for the year ended 30 June 2011 of $170,000 (2010 - $150,000) plus proﬁ t share. Payment on termination of employment by the employer, other than for gross misconduct – three months salary. Nick McGlew, Director Euroz Securities Limited (appointed 1 July 2010) • • • Term of contract – ongoing employment contract Base salary, inclusive of superannuation for the year ended 30 June 2011 of $210,000 (2010 - $200,000) plus proﬁ t share. Payment on termination of employment by the employer, other than for gross misconduct – three months salary. Maurice Argento, Director Euroz Securities Limited (appointed 14 February 2011) • • • Term of contract – ongoing employment contract Base salary, inclusive of superannuation contract of $300,000 per annum plus proﬁ t share. Payment on termination of employment by the employer, other than for gross misconduct – three months salary. Brian Beresford, Director Euroz Securities Limited (appointed 21 March 2011) • • • Term of contract – ongoing employment contract Base salary, inclusive of superannuation contract of $300,000 per annum plus proﬁ t share. Payment on termination of employment by the employer, other than for gross misconduct – three months salary. Phil Rees, Director Westoz Funds Management Pty Ltd • • • Term of contract – ongoing employment contract minimum period 1 year Base salary, inclusive of superannuation for the year ended 30 June 2011 of $220,000 (2010 - $220,000) plus bonus Payment on termination of employment by the employer other than for gross misconduct – three months salary. Dermot Woods, Director Westoz Funds Management Pty Ltd (appointed 1 July 2010) Term of contract – ongoing employment contract minimum period 1 year • Base salary, inclusive of superannuation for the year ended 30 June 2011 of $220,000 (2010 - $190,000) plus bonus • Payment on termination of employment by the employer other than for gross misconduct – three months salary. • EUROZ LIMITED Annual Report 2011 19 DIRECTORS’ REPORT Share based compensation No options or shares were issued to Directors or speciﬁ ed executives during the year ended 30 June 2011. Share holdings The number of shares held at the date of this report by each director of Euroz Limited and each of the key management personnel of the consolidated group, including their personal-related entities, are set out below. Directors of Euroz Limited Ordinary shares P Diamond A McKenzie J Hughes G Chessell (appointed 8 February 2011) D Young (appointed 8 February 2011) Key management personnel of the consolidated entity Ordinary shares R Caldow S Yeo K Paganin (resigned 22 July 2010) O Foster P Rees M Hepburn (resigned 8 February 2011) R Kane A Clayton A Brittain G Allen R Black N McGlew (appointed 1 July 2010) D Woods (appointed 1 July 2010) M Argento (appointed 14 February 2011) B Beresford (appointed 21 March 2011) B Laird (appointed 5 July 2011) J Bishop (appointed 5 July 2011) J Mackie (appointed 5 July 2011) A Fresson (appointed 6 July 2011) Loans to Directors and executives No. of ordinary shares No. of options over ordinary shares 10,000,000 9,928,000 9,928,000 3,102,000 4,202,001 4,950,000 3,520,000 4,905,522 2,301,200 1,100,000 1,222,000 2,359,377 2,100,000 303,400 500,000 1,800,000 225,291 373,260 1,000,000 2,000,000 655,000 91,112 847,000 260,511 - - - - - - - 418,791 - - 122,200 233,000 100,000 - 41,200 300,000 - - - - 60,000 - - - No loans were made to Directors of Euroz Limited and the key management personnel of the consolidated group, including their personally related entities during the year. Indemnifying Ofﬁ cers During the ﬁ nancial year, Euroz Limited paid a premium to insure the Directors and secretaries of the company and its Australian based controlled entities. The liabilities insured include costs and expenses that may be incurred in defending civil or criminal proceedings that may be brought against the ofﬁ cers in their capacity as ofﬁ cers of entities in the consolidated group. Proceedings on Behalf of Company 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 such proceedings during the year. Non-Audit Services The following non-audit services were provided by the group’s auditor, PKF Mack & Co. The Directors are satisﬁ ed that the provision of non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The nature and scope of each type of non-audit service provided means that auditor independence was not compromised. PKF Mack & Co. received or are due to receive the following amounts for the provision of non-audit services: Tax compliance services 20 EUROZ LIMITED Annual Report 2011 $ 15,000 DIRECTORS’ REPORT Auditor’s Independence Declaration The lead auditor’s independence declaration for the year ended 30 June 2011 has been received and follows the Directors report. This report is made in accordance with a resolution of the Directors. Peter Diamond Chairman Jay Hughes Director 15 August 2011 EUROZ LIMITED Annual Report 2011 21 AUDITOR’S INDEPENDENCE DECLARATION (cid:3) (cid:3) (cid:3) (cid:3) (cid:3) (cid:3) (cid:3) (cid:3) (cid:3) (cid:3) (cid:3) (cid:3) (cid:36)(cid:88)(cid:71)(cid:76)(cid:87)(cid:82)(cid:85)(cid:182)(cid:86)(cid:3)(cid:44)(cid:81)(cid:71)(cid:72)(cid:83)(cid:72)(cid:81)(cid:71)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3)(cid:39)(cid:72)(cid:70)(cid:79)(cid:68)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3) (cid:56)(cid:81)(cid:71)(cid:72)(cid:85)(cid:3)(cid:54)(cid:72)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:22)(cid:19)(cid:26)(cid:70)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:36)(cid:70)(cid:87)(cid:3)(cid:21)(cid:19)(cid:19)(cid:20)(cid:3) (cid:55)(cid:82)(cid:3)(cid:55)(cid:75)(cid:72)(cid:3)(cid:39)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:40)(cid:88)(cid:85)(cid:82)(cid:93)(cid:3)(cid:47)(cid:76)(cid:80)(cid:76)(cid:87)(cid:72)(cid:71)(cid:3) (cid:3) (cid:3) (cid:44)(cid:3)(cid:71)(cid:72)(cid:70)(cid:79)(cid:68)(cid:85)(cid:72)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:69)(cid:72)(cid:86)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:80)(cid:92)(cid:3)(cid:78)(cid:81)(cid:82)(cid:90)(cid:79)(cid:72)(cid:71)(cid:74)(cid:72)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:69)(cid:72)(cid:79)(cid:76)(cid:72)(cid:73)(cid:15)(cid:3)(cid:71)(cid:88)(cid:85)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:3)(cid:72)(cid:81)(cid:71)(cid:72)(cid:71)(cid:3)(cid:22)(cid:19)(cid:3)(cid:45)(cid:88)(cid:81)(cid:72)(cid:3)(cid:21)(cid:19)(cid:20)(cid:20)(cid:3)(cid:87)(cid:75)(cid:72)(cid:85)(cid:72)(cid:3)(cid:75)(cid:68)(cid:86)(cid:3) (cid:69)(cid:72)(cid:72)(cid:81)(cid:29)(cid:3) (cid:3) (cid:49)(cid:82)(cid:3) (cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:68)(cid:89)(cid:72)(cid:81)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3) (cid:82)(cid:73)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:68)(cid:88)(cid:71)(cid:76)(cid:87)(cid:82)(cid:85)(cid:3) (cid:76)(cid:81)(cid:71)(cid:72)(cid:83)(cid:72)(cid:81)(cid:71)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3) (cid:85)(cid:72)(cid:84)(cid:88)(cid:76)(cid:85)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3) (cid:68)(cid:86)(cid:3) (cid:86)(cid:72)(cid:87)(cid:3) (cid:82)(cid:88)(cid:87)(cid:3) (cid:76)(cid:81)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:36)(cid:70)(cid:87)(cid:3)(cid:21)(cid:19)(cid:19)(cid:20)(cid:3)(cid:76)(cid:81)(cid:3)(cid:85)(cid:72)(cid:79)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:68)(cid:88)(cid:71)(cid:76)(cid:87)(cid:30)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3) (cid:49)(cid:82)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:68)(cid:89)(cid:72)(cid:81)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:68)(cid:81)(cid:92)(cid:3)(cid:68)(cid:83)(cid:83)(cid:79)(cid:76)(cid:70)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:70)(cid:82)(cid:71)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:83)(cid:85)(cid:82)(cid:73)(cid:72)(cid:86)(cid:86)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:3)(cid:70)(cid:82)(cid:81)(cid:71)(cid:88)(cid:70)(cid:87)(cid:3)(cid:76)(cid:81)(cid:3)(cid:85)(cid:72)(cid:79)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:68)(cid:88)(cid:71)(cid:76)(cid:87)(cid:17)(cid:3) (cid:11)(cid:76)(cid:12)(cid:3) (cid:3) (cid:11)(cid:76)(cid:76)(cid:12)(cid:3) (cid:3) (cid:3) (cid:3) (cid:51)(cid:46)(cid:41)(cid:3)(cid:48)(cid:36)(cid:38)(cid:46)(cid:3)(cid:9)(cid:3)(cid:38)(cid:50)(cid:3) (cid:3) (cid:3) (cid:3) (cid:54)(cid:44)(cid:48)(cid:50)(cid:49)(cid:3)(cid:41)(cid:40)(cid:53)(cid:48)(cid:36)(cid:49)(cid:44)(cid:54)(cid:3) (cid:51)(cid:36)(cid:53)(cid:55)(cid:49)(cid:40)(cid:53)(cid:3) (cid:3) (cid:20)(cid:24)(cid:3)(cid:36)(cid:56)(cid:42)(cid:56)(cid:54)(cid:55)(cid:3)(cid:21)(cid:19)(cid:20)(cid:20)(cid:3) (cid:58)(cid:40)(cid:54)(cid:55)(cid:3)(cid:51)(cid:40)(cid:53)(cid:55)(cid:43)(cid:15)(cid:3) (cid:58)(cid:40)(cid:54)(cid:55)(cid:40)(cid:53)(cid:49)(cid:3)(cid:36)(cid:56)(cid:54)(cid:55)(cid:53)(cid:36)(cid:47)(cid:44)(cid:36)(cid:3) (cid:3) (cid:20)(cid:24)(cid:3) 22 EUROZ LIMITED Annual Report 2011 CONSOLIDATED INCOME STATEMENT For the year ended 30 June 2011 Revenue Share of net proﬁ t (loss) of associates Employee beneﬁ ts expense Depreciation and amortisation expenses Regulatory expenses Consultancy expenses Conference and seminar expenses Brokerage & underwriting expense Communication expenses Carrying amount of principal trading securities sold Other expenses Proﬁ t for the period Income tax expense Proﬁ t for the period Basic earnings per share Diluted earnings per share Notes 2011 $ 2010 $ 4 5 5 6 33 33 70,012,360 67,111,208 7,794,638 (23,214,359) (1,145,045) (274,756) (2,008,990) (1,244,605) (3,182,413) (288,980) (7,870,761) (4,167,970) 8,969,336 (18,924,567) (185,064) (566,639) (1,736,041) (1,062,262) (3,391,695) (308,789) (13,562,514) (2,840,478) 34,409,119 (7,843,079) 33,502,495 (7,170,745 26,566,040 26,331,750 Cents 19.38 16.66 Cents 20.07 18.49 The above Income Statements should be read in conjunction with the accompanying notes. EUROZ LIMITED Annual Report 2011 23 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME for the year ended 30 June 2011 Proﬁ t for the period Other comprehensive income Gain/(loss) on available for sale investment taken to equity 2011 $ 2010 $ 26,566,040 26,331,750 - (893,576) Total comprehensive income for the period 26,566,040 25,438,174 The above Statement of Comprehensive Income should be read in conjunction with the accompanying notes. 24 EUROZ LIMITED Annual Report 2011 CONSOLIDATED STATEMENT OF FINANCIAL POSITION as at 30 June 2011 Current assets Cash and cash equivalents Trade and other receivables Inventories Other current assets Total current assets Non-current assets Long term receivable Investments accounted for using equity method Financial assets Plant and equipment Deferred tax assets Total non-current assets Total assets Current liabilities Trade and other payables Current tax liabilities Short term provisions Total current liabilities Non-current liabilities Deferred tax liabilities Long term provisions Total non-current liabilities Total liabilities Net assets Equity Issued capital Reserves Retained earnings Total equity Notes 2011 $ 2010 $ 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 21 21 68,059,994 1,909,730 348,675 2,184,432 62,472,744 452,001 386,086 967,615 72,502,831 64,278,446 5,000,000 65,596,600 219,746 3,067,837 563,305 5,000,000 58,792,688 351,592 584,507 415,653 74,447,488 65,144,440 146,950,319 129,422,886 2,057,798 3,494,336 21,661,269 2,367,819 3,013,685 13,704,960 27,213,403 19,086,464 548,361 670,205 1,218,566 231,735 687,274 919,009 28,431,969 20,005,473 118,518,350 109,417,413 87,261,731 186,000 31,070,619 79,296,164 186,000 29,935,249 118,518,350 109,417,413 The above Balance Sheet should be read in conjunction with the accompanying notes. EUROZ LIMITED Annual Report 2011 25 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the year ended 30 June 2011 Share Capital $ Asset Retained Revaluation Reserve $ Proﬁ t $ Option Premium Reserves $ Total $ Balance at 1 July 2009 75,711,764 19,504,347 893,576 186,000 96,295,687 Proﬁ t for the period Changes in fair value of ﬁ nancial asset Total comprehensive income for the period - - - 26,331,750 - - (893,576) 26,331,750 (893,576) Transactions with owners, recorded directly in equity Shares issued during the period Dividends to equity holders 3,584,400 - - (15,900,848) Total contributions by and distributions to owners 3,584,400 (15,900,848) Balance at 30 June 2010 79,296,164 29,935,249 Balance at 1 July 2010 79,296,164 29,935,249 Proﬁ t for the period Changes in fair value of ﬁ nancial asset Total comprehensive income for the period - - - 26,566,040 - 26,566,040 Transactions with owners, recorded directly in equity Shares issued during the period Dividends to equity holders 7,965,567 - - (25,430,670) Total contributions by and distributions to owners 7,965,567 (25,430,670) Balance at 30 June 2011 87,261,731 31,070,619 - - - - - - - - - - - - - - - - - 26,331,750 (893,576) 25,438,174 3,584,400 (15,900,848) - (12,316,448) 186,000 109,417,413 186,000 109,417,413 - - - - - 26,566,040 - 26,566,040 7,965,567 (25,430,670) - (17,465,103) 186,000 118,518,350 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. 26 EUROZ LIMITED Annual Report 2011 CONSOLIDATED STATEMENT OF CASH FLOWS for the year ended 30 June 2011 Cash ﬂ ows from operating activities Receipts from customers (inclusive of goods and services tax) Payments to suppliers and employees (inclusive of goods and services tax) Dividends received Interest received Proceeds from sale of trading shares Income taxes (paid)/refunded Payments for trading shares Notes 2011 $ 2010 $ 54,239,791 (34,694,192) 51,600,529 (33,677,185) 19,545,599 17,923,344 2,571 2,901,341 9,444,069 (7,193,455) (7,949,366) 499,719 2,159,100 13,862,728 (5,239,806) (14,072,653) Net cash ﬂ ows from operating activities 31 16,750,759 15,132,432 Cash ﬂ ows from investing activities Net (payments)/receipts from investments Payments for plant and equipment Net cash ﬂ ows used in investing activities Cash ﬂ ows from ﬁ nancing activities Proceeds from issues of shares and other equity securities Dividends paid Net cash ﬂ ows from/(used in) ﬁ nancing activities Net increase/(decrease) at cash and cash equivalents Cash and cash equivalents at 1 July 2,066,701 (3,628,376) (8,760,432) (393,367) (1,561,675) (9,153,799) 7,965,567 (17,567,401) 3,584,400 (10,974,983) (9,601,834) (7,390,583) 5,587,250 62,472,744 (1,411,950) 63,884,694 Cash and cash equivalents at 30 June 7 68,059,994 62,472,744 The above statements of cash ﬂ ows should be read in conjunction with the accompanying notes. EUROZ LIMITED Annual Report 2011 27 NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2011 Contents Note 1. Statement of signiﬁ cant accounting policies Note 2. Signiﬁ cant accounting estimates and judgements Note 3. Segment information Note 4. Revenue Note 5. Proﬁ t before income tax expense Note 6. Income tax Note 7. Cash and cash equivalents Note 8. Trade and other receivables Note 9. Inventories Note 10. Other current assets Note 11. Long term receivable Note 12. Investments accounted for using the equity method Note 13. Financial assets Note 14. Plant and equipment Note 15. Deferred tax assets Note 16. Trade and other payables Note 17. Current tax liabilities Note 18. Short term provisions Note 19. Deferred tax liabilities Note 20. Long term provisions Note 21. Contributed equity Note 22. Dividends Note 23. Financial instruments Note 24. Remuneration of auditors Note 25. Contingent liabilities Note 26. Commitments for expenditure Note 27. Employee beneﬁ ts Note 28. Related parties Note 29. Investments in controlled entities Note 30. Events occurring after reporting date Note 31. Reconciliation of cash ﬂ ows from operating activities Note 32. Credit facilities Note 33. Earnings per share Note 34. Parent entity disclosures Note 35. Company details 28 EUROZ LIMITED Annual Report 2011 29 37 37 39 40 40 41 41 41 42 42 42 43 43 44 44 44 45 45 45 45 47 48 49 50 50 50 51 54 55 55 55 56 56 56 NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2011 Note 1. Statement of Signiﬁ cant Accounting Policies The ﬁ nancial report is a general purpose ﬁ nancial report that has been prepared in accordance with Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001. Euroz Limited is a listed public company, trading on the Australian Securities Exchange, limited by shares, incorporated and domiciled in Australia. The ﬁ nancial report of Euroz Limited and controlled entities (the consolidated group), complies with Australian Accounting Standards and International Financial Reporting Standards (IFRS). Separate ﬁ nancial information of the parent company has been included in Note 34 as permitted by amendments to the Corporations Act 2001. The following is a summary of the material accounting policies adopted by the consolidated group in the preparation of the ﬁ nancial report. The accounting policies have been consistently applied, unless otherwise stated. Basis of preparation Reporting Basis and Conventions The ﬁ nancial report has been prepared on an accruals basis and is based on historical costs modiﬁ ed by the revaluation of selected non-current assets, ﬁ nancial assets and ﬁ nancial liabilities for which the fair value basis of accounting has been applied. Accounting Policies (a) Principles of Consolidation The consolidated ﬁ nancial statements incorporate the assets and liabilities of all entities controlled by Euroz Limited (‘company’ or ‘parent entity’) as at 30 June 2011 and the results of all controlled entities for the year then ended. Euroz Limited and its controlled entities together are referred to in this ﬁ nancial report as the consolidated entity. The effects of all transactions between entities in the consolidated entity are eliminated in full. Subsidiaries are all those entities over which the consolidated entity has the power to govern the ﬁ nancial and operating policies, generally accompanying a shareholding of more than one-half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the consolidated entity controls another 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. The purchase method of accounting is used to account for the acquisition of subsidiaries by the consolidated entity. Intercompany transactions, balances and unrealised gains on transactions between group companies 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 group. All controlled entities have a 30 June ﬁ nancial year end. (b) Income Tax The charge for current income tax expense is based on the proﬁ t for the year adjusted for any non-assessable or disallowed items. It is calculated using tax rates that have been enacted or are substantively enacted by the balance sheet date. Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the ﬁ nancial statements. 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 either accounting proﬁ t or taxable proﬁ t or loss. Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or liability is settled. Deferred tax is credited in the income statement except where it relates to items that may be credited directly to equity, in which case the deferred tax is adjusted directly against equity. EUROZ LIMITED Annual Report 2011 29 NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2011 Deferred income tax assets are recognised to the extent that it is probable that future tax proﬁ ts will be available against which deductible temporary differences can be utilised. The amount of beneﬁ ts brought to account or which may be realised in the future is based on the assumption that no adverse change will occur in income taxation legislation and the anticipation that the economic entity will derive sufﬁ cient future assessable income to enable the beneﬁ t to be realised and comply with the conditions of deductibility imposed by the law. Euroz Limited and its wholly-owned Australian subsidiaries have formed an income tax consolidated group under the Tax Consolidation Regime. Euroz Limited is responsible for recognising the current and deferred tax assets and liabilities for the tax consolidated group. The group formed an income tax consolidated group to apply from 1 July 2003. The tax consolidated group has entered a tax sharing agreement whereby each company in the group contributes to the income tax payable in proportion to their contribution to the net proﬁ t before tax of the tax consolidated group. (c) Acquisition of investments The purchase method of accounting is used for all business combinations regardless of whether equity instruments or other assets are acquired. Cost is determined as the fair value of the assets given up, shares issued or liabilities undertaken at the date of acquisition plus incidental costs directly attributable to the acquisition. (d) Revenue Recognition Revenue is recognised to the extent that it is probable that the economic beneﬁ ts will ﬂ ow to the entity and the revenue can be reliably measured. The following speciﬁ c recognition criteria must also be met before revenue is recognised: • • • • • Brokerage revenue earned from share trading on behalf of clients is recognised on completion of the transactions. That is, the day the security is traded, not the day of settlement. Underwriting, management fees and corporate retainers are brought to account when the fee in respect of the services provided is receivable. Share trading revenue from the sale of stocks in the jobbing account is recognised on the day the security is traded. Revenue comprises the gross proceeds on sale of the security. Interest income is recognised as it accrues. Dividend revenue is recognised when the right to receive a dividend has been established. All revenue is stated net of the amount of goods and services tax (GST). (e) Receivables Trade debtors are recognised as current receivables as they are generally settled within 30 days from the date of recognition. Collectability of trade debtors is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. A provision for doubtful debts is raised when some doubt as to collection exists. All trade debtors relating to brokerage and principal trading have been transferred to Penson Financial Services Australia Pty Ltd (“Penson”) who provides a trust account facility as part of the clearing and settlement service. (f) Inventories Inventories are stocks held in the operating (jobbing) account at year end. All inventory is held at fair value. Refer to Note 1 (u) (i) ﬁ nancial assets at fair value through proﬁ t or loss. (g) Investments Interests in listed and unlisted securities are initially bought to account at cost. Controlled entities are accounted for in the consolidated ﬁ nancial statements as set out in Note 1 (a). Other securities are included at fair value at balance date. Unrealised gains/losses on securities held for short term investment are accounted for as set out in Note 1 (u) (i) ﬁ nancial assets at fair value through proﬁ t or loss. Unrealised gains/losses on securities held for long term investment are accounted for as set out in Note 1 (u) (iii) available for sale ﬁ nancial assets. 30 EUROZ LIMITED Annual Report 2011 NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2011 (h) Investments in associates The Group’s investment in its associates is accounted for using the equity method of accounting in the consolidated ﬁ nancial statements. The associates are entities over which the Group has signiﬁ cant inﬂ uence and that are neither subsidiaries nor joint ventures. Under the equity method, investments in associates are carried in the consolidated statement of ﬁ nancial position at cost plus post-acquisition changes in the Group’s share of net assets of the associates. Goodwill or gain on bargain purchase relating to an associate is included in the carrying amount of the investment and is not amortised. After application of the equity method, the Group determines whether it is necessary to recognise any impairment loss with respect to the Group’s net investment in associates. Goodwill or gain on bargain purchase included in the carrying amount of the investment in associate is not tested separately, rather the entire carrying amount of the investment is tested for impairment as a single asset. If an impairment is recognised, the amount is not allocated to the goodwill of the associate. The Group’s share of its associates’ post-acquisition proﬁ ts or losses is recognised in the statement of comprehensive income, and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post- acquisition movements are adjusted against the carrying amount of the investment. Dividends receivable from associates are recognised in the parent entity’s statement of comprehensive income as a component of other income. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any unsecured long-term receivables and loans, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate. The reporting dates of the associates and the Group are identical and the associates’ accounting policies conform to those used by the Group for like transactions and events in similar circumstances. (i) Plant and equipment Each class of plant and equipment is carried at cost or fair value as indicated less, where applicable, any accumulated depreciation and impairment losses. The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed as the greater of the fair value less costs to sell and the expected net cash ﬂ ows that will be received from the assets employment and subsequent disposal. The expected net cash ﬂ ows are discounted to their present values in determining recoverable amounts. The cost of ﬁ xed assets constructed within the consolidated group includes the cost of materials, direct labour, borrowing costs and an appropriate proportion of ﬁ xed and variable overheads. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic beneﬁ ts associated with the item will ﬂ ow to the group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the ﬁ nancial period in which they are incurred. Depreciation The depreciable amount of all ﬁ xed assets is depreciated on a straight line basis over their useful lives to the consolidated group commencing from the time the asset is held ready for use. The depreciation rates used for each class of depreciable assets are: Class of Fixed Asset Leasehold improvements Plant and equipment Depreciation Rate 25% 25 – 33% Artwork is not depreciated, but is reviewed annually for impairment. The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. EUROZ LIMITED Annual Report 2011 31 NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2011 Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are included in the income statement. When revalued assets are sold, amounts included in the revaluation reserve relating to the asset are transferred to retained earnings. (j) Leasehold improvements The cost of improvements to or on leasehold properties are amortised over the unexpired period of the lease or the estimated useful life of the improvement to the consolidated group, whichever is the shorter. (k) Leased non current assets A distinction is made between ﬁ nance leases which effectively transfer from the lessor to the lessee substantially all the risks and beneﬁ ts incidental to ownership of leased non current assets, and operating leases under which the lessor effectively retains substantially all such risks and beneﬁ ts. Incentives received on entering into operating leases are recognised as liabilities. Lease payments are allocated between rental expense and reduction of the liability. Other operating lease payments are charged to the income statement in the periods in which they are incurred, as this represents the pattern of beneﬁ ts derived from the leased assets. (l) Trade and other creditors Trade and other creditors also includes other liabilities for goods and services provided to the consolidated entity prior to the end of the ﬁ nancial year and which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. All trade creditors relating to brokerage and principal trading have been transferred to Penson who provides a trust account facility as part of the clearing and settlement service. (m) Dividends Provision is made for the amount of any dividend declared and authorised by the directors on or before the end of the ﬁ nancial year, but not distributed at balance date. (n) Options The fair value of options in the shares of the company issued to directors and other parties is recognised as an expense in the ﬁ nancial statements in relation to the granting of these options. (o) Employee beneﬁ ts (i) Wages, salaries and annual leave Liabilities for wages, salaries and annual leave expected to be settled within 12 months of the reporting date are recognised in respect of employees’ services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled. (ii) Employee beneﬁ ts payable later than one year Employee beneﬁ ts payable later than one year have been measured at the present value of the estimated future cash outﬂ ows to be made for those beneﬁ ts. (iii) Superannuation Contributions are made by the consolidated group to superannuation funds as stipulated by statutory requirements and are charged as expenses when incurred. (iv) Employee beneﬁ t on costs Employee beneﬁ t on costs, including payroll tax, are recognised and included in employee beneﬁ ts liabilities and costs when the employee beneﬁ ts to which they relate are recognised as liabilities. 32 EUROZ LIMITED Annual Report 2011 NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2011 (v) Options The fair value of options granted is recognised as an employee beneﬁ t expense with a corresponding increase in equity. The fair value is measured at grant date. The fair value at grant date is independently determined using the Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the vesting and performance criteria, the impact of dilution, the non-tradeable nature of the option, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option. (vi) Proﬁ t-sharing The consolidated entity recognises a liability and an expense for proﬁ t-sharing based on a formula that takes into consideration the proﬁ t attributable to the company’s employees after certain adjustments. (vii) Termination beneﬁ ts The consolidated entity recognises a liability and an expense when the entity demonstrate commitment to either terminate the employee before the normal retirement date or provide termination beneﬁ ts as a result of an offer made to the employee prior to retirement date. (p) Cash and cash equivalents For purposes of the statement of cash ﬂ ows, cash includes deposits at call which are readily convertible to cash on hand and are subject to an insigniﬁ cant risk of changes in value, net of outstanding bank overdrafts. (q) Earnings per share (i) Basic earnings per share Basic earnings per share is determined by dividing the net proﬁ t after income tax attributable to members of the company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the ﬁ nancial year, adjusted for bonus elements in ordinary shares issued during the year. (ii) Diluted earnings per share Diluted earnings per share adjusts the ﬁ gures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other ﬁ nancing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. (r) Fair value estimation The fair value of ﬁ nancial assets and ﬁ nancial liabilities must be estimated for recognition and measurement or for disclosure purposes. The fair value of ﬁ nancial instruments traded in active markets (such as publicly traded derivatives, and trading and available-for-sale securities) is based on quoted market prices at the balance sheet date. The quoted market price used for ﬁ nancial assets held by the consolidated entity is the current bid price; the appropriate quoted market price for ﬁ nancial liabilities is the current ask price. The fair value of ﬁ nancial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined using valuation techniques. The consolidated entity uses a variety of methods and makes assumptions that are based on market conditions existing at each balance date. Quoted market prices or dealer quotes for similar instruments are used for long-term debt instruments held. Other techniques, such as estimated discounted cash ﬂ ows, are used to determine fair value for the remaining ﬁ nancial instruments. The nominal value less estimated credit adjustments of trade receivables and payables are assumed to approximate their fair values. The fair value of ﬁ nancial liabilities for disclosure purposes is estimated by discounting the future contractual cash ﬂ ows at the current market interest rate that is available to the consolidated entity for similar ﬁ nancial instruments. EUROZ LIMITED Annual Report 2011 33 NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2011 (s) Goods and services tax (GST) Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Tax Ofﬁ ce. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the balance sheet are shown inclusive of GST. Cash ﬂ ows are presented in the cash ﬂ ow statement on a gross basis, except for the GST component of investing and ﬁ nancing activities, which are disclosed as operating cash ﬂ ows. (t) Comparative ﬁ gures When required by accounting standards, comparative ﬁ gures have been adjusted to conform to changes in presentation for the current ﬁ nancial year. (u) Financial instruments The consolidated group classiﬁ es its investments in the following categories: ﬁ nancial assets at fair value through proﬁ t or loss, loans and receivables, and available-for-sale ﬁ nancial assets. The classiﬁ cation depends on the purpose for which the investments were acquired. Management determines the classiﬁ cation of its investments at initial recognition and re-evaluates this designation at each reporting date. Initial recognition and measurement Financial assets and ﬁ nancial liabilities are recognised when the entity becomes a party to the contractual provisions to the instrument. For ﬁ nancial assets, this is equivalent to the date that the company commits itself to either the purchase or sale of the asset (ie trade date accounting is adopted). Financial instruments are initially measured at fair value plus transaction costs, except where the instrument is classiﬁ ed ‘at fair value through proﬁ t or loss’, in which case transaction costs are expensed to proﬁ t or loss immediately. Classiﬁ cation and subsequent measurement Financial instruments are subsequently measured at either of fair value, amortised cost using the effective interest rate method, or cost. Fair value represents the amount for which an asset could be exchanged or a liability settled, between knowledgeable, willing parties. Where available, quoted prices in an active market are used to determine fair value. In other circumstances, valuation techniques are adopted. Amortised cost is calculated as: • • • • the amount at which the ﬁ nancial asset or ﬁ nancial liability is measured at initial recognition; less principal repayments; plus or minus the cumulative amortisation of the difference, if any, between the amount initially recognised and the maturity amount calculated using the effective interest method; and less any reduction for impairment. The effective interest method is used to allocate interest income or interest expense over the relevant period and is equivalent to the rate that exactly discounts estimated future cash payments or receipts (including fees, transaction costs and other premiums or discounts) through the expected life (or when this cannot be reliably predicted, the contractual term) of the ﬁ nancial instrument to the net carrying amount of the ﬁ nancial asset or ﬁ nancial liability. Revisions to expected future net cash ﬂ ows will necessitate an adjustment to the carrying value with a consequential recognition of an income or expense in proﬁ t or loss. The Group does not designate any interests in subsidiaries, associates or joint venture entities as being subject to the requirements of accounting standards speciﬁ cally applicable to ﬁ nancial instruments. (i) Financial assets at fair value through proﬁ t or loss This category has two sub-categories; ﬁ nancial assets held for trading, and those designated at fair value through proﬁ t or loss on initial recognition. A ﬁ nancial asset is classiﬁ ed in this category if acquired principally for the purpose of selling in the short term or if so designated by management. The policy of management is to designate a ﬁ nancial asset if there exists the possibility it will be sold in the short term and the asset is subject to frequent changes in fair value. Assets in this category are classiﬁ ed as current assets if they are either held for trading or are expected to be realised within 12 months of the balance sheet date. 34 EUROZ LIMITED Annual Report 2011 NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2011 (ii) Loans and receivables Loans and receivables are non derivative ﬁ nancial assets with ﬁ xed or determinable payments that are not quoted in an active market. They arise when the consolidated group provides money, goods or services directly to a debtor with no intention of selling the receivable. They are included in current assets, except for those with maturities greater than 12 months after the balance sheet date which are classiﬁ ed as non-current assets. Loans and receivables are included in receivables in the balance sheet. (iii) Available-for-sale ﬁ nancial assets Available-for-sale ﬁ nancial assets, comprising principally marketable equity securities, are non-derivatives that are either designated in this category or not classiﬁ ed in any of the other categories. They are included in non- current assets. Purchases and sales of investments are recognised on trade-date being the date on which the consolidated group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all ﬁ nancial assets not carried at fair value through proﬁ t or loss. Financial assets are derecognised when the rights to receive cash ﬂ ows from the ﬁ nancial assets have expired or have been transferred and the consolidated entity has transferred substantially all the risks and rewards of ownership. Available-for-sale ﬁ nancial assets and ﬁ nancial assets at fair value through proﬁ t and loss are subsequently carried at fair value. Loans and receivables are carried at amortised cost using the effective interest method. Realised and unrealised gains and losses arising from changes in the fair value of the ‘ﬁ nancial assets at fair value through proﬁ t or loss’ category are included in the income statement in the period in which they arise. Unrealised gains and losses arising from changes in the fair value of non monetary securities classiﬁ ed as available-for-sale investments revaluation reserve are recognised in equity in the “available for sale revaluation reserve”. When securities classiﬁ ed as available-for-sale are sold or impaired, the accumulated fair value adjustments are included in the income statement as gains and losses from investment securities. The fair values of quoted investments are based on current bid prices. If the market for a ﬁ nancial asset is not active (and for unlisted securities), the consolidated entity establishes fair value by using valuation techniques. These include reference to the fair values of recent arm’s length transactions, involving the same instruments or other instruments that are substantially the same, discounted cash ﬂ ow analysis, and option pricing methods reﬁ ned to reﬂ ect the issuer’s speciﬁ c circumstances. The consolidated group assesses at each balance date whether there is objective evidence that a ﬁ nancial asset or group of ﬁ nancial assets is impaired. In the case of equity securities classiﬁ ed as available for sale, a signiﬁ cant or prolonged decline in the fair value of a security below its cost is considered in determining whether the security is impaired. If any such evidence exists for available-for-sale ﬁ nancial assets, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that ﬁ nancial asset previously recognised in proﬁ t and loss, is removed from equity and recognised in the income statement. Impairment losses recognised in the income statement on equity instruments are not reversed through the income statement. (v) Business combinations Acquisitions by the group of additional interests in equity accounted investments are brought to account in accordance with the provision of AASB 3 Business Combinations. (w) Contributed equity Ordinary shares are classiﬁ ed 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. Incremental costs directly attributable to the issue of new shares or options, or for the acquisition of a business, are included in the cost of the acquisition as part of the purchase consideration. EUROZ LIMITED Annual Report 2011 35 NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2011 (x) New standards and interpretations not yet adopted The AASB has issued the following new and amended accounting standards and interpretations that have mandatory application dates for future reporting periods. The Group has decided against early adoption of these standards, and has not yet determined the potential impact on the ﬁ nancial statements from the adoption of these standards and interpretations. AASB No. Title 9 1053 Financial Instruments Application of Tiers of Australian Accounting Standards Issue Date Dec-10 Jun-10 Operative Date (Annual reporting periods beginning on or after) 1-Jan-13 1-Jul-13 2009 – 10 Amendments to Australian Accounting Standards – Classiﬁ cation of Rights Issues [AASB 132] Oct-09 1-Feb-10 2009 – 12 Amendments to Australian Accounting Standards Dec-09 1-Jan-11 2010 – 2 2010 – 3 2010 – 4 [AASBs 5, 8, 108, 110, 112, 119, 133, 137, 139, 1023 & 1031 and Interpretations 2, 4, 16, 1039 & 1052] Amendments to Australian Accounting Standards arising from Reduced Disclosure Requirements Amendments to Australian Accounting Standards arising from the Annual Improvements Project [AASB 3, AASB 7, AASB 121, AASB 128, AASB 131, AASB 132 & AASB 139] Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project [AASB 1, AASB 7, AASB 101 & AASB 134 and Interpretation 13] Jun-10 1-Jul-13 Jun-10 1-Jul-10 Jun-10 1-Jan-11 2010 – 5 Amendments to Australian Accounting Standards Oct-10 1-Jan-11 [AASB 1, 3, 4, 5, 101, 107, 112, 118, 119, 121, 132, 133, 134, 137, 139, 140, 1023 & 1038 and Interpretations 112, 115, 127, 132 & 1042] 2010 – 6 Amendments to Australian Accounting Standards – Disclosures on Transfers of Financial Assets Nov-10 1-Jul-11 [AASB 1 & AASB 7] 2010 – 7 Amendments to Australian Accounting Standards arising from AASB 9 (December 2010) Dec-10 1-Jan-13 [AASB 1, 3, 4, 5, 7, 101, 102, 108, 112, 118, 120, 121, 127, 128, 131, 132, 136, 137, 139, 1023 & 1038 and Interpretations 2, 5, 10, 12, 19 & 127] 2010 – 8 Amendments to Australian Accounting Standards – Deferred Tax: Recovery of Underlying Assets Dec-10 1-Jan-12 [AASB 112] 2010 – 9 Amendments to Australian Accounting Standards – Severe Hyperinﬂ ation and Removal of Fixed Dates for First-time Adopters Dec-10 1-Jul-11 [AASB 1] 2010 – 10 Further Amendments to Australian Accounting Standards – Removal of Fixed Dates for First-time Adopters Dec-10 1-Jan-13 [AASB 2009-11 & AASB 2010-7] Australian Interpretations 19 Extinguishing Financial Liabilities with Equity Instruments Dec-09 1-Jul-10 36 EUROZ LIMITED Annual Report 2011 NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2011 Note 2. Signiﬁ cant accounting estimates and judgements Estimates and judgements incorporated in the ﬁ nancial statements are 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. Key Estimates (i) Impairment At each reporting date, the group compares the carrying values and market values of the associates to determine whether there is any indication of impairment. If signiﬁ cant and prolonged impairment indicators exist, any excess of the associate’s carrying value over the recoverable amount is expensed to the income statement. 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. Key judgements (i) Classiﬁ cation of investments The group has decided to classify investments in listed securities as available for sale. These securities are accounted for at fair value. Any increments or decrements in their value at year end are charged or credited to the income statement. (ii) Taxation Judgement is required in assessing whether deferred tax assets and certain deferred tax liabilities are recognised on the balance sheet. Deferred tax assets, including those arising from temporary differences, are recognised only where it is considered more likely than not they will be recovered, which is dependent on the generation of sufﬁ cient future taxable proﬁ ts. Deferred tax liabilities arising from temporary differences are recognised to the extent that there are future proﬁ ts. Note 3. Segment information Identiﬁ cation of reportable segments The group has identiﬁ ed its operating segments based on the internal reports that are reviewed and used by the executive team (the chief operating decision makers) in assessing performance and in allocating resources. Types of products and services Stockbroking Stockbroking business offering trading of Australian securities, post trade reporting, corporate ﬁ nance opportunities, provision of company research. Principal Trading Principal trading relates to the purchase and sale of securities by the consolidated group. Funds Management The consolidated group provides advice in relation to fund management. Basis of accounting for purpose of reporting by operating segments The accounting policies used by the group in reporting segments internally are consistent with those adopted in the ﬁ nancial statements of the group, unless otherwise stated. Segment assets and liabilities Where an asset is used across multiple segments, the asset is allocated to that segment that receives majority economic value from that asset. Liabilities are allocated to segments where there is a direct nexus between the liability and the operations of the segment. EUROZ LIMITED Annual Report 2011 37 NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2011 Unallocated items The following items of revenue, expenses, assets and liabilities are not allocated to operating segments as they are not considered part of the core operations of any segments: • • • • • • Dividend revenue Fair value gains or losses on ﬁ nancial instruments Share of proﬁ ts and losses of equity-accounted investments Corporate assets and liabilities not speciﬁ c to any segments Deferred tax assets and liabilities Current tax liabilities Stockbroking $ Principal Funds Trading Management $ $ Unallocated Total Items (Consolidated) $ $ Total $ 2011 Sales and other fees Other revenues 47,730,545 1,495,066 9,547,185 - 8,974,867 179,160 66,252,597 1,674,226 - 9,880,174 66,252,597 11,554,400 Total segment revenue 49,225,611 9,547,185 9,154,027 67,926,823 9,880,174 77,806,997 Segment net operating proﬁ t after tax 9,916,246 1,574,237 5,661,366 17,151,849 9,414,191 26,566,040 Interest revenue Depreciation and amortisation Share of associate 1,392,803 1,144,507 - - - - 179,160 538 - 1,571,963 1,145,045 - 1,347,278 - 7,794,638 2,919,241 1,145,045 7,794,638 Segment assets 32,920,874 348,675 5,967,911 39,237,460 107,712,859 146,950,319 Investments in associate Capital expenditure Segment liabilities - 3,627,846 7,762,756 - - - - - - 3,627,846 65,596,600 - 65,596,600 3,627,846 3,381,939 11,144,695 17,287,273 28,431,968 Cash ﬂ ow information Net cash ﬂ ow from operating activities Net cash ﬂ ow from investing activities Net cash ﬂ ow from ﬁ nancing activities 9,275,914 1,690,253 5,183,577 16,149,744 601,015 16,750,759 (3,628,376) - - - - - (3,628,376) 2,066,701 (1,561,675) - (9,601,834) (9,601,834) 38 EUROZ LIMITED Annual Report 2011 NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2011 Stockbroking $ Principal Funds Trading Management $ $ Unallocated Total Items (Consolidated) $ $ Total $ 2010 Sales and other fees Other revenues 39,490,501 1,350,700 13,738,675 - 10,102,074 90,441 63,331,250 1,441,141 - 11,765,435 63,331,250 13,206,576 Total segment revenue 40,841,201 13,738,675 10,192,515 64,772,391 11,765,435 76,537,826 Segment net operating proﬁ t after tax 13,227,400 215,117 6,333,425 19,775,942 6,555,808 26,331,750 Interest revenue Depreciation and amortisation Share of associate 1,227,179 177,756 - Segment assets 31,102,083 Investments in associate Capital expenditure - 391,385 Segment liabilities 6,549,254 - - - - - - - 90,441 7,308 - 1,317,620 185,064 - 841,480 - (457,282) 2,159,100 185,064 (457,282) 5,980,304 37,082,387 92,340,499 129,422,886 - 1,982 - 393,367 58,792,688 - 58,792,688 393,367 3,862,605 10,411,859 9,593,614 20,005,473 Cash ﬂ ow information Net cash ﬂ ow from operating activities Net cash ﬂ ow from investing activities Net cash ﬂ ow from ﬁ nancing activities Note 4. Revenue 9,396,088 (209,925) 9,310,727 18,496,890 (3,364,458) 15,132,432 (391,385) - - - (1,982) (393,367) (8,760,432) (9,153,799) - - (7,390,583) (7,390,583) Revenue from operating activities Brokerage Underwriting and management fees Proceeds on sale of principal trading shares Other income Interest received Dividends received Other revenue Fair value gain on derivatives Gain arising from acquisition of further interests in associates Total Revenue 2011 $ 2010 $ 22,846,828 31,767,263 9,468,579 2,091,321 20,509,908 27,849,180 13,738,675 1,233,487 66,173,991 63,331,250 2,919,241 2,571 104,279 (131,849) 944,127 2,159,100 503,199 123,521 351,592 642,546 3,838,369 3,779,958 70,012,360 67,111,208 EUROZ LIMITED Annual Report 2011 39 NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2011 Note 5. Proﬁ t before income tax expense Proﬁ t for the year arrived at after charging following expenses Plant and equipment – depreciation Leasehold improvements – amortisation Employee entitlements costs Rental expenses relating to operating lease Note 6. Income tax The components of tax expense comprise: Current tax Deferred tax Numerical reconciliation between tax expense and pre tax accounting proﬁ t Income tax rate using company’s tax rate of 30% (2010: 30%) Add tax effect of: - imputation credits - other non-allowable items - prior year under provision - share of loss of associate Less tax effect of: - rebateable fully franked dividends - gain on acquisition of associates Income tax attributable to entity 2011 $ 451,536 693,509 145,789 1,244,708 2010 $ 119,604 65,460 101,938 413,966 2011 $ 2010 $ 7,648,412 194,667 7,232,714 (61,969) 7,843,079 7,170,745 10,322,736 10,050,748 231 115,009 27,503 - 65,021 92,588 62,689 137,185 10,465,479 10,408,231 (771) (2,621,629) (216,737) (3,020,749) 7,843,079 7,170,745 The applicable weighted average effective tax rates are as follows: 22.8% 21.4% The increase in the weighted average effective consolidated tax rate for 2011 is due to the accounting requirement to recognise the gain on acquisition of associates. Reconciliations i. Gross movements The overall movement in the deferred tax account is as follows: Balance at 1 July Recognised in income statement Recognised in other comprehensive income Balance at 30 June ii. Deferred tax liability Movement in temporary differences during the year Fair value gain adjustments Balance at 1 July Recognised in other comprehensive income Balance at 30 June Other Balance at 1 July Recognised in the income statement Balance at 30 June 40 EUROZ LIMITED Annual Report 2011 183,918 (194,667) 25,693 (3,534,378) 185,511 4,645,865 14,944 1,296,998 77,982 (25,693) 52,289 - 77,982 77,982 153,753 342,319 198,750 (44,997) 496,072 153,753 NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2011 iii. Deferred tax assets Movement in temporary difference during the year Fair value gain adjustments Balance at 1 July Recognised in other comprehensive income Balance at 30 June Provisions Balance at 1 July Recognised in the income statement Balance at 30 June - - - 1,097,067 (1,097,067) - 415,653 147,652 563,305 398,681 16,972 415,653 Tax losses No part of the deferred tax asset shown in Note 15 is attributable to tax losses. The directors advise that the potential future income tax beneﬁ t at 30 June 2011 in respect of tax losses not brought to account is nil. Tax consolidation legislation Euroz Limited and its wholly-owned Australian subsidiaries implemented the tax consolidation legislation as of 1 July 2003. The accounting policy on implementation of the legislation is set out in Note 1(b). The impact on the income tax expense for the year is disclosed in the tax reconciliation above. The entities have also entered into a tax sharing and funding agreement. Under the terms of this agreement, the wholly- owned entities reimburse Euroz Limited for any current income tax payable by Euroz Limited arising in respect of their activities. The reimbursements are payable at the same time as the associated income tax liability falls due and have therefore been recognised as a current tax-related receivable by Euroz Limited. In the opinion of the directors, the tax sharing agreement is also a valid agreement under the tax consolidation legislation and limits the joint and several liability of the wholly owned entities in the case of a default by Euroz Limited. The wholly owned entities have fully compensated Euroz Limited for deferred tax liabilities assumed by Euroz Limited on the date of the implementation of the legislation and have been fully compensated for any deferred tax assets transferred to Euroz Limited. Note 7. Cash and cash equivalents Cash at bank and on hand Note 8. Trade and other receivables Trade debtors 2011 $ 68,059,994 2010 $ 62,472,744 2011 $ 1,909,730 2010 $ 452,001 All trade debtors relating to brokerage and principal trading have been transferred to Penson who provides a trust account facility as part of the clearing and settlement service. Note 9. Inventories Trading securities in listed companies (at cost) Fair value adjustments (i) Total 2011 $ 394,122 (45,447) 2010 $ 510,139 (124,053) 348,675 386,086 (i) The fair value adjustment is based on the closing price of each investment at year end. EUROZ LIMITED Annual Report 2011 41 NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2011 Note 10. Other current assets Prepayments Accrued income Total Note 11. Long term receivable Security deposit (unsecured) 2011 $ 541,854 1,642,578 2,184,432 2010 $ 455,108 512,507 967,615 2011 $ 5,000,000 2010 $ 5,000,000 Deposit held by Penson (clearing participant on behalf of Euroz Securities Limited) in order to meet the capital requirements under ASX Clear Pty Ltd. Note 12. Investments accounted for using the equity method Associated company (a) Movements during the year in equity accounted investment in associated companies Balance at 1 July Add: Recognised as investment during the year Acquisition on additional interest in associate during the year (Note 1(v)) Share of proﬁ ts after tax Gain arising from acquisition of further interests in associate Less: Share of loss after tax Dividend received/receivable Balance at 30 June (b) Interest held in the associated company Name of entity Ozgrowth Limited Westoz Investment Company Limited Country of Incorporation Australia Australia Principal activity Investment company Investment company 2011 $ 65,596,600 2010 $ 58,792,688 2011 $ 58,792,688 2010 $ 20,220,165 2,426,942 944,126 7,264,655 544,890 27,581,673 1,643,833 2,448,929 10,139,498 - (4,376,701) (2,906,205) (335,205) 65,596,600 58,792,688 Ownership interest 2010 2011 % % 31.76 20.93 28.49 20.07 42 EUROZ LIMITED Annual Report 2011 NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2011 Summarised ﬁ nancial information in respect of the group’s associates is set out below: (c) Summarised ﬁ nancial information Financial position: Total assets Total liabilities Net assets Share of associates’ net assets Financial performance: Total revenue Total proﬁ t/(loss) for the year after tax Note 13. Financial assets Fair value movement on derivatives (i) Total 2011 $ 2010 $ 286,598,020 (34,138,215) 270,923,668 (27,491,610) 252,459,805 243,432,058 65,596,600 58,792,688 48,789,859 31,716,373 54,013,447 32,106,573 2011 $ 219,746 219,746 2010 $ 351,592 351,592 (i) The company is a listed company. The company’s fair value at year end is determined by the current share price as at 30 June 2011. Non-current assets pledged as security See Note 32 for information on non-current assets pledged as security by the parent entity or its controlled entities. Note 14. Plant and equipment Leasehold improvements At cost Less: Accumulated amortisation Software At cost Less: Accumulated depreciation Ofﬁ ce equipment At cost Less: Accumulated depreciation Furniture, ﬁ xtures and ﬁ ttings At cost Less: Accumulated depreciation 2011 $ 2010 $ 2,524,118 (627,935) 1,896,183 481,686 (256,466) 225,220 31,170 (28,625) 2,545 1,061,736 (343,445) 718,291 603,846 (153,028) 450,818 3,067,837 31,170 (19,041) 12,129 368,470 (199,805) 168,665 295,695 (117,202) 178,493 584,507 EUROZ LIMITED Annual Report 2011 43 NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2011 Reconciliations Reconciliations of the carrying amounts of each class of property, plant and equipment at the beginning and end of the current and previous ﬁ nancial year are set out below: 2011 Carrying amount at 1 July 2010 Additions Depreciation/amortisation expense (Note 5) Leasehold improvements $ Plant and equipment $ Total $ 225,220 2,364,472 (693,509) 359,287 1,263,374 (451,007) 584,507 3,627,846 (1,144,516) Carrying amount at 30 June 2011 1,896,183 1,171,654 3,067,837 2010 Carrying amount at 1 July 2009 Additions Depreciation/amortisation expense (Note 5) 125,680 165,000 (65,460) 250,524 228,367 (119,604) 376,204 393,367 (185,064) Carrying amount at 30 June 2010 225,220 359,287 584,507 Note 15. Deferred tax assets Deferred tax asset (Note 6) Deferred tax assets comprises: Provisions Fair value loss adjustments Total Note 16. Trade and other payables Trade creditors Other payables and accruals Total 2011 $ 563,305 563,305 - 563,305 2010 $ 415,653 415,653 - 415,653 2011 $ 310,207 1,747,591 2010 $ 233,055 2,134,764 2,057,798 2,367,819 All trade creditors relating to brokerage and principal trading have been transferred to Penson who provides a trust account facility as part of the clearing and settlement service. Note 17. Current tax liabilities Provision for taxation 2011 $ 3,494,336 2010 $ 3,013,685 44 EUROZ LIMITED Annual Report 2011 NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2011 Note 18. Short term provisions Dividends Employee entitlements (annual leave) Total Note 19. Deferred tax liabilities Deferred tax liability (Note 6) Deferred tax liability comprises: Fair value gain adjustments Other Total Note 20. Long term provisions Lease incentive Employee entitlements (long service leave) Total Note 21. Contributed equity 2011 $ 21,134,214 527,055 2010 $ 13,270,946 434,014 21,661,269 13,704,960 2011 $ 548,361 52,289 496,072 548,361 2010 $ 231,735 77,982 153,753 231,735 2011 $ 129,524 540,681 670,205 2010 $ 199,341 487,933 687,274 (a) Share capital Ordinary shares Issued and paid up capital - consisting of ordinary shares (b) Movements in ordinary share capital At the beginning of the reporting period Shares issued during the year (i) Exercise of options (ii) At the end of the reporting period Consolidated group 2010 2011 Shares Shares Parent entity 2011 $ 2010 $ 140,894,763 132,570,140 87,261,731 79,296,164 Consolidated entity 2010 Shares 2011 Shares 132,570,140 3,480,000 4,844,623 128,385,858 3,000,000 1,184,282 140,894,763 132,570,140 (i) On 4 February 2011, the company issued 3,480,000 shares at $1.25 each for cash. (ii) Options were exercised at various times during the ﬁ nancial year. The options were granted on 27 February 2009 at an exercise price of 75 cents and expire on 1 March 2014. EUROZ LIMITED Annual Report 2011 45 NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2011 (c) Movements in ordinary share capital At the beginning of the reporting period Shares issued during the year Exercise of options Capital raising costs At the end of the reporting period (d) Ordinary shares Consolidated entity 2010 $ Shares 2011 $ Shares 79,296,164 4,350,000 3,633,467 (17,900) 75,711,764 2,700,000 893,706 (9,306) 87,261,731 79,296,164 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. (e) Options A total of 4,844,623 options were exercised during the year at an exercise price of $0.75. There are 6,357,713 number of options on issue at 30 June 2011 (2010: 11,202,336). These options are convertible into shares at $0.75. (f) Movements in retained earnings Balance 1 July 2010 Opening adjustments Net proﬁ t Dividends paid Balance 30 June 2011 (g) Movement in reserves Asset revaluation reserve Opening balance Fair value of available for sale investments Closing balance Options reserve Total reserves 2011 $ 2010 $ 29,935,249 - 26,566,040 (25,430,670) 19,504,347 - 26,331,750 (15,900,848) 31,070,619 29,935,249 2011 $ 2010 $ - - - 893,576 (893,576) - 186,000 186,000 186,000 186,000 The asset revaluation reserve is used to record increments and decrements in the fair value of available for sale investments. Refer to Note 1(u) (iii). There has been no movement in the options reserve. 46 EUROZ LIMITED Annual Report 2011 NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2011 (h) Capital management The Directors primary objective is to maintain a capital structure that ensures the lowest cost of capital available to the group. At balance date, the group has no external borrowings. The group is not subject to any externally imposed capital requirements. Note 22. Dividends Ordinary shares Interim dividend for the half year ended 31 December 2010 of 3 cents (2010 - 2 cents) per fully paid ordinary share paid on 28 January 2011. Fully franked based on tax paid @ 30% Final dividend declared and provided for at 30 June 2011 of 15 cents (2010 – 10 cents) per fully paid ordinary share Fully franked based on tax paid @ 30% Total dividends provided for or paid 2011 $ 2010 $ 4,296,456 2,633,325 21,134,214 13,257,014 25,430,670 15,890,339 Franked dividends The franked portions of the dividends recommended after 30 June 2011 will be franked out of existing franking credits or out of franking credits arising from the payment of income tax in the year ending 30 June 2011. Franking credits available for subsequent ﬁ nancial years based on a tax rate of 30% (2010: 30%) Consolidated group 2010 $ 2011 $ 7,132,251 13,038,463 The above amounts represent the balance of the franking account as at the end of the ﬁ nancial year, adjusted for: a) b) c) d) franking credits that will arise from the payment of the current tax liability franking debits that will arise from the payment of dividends recognised as a liability at the reporting date franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date, and franking credits that may be prevented from being distributed in subsequent ﬁ nancial years. The consolidated amounts include franking credits that would be available to the parent entity if distributable proﬁ ts of controlled entities were paid as dividends. EUROZ LIMITED Annual Report 2011 47 NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2011 Note 23. Financial instruments (a) Financial risk management The group’s ﬁ nancial instruments consist of deposits with banks, trade receivables and payables, short term investments and available for sale investments. Derivative ﬁ nancial instruments are not used by the group. Senior executives meet regularly to analyse and monitor the ﬁ nancial risk associated with the ﬁ nancial instruments used by the group. (b) Financial risk exposure and management (i) Interest rate risk The group has no borrowings and therefore is not exposed to interest rate risk associated with debt. The group has signiﬁ cant cash reserves and the interest income earned from these cash reserves will be effected by movements in the interest rate. A sensitivity analysis has been provided in the note to illustrate the effect of interest rate movements on interest income earned. (ii) Liquidity risk The group manages liquidity risk using forward cashﬂ ow projections, maintaining cash reserves and having no borrowings or debt. In addition, at balance sheet date, the group has unutilised credit facilities totalling $20,000,000. Trade and other payables are expected to be paid as follows: Less than 1 month (iii) Credit risk 2011 $ 2,057,798 2010 $ 2,367,819 The maximum exposure to credit risk, excluding the value of any collateral or security, at balance date is the carrying amount of the ﬁ nancial assets disclosed in the balance sheet. There is no collateral or security held for those assets at 30 June 2011. Credit risk arises from exposure to customers and deposits with banks. Senior management monitors its exposure to customers on a regular basis to ensure recovery and repayment of outstanding amounts. Cash deposits are only made with Australian based banks. All trade debtors relating to brokerage and principal trading have been transferred to Penson who provides a trust account facility as part of the clearing and settlement service. The group invests in listed held for trade ﬁ nancial assets. These investments are held in companies listed on the Australian Securities Exchange and are considered to be liquid in nature. The group also invests in unlisted available for sale ﬁ nancial assets. The ﬁ nancial performance and return of all investments are regularly reviewed by senior management. Exposure to credit risk The carrying amount of the consolidated entity’s ﬁ nancial assets represents the maximum credit exposure. The consolidated entity’s maximum exposure to credit risk at the reporting date was: Financial assets at fair value through proﬁ t or loss Cash and cash equivalents Receivables Impairment losses None of the consolidated entity’s other receivables are past due (2010: Nil). Carrying Amount 2010 $ 351,592 62,472,744 452,001 2011 $ 219,746 68,059,994 1,909,730 70,189,470 63,276,337 48 EUROZ LIMITED Annual Report 2011 NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2011 (iv) Financial instruments composition and materiality analysis Weighted average effective interest rate 2010 % 2011 % Floating interest rate 2011 $ 2010 $ Non interest bearing 2011 $ 2010 $ - 452,001 - 452,001 4.81 - 4.81 3.75 - 3.75 68,059,994 - 5,000,000 73,059,994 62,472,744 - 5,000,000 67,472,744 - 1,909,730 - 1,909,730 - - - - 2,057,798 2,367,819 FINANCIAL ASSETS Cash and cash equivalents Receivables Loan term deposit Total ﬁ nancial assets FINANCIAL LIABILITIES Trade and other payables (v) Sensitivity analysis The Group has performed a sensitivity analysis in relation to interest income and movements in interest rates. The analysis highlights the post tax effect on the current year’s results and equity which would have resulted from movement in interest rates with all other variables remaining constant. Change in proﬁ t - increase in interest rate by 1% - decrease in interest rate by 1% Change in equity - increase in interest rate by 1% - decrease in interest rate by 1% Note 24. Remuneration of auditors Assurance services Audit services Audit and review of ﬁ nancial reports for the company Fees paid to PKF Mack & Co ﬁ rm Taxation services Tax compliance services Fees paid to PKF Mack & Co ﬁ rm 2011 $ 2010 $ 476,420 (476,420) 437,309 (437,309) 476,420 (476,420) 437,309 (437,309) 2011 $ 2010 $ 156,200 175,450 15,000 21,000 EUROZ LIMITED Annual Report 2011 49 NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2011 Note 25. Contingent liabilities The parent entity and consolidated group had contingent liabilities at 30 June 2011 as follows: Secured guarantees in respect of: operating lease of a controlled group entity Note 26. Commitments for expenditure 2011 $ 2010 $ 791,000 821,000 2011 $ 2010 $ (a) Operating leases Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows: Within one year Later than one year but not later than ﬁ ve years Later than ﬁ ve years 1,126,508 3,948,029 4,408,558 1,079,582 4,072,658 5,410,437 Commitments not recognised in the ﬁ nancial statements 9,483,095 10,562,677 The current lease on the premises at Level 14, 1 William Street is for the period of 10 years commencing on 1 February 2003 and expiring on 31 January 2013 has been sublet to Rio Tinto until the expiry of the lease. A new lease has been entered on the premises at Level 18, 54-58 Mounts Bay Road for the period of 10 years commencing 2 July 2010 and expiring on 1 July 2020. (b) Plant, Property and Equipment Within a year Commitments contracted for Commitments not contracted for (c) Other commitments Commitments for the cost of services supplied to the Group but not recognised as liabilities, payable: Within one year - - - - 2,635,000 3,524,000 6,159,000 - Note 27. Employee beneﬁ ts Employee beneﬁ t and related on-costs liabilities Provision for employee entitlements – current Aggregate employee beneﬁ t and related on costs liabilities 2011 $ 1,067,736 1,067,736 2010 $ 921,947 921,947 50 EUROZ LIMITED Annual Report 2011 NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2011 Note 28. Related parties All key management personnel have the title of director. (a) Key management personnel compensation Short-term employee beneﬁ ts - Executive Directors - Speciﬁ ed executives Post-employment beneﬁ ts - Executive Directors - Speciﬁ ed executives Total compensation 2011 $ 2010 $ 4,383,179 6,549,159 2,380,901 6,724,833 10,932,338 9,105,734 150,000 271,615 421,615 72,871 368,966 441,837 11,353,953 9,547,571 Individual directors’ and executives’ compensation disclosure (b) Information regarding individual directors’ and executives’ compensation and some equity instruments disclosures as required by Corporation Regulation 2M.3.03 is provided in the remuneration report section of the directors’ report. Apart from the details disclosed in this note, no director has entered into a material contract with the group since the end of the previous ﬁ nancial year and there were no material contracts involving directors’ interest existing at year end. (c) The ultimate parent entity within the Group is Euroz Limited. Parent entity EUROZ LIMITED Annual Report 2011 51 NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2011 (d) Wholly-owned group transactions (i) Loans to key management personnel There were no loans to key management personnel at the end of the year. (ii) Shareholdings of key management personnel The movement during the reporting period in the number of shares in Euroz Limited held, directly, indirectly or beneﬁ cially, by each key management person, including related parties, is as follows: Balance at 1 July 2010 Grant as remuneration On exercise of options Bought & Balance at (sold) * 30 June 2011 2011 Directors of Euroz Limited Ordinary shares P Diamond A McKenzie J Hughes G Chessell D Young 9,000,000 9,100,000 9,400,000 3,102,000 4,000,000 Key management personnel of the consolidated entity Ordinary shares R Caldow S Yeo K Paganin (resigned 22 July 2010) O Foster P Rees M Hepburn R Kane A Clayton A Brittain G Allen R Black N McGlew (appointed 1 July 2010) D Woods (appointed 1 July 2010) M Argento (appointed 14 February 2011) B Beresford (appointed 21 March 2011) 4,500,000 3,200,000 4,905,522 2,101,200 1,000,000 1,222,000 2,330,000 2,000,000 265,400 500,000 1,800,000 150,094 350,000 - - 58,926,216 *Only disclosed to date of resignation. 2010 Directors of Euroz Limited Ordinary shares P Diamond A McKenzie J Hughes 9,000,000 9,000,000 9,000,000 Key management personnel of the consolidated entity Ordinary shares R Caldow G Chessell S Yeo K Paganin (resigned 22 July 2010) D Young O Foster P Rees M Hepburn R Kane A Clayton A Brittain G Allen R Black N McGlew (appointed 1 July 2010) D Woods (appointed 1 July 2010) 4,500,000 2,820,000 3,200,000 4,905,522 4,000,000 2,099,000 1,000,000 1,222,000 2,330,000 2,000,000 15,400 412,000 1,800,000 75,540 275,200 57,654,662 52 EUROZ LIMITED Annual Report 2011 - - - - - - - - - - - - - - - - - - - - 900,000 50,000 500,000 - 202,001 - - - - 100,000 - - - - - - - - - - 1,752,001 100,000 - - - - 10,000,000 9,150,000 9,900,000 3,102,000 4,202,001 - - - - - - - - 38,000 - - 67,712 - 1,000,000 2,000,000 3,205,712 4,500,000 3,200,000 4,905,522 2,101,200 1,100,000 1,222,000 2,330,000 2,000,000 303,400 500,000 1,800,000 217,806 350,000 1,000,000 2,000,000 63,883,929 - - - - - - - - - - - - - - - - - - - - 100,000 400,000 - 282,000 - - - 2,200 - - - - - - - 7,554 - 791,754 - - - 9,000,000 9,100,000 9,400,000 - - - - - - - - - - 250,000 88,000 - 67,000 74,800 479,800 4,500,000 3,102,000 3,200,000 4,905,522 4,000,000 2,101,200 1,000,000 1,222,000 2,330,000 2,000,000 265,400 500,000 1,800,000 150,094 350,000 58,926,216 Balance at 1 July 2009 Grant as remuneration On exercise of options Bought & Balance at (sold) * 30 June 2010 NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2011 (iii) Option holdings of key management personnel The movement during the reporting period in the number of options over ordinary shares in Euroz Limited held, directly, indirectly or beneﬁ cially, by each key management person, including related parties, is as follows: Balance at Granted as remuner- 1 July 2010 ation Exercised Bought Total not Balance at exercisable at exercisable at 30 June ‘11 30 June ‘11 30 June’11 Total 2011 Directors of Euroz Limited Ordinary shares P Diamond A McKenzie J Hughes G Chessell D Young 900,000 800,000 500,000 - 202,001 Key management personnel of the consolidated entity Ordinary shares 450,000 R Caldow 320,000 S Yeo 391,552 K Paganin (resigned 22 July 2010) 200,000 O Foster P Rees 100,000 M Hepburn (resigned 8 February 2011) 122,200 233,000 R Kane 200,000 A Clayton - A Brittain 41,200 G Allen 180,000 R Black - N McGlew (appointed 1 July 2010) 23,260 D Woods (appointed 1 July 2010) - M Argento (appointed 14 Feb 2011) - B Beresford (appointed 21 March 2011) - - - - - - - - - - - - - - - - - - - - (900,000) (50,000) - - (202,001) - - - - - - - - - -100,000 - - - - - - - - - - - - 27,239 - - - 29,377 - - - 91,251 - - - - - 750,000 500,000 - - 450,000 320,000 418,791 200,000 - 122,200 262,377 200,000 - 41,200 271,251 - 23,260 - - - 750,000 500,000 - - 450,000 320,000 418,791 200,000 - 122,200 262,377 200,000 - 41,200 271,251 - 23,260 - - - - - - - - - - - - - - - - - - - - - - - 4,663,513 - (1,252,001) 147,867 3,559,079 3,559,079 (iv) Option holdings of key management personnel 2010 Directors of Euroz Limited Ordinary shares P Diamond A McKenzie J Hughes Key management personnel of the consolidated entity Ordinary shares R Caldow G Chessell S Yeo K Paganin (resigned 22 July 2010) D Young O Foster P Rees M Hepburn R Kane A Clayton A Brittain G Allen R Black N McGlew (appointed 1 July 2010) D Woods (appointed 1 July 2010) Balance at Granted as remuner- 1 July 2009 ation Exercised Bought Total not Balance at exercisable at exercisable at 30 June ‘10 30 June ‘10 30 June’10 Total 900,000 900,000 900,000 450,000 282,000 320,000 391,552 202,001 202,200 100,000 122,200 233,000 200,000 - 41,200 180,000 7,554 23,260 5,454,967 - - - - - - - - - - - - - - - - - - - - 100,000 400,000 - 282,000 - - - 2,200 - - - - - - - 7,554 - 791,754 - - - - - - - - - - - - - - - - - - - 900,000 800,000 500,000 900,000 800,000 500,000 450,000 - 320,000 391,552 202,001 200,000 100,000 122,200 233,000 200,000 - 41,200 180,000 - 23,260 450,000 - 320,000 391,552 202,001 200,000 100,000 122,200 233,000 200,000 - 41,200 180,000 - 23,260 4,663,213 4,663,213 - - - - - - - - - - - - - - - - - - - EUROZ LIMITED Annual Report 2011 53 NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2011 The company has applied the option under Corporations Amendments Regulation to transfer key management personnel remuneration disclosures required by AASB 124 paragraphs 25.4 to 25.7.2 to the Remuneration Report in the Directors’ report. Wholly owned group The wholly owned group consists of Euroz Limited and its wholly owned controlled entities, Euroz Securities Limited, Detail Nominees Pty Ltd, Zero Nominees Pty Ltd and Westoz Funds Management Pty Ltd Ownership interests in these controlled entities are set out in Note 29. Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated. Transactions with subsidiaries consists of: (i) Subsidiaries company - Loans advanced by Euroz Limited to subsidiaries - Payments of dividends to Euroz Limited by subsidiaries (ii) Director related entities - A former Director of Euroz Securities Limited has a brother who is a partner in a law ﬁ rm Steinepreis Paganin. The consolidated entity received legal advisory services from Steinepreis Paganin recognised as legal fee expense. (iii) Associated Companies 2011 $ 2010 $ 7,359,828 16,400,000 6,915,909 16,400,000 - 48,530 - Dividends received by Euroz Limited from Associates - Performance fee received by the Euroz Group from Associates - Management fee received by the Euroz Group from Associates 4,376,702 5,859,837 3,115,030 834,924 6,939,430 3,162,643 Ownership interests in related parties Interests held in the following classes of related parties are set out in the following notes: (a) controlled entities - Note 29 Other transactions with directors and speciﬁ ed executives During the year ended 30 June 2011 the Directors and key management personnel transacted share business through Euroz Securities Limited on normal terms and conditions. Aggregate amounts of the above transactions with Directors and key management personnel of the consolidated group: Amounts recognised as revenue Brokerage earned by Euroz Securities Limited on Directors’ accounts Note 29. Investments in controlled entities Name of entity Country of incorporation Class of shares Euroz Securities Limited Detail Nominees Pty Limited Zero Nominees Pty Limited Westoz Funds Management Pty Ltd Australia Australia Australia Australia Ordinary Ordinary Ordinary Ordinary The ultimate parent entity in the wholly owned group is Euroz Limited. 2011 $ 2010 $ 73,481 67,671 Equity holding 2011 % 100 100 100 100 2010 % 100 100 100 100 Cost of parent entity’s investment 2011 $ 25,000,000 - - 1,450,000 2010 $ 25,000,000 - - 1,450,000 54 EUROZ LIMITED Annual Report 2011 NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2011 Note 30. Events occurring after reporting date The directors are not aware of any other matter or circumstance subsequent to 30 June 2010 that has signiﬁ cantly affected, or may signiﬁ cantly affect: (a) the consolidated entity’s operations in future ﬁ nancial years: or (b) the results of those operations in future ﬁ nancial years: or (c) the consolidated entity’s state of affairs in future ﬁ nancial years. Note 31. Reconciliation of cash ﬂ ows from operating activities Proﬁ t for the period Adjustments for: Depreciation and amortisation Share of net proﬁ ts of associate Dividend received from associate Realised gain in associates Fair value movement on inventories Fair value movement on derivatives Changes in assets and liabilities Decrease in trade debtors and other receivables Decrease/(increase) in prepayments Decrease in accrued income (Increase)/decrease in inventories Increase in long term deposit Decrease in deferred tax asset Decrease in trade creditors and other liabilities Increase/(decrease) in provision for income taxes payable Decrease in provision for deferred tax liabilities Increase in provisions Net cash from operating activities Note 32. Credit facilities Unrestricted access was available at balance date to the following lines of credit: Credit standby arrangements Bank overdrafts Unused at balance date Bank overdrafts 2011 $ 26,566,040 2010 $ 26,331,750 1,145,045 (7,794,638) - (944,127) - - 185,064 457,282 335,205 (10,069,163) 124,053 (351,592) (1,457,729) (86,746) (1,130,071) 37,411 - (253,131) (310,020) 480,651 422,104 75,970 13,977,035 111,702 149,993 (510,139) (5,000,000) 67,400 (12,581,275) 1,936,025 (72,493) 41,585 16,750,759 15,132,432 2011 $ 2010 $ 20,000,000 20,000,000 20,000,000 20,000,000 Euroz Securities Ltd, a wholly owned subsidiary of Euroz Limited, has a bank overdraft facility as at 30 June 2011 for up to $10,000,000. The facility may be drawn down at any time, is repayable on demand and interest is incurred at the standard variable rate. The facility is secured by a ﬁ xed and ﬂ oating charge over the assets of Euroz Limited and Euroz Securities Limited. Euroz Limited has a bank overdraft facility as at 30 June 2011 for up to $10,000,000. The facility may be drawn down at any time, is repayable on demand and interest is incurred at the standard variable rate. The facility is secured by a ﬁ xed and ﬂ oating charge over the assets of Euroz Limited. EUROZ LIMITED Annual Report 2011 55 NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2011 Note 33. Earnings per share Basic earnings per share Diluted earnings per share Weighted average number of shares used as the denominator Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share. 2011 ¢ 19.38 16.66 2010 ¢ 20.07 18.49 2011 Number 2010 Number 137,062,530 131,232,079 Weighted average number of ordinary shares and potential ordinary shares used as the denominator in calculating diluted earnings per share. 159,497,978 142,434,415 The proﬁ t after tax ﬁ gures used to calculate the earnings per share for both the basic and diluted calculations was the same as the proﬁ t ﬁ gure from income statement. Note 34. Parent entity disclosures 2011 $ 2010 $ 41,990,525 81,981,042 39,325,967 70,795,039 123,971,567 110,121,006 24,663,701 - 16,355,870 - 24,663,701 16,355,870 87,261,731 15,703,870 79,296,164 19,647,318 (3,843,735) 186,000 (5,364,346) 186,000 99,307,866 93,765,136 21,487,221 - 17,776,852 (2,804,522) 21,487,221 14,972,330 Financial position Assets Current assets Non-current assets Total assets Liabilities Current liabilities Non-current liabilities Total liabilities Equity Issued capital Retained earnings Reserves Asset revaluation reserve Option premium reserve Total equity Financial performance Proﬁ t for the year Other comprehensive income Total comprehensive income Note 35. Company details The registered ofﬁ ce and principal place of business address of the company is: Euroz Limited Level 18 Alluvion 58 Mounts Bay Road PERTH WA 6000 56 EUROZ LIMITED Annual Report 2011 DIRECTORS’ DECLARATION for the year ended 30 June 2011 The Directors declare that: 1. The ﬁ nancial statements, notes and additional disclosures included in the Directors’ report and designated as audited, are in accordance with the Corporations Act 2001 and: (a) comply with Accounting Standards and Corporations Regulations 2001; (b) (c) give a true and fair view of the company’s and consolidated group’s ﬁ nancial position as at 30 June 2011 and of their performance for the year ended on that date; the ﬁ nancial statements are in compliance with International Financial Reporting Standards, as stated in note 1 to the ﬁ nancial statements. 2. The Chief Financial Ofﬁ cer has declared that: (a) the ﬁ nancial records of the company for the ﬁ nancial year have been properly maintained in accordance with section 295A of the Corporations Act 2001; (b) the ﬁ nancial statements and notes for the ﬁ nancial year comply with the Accounting Standards; and (c) the ﬁ nancial statements and notes for the ﬁ nancial year give a true and fair view; 3. In the Directors’ opinion there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable. This declaration is made in accordance with a resolution of the Board of Directors. 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58 EUROZ LIMITED Annual Report 2011 INDEPENDENT AUDIT REPORT To Members Of Euroz Limited (cid:3) (cid:3) (cid:50)(cid:83)(cid:76)(cid:81)(cid:76)(cid:82)(cid:81)(cid:3) (cid:3) (cid:44)(cid:81)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:82)(cid:83)(cid:76)(cid:81)(cid:76)(cid:82)(cid:81)(cid:29)(cid:3) (cid:3) (cid:11)(cid:68)(cid:12)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3) (cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3) (cid:82)(cid:73)(cid:3) (cid:40)(cid:88)(cid:85)(cid:82)(cid:93)(cid:3) (cid:47)(cid:76)(cid:80)(cid:76)(cid:87)(cid:72)(cid:71)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:70)(cid:82)(cid:81)(cid:86)(cid:82)(cid:79)(cid:76)(cid:71)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3) (cid:72)(cid:81)(cid:87)(cid:76)(cid:87)(cid:92)(cid:3) (cid:76)(cid:86)(cid:3) (cid:76)(cid:81)(cid:3) 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(cid:86)(cid:72)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:22)(cid:19)(cid:19)(cid:36)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:36)(cid:70)(cid:87)(cid:3)(cid:21)(cid:19)(cid:19)(cid:20)(cid:17)(cid:3)(cid:3) (cid:3) (cid:3) (cid:51)(cid:46)(cid:41)(cid:3)(cid:48)(cid:36)(cid:38)(cid:46)(cid:3)(cid:9)(cid:3)(cid:38)(cid:50)(cid:3) (cid:3) (cid:3) (cid:54)(cid:44)(cid:48)(cid:50)(cid:49)(cid:3)(cid:41)(cid:40)(cid:53)(cid:48)(cid:36)(cid:49)(cid:44)(cid:54)(cid:3) (cid:51)(cid:36)(cid:53)(cid:55)(cid:49)(cid:40)(cid:53)(cid:3) (cid:3) (cid:20)(cid:24)(cid:3)(cid:36)(cid:56)(cid:42)(cid:56)(cid:54)(cid:55)(cid:3)(cid:21)(cid:19)(cid:20)(cid:20)(cid:3) (cid:58)(cid:40)(cid:54)(cid:55)(cid:3)(cid:51)(cid:40)(cid:53)(cid:55)(cid:43)(cid:15)(cid:3) (cid:58)(cid:40)(cid:54)(cid:55)(cid:40)(cid:53)(cid:49)(cid:3)(cid:36)(cid:56)(cid:54)(cid:55)(cid:53)(cid:36)(cid:47)(cid:44)(cid:36)(cid:3) (cid:3) (cid:3) (cid:3) (cid:3) (cid:3) (cid:3) (cid:25)(cid:28)(cid:3) EUROZ LIMITED Annual Report 2011 59 CORPORATE GOVERNANCE STATEMENT Introduction – the Euroz Group Euroz Limited (“Euroz”) is the listed holding company of the Euroz group of companies (“the Euroz Group”). The Euroz Group consists of Euroz together with its wholly owned subsidiaries Euroz Securities Limited (“Euroz Securities”) and Westoz Funds Management Limited (“Westoz Funds Management”). Euroz Securities conducts a substantial stockbroking and corporate ﬁ nance business which generates the majority of the revenues of the Euroz Group and which employs the majority of staff within the Euroz Group. Revenue generated by Euroz Securities is paid by way of dividends to Euroz. Euroz Securities holds an Australian Financial Services Licence (“AFSL”) and is regulated by the Australian Securities and Investments Commission (“ASIC”) pursuant to the Corporations Act 2001 and the ASIC Market Integrity Rules. Euroz Securities is a Participant of the ASX Group and is regulated pursuant to the Operating Rules of the ASX Group. Westoz Funds Management is a specialist manager of equity funds managing the portfolios of Westoz Investment Company Limited and Ozgrowth Limited which are both listed investment companies. Revenue generated by Westoz Funds Management through management and performance fees is paid by way of dividends to Euroz. Westoz Funds Management also holds an AFSL and its activities are therefore regulated by ASIC pursuant to the Corporations Act. Approach to Corporate Governance Euroz is committed to maintaining a high standard of corporate governance. In this regard, Euroz has adopted the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations with 2010 Amendments (“2010 Principles and Recommendations”). In considering its approach to Corporate Governance in the context of the Revised Principles and Recommendations, Euroz has taken account of the following: • • • Euroz is a holding company and the majority of the activity within the Euroz Group is conducted by its wholly owned subsidiary Euroz Securities which conducts a substantial stockbroking and corporate advisory business. Euroz Securities and Westoz Funds Management are subject to a rigorous regulatory regime (administered by both ASX and ASIC, where applicable) which includes extensive governance, risk management and reporting obligations. Each member of the Board works day to day in the business of the Euroz Group and each member holds a substantial quantity of Euroz shares. • Many staff within the Euroz Group are largely remunerated by commission based payments and many staff hold Euroz shares. In these circumstances, the interests of the Directors and staff of the Euroz Group are closely aligned to the interests of Euroz’s shareholders. • Euroz has a relatively small number of employees and operates from a single location. In these circumstances, Euroz has decided to adopt an owner-manager model (“the Direct Governance Model”) to Corporate Governance. The key features of the Direct Governance Model being that: • • each member of the Board and the senior executives work in an operational capacity in the business of the Euroz Group on a daily basis; Corporate Governance is largely achieved as a result of this close operational involvement rather than via the use of mechanisms and structures which are more suited to different types of businesses including those which have large numbers of employees who operate from various locations; and • many corporate governance related issues are dealt with as part of compliance related activities that the Euroz Group undertakes pursuant to obligations created by the Corporations Act, the ASIC Marker Integrity Rules and the Operating Rules of the ASX Group. More generally, Euroz believes that the Direct Governance Model (as opposed to other corporate governance mechanisms and structures) is best suited to dealing with the various types of risk that are an inherent and unavoidable part of conducting a stockbroking and corporate advisory style business. In accordance with ASX Listing Rule 4.10.3, Euroz provides the following statement regarding the extent to which it has followed the 2010 Principles and Recommendations. 60 EUROZ LIMITED Annual Report 2011 CORPORATE GOVERNANCE STATEMENT PRINCIPLE 1: LAY SOLID FOUNDATIONS FOR MANAGEMENT AND OVERSIGHT Recommendation 1.1: Companies should establish the functions reserved to the Board and those delegated to senior executives and disclose those functions. The Board has adopted a Charter which sets out the role and functions of Board. The Charter is available from Euroz’s website. In accordance with the Direct Governance Model, the members of the Board are also the most senior executives of the Euroz Group and play an integral part in the day-to-day management of the Group’s activities. Accordingly, Euroz does not delegate functions in the manner anticipated by this Recommendation. The roles and responsibilities of the Board are to: • • Oversee control and accountability of the company. Set broad targets, objectives and strategies. • Monitor ﬁ nancial performance. • • • • • • • Assess and review risk exposure and management. Oversee compliance, corporate governance and legal obligations. Approve all major purchases, disposals, acquisitions and issue of new shares. Approve the annual and half-year ﬁ nancial statements. Appoint and remove the Company’s Auditor. Appoint and assess the performance of the Managing Director and members of the senior management team. Report to shareholders. The Directors due to their long association with Euroz, their extensive relevant business experience and the fact that their interests are closely aligned to shareholders’ interests clearly understand what is required of them. Accordingly, Euroz has formed the view that letters of appointment are not required with respect to the Directors. Similarly in the context of the matters referred to above, with respect to senior executives (including the Company Secretary and the Chief Operating Ofﬁ cer/Chief Financial Ofﬁ cer of Euroz Securities), Euroz has formed the view that written position statements are not required at this time. Recommendation 1.2: Companies should disclose the process for evaluating performance of senior executives. The performance of senior executives is reviewed by the Board on an annual basis and also pursuant to the Board’s involvement in the day to day operations of the Euroz Group. The performance of senior executives is assessed against 3 broad criteria: • • • the ﬁ nancial performance of the respective group or department managed by the senior executive (as applicable); the extent to which the senior executive has contributed to the Euroz Group achieving its organisational aims with a particular focus on the maintenance of the commercial reputation of the Euroz Group; and the extent to which the senior executive has personally and each member of staff under his or her control has acted in a manner which is in accordance with Euroz’s compliance related policies and procedures. Each member of the Board assesses other Board members performance against these criteria. The Remuneration Policy set out on pages 6-7 of the Directors Report outlines the methodology used to assess the performance and remuneration of the members of the Board. Recommendation 1.3: Companies should provide the information indicated in the Guide to reporting on Principle 1. This information is set out above. EUROZ LIMITED Annual Report 2011 61 CORPORATE GOVERNANCE STATEMENT PRINCIPLE 2: STRUCTURE THE BOARD TO ADD VALUE Recommendation 2.1: A majority of the Board should be independent Directors. In accordance with the Direct Governance Model, Euroz has elected to not comply with this recommendation with the result being that no Director is an Independent Director. Euroz has made this decision as it has formed the view that in the circumstances set out above, the interests of the Board are so closely aligned with the interests of shareholders that independent Directors are not required to achieve an effective system of corporate governance. More generally, given the specialised nature of Euroz’s business, the fact that a person, generally speaking, may not be a director of more than one ASX Group Participant and the relatively low level of fees paid to non-executive Directors, Euroz has formed the view that it will be difﬁ cult to attract suitable candidates to be non-executive Directors. However, the Board continues to keep this matter under review. Each Director has the right to seek independent professional advice at the Company’s expense for which the prior approval of the Chairman is required and which will be not unreasonably withheld. The skills experience and expertise of each Director is set out at page 14 of the Annual Report. The composition of the Board has recently changed (by the addition of 2 directors) this being the ﬁ rst time that a change in the composition of the Board has occurred since ofﬁ cial quotation of Euroz’s Securities commenced. It is not anticipated that the composition of the Board will change again in the immediate future. Should it become apparent that it is likely that new members will need to be appointed to the Board, Euroz will develop a policy about the mix of skills including diversity related issues that should be taken account of in reviewing potential candidates to be a member of the Board. Recommendation 2.2: The chair should be an independent director. In accordance with the Direct Governance Model, Euroz has elected to not comply with this recommendation. Euroz has made this decision as it has formed the view that in the circumstances set out above, the interests of the Board and its Chair are so closely aligned with the interests of shareholders that an independent director as Chair is not required to achieve an effective system of corporate governance. Recommendation 2.3: The roles of chair and chief executive ofﬁ cer should not be exercised by the same individual. Euroz, in its role as a holding company, does not have a Chief Executive Ofﬁ cer but an analogous role is undertaken in the form of the Managing Director with respect to both Euroz Limited and Euroz Securities Limited. The role of the Chair and the Managing Director are not exercised by the same individual. Recommendation 2.4: The Board should establish a nomination committee. Given that the composition of the Board is unlikely to vary in the near future and the signiﬁ cant level of employees (of the Euroz Group) ownership, Euroz has formed the view that a nomination committee is not necessary for Euroz to achieve an effective system of corporate governance. Should it become necessary, Euroz will consider putting a Board selection process in place that is in accordance with this Recommendation but which reﬂ ects the particular characteristics of Euroz’s business. Recommendation 2.5: Companies should disclose the process for evaluating the performance of the Board, its committees and individual Directors. A review of the performance of the Board and its Directors is undertaken by each Director with respect to each other Director and the performance of the Board itself on an annual basis and also as part of the day to day operations of the Euroz Group in accordance with the matters set out with respect to Recommendation 1.2. The Remuneration Policy set out on pages 16-18 of the Directors Report outlines the methodology used to assess the performance and remuneration of the members of the Board. An outcome and an advantage of the Direct Governance Model is that the Board has real time access to information regarding all aspects of Euroz’s operations and has direct access, at all times, to the Company Secretary. The Directors have extensive experience with respect to all aspects of the operations of the Euroz Group. In this regard, the section “Information on Directors” set out on page 14 of the Directors Report outlines the experience and qualiﬁ cations of the Directors. The Directors, pursuant to obligations imposed by the Corporations Act the ASIC Market Integrity Rules and the Operating Rules of the ASX Group and generally, undertake a substantial level of continuing education and therefore continue to be fully aware of developments with respect to the industry and commercial environment in which Euroz operates. 62 EUROZ LIMITED Annual Report 2011 CORPORATE GOVERNANCE STATEMENT Recommendation 2.6: Companies should provide the information indicated in the Guide to reporting on Principle 2. This information is set out above. PRINCIPLE 3: PROMOTE ETHICAL AND RESPONSIBLE DECISION-MAKING Recommendation 3.1: Companies should establish a code of conduct and disclose the code or a summary of the code as to: • • the practices necessary to maintain conﬁ dence in the company’s integrity; the practices necessary to take into account their legal obligations and the reasonable expectations of their stakeholders; and the responsibility and accountability of individuals for reporting and investigating reports of unethical practices. • In its role as holding company and given the particular circumstances of the Euroz Group, Euroz does not have a code of conduct of the type anticipated by this recommendation. However, Euroz Securities and Westoz Funds Management, in the context of the onerous obligations imposed upon them by the Corporations Act, the ASIC Market Integrity Rules and the ASX Operating Rules (as applicable) have detailed written compliance policies and procedures in place that include a code of conduct. These compliance policies and procedures including the code of conduct apply to every person who works in the Euroz Group. Due to their length it is not practical to make these compliance related policies and procedures available on Euroz’s website. More generally, these policies and procedures contain intellectual property of the Euroz Group, the conﬁ dentiality of which the Euroz Group wishes to maintain. The Euroz Group is committed to all Directors and employees maintaining high standards of integrity and to ensuring that their activities are in compliance with the letter and spirit of both the law and Euroz Group policies. In this regard, each Staff member is issued with the Company’s Policies and Procedures Manual at the commencement of their employment with the Euroz Group Euroz conducts a substantial level of training regarding the operation of these policies and procedures. The Group provides a number of full time resources for the purpose of monitoring compliance with its policies and procedures. These resources report directly to the Board for matters of compliance, governance and internal controls. Recommendation 3.2: Companies should establish a policy concerning diversity and disclose the policy or a summary of that policy. The policy should include requirements for the board to establish measurable objectives for achieving gender diversity for the board to assess annually both the objectives and progress is achieving them. Euroz has recently put in place a Diversity Policy that applies to each company within the Euroz Group. That policy is available from Euroz’s website. In accordance with the matters set out in the Diversity Policy, Euroz, given the small size and relatively stable nature of its workforce has formed the view that it would not be appropriate or practical to, at this time, establish measurable objectives for achieving gender diversity. The Board will review this position, at least, annually. Recommendation 3.3: Companies should disclose in each annual report the measurable objectives for achieving gender diversity set by the Board in accordance with the diversity policy and progress towards achieving them. In accordance with the reasons set out above with respect to recommendation 3.2 Euroz does not, at this time, intend to comply with this recommendation. However, this position will be reviewed, at least annually. Recommendation 3.4: Companies should disclose in each annual report the proportion of women employees in the whole organisation, women in senior executive positions and women on the Board. Given the relatively small size of the Euroz Group’s workforce and the stable nature of that workforce Euroz does not, at this time, intend to disclose this information. The Euroz has formed this view as given the particular characteristics of Euroz’s workforce, such disclosure would be statistically meaningless. Euroz will review this position, at least, on an annual basis. Recommendation 3.4: companies should provide the information indicated in the Guide to reporting on Principle 3 This information is set out above. PRINCIPLE 4: SAFEGUARD INTEGRITY IN FINANCIAL REPORTING Recommendation 4.1: the Board should establish an audit committee. The Board has established an audit committee consisting of Mr Diamond and Mr McKenzie. EUROZ LIMITED Annual Report 2011 63 CORPORATE GOVERNANCE STATEMENT Recommendation 4.2: The audit committee should be structured so that it: • • • • consists only of non-executive Directors; consists of a majority of independent Directors; is chaired by an independent chair, who is not chair of the Board; and has at least 2 members. Given the size and composition of the Board it Euroz considers that it is not possible for Euroz to comply with this recommendation. However, in accordance with the matter set out above, the interests of the members of the audit committee are closely aligned with the interests of shareholders in circumstances where the members of the audit committee have sufﬁ cient skills and experience such that they are properly able to discharge this function. Recommendation 4.3: the audit committee should have a formal charter A Charter has been adopted which sets out the role and functions of Audit Committee. The Charter is available from Euroz’s website. Further to the Charter, the Audit Committee meets at least twice a year. Its key roles and responsibilities are to: Review the Company’s accounting policies. Review the content of ﬁ nancial statements. Review the scope of the external audit, its effectiveness and independence of the external audit. Ensure accounting records are maintained in accordance with statutory and accounting standard requirements. • • • • • Monitor systems used to ensure ﬁ nancial and other information provided is reliable, accurate and timely. Review the audit process with the external auditors to ensure full and frank discussion of audit issues. • Present half and full year ﬁ nancial statements to the Board. • A Partner of the Euroz’s auditor, PKF Mack & Co, and senior management of the Euroz Group may also attend meetings of the Audit Committee by invitation. Given the size and nature of Euroz’s business and in the context of the Direct Governance Model, Euroz has formed the view that it is not necessary for Euroz to have an internal audit function so as to achieve its corporate governance objectives. External Auditors are selected by the Board in consultation with relevant Euroz staff memebers as the Board see ﬁ t. The rotation of engagement Partners is in accordance with regulatory requirements and is on a 5 year within a 7 year basis. Recommendation 4.4: Companies should provide the information indicated in the Guide to reporting on Principle 4. This information is set out above. PRINCIPLE 5: MAKE TIMELY AND BALANCED DISCLOSURE Recommendation 5.1: Companies should establish written policies designed to ensure compliance with ASX Listing Rule disclosure requirements and to ensure accountability at senior executive level for that compliance and disclose those policies or a summary of those policies. Given the nature of its business, Euroz, its Directors and staff are fully aware of ASX Listing Rule disclosure requirements. In the context of the Direct Governance Model and given the close alignment between the interests of shareholders, the Directors and staff of the Euroz Group, Euroz has formed the view that it does not require written policies with respect to this issue. In this regard, Euroz views compliance with this obligation as being the collective responsibility of the Directors and of the senior executives of the Euroz Group. The Company Secretary has been appointed as the person responsible for communications with the Australian Securities Exchange. This role includes responsibility for ensuring compliance with the continuous disclosure requirements of the ASX Listing Rules and overseeing and co-ordinating information disclosure to the Australian Securities Exchange, analysts, brokers, shareholders, the media and the public. Recommendation 5.2: Companies should provide the information indicated in the Guide to reporting on Principle 5. This information is set out above. 64 EUROZ LIMITED Annual Report 2011 CORPORATE GOVERNANCE STATEMENT PRINCIPLE 6: RESPECT THE RIGHTS OF SHAREHOLDERS Recommendation 6.1: Companies should design a communications policy for promoting effective communication with shareholders and encouraging their participation at general meetings and disclose their policy or a summary of that policy. Euroz is committed to keeping shareholders fully informed of signiﬁ cant developments. In addition to the public announcement of its ﬁ nancial information and disclosure of signiﬁ cant matters pursuant to the ASX Listing Rules, the Company provides the opportunity for shareholders to question the Board and senior executives about its activities at the Company’s annual general meeting. The Company’s auditor, PKF Mack & Co, attends each annual general meeting and is available to answer questions from shareholders about the conduct of the audit and the preparation and content of the auditor’s report. Euroz’s website provides detailed information regarding the operations of the Euroz Group including copies of all information that has been released to the market. Given the relatively small size of Euroz’s shareholder base, Euroz has formed the view that it does not need to put a written communications policy in place at this time. Recommendation 6.2: Companies should provide the information indicated in the Guide to reporting on Principle 6. This information is set out above. PRINCIPLE 7: RECOGNISE AND MANAGE RISK Recommendation 7.1: Companies should establish policies for the oversight and management of business risks and disclose a summary of those policies. Euroz undertakes risk management in the context of the activities undertaken by the Euroz Group. The Euroz Group is subject to extensive risk management obligations pursuant to the Corporations Act, the ASIC Market Integrity Rules and the Operating Rules of the ASX Group and written policies and procedures are in place so as to ensure compliance with these obligations. Risk management is achieved by way of the implementation of these policies and procedures in the context of the day to day involvement of the Board in the business of the Euroz Group pursuant to the Direct Governance Model. In particular, the ﬁ nancial position of Euroz and matters of risk are considered by the Board on a daily basis. The main area of exposure for Euroz is failure of trade settlements by clients and counter-parties in the context of a third party clearing arrangement that has been entered into by Euroz Securities. Settlements and exposure are monitored on a daily basis in the context of that third party clearing arrangement. Investments made by Euroz are undertaken pursuant to criteria determined by the Board. Euroz’s investments are monitored by Board members on a daily basis. The Board is responsible for ensuring that controls and procedures to identify, analyse, assess, prioritise, monitor and manage risk are in place, are being maintained and are being adhered to. For the reasons set out above, Euroz has decided to not make the relevant policies and procedures available on its website. Recommendation 7.2: the Board should require management to design and implement the risk management and internal control system to manage the company’s material business risks and report to it on whether those risks are being managed effectively. The Board should disclose that management has reported to it as to the effectiveness of the company’s management of its material business risks. In accordance with the above, risk management is dealt with pursuant to the Direct Governance Model and accordingly this recommendation is not appropriate for Euroz. More generally, the Board performs an internal audit function in circumstances where the interests of the Board are closely aligned with the interests of shareholders. Euroz engages external assistance with respect to this issue, as required. Euroz has formed the view that, in all of the circumstances set out above, it is not necessary for the Board to convene a risk management committee. EUROZ LIMITED Annual Report 2011 65 CORPORATE GOVERNANCE STATEMENT Recommendation 7.3: The Board should disclose whether it has received assurance from the chief executive ofﬁ cer (or equivalent) and the chief ﬁ nancial ofﬁ cer (or equivalent) that the declaration provided in accordance with section 295A of the Corporations Act is founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to ﬁ nancial reporting risks. Annually, the Chief Financial Ofﬁ cer states in writing to the Board that: • • The statement given in accordance with best practice recommendation 4.1 (the integrity of ﬁ nancial statements) is founded on a sound system of risk management and internal compliance and control which implements the policies adopted by the Board. The company’s risk management and internal compliance and control system is operating efﬁ ciently and effectively in all material respects. Recommendation 7.4: Companies should provide the information indicated in the Guide to reporting on Principle 7. This information is set out above. PRINCIPLE 8: REMUNERATE FAIRLY AND RESPONSIBLY Recommendation 8.1: The Board should establish a remuneration committee. Euroz has formed the view that, given the relatively small size of the Board and the close alignment between the interests of Board members and the interests of shareholders, a remuneration committee is not required. Instead, the Board performs the functions that would otherwise be allocated to a remuneration committee. In this regard, the Board convenes separately as a remuneration committee. In performing the functions that would be allocated to the remuneration committee the Board undertakes its functions according to the principles set out below. The objective of Euroz’s remuneration framework is to ensure reward for performance is competitive and appropriate to the results delivered. The framework aligns executive reward with the creation of value for shareholders, and conforms to market best practice. The remuneration committee ensures that executive remuneration satisﬁ es the following key criteria: • • • • • Competitiveness and reasonableness. Acceptability to shareholders. Performance linked. Transparency. Capital management. Euroz has structured an executive remuneration framework that is market competitive and complimentary to the reward strategy of the organisation. In accordance with the above, the remuneration committee has decided that there will be no equity-based remuneration paid to Directors or staff of the Euroz Group. Detailed information regarding the remuneration paid to Directors and senior executives of the Euroz Group is set out at pages 8-12 of this report. Recommendation 8.2: Companies should clearly distinguish the structure of non-executive Directors’ remuneration from that of executive Directors and senior executives. Euroz does not have any non-executive Directors. The remuneration structure adopted by the Euroz Group is in accordance with the mechanisms usually adopted within the stockbroking/ﬁ nancial advisory industries and is appropriate to Euroz’s circumstances and goals. Detailed information regarding both the remuneration paid to Directors and Staff of the Euroz Group and the structure that underlies remuneration payments is set out at pages 8-12. Recommendation 8.3: Companies should provide the information indicated in the Guide to reporting on Principle 8. This information is set out above. 66 EUROZ LIMITED Annual Report 2011 SHAREHOLDER INFORMATION as at 30 September 2011 DISTRIBUTION OF SHAREHOLDERS Size of Holdings 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 - 9,999,999,999 Rounding Total Unmarketable Parcels Total Holders Units 365 760 435 773 119 0 2,452 179,836 2,246,751 3,459,087 23,129,017 114,560,636 143,575,327 Issued Capital (%) 0.13 1.56 2.41 16.11 79.79 100 Minimum $ 500.00 parcel at $ 1.32 per unit Minimum Parcel Size 379 Holders 167 Units 33638 SHAREHOLDERS - TOP 20 Rank Name 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. ZERO NOMINEES PTY LTD NAVIGATOR AUSTRALIA LTD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED ICON HOLDINGS PTY LTD JP MORGAN NOMINEES AUSTRALIA LIMITED ICE COLD INVESTMENTS PTY LTD ICE COLD INVESTMENTS PTY LTD MR A. W. MCKENZIE + MRS C. P. MCKENZIE YANDAL INVESTMENTS PTY LIMITED ICE COLD INVESTMENTS PTY LTD AUSTRALIAN EXECUTOR TRUSTEES LIMITED WESTRADE RESOURCES PTY LTD BNM HOLDINGS PTY LTD BNM HOLDINGS PTY LTD OSSON PTY LTD TPIC PTY LTD ICON HOLDINGS PTY LTD NATIONAL NOMINEES LIMITED ONYX (WA) PTY LTD CITICORP NOMINEES PTY LIMITED TOTAL Units 43,620,721 17,616,975 4,660,123 3,500,000 3,364,990 2,500,000 2,420,000 2,071,500 1,530,000 1,500,000 1,299,868 1,163,200 1,000,000 1,000,000 1,000,000 1,000,000 990,000 831,061 770,000 757,469 92,595,907 % 30.38 12.27 3.25 2.44 2.34 1.74 1.69 1.44 1.07 1.04 0.91 0.81 0.70 0.70 0.70 0.70 0.69 0.58 0.54 0.53 64.49 EUROZ LIMITED Annual Report 2011 67 EUROZ SECURITIES LIMITED CONTACT DETAILS Institutional Dealing Andrew McKenzie Ben Laird Jay Hughes Jonathan van Hazel Peter Diamond Peter Schwarzbach Rob Black Russell Kane Tim Bunney Corporate Austen Fresson Brian Beresford Briohny McManus Douglas Young Mark Laybourn Maurice Argento Nathan Ling Nick McGlew Sarah Fisher Tamara Stampﬂ i Trigg Mickle Equities Research Andrew Clayton Claire O’Brien Gavin Allen Greg Chessell Jon Bishop Kristan Harvey Oliver Foster Richard Hamersley Serena Anderson Retail Dealing Ben Statham Brett Stapleton Cameron Murray Chris Webster Christian Zerovich Giles McCaw James Mackie Joel Pember Keenan Maes Kyle Hookey Leigh Travers Lucas Robinson Matt Swinney Matt Williamson Nicholas Gorton Phillip Cosh Richard Caldow Richard Gardner Ryan Stewart Simon Yeo Sian Hepburn Stephen Grove Tim Bennett Tom Ruello Operations Anthony Brittain Adelaide de Vis Alison Wreford Anthony Hewett Ayesha Smith Bridget Watkins Catherine Horton Chiara Tranchita Dolly Lim Donna McKay Emma Whitehurst Frances Sumich Tania Castlehow Fax +61 8 9488 1478 Managing Director Institutional Advisor Institutional Advisor Institutional Advisor Executive Chairman Institutional Advisor Head of Institutional Dealing Institutional Advisor Dealers Assistant Fax +61 8 9488 1458 Corporate Finance Executive Corporate Finance Executive Corporate Finance Executive Head of Corporate Finance Corporate Finance Executive Corporate Finance Executive Corporate Finance Executive Corporate Finance Executive Senior Executive Assistant Executive Assistant Executive Assistant Fax +61 8 9488 1479 Resources Analyst Publications Co-Ordinator Industrials Analyst Head of Research Resources Analyst Resources Associate Analyst Resources Analyst Industrials Analyst Publications Junior Fax +61 8 9488 1477 Equities Advisor Equities Advisor Equities Advisor Equities Advisor Equities Advisor Equities Advisor Equities Advisor Equities Advisor Dealers Assistant Dealers Assistant Equities Advisor Equities Advisor Equities Advisor Equities Advisor Equities Advisor Equities Advisor Equities Advisor Trainee Dealer Equities Advisor Head of Retail Dealing Dealers Assistant Equities Advisor Equities Advisor Dealers Assistant Fax +61 8 9488 1477 Chief Operating and Financial Ofﬁ cer Compliance Assistant New Accounts Ofﬁ cer Company Secretary/ Head of Risk Mgt. Assistant Accountant New Accounts Assistant Settlements/Nominees Ofﬁ ce Assistant Financial Controller Reception Settlements/Nominees Head of Settlements Bookings Westoz Funds Management Ltd Phil Rees Dermot Woods Fax +61 8 9321 8288 Fund Manager Fund Manager 68 EUROZ LIMITED Annual Report 2011 Telephone +61 8 9488 1407 +61 8 9488 1429 +61 8 9488 1406 +61 8 9488 1443 +61 8 9488 1405 +61 8 9488 1492 +61 8 9488 1423 +61 8 9488 1426 +61 8 9488 1461 Telephone +61 8 9488 1475 +61 8 9488 1493 +61 8 9488 1437 +61 8 9488 1434 +61 8 9488 1480 +61 8 9488 1494 +61 8 9488 1472 +61 8 9488 1460 +61 8 9488 1421 +61 8 9488 1469 +61 8 9488 1421 Telephone +61 8 9488 1427 +61 8 9488 1411 +61 8 9488 1413 +61 8 9488 1409 +61 8 9488 1481 +61 8 9488 1463 +61 8 9488 1431 +61 8 9488 1414 +61 8 9488 1421 Telephone +61 8 9488 1417 +61 8 9488 1435 +61 8 9488 1440 +61 8 9488 1412 +61 8 9488 1436 +61 8 9488 1462 +61 8 9488 1416 +61 8 9488 1476 +61 8 9488 1470 +61 8 9488 1419 +61 8 9488 1482 +61 8 9488 1424 +61 8 9488 1445 +61 8 9488 1466 +61 8 9488 1473 +61 8 9488 1442 +61 8 9488 1403 +61 8 9488 1444 +61 8 9488 1441 +61 8 9488 1404 +61 8 9488 1447 +61 8 9488 1410 +61 8 9488 1432 +61 8 9488 1420 Telephone +61 8 9488 1401 +61 8 9488 1471 +61 8 9488 1402 +61 8 9488 1428 +61 8 9488 1467 +61 8 9488 1433 +61 8 9488 1446 +61 8 9488 1474 +61 8 9488 1415 +61 8 9488 1400 +61 8 9488 1465 +61 8 9488 1439 +61 8 9488 1425 Telephone +61 8 9321 7015 +61 8 9321 7023 Email amckenzie@euroz.com.au blaird@euroz.com.au jhughes@euroz.com.au jvanhazel@euroz.com.au pdiamond@euroz.com.au pschwarzbach@euroz.com.au rblack@euroz.com.au rkane@euroz.com.au tbunney@euroz.com.au Email afresson@euroz.com.au bberesford@euroz.com.au bmcmanus@euroz.com.au dyoung@euroz.com.au mlaybourn@euroz.com.au margento@euroz.com.au nling@euroz.com.au nmcglew@euroz.com.au sﬁ sher@euroz.com.au tstampﬂ i@euroz.com.au tmickle@euroz.com.au Email aclayton@euroz.com.au cobrien@euroz.com.au gallen@euroz.com.au gchessell@euroz.com.au jbishop@euroz.com.au kharvey@euroz.com.au ofoster@euroz.com.au rhamersley@euroz.com.au sanderson@euroz.com.au Email bstatham@euroz.com.au bstapleton@euroz.com.au cmurray@euroz.com.au cwebster@euroz.com.au czerovich@euroz.com.au gmccaw@euroz.com.au jmackie@euroz.com.au jpember@euroz.com.au kmaes@euroz.com.au khookey@euroz.com.au ltravers@euroz.com.au lrobinson@euroz.com.au mswinney@euroz.com.au mwilliamson@euroz.com.au ngorton@euroz.com.au pcosh@euroz.com.au rcaldow@euroz.com.au rgardner@euroz.com.au rstewart@euroz.com.au syeo@euroz.com.au shepburn@euroz.com.au sgrove@euroz.com.au tbennett@euroz.com.au truello@euroz.com.au Email abrittain@euroz.com.au adevis@euroz.com.au awreford@euroz.com.au ahewett@euroz.com.au aysmith@euroz.com.au bwatkins@euroz.com.au chorton@euroz.com.au ctranchita@euroz.com.au dlim@euroz.com.au reception@euroz.com.au ewhitehurst@euroz.com.au fsumich@euroz.com.au tcastlehow@euroz.com.au Email prees@westozfunds.com.au dwoods@westozfunds.com.au Level 18 Alluvion Level 18 Alluvion 58 Mounts Bay Rd 58 Mounts Bay Rd Perth Western Australia 6000 Perth Western Australia 6000 T +61 8 9488 1400 T +61 8 9488 1400 F +61 8 9488 1477 F +61 8 9488 1477 www.euroz.com.au www.euroz.com.au

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