Euroz Limited
Annual Report 2012

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n g i s e D & n o i t a c i n u m m o C t h g i s n I A N N U A L R E P O R T 2 0 1 2 C o n t e n t s Chairman’s Report Managing Director’s Report Euroz Securities Limited Directors’ Profiles Euroz Securities Limited Operating Divisions Westoz Funds Management Euroz Group Community Activities Financial Report 2012 Directors’ Report Auditor’s Independence Declaration Corporate Governance Statement 2 4 6 10 11 12 13 14 25 26 Consolidated Income Statement 33 Consolidated Statement of Comprehensive Income 34 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 Shareholder Information Euroz Securities Limited Contact Details 35 36 37 39 67 68 70 71 C o r p o r a t e D i r e c t o r y Euroz Limited ABN 53 000 364 465 Directors Peter Diamond Executive Chairman Andrew McKenzie Managing Director Jay Hughes Executive Director Doug Young Executive Director Greg Chessell Executive Director Company Secretary Anthony Hewett Principal registered office and place of business Euroz Limited ABN 53 000 364 465 Level 18 Alluvion 58 Mounts Bay Rd Perth Western Australia 6000 Telephone: +61 8 9488 1400 Facsimile: +61 8 9488 1477 Email: Website: info@euroz.com.au 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 3 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). Website Address www.euroz.com.au L o c a l K n o w l e d g e G l o b a l D i s t r i b u t i o n We are a focused, specialist fi na nc ia l se r vice s company w ith a consi ste nt t ra c k record of strong shareholder ret ur ns. Euroz Limited 1 C h a i r m a n ’s R e p o r t The Directors of Euroz Limited are pleased to announce a pre-tax profit of $16,882,373 (2011: $34,409,119) and a net profit after tax of $11,760,189 (2011: $26,566,040). This profit equates to earnings per share for the financial year to 30 June 2012 on a normalised basis of 7.3 cents. The Directors have declared a final dividend of 6.5 cents per share (fully franked) in addition to the interim dividend of 1.5 cents per share fully franked. Last year’s result was achieved in particularly challenging market conditions. Turbulence in financial markets around the world has affected the trading and business environment that we operate in, and we expect these conditions to continue in the near future. Due to challenging market conditions the performance from Westoz Funds Management in terms of returns for investors was down from the previous year. Funds under management as at 30 June 2012 were $257m. The gross investment return for the year was minus 5.1% for Westoz Investment Company Limited and 1.7% 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 benefits 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 $57.5m in Westoz Investment Company Limited and Ozgrowth Limited. Upon payment of the final dividend of the year ended 30 June 2012, a total of $142m of fully franked dividends have been paid to our shareholders over the last twelve years. The Directors believe our long term future remains in focusing on West Australian based initiatives and that from time to time conditions in our market can be very challenging. In acknowledging that we are still in a difficult market, we remain positive that our 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 significant factor in our continued profitability. Our employees’ motivation is also supported by their strong share ownership in the company which is currently around 45% 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 profitably, has no debt and with a strong balance sheet, is optimistic that even in these challenging markets we look forward to the opportunities that our strong base and motivated employees can deliver us in the future. Peter Diamond Executive Chairman 2 Annual Report 2012 Euroz Limited 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 Jun-12 1H Profit Before Tax 2H Profit Before Tax Net Profit After Tax Euroz Limited Dividend History Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 1H Dividend Per Share 2H Dividend Per Share Euroz Limited NTA Per Share Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Cents per share Westoz Funds Management Pty Ltd Funds Under Management 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 n o i l l i m $ 60 50 40 30 20 10 0 30 25 20 15 10 5 0 100 80 60 40 20 0 400 350 300 250 200 150 100 50 0 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 NTA after unrealised Euroz Limited 3 M a n a g i n g D i r e c t o r ’s R e p o r t to come Euroz Limited remains true to it’s original strategy of being a Western Australian focused company that provides specialised stockbroking, corporate finance and funds management services. We very much appreciate our staff ’s loyalty and in turn they remain our greatest asset. We remain firmly committed to making Euroz an enjoyable, secure and rewarding place to work. The past year continues the five year trend of extremely volatile trading conditions since the GFC. Like many businesses we have experienced solid trading months which are often then undermined by any combination of uncertainties. These may take the form of European concerns, weaker Chinese growth and/or alternating commodity price movements. Stable market conditions give traditional investors the confidence to invest and this continuing volatility is clearly affecting this decision making. This lack of investor confidence is demonstrated through lower overall daily ASX turnover for all participants in the past year. I commented in last year’s Annual Report that we were seeing unprecedented competition from both small and larger players. We can now report that our competition has been severely impacted by these difficult trading conditions and I believe that over time our relative market position and profitability will be seen to have improved. Given this backdrop and the increasingly competitive landscape it has created, we are extremely pleased with our overall results for the financial year. Our entire team has worked hard to produce profits and dividends that, whilst down on previous periods, are significantly better than almost all of our competitors, either large or small. Our Group net profit after tax of $11,760,189 can therefore be regarded as one of our best ever financial results. Major financial highlights for the past financial year include: • • • • Normalized net profit after tax of $10,447,425 Payment of 8 cents in fully franked dividends NTA steady at 84 cents per share Cash and investments of $118m at 30 June 2012 As in previous downturns we have resisted the industry practice of shedding staff but we have made some modest cost adjustments to our businesses. Euroz Limited Euroz Limited(ASX code: EZL) is the listed holding company for all our businesses and is the major investor in our two Listed Investment Companies (LIC’s): Westoz Investment Company Limited (ASX code: WIC) and Ozgrowth Limited (ASX code: OZG). As at 30 June 2012 we have invested $57.5m in these two companies which have a look through NTA of $67.5m. During the past year we have continued to increase our ownership in these two companies through a combination of on- market buying and their own respective ongoing buy backs. As we consolidate their respective earnings into our consolidated Group results, these investments will have an increasing effect on our reported earnings. Euroz Securities Euroz Securities is our stockbroking business that provides highly specialised research, dealing and corporate finance services to our established retail, institutional and corporate client base. The stock picking and deal flow from these activities provide leverage to our entire Group. We continue to question and refine our basic strategy to look to improve our share of the small-mid cap market. It is worth commenting on the increasing emergence of High Frequency Trading (HFT ) and unregulated “dark pool” trading. These are significant issues that will continue to affect the integrity and confidence of our markets and they require urgent attention from our regulators. The past year has seen lower ASX brokerage revenues but our corporate finance revenues have increased on the previous year. We are particularly pleased with a major increase in our merger and acquisition and advisory revenues. 4 Annual Report 2012 euroz group organisational Westoz Funds Management chart to come Westoz Funds Management is responsible for managing the funds of Westoz Investment Company Limited and Ozgrowth Limited. As at 30 June 2012 these funds under management totalled $257 million. Whilst both of these funds are absolute return funds and our focus remains firmly on absolute profitability, we are pleased that both funds outperformed the ASX All Ordinaries Accumulation Index during this difficult investing year. We will continue to focus on building reliable dividend streams for shareholders to better align their share prices with their LIC peers. Westoz Investment Company Limited reported investment returns for the past year of minus 5.1% and paid fully franked dividends of 4 cents for the period. In Summary We are extremely pleased with the financial results of the past year and we are constantly improving our major market position in Western Australian capital markets. We continue to invest capital and resources in all of our businesses and believe that when markets inevitably improve we will reap significant rewards for all our shareholders. Our strong balance sheet continues to differentiate us from our competitors and gives our Director’s and staff the confidence to pursue our well defined strategies. I would like to thank all of our loyal clients, staff and shareholders for their respective contributions. Ozgrowth Limited reported investment returns of 1.7% and a fully franked dividend of 1 cent per share for the period. Andrew McKenzie Managing Director We are pleased to note that both funds have paid $69 million in fully franked dividends since inception. Euroz Group Organisational chart 35.25% Equity Stake 22.77% Equity Stake 100% 100% Euroz Limited 5 E u r o z S e c u r i t i e s L i m i t e d D i r e c t o r s ’ P r o f i l e s 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 Certified Practicing Accountants Australia (CPA). Jay Hughes Executive Director Jay has worked in stockbroking since 1986, starting his career on the trading floor. He is an Institutional Dealer specialising in promoting Australian stocks to international clients. Jay holds a Graduate Diploma in Applied Finance and Investment from Financial Services Institute of Australasia (FINSIA). He was recognised as an affiliate of ASX in December 2000 and was admitted in May 2004 as a Practitioner Member (Master Stockbroking) of the Stockbrokers Association of Australia (SAA). Andrew Mckenzie Managing Director Andrew holds a Bachelor of Economics (B. Econ), is an Associate of FINSIA and a Fellow of the Australian Institute of Company Directors (FAICD). Andrew has worked in the stockbroking industry since 1991. Douglas Young Executive Director Doug is Head of Corporate Finance. He has over 25 years of corporate finance experience, covering mergers and acquisitions, debt and equity raisings in domestic and international financial markets, corporate restructuring and other corporate finance 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 Certified 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 qualification. 6 Annual Report 2012 Andrew Clayton 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). Anthony Brittain Executive Director Anthony is the Chief Operating and Financial Officer. Prior to 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 Certified 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 Fresson Executive Director 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. Euroz Limited 7 E u r o z S e c u r i t i e s L i m i t e d D i r e c t o r s ’ P r o f i l e s Brian Beresford Executive Director Prior to joining Euroz, Brian was a corporate finance 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). Gavin Allen Executive Director Prior to joining Euroz Securities, Gavin was a senior manager in the Corporate Finance division of a major accounting firm, specialising in the financial 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 James has been working in the stockbroking industry since 1998. 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. 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 in Applied Finance and Investment from FINSIA. Lucas Robinson Executive Director Lucas has been advising in the stockbroking industry since 1998. He holds a Bachelor of Commerce (UWA) with a double major in Finance and Marketing with a minor in Business Law. NB. Lucas Robinson was appointed as Executive Directors of Euroz Securities Limited in July 2012. 8 Annual Report 2012 Nick McGlew Executive Director Nick has over 12 years experience in mergers, acquisitions, corporate and commercial law and corporate finance with major firms in Australia and the United States. He holds a Bachelor in Economics (UWA) and Master of Laws (NYU, Corporate). 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. Russell Kane Executive Director 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. Rob Black Executive Director Rob has been working in the stockbroking industry since 1995 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 Simon is Head of Retail Dealing and specialises in servicing high net worth clients and domestic institutions. He has been in the 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). Euroz Limited 9 E u r o z S e c u r i t i e s L i m i t e d O p e r a t i n g D i v i s i o n s Retail Dealing Corporate Finance • • • • Our corporate business is focused on developing strong, long term relationships with our clients Clients are provided with specialised Corporate Advisory services in: – – – – Capital Raisings Mergers and Acquisitions Strategic Planning and Reviews Privatisation and Reconstructions Established track record in raising equity capital via: – – – Initial Public Offerings (IPO) Placements Rights Issues Euroz has raised $810.5m in new equity this financial year • • • • • Team of highly experienced and qualified private client advisors 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 Specialised broking allows – – Close interaction between research analysts and private client advisors Timely communication of ideas with clients Sophisticated investors are able to participate in many of our corporate capital raisings • We pride ourselves on offering a tailored service to our clients based on: – – – Quality research Personalised service Wealth creation • Client services – – Exclusive web based research Web based access to portfolios and ledgers Equities Research Institutional Dealing • • • • • • Team of seven experienced analysts with access to the latest online news and financial information Based on fundamental analysis, strict financial modelling and regular company contact 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 Research Products – – – – Daily Briefing: Overnight market updates Weekly Informer: Compilation of all company reports throughout the preceding week Quarterly and/or Semi-annual Review: Regular coverage on midcap companies in book format Company Reports: Detailed analysis on companies as opportunities emerge • • • Largest institutional dealing desk based in Western Australia Team of eleven institutional dealers with an extensive client base of Australian and International investors Distribution network strength - long standing relationships with major institutional investors in the small to mid cap market • Western Australia’s geographic isolation makes it difficult for institutional investors to maintain close contact with companies based here - investors can rely on our “on the ground” information • Institutional dealing team “highly focused” on providing the following services: – – – – – Quality advice and idea generation Efficient execution Regular company contact Site visits Roadshows 10 Annual Report 2012 W e s t o z F u n d s M a n a g e m e n t Westoz Funds Management is responsible for $257m of funds under management at 30 June 2012. It manages funds under mandates from two Listed Investment Companies; Westoz Investment Company Limited and Ozgrowth Limited. Both companies have enjoyed competitive portfolio returns since inception. Westoz Investment Company Limited commenced trading on the ASX in September 2009 after 4 years as an unlisted company. Westoz Investment Company Limited reported an investment return in line with the market for the past year and declared 4¢ in fully franked dividends. Ozgrowth Limited has been listed on the ASX since January 2008 and reported a small positive investment return and a fully franked dividend of 1.0¢ for the past year. Westoz Investment Company Limited and Ozgrowth Limited have now paid $69m in dividends to shareholders since inception. Philip Rees Executive Director (Westoz Funds Management) Dermot Woods Executive Director (Westoz Funds Management) Mr Philip Rees is an Executive Director 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 26 years. He has previously managed investment portfolios and developed several early stage investment opportunities until he joined Westoz in April 2005. institutional large Mr Dermot Woods is an Executive Director of the manager and oversees the construction of its investment portfolios. Mr Woods joined Westoz funds management in 2007. He has previously worked as an industrial analyst for Euroz Securities and prior to this role, as a fund manager specialising in European equities. Euroz Limited 11 E u r o z G r o u p C o m m u n i t y A c t i v i t i e s Euroz Charitable Foundation Euroz Green Office 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, reduce the use of power, reduce energy consumption and purchase environmentally friendly products. This initiative has been strongly supported by members of the Euroz Group of companies since its inception five years ago. The Euroz Group has been fortunate to have benefited from strong investment markets and a vibrant local economy over many years. Euroz are proudly West Australian focused and we believe we have an obligation to give back to Western Australian charities in need. In 2007, the Euroz Charitable Foundation was formed in a Private Ancillary Fund (PAF) structure through which Euroz could make donations, invest these funds and make distributions to worthy charities and contribute to the broader community. During the past 5 years all businesses within the Euroz Group and many of our staff members have made consistent donations to the Foundation. The funds of the Foundation are now significant and we will continue to contribute and make a difference to Western Australian charities. Euroz Securities Scholarships In addition to direct donations, Euroz have collaborated with The University of Western Australia in a program to provide financial assistance to outstanding students who otherwise would not have the opportunity to further their studies. Euroz Securities is offering equity and merit based scholarships to assist students in financial hardship and achieve academic success. The scholarship program was inaugurated in 2012 and currently supports three students through to graduation. Each year we will support three more students – by 2015, nine students will benefit annually from a Euroz Securities Scholarship. Beneficiaries The Euroz Charitable Foundation has been delighted to support the following charities, amongst others, during the past financial year: f o r k i ds at PMH and Rotary pro j e c t s 12 Annual Report 2012 F i n a n c i a l R e p o r t 2 0 1 2 Euroz Limited 13 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 2012. Directors and executive disclosures The following persons were Directors of Euroz Limited at any time during or since the end of the financial 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 Greg Chessell – Director 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 (“specified executives”) during the financial year and up to the date of this report: Name R Caldow S Yeo O Foster R Kane A Clayton A Brittan G Allen R Black M Argento B Beresford B Laird J Bishop J Mackie N McGlew A Fresson L Robinson P Rees D Woods Position Employer Director Director Director Director Director Director Director Director Director Director Director Director Director Director Director Director Director Director Euroz Securities Limited Euroz Securities Limited Euroz Securities Limited (resigned 3 November 2011) Euroz Securities Limited Euroz Securities Limited Euroz Securities Limited Euroz Securities Limited Euroz Securities Limited Euroz Securities Limited (resigned 30 June 2012) Euroz Securities Limited Euroz Securities Limited Euroz Securities Limited Euroz Securities Limited Euroz Securities Limited Euroz Securities Limited Euroz Securities Limited (appointed 1 July 2012) Westoz Funds Management Pty Ltd Westoz Funds Management Pty Ltd Company Secretary Anthony Hewett held the position at the end of the financial 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 firms in Perth. 14 Annual Report 2012 Directors’ Report Principal activities During the year the principal activities of the Euroz Group consisted of: (a) Stockbroking; (b) Corporate Finance; (c) Funds Management, and (d) Investing Review of results The Directors of Euroz Limited are pleased to announce a consolidated pretax profit of $16,882,373 for the year ended 30 June 2012. The consolidated net profit after tax was $11,760,189 compared with the 2011 year’s consolidated net profit after tax of $26,566,040. This profit represents basic earnings per share of 8.20 cents versus 19.38 cents in the 2011 year. The Directors have declared a final dividend of 6.5 cents per share fully franked which, combined with the interim dividend of 1.5 cent per share, represents a total dividend of 8 cents per share fully franked. Review of operations Stockbroking Principal Trading Funds Management Unallocated revenue Segment revenues Segment results 2012 $ 47,564,481 45,889,043 2,882,683 2,403,935 2011 $ 49,225,611 9,547,185 9,154,027 2,085,537 2012 $ 9,652,609 (132,361) 1,441,604 798,337 2011 $ 9,916,246 1,574,237 5,661,366 9,414,191 98,740,142 70,012,360 11,760,189 26,566,040 These results have been achieved through strong contributions from all divisions of the business. Financial position The net assets of the consolidated group have increased from $118,518,350 at 30 June 2011 to $120,722,032 at 30 June 2012. This increase has largely resulted from adjustments to the carrying value of investments as at 30 June 2012. The company’s strong financial 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 $45,289,428 in 2011 to $45,918,414 in 2012. During the past six 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 entities are valued at $67,480,289 as at 30 June 2012. The Directors believe the company is in a strong and stable financial position to expand and grow its current operations. Earnings per share Basic earnings per share Diluted earnings per share 2012 Cents 8.20 8.11 2011 Cents 19.38 16.66 Euroz Limited 15 Directors’ Report 2012 $ 2011 $ Dividends - Euroz Limited Dividends paid or provided for during the financial year were as follows: Interim ordinary dividend of 1.5 cent (2011 – 3 cents) per fully paid ordinary share was paid on 25 January 2012. 2,554,359 4,296,456 Provision for final ordinary dividend for 30 June 2012 of 6.5 cents (2011 – 15 cents) per fully paid ordinary share paid on 27 July 2012. 9,341,110 21,134,214 11,895,469 25,430,670 Significant changes in the state of affairs There have been no significant changes in the state of affairs of the consolidated group during the year. Share options A total of 2,814,625 options were exercised during the year at an exercise price of $0.75. At the date of this report, there are 3,543,088 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 2012 that has significantly affected, or may significantly affect: (a) the consolidated group’s operations in future financial years; or (b) the results of those operations in future financial years; or (c) the consolidated group’s state of affairs in future financial years. Likely developments and expected results of operations The Directors are confident that a strong statement of financial position and established business platforms will support the company in increasingly volatile market conditions. However, it is likely that we will continue to experience volatile trading conditions in the next financial 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 significant environmental regulation in respect of its operations. 16 Annual Report 2012 Directors’ Report Information on Directors Particulars of directors’ interests in shares and options of Euroz Limited Experience Special responsibilities and qualifications Ordinary shares Options Director 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 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 (FINSIA) and is a Fellow of the Australian Institute of Company Directors. Member of the Remuneration Committee Holds a Graduate Diploma in Applied Finance and Investment from FINSIA. He was recognised as an affiliate of the ASX in December 2000 and was admitted in May 2004 as a Practitioner Member (Master Stockbroking) of the Stockbrokers Association of Australia. 10,000,000 10,000,000 10,000,000 D Young Director Mr Young has worked in corporate finance since 1984. Head of Corporate Finance of our 100% owned subsidiary Euroz Securities Limited. 4,250,000 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 Certified 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 qualification. - - - - - Meetings of Directors The numbers of meetings of the company’s board of Directors held during the year ended 30 June 2012, and the numbers of meetings attended by each director were: Committee Meetings Director Peter Diamond Andrew McKenzie Jay Hughes Greg Chessell Doug Young Directors Meetings Audit Remuneration Number eligible to attend Number attended Number eligible to attend Number Attended Number eligible to attend Number attended 14 14 14 14 14 13 13 8 13 12 1 1 - - - 1 1 - - - 12 12 12 - - 12 12 12 - - Euroz Limited 17 Directors’ Report 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 defined 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 five executives in the parent and the group receiving the highest remuneration. Directors and 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 first being a participation in the profit 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, profits and dividends for the last five years for the listed entity, as well as the share price at the end of the respective financial years. 2008 $ 2009 $ 2010 $ 2011 $ 2012 $ Revenue (including net profit/(loss) of associates) 121,889,088 43,288,071 76,080,544 77,806,998 97,609,657 Net profit after tax Share price at year end 41,931,627 10,335,056 26,331,750 26,566,040 11,760,189 4.00 0.93 1.28 1.62 1.15 Dividends paid or recommended 34,560,000 9,625,081 15,890,339 25,430,670 11,895,469 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. Base pay Directors and executives are offered a competitive base and participation in the profit share pool. Base pay for senior executives is reviewed semiannually 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 fixed 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 profit share pool Commission Head of Retail incentive 18 Annual Report 2012 Directors’ Report Equity based payments There is no entitlement to equity based remuneration. Commission Executives that do not participate in the profit 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. Short-term incentives Cash incentives (profit share) are calculated on 30% of pre tax profit 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 profit share is leveraged to performance as described below. Profit share pool The Remuneration Committee determines the allocation of the 30% pretax profit 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 specifications 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 profit 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 overall performance of the members of the Retail Desk and the 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 specified executives of the consolidated entity are set out in the following tables. Executive directors of Euroz Limited Short-term Profit Share/ bonus $ 440,000 440,000 440,000 440,000 440,000 Other benefits $ 30,427 36,769 24,421 24,901 8,752 Post employment Super- annuation $ 25,000 25,000 25,000 50,000 25,000 Base salary $ 296,316 296,316 296,316 271,316 296,316 Total $ 791,743 798,085 785,737 786,218 770,068 1,456,580 2,200,000 125,270 150,000 3,931,851 275,000 275,000 275,000 244,615 229,231 590,000 590,000 590,000 590,000 590,000 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 2012 P Diamond A McKenzie J Hughes D Young G Chessell Total 2011 P Diamond A McKenzie J Hughes D Young (appointed 8 Feb 2011) G Chessell (appointed 8 Feb 2011) Total 1,298,846 2,950,000 134,333 150,000 4,533,179 Current Directors did not receive any Directors fees. Performance related $ 56% 55% 56% 56% 57% 64% 64% 64% 65% 68% Euroz Limited 19 Directors’ Report Specified executives of the consolidated group 2012 Name R Caldow* S Yeo* O Foster* (resigned 3 November 2011) A Clayton* R Kane* G Allen * R Black * A Brittain * N McGlew * P Rees** D Woods ** M Argento* (resigned 30 June 2012) B Beresford* B Laird* J Bishop* A Fresson* J Mackie* Total 2011 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 Short-term Base Salary $ Profit Share/ Bonus $ Other Benefits $ Commission $ Post employment Super annuation $ Total $ Performance related % 90,935 156,115 113,960 222,970 184,248 197,663 216,310 197,663 192,470 178,280 202,855 330,919 305,541 150,398 226,739 222,464 44,319 - 100,000 75,000 350,000 200,000 185,000 350,000 155,208 200,000 130,000 130,000 220,000 440,000 219,613 390,000 390,000 12,000 14,049 20,798 3,850 13,749 13,748 11,640 14,118 13,474 12,870 13,100 8,464 325,788 9,798 7,384 1,369 12,661 4,663 3,215,849 3,546,821 501,523 105,232 331,062 - - - - - - - - - - - - - - 401,694 837,988 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 - 132,019 12,825 22,603 261,704 384,615 - 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 - - - - - - - - - - - - - 13,378 15,775 7,888 25,000 25,000 25,000 15,775 25,000 25,000 49,575 25,000 15,775 15,775 25,000 25,000 15,775 15,775 223,595 623,750 200,698 611,719 422,996 419,303 596,203 391,345 430,340 370,955 366,319 892,482 771,114 402,395 643,108 640,900 478,451 365,491 8,585,613 15,199 15,199 23,216 15,199 24,412 14,611 9,193 14,611 14,173 25,000 25,000 49,553 15,199 6,757 4,293 363,121 627,830 565,428 555,265 535,288 474,052 297,272 472,918 573,742 438,580 523,561 432,775 434,965 300,034 225,943 2,039,696 3,191,569 671,575 646,319 271,615 6,820,774 47% 69% 37% 57% 47% 44% 59% 40% 46% 35% 35% 25% 57% 55% 61% 61% 86% 72% 82% 0% 59% 65% 61% 50% 61% 69% 48% 57% 47% 47% 63% 66% * Director of Euroz Securities Limited ** Director of Westoz Funds Management Pty Ltd 20 Annual Report 2012 Directors’ Report Service agreements Remuneration and other terms of employment for the Directors and specified executives are formalised in service agreements. Each of these agreements provide for the provision of performancerelated cash bonuses and other benefits. 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 2012 of $310,000 (2011 - $300,000) plus profit 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 2012 of $310,000 (2011- $300,000) plus profit 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 2012 of $310,000 (2011 - $300,000) plus profit share. Payment on termination of employment by the employer, other than for gross misconduct three months salary. Greg Chessell, Director • Term of contract ongoing employment contract • • Base salary, inclusive of superannuation for the year ended 30 June 2012 of $310,000 (2011 - $300,000) plus profit share. Payment on termination of employment by the employer, other than for gross misconduct three months salary. Doug Young, Director • Term of contract ongoing employment contract • • Base salary, inclusive of superannuation for the year ended 30 June 2012 $310,000 (2011 - $300,000) plus profit share. Payment on termination of employment by the employer, other than for gross misconduct three months salary. Richard Caldow, Director Euroz Securities Limited • Term of contract ongoing employment contract • • Base salary, inclusive of superannuation for the year ended 30 June 2012 of $80,000 (2011 - $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 2012 of $80,000 (2011 - $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 (resigned 3 November 2011) • Term of contract ongoing employment contract • • Base salary, inclusive of superannuation for the year ended 30 June 2012 of $215,000 (2011 - $215,000) plus profit share. Payment on termination of employment by the employer, other than for gross misconduct three months salary. Andrew Clayton, Director Euroz Securities Limited • Term of contract ongoing employment contract • • Base salary, inclusive of superannuation for the year ended 30 June 2012 of $250,000 (2011 - $171,002) plus profit 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 2012 of $215,000 (2011 - $171,002) plus profit share. Payment on termination of employment by the employer, other than for gross misconduct three months salary. Euroz Limited 21 Directors’ Report Anthony Brittain, Director Euroz Securities Limited • Term of contract ongoing employment contract • • Base salary, inclusive of superannuation for the year ended 30 June 2012 of $215,000 (2011 - $215,000) plus profit 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 2012 of $215,000 (2011 - $171,002) plus profit 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 2012 of $250,000 (2011 - $170,000) plus profit share. Payment on termination of employment by the employer, other than for gross misconduct three months salary. Nick McGlew, Director Euroz Securities Limited • Term of contract ongoing employment contract • • Base salary, inclusive of superannuation for the year ended 30 June 2012 of $210,000 (2011 - $210,000) plus profit share. Payment on termination of employment by the employer, other than for gross misconduct three months salary. Maurice Argento, Director Euroz Securities Limited (resigned 30 June 2012) • Term of contract ongoing employment contract • • Base salary, inclusive of superannuation for the year ended 30 June 2012 of $310,000 (2011 - $300,000) per annum plus profit share. Payment on termination of employment by the employer, other than for gross misconduct three months salary. Brian Beresford, Director Euroz Securities Limited • Term of contract ongoing employment contract • • Base salary, inclusive of superannuation for the year ended 30 June 2012 of $310,000 (2011 - $300,000) plus profit share. Payment on termination of employment by the employer, other than for gross misconduct three months salary. Benjamin Laird, Director Euroz Securities Limited • Term of contract ongoing employment contract • • Base salary, inclusive of superannuation for the year ended 30 June 2012 of $180,000 (2011 - $160,000) plus profit share. Payment on termination of employment by the employer, other than for gross misconduct three months salary. Jonathan Bishop, Director Euroz Securities Limited • Term of contract ongoing employment contract • • Base salary, inclusive of superannuation for the year ended 30 June 2012 of $250,000 (2011 - $215,000) plus profit share. Payment on termination of employment by the employer, other than for gross misconduct three months salary. Austen Fresson, Director Euroz Securities Limited • Term of contract ongoing employment contract • • Base salary, inclusive of superannuation for the year ended 30 June 2012 of $230,000 (2011 - $230,000) plus profit share. Payment on termination of employment by the employer, other than for gross misconduct three months salary. Jamie Mackie, Director Euroz Securities Limited • Term of contract ongoing employment contract • • Base salary, inclusive of superannuation for the year ended 30 June 2012 of $80,000 (2011 - $40,000) plus profit share. Payment on termination of employment by the employer, other than for gross misconduct commission earned. 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 2012 of $220,000 (2011 - $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 • Term of contract – ongoing employment contract minimum period 1 year • • Base salary, inclusive of superannuation for the year ended 30 June 2012 of $220,000 (2011 - $220,000) plus bonus Payment on termination of employment by the employer other than for gross misconduct – three months salary 22 Annual Report 2012 Directors’ Report Sharebased compensation No options or shares were issued to Directors or specified executives during the year ended 30 June 2012. 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. No of ordinary shares No of options over ordinary shares Directors of Euroz Limited Ordinary shares P Diamond A McKenzie J Hughes G Chessell D Young Key management personnel of the consolidated entity Ordinary shares R Caldow S Yeo O Foster (resigned 3 November 2011) P Rees R Kane A Clayton A Brittain G Allen R Black N McGlew D Woods M Argento (resigned 30 June 2012) B Beresford B Laird J Bishop J Mackie A Fresson Loans to directors and executives 10,000,000 10,000,000 10,000,000 3,102,000 4,250,000 4,950,000 3,520,000 - 1,100,000 2,370,000 2,100,000 303,400 500,000 1,800,000 237,791 373,260 1,000,000 2,000,000 655,000 102,612 847,000 278,511 - - - - - - - - - 233,000 100,000 - 41,200 360,000 4,940 - - - 60,000 - - - No loans were made to Directors of Euroz Limited and the key management personnel of the consolidated group, including their personallyrelated entities during the year. Indemnifying officers During the financial 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 officers in their capacity as officers of entities in the consolidated group. Euroz Limited 23 Directors’ Report 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 satisfied 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 Auditor’s Independence Declaration $ 15,600 The lead auditor’s independence declaration for the year ended 30 June 2012 has been received and follows the Directors report. This report is made in accordance with a resolution of the Directors. Peter Diamond Chairman Andrew McKenzie Director Date: 20 August 2012 24 Annual Report 2012 Directors’ Report Auditor ’s I ndependence D ec la ra ti o n AUDITOR’S INDEPENDENCE DECLARATION TO THE DIRECTORS OF EUROZ LIMITED In relation to our audit of the financial report of Euroz Limited for the year ended 30 June 2012, to the best of my knowledge and belief, there have been no contraventions of the auditor independence requirements of the Corporations Act 2001 or any applicable code of professional conduct. AUDITOR’S INDEPENDENCE DECLARATION AUDITOR’S INDEPENDENCE DECLARATION TO THE DIRECTORS OF EUROZ LIMITED TO THE DIRECTORS OF EUROZ LIMITED PKF MACK & CO In relation to our audit of the financial report of Euroz Limited for the year ended 30 June 2012, to the best of my knowledge and belief, there have been no contraventions of the auditor independence requirements of the Corporations Act 2001 or any applicable code of professional conduct. In relation to our audit of the financial report of Euroz Limited for the year ended 30 June 2012, to the best of my knowledge and belief, there have been no contraventions of the auditor independence requirements of the Corporations Act 2001 or any applicable code of professional conduct. SIMON FERMANIS PARTNER PKF MACK & CO 20 AUGUST 2012 PKF MACK & CO WEST PERTH, WESTERN AUSTRALIA SIMON FERMANIS PARTNER SIMON FERMANIS PARTNER 20 AUGUST 2012 WEST PERTH, WESTERN AUSTRALIA 20 AUGUST 2012 WEST PERTH, WESTERN AUSTRALIA 15 15 15 Euroz Limited 25 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 finance 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 2010 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. 26 Annual Report 2012 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 financial 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 financial 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 Officer/Chief Financial Officer 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 financial 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 18-19 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 27 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 difficult 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 6 of the Annual Report. It is not anticipated that the composition of the Board will change 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. The period of office held by each Director is set out at page 6 of the Annual Report. 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 officer should not be exercised by the same individual. Euroz, in its role as a holding company, does not have a Chief Executive Officer 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 significant 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 reflects 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 18-19 of the Directors Report outlines the methodology used to assess the performance and remuneration of the members of the Board. With respect to the assessment of the performance of the Board and its directors, 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 17 of the Directors Report outlines the experience and qualifications 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. 28 Annual Report 2012 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 confidence 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 confidentiality 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, by way of the Head of Risk Management and the Chief Operating Officer, 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 3.5: Companies should provide the information indicated in the Guide to reporting on Principle 3 This information is set out above. Euroz Limited 29 Corporate Governance Statement 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. 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 sufficient 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 financial 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 financial 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 financial 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 members as the Board see fit. 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. 30 Annual Report 2012 Corporate Governance Statement Recommendation 5.2: Companies should provide the information indicated in the Guide to reporting on Principle 5. This information is set out above. 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 significant developments. In addition to the public announcement of its financial information and disclosure of significant 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 financial 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 31 Corporate Governance Statement Recommendation 7.3: The Board should disclose whether it has received assurance from the chief executive officer (or equivalent) and the chief financial officer (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 financial reporting risks. Annually, the Chief Financial Officer states in writing to the Board that: • • The statement given in accordance with best practice recommendation 4.1 (the integrity of financial 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 efficiently 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 satisfies 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 19-20 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/financial 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 19-20. Recommendation 8.3: Companies should provide the information indicated in the Guide to reporting on Principle 8. This information is set out above. 32 Annual Report 2012 Corporate Governance Statement Consolidated I ncome Statement For the year ended 30 June 2012 Revenue Share of net profit (loss) of associates Employee benefits 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 Profit for the period Income tax expense Profit for the period Basic earnings per share Diluted earnings per share Notes 4 5 5 6 33 33 2012 $ 2011 $ 98,740,142 70,012,360 ( 1,130,485) 7,794,638 ( 20,796,411) (23,214,359) ( 1,190,337) (1,145,045) ( 315,842) (274,756) ( 1,579,477) (2,008,990) ( 1,451,490) (1,244,605) ( 5,237,660) (3,182,413) ( 307,419) (288,980) ( 46,243,988) (7,870,761) ( 3,604,660) (4,167,970) 16,882,373 34,409,119 (5,122,184) (7,843,079) 11,760,189 26,566,040 Cents 8.20 8.11 Cents 19.38 16.66 The above Income Statements should be read in conjunction with the accompanying notes. Euroz Limited 33 Consolidated Statement of Com preh en s i ve I n co me For the year ended 30 June 2012 Profit for the period Other comprehensive income/(expense) 2012 $ 2011 $ 11,760,189 26,566,040 - - Total comprehensive income for the period 11,760,189 26,566,040 The above Statement of Comprehensive Income should be read in conjunction with the accompanying notes. 34 Annual Report 2012 Consolidated Sta tem ent of Fina n ci a l Po s i t i o n As at 30 June 2012 Notes 2012 $ 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 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 21 53,741,715 68,059,994 1,775,702 1,458,820 2,321,929 1,909,730 348,675 2,184,432 59,298,166 72,502,831 5,000,000 5,000,000 67,480,289 65,596,600 2,000 219,746 2,126,185 3,067,837 772,752 563,305 75,381,226 74,447,488 134,679,392 146,950,319 1,238,111 1,487,851 2,057,798 3,494,336 10,653,790 21,661,269 13,379,752 27,213,403 367,517 210,091 577,608 548,361 670,205 1,218,566 13,957,360 28,431,969 120,722,032 118,518,350 89,373,600 87,261,731 186,000 186,000 31,162,432 31,070,619 120,722,032 118,518,350 The above Statement of Financial Position should be read in conjunction with the accompanying notes. Euroz Limited 35 Consolidated Statement of Cha ng es i n Eq ui t y for the year ended 30 June 2012 Balance at 1 July 2010 Profit for the period Changes in fair value of financial asset Total comprehensive income for the period Share capital $ Retained profits $ 79,296,164 29,935,249 - - - 26,566,040 - 26,566,040 Transactions with owners, recorded directly in equity Shares issued during the period 7,965,567 - Dividends to equity holders - (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 Balance at 1 July 2011 87,261,731 31,070,619 Profit for the period Changes in fair value of financial asset Total comprehensive income for the period Transactions with owners, recorded directly in equity Investee equity - - - - Shares issued during the period 2,111,869 11,760,189 - 11,760,189 227,093 - Dividends to equity holders - (11,895,469) Total contributions by and distributions to owners 2,111,869 (11,668,376) Balance at 30 June 2012 89,373,600 31,162,432 Asset revaluation reserves $ Option premium reserves $ Total $ - - - - - - - - - - - - - - - - - 186,000 109,417,413 - - - - - - 26,566,040 - 26,566,040 7,965,567 (25,430,670) (17,465,103) 186,000 118,518,350 186,000 118,518,350 - - - - - - - 11,760,189 - 11,760,189 227,093 2,111,869 (11,895,469) (9,556,507) 186,000 120,722,032 The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes. 36 Annual Report 2012 Consolidated Sta tem ent of Ca sh Flow s For the year ended 30 June 2012 Cash flows 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 2012 $ 2011 $ 49,010,336 54,239,791 (33,980,001) (34,694,192) 15,030,335 19,545,599 - 2,714,338 44,259,537 2,571 2,901,341 9,444,069 (7,518,959) (7,193,455) (45,502,043) (7,949,366) Net cash flows from operating activities 31 8,983,208 16,750,759 Cash flows from investing activities Net (payments)/receipts from investments Payments for plant and equipment Net cash flows used in investing activities Cash flows from financing activities Proceeds from issues of shares and other equity securities Dividends paid Net cash flows from/(used in) financing activities Net increase/(decrease) at cash and cash equivalents Cash and cash equivalents at 1 July Cash and cash equivalents at 30 June (1,475,199) 2,066,701 (248,684) (3,628,376) (1,723,883) (1,561,675) 2,110,969 7,965,567 (23,688,573) (17,567,401) (21,577,604) (9,601,834) (14,318,279) 5,587,250 68,059,994 62,472,744 7 53,741,715 68,059,994 The above Statements of Cash Flows should be read in conjunction with the accompanying notes. Euroz Limited 37 Content s Note 1. Statement of significant accounting policies 39 Note 18. Short term provisions Note 2. Significant accounting estimates Note 19. Deferred tax liabilities and judgements Note 3. Segment information Note 4. Revenue Note 5. Profit 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 47 47 49 49 49 51 51 51 51 51 51 52 52 53 53 53 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 benefits Note 28. Related parties Note 29. Investments in controlled entities Note 30. Events occurring after reporting date Note 31. Reconciliation of cash flows from operating activities Note 32. Credit facilities Note 33. Earnings per share Note 34. Parent entity disclosures Note 35. Company details 54 54 54 55 56 57 59 59 59 59 59 64 65 65 65 66 66 66 38 Annual Report 2012 Note 1. Statement of significant accounting policies The financial report is a general purpose financial 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. This financial report has been authorised by the Directors to be issued on 20 August 2012 Euroz Limited is a listed public company, trading on the Australian Securities Exchange, limited by shares, incorporated and domiciled in Australia. Euroz is a for profit entity for the purposes of preparing the financial statements. The financial report of Euroz Limited and controlled entities (the consolidated group), complies with Australian Accounting Standards and International Financial Reporting Standards (IFRS). Separate financial information of the parent company has been included in Note 34 as permitted by amendments to the Corporations Act 2001. The financial report is presented in Australian dollars which is the group’s functional and presentation currency. The following is a summary of the material accounting policies adopted by the consolidated group in the preparation of the financial report. The accounting policies have been consistently applied, unless otherwise stated. Basis of preparation Reporting basis and conventions The financial report has been prepared on an accruals basis and is based on historical costs modified by the revaluation of selected non- current assets, financial assets and financial liabilities for which the fair value basis of accounting has been applied. Accounting policies (a) Principles of consolidation The consolidated financial statements incorporate the assets and liabilities of all entities controlled by Euroz Limited (‘company’ or ‘parent entity’) as at 30 June 2012 and the results of all controlled entities for the year then ended. Euroz Limited and its controlled entities together are referred to in this financial 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 financial 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 financial year end. (b) Income tax The charge for current income tax expense is based on the profit 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 financial 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 profit or taxable profit 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 39 Notes to the Financial StatementsFor the year ended 30 June 2012 Note 1. Statement of significant accounting policies (continued) Deferred income tax assets are recognised to the extent that it is probable that future tax profits will be available against which deductible temporary differences can be utilised. The amount of benefits 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 sufficient future assessable income to enable the benefit 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 profit 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 benefits will flow to the entity and the revenue can be reliably measured. The following specific 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 Pershing Securities Australia Pty Ltd (“Pershing”) 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) financial assets at fair value through profit 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 financial statements as set out in Note 1 (a). Other securities are included at fair value at reporting date. Unrealised gains/losses on securities held for short term investment are accounted for as set out in Note 1 (u) (i) financial assets at fair value through profit 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 financial assets. 40 Annual Report 2012 Notes to the Financial StatementsFor the year ended 30 June 2012 Note 1. Statement of significant accounting policies (continued) (h) Investments in associates The Group’s investment in its associates is accounted for using the equity method of accounting in the consolidated financial statements. The associates are entities over which the Group has significant influence and that are neither subsidiaries nor joint ventures. Under the equity method, investments in associates are carried in the consolidated statement of financial 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 profits 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 flows that will be received from the assets employment and subsequent disposal. The expected net cash flows are discounted to their present values in determining recoverable amounts. The cost of fixed assets constructed within the consolidated group includes the cost of materials, direct labour, borrowing costs and an appropriate proportion of fixed 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 benefits associated with the item will flow 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 financial period in which they are incurred. Depreciation The depreciable amount of all fixed 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 reporting 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. 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. Euroz Limited 41 Notes to the Financial StatementsFor the year ended 30 June 2012 Note 1. Statement of significant accounting policies (continued) (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 finance leases which effectively transfer from the lessor to the lessee substantially all the risks and benefits incidental to ownership of leased non-current assets, and operating leases under which the lessor effectively retains substantially all such risks and benefits. 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 benefits 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 financial 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 Pershing 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 financial year, but not distributed at reporting 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 financial statements in relation to the granting of these options. (o) Employee benefits (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 benefits payable later than one year Employee benefits payable later than one year have been measured at the present value of the estimated future cash outflows to be made for those benefits. There have been no changes to the method used to calculate this liability. (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 benefit on costs Employee benefit on costs, including payroll tax, are recognised and included in employee benefits liabilities and costs when the employee benefits to which they relate are recognised as liabilities. (v) Options The fair value of options granted is recognised as an employee benefit 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. 42 Annual Report 2012 Notes to the Financial StatementsFor the year ended 30 June 2012 Note 1. Statement of significant accounting policies (continued) (vi) Profit-sharing The consolidated entity recognises a liability and an expense for profit-sharing based on a formula that takes into consideration the profit attributable to the company’s employees after certain adjustments. (vii) Termination benefits 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 benefits 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 flows, cash includes deposits at call which are readily convertible to cash on hand and are subject to an insignificant 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 profit 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 financial year, adjusted for bonus elements in ordinary shares issued during the year. (ii) Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing 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 financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes. The fair value of financial 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 reporting date. The quoted market price used for financial assets held by the consolidated entity is the current bid price; the appropriate quoted market price for financial liabilities is the current ask price. The fair value of financial 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 reporting 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 flows, are used to determine fair value for the remaining financial instruments. The nominal value less estimated credit adjustments of trade receivables and payables are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the consolidated entity for similar financial instruments. (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 Office. 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 statement of financial position are shown inclusive of GST. Cash flows are presented in the statement of cash flow on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows. (t) Comparative figures When required by accounting standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year. Euroz Limited 43 Notes to the Financial StatementsFor the year ended 30 June 2012 Note 1. Statement of significant accounting policies (continued) (u) Financial instruments The consolidated group classifies its investments in the following categories: financial assets at fair value through profit or loss, loans and receivables, and available-for-sale financial assets. The classification depends on the purpose for which the investments were acquired. Management determines the classification of its investments at initial recognition and re-evaluates this designation at each reporting date. Initial recognition and measurement Financial assets and financial liabilities are recognised when the entity becomes a party to the contractual provisions to the instrument. For financial 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 classified ‘at fair value through profit or loss’, in which case transaction costs are expensed to profit or loss immediately. Classification 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 financial asset or financial 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 financial instrument to the net carrying amount of the financial asset or financial liability. Revisions to expected future net cash flows will necessitate an adjustment to the carrying value with a consequential recognition of an income or expense in profit 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 specifically applicable to financial instruments. (i) Financial assets at fair value through profit or loss This category has two sub-categories; financial assets held for trading, and those designated at fair value through profit or loss on initial recognition. A financial asset is classified 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 financial 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 classified as current assets if they are either held for trading or are expected to be realised within 12 months of the reporting date. (ii) Loans and receivables Loans and receivables are non derivative financial assets with fixed 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 reporting date which are classified as non-current assets. Loans and receivables are included in receivables in the statement of financial position. 44 Annual Report 2012 Notes to the Financial StatementsFor the year ended 30 June 2012 Note 1. Statement of significant accounting policies (continued) (iii) Available-for-sale financial assets Available-for-sale financial assets, comprising principally marketable equity securities, are non-derivatives that are either designated in this category or not classified 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 financial assets not carried at fair value through profit or loss. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the consolidated entity has transferred substantially all the risks and rewards of ownership. Available-for-sale financial assets and financial assets at fair value through profit 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 ‘financial assets at fair value through profit 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 classified as available-for-sale investments revaluation reserve are recognised in equity in the “available for sale revaluation reserve”. When securities classified 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 financial 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 flow analysis, and option pricing methods refined to reflect the issuer’s specific circumstances. The consolidated group assesses at each reporting date whether there is objective evidence that a financial asset or group of financial assets is impaired. In the case of equity securities classified as available for sale, a significant 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 financial assets, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit 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 classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. 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. (x) Rounding of amounts Amounts in this financial report have been rounded to the nearest dollar in accordance with class order 98/100. (y) Impairment of non-financial assets Goodwill and other intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment or more frequently if events or changes in circumstances indicate that they might be impaired. Other non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. Recoverable amount is the higher of an asset’s fair value less costs to sell and value-in-use. The value-in-use is the present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or cash-generating unit to which the asset belongs. Assets that do not have independent cash flows are grouped together to form a cash-generating unit. (z) 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 financial statements from the adoption of these standards and interpretations. Euroz Limited 45 Notes to the Financial StatementsFor the year ended 30 June 2012 Note 1. Statement of significant accounting policies (continued) AASB No. Title 9 10 11 12 13 Financial Instruments Consolidation Joint Arrangements Disclosure of Interests in Other Entities Fair Value Measurement 1053 Application of Tiers of Australian Accounting Standards 2010 – 2 2010 – 7 Amendments to Australian Accounting Standards arising from Reduced Disclosure Requirements Amendments to Australian Accounting Standards arising from AASB 9 (December 2010) [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] Operative Date (Annual reporting periods beginning on or after) 1 Jan 2015 1 Jan 2013 1 Jan 2013 1 Jan 2013 1 Jan 2013 1 Jul 2013 1 Jul 2013 Issue Date Dec 2010 Aug 2011 Aug 2011 Aug 2011 Sep 2011 Jun 2010 Jun 2010 Dec 2010 1 Jan 2013 2010 – 8 Amendments to Australian Accounting Standards – Deferred Tax: Recovery of Underlying Assets Dec 2010 1 Jan 2012 [AASB 112] 2010 – 10 Further Amendments to Australian Accounting Standards – Removal of Fixed Dates for First-time Adopters Dec 2010 1 Jan 2013 [AASB 2009-11 & AASB 2010-7] 2011 - 4 Amendments to Australian Accounting Standards to Remove Individual Key Management Personnel Disclosure Requirements Jul 2011 1 Jul 2013 [AASB 124] 2012 - 2 Amendments to Australian Accounting Standards – Disclosures – Offsetting Financial Assets and Financial Liabilities Jun 2012 1 Jan 2013 [AASB 7 & AASB 132] 2012 - 3 Amendments to Australian Accounting Standards – Offsetting Financial Assets and Financial Liabilities Jun 2012 1 Jan 2014 [AASB 132] 2012 - 5 Amendments to Australian Accounting Standards arising from Annual Improvements 2009–2011 Cycle Jun 2012 1 Jan 2013 [AASB 1, AASB 101, AASB 116, AASB 132 & AASB 134 and Interpretation 2] Australian Interpretations 20 Stripping Costs in the Production Phase of a Surface Mine Nov 2011 1 Jan 2013 46 Annual Report 2012 Notes to the Financial StatementsFor the year ended 30 June 2012 Note 2. Significant accounting estimates and judgements Estimates and judgements incorporated in the financial 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 significant and prolonged impairment indicators exist, any excess of the associate’s carrying value over the recoverable amount is expensed to the income statement. Refer to note 12 regarding the equity accounting of associates. 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) Classification of inventories The group has decided to classify investments in listed securities as held for trading. 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 statement of financial position. 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 sufficient future taxable profits. Deferred tax liabilities arising from temporary differences are recognised to the extent that there are future profits. Note 3. Segment information Identification of reportable segments The group has identified 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 finance 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 financial 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 47 Notes to the Financial StatementsFor the year ended 30 June 2012 Note 3. Segment information (continued) 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 financial instruments Share of profits and losses of equity-accounted investments Corporate assets and liabilities not specific to any segments Deferred tax assets and liabilities Current tax liabilities Segment performance 2012 Sales and other fees Other revenues Stockbroking $ Principal Trading $ Funds Management $ Total $ Unallocated Items $ Total (Consolidated) $ 46,225,507 1,338,974 45,889,043 - 2,700,491 182,192 94,815,041 1,521,166 - 2,403,935 94,815,041 3,925,101 Total segment revenue 47,564,481 45,889,043 2,882,683 96,336,207 2,403,935 98,740,142 Segment net operating profit after tax 9,652,609 (132,361) 1,441,604 10,961,852 798,337 11,760,189 Interest revenue Depreciation and amortisation Share of associate 1,321,521 1,188,107 - - - - 182,192 2,230 - 1,503,713 1,190,337 - 1,309,797 - (1,130,485) 2,813,510 1,190,337 (1,130,485) Segment assets 31,973,988 1,259,701 3,733,978 36,967,667 97,711,725 134,679,392 Investments in associate Capital expenditure Segment liabilities - 248,793 7,265,755 - - - - - - 248,793 67,480,289 - 67,480,289 248,793 1,006,401 8,272,156 5,685,204 13,957,360 Cash flow information Net cash flow from operating activities Net cash flow from investing activities Net cash flow from financing activities 2011 Sales and other fees Other revenues 5,981,675 (248,684) - (1,242,505) - - 2,934,241 - - 7,673,411 (248,684) - 1,309,797 (1,475,199) (21,577,604) 8,983,208 (1,723,883) (21,577,604) 47,730,545 1,495,066 9,547,185 - 8,974,867 179,160 66,252,597 1,674,226 - 2,085,537 66,252,597 3,759,763 Total segment revenue 49,225,611 9,547,185 9,154,027 67,926,823 2,085,537 70,012,360 Segment net operating profit 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 Cash flow information - 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 Net cash flow from operating activities 9,275,914 1,690,253 5,183,577 16,149,744 601,015 16,750,759 Net cash flow from investing activities (3,628,376) Net cash flow from financing activities - - - - - (3,628,376) 2,066,701 (1,561,675) - (9,601,834) (9,601,834) 48 Annual Report 2012 Notes to the Financial StatementsFor the year ended 30 June 2012 Note 4. Revenue Revenue from operating activities Brokerage Underwriting and management fees Proceeds on sale of principal trading shares Corporate retainers Other income Interest received Dividends received Other revenue Fair value gain on derivatives Gain arising from acquisition of further interests in associates Total Revenue Note 5. Profit before income tax expense Profit 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 Superannuation expense Fair value of unrealised loss Note 6. Income tax The components of tax expense comprise: Current tax Deferred tax 2012 $ 2011 $ 16,998,213 27,284,696 45,889,043 4,643,089 22,846,828 31,767,263 9,468,579 2,091,321 94,815,041 66,173,991 2,813,510 2,919,241 - 17,453 - 1,094,138 2,571 104,279 (131,849) 944,127 3,925,101 3,838,369 98,740,142 70,012,360 558,248 632,089 451,536 693,509 1,190,337 1,145,045 405,157 1,054,301 630,744 742,827 145,789 1,244,708 533,602 (78,606) 5,512,475 (390,291) 7,648,412 194,667 5,122,184 7,843,079 Numerical reconciliation between tax expense and pre tax accounting profit Income tax using company’s tax rate of 30% (2011: 30%) 5,064,712 10,322,736 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 - 106,104 6,052 339,145 231 115,009 27,503 - 5,516,013 10,465,479 - (771) (393,829) (2,621,629) 5,122,184 7,843,079 The applicable weighted average effective tax rates are as follows: 30.3% 22.8% Euroz Limited 49 Notes to the Financial StatementsFor the year ended 30 June 2012 Note 6. Income tax (continued) 2012 $ 2011 $ The increase in the weighted average effective consolidated tax rate for 2012 is due to the reduction to the effect of the accounting requirement to recognise the gain on acquisition of associates, and share of net loss 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 the income statement Balance at 30 June Other Balance at 1 July Recognised in the income statement Balance at 30 June 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 Tax losses 14,944 390,291 - 405,235 52,289 (227,440) (175,151) 496,072 46,596 542,668 183,918 (194,667) 25,693 14,944 77,982 (25,693) 52,289 153,753 342,319 496,072 - - - - - - 563,305 209,447 772,752 415,653 147,652 563,305 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 benefit at 30 June 2012 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. 50 Annual Report 2012 Notes to the Financial StatementsFor the year ended 30 June 2012 Note 7. Cash and cash equivalents Cash at bank and on hand Note 8. Trade and other receivables Trade debtors 2012 $ 2011 $ 53,741,715 68,059,994 1,775,702 1,909,730 All trade debtors relating to brokerage and principal trading have been transferred to Pershing who provides a trust account facility as part of the clearing and settlement service. Note 9. Inventories Securities in unlisted companies (at cost) (i) Trading securities in listed companies (at cost) (i) Fair value adjustments (ii) Total (i) These securities are held for trade purposes. (ii) The fair value adjustment is based on the closing price of each investment at year end. Note 10. Other current assets Prepayments Accrued income Total Note 11. Long term receivable Security deposit (unsecured) 527,000 1,720,094 (788,274) - 394,122 (45,447) 1,458,820 348,675 513,035 1,808,894 2,321,929 541,854 1,642,578 2,184,432 5,000,000 5,000,000 Deposit held by Pershing (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 67,480,289 65,596,600 (a) Movements during the year in equity accounted investment in associated companies Balance at 1 July Add: Recognised as investment during the year Gain arising from acquisition of further interests in associate Share of profits/(loss) after tax 65,596,600 58,792,688 5,877,470 1,312,764 2,426,942 944,126 (1,434,090) 7,264,655 Acquisition on additional interest in associate during the year (Note 1(v)) 303,605 544,890 Less: Dividend received/receivable Balance at 30 June (4,176,060) (4,376,701) 67,480,289 65,596,600 Euroz Limited 51 Notes to the Financial StatementsFor the year ended 30 June 2012 Note 12. Investments accounted for using the equity method (continued) (b) Interest held in the associated company Name of entity Ozgrowth Limited Westoz Investment Company Limited Country of Incorporation Principal activity Australia Australia Investment company Investment company Summarised financial information in respect of the group’s associates is set out below: (c) Summarised financial information Financial position: Total assets Total liabilities Net assets Share of associates’ net assets Financial performance: Total revenue Total profit/(loss) for the year after tax Note 13. Financial assets Fair value movement on derivatives (i) Total Ownership interest 2012 % 35.25% 22.77% 2012 $ 2011 % 31.76 20.93 2011 $ 256,809,686 286,598,020 (13,650,755) (34,138,215) 243,158,931 252,459,805 67,480,289 65,596,600 7,707,403 (5,946,607) 51,789,081 31,716,373 2,000 2,000 219,746 219,746 (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 2012. 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 Office equipment At cost Less: Accumulated depreciation Furniture, fixtures and fittings At cost Less: Accumulated depreciation 52 Annual Report 2012 2,528,511 (1,260,023) 1,268,488 31,811 (8,925) 22,886 1,190,475 (630,711) 559,764 587,965 (312,918) 275,047 2,524,118 (627,935) 1,896,183 31,170 (28,625) 2,545 1,061,736 (343,445) 718,291 603,846 (153,028) 450,818 2,126,185 3,067,837 Notes to the Financial StatementsFor the year ended 30 June 2012 Note 14. Plant and equipment (continued) Reconciliations Reconciliations of the carrying amounts of each class of property, plant and equipment at the beginning and end of the current and previous financial year are set out below: 2012 Carrying amount at 1 July 2011 Additions Depreciation/amortisation expense (Note 5) Leasehold improvements $ Plant and equipment $ Total $ 1,896,183 1,171,654 3,067,837 4,393 (632,089) 244,292 248,685 (558,248) (1,190,337) Carrying amount at 30 June 2012 1,268,487 857,698 2,126,185 2011 Carrying amount at 1 July 2010 Additions Depreciation/amortisation expense (Note 5) 225,220 2,364,472 (693,509) 359,287 584,507 1,263,903 3,628,375 (451,536) (1,145,045) Carrying amount at 30 June 2011 1,896,183 1,171,654 3,067,837 Note 15. Deferred tax assets Deferred tax asset (Note 6) Deferred tax assets comprises: Provisions Total Note 16. Trade and other payables Trade creditors Other payables and accruals Total 2012 $ 2011 $ 772,752 563,305 772,752 563,305 772,752 563,305 65,312 310,207 1,172,799 1,747,591 1,238,111 2,057,798 All trade creditors relating to brokerage and principal trading have been transferred to Pershing who provides a trust account facility as part of the clearing and settlement service. Note 17. Current tax liabilities Provision for taxation 1,487,851 3,494,336 Euroz Limited 53 Notes to the Financial StatementsFor the year ended 30 June 2012 Note 18. Short term provisions Dividends Employee entitlements (annual leave) Employee entitlements (long service leave) Total Dividends 2012 $ 2011 $ 9,341,110 21,134,214 602,920 709,760 527,055 - 10,653,790 21,661,269 This provision represents the dividend declared by the board to be paid out to shareholders on or before reporting date. Movements in each class of provisions, other than employee benefits, are set out below: Carrying amount at 1 July 2011 Additional provisions recognised Amounts paid out Carrying amount at 30 June 2012 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 Lease incentive Dividends 21,134,214 11,895,469 (23,688,573) 9,341,110 2012 $ 2011 $ 367,517 548,361 (175,151) 542,668 52,289 496,072 367,517 548,361 49,879 160,212 210,091 129,524 540,681 670,205 This provision represents the amounts of incentive received under the lease agreement for Level 14, 1 William Street, which is being amortised over the life of the lease. Movements in each class of provisions, other than employee benefits, are set out below: Lease incentive 129,524 (79,645) 49,879 Carrying amount at 1 July 2011 Amounts paid out Carrying amount at 30 June 2012 54 Annual Report 2012 Notes to the Financial StatementsFor the year ended 30 June 2012 Note 21. Contributed equity (a) Share capital Ordinary shares Consolidated entity Consolidated entity 2012 Shares 2011 Shares 2012 $ 2011 $ Issued and paid up capital - consisting of ordinary shares 143,709,388 140,894,763 89,373,600 87,261,731 (b) Movements in ordinary share capital At the beginning of the reporting period Shares issued during the year Exercise of options (i) At the end of the reporting period Consolidated entity 2012 Shares 2011 Shares 140,894,763 132,570,140 - 2,814,625 3,480,000 4,844,623 143,709,388 140,894,763 (i) Options were exercised at various times during the financial year. The options were granted on 27 February 2009 at an exercise price of 75 cents and expire on 1 March 2014. (c) Movements in ordinary share capital At the beginning of the reporting period Shares issued during the year Excercise of options Capital raising costs At the end of the reporting period (d) Ordinary shares Consolidated entity 2012 $ 2011 $ 87,261,731 79,296,164 - 2,111,869 4,350,000 3,633,467 - (17,900) 89,373,600 87,261,731 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. Ordinary shares have no par value. 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 2,814,625 options were exercised during the year at an exercise price of $0.75. There are 3,543,088 number of options on issue at 30 June 2012 (2011: 6,357,713). These options are convertible into shares at $0.75. (f ) Option Reserves The option reserve records items recognised as expenses on valuation of share based payments. There has been no movement in the options reserve. (g) Capital Management The Directors primary objective is to maintain a capital structure that ensures the lowest cost of capital available to the group. At reporting date, the group has no external borrowings. As a holder of Australian Financial Services Licenses the group is subject to externally imposed capital requirements, which have been complied with during the year. Euroz Limited 55 Notes to the Financial StatementsFor the year ended 30 June 2012 Note 22. Dividends Ordinary shares Interim dividend for the half year ended 31 December 2011 of 1.5 cents (2011 - 3 cents) per fully paid ordinary share paid on 28 January 2012. 2012 $ 2011 $ Fully franked based on tax paid @ 30% 2,554,359 4,296,456 Final dividend declared and provided for at 30 June 2012 of 6.5 cents (2011 – 15 cents) per fully paid ordinary share Fully franked based on tax paid @ 30% Total dividends provided for or paid Franked dividends 9,341,110 21,134,214 11,895,469 25,430,670 The franked portions of the dividends recommended after 30 June 2012 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 2012. Consolidated group 2012 $ 2011 $ Franking credits available for subsequent financial years based on a tax rate of 30% (2011: 30%) 11,206,555 7,132,251 The above amounts represent the balance of the franking account as at the end of the financial year, adjusted for: (a) franking credits that will arise from the payment of the current tax liability (b) franking debits that will arise from the payment of dividends recognised as a liability at the reporting date (c) franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date, and (d) franking credits that may be prevented from being distributed in subsequent financial years. The consolidated amounts include franking credits that would be available to the parent entity if distributable profits of controlled entities were paid as dividends. 56 Annual Report 2012 Notes to the Financial StatementsFor the year ended 30 June 2012 Note 23. Financial instruments (a) Financial risk management The group’s financial instruments consist of deposits with banks, trade receivables and payables, short term investments and available for sale investments. Derivative financial instruments are not used by the group. Senior executives meet regularly to analyse and monitor the financial risk associated with the financial 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 significant 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 cashflow projections, maintaining cash reserves and having no borrowings or debt. In addition, at reporting 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 2012 $ 2011 $ 1,238,111 2,057,798 The maximum exposure to credit risk, excluding the value of any collateral or security, at reporting date is the carrying amount of the financial assets disclosed in the statement of financial position. There is no collateral or security held for those assets at 30 June 2012. 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 Pershing who provides a trust account facility as part of the clearing and settlement service. The group invests in listed held for trade financial 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 held for trading financial assets. The financial performance and return of all investments are regularly reviewed by senior management. Exposure to credit risk The carrying amount of the consolidated entity’s financial 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 profit or loss Cash and cash equivalents Receivables Financial assets held for trading Long term deposit Impairment losses None of the consolidated entity’s other receivables are past due (2011: Nil) Carrying Amount 2012 $ 2011 $ 2,000 219,746 53,741,715 68,059,994 1,775,702 1,458,820 5,000,000 1,909,730 348,675 5,000,000 61,978,237 75,538,145 Euroz Limited 57 Notes to the Financial StatementsFor the year ended 30 June 2012 Note 23. Financial instruments (continued) (iv) Financial instruments composition and maturity analysis Weighted Average Effective Interest Rate Floating Interest Rate Non Interest Bearing 2012 % 2011 % 2012 $ 2011 $ 2012 $ 2011 $ FINANCIAL ASSETS Cash and cash equivalents 4.44 4.81 53,741,715 68,059,994 Receivables Financial assets held for trading Financial assets at fair value through profit and loss - - - - - - - - - - - - - - - 1,909,730 1,458,820 348,675 2,000 219,746 Long term deposit 2.75 3.5 5,000,000 5,000,000 - - Total financial assets FINANCIAL LIABILITIES 58,741,715 73,059,994 1,460,820 2,478,151 Trade and other payables - - - - 1,238,111 2,057,798 (iv) 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 profit – – 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% (v) Fair Value 2012 $ 2011 $ 411,192 (411,192) 476,420 (476,420) 411,192 (411,192) 476,420 (476,420) The following table details the consolidated entities fair value of financial instruments categorised by the following levels: Level 1: Quoted prices (unadjusted) in active markets for identical assets and liabilities Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices) Level 3: Inputs for the assets or liability that are not based on observable market data (unobservable inputs) 2012 Assets Ordinary shares Total Assets Level 1 Level 2 Level 3 Total 931,820 931,820 527,000 527,000 - - 1,458,820 1,458,820 58 Annual Report 2012 Notes to the Financial StatementsFor the year ended 30 June 2012 Note 24. Remuneration of auditors Assurance services Audit services Audit and review of financial reports for the company Fees paid to PKF Mack & Co firm Taxation services Tax compliance services Fees paid to PKF Mack & Co firm Note 25. Contingent liabilities 2012 $ 2011 $ 97,000 156,200 15,600 15,000 The parent entity and consolidated group had contingent liabilities at 30 June 2012 as follows: Secured guarantees in respect of: operating lease of a controlled group entity 791,000 791,000 Note 26. Commitments for expenditure (a) Operating leases Commitments for minimum lease payments in relation to noncancellable operating leases are payable as follows: Within one year Later than one year but not later than five years Later than five years Commitments not recognised in the financial statements 1,052,485 3,936,012 3,368,089 1,126,508 3,948,029 4,408,558 8,356,586 9,483,095 The 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. The lease on the premises at Level 18, 54-58 Mounts Bay Road is for the period of 10 years commencing 2 July 2010 and expiring on 1 July 2020. Note 27. Employee benefits Employee benefit and related on-costs liabilities Provision for employee entitlements – current Aggregate employee benefit and related oncosts liabilities Note 28. Related parties All key management personnel have the title of director. (a) Key Management Personnel Compensation Short-term employee benefits – – Executive Directors Specified executives Post-employment benefits – – Executive Directors Specified executives Total compensation 1,472,892 1,472,892 1,067,736 1,067,736 Group 2012 $ 2011 $ 3,781,851 8,220,122 4,383,179 6,549,159 12,001,973 10,932,338 150,000 365,491 515,491 150,000 271,615 421,615 12,517,464 11,353,953 Euroz Limited 59 Notes to the Financial StatementsFor the year ended 30 June 2012 Note 28. Related parties (continued) (b) Individual directors’ and executives’ compensation disclosure 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 financial year and there were no material contracts involving directors’ interest existing at year end. (c) Parent entity The ultimate parent entity within the Group is Euroz Limited. (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 beneficially, by each key management person, including related parties, is as follows: Balance at 1 July 2011 Grant as remuneration On exercise of options Bought & (sold) * Balance at 30 June 2012 2012 Directors of Euroz Limited Ordinary shares P Diamond A McKenzie J Hughes G Chessell D Young 10,000,000 9,150,000 9,900,000 3,102,000 4,202,001 Key management personnel of the consolidated entity Ordinary shares R Caldow S Yeo O Foster (resigned 3 November 2011) P Rees R Kane A Clayton A Brittain G Allen R Black N McGlew D Woods 4,500,000 3,200,000 2,101,200 1,100,000 2,330,000 2,000,000 303,400 500,000 1,800,000 217,806 350,000 M Argento (resigned 30 June 2012) 1,000,000 B Beresford (appointed 21 March 2011) B Laird J Bishop J Mackie A Fresson 2,000,000 655,000 91,112 847,000 260,511 59,610,030 *Only disclosed to date of resignation 60 Annual Report 2012 - - - - - - - - - - - - - - - - - - - - - - - - 750,000 - - - 450,000 320,000 - - 29,377 100,000 - - - 7,485 23,260 - - - - - - - 100,000 100,000 - 47,999 - - - - 10,623 - - - 10,000 12,500 - - - - 11,500 - - 10,000,000 10,000,000 10,000,000 3,102,000 4,250,000 4,950,000 3,520,000 2,101,200* 1,100,000 2,370,000 2,100,000 303,400 500,000 1,810,000 237,791 373,260 1,000,000* 2,000,000 655,000 102,612 847,000 260,511 1,680,122 292,622 61,582,774 Notes to the Financial StatementsFor the year ended 30 June 2012 Note 28. Related parties (continued) 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) *Only disclosed to date of resignation 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 Balance at 1 July 2010 Grant as remuneration On exercise of options Bought & (sold) * Balance at 30 June 2011 - - - - - - - - - - - - - - - - - - - - - 900,000 50,000 500,000 - 202,001 - - - - 100,000 - - - - - - - - - - 100,000 10,000,000 - - - - - - - - - - - - 38,000 - - 67,712 - 9,150,000 9,900,000 3,102,000 4,202,001 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 1,000,000 2,000,000 2,000,000 1,752,001 3,205,712 63,883,929 Euroz Limited 61 Notes to the Financial StatementsFor the year ended 30 June 2012 Note 28. Related parties (continued) (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 beneficially, by each key management person, including related parties, is as follows: Balance at 1 July 2011 Granted as remuneration Exercised Bought Balance at 30 June 2012 Total exercisable at 30 June 2012 Total not exercisable at 30 June 2012 2012 Directors of Euroz Limited Ordinary shares P Diamond A McKenzie J Hughes G Chessell D Young - 750,000 - - - - - - - - - (750,000) - - - Key management personnel of the consolidated entity - - - - - - - - - - - 66,765 12,425 - - - - - - - - - - - - - - - - - - - - - 200,000* 200,000* - - 233,000 233,000 100,000 100,000 - - 41,200 41,200 338,016 338,016 4,940 4,940 - - - - - - 60,000 60,000 - - - - - - (450,000) (320,000) - - (29,377) (100,000) - - - (7,485) (23,260) - - - - - - (1,680,122) 79,190 977,156 977,156 - - - - - - - - - - - - - - - - - - - - - - - Ordinary shares R Caldow S Yeo O Foster (resigned 3 November 2011) P Rees R Kane A Clayton A Brittain G Allen R Black N McGlew D Woods M Argento (resigned 30 June 2012) B Beresford B Laird J Bishop J Mackie A Fresson 450,000 320,000 200,000 - 262,377 200,000 - 41,200 271,251 - 23,260 - - 60,000 - - - 2,578,088 - - - - - - - - - - - - - - - - - - 62 Annual Report 2012 Notes to the Financial StatementsFor the year ended 30 June 2012 Note 28. Related parties (continued) (iv) Option holdings of key management personnel Balance at 1 July 2010 Granted as remuneration Exercised Bought Balance at 30 June 2011 Total exercisable at 30 June 2011 Total not exercisable at 30 June 2011 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 - - - - - (900,000) (50,000) (500,000) - (202,001) 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 (appointed14 February 2011) B Beresford (appointed 21 March 2011) 450,000 320,000 391,552 200,000 100,000 122,200 233,000 200,000 - 41,200 180,000 - 23,260 - - 4,663,213 *Only disclosed to date of resignation - - - - - - - - - - - - - - - - - - - - (100,000) - - - - - - - - - - - - - - - - - - - 750,000 750,000 - - - - - - 450,000 450,000 320,000 320,000 27,239 418,791 418,791* - - - 200,000 200,000 - - 122,200 122,200* 29,377 262,377 262,377 - - - 200,000 200,000 - - 41,200 41,200 91,251 271,251 271,251 - - - - - - 23,260 23,260 - - - - - - - - - - - - - - - - - - - - - - - - - Euroz Limited 63 (1,752,001) 147,867 3,559,079 3,559,079 Notes to the Financial StatementsFor the year ended 30 June 2012 Note 28. Related parties (continued) 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. 2012 $ 2011 $ Transactions with related parties consisting of: (i) Subsidiaries – – Loans advanced by Euroz Limited to subsidiaries 5,180,513 7,359,828 Payments of dividends to Euroz Limited by subsidiaries 10,350,000 16,450,000 (ii) Associated Companies – – 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 4,176,060 - 2,700,491 4,376,702 5,859,837 3,115,030 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 specified executives During the year ended 30 June 2012 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 50,160 73,481 Note 29. Investments in controlled entities Name of entity Euroz Securities Limited Detail Nominees Pty Limited Zero Nominees Pty Limited Country of incorporation Australia Australia Australia Westoz Funds Management Pty Ltd Australia Equity holding Class of shares Ordinary Ordinary Ordinary Ordinary 2012 % 100 100 100 100 2011 % 100 100 100 100 Cost of parent entity’s investment 2012 $ 2011 $ 25,000,000 25,000,000 - - - - 1,450,000 1,450,000 The ultimate parent entity in the wholly owned group is Euroz Limited. 64 Annual Report 2012 Notes to the Financial StatementsFor the year ended 30 June 2012 Note 30. Events occurring after reporting date The directors are not aware of any other matter or circumstance subsequent to 30 June 2012 that has significantly affected, or may significantly affect: (a) the consolidated entity’s operations in future financial years: or (b) the results of those operations in future financial years: or (c) the consolidated entity’s state of affairs in future financial years. Note 31. Reconciliation of cash flows from operating activities Profit for the period Adjustments for: Depreciation and amortisation Share of net profits of associate Realised gain in associates Changes in assets and liabilities Decrease/(increase) in trade debtors and other receivables Decrease/(increase) in prepayments Increase in accrued income (Increase)/decrease in inventories Increase in deferred tax asset Decrease in trade creditors and other liabilities Increase/(decrease) in provision for income taxes payable Increase/(decrease) in provision for deferred tax liabilities Increase in provisions Net cash from operating activities Note 32. Credit facilities Unrestricted access was available at reporting date to the following lines of credit: Credit standby arrangements Bank overdrafts Unused at reporting date Bank overdrafts 2012 $ 2011 $ 11,760,189 26,566,040 1,190,337 1,130,485 1,145,045 (7,794,638) (1,094,138) (944,127) 134,029 28,818 (1,457,729) (86,746) (166,316) (1,130,071) (1,110,144) (209,447) (818,788) (2,006,485) (180,844) 325,512 37,411 (253,131) (310,020) 480,651 422,104 75,970 8,983,208 16,750,759 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 2012 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 fixed and floating charge over the assets of Euroz Limited and Euroz Securities Limited. Euroz Limited has a bank overdraft facility as at 30 June 2012 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 fixed and floating charge over the assets of Euroz Limited. Euroz Limited 65 Notes to the Financial StatementsFor the year ended 30 June 2012 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. Weighted average number of ordinary shares and potential ordinary shares used as the denominator in calculating diluted earnings per share. 2012 Cents 8.20 8.11 2011 Cents 19.38 16.66 2012 Number 2011 Number 143,457,112 137,062,530 145,096,323 159,497,978 The profit after tax figures used to calculate the earnings per share for both the basic and diluted calculations was the same as the profit figure from income statement. 2012 $ 2011 $ 30,023,117 41,990,525 82,771,910 81,981,042 112,795,027 123,971,567 10,852,041 24,663,701 10,852,041 24,663,701 89,372,700 87,261,731 18,950,518 15,703,870 (6,566,232) (3,843,735) 186,000 186,000 101,942,986 99,307,866 15,142,118 21,487,221 - - 15,142,118 21,487,221 Note 34. Parent entity disclosures Financial position Assets Current assets Non-current assets Total assets Liabilities Current liabilities Total liabilities Equity Issued capital Retained earnings Reserves Asset revaluation reserve Option premium reserve Total equity Financial performance Profit for the year Other comprehensive income Total comprehensive income Note 35. Company details The registered office and principal place of business address of the company is: Euroz Limited Level 18 Alluvion 58 Mounts Bay Road PERTH WA 6000 66 Annual Report 2012 Notes to the Financial StatementsFor the year ended 30 June 2012 Direc tors’ D e clarati on For the year ended 30 June 2012 The directors declare that: 1. The financial statements, notes and additional disclosures included in the Directors’ report and designated as audited, are in accordance with the Corporations Act 2001 and: (a) (b) (c) comply with Accounting Standards and Corporations Regulations 2001; giving a true and fair view of the company’s and consolidated group’s financial position as at 30 June 2012 and of their performance for the year ended on that date; the financial statements are in compliance with International Financial Reporting Standards, as stated in note 1 to the financial statements. 2. The Chief Executive Officer and Chief Financial Officer have declared that: (a) (b) (c) the financial records of the company for the financial year have been properly maintained in accordance with section 295A of the Corporations Act 2001; the financial statements and notes for the financial year comply with Accounting Standards; and the financial statements and notes for the financial 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. Peter Diamond Director Andrew McKenzie Director Date: 20 August 2012 Euroz Limited 67 I ndepend ent Audit R epor t 68 Annual Report 2012 69 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF EUROZ LIMITED Report on the Financial Report We have audited the accompanying financial report of Euroz Limited, which comprises the statements of financial position as at 30 June 2012, the statements of comprehensive income, the statements of changes in equity and the statements of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration of Euroz Limited (the company) and the consolidated entity. The consolidated entity comprises the company and the entities it controlled at the year’s end or from time to time during the financial year. Directors’ Responsibility for the Financial Report The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements comply with International Financial Reporting Standards. Auditor’s Responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance about whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of the financial report that gives a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Independence In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. 15 AUDITOR’S INDEPENDENCE DECLARATION TO THE DIRECTORS OF EUROZ LIMITED In relation to our audit of the financial report of Euroz Limited for the year ended 30 June 2012, to the best of my knowledge and belief, there have been no contraventions of the auditor independence requirements of the Corporations Act 2001 or any applicable code of professional conduct. PKF MACK & CO SIMON FERMANIS PARTNER 20 AUGUST 2012 WEST PERTH, WESTERN AUSTRALIA I ndependent Audit R epor t Euroz Limited 69 70 Opinion In our opinion: (a) the financial report of Euroz Limited is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the company’s and consolidated entity’s financial positions as at 30 June 2012 and of their performance for the year ended on that date; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and (b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 1. Report on the Remuneration Report We have audited the Remuneration Report included in pages 6 to 12 of the directors’ report for the year ended 30 June 2012. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Opinion In our opinion, the Remuneration Report of Euroz Limited for the year ended 30 June 2012, complies with section 300A of the Corporations Act 2001. PKF MACK & CO SIMON FERMANIS PARTNER 20 AUGUST 2012 WEST PERTH, WESTERN AUSTRALIA 70 Opinion In our opinion: (a) the financial report of Euroz Limited is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the company’s and consolidated entity’s financial positions as at 30 June 2012 and of their performance for the year ended on that date; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and (b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 1. Report on the Remuneration Report We have audited the Remuneration Report included in pages 6 to 12 of the directors’ report for the year ended 30 June 2012. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Opinion In our opinion, the Remuneration Report of Euroz Limited for the year ended 30 June 2012, complies with section 300A of the Corporations Act 2001. PKF MACK & CO SIMON FERMANIS PARTNER 20 AUGUST 2012 WEST PERTH, WESTERN AUSTRALIA Shareholding I nfor ma tion Ordinary Shares at 30 September 2012 Distribution of Shareholders Range 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 Minimum $ 500.00 parcel at $ 0.0000 per unit Top Twenty Shareholders 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 Mr Simon David Yeo + Mrs Jennifer Dale Yeo Ice Cold Investments Pty Ltd Ice Cold Investments Pty Ltd Thorney Holdings Pty Ltd Mr Andrew William McKenzie + Mrs Catherine Patricia McKenzie Mrs Rebecca Joy Foster Australian Executor Trustees Limited Ice Cold Investments Pty Ltd Yandal Investments Pty Limited National Nominees Limited Westrade Resources Pty Ltd Mrs Catherine Elizabeth Kane BNM Holdings Pty Ltd BNM Holdings Pty Ltd Cape Bouvard Equities Pty Ltd TPIC Pty Ltd Total Total Remaining Holders Balance 70 Annual Report 2012 Total Holders 335 638 385 777 118 Units 162,793 1,904,617 3,125,934 24,106,356 114,504,705 Issued Capital % 0.11 1.32 2.17 16.76 79.63 0.01 2,253 143,804,405 100.00 Minimum Parcel Size 0 Holders 205 Units 51929 Units 43,408,901 10,420,982 3,896,166 3,500,000 2,831,000 2,760,000 2,500,000 2,200,000 2,071,500 2,000,000 1,818,189 1,600,000 1,530,000 1,449,359 1,163,200 1,160,000 1,000,000 1,000,000 1,000,000 1,000,000 88,309,297 55,495,108 % 30.19 7.25 2.71 2.43 1.97 1.92 1.74 1.53 1.44 1.39 1.26 1.11 1.06 1.01 0.81 0.81 0.70 0.70 0.70 0.70 61.41 38.59 100.00 Euroz S ecur iti es Limited Contac t D e ta i ls Institutional Dealing Andrew McKenzie Ben Laird Chris Webster Jay Hughes Jonathan van Hazel Peter Diamond Peter Schwarzbach Rob Black Russell Kane Tim Bunney Corporate Austen Fresson Brian Beresford David Riley Douglas Young Mark Laybourn Nathan Ling Nick McGlew Robbie Harrison Tamara Stampfli Karlie Torrens Equities Research Andrew Clayton Bridget Watkins Gavin Allen Greg Chessell Jon Bishop Kristan Harvey Michael Skinner Peta Gale Richard Hamersley Retail Dealing Ben Statham Brett Stapleton Cameron Murray Christian Zerovich Giles McCaw Ian Dodson James Mackie Joel Pember Leigh Travers Lucas Robinson Matt Williamson Nicholas Gorton Richard Caldow Richard Gardner Ryan Stewart Sian Hepburn Simon Yeo Stephen Grove Tim Bennett Tom Ruello Operations Adelaide de Vis Alison Wreford Angie Wood Anthony Brittain Anthony Hewett Bindi Stickland Catherine Horton Dolly Lim Emma Whitehurst Jayde Gouveia Hayley Graham Sheri Chandran Tania Castlehow Fax +61 8 9488 1478 Managing Director Institutional Advisor 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 Executive Assistant Executive Assistant Fax +61 8 9488 1479 Resources Analyst Publications Junior Industrials Analyst Head of Research Resources Analyst Resources Associate Analyst Resources Analyst Publications & Events Coordinator Industrials Analyst Fax +61 8 9488 1477 Equities Advisor Equities Advisor Equities Advisor Equities Advisor Equities Advisor Equities Advisor Equities Advisor Equities Advisor Equities Advisor Equities Advisor Equities Advisor Equities Advisor Equities Advisor Equities Advisor Equities Advisor Dealers Assistant Head of Retail Dealing Equities Advisor Equities Advisor Equities Advisor Telephone +61 8 9488 1407 +61 8 9488 1429 +61 8 9488 1412 +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 1472 +61 8 9488 1460 +61 8 9488 1490 +61 8 9488 1469 +61 8 9488 1421 Telephone +61 8 9488 1427 +61 8 9488 1433 +61 8 9488 1413 +61 8 9488 1409 +61 8 9488 1481 +61 8 9488 1463 +61 8 9488 1431 +61 8 9488 1411 +61 8 9488 1414 Telephone +61 8 9488 1417 +61 8 9488 1435 +61 8 9488 1440 +61 8 9488 1436 +61 8 9488 1462 +61 8 9488 1442 +61 8 9488 1416 +61 8 9488 1476 +61 8 9488 1482 +61 8 9488 1424 +61 8 9488 1466 +61 8 9488 1473 +61 8 9488 1403 +61 8 9488 1444 +61 8 9488 1441 +61 8 9488 1447 +61 8 9488 1404 +61 8 9488 1410 +61 8 9488 1432 +61 8 9488 1420 Telephone Fax +61 8 9488 1477 +61 8 9488 1471 Compliance Assistant +61 8 9488 1402 New Accounts Officer +61 8 9488 1468 Office Assistant Chief Operating and Financial Officer +61 8 9488 1401 Company Secretary/ Head of Risk Mgt. +61 8 9488 1428 +61 8 9488 1439 Acting Head of Settlements +61 8 9488 1446 Settlements/Nominees +61 8 9488 1415 Financial Controller +61 8 9488 1465 Settlements/Nominees +61 8 9488 1474 New Accounts Assistant +61 8 9488 1400 Reception +61 8 9488 1485 Assistant Accountant +61 8 9488 1425 Bookings Email amckenzie@euroz.com.au blaird@euroz.com.au cwebster@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 driley@euroz.com.au dyoung@euroz.com.au mlaybourn@euroz.com.au nling@euroz.com.au nmcglew@euroz.com.au rharrison@euroz.com.au tstampfli@euroz.com.au tmickle@euroz.com.au Email aclayton@euroz.com.au bwatkins@euroz.com.au gallen@euroz.com.au gchessell@euroz.com.au jbishop@euroz.com.au kharvey@euroz.com.au mskinner@euroz.com.au pgale@euroz.com.au rhamersley@euroz.com.au Email bstatham@euroz.com.au bstapleton@euroz.com.au cmurray@euroz.com.au czerovich@euroz.com.au gmccaw@euroz.com.au idodson@euroz.com.au jmackie@euroz.com.au jpember@euroz.com.au ltravers@euroz.com.au lrobinson@euroz.com.au mwilliamson@euroz.com.au ngorton@euroz.com.au rcaldow@euroz.com.au rgardner@euroz.com.au rstewart@euroz.com.au shepburn@euroz.com.au syeo@euroz.com.au sgrove@euroz.com.au tbennett@euroz.com.au truello@euroz.com.au Email adevis@euroz.com.au awreford@euroz.com.au awood@euroz.com.au abrittain@euroz.com.au ahewett@euroz.com.au bstickland@euroz.com.au chorton@euroz.com.au dlim@euroz.com.au ewhitehurst@euroz.com.au jgouveia@euroz.com.au reception@euroz.com.au schandran@euroz.com.au tcastlehow@euroz.com.au Westoz Funds Management Ltd Phil Rees Dermot Woods Fax +61 8 9321 8288 Fund Manager Fund Manager Telephone +61 8 9321 7015 +61 8 9321 7023 Email prees@westozfunds.com.au dwoods@westozfunds.com.au Euroz Limited 71 72 Annual Report 2012 Euroz Limited Level 18 Alluvion 58 Mounts Bay Road Perth WA 6000 Telephone: (08) 9488 1400 Facsimile: (08) 9488 1477 Website: www.euroz.com.au w w w . e u r o z . c o m . a u i n g i s e D & n o i t a c n u m m o C t h g i s n I

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