FSA GROUP LTD
ANNUAL REPORT 2008
C O R P O R A T E I N F O R M A T I O N
DIRECTORS
Sam Doumany - Non-Executive Chairman
Tim Odillo Maher - Executive Director
Deborah Southon - Executive Director
Hugh Parsons - Non-Executive Director
Stan Kalinko - Non-Executive Director
COMPANY SECRETARIES
Duncan Cornish
Anthony Carius
REGISTERED OFFICE AND CORPORATE OFFICE
Level 5, 60 Edward Street
Brisbane QLD 4000
Phone: + 61 (07) 3303 0690
Fax: + 61 (07) 3303 0601
PRINCIPAL BUSINESS OFFICE
Level 3, 70 Phillip Street
Sydney NSW 2000
Phone: +61 (02) 9293 6096
Fax: +61 (02) 9290 6098
SOLICITORS
Hopgood Ganim
Level 8, Waterfront Place
1 Eagle Street
Brisbane QLD 4000
SHARE REGISTER
Link Market Services Ltd
Level 12, 300 Queen Street
Brisbane QLD 4000
Phone: +61 (02) 8280 7454
AUDITORS
PKF
Level 6, 10 Eagle Street
Brisbane QLD 4000
COUNTRY OF INCORPORATION
Australia
STOCK EXCHANGE LISTING
Australian Stock Exchange Ltd
ASX Code: FSA
INTERNET ADDRESS
www.fsagroup.com.au
AUSTRALIAN BUSINESS NUMBER
ABN 98 093 855 791
CONTENTS
1. CHAIRMAN’S REPORT
2. FINANCIAL HIGHLIGHTS
3. REVIEW OF OPERATIONS AND FUTURE DEVELOPMENTS
4. OPERATING RESULTS
5. DIRECTORS’ REPORT
6. AUDITOR’S INDEPENDENCE DECLARATION
7. SHAREHOLDER INFORMATION
8. CORPORATE GOVERNANCE STATEMENT
9.
INCOME STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2008
10. BALANCE SHEETS AS AT 30 JUNE 2008
11. STATEMENTS OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2008
12. CASH FLOW STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2008
13. NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2008
14. DIRECTORS’ DECLARATION
15. INDEPENDENT AUDITOR’S REPORT
2
3
4
8
10
24
25
27
30
31
32
33
34
70
71
1CHAIRMAN’S REPORT
Dear Shareholder,
Despite the economic turbulence in Australia and particularly
overseas, I am pleased to report the 2008 financial year has
been successful for FSA Group Ltd (FSA Group or the
Company).
The Company generated $36.3 million in revenue, achieved a
profit after tax attributable to members of $2.68 million for the
2008 financial year and is in a strong financial position.
During the financial year FSA Group successfully transitioned
its business from solely a “fee for service” model to a “fee for
service and direct lending” model. Direct lending, which now
includes mortgage finance, bridging finance and factoring
finance, will be the platform for future growth. It has been
able to provide these services since it secured funding lines
of $220 million from Westpac Banking Corporation, of which
$210 million is non-recourse.
As predicted, the transition to direct lending had a once off
downward impact on profitability during the 2008 financial
year. This was because the shift from broker to lender
caused a shift in revenue from an upfront revenue model to a
deferred revenue model. The cost of establishing the
residential mortgage lending division reduced profit before
income tax by $1.8 million for the 2008 financial year. All
lending divisions are now profitable and will contribute
significantly to earnings during the 2009 financial year.
The “Fox Symes” subsidiary retained its position as the
leading provider of debt solutions to individuals. It currently
administers around 50% of all debt agreements and is the
largest individual mortgage broker of non-conforming
residential mortgages in Australia, brokering new business in
excess of $200 million per annum.
The “180 Group” subsidiary is the leading provider of debt
solutions to businesses, which include a range of finance
options. The Company is planning to secure an additional
non-recourse wholesale line of credit to further support the
growth of factoring finance.
The Company will continue to focus on and invest in the
future growth of the business. The Directors have committed
to continuing the current policy of retaining otherwise
distributable earnings for re-investment in its direct lending
services and therefore have not recommended a dividend.
With consumer and small business debt at record levels it is
inevitable there will be continued strong demand for our
comprehensive range of debt solutions and direct lending
services.
I am confident of substantial growth for the Company in the
financial year ahead and would like to conclude with my
sincere appreciation to my fellow directors, all our executives
and staff for their contribution to the successes of the
current year.
Sam Doumany
Chairman
25 September 2008
2
2
A N N U A L R E P O R T 2 0 0 8
2FINANCIAL HIGHLIGHTS
REVENUE
NET ASSETS
36.3
33.6
21.8
$40m
$30m
$20m
13.9
14.2
10.9
$10m
$0m
$8m
$6m
$4m
$2m
2003
2004
2005
2006
2007
2008
PROFIT AFTER TAX
(Attributable to Members)
6.5
2.5
2.7
1.2
1.2
-1.7
$0m
22.6
18.9
11.9
4.6
3.1
1.9
2003
2004
2005
2006
2007
5
2008
BASIC EARNINGS PER SHARE
6.24
2.85
2.37
1.4
1.38
-2.05
$25m
$20m
$15m
$10m
$5m
$0m
8c
6c
4c
2c
0c
-2c
-$2m
2003
2004
2005
2006
2007
2008
2003
2004
2005
2006
2007
2008
F S A G R O U P L I M I T E D
3
3REVIEW OF OPERATIONS
AND FUTURE DEVELOPMENTS
BACKGROUND
PERSONAL DEBT
FSA Group is the leading provider of debt solutions to
individuals and businesses in Australia, and, with the
uncertain economic circumstances over the past 12 months,
demand for the range of solutions offered by the Company
has increased.
Its subsidiary Fox Symes offers a range of debt solutions to
individuals which include budgeting assistance, informal
creditor arrangements, arrangement of third party
consolidation loans and mortgage finance, debt agreements,
personal insolvency agreements and bankruptcy assistance.
Its subsidiary 180 Group offers a range of debt solutions to
businesses that are experiencing short term cash flow
problems. These include the preparation of strategic plans,
creditor negotiation, arrangement of third party finance, sale
of business, liquidation of the company and contingent
liability management.
FSA Group has broadened its debt solutions to include a
range of direct lending services. These now include
mortgage finance, bridging finance and factoring finance. It
has been able to provide these services since it secured
funding lines of $220 million from Westpac Banking
Corporation, of which $210 million is non-recourse.
The subsidiary “Fox Symes” is the leading provider of debt
solutions to individuals in Australia. The key solutions which
the Company offers to indebted individuals are:
• A debt agreement
• Mortgage finance as broker and principal lender
• A personal insolvency agreement
• Bankruptcy
Not all individuals can rely upon or need the solutions above.
In other instances the Company can assist individuals
through additional debt solutions such as budgeting
assistance and advocating with the primary creditor.
Debt Agreement
A debt agreement, which was introduced into the Bankruptcy
Act in 1996, is a simple way for an indebted individual to
come to an arrangement with their creditors. It is an
alternative to going bankrupt and is a binding agreement
between the individual and their creditors.
The Company is the largest provider of debt agreements in
Australia and currently administers around 50% of all debt
agreements.
NUMBER OF INDIVIDUALS ENTERING INTO BANKRUPTCY
30,000
25,000
21,846
26,378
24,408
23,373 23,902 24,114
22,639
20,497 20,501
22,299
25,249 25,961
20,000
15,000
10,000
5,000
0
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
4
A N N U A L R E P O R T 2 0 0 8
3REVIEW OF OPERATIONS
AND FUTURE DEVELOPMENTS
PERSONAL DEBT continued
8,000
7,000
6,000
5,000
4,000
3,000
2,000
5,382
4,866
4,682
4,445
3,258
1,223
1,000
802
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
NUMBER OF INDIVIDUALS ENTERING
INTO A DEBT AGREEMENT
6,517
6,620
% OF DEBT AGREEMENTS ADMINISTERED BY
FSA GROUP MARKET SHARE
60% 59%
50%
49%
52%
51%
47%
40%
20%
0
2003
2004
2005
2006
2007
2008
Since 2001 the Company has administered around 20,000 debt agreements. The commitment of debtors to debt agreements and
the benefit gained from them by creditors is evident from the dividend distribution. Over the past six financial years the Company
has made dividend payments under debt agreements to creditors of over $100 million.
DIVIDENDS PAID TO CREDITORS
BY FSA GROUP
29.4
$30m
22.5
$20m
18.8
15.2
$10m
10.2
4.8
DIVIDEND RETURNS
BANKRUPTCIES VS DEBT AGREEMENTS
Item
Bankruptcies
ITSA
Debt
Agreements
FSA Group
3 year cases -
compounding
average
61,000
9,000
Dividends paid
FY 2007
$16.8m
$22.5m
$0m
2003
2004
2005
2006
2007
2008
Dividends paid
FY 2008
Not yet
available
$29.4m
F S A G R O U P L I M I T E D
5
3REVIEW OF OPERATIONS
AND FUTURE DEVELOPMENTS
Mortgage Finance
The Company is the largest individual mortgage broker of
non-conforming residential mortgages in Australia, brokering
new business in excess of $200 million per annum.
The non-conforming residential mortgage market comprises
lenders who provide loan products to individuals unlikely to
meet or “conform” to the rules of traditional lenders. The
borrower is usually a creditworthy individual with unique
circumstances or those who have experienced temporary
problems and need to refinance their debts.
In addition to acting as a broker of mortgage finance, the
Company can, where applicable, be the principal lender.
Personal Insolvency Agreements and Bankruptcy
Some individuals with unmanageable debt may consider
voluntary bankruptcy as the most appropriate solution for
their situation. The Company has a Registered Trustee to
assist individuals in these circumstances. This service, which
can also assist individuals considering submitting a Personal
Insolvency Arrangement to their creditors, is a logical
complement to the debt solution core business.
CORPORATE DEBT
The subsidiary “180 Group” is the leading provider of debt
solutions to businesses that are experiencing short term
cash flow problems.
The primary business assisted by the Company normally has
annual revenue of less than $3 million. The role the Company
fulfils is to review the client company’s business performance
and, based on the evidence ascertained, present the
directors of the client company with a range of solutions to
address and resolve the underlying issues.
The key solutions which the Company offers to indebted
businesses are:
• A strategic plan
• Creditor negotiation
• Arrangement of finance
• Sale of business
• Liquidation of the company
• Contingent liability management.
The arrangement of finance plays a critical role in the debt
solutions provided by the Company. There is a range of
finance solutions for which the Company acts as a broker on
behalf of the client company.
In addition to acting as a broker of finance, the Company
can, where applicable, also be the lender. The Company can
provide mortgage, bridging and factoring finance.
While the Company currently deals mostly with client
companies with annual revenue of less than $3 million the
future growth strategy is to start assisting target client
companies with revenue greater than $3 million.
LENDING
The provision of direct lending services is pivotal to the
Company’s growth strategy. Direct lending will be the platform
for growth and will allow FSA Group to:
• Act as principal lender as well as broker;
• Assist more clients;
• Diversify and increase income; and
• Capture greater margin and create longer term annuity
income streams.
The Company’s direct lending services now include
mortgage, bridging and factoring finance.
Mortgage Finance
In May 2007, the Company announced it had secured non-
recourse funding for its residential mortgage lending
business with Westpac committing funding of $210 million.
The funding facility will enable the Company to act as
principal mortgage lender as well as a mortgage broker.
The entity created is Fox Symes Home Loans Pty Ltd
(“FSHL”). The Company owns 100% of FSHL reducing to 90%
with the balance of the equity equally shared between
Westpac Direct Equity Investments (through an option
agreement) and FSHL senior management (through a
converting share agreement).
6
A N N U A L R E P O R T 2 0 0 8
3REVIEW OF OPERATIONS
AND FUTURE DEVELOPMENTS
LENDING continued
FUTURE DEVELOPMENTS
The Company’s vision for the future is to be able to meet the
needs of clients throughout their entire financial lifecycle. This
will be achieved through the strengthening and improving of
current debt solutions as well as adding new solutions and
products to meet the diverse needs of a growing pool of
customers. This process commenced with the introduction of
direct lending to our clients.
Over the next twelve months the Company will continue this
process. While the economic climate remains favourable for
growth in the debt solutions area, the Company envisages
that the demand for money management solutions will be a
growth area and will therefore invest in developing a range of
appropriate solutions which meet customer needs.
The Company will continue to investigate and explore growth
opportunities. These may include the acquisition of additional
business and the development of additional products.
The loan portfolio is being funded through the “Fox Symes
Home Loans Warehouse Trust” with Westpac and the
Company committing funding of $210 million and $2 million
respectively. The funding of the “Fox Symes Home Loans
Warehouse Trust” is on a non-recourse basis to FSA Group.
At the end of June 2008 the mortgage loan pool was
$90 million.
Bridging and Factoring Finance
Bridging finance plays an important role in corporate debt
solutions. All bridging finance is secured by a registered or
registrable mortgage over real property and as secondary
security a charge over business assets. It is utilised by
borrowers until more suitable finance facilities can be
arranged.
Many of the Company’s business clients which have gone
through an informal or formal reconstruction find it difficult to
obtain finance to cash flow their business. Factoring finance
becomes a key source of finance for these clients. The
Company, in addition to acting as a broker to factoring
financiers for larger transactions, has established its own
factoring finance division. The Company secures its funds
against each client’s debtors. It can also require a registered
or registrable mortgage over real property.
In November 2007, the Company announced it had secured
funding for its bridging and factoring finance activities with
Westpac committing funding of $10 million. At the end of
June 2008 the loan pool for bridging and factoring finance
exceeded $11 million.
FSA Group is planning to secure an additional wholesale line
of credit to further support the growth of factoring finance.
F S A G R O U P L I M I T E D
7
4OPERATING RESULTS
FSA Group’s profit after tax attributable to members of the
company for the year ended 30 June 2008 was $2.68 million.
Profit before tax compared with the previous financial year
was down some $4.0 million to $4.4 million due to specific
events which impacted on profit and are discussed below.
Events Impacting on Profit for the 2008 Financial Year
As noted above profit before tax for the 2008 financial year
was affected by some $4.0 million to $4.4 million due to the
following:
The key measures for the 2008 financial year compared to
the previous corresponding period are as follows:
• Consolidated Revenue of $36.29m up 7.8%
• Consolidated Profit Before Tax (and before minority
interests) of $4.74m down 51.1%
• Consolidated Profit After Tax (attributable to members of
the company) of $2.68m down 58.8%
• Consolidated Net Assets of $22.6m up 19.3%
• Consolidated Net Tangible Asset Backing per Share of
16.2c up 14.9%
• Basic Earnings per Share of 2.37c down 62.1%
The Directors have decided to retain otherwise distributable
earnings for re-investment in FSA Group’s direct lending
services to allow for further growth and therefore have not
recommended a dividend.
Significant Milestones
• The second half of the year delivered strong trading
performance from all divisions.
• The debt agreement division’s market share grew from
47% to 51%.
• The transition to direct lender was completed at year end.
• Westpac renewed the $210 million mortgage facility for a
further term. At the end of June 2008 the mortgage loan
pool was $90 million.
• Westpac approved a $10m bridging and factoring finance
facility. At the end of June 2008 the loan pool for bridging
and factoring finance exceeded $11 million.
• Overall demand for services has grown across all
divisions.
• Establishment of the residential mortgage lending
division
As predicted the cost of establishing the residential
mortgage lending division lead to a pre tax operating loss
of $1.8 million for the 2008 financial year. This division is
now profitable.
• Effective changes to the debt agreement division
During the first half of the 2008 financial year this division
underwent major reforms which included substantial
changes to processes and the IT platform. These reforms,
due in part to new legislation, are now complete and the
cost affected profit before tax by some $1.2 million to $1.6
million.
• Discounting of non current receivables
FSA Group now receipts its debt agreement
administration fee in parity with creditors. The effect of
discounting these non current receivables resulted in a
reduction in profit before tax for the 2008 financial year of
$1.0m. This discounted amount is progressively added
back to revenue as effective interest income over the next
3 years.
Key innovation - Establishment of the lending platform
At the start of the 2008 financial year, FSA Group
commenced the process of transitioning the business from a
“fee for service” model to a “fee for service and direct
lending” model. Direct lending for which FSA Group acts as
principal lender rather than broker includes mortgage
finance, bridging finance and factoring finance.
As predicted, the transition to direct lending had a once off
downward impact on profitability during the 2008 financial
year. This was because the shift from broker to lender
caused a shift in revenue from an upfront revenue model to a
deferred revenue model. Previously as a broker, FSA Group
was paid an upfront commission by third party lenders for
mortgage, bridging and factoring finance referrals, whereas
now as principal lender it does not receive third party upfront
commissions.
All lending divisions, subsequent to year end, are profitable.
8
A N N U A L R E P O R T 2 0 0 8
Debt Agreement Division
On 1 July 2007 the Federal Government reforms to the
Bankruptcy Act took effect. The reforms introduced major
changes to the administration of debt agreements. To
accommodate the reforms we invested significantly in re-
training our staff and improving our delivery platforms during
the 2008 financial year. These changes which were
significant meant that during the transition period fewer
clients were assisted. This transition is now complete.
The debt agreement division has performed strongly during
the period January to June 2008. During this period it
assisted a record number of clients. This growth is likely to
continue given the current economic conditions.
FSA Group’s market share for debt agreements grew over
the 2008 financial year. It now has a 51% share of the market
compared with a 47% share for the same period in the
previous year.
The commitment of debtors to debt agreements and the
benefit gained from them by creditors is evident from the
dividend distribution. $29.4m of dividends were paid by FSA
Group to creditors in the 2008 financial year. This is an
increase of 31% compared to the previous financial year.
Conclusion
Demand across all divisions has grown incrementally across
the year driven primarily by the current economic
environment. This has been particularly noticeable in the
consumer debt area. As a consequence FSA Group is
experiencing record demand for its services. This is likely to
continue throughout the 2009 financial year.
4OPERATING RESULTS
Key innovation - Establishment of the lending platform
continued
Mortgage Finance
In July 2007, FSA Group launched its residential mortgage
lending business with Westpac committing non-recourse
funding of $210 million for an initial term of 364 days.
Following the recent annual review by Westpac, this facility
was renewed for a further term of 364 days.
At the end of June 2008 the mortgage loan pool was $90
million.
The key strengths of FSA Group’s residential mortgage
lending business include:
• Low “loan to valuation ratios” (weighted average <65%)
• Low average loan size (<$200,000)
• High concentration of income certified (“Full Doc”)
borrowers (>85%)
• Broad geographical spread around Australia
This means that the mortgage loan pool is of a high quality
which, in turn, means only low levels of credit support will be
required.
FSA Group continues to act as a mortgage broker to third
party lenders for approximately 50% of loan applications –
broking remains a key component of the Group’s revenue.
Bridging and Factoring Finance
The provision of finance plays an important role in the debt
solutions provided to small businesses. There is a range of
finance solutions for which FSA Group acts as a broker on
behalf of its clients. These include bridging finance, factoring
finance, plant and equipment finance, mortgage finance and
inventory finance.
FSA Group also acts as principal lender for bridging and
factoring finance utilising the $10 million facility approved by
Westpac in November 2007. At the end of June 2008 the loan
pool for bridging and factoring finance exceeded $11m.
FSA Group is planning to secure an additional non-recourse
wholesale line of credit to further support the growth of
factoring finance.
F S A G R O U P L I M I T E D
9
5DIRECTORS’ REPORT
Your Directors present their report for the year ended 30
June 2008.
DIRECTORS
The Directors of the Company at any time during or since the
end of the financial year are:
Sam Doumany
Tim Odillo Maher
Deborah Southon
Hugh Parsons
Stan Kalinko
Directors have been in office since the start of the financial
year to the date of this report unless otherwise stated.
Since 1983 Mr Doumany has operated a consultancy
practice providing services in government relations, corporate
strategy and market development. Mr Doumany was also
retained by Ernst & Young in an executive consultancy role
between 1991 and 2002. Significant assignments for Ernst &
Young include the Coutts and Bartlett Receiverships as well
as major submissions to the Federal Government. He has
also held numerous executive and non-executive board
positions, many as Chairman, for private and public
companies, industry authorities/associations and review
committees.
Mr Doumany holds a Bachelor of Science from the University
of Sydney and is a member of the Australia Institute of
Company Directors.
Other current (listed company) directorships
Sam Doumany (Non-Executive Chairman)
Nil
Experience and Expertise
Former (listed company) directorships in last 3 years
Mr Doumany was appointed as a Non-Executive Director on
18 December 2002 and was appointed Chairman on 30
June 2003.
Nil
Special responsibilities
Mr Doumany commenced his career in economic research,
agribusiness and marketing before embarking on a
distinguished political career as a member of parliament in
Queensland in 1974.
Between 1974 and 1983 Mr Doumany served on several
parliamentary committees, the Liberal Party’s State and
Federal Rural Policy Committees and the Queensland Liberal
Party State Executive. Elevated to the Cabinet in 1978, Mr
Doumany served firstly as Minister for Welfare and Corrective
Services before serving as Minister for Justice, Queensland
Attorney-General and the Deputy Leader of the Liberal
Parliamentary Party until late 1983.
Throughout his parliamentary and ministerial career Mr
Doumany worked closely, at a senior level, with a wide range
of key professional, industry and community organisations.
Member of the Company’s Audit and Risk Management
Committee
Interest in shares and options
Ordinary Shares
Options ($0.25 @ 31/01/10)
Options ($0.98 @ 31/01/10)
Options ($0.60 @ 31/01/10)
Convertible Redeemable Preference Shares
1,000,000
-
-
-
-
10
A N N U A L R E P O R T 2 0 0 8
5
DIRECTORS’ REPORT
Tim Odillo Maher (Executive Director)
Deborah Southon (Executive Director)
Experience and Expertise
Experience and Expertise
Mr Odillo Maher was appointed on 30 July 2002. Mr Odillo
Maher’s background has been in banking and finance, before
concentrating on insolvency and corporate finance
assignments. He has worked at ANZ Banking Corporation
and Star Dean Wilcocks Chartered Accountants. Mr Odillo
Maher holds a Bachelor of Business Degree (majoring in
Accounting and Finance) from Australian Catholic University
and is a Certified Practicing Accountant. His work experience
has included special reviews of companies experiencing
financial difficulties, the rationalisation and re-organisation of
businesses, and the implementation of turnaround and exit
strategies for businesses, including support plans and asset
disposal programmes.
Other current (listed company) directorships
Nil
Ms Southon was appointed on 30 July 2002. Ms Southon
has attained a wealth of experience in the government and
community services sectors having worked for the
Commonwealth Department of Health and Family Services,
the former Department of Community Services, and the
Smith Family. Ms Southon has successfully managed a
programme and administration budget exceeding $150
million and was part of a management team which oversaw
a significant growth in client numbers and service delivery
which stemmed from the implementation of fresh legislation.
Ms Southon has an Executive Certificate in Leadership &
Management (University of Technology, Sydney) and a
Bachelor of Arts Degree (Sydney University). She also has
qualifications in Speech and Drama (AMEB) and has
undertaken post graduate management studies at the
Australian Graduate School of Management.
Other current (listed company) directorships
Former (listed company) directorships in last 3 years
Nil
Nil
Special responsibilities
Nil
Interest in shares and options
Ordinary Shares
Options ($0.25 @ 31/01/10)
Options ($0.98 @ 31/01/10)
Options ($0.60 @ 31/01/10)
Convertible Redeemable Preference Shares
16
Former (listed company) directorships in last 3 years
Nil
Special responsibilities
40,795,717
Nil
-
-
-
Interest in shares and options
Ordinary Shares
Options ($0.25 @ 31/01/10)
Options ($0.98 @ 31/01/10)
Options ($0.60 @ 31/01/10)
Convertible Redeemable Preference Shares
12,946,533
-
-
-
-
F S A G R O U P L I M I T E D
11
5DIRECTORS’ REPORT
Hugh Parsons (Non-Executive Director)
Stan Kalinko (Non-Executive Director)
Experience and Expertise
Experience and Expertise
Mr Parsons was appointed on 1 August 2006.
Mr Kalinko was appointed on 9 May 2007.
Mr Parsons commenced his career in 1969 working for
Coopers & Lybrand in London and overseas.
Mr Kalinko commenced his career in South Africa and spent
20 years as a practising solicitor.
Between 1972 and 1985 he worked for Binder Hamlyn & Co
(in Audit and Banking), became a Partner in 1975 and Sydney
Managing Partner and National Executive between 1983 and
1985. Binder Hamlyn & Co merged with Ernst & Whinney in
1985, subsequently Ernst & Young 1985, where he
specialised in insurance and banking.
Mr Parsons became the Finance Director of Schroders
Australia Group between 1987 to 1992 and between 1992 to
1996 acted as a consultant to Price Waterhouse (in Process
Re-Engineering, Banking), including 10 months in Bangkok
with Commercial Bank of Siam.
Between 1997 and July 2006 he has been the Executive
Director of the Insolvency Practitioners Association. In the
same period he was a director of a major overseas
corporation.
Mr Parsons holds the following qualifications/memberships:
FCA, SA Fin., MAICD.
Other (listed company) current directorships
Nil
Former (listed company) directorships in last 3 years
Nil
Special responsibilities
In late 1983, he migrated to Australia and spent 1 year as an
associate at Stephen Jaques Stone James, now Mallesons
Stephen Jaques.
Between 1985 and 1989 he worked as a merchant banker for
Kleinwort Benson Australia (“KBA”), a subsidiary of the
largest merchant bank in the United Kingdom at the time,
until KBA was sold to Security Pacific Ltd. Mr Kalinko
continued to work there until 1991.
For 16 years prior to joining the board of FSA, Mr Kalinko was
a partner at Deacons, a national and international law firm.
He specialised primarily in corporate and commercial law,
focussing on mergers and acquisitions, management buy-
outs and joint ventures, and advising Company Directors and
Underwriters on capital raisings.
He spent 8 years on the board of Deacons in Sydney, 3
years on their national board, 10 years as the business unit
leader of their Banking and Finance Practice Group and 3
years as Chairman of the Sydney office.
Mr Kalinko retired from Deacons on 30 June 2007.
Mr Kalinko is a Fellow of the Australian Institute of Company
Directors and has a Bachelor of Commerce, Bachelor of Law
and Higher Diploma in Tax. He is also an accredited
mediator.
Other (listed company) current directorships
Chairman of the Company’s Audit and Risk Management
Committee
Nil
Interest in shares and options
Ordinary Shares
Options ($0.25 @ 31/01/10)
Options ($0.98 @ 31/01/10)
Options ($0.60 @ 31/01/10)
Convertible Redeemable Preference Shares
-
500,000
-
-
-
Former (listed company) directorships in last 3 years
Nil
Special responsibilities
Member of the Company’s Audit and Risk Management
Committee
12
A N N U A L R E P O R T 2 0 0 8
5
DIRECTORS’ REPORT
Stan Kalinko (Non-Executive Director) continued
PRINCIPAL ACTIVITIES
Interest in shares and options
Ordinary Shares
Options ($0.25 @ 31/01/10)
Options ($0.98 @ 31/01/10)
Options ($0.60 @ 31/01/10)
10,000
-
250,000
250,000
Convertible Redeemable Preference Shares
-
SECRETARIES
Mr Duncan Cornish and Mr Anthony Carius were joint
Secretaries of the Company during the period and until the
date of this report.
Duncan Cornish
Mr Cornish has more than fifteen years experience in the
accountancy profession both in England and Australia, mainly
with the accountancy firms Ernst & Young and
PriceWaterhouseCoopers. He has extensive experience in all
aspects of company financial reporting, corporate regulatory
and governance areas, business acquisition and disposal
due diligence, capital raising and company listings and
company secretarial responsibilities.
Mr Cornish holds a Bachelor of Business (Accounting) and is
a member of the Australian Institute of Chartered
Accountants. He is also the Company Secretary of several
other ASX listed companies.
Mr Cornish is also the joint secretary on the Company’s Audit
and Risk Management Committee.
Anthony Carius (appointed 2 January 2008)
Mr Carius has worked for nine years in accounting, primarily
with accounting firm PKF International in both Australia and
England. His experience consists of providing mainly
assurance and corporate services to range of listed and non-
listed companies across various industries.
He holds a Bachelor of Business degree and a Graduate
Diploma from the Institute of Chartered Accountants in
Australia. He is also a member of the Institute of Chartered
Accountants in Australia.
Mr Carius serves as the Company’s Chief Financial Officer
and is also the joint secretary on the Company’s Audit and
Risk Management Committee.
The principal activities of the Consolidated Entity during the
period were providing debt solutions and direct lending
services to individuals and businesses.
OPERATING RESULTS
The consolidated profit from ordinary activities for the
Consolidated Entity after providing for income tax and
eliminating outside equity interests was $2,681,116 (2007:
$6,519,690).
DIVIDENDS PAID OR RECOMMENDED
There were no dividends paid or recommended during or
since the financial year.
REVIEW OF OPERATIONS
Detailed comments on operations up to the date of this
report are included separately in the Annual Report under
Review of Operations and Future Developments.
REVIEW OF FINANCIAL CONDITION
Capital structure
Changes to the Company’s capital structure during or since
the end of the financial year are as follows:
On 12 July 2007, 400,000 ordinary shares were issued on
exercise of 400,000 $0.10 options;
On 7 August 2007, 200,000 ordinary shares were issued in
consideration for services rendered;
On 2 October 2007, 8 Convertible Redeemable Preference
Shares (“CRPS”) were converted pursuant to the terms of the
purchase agreement of 180 Group, which was acquired on
21 April 2006 and 180 Group exceeding its first profit target.
The 8 CRPS were converted into 8,000,000 ordinary shares;
On 11 April 2008, 250,000 options exercisable at $0.60 on or
before 31 January 2010 were issued as part of Director’s
remuneration;
On 8 August 2008, 375,000 options exercisable at $0.60 on
or before 31 January 2010 were issued as part of executive
remuneration pursuant to the Company’s ESOP.
F S A G R O U P L I M I T E D
13
5DIRECTORS’ REPORT
Financial position
AFTER BALANCE DATE EVENTS
The net assets of the Consolidated Entity have increased by
$3,658,910 from that at 30 June 2007 to $22,562,851 at 30
June 2008.
There have been no events since the end of the financial
year that impact upon the financial report as at 30 June
2008, except as follows:
The Consolidated Entity’s working capital, being current
assets less current liabilities has improved from $10,941,394 in
2007 to $16,287,518 in 2008.
• On 15 August 2008, Fox Symes Home Loans Warehouse
Trust #1’s $210m Warehouse facility was renewed until 15
May 2009.
Treasury policy
FUTURE DEVELOPMENTS
The Consolidated Entity does not have a formally established
treasury function. The Board is responsible for managing the
Consolidated Entity’s currency risks and finance facilities. The
Consolidated Entity does not currently undertake hedging of
any kind.
Likely developments in the operations of the Consolidated
Entity and the expected results of those operations in
subsequent financial years have been discussed where
appropriate in the Annual Report under Review of Operations
and Future Developments.
Liquidity and funding
The Consolidated Entity has sufficient funds to finance its
operations, and to allow the Consolidated Entity to take
advantage of favourable business opportunities, not
specifically budgeted for, or to fund unforeseen expenditure.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
There are no further developments of which the Directors are
aware which could be expected to affect the results of the
Consolidated Entity’s operations in subsequent financial years
other than the information contained in the Review of
Operations and Future Developments in the Directors’ Report
and information which the Directors believe comment on or
disclosure of would prejudice the interests of the
Consolidated Entity.
The following significant changes in the state of affairs of the
Company occurred in the financial period:
ENVIRONMENTAL ISSUES
On 12 July 2007, 400,000 ordinary shares were issued on
exercise of 400,000 $0.10 options;
On 7 August 2007, 200,000 ordinary shares were issued in
consideration for services rendered;
On 2 October 2007, 8 Convertible Redeemable Preference
Shares (“CRPS”) were converted pursuant to the terms of the
purchase agreement of 180 Group, which was acquired on
21 April 2006 and 180 Group exceeding its first profit target.
The 8 CRPS were converted into 8,000,000 ordinary shares;
On 11 April 2008, 250,000 options exercisable at $0.60 on or
before 31 January 2010 were issued as part of Director’s
remuneration.
There are no matters that have arisen in relation to
environmental issues up to the date of this report.
SHARE OPTIONS
As at 30 June 2008 there were 2,090,000 unissued ordinary
shares under options. As at the date of this report there were
2,465,000 unissued ordinary shares under options. All
options granted are for unissued ordinary shares in FSA
Group Ltd.
INDEMNIFICATION AND INSURANCE OF DIRECTORS
AND OFFICERS
Each of the Directors and the Secretaries of the Company
have either entered into or are about to enter into a Deed
with the Company whereby the Company has provided
certain contractual rights of access to books and records of
the Company to those Directors.
14
A N N U A L R E P O R T 2 0 0 8
5DIRECTORS’ REPORT
The Company has insured all of the Directors of FSA Group
Ltd. The contract of insurance prohibits the disclosure of the
nature of the liabilities covered and amount of the premium
paid. The Corporations Act 2001 does not require disclosure
of the information in these circumstances.
The Company has not indemnified its auditor.
REMUNERATION REPORT (AUDITED)
This report outlines the remuneration arrangements in place
for Directors and Executives of FSA Group Ltd (the
Company).
The Company aims to reward the Directors, Executives and
Senior Management with a level and mix of remuneration
commensurate with their position and responsibilities within
the Company. The Board’s policy is to align Director,
Executive and Senior Management objectives with
shareholder and business objectives by providing a fixed
remuneration component and offering short and long-term
incentives.
In accordance with best practice corporate governance, the
structure of Non-Executive Director, Executive Director,
Executives and Senior Management remuneration is separate
and distinct.
Remuneration policy
Non-Executive Director Remuneration
The performance of the Company depends upon the quality
of its Directors, Executives and Senior Management. To
prosper, the Company must attract, motivate and retain highly
skilled Directors, Executives and Senior Management.
The Board seeks to set aggregate remuneration at a level
which provides the Company with the ability to attract and
retain directors of the highest calibre, whilst incurring a cost
which is acceptable to shareholders.
The Board does not presently have a Remuneration and
Nomination Committee. The Directors consider that the
Company is not of a size, nor are its affairs of such
complexity, as to justify the formation of a separate
committee. All matters which might be dealt with by such a
committee are reviewed by the Directors meeting as a Board.
The Board, in carrying out the functions of the Remuneration
and Nomination Committee, are responsible for determining
and reviewing compensation arrangements for the Directors,
Executives and Senior Management.
The Board, in carrying out the functions of the Remuneration
and Nomination Committee, assess the appropriateness of
the nature and amount of emoluments of such officers on a
periodic basis by reference to relevant employment market
conditions with the overall objective of ensuring maximum
shareholder benefit from the retention of a high quality Board
and Executive team. Such officers are given the opportunity
to receive their base emolument in a variety of forms
including cash and fringe benefits. It is intended that the
manner of payments chosen will be optimal for the recipient
without creating undue cost for the Company.
The Constitution of the Company and the ASX Listing Rules
specify that the Non-Executive Directors are entitled to
remuneration as determined by the Company in General
Meeting. The total aggregate annual remuneration payable to
Non-Executive Directors of the Company is currently
determined to be a maximum aggregate of $250,000 (to be
divided between Non-Executive Directors as the board
determines). Additionally, Non-Executive Directors will be
entitled to be reimbursed for properly incurred expenses.
If a Non-Executive Director performs extra services, which in
the opinion of the Directors are outside the scope of the
ordinary duties of the Director, the Company may remunerate
that Director by payment of a fixed sum determined by the
Directors in addition to or instead of the remuneration
referred to above. A Non-Executive Director is entitled to be
paid travel and other expenses properly incurred by them in
attending Director’s or General Meetings of the Company or
otherwise in connection with the business of the Company.
The remuneration of Non-Executive Directors for the period
ending 30 June 2008 is detailed in Table 1 of this
Remuneration Report.
F S A G R O U P L I M I T E D
15
5DIRECTORS’ REPORT
REMUNERATION REPORT (AUDITED) continued
Executive Directors and Senior Management
Remuneration
The Company aims to reward the Executive Directors and
Senior Management with a level and mix of remuneration
commensurate with their position and responsibilities within
the Company and so as to:
• reward Executives for company and individual
performance against targets set by reference to
appropriate benchmarks;
• align the interests of Executives with those of
shareholders;
• link reward with the strategic goals and performance of
the Company; and
• ensure total remuneration is competitive by market
standards.
The remuneration of the Executive Directors and Senior
Management may from time to time be fixed by the Board.
The remuneration will comprise a fixed remuneration
component and also may include offering specific short and
long-term incentives, in the form of:
1. performance based salary increases and/or bonuses;
and/or
All executives and employees have the opportunity to qualify
for participation in the FSA Group Ltd Employee Share
Option Plan (“ESOP”).
The remuneration of the Executive Directors and Senior
Management for the period ended 30 June 2008 is detailed
in Table 1 of this Remuneration Report.
An employee share incentive scheme has been established
where executives and certain members of staff of FSA Group
Ltd are issued with options over the ordinary shares of FSA
Group Ltd. The options, issued for nil consideration, are
issued in accordance with performance guidelines
established by the Directors of FSA Group Ltd. The options
cannot be transferred and will not be quoted on the ASX. The
total number of shares in respect of which options may be
granted under the scheme to employees and which have not
been exercised or lapsed shall not at any time exceed five
percent (5%) of the Company’s total issued share capital.
There are no such restrictions as to the number of shares in
respect of which options may be granted under the scheme
to executives.
The exercise price of an option is and the exercise period is
determined by the Board in accordance with Listing Rules.
No formal policy has been adopted regarding employees and
directors hedging exposure to holdings of the Company’s
securities. No employees or directors have hedged their
exposures.
2. share-based payments.
Employment contracts
It is the Board’s policy that employment agreements are
entered into with all Executive Directors, Executives and
employees. An employment agreement has also been
entered into with Mr Hugh Parsons, a Non-Executive Director.
Performance based salary increases and bonuses are
assessed on a discretionary basis by the Board. No formal
performance conditions or earnings milestones have been
set for the granting of salary increases and bonuses. This
allows the Board to retain flexibility around granting of salary
increases and bonuses if the Company is affected by
adverse economic conditions, and the payment of these
salary increases and bonuses is not in the best interests of
shareholders. A review of bonuses paid to the Executive
Directors over the previous 4 years is consistent with the
operational performance of the Group in those periods.
16
A N N U A L R E P O R T 2 0 0 8
5DIRECTORS’ REPORT
REMUNERATION REPORT (AUDITED) continued
Executive Directors
The Executive Directors, Mr Tim Odillo Maher and Ms
Deborah Southon are employed under Executive Service
Contracts. Under the terms of the contracts:
• Both FSA Group Ltd and the Executive Directors are
entitled to terminate the contract upon giving three (3)
months written notice.
• FSA Group Ltd is entitled to terminate the agreements
upon the happening of various events or other conduct or
if Mr Odillo Maher or Ms Southon cease to be a Directors
of FSA Group Ltd.
• The contracts provide for annual reviews of performance
by FSA Group Ltd.
• There are non early termination clauses.
Non-Executive Directors
Mr Hugh Parsons
Mr Hugh Parsons has been engaged under an Employment
Agreement and a Letter of Appointment of Non-Executive
Director.
The key terms of Mr Parsons’ Employment Agreement are:
• To serve as the Company’s Compliance and Public
Relations Officer for a minimum of 7.5 hours per week
(previously 14 hours per week until employment terms
amended on 6 February 2008).
• Three year term, plus an option (by both parties) for a
further three year term.
• Total remuneration package of $49,050 per year
(amended from 6 February 2008, previously $70,850 per
year).
• 500,000 (unlisted) options were issued, as approved at the
Annual General Meeting, to Mr Parsons. The terms of this
issue were subsequently amended and approved at the
EGM of 29 June 2007. The options will expire on 31
January 2010 (as amended) and have an exercise price of
$0.25. The variation of the terms approved at the EGM
changed the vesting period of Mr Parsons’ options from
the grant date to 2 years after the grant date.
• Redundancy Payment as follows:
Termination after 12 months after
commencement
$100,000
The Redundancy Payment is payable in lieu of the Notice
Period in the following circumstances:
• The Company terminates the Employment Agreement
• The Company does not renew the Employment
Agreement for a further fixed term of three years
• Mr Parsons is not re-elected as a Director by the
members of the Company
• Mr Parsons is removed as a Director by members of
the Company
The Redundancy Payment is not payable in the following
circumstances:
• Mr Parsons terminates the Employment Agreement
• The Company terminates the Employment Agreement
in the event of bankruptcy or misconduct (as defined in
the Employment Agreement)
The key terms of Mr Parsons’ Letter of Appointment as Non-
Executive Director are:
• Annual fee of $38,150 (inclusive of Superannuation).
F S A G R O U P L I M I T E D
17
5DIRECTORS’ REPORT
REMUNERATION REPORT (AUDITED) continued
(a) Details of Directors and Key Management
Mr Stan Kalinko
Mr Stan Kalinko (appointed 9 May 2007) has been engaged
under a Letter of Appointment of Non-Executive Director.
The key terms of Mr Kalinko’s Letter of Appointment as Non-
Executive Director are:
• Annual fee of $45,000 (exclusive of Superannuation).
Personnel
(i) Directors
Sam Doumany
Non-Executive Chairman
Tim Odillo Maher
Executive Director
Deborah Southon
Executive Director
Hugh Parsons
Stan Kalinko
Non-Executive Director
Non-Executive Director
• 250,000 (unlisted) options were issued, as approved at the
(ii) Key Management Personnel
EGM of 29 June 2007. The options will expire at 31
January 2010 and have an exercise price of $0.98.
• 250,000 (unlisted) options were issued, as approved at the
EGM of 14 March 2008. The options will expire at 31
January 2010 and have an exercise price of $0.60.
Duncan Cornish
Anthony Carius
Goran Turner
Senior Management
Pierre-Alain De Villecourt
Joint Company Secretary
Chief Financial Officer and
Joint Company Secretary
Chief Executive -
Fox Symes Home Loans
Chief Information Officer -
FSA Group
(employed 10 September 2007)
Nino Eid
Manager - Refinance
Employment contracts entered into with senior management
contain the following key terms:
Event
Company Policy
Performance based salary
increases and/or bonuses
Board discretion
Short and long-term incentives,
such as options and shares
Board discretion
Resignation / notice period
1-3 month
Serious misconduct
Payouts upon resignation
or termination, outside
industrial regulations
(i.e. ‘golden handshakes’)
Company may
terminate at any time
None
18
A N N U A L R E P O R T 2 0 0 8
5DIRECTORS’ REPORT
REMUNERATION REPORT (AUDITED) continued
(b) Remuneration of Directors and Key Management Personnel
The Key Management Personnel of the Group include Duncan Cornish, Anthony Carius and Pierre-Alain De Villecourt, being the
only executive officers of the Group’s parent company, FSA Group Ltd.
Short-term
Post-
Employment
Salary &
Fees
$
Cash
Bonus
$
Non-cash
benefits
$
Superan-
nuation
$
Termination
benefits
$
Share –based
Payment
Options
Shares
Total
$
$
$
Table 1
Directors
Sam Doumany
2008
2007
Tim Odillo Maher
2008
2007
Deborah Southon
2008
2007
Hugh Parsons
2008
2007
Stan Kalinko
2008
2007
80,000
73,711
150,000
165,000
145,991
157,092
57,692
42,307
-
-
-
-
-
38,500
-
35,000
-
-
-
-
-
-
-
-
5,589
-
23,097
6,723
3,955
493
7,200
6,634
-
-
12,757
17,288
34,614
45,192
49,050
6,058
Total Remuneration: Directors
2008
2007
433,683
438,110
-
73,500
32,641
7,216
103,621
75,172
Key Management Personnel
Duncan Cornish
2008
2007
Anthony Carius
2008
2007
Pierre-Alain De Villecourt
2008
2007
Goran Turner
2008
2007
Nino Eid
2008
2007
38,000
83,446
-
-
114,679
45,871
**22,935
-
182,603
-
229,323
292,800
170,394
187,445
-
-
-
-
-
-
-
-
-
9,800
3,600
5,389
-
8,923
-
6,067
4,463
-
-
12,385
4,128
10,402
-
17,792
-
15,286
16,781
-
3,494
Formerly specified as Key Management Personnel
Gregory Woszczalski
2007
137,822
Total Remuneration: Key Management Personnel
2008
2007
734,999
747,384
22,935
-
30,179
8,063
55,865
24,403
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
68,597
33,924
57,479
137
126,076
34,061
-
-
62,797
35,402
-
-
-
-
5,625
16,101
-
68,422
51,503
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
87,200
80,345
150,000
203,500
164,337
209,380
184,000
128,146
110,484
6,688
696,021
628,059
38,000
83,446
222,596
89,001
198,394
-
256,038
292,800
197,372
224,790
141,316
912,400
831,353
** Bonuses were paid of $13,761 and $9,174 on 31 October 2007 and 12 June 2008 respectively. These bonuses were approved by the Executive Directors as
part of discretionary performance based remuneration.
Fair value of options granted as part of remuneration are estimates only. The estimates are based on the use of the Black Scholes option pricing model.
This model takes account of factors such as the option exercise price, the current level and volatility of the underlying share price and the time to maturity of
the options.
F S A G R O U P L I M I T E D
19
5DIRECTORS’ REPORT
REMUNERATION REPORT (AUDITED) continued
(c) Options issued as part of remuneration for the period ended 30 June 2008
During the year options were granted as equity compensation benefits to one Non-Executive Director. The options were issued for
no consideration. Each of the granted options entitles the holder to subscribe for one fully paid ordinary share in the entity at an
exercise price and expiry date, as set out below.
The Company uses employee continuity of service and the future share price to align comparative shareholder return and reward
for Executives.
Terms & Conditions for Each Grant
Grant Date
Grant
Number
Vest
Date
Fair Value
per Option
at grant
date
($)#
Exercise
Price
Fair Value
per Option
at Exercise
Date
Fair Value
at Date
Option
Lapsed
% of
Remuner-
ation
Directors
Stan Kalinko
14 Mar 2008
250,000
28 Jun 2009
$0.098
$0.60
n/a
n/a
7%
# Calculation of fair value of options granted using the Black-Scholes option pricing model, which takes into account factors such as the option exercise price,
the market price at the date of issue and volatility of the underlying share price and the time to maturity of the option.
(d) Shares issued on exercise of remuneration options
Options exercised during the year that were granted as remuneration in prior periods
Key Management Personnel
Duncan Cornish
Total
Number of Ordinary
Shares Issued
400,000
400,000
Amount Paid
per Share
$0.10
Amount Unpaid
per Share
-
20
A N N U A L R E P O R T 2 0 0 8
5DIRECTORS’ REPORT
REMUNERATION REPORT (AUDITED) continued
(e) Option holdings of Directors and Key Management Personnel
Balance
at 1 July
2007
Granted
as
remuner-
ation
Options
Exercised
Net
Change
Other
Balance
at 30 June
2008
Vested at 30 June 2008
Total
Not
Exercisable Exercisable
ESOP Options
Directors
Key Management
Personnel
Duncan Cornish
Anthony Carius
Nino Eid
Total ESOP Options
Unlisted Options
($0.25 @ 31-Jan-10)
Directors
Hugh Parsons
Key Management
Personnel
Unlisted Options
($0.98 @ 31-Jan-10)
Directors
Stan Kalinko
Key Management
Personnel
Unlisted Options
($0.60 @ 31-Jan-10)
Directors
Stan Kalinko
Key Management
Personnel
n/a
400,000
450,000
50,000
900,000
500,000
n/a
250,000
n/a
-
-
-
-
-
-
-
250,000
n/a
Total Unlisted Options
750,000
250,000
(400,000)
-
-
(400,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
450,000
50,000
-
150,000
-
500,000
150,000
500,000
250,000
250,000
1,000,000
-
-
-
-
-
-
-
-
-
-
-
-
-
150,000
-
150,000
-
-
-
-
All options vest to Directors or other employees if they are employed with the Group at vesting date. The exercise price reflects the closing share price of FSA
Group Limited on the trading day preceding the grant plus a premium specific to each grant contract to ensure benefits are linked to the future growth in share
price of the Company.
The terms and conditions of each grant of options affecting remuneration in the previous, this or future reporting periods are as follows:
Terms & Conditions for Each Grant
Grant
Date
Grant
Number
Vest
Date
Fair Value
per Option
at Grant Date
($)
Exercise
Price
21 Nov 2006
01 Feb 2007
01 Feb 2007
01 Feb 2007
19 Feb 2007
29 Jun 2007
14 Mar 2008
500,000
150,000
150,000
150,000
640,000
250,000
250,000
20 Nov 2008
31 Dec 2007
31 Dec 2008
31 Dec 2009
31 Dec 2009
28 Jun 2009
28 Jun 2009
$0.2736
$0.2948
$0.2948
$0.2948
$0.3220
$0.4014
$0.0980
$0.25
$0.655
$0.655
$0.655
$0.60
$0.98
$0.60
F S A G R O U P L I M I T E D
21
5DIRECTORS’ REPORT
REMUNERATION REPORT (AUDITED) continued
(f) Shareholdings of Directors and Key Management Personnel
Shares held in FSA Group
Ltd, including CRPS
(number)
Balance
1 July
2007
Granted as
Remunera-
tion
Options
Exercised
Directors
Sam Doumany
Tim Odillo Maher
Deborah Southon
Stan Kalinko
Key Management
Personnel
Duncan Cornish
Anthony Carius
Nino Eid
Total
1,000,000
32,695,536
12,946,533
-
2,100,000
-
100,000
48,842,069
-
-
-
-
-
-
-
-
-
-
-
-
400,000
-
-
400,000
Net
Change
Other
-
**8,100,197
-
10,000
(1,416,729)
26,158
-
6,719,626
Balance
30 June
2008
1,000,000
40,795,733
12,946,533
10,000
1,083,271
26,158
100,000
55,961,695
** Included here is the conversion of 8 Convertible Redeemable Preference Shares to 8,000,000 ordinary shares.
Refer to (h) below. Total shareholdings includes 16 Convertible Redeemable Preference Shares.
(g) Loans to Directors and Key Management Personnel
There were no loans to Directors or Key Management
Personnel during the period.
On 2 October 2007, upon 180 Group exceeding the
performance parameters required, 8 CRPS, converted in to
8,000,000 ordinary shares and were issued to the Vendor, a
company associated with Mr Tim Odillo Maher.
(h) Other transactions to Directors and Key
Management Personnel
There were no other transactions or balances with Directors
or Key Management Personnel during the period.
Convertible Redeemable Preference Shares (CRPS)
Background to the transaction
Part of the consideration for the acquisition of 180 Group
Holdings was paid by FSA Group by the issue of the CRPS.
In summary, the terms of the CRPS are as follows:
• a total of 32 one dollar ($1) CRPS were issued to Capital
Management Corporation Pty Ltd, the Vendor;
• each CRPS will be convertible, subject to certain
performance parameters being achieved in the 180 Group,
into 1,000,000 ordinary fully paid FSA Group shares (such
that if all of the CRPS are converted, a total of 32,000,000
FSA Group shares will be issued); and
• CRPS are able to be converted into ordinary FSA Group
shares under one of three scenarios (or “Phases”) based
on the financial performance of the 180 Group. These
Phases were set out fully in the Notice of Meeting and
Explanatory Memorandum distributed to shareholders on
17 March 2006.
DIRECTORS’ MEETINGS
The number of meetings of directors held during the period
and the number of meetings attended by each director are
as follows:
Number of
meetings held
while in office
Meetings
attended
Sam Doumany
Tim Odillo Maher
Deborah Southon
Hugh Parsons
Stan Kalinko
12
12
12
12
12
12
11
11
12
11
Total number of meetings held during the financial year – 12
22
A N N U A L R E P O R T 2 0 0 8
5DIRECTORS’ REPORT
AUDIT AND RISK MANAGEMENT COMMITTEE
MEETINGS
The number of meetings of the Audit and Risk Management
Committee held during the period and the number of
meetings attended by each member of the Audit and Risk
Management Committee are as follows:
Number of
meetings held
while in office
Meetings
attended
Hugh Parsons
Sam Doumany
Stan Kalinko
3
3
3
3
3
3
Total number of meetings held during the financial year – 3
TAX CONSOLIDATION
FSA Group Ltd and its 100% owned subsidiaries have
formed a tax consolidated group and have entered tax
sharing and tax funding arrangements.
180 Group Pty Ltd (controlled by FSA Group Ltd) and its
100% owned subsidiaries have formed a tax consolidated
group and have entered tax sharing and tax funding
arrangements.
Fox Symes Home Loans Pty Limited (controlled by FSA
Group Ltd) and its 100% owned subsidiaries have formed a
tax consolidated group and have entered tax sharing and tax
funding arrangements.
NON-AUDIT SERVICES
The Board of Directors, in accordance with advice from the
Audit and Risk Management Committee, is satisfied that the
provision of non-audit services during the year is compatible
with the general standard of independence for auditors
imposed by the Corporations Act 2001. The Directors are
satisfied that the services disclosed below did not
compromise the external auditor’s independence for the
following reasons:
• all non-audit services are reviewed and approved by the
Audit and Risk Management Committee prior to
commencement to ensure they do not adversely affect
the integrity and objectivity of the auditor; and
• the nature of the services provided do not compromise
the general principles relating to auditor independence as
set out in the Institute of Chartered Accountants in
Australia and CPA Australia’s Professional Statement F1:
Professional Independence.
• all non-audit services are performed by persons not
involved in the audit.
The following fees for non-audit services were paid/payable
to the external auditors during the year ended 30 June 2008:
Tax consulting services $67,910
AUDITOR’S INDEPENDENCE DECLARATION
The Auditor’s Independence Declaration forms part of the
Directors Report and can be found on page 24.
AUDITOR DETAILS
PKF Chartered Accountants continues in office in
accordance with section 327 of the Corporations Act 2001.
CORPORATE GOVERNANCE
In recognising the need for the highest standards of
corporate behaviour and accountability, the Directors of FSA
Group Ltd support and have adhered to the principles of
corporate governance. The Company’s Corporate
Governance Statement is separately contained in the Annual
Report.
Signed in accordance with a resolution of the directors.
Tim Odillo Maher
Director
Sydney
25 September 2008
F S A G R O U P L I M I T E D
23
6AUDITOR’S INDEPENDENCE DECLARATION
Chartered Accountants
& Business Advisers
As lead auditor for the audit of FSA Group Limited for the
year ended 30 June 2008, I declare that to the best of my
knowledge and belief, there have been:
(a) no contraventions of the auditor independence
requirements of the Corporations Act 2001 in relation to
the audit; and
(b) no contraventions of any applicable code of professional
conduct in relation to the audit.
This declaration is in respect of FSA Group Limited and the
entities it controlled during the year.
PKF
Wayne Wessels
Partner
Dated at Brisbane this 25th day of September 2008
Tel: 61 7 3226 3555 | Fax: 61 7 3226 3500 | www.pkf.com.au
PKF | ABN 83 236 985 726
Level 6, 10 Eagle Street | Brisbane | Queensland 4000 | Australia
GPO Box 1078 | Brisbane | Queensland 4001 | Australia
PKF East Coast Practice is a member of PKF Australia Limited a national association of independent chartered accounting and consulting firms each trading
as PKF. The East Coast Practice has offices in NSW, Victoria and Brisbane. PKF East Coast Practice is also a member of PKF International, an association of
legally independent chartered accounting and consulting firms.
Liability limited by a scheme approved under Professional Standards Legislation.
24
A N N U A L R E P O R T 2 0 0 8
7SHAREHOLDER INFORMATION
Additional information required by the Australian Stock Exchange Ltd and not shown elsewhere in this report is as
follows. The information is current as at 23 September 2008.
(a) Distribution of equity securities
The number of holders, by size of holding, in each class of security are:
Quoted
Ordinary shares
Number of
holders
115
290
318
421
89
1,233
Number of
shares
154,895
1,074,728
2,694,580
12,831,775
98,681,535
115,437,513
1 – 2,273
2,273 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
The number of shareholders holding less than a marketable parcel of shares (2,273) are 115
(holding a total of 154,895 ordinary shares).
Convertible Redeemable
Preference Shares (“CRPS”)
Unquoted
$0.60 options exercisable
on or before 31 January 2010
Number of
holders
Number of
CRPS
Number of
holders
Number of
CRPS
1
-
-
-
-
1
16
-
-
-
-
16
-
-
-
13
1
14
-
-
-
600,000
250,000
850,000
Unquoted
$0.25 options exercisable on
or before 31 January 2010
Number of
holders
Number of
options
Unquoted
$0.655 options exercisable on
or before 31 January 2010
Number of
holders
Number of
options
-
-
-
-
1
1
-
-
-
-
450,000
450,000
-
-
-
-
1
1
-
-
-
-
500,000
500,000
Unquoted
$0.98 options exercisable on
or before 31 January 2010
Number of
holders
Number of
options
-
-
-
-
1
1
-
-
-
-
250,000
250,000
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001–100,000
100,001 and over
Total
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
F S A G R O U P L I M I T E D
25
7SHAREHOLDER INFORMATION
(b) Twenty largest holders
The names of the twenty largest holders, in each class of quoted security are:
Ordinary shares:
1
2
3
4
5
6
7
8
9
Capital Management Corporation Pty Ltd
Mazamand Group Pty Ltd
ADST Pty Ltd
BJR Investment Holdings Pty Ltd
Droga Capital Pty Ltd
Bulwarra Holdings Pty Ltd
Investment Custodial Services Ltd
Sareena Enterprises Pty Ltd
Phillips Consolidated Pty Ltd
10
Top Chook Investments Pty Ltd
11 Maramindi Pty Ltd
12 Mr Costa Emil Vrisakis and Mrs Despina Vrisakis
13 Miss Xin Zhang
14 Ganbros Pty Ltd
15 Mr Peter David Carr and Mr John Richard Carr
16
17
James Dundas Ritchie
Karia Investments Pty Ltd
18 Mrs Catherina Louisa Cornish
19 Mrs Zhi Chen
20 Cogent Nominees Pty Ltd
Top 20
Total
24,000,000
16,795,717
12,946,533
11,000,000
3,410,000
1,913,150
1,361,153
1,356,667
1,150,000
1,111,111
1,000,000
1,000,000
911,000
750,000
743,413
700,000
666,666
652,916
650,000
554,722
20.8%
14.5%
11.2%
9.5%
3.0%
1.7%
1.2%
1.2%
1.0%
1.0%
0.9%
0.9%
0.8%
0.6%
0.6%
0.6%
0.6%
0.6%
0.6%
0.5%
82,673,048
71.8%
115,437,513
100.0%
(c) Substantial shareholders
(e) Restricted securities
The names of substantial shareholders who have notified
the Company in accordance with section 671B of the
Corporations Act 2001 are:
As at the date of this report, there were 8,000,000 ordinary
shares subject to voluntary restriction agreements.
Number
of shares
16,795,717
12,946,533
11,000,000
Mazamand Group Pty Ltd
ADST Pty Ltd
BJR Investment Holdings Pty Ltd
(d) Voting rights
All ordinary shares carry one vote per share without
restriction.
(f) Business objectives
The entity has used its cash and assets that are readily
convertible to cash in a way consistent with its business
objectives.
26
A N N U A L R E P O R T 2 0 0 8
8CORPORATE GOVERNANCE STATEMENT
The Board of Directors of FSA Group Ltd is responsible for
the corporate governance of the Consolidated Entity. The
Board guides and monitors the business and affairs of FSA
Group Ltd on behalf of the shareholders by whom they are
elected and to whom they are accountable.
FSA Group Ltd’s Corporate Governance Statement is now
structured with reference to the Australian Stock Exchange
Corporate Governance Council’s (the “Council”) “Principles of
Good Corporate Governance and Best Practice
Recommendations”, which are as follows:
Principle 1
Lay solid foundations for management and oversight
Principle 2
Structure the board to add value
Principle 3
Promote ethical and responsible decision making
Principle 4
Safeguard integrity in financial reporting
Principle 5
Make timely and balanced disclosure
Principle 6
Respect the rights of shareholders
Principle 7
Recognise and manage risk
Principle 8
Encourage enhanced performance
Principle 9
Remunerate fairly and responsibly
Principle 10
Recognise the legitimate interests of stakeholders
FSA Group Ltd’s corporate governance practices were in
place throughout the year ended 30 June 2008. Any
departures to the Council’s best practice recommendations
are set out below.
Structure of the Board
The skills, experience and expertise relevant to the position
of director held by each Director in office at the date of the
Annual Report is included in the Director’s Report. Corporate
Governance Council Recommendation 2.1 requires a majority
of the Board to be independent directors. The Corporate
Governance Council defines independence as being free
from any business or other relationship that could materially
interfere with – or could reasonably be perceived to materially
interfere with – the exercise of their unfettered and
independent judgement.
In the context of director independence, “materiality” is
considered from both the company and the individual
director perspective. The determination of materiality requires
consideration of both quantitative and qualitative elements.
An item is presumed to be quantitatively immaterial if it is
equal or less than 5% of the appropriate base amount. It is
presumed to be material (unless there is qualitative evidence
to the contrary) if it is equal to or greater than 10% of the
appropriate base amount. Qualitative factors considered
included whether a relationship is strategically important, the
competitive landscape, the nature of the relationship and the
contractual or other arrangements governing it and other
factors which point to the actual ability of the director in
question to shape the direction of the company’s loyalty.
In accordance with the Council’s definition of independence
above, and the materiality thresholds set, the following
Directors are considered to be independent:
Name
Position
Mr Sam Doumany
Non-Executive Chairman
Mr Hugh Parsons
Non-Executive Director
Mr Stan Kalinko
Non-Executive Director
F S A G R O U P L I M I T E D
27
8CORPORATE GOVERNANCE STATEMENT
In accordance with the Council’s definition of independence
above, and the materiality thresholds set, the following
Directors are not considered to be independent:
Name
Position
Mr Tim Odillo Maher
Executive
Director
Ms Deborah Southon
Executive
Director
Reason for
non-compliance
Mr Odillo Maher is
employed by the
Company in an
executive capacity
Ms Southon is
employed by the
Company in an
executive capacity
FSA Group Ltd considers industry experience and specific
expertise, as well as general corporate experience, to be
important attributes of its board members. The members of
the board have been brought together to provide a blend of
qualifications, considerable industry skills and national and
international experience required for managing a company
operating within the financial services and debt management
industry.
There are procedures in place, agreed by the Board, to
enable the Directors, in furtherance of their duties, to seek
independent professional advice at the Company’s expense.
The term in office held by each Director in office at the date
of this report is as follows:
Name
Term in office
Sam Doumany
5 years 8 months
Tim Odillo Maher
6 years 1 month
Deborah Southon
6 years 1 month
Hugh Parsons
Stan Kalinko
2 year 1 month
1 year 4 months
Nomination and Remuneration Committees
Recommendations 2.4 and 9.2 require listed entities to
establish nomination and remuneration committees. During
the year ended 30 June 2008, FSA Group Ltd did not have
separately established nomination or remuneration
committees. The full Board shall for the time being carry out
the functions of remuneration & nomination committees. The
Board does not believe that any marked efficiencies or
enhancements would be achieved by the creation of
separate remuneration or nomination committees.
Audit and Risk Management Committee
The Board has established an Audit and Risk Management
Committee, which operates under a charter approved by the
Board. It is the Board’s responsibility to ensure that an
effective internal control framework exists within the entity.
This includes internal controls to deal with both the
effectiveness and efficiency of significant business
processes, the safeguarding of assets, the maintenance of
proper accounting records, and the reliability of financial
information as well as non-financial considerations such as
the benchmarking of operational key performance indicators.
The Board has delegated the responsibility for the
establishment and maintenance of a framework of internal
control and ethical standards for the management of the
consolidated entity to the Audit and Risk Management
Committee.
The Audit and Risk Management Committee also provides
the Board with additional assurance regarding the reliability
of financial information for inclusion in the financial reports. All
members of the Audit and Risk Management Committee are
Non-Executive Directors.
28
A N N U A L R E P O R T 2 0 0 8
8CORPORATE GOVERNANCE STATEMENT
For details on the amount of remuneration and all monetary
and non-monetary components for each of the key
management personnel during the year, and for all directors,
please refer to the Remuneration Report within the Directors’
Report. In relation to the payment of bonuses, options and
other incentive payments, discretion is exercised by the
board, having regard to the overall performance of FSA
Group Ltd and the performance of the individual during the
period.
The Board is responsible for determining and reviewing
compensation arrangements for the directors themselves
and the executive team. As noted above, no separate
remuneration committee has been created.
The members of the Audit and Risk Management Committee
during the period 1 July 2007 to 30 June 2008 were:
• Sam Doumany
• Hugh Parsons – Chairperson
• Stan Kalinko
For additional details of Directors’ attendance at Audit and
Risk Management Committee meetings and to review the
qualifications of the members of the Audit and Risk
Management Committee, please refer to the Directors’
Report.
Performance
The performance of the Board and key executives is
reviewed regularly against both measurable and qualitative
indicators. The performance criteria against which Directors
and Executives are assessed is aligned with the financial and
non-financial objectives of FSA Group Ltd.
Remuneration
It is the Company’s objective to provide maximum
stakeholder benefit from the retention of a high quality board
and executive team by remunerating director and key
executives fairly and appropriately with reference to relevant
and employment market conditions. To assist in achieving
this objective, the Board links the nature and amount of
executive director’s and officer’s emoluments to the
Company’s financial and operations performance. The
expected outcomes of the remuneration structure are:
• Retention and motivation of key executives
• Attraction of quality management to the Company
• Performance incentives which allow executives to share
the rewards of the success of FSA Group Ltd
F S A G R O U P L I M I T E D
29
9INCOME STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2008
Note
Consolidated Entity
Parent Entity
2008
$
2007
$
2008
$
2007
$
REVENUE AND OTHER INCOME
Fees from Services
Finance income
Finance expense
Net finance income
Other income
TOTAL REVENUE AND OTHER INCOME
NET OF FINANCE EXPENSE
SHARE OF PROFITS OF AN ASSOCIATE
USING THE EQUITY ACCOUNTING METHOD
EXPENSES FROM CONTINUING ACTIVITIES
PROFIT/(LOSS) BEFORE INCOME TAX
INCOME TAX (EXPENSE)/BENEFIT
2
2
2
2
2
27
3
4
30,308,900
29,538,598
12,241
-
9,597,656
(4,143,935)
5,453,721
4,377,773
(260,675)
4,117,098
526,090
-
21,072
-
21,072
-
133,955
-
133,955
-
36,288,711
33,655,696
33,313
133,955
246,665
187,836
(31,797,640)
(24,147,626)
4,737,736
9,695,906
(1,533,812)
(2,874,320)
-
(261,101)
(227,788)
(29,147)
-
(102,790)
31,165
87,539
118,704
PROFIT/(LOSS) FOR THE YEAR
3,203,924
6,821,586
(256,935)
PROFIT ATTRIBUTABLE TO MINORITY
EQUITY INTEREST
PROFIT/(LOSS) ATTRIBUTABLE TO MEMBERS
OF THE PARENT ENTITY
Earnings per share
522,808
301,896
-
-
2,681,116
6,519,690
(256,935)
118,704
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
6
6
2.37
2.21
6.24
5.76
The Income Statements should be read in conjunction with the Notes to the Financial Statements.
30
A N N U A L R E P O R T 2 0 0 8
10BALANCE SHEETS
AS AT 30 JUNE 2008
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Current tax assets
Other assets
Total Current Assets
NON-CURRENT ASSETS
Trade and other receivables
Investments in associates
Plant and equipment
Investment property
Other assets
Deferred tax assets
Intangible assets
Total Non-Current Assets
ASSETS FINANCED BY NON-RECOURSE
FINANCIAL LIABILITIES
Cash and cash equivalents
Trade and other receivables
Specialty finance assets
Total Assets financed by Non-Recourse
Financial Liabilities
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Current tax liabilities
Borrowings
Provisions
Total Current Liabilities
NON-CURRENT LIABILITIES
Borrowings
Provisions
Deferred tax liabilities
Total Non-Current Liabilities
NON-RECOURSE FINANCIAL LIABILITIES
Borrowings
Total Non-Recourse Financial Liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Share capital
Reserves
Retained earnings/(Accumulated losses)
Minority equity interest
TOTAL EQUITY
Note
Consolidated Entity
Parent Entity
2008
$
7,676,105
19,909,109
660,749
440,596
28,686,559
9,065,820
62,114
1,029,289
333,922
3,900
901,176
3,830,835
15,227,056
11,187,707
39,340
89,767,650
2007
Restated
$
6,670,521
14,105,368
-
151,802
20,927,691
4,255,545
139,449
701,744
1,359,387
594,716
812,622
3,830,835
11,694,298
1,750,365
185,412
565,000
2008
$
256,456
-
421,952
-
678,408
-
-
-
-
6,546,397
-
-
6,546,397
-
-
-
100,994,697
144,908,312
2,500,777
35,122,766
-
7,224,805
9,723,593
-
786,298
1,889,150
12,399,041
6,952,779
71,959
3,034,842
10,059,580
99,886,840
99,886,840
122,345,461
22,562,851
7,137,472
402,605
13,931,661
1,091,113
22,562,851
7,098,919
929,350
698,218
1,259,810
9,986,297
1,099,542
39,218
2,615,673
3,754,433
2,478,095
2,478,095
16,218,825
18,903,941
6,943,472
141,619
11,250,545
568,305
18,903,941
604,998
-
-
-
604,998
-
-
-
-
-
-
604,998
6,619,807
7,137,472
402,605
(920,270)
-
6,619,807
7
8
9
8
27
12
13
9
4d
14
7
8
10
15
16
17
16
17
4e
16
18
19
2007
$
2,253,102
-
-
-
2,253,102
-
-
-
-
6,546,397
-
-
6,546,397
-
-
-
-
8,799,499
1,888,664
489,079
-
-
2,377,743
-
-
-
-
-
-
2,377,743
6,421,756
6,943,472
141,619
(663,335)
-
6,421,756
The Balance Sheets should be read in conjunction with the Notes to the Financial Statements. Refer to Note 1 for details of the
restatement of the 30 June 2007 consolidated balance sheet.
F S A G R O U P L I M I T E D
31
11STATEMENTS OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2008
Consolidated Entity
Share Capital
Reserves
$
$
Retained
Earnings
$
Minority
Interest
$
Total
$
Balance at 1 July 2006
6,891,022
38,848
4,730,855
266,409
11,927,134
Profit for the year attributable to
members of the parent
Profit for the year attributable to
minority shareholders
Share based payments expense
Options exercised into ordinary shares
Issue costs
-
-
-
60,000
(7,550)
-
-
102,771
-
-
6,519,690
-
6,519,690
-
-
-
-
301,896
-
-
-
301,896
102,771
60,000
(7,550)
Balance at 30 June 2007/1 July 2007
6,943,472
141,619
11,250,545
568,305
18,903,941
Profit for the year attributable to members
of the parent
Profit for the year attributable to
minority shareholders
Issue of shares (remuneration)
Options exercised into ordinary shares
Share based payment expense
Balance at 30 June 2008
Parent Entity
-
-
154,000
40,000
-
7,137,472
-
-
-
-
260,986
402,605
2,681,116
-
2,681,116
-
-
-
-
522,808
-
-
-
522,808
154,000
40,000
260,986
13,931,661
1,091,113
22,562,851
Share Capital
Reserves
$
$
(Accumulated
Losses)
$
Total
$
Balance at 1 July 2006
6,891,022
38,848
(782,039)
6,147,831
Profit for the year attributable to
members of the parent
Share based payments expenses
Options exercised into ordinary shares
Issue costs
-
-
60,000
(7,550)
-
118,704
102,771
-
-
-
-
-
118,704
102,771
60,000
(7,550)
Balance at 30 June 2007/1 July 2007
6,943,472
141,619
(663,335)
6,421,756
Loss for the year attributable to
members of the parent
Issue of shares (remuneration)
Options exercised into ordinary shares
Share based payment expense
Balance at 30 June 2008
-
154,000
40,000
-
7,137,472
-
-
-
260,986
402,605
(256,935)
(256,935)
-
-
-
154,000
40,000
260,986
(920,270)
6,619,807
The Statements of Changes in Equity should be read in conjunction with the Notes to the Financial Statements.
32
A N N U A L R E P O R T 2 0 0 8
12CASH FLOW STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2008
Note
Consolidated Entity
Parent Entity
2008
$
Inflows/
(Outflows)
2007
Restated
$
Inflows/
(Outflows)
2008
2007
$
Inflows/
(Outflows)
$
Inflows/
(Outflows)
20
CASH FLOWS FROM OPERATING
ACTIVITIES
Receipts from customers and debtors,
including amounts received on behalf of
institutional creditors
Payments to institutional creditors, suppliers
and employees
Interest received
Interest and other costs of finance paid
Income tax paid
Net cash inflow/(outflow) from operating
activities
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property, plant and equipment
Acquisition of investment property
Acquisition of investment in associate
Proceeds from disposal of Investment Property
Increase in Specialty finance assets
Increase in Bridging finance assets and
factoring finance assets
Net cash outflow from investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from / (repayment of) borrowings
Proceeds from share issues
Proceeds from /(repayment of) Unsecured notes
Net cash inflow/(outflow) from financing activities
Net increase/(decrease) in cash and cash
equivalents
Cash and cash equivalents at the beginning of
the financial year
Cash and cash equivalents at the end of the
financial year
7
61,689,080
53,867,455
-
-
(61,056,113)
5,928,207
(3,620,421)
(2,706,312)
(50,971,320)
2,645,153
(260,675)
(2,467,910)
-
21,072
-
(1,599,475)
-
133,955
-
(1,328,277)
234,441
2,812,703
(1,578,403)
(1,194,322)
(780,206)
-
-
1,350,000
(88,696,293)
(404,781)
(1,039,878)
(7,963)
-
(565,000)
(4,876,564)
(93,003,063)
(3,342,427)
(5,360,049)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
103,126,548
40,000
45,000
103,211,548
3,331,386
52,450
(370,000)
3,013,836
(553,243)
40,000
95,000
(418,243)
986,736
52,450
(95,000)
944,186
10,442,926
466,490
(1,996,646)
(250,136)
8,420,886
7,954,396
2,253,102
2,503,238
18,863,812
8,420,886
256,456
2,253,102
Reclassification of the Cashflow Statements
The Consolidated Entity has previously classified cash flows
of its loan receivables from lending operations as “Cash flows
from operating activities” as these were largely funded from
internal cash reserves. During the 2008 financial year the
Consolidated Entity’s mortgage loan receivables book grew
by $88m and it obtained a $10m funding line to finance the
growth in it’s bridging finance and factoring finance loan
portfolios.
Given the growth of these assets it is now more relevant to
classify these cashflows as “Cash flows from investing
activities”. Accordingly the presentation of the Cash Flow
Statements for the 2007 financial year has been restated for
comparability. The cash outflows for increases in specialty
finance assets, bridging finance assets and factoring finance
assets being $565,000, $1,766,606 and $1,575,821 respectively
were previously included in cashflow from operations.
The Cash Flow Statements should be read in conjunction with the Notes to the Financial Statements.
F S A G R O U P L I M I T E D
33
13NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2008
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING
Basis of preparation
POLICIES
The financial report is a general purpose financial report that
has been prepared in accordance with Australian Accounting
Standards, including Australian Accounting Interpretations,
other authoritative pronouncements of the Australian
Accounting Standards Board and the Corporations Act 2001.
The consolidated financial report of the Group and the
financial report of the Company comply with International
Financial Reporting Standards (IFRSs) and interpretations
adopted by the International Accounting Standards Board
(IASB).
The financial report includes the financial statements of FSA
Group Ltd (“the Parent Entity” or “the Company”) and the
Consolidated entity (or “the Group”) consisting of FSA Group
Ltd and its controlled entities. FSA Group Ltd is a listed public
company, incorporated and domiciled in Australia.
The financial report was authorised for issue by the Directors
on 25 September 2008.
The following is a summary of the material accounting
policies adopted in the preparation of the financial report. The
accounting policies have been consistently applied, unless
otherwise stated.
The financial report is presented in Australian dollars.
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, and financial assets and
financial liabilities for which the fair value basis of accounting
has been applied.
Reclassification of the Balance Sheet
Australian Accounting Standard AASB 101 “Presentation of
Financial Statements” allows an entity to present some of its
assets and liabilities using a current/non-current classification
and others in order of liquidity when this provides information
that is reliable and more relevant. FSA Group Ltd has
amended the presentation of the Consolidated Entity’s
Balance Sheet and adopted this mixed basis of presentation
as the non-current/current allocation is the more relevant
presentation for the Group generally, whilst the assets and
liabilities of the Group’s special purpose entity, Fox Symes
Home Loans Warehouse Trust #1, which creates Residential
Mortgage Backed Securities are more relevantly presented
on the liquidity basis.
The effect of this re-classification on the 30 June 2007
Balance Sheet is as follows:
Consolidated Entity
Previously reported
As at 30 June 2007
$
Reclassification
$
Restated As at
30 June 2007
$
8,420,886
14,295,004
151,802
22,867,692
4,816,321
139,449
701,744
1,359,387
594,716
812,622
3,830,835
12,255,074
(1,750,365)
(189,636)
-
(1,940,001)
(560,776)
-
-
-
-
-
-
(560,776)
6,670,521
14,105,368
151,802
20,927,691
4,255,545
139,449
701,744
1,359,387
594,716
812,622
3,830,835
11,694,298
A N N U A L R E P O R T 2 0 0 8
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Other
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Trade and other receivables
Investment in Associate
Plant and equipment
Investment Properties
Other financial assets
Deferred tax assets
Intangible assets
TOTAL NON-CURRENT ASSETS
34
13NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2008
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES continued
Reclassification of the Balance Sheet continued
Consolidated Entity
Previously reported
As at 30 June 2007
$
Reclassification
$
Restated As at
30 June 2007
$
ASSETS FINANCED BY NON-RECOURSE
FINANCIAL LIABILITIES
Cash and cash equivalents
Trade and other receivables
Specialty Finance Assets
TOTAL ASSETS FINANCED BY NON-RECOURSE
FINANCIAL LIABILITIES
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Current tax liabilities
Borrowings
Provisions
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Borrowings
Provisions
Deferred tax liabilities
TOTAL NON-CURRENT LIABILITIES
NON-RECOURSE FINANCIAL LIABILITIES
Borrowings
TOTAL NON-RECOURSE FINANCIAL LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Share Capital
Reserves
Retained earnings
Minority equity interest
TOTAL EQUITY
Accounting Policies
(a) Principles of Consolidation
A controlled entity is any entity FSA Group Ltd has the power
to control the financial and operating policies so as to obtain
benefits from its activities. A list of controlled entities is
contained in Note 11 to the financial statements. All inter-
company balances and transactions between entities in the
Group, including any unrealised profits or losses, have been
eliminated on consolidation.
-
-
-
-
35,122,766
7,098,919
929,350
3,176,313
1,259,810
12,464,392
1,099,542
39,218
2,615,673
3,754,433
-
-
16,218,825
18,903,941
6,943,472
141,619
11,250,545
568,305
18,903,941
1,750,365
185,412
565,000
2,500,777
-
-
-
(2,478,095)
-
(2,478,095)
-
-
-
-
2,478,095
2,478,095
-
-
-
-
-
-
-
1,750,365
185,412
565,000
2,500,777
35,122,766
7,098,919
929,350
698,218
1,259,810
9,986,297
1,099,542
39,218
2,615,673
3,754,433
2,478,095
2,478,095
16,218,825
18,903,941
6,943,472
141,619
11,250,545
568,305
18,903,941
Accounting policies of subsidiaries have been changed
where necessary to ensure consistency with those policies
applied by the parent entity. Where controlled entities have
entered or left the Group during the year, their operating
results have been included from the date control was
obtained or until the date control ceased.
Minority interests in equity and results of the entities
controlled are shown as a separate item in the consolidated
financial report.
F S A G R O U P L I M I T E D
35
13NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2008
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES continued
(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 the tax rates that have
been enacted or are substantially enacted by the balance
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
is recognised from the initial recognition of an asset or
liability, excluding a business combination, where there is no
effect on accounting or taxable profit or loss.
Deferred tax is calculated at the tax rates 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.
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 and unused tax
losses 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 Group will derive sufficient future
assessable income to enable the benefit to be realised and
comply with the conditions of deductibility imposed by the
law.
Tax consolidation
FSA Group Ltd and its wholly-owned Australian subsidiaries
have formed an income tax consolidated group under the
Tax Consolidation Regime. Additionally, 180 Group Pty Ltd
and its wholly-owned Australian subsidiaries and Fox Symes
Home Loans Pty Ltd and its wholly-owned Australian
subsidiaries have also formed income tax consolidated
groups under the Tax Consolidation Regime.
FSA Group Ltd, 180 Group Pty Ltd and Fox Symes Homes
Loans Pty Ltd as head entities of their respective tax
consolidated groups and the controlled entities in each group
continue to account for their own current and deferred tax
amounts. These tax amounts are measured as if each entity
in the tax consolidated group continues to be a stand alone
taxpayer in its own right.
In addition to its own current and deferred tax amounts, the
head entity of each tax consolidated group also recognises
the current tax liabilities (or assets) and the deferred tax
assets arising from unused tax losses and unused tax
credits assumed from controlled entities in the tax
consolidated group.
The respective tax consolidated groups have entered into tax
sharing agreements whereby each company in the group
contributes to the income tax payable of the consolidated
group.
(c) Financial Instruments
Non-derivative financial instruments
Non-derivative financial instruments comprise investments in
equity and debt securities, trade and other receivables, cash
and cash equivalents, loans and borrowings and trade and
other payables.
Non-derivative financial instruments are recognised initially at
fair value plus, for instruments not at fair value through profit
and loss, any directly attributable transaction costs, except as
described below. Subsequent to initial recognition, non-
derivative financial instruments are measured as described
below.
A financial instrument is recognised if the Group becomes a
party to the contractual provisions of the instrument. Financial
assets are de-recognised if the Group’s contractual rights to
cashflows from the financial assets expire or the Group
transfers the financial asset to another party without retaining
control or substantially all the risks and rewards of the asset.
Regular way purchases and sales of financial assets are
accounted for at trade date i.e. the date the Group commits
itself to purchase or sell an asset. Financial liabilities are de-
recognised if the Group’s obligations specified in the contract
expire, are discharged or cancelled.
36
A N N U A L R E P O R T 2 0 0 8
13NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2008
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING
Loans and Receivables
POLICIES continued
Non-derivative financial instruments continued
Cash and cash equivalents comprise cash balances and call
deposits. Bank overdrafts that are repayable on demand and
form an integral part of the Group’s cash management are
included as a component of cash and cash equivalents for
the purposes of the Cashflow Statement.
Ordinary Share Capital
Incremental costs directly attributable to the issue of ordinary
shares and share options are recognised as a deduction
from equity net of any related income tax benefit.
Held-to-maturity investments
If the Group has the positive intent and ability to hold debt
securities to maturity, then they are classified as held-to-
maturity. Held-to-maturity investments are measured at
amortised cost using the effective interest method, less any
impairment losses.
Available-for-sale financial assets
The Group’s investments in equity securities and certain debt
securities are classified as available-for-sale financial assets.
Subsequent to initial recognition, they are measured at fair
value and changes therein, other than impairment losses and
foreign exchange gains and losses on available-for-sale
monetary items are recognised as a separate component of
equity. When an investment is derecognised, the cumulative
gain or loss in equity is transferred to profit or loss.
Investments at fair value through profit or loss
An instrument is classified as at fair value through profit or
loss if it is held for trading or is designated as such upon
initial recognition. Financial instruments are designated at fair
value through profit or loss if the Group manages such
investments and makes purchase and sale decisions based
on their fair value in accordance with the Group’s
documented risk management or investment strategy. Upon
initial recognition, attributable transaction costs are
recognised in profit or loss when incurred. Financial
instruments at fair value through profit or loss are measured
at fair value, and changes therein are recognised in profit
or loss.
Loans and receivables are held at amortised cost. Loan
assets held at amortised cost are non derivative financial
instruments with fixed or determinable payments that are not
quoted in an active market. They arise when a mortgage loan
is originated in the Group’s balance sheet. These are
accounted for at amortised cost using the effective interest
method.
(d) Property, Plant and Equipment
Property, Plant and equipment
Property, plant and equipment are measured on the cost
basis less accumulated depreciation and accumulated
impairment losses.
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
Property, plant and equipment is depreciated over their useful
life to the Group commencing from the time the asset is held
ready for use. Leasehold improvements are amortised over
the shorter of either the unexpired period of the lease or the
estimated useful lives of the improvements.
The useful lives used for each class of asset are:
Class of Asset
Plant and equipment
Computers and Office Equipment
Leasehold improvements
Furniture and Fitting
Motor Vehicles
Useful life
2 to 5 years
2 to 5 years
5 years
2 to 5 years
5 years
The assets’ residual values and useful lives are reviewed, and
adjusted if appropriate, at each balance sheet date.
An asset’s carrying amount is written down immediately to its
recoverable amount if the assets carrying amount is greater
than its estimated recoverable amount.
F S A G R O U P L I M I T E D
37
13NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2008
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES continued
Depreciation continued
Gains and losses on disposal are determined by comparing
proceeds with the carrying amount. These gains or losses
are included in the income statement.
(e) Investment properties
Investment property is property held either to earn rental
income or for capital appreciation or both. Investment
properties are measured at cost less accumulated
depreciation.
Investment properties have a useful life of 40 years.
(f) Leases
Leases of property plant and equipment where the Group, as
lessee, has substantially all the risks and benefits incidental to
the ownership of the asset are classified as finance leases.
Finance leases are capitalised by recording an asset and a
liability at the lower of the amounts equal to the fair value of
the leased property or the present value of the minimum
lease payments, including any guaranteed residual values.
Lease payments are allocated between the reduction of the
lease liability and the lease interest expense for the period.
Leased assets are depreciated on a straight-line basis over
the shorter of their estimated useful lives or the lease term.
Lease payments for operating leases, where substantially all
the risks and benefits remain with the lessor are charged to
the income statement on a straight line basis over the period
of the lease.
(g) Impairment of assets
At each reporting date, the Group reviews the carrying values
of its assets to determine whether there is any indication that
those assets have been impaired. If such an indication exists,
the recoverable amount of the asset, being the higher of the
asset’s fair value less costs to sell and value in use, is
compared to the asset’s carrying value. Any excess of the
asset’s carrying value over its recoverable amount is
expensed to the income statement.
Where it is not possible to estimate the recoverable amount
of an individual asset, the Group estimates the recoverable
amount of the cash-generating unit to which the asset
belongs.
(h) Employee benefits
Provision is made for the Group’s liability for employee
benefits arising from services rendered by employees to
balance date. Employee benefits that are expected to be
settled within one year have been measured at the amounts
expected to be paid when the liability is settled, plus related
on-costs. 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.
Equity settled compensation
Share based compensation benefits are provided to
employees via the FSA Group Ltd Employee Share Option
Plan (“ESOP”). Information relating to the ESOP is set out in
the Remuneration Report, contained within the Directors’
report.
The fair value of options granted under the ESOP is
recognised as an employee benefit expense with a
corresponding increase in equity. The fair value is measured
at grant date and recognised over the period during which
the employees become unconditionally entitled to the
options.
The fair value at grant date is independently determined
using a Black-Scholes option pricing model that takes into
account the exercise price, the term of the option, the impact
of dilution, 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.
The fair value of the options granted is adjusted to reflect
market vesting conditions, but excludes the impact of any
non-market vesting conditions (for example, profitability and
sales growth targets). Non-market vesting conditions are
included in assumptions about the number of options that
are expected to become exercisable. At each balance sheet
date, the Group revises its estimate of the number of options
that are expected to become exercisable. The employee
benefit expense recognised each period takes into account
the most recent estimate.
38
A N N U A L R E P O R T 2 0 0 8
13NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2008
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING
Debt Agreement Application Fees
POLICIES continued
(h) Employee benefits continued
Equity settled compensation continued
Upon the exercise of options, the balance of the share-based
payments reserve relating to those options is transferred to
share capital and the proceeds received, net of any directly
attributable transaction costs, are credited to share capital.
Under the employee share scheme, shares issued to
employees for no cash consideration vest immediately on
grant date. On this date, the market value of the shares
issued is recognised as an employee benefits expense with
a corresponding increase in equity.
Upon the completion of preparing the Debt Agreement
proposal for consideration by the creditors and the
Insolvency and Trustee Service of Australia (ITSA).
Debt Agreement Fees
At the date of approval of the Debt Agreement proposal
by a majority of the vote value of creditors.
Trustee Fees – Bankruptcy and Personal Insolvency
Agreements
Trustee Fees are recognised as work in progress and time
billed. Fee income is only recognised to the extent fees
have been approved by creditors.
Bonuses and profit sharing arrangements
Rendering of Services – Recruitment Fees
Recruitment Fees are recognised upon commencement of
employment under the agreed contact terms for that
placement.
Under the contract terms the outcome of the transaction
cannot be measured reliably until such time as the candidate
has commenced employment.
Refinance Fees
When the outcome of a contract to provide services can be
estimated reliably, either upon receipt of upfront fee and
subsequent turbo or trail commission, in the case of non-
conforming lending, or in the case of conforming lending, trail
commission revenue and receivables are recognised at fair-
value being the future trail commission receivable discounted
to their net present value.
A provision is recognised for the amount expected to be paid
under short term cash bonus or profit-sharing plans if the
Group has a present legal or constructive obligation to pay
this amount as a result of past service provided by the
employee and the obligation can be estimated reliably.
(i) Provisions
Provisions are recognised when the Group has a legal or
constructive obligation, as a result of past events, for which it
is probable that an outflow of economic benefits will result
and that outflow can be reliably measured.
(j) Revenue recognition
Revenue is recognised when 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:
Rendering of Services – Personal Insolvency
When the outcome of a contract to provide services under
the Bankruptcy Act can be estimated reliably, revenue is
recognised by reference to the right to be compensated for
services and where the stage of completion of the service
can be reliably estimated, specifically:
F S A G R O U P L I M I T E D
39
13NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2008
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING
(l) Comparative figures
POLICIES continued
(j) Revenue recognition continued
Interest
Interest income is recognised in the income statement using
the effective interest method. The effective interest method is
the method of calculating the amortised cost of a financial
asset or financial liability and allocating the interest income or
expense over the relevant period. The effective interest rate is
the rate that exactly discounts the estimated future cash
receipts or payments over the expected life of the financial
instrument to the net carrying amount of the financial asset
or financial liability (which includes, where applicable, the
unamortised balance of transaction costs).
Finance fee income
Finance fee income is recognised in either of two ways,
either upfront where the fee represents a recovery of costs or
a charge for services provided to customers (e.g. application
fees and risk assessment fees) or, where income relates to
loan origination, income is deferred and amortised over the
effective life of the loan using the effective interest method.
Deferred establishment fees are establishment fees which
the borrower is contracted to pay but payment is deferred
until such time as they repay the outstanding loan balance.
These fees are waived if the loan is repaid after the qualifying
period. These fees are recognised at the commencement of
the contract and are amortised over the current average life
of the loan.
Where required by Australian Accounting Standards,
comparative figures have been adjusted to conform to
changes in presentation for the current financial year.
(m) Investments in Subsidiaries
Investments are brought to account on the cost basis in the
parent entity’s financial statements and using the equity
method, after initially being recognised at costs in the
consolidated entity’s financial statements. The carrying
amount of investments is reviewed annually by Directors to
ensure it is not in excess of the recoverable amount of these
investments. The recoverable amount is assessed from the
shares’ current market value or the underlying net assets in
the particular entities. The expected net cash flow from
investments has not been discounted to their present value
in determining the recoverable amounts, except where stated.
(n) Intangibles
Goodwill on consolidation is initially recorded at the amount
by which the purchase price for a business or for an
ownership interest in a controlled entity exceeds the fair value
attributed to its net assets at date of acquisition. Goodwill on
acquisitions of subsidiaries is included in intangible assets.
Goodwill on acquisition of associates is included in
investments in associates. Goodwill is tested annually for
impairment and carried at cost less accumulated impairment
losses. Gains and losses on the disposal of a subsidiary
include the carrying amount of goodwill relating to the
subsidiary sold.
(k) Goods & Services Tax (GST)
(o) Trade and other payables
Revenue, expenses and assets are recognised net of the
amount of GST, except where the amount of GST incurred is
not recoverable from the Australian Taxation Office. In these
circumstances GST is recognised as part of the acquisition
of the asset or as part of the expense. Receivables and
payables in the balance sheet are shown inclusive of GST.
Cash flows are presented in the cash flow statement on a
gross basis, except for the GST component of financing and
investing activities, which are disclosed as operating cash
flows.
Trade payables and other amounts are carried at cost which
is the fair value of the consideration to be paid in the future
for goods and services received, whether or not billed to the
Group.
Monies received (and not yet distributed pursuant to the Debt
Agreements) on behalf of institutional creditors are recorded
as current liabilities.
40
A N N U A L R E P O R T 2 0 0 8
13NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2008
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES continued
(p) Provision for Institutional Creditor Payments
Dividends payable to Institutional Creditors are provided for in
the financial statements in accordance with the respective
Debt Agreement Proposals accepted by the official receiver
for processing prior to 1 July 2007 and are classified as
current provisions unless all of the Debt Agreement fee has
been received, in which case they are classified as a current
payable.
(q) Significant accounting estimates and assumptions
The carrying amounts of certain assets and liabilities are
often determined based on estimates and assumptions
about future events. The key estimates and assumptions that
have a significant risk of causing a material adjustment to the
carrying amounts of certain assets and liabilities in the next
annual reporting period are:
Impairment of goodwill
The Group determines whether goodwill is impaired at least
on an annual basis. This requires an estimation of the
recoverable amount of the cash generating units to which the
goodwill is allocated. The assumptions used in this estimation
of recoverable amount and the carrying amount of goodwill
are discussed in note 14.
Impairment of receivables
Debt agreement receivables
Impairment of debt agreement receivables is assessed on a
collective basis based on historical collections data.
Considering the length of time it takes to collect debts in
administration and the inherent uncertainty over the collection
of these amounts this method represents management’s
“best estimate” of the recoverability of debtors in the debt
agreement business. Impairment is provided for and
recorded in a separate Allowance account. Amounts are
written off against this account as bad when debt
agreements are terminated by creditors.
The evaluation process is subject to a series of estimates
and judgments. The frequency of default, loss history, and
current economic conditions are considered. Changes in
these estimates could have a direct impact on the level of
provision determined.
Other loans and advances
For other loans and advances individually assessed
provisions are raised where there is objective evidence of
impairment and full recovery of the principal is considered
doubtful. Provisions are established after considering the
estimates of the fair value of the collateral taken and recorded
in a separate Allowance account. Amounts are written off
against the account as bad after management establishes
amounts which will not be recovered from available evidence.
(r) Associates
Associates are those entities in which the Group has
significant influence, but not control, over the financial and
operating policies. Associates are accounted for using the
equity method (equity accounted investees). The consolidated
financial statements include the Group’s share of the income
and expenses of the equity accounted investees, after
adjustments to align the accounting policies with those of the
Group, from that date the significant influence commences
until the date where significant influence ceases. When the
Group’s share of the loss extends its interest in the equity
accounted investee, the carrying amount of that interest
(including any long term investments) is reduced to nil and
the recognition of further losses is discontinued except to the
extent that the Group has an obligation or has made
payments on behalf of the investee.
(s) Finance Income and Costs
Finance Income is measured and recognised as per
(j) Revenue recognition above.
Finance costs comprise interest expense on borrowings,
unwinding of discount on provisions, dividends on preference
shares classified as liabilities, foreign currency losses,
changes in fair value of financial assets at fair value through
profit or loss, impairment losses recognised on financial
assets and losses on hedging instruments that are
recognised in profit or loss. All borrowing costs are
recognised in profit or loss using the effective interest
method.
F S A G R O U P L I M I T E D
41
13NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2008
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES continued
(t) Earnings per share
The Group presents basic and diluted earnings per share
(EPS) data for its ordinary shares. Basic EPS is calculated by
dividing the profit or loss attributable to ordinary shareholders
of the Company by the weighted average number of ordinary
shares outstanding during the period. Diluted EPS is
determined by adjusting profit or loss attributable to the
ordinary shareholders and the weighted average number of
ordinary shares outstanding for the effects of all dilutive
potential ordinary shares.
(u) Operating segments
An operating segment is a component of an entity that
engages in business activities from which it may earn
revenue and incur expenses (including revenues and
expenses relating to transactions with other components of
the same entity); whose operating results are regularly
reviewed by the entity’s chief operating decision maker to
make decisions about resources to be allocated to the
segment and assess its performance; and for which discrete
financial information is available.
Operating segments are distinguished and presented based
on the differences in providing services and providing finance
products.
(v) Financial Guarantee Contracts
Financial guarantee contracts are recognised as a financial
liability at the time the guarantee is issued. The liability is
initially measured at fair value and subsequently at the higher
of the amount determined in accordance with AASB 137
Provisions, Contingent Liabilities and Contingent Assets and
the amount initially recognised less cumulative amortisation,
where appropriate.
(w) New standards and interpretations not yet adopted
Certain new accounting standards and interpretations have
been published that are not mandatory for the 30 June 2008
reporting period. The Consolidated Entity and the Parent
Entity’s assessment of the impact of these new standards
and interpretations is set out below.
(i) Revised AASB 123 Borrowing Costs and AASB 2007-6
Amendments to Australian Accounting Standards arising
from AASB 123 [AASB 1, AASB 101, AASB 107, AASB 111,
AASB 116 & AASB 138 and Interpretations 1 & 12]
The revised AASB 123 is applicable to annual reporting
periods commencing on or after 1 January 2009. It has
removed the option to expense all borrowing costs and -
when adopted - will require the capitalisation of all borrowing
costs directly attributable to the acquisition, construction or
production of a qualifying asset. The Group currently does
not incur borrowing costs.
(ii) Revised AASB 101 Presentation of Financial Statements
and AASB 2007-8 Amendments to Australian Accounting
Standards arising from AASB 101
A revised AASB 101 was issued in September 2007 and is
applicable for annual reporting periods beginning on or after
1 January 2009. It requires the presentation of a statement of
comprehensive income and makes changes to the statement
of changes in equity, but will not affect any of the amounts
recognised in the financial statements. If an entity has made
a prior period adjustment or has reclassified items in the
financial statements, it will need to disclose a third balance
sheet (statement of financial position), this one being as at
the beginning of the comparative period. The Group intends
to apply the revised standard from 1 July 2009.
(iii) Revised AASB 3 Business Combinations
The revised AASB 3 Business Combinations changes the
application of acquisition accounting for business
combinations and the accounting for non-controlling
(minority) interests. Key changes include the immediate
expensing of all transaction costs, measurement of
contingent consideration at acquisition date with subsequent
changes through the income statement, measurement of
non-controlling (minority) interests at full fair value or the
proportionate share of the fair value of the underlying net
assets and the inclusion of combinations by contract alone
and those involving mutuals. The revised standard becomes
mandatory for the Group’s 30 June 2009 financial statements.
The Group has not yet determined the impact (if any) on the
financial report.
42
A N N U A L R E P O R T 2 0 0 8
13NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2008
The amendment clarifies that vesting conditions are restricted
to service conditions and performance conditions only. Other
features of a share-based payment are not vesting
conditions. This restriction was not clearly stated in the pre-
amended standards. This means that all other terms and
conditions are accounted for in the value of the share or
option at grant date. It also specifies that all cancellations,
whether by the entity or by other parties, should receive the
same accounting treatment. The revised standard will
become mandatory for the Group’s 30 June 2010 financial
report. The Group has not yet determined the potential effect
of these improvements on the financial report.
(vii) AASB 2008-5 and AASB 2008-6 Amendments to
Australian Accounting Standards arising from the Annual
Improvements Project and Further Amendments to Australian
Accounting Standards arising from the Annual Improvements
Project.
A number of accounting standards have been amended
under the improvement project. The first part contains
amendments that result in accounting changes for
presentation, recognition and measurement purposes. The
second part contains amendments that are terminology or
editorial changes only, which is expected to have no or
minimal effect on accounting. The revised standard will
become mandatory for the Group’s 30 June 2010 financial
report. The Group has not yet determined the potential effect
of these improvements on the financial report.
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES continued
(w) New standards and interpretations not yet adopted
continued
(iv) Revised AASB 127 Consolidated and Separate Financial
Statements
Revised AASB 127 Consolidated and Separate Financial
Statements changes the accounting treatment for
investments in subsidiaries. Key changes include the
remeasurement to fair value of any previous / retained
investment when control is obtained / lost, with any resulting
gain or loss being recognised in profit or loss; and the
treatment of increases in ownership interest after control is
obtained as transactions with equity holders in their capacity
as equity holders. The revised standard will become
mandatory for the Group’s 30 June 2009 financial statements.
The Group has not yet determined the impact (if any) on the
financial report.
(v) AASB 2008-7 Amendments to Australian Accounting
Standards – Cost of an Investment in a Subsidiary, Jointly
Controlled Entity or Associate.
The key changes include dividends received from a
subsidiary, jointly controlled entity or associate out of pre-
acquisition income will be recorded as income; a dividend
from a subsidiary, jointly controlled entity or associate is
recognised in the income statement when the right to receive
the dividend is established; and the recognition of a dividend
received by the parent is an impairment indicator in specified
circumstances. The revised standard will become mandatory
for the Group’s 30 June 2010 financial report. The Group has
not yet determined the potential effect of these improvements
on the financial report.
(vi) Revised AASB 2008-1 Amendments to Australian
Accounting Standard – Share-based payments: Vesting
Conditions and Cancellations [AASB 2].
F S A G R O U P L I M I T E D
43
13NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2008
2
REVENUE AND OTHER INCOME
NET OF FINANCE EXPENSE
Fees from Services
- Personal Insolvency
- Refinance
- Corporate
- Recruitment
- Other services
Total revenue
Finance Income
- Interest income – bridging finance
- Interest income – specialty finance assets
- Upfront Fee income – bridging finance
- Upfront Fee income – specialty finance assets
- Factoring income
- Other interest income
Finance Expense
- Interest expense – Warehouse facilities
- Interest expense – Other financial liabilities
Net Finance income
Other Income
Gain on disposal of portfolio assets
Gain on disposal of investment property
3
PROFIT/(LOSS) FOR THE YEAR
Expenses
Expenses from continuing activities excluding
finance costs, classified by function:
Marketing expenses
Administrative expenses
Operating expenses
Depreciation on plant and equipment
Amortisation on leasehold improvements
Depreciation on investment properties
Impairment in value – trade receivables
Reversal of impairment in value – trade receivables (a)
Net Impairment
Rental expense on operating lease
- minimum lease payment
Employee benefits expenses
Legal and consultancy
Consolidated Entity
Parent Entity
2008
$
2007
$
2008
$
2007
$
22,344,265
3,921,231
1,393,181
2,181,313
468,910
20,497,856
6,148,699
1,747,757
735,538
408,748
30,308,900
29,538,598
2,675,601
3,637,764
648,445
1,038,989
812,483
784,374
9,597,656
(3,666,474)
(477,461)
(4,143,935)
5,453,721
187,942
338,148
526,090
5,618,249
6,094,238
20,085,153
31,797,640
403,339
9,811
13,613
426,763
5,335,879
(1,149,662)
4,186,217
846,883
14,143,168
818,865
2,344,591
1,175
1,165,402
-
427,587
439,018
4,377,773
(3,095)
(257,580)
(260,675)
4,117,098
-
-
-
4,306,350
6,297,713
13,543,563
24,147,626
319,186
5,738
32,572
357,496
5,111,924
(3,239,073)
1,872,851
803,709
10,827,760
1,251,323
-
-
-
-
12,241
12,241
-
-
-
-
-
21,072
21,072
-
-
-
21,072
-
-
-
-
260,986
115
261,101
-
-
-
-
-
-
-
-
260,986
-
-
-
-
-
-
-
-
-
-
-
-
133,955
133,955
-
-
-
133,955
-
-
-
-
102,771
19
102,790
-
-
-
-
-
-
-
-
102,771
-
44
A N N U A L R E P O R T 2 0 0 8
13NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2008
3
PROFIT/(LOSS) FOR THE YEAR continued
(a) Change in estimates previously reported
As stated in Note 1(q), the impairment of trade receivables is
based on a method which evaluates the frequency of default,
loss history, and current economic conditions. During the
period, management received updated information on the
loss history and recoverability percentages of debt
agreement administration fees over their collection periods.
Accordingly management has revised its “best-estimate”
based on assumptions consistent with the updated
information. Had management used the same data and
assumptions in the previous financial period this would have
resulted in the reduction in the Impairment for trade
receivables amount previously reported in the income
statement at 30 June 2007 of $515,408. This amount is
included in the “Reversal of impairment in value” amount in
Note 3 above.
Consolidated Entity
Parent Entity
2008
$
2007
$
2008
$
2007
$
4
INCOME TAX
a. Income tax expense
Current tax expense
Deferred tax expense
(Over)/under provision in a prior period
Deferred income tax expense included in
income tax expense comprises:
Increase in deferred tax assets
Increase in deferred tax liabilities
b. Numerical reconciliation of income tax
expense to prima facie tax payable
Profit/(Loss) before income tax
Tax at the Australian tax rate of 30% (2007: 30%)
Tax effect of amounts which are not deductible/
(taxable) in calculating taxable income:
Entertainment
Unrecognised tax losses
Other
Previously unrecognised tax losses utilised
Non-deductible employee costs
(Over)/under provision in the prior year
Income tax expense/(benefit)
c. Unused tax losses
Unused tax losses for which no deferred tax asset
has been recognised
Potential tax benefit
Unused tax losses were principally incurred by
entities not part of the tax consolidated group.
1,132,335
330,615
70,862
1,533,812
(88,554)
419,169
330,615
1,545,289
1,468,930
(139,899)
2,874,320
(33,617)
1,502,547
1,468,930
9,959
-
19,188
29,147
-
-
-
4,737,736
1,421,321
9,695,906
2,908,772
(227,788)
(68,337)
17,432
77,179
(4,101)
(127,177)
78,296
1,462,950
70,862
1,533,812
22,379
51,614
624
-
30,830
3,014,219
(139,899)
2,874,320
282,342
84,703
449,003
134,701
-
-
-
-
78,296
9,959
19,188
29,147
-
-
F S A G R O U P L I M I T E D
40,181
-
(127,720)
(87,539)
-
-
-
31,165
9,350
-
-
-
-
30,831
40,181
(127,720)
(87,539)
-
-
45
13NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2008
Consolidated Entity
Parent Entity
2008
$
2007
$
2008
$
2007
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4
INCOME TAX continued
d. Deferred tax assets
Provisions
Capital legal expenses
Accrued expenditure
Current year tax losses carried forward
Other
Deferred tax liability offset on tax
consolidation
Total deferred tax assets
e. Deferred tax liabilities
Temporary difference on assessable income
Other
Deferred tax liability offset on tax consolidation
Total deferred tax liabilities
5
AUDITORS’ REMUNERATION
Amounts received or due and receivable
by PKF (East Coast Practice):
Audit and review of financial reports
Other services - taxation
6
EARNINGS PER SHARE
(a) Reconciliation of earnings used to calculated
basic and dilutive earnings per share
Profit after income tax ($)
Basic earning per share (cents)
Diluted earning per share (cents)
(b) Weighted average number of ordinary shares
outstanding during the year
Dilution effect of options
Dilution effect of preference shares
Weighted average number of ordinary shares
outstanding during the year used in calculating
dilutive EPS
449,332
238,931
41,500
640,433
56,254
1,426,450
(525,274)
901,176
3,558,567
1,549
3,560,116
(525,274)
3,034,842
363,728
285,716
43,690
-
119,488
812,622
-
812,622
2,614,595
1,078
2,615,673
-
2,615,673
181,700
67,910
249,610
109,400
41,775
151,175
Consolidated
2008
2007
2,681,116
2.37
2.21
2008
Number
6,519,690
6.24
5.76
2007
Number
113,348,988
-
8,000,000
104,427,760
686,457
7,978,082
121,348,988
113,092,299
46
A N N U A L R E P O R T 2 0 0 8
13NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2008
7 CASH AND CASH EQUIVALENTS
Current
Cash on hand and at bank
Assets financed by Non-Recourse
Financial Liabilities
Cash on hand and at bank
8
TRADE AND OTHER RECEIVABLES
Current
Trade receivables
Provision for impairment
Sundry receivables
Non-current
Trade receivables
Provision for impairment
Assets financed by Non-Recourse
Financial Liabilities
Other receivables
Trade receivables and allowances for doubtful debts
Consolidated Entity
Parent Entity
2008
$
2007
$
2008
$
2007
$
7,676,105
6,670,521
256,456
2,253,102
11,187,707
1,750,365
-
-
18,863,812
8,420,886
256,456
2,253,102
23,452,360
(4,308,110)
19,144,250
764,859
19,909,109
11,575,401
(2,509,581)
9,065,820
18,522,275
(4,594,309)
13,927,966
177,402
14,105,368
5,202,939
(947,394)
4,255,545
39,340
185,412
-
-
-
-
-
-
-
-
-
Gross
$
29,371,337
1,124,490
1,085,684
116,895
4,133,554
2008
Allowance
$
(5,801,011)
(120,652)
(97,683)
(82,184)
(716,161)
Consolidated Entity
Net
$
Gross
$
2007
Allowance
$
Net
$
23,570,326
1,003,838
988,001
34,711
3,417,393
19,609,217
(3,993,291)
15,615,926
840,125
399,464
172,347
3,066,875
(407,914)
(185,252)
(154,614)
(800,632)
432,211
214,212
17,733
2,266,243
35,831,960
(6,817,691)
29,014,269
24,088,028
(5,541,703)
18,546,325
Trade and Other
Receivables
Not past due
Past due 0-30 Days
Past due 31-60 Days
Past due 61-90 Days
Past 90 Days
Total
The movement in the provision for impairment
Consolidated Entity
2008
$
2007
$
Opening Balance
Additional provision
5,541,703
4,452,036
Reversal of provision
(1,264,630)
Bad debts
Closing balance
(1,911,418)
6,817,691
8,161,750
3,925,142
(3,562,981)
(2,982,208)
5,541,703
Some amounts have been written off as Bad debts
during the period, as incurred and were not provided
for. These are included in Bad and doubtful debts in the
Income statement. The additional provision amount in
this reconciliation will therefore not agree to the Bad
and doubtful debts amount disclosed in Note 3.
F S A G R O U P L I M I T E D
-
-
-
-
-
-
-
-
-
47
13NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2008
These debtors are assessed as being in arrears where they
do not make their payment obligations as required by their
loan contracts and where the terms of this payment have not
been re-negotiated. This is monitored monthly by
management.
At balance date there are certain bridging finance receivables
that were past due and are not impaired. Management has
reviewed these receivables, their underlying mortgage
security (collateral) and other information available, and have
considered these to be recoverable.
Of the $4,133,554 of receivables which are past 90 days in
arrears, $3,054,189 represents bridging finance receivables
which are have underlying collateral and security as
mentioned above.
Other trade and sundry receivables
Other trade and sundry receivables are generally on 14 to 30
day terms.
Impairment of other trade and sundry receivables is
assessed on an individual basis with regard to the credit
quality of the debtor, payment history and any other
information available.
These debtors are assessed as being in arrears where they
do not pay on their invoice terms and where the terms of this
payment have not been re-negotiated. This is monitored
monthly by management.
At balance date there are certain other trade and sundry
receivables that were past due and are not impaired.
Management has reviewed these receivables, their payment
history and other information available, and have considered
these to be recoverable.
8
TRADE AND OTHER RECEIVABLES continued
Debt Agreement receivables
Debt agreement receivables are collected on 2 bases:
1. For all debt agreements accepted by ITSA for
processing prior to 1 July 2007, debt agreement fees
are receipted in priority to other parties to the debt
agreement, and in accordance with work performed to
date; and
2. For all debt agreements accepted by ITSA for
processing after 1 July 2007, debt agreement fees are
receipted on a prorata basis, in parity with other parties
to the debt agreement.
These debtors are assessed as being in arrears where they
do not make their periodic payments as required by their
debt agreements and where the terms of this payment have
not been re-negotiated and approved by creditors to the debt
agreement. This is monitored continuously by the Company’s
internal collection department.
Impairment of debt agreement receivables is assessed on a
collective (portfolio) basis based on historical collections
data. Considering the length of time it takes to collect debts
in administration and the inherent uncertainty over the
collection of these amounts this method represents
management’s “best estimate” of the recoverability of debtors
in the debt agreement business. Amounts are written off
against this account as bad when debt agreements are
terminated by creditors.
Bridging and factoring finance receivables
Bridging finance receivables which are generally on 90 day
terms and factoring finance receivables are generally on 14 to
60 day terms.
Impairment of bridging finance receivables and factoring
finance receivables is assessed primarily by the equity in their
underlying mortgage security (collateral), any fixed and
floating charges over the borrower’s business assets, the
credit quality of the debtor, payment history and any other
information available.
48
A N N U A L R E P O R T 2 0 0 8
13NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2008
9 OTHER ASSETS
Current
Prepayments
Security bonds
Other
Non-current
Security bonds
Investments in controlled entities
(Refer Note 11)
Consolidated Entity
Parent Entity
2008
$
2007
$
2008
$
2007
$
383,165
5,053
52,378
440,596
3,900
-
3,900
109,334
7,715
34,753
151,802
594,716
-
594,716
-
-
-
-
-
-
-
-
-
-
6,546,397
6,546,397
6,546,397
6,546,397
10 SPECIALTY FINANCE ASSETS
Non-securitised mortgage assets
89,767,650
565,000
Maturity Analysis
Amounts to be received in less than 1 year
Amounts to be received in greater than 1 year
1,600,718
88,166,932
89,767,650
4,224
560,776
565,000
-
-
-
-
-
-
-
-
Impairment
An impairment loss is recognised if the total expected
recoveries in regard to an individual loan do not exceed the
mortgage balance. In the event that actual or expected sales
proceeds do not exceed the mortgage loan balance, this
difference and any realisation costs would equal the
impairment loss. Total recoveries include expected or actual
net sales proceeds resulting from enforced sale of property
security.
Impairment has been assessed on an individual basis with
primary regard to the underlying equity in mortgage security
(collateral) for each of the loans receivable and also with
regard to the credit quality of the debtor, payment history and
any other information available. As a result of this
assessment, there has been no provision for impairment
recognised at 30 June 2008.
A mortgage loan is classified as being in arrears at the
reporting date on the basis of “past due” amounts. Any loan
with an amount that is past due (either instalment arrears or
total arrears comprising of any instalments arrears plus any
other charges) is classified as being in arrears and the total
amount of the loan is recorded as in arrears. Aging of arrears
is determined by dividing total arrears over instalment amount
and multiplying this by the instalment frequency (i.e. weekly,
fortnightly, and monthly).
At reporting date, the Group had registered mortgages over
real property (comprising of residential land and buildings) for
each of the mortgage loan receivables. The assessed fair
value of the underlying real property securities at balance
date were $151,841,000 (2007: $1,375,000). The valuations of
the underlying property securities have been performed at
the later of the original loan application or subsequent loan
variation date and do not take into account any other
realisation costs.
F S A G R O U P L I M I T E D
49
13NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2008
10 SPECIALTY FINANCE ASSETS continued
Impairment continued
Ageing Analysis
The arrears status of mortgages is as follows:
Not Past due
0-30 days past due
31-60 days past due
61 -90 days past due
Past 90 Days
Consolidated Entity
Parent Entity
2008
$
2007
$
2008
$
2007
$
74,001,104
7,952,153
3,607,676
1,848,967
2,357,750
89,767,650
565,000
-
-
-
-
565,000
-
-
-
-
-
-
-
-
-
-
-
-
50
A N N U A L R E P O R T 2 0 0 8
13NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2008
11 CONTROLLED ENTITIES
Name
Country of
Incorporation
Percentage of equity interest
held by the consolidated entity
Prospex Profile Pty Ltd (3)
FSA Australia Pty Ltd (3)
Fox Symes Financial Pty Ltd (1)
Fox Symes & Associates Pty Ltd (1)
Fox Symes Debt Relief Services Pty Ltd (1)
FSA Services Group Pty Ltd (2)
Fox Symes Home Loans Pty Ltd (3)
180 Group Holdings Pty Ltd (3)
Aravanis Insolvency Pty Ltd (1)
Fox Symes Business Services Pty Ltd (1)
Fox Symes Recruitment Pty Ltd (1)
Fox Symes Wealth Management Pty Ltd (1)
180 Group Pty Ltd (4)
(1) Investment held by FSA Australia Pty Ltd
(2) Investment held by Fox Symes & Associates Pty Ltd
(3) Investment held by FSA Group Ltd
(4) Investment held by 180 Group Holdings Pty Ltd
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
2008
%
100
100
100
100
100
100
90
100
65
75
70
100
70
2007
%
100
100
100
100
100
100
90
100
65
75
70
67
70
The following entities are subsidiaries of 180 Group Pty Ltd
Name
Country of
Incorporation
Percentage of equity interest
held by 180 Group Pty Ltd
180 Capital Finance Pty Ltd
180 Corporate Pty Ltd
180 Property Holdings Pty Ltd
180 Equity Partners Pty Ltd
180 Capital Funding Pty Ltd
One Financial Pty Ltd
Australia
Australia
Australia
Australia
Australia
Australia
2008
%
100
100
100
100
100
65
2007
%
100
100
100
100
100
65
The following entities are subsidiaries of Fox Symes Home Loans Pty Ltd
Name
Country of
Incorporation
Percentage of equity interest
held by Fox Symes Home Loans Pty Ltd
Fox Symes Home Loans (Services) Pty Ltd
Fox Symes Home Loans (Mgmt) Pty Ltd
Fox Symes Home Loans Warehouse Trust No.1
Ultimate Parent Entity
FSA Group Ltd is the ultimate parent entity.
Australia
Australia
Australia
2008
%
100
100
85
2007
%
100
100
85
F S A G R O U P L I M I T E D
51
13NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2008
12 PLANT AND EQUIPMENT
Computer equipment at cost
Accumulated depreciation
Net carrying amount
Office equipment at cost
Accumulated depreciation
Net carrying amount
Leasehold improvements at cost
Accumulated amortisation
Net carrying amount
Furniture and fittings at cost
Accumulated depreciation
Net carrying amount
Motor vehicles at cost
Accumulated depreciation
Net carrying amount
Total plant and equipment at cost
Accumulated depreciation
Net carrying amount
Consolidated
Movements
Balance at 1 July 2006
Additions
Disposals
Depreciation
Balance at 30 June 2007/
1 July 2007
Additions
Disposals
Depreciation
Balance at 30 June 2008
Consolidated Entity
Parent Entity
2008
$
2007
$
2008
$
2007
$
1,586,305
(835,358)
750,947
331,995
(233,636)
98,359
-
-
-
246,795
(103,935)
142,860
74,978
(37,855)
37,123
2,240,073
(1,210,784)
1,029,289
1,187,379
(846,957)
340,422
294,845
(185,524)
109,321
37,820
(5,738)
32,082
220,240
(59,781)
160,459
97,103
(37,643)
59,460
1,837,387
(1,135,643)
701,744
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Computer
Equipment
Office
Equipment
Leasehold
Improvements
Furniture &
Fittings
Motor
Vehicles
Total
$
$
$
$
$
$
332,677
228,610
(17,827)
(203,038)
340,422
708,797
(8,178)
(290,094)
750,947
118,193
45,219
(173)
(53,918)
109,321
43,775
(4,052)
(50,685)
98,359
-
37,820
-
(5,738)
32,082
-
(22,271)
(9,811)
-
140,957
58,217
-
(38,715)
160,459
26,875
(172)
(44,302)
142,860
57,731
34,913
(9,669)
(23,515)
59,460
760
(4,839)
(18,258)
649,558
404,779
(27,669)
(324,924)
701,744
780,207
(39,512)
(413,150)
^^37,123
1,029,289
^^ - Included in this amount are Motor Vehicles which have a fixed charge relating to a Hire Purchase Liability. The Hire Purchase Liability is secured by the
underlying asset. Refer note 16 for further information.
52
A N N U A L R E P O R T 2 0 0 8
13NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2008
13 INVESTMENT PROPERTY
Investment property
At cost
Accumulated depreciation
Movements during year:
Beginning of the year
Additions
Disposals
Depreciation
Consolidated Entity
Parent Entity
2008
$
2007
$
2008
$
2007
$
362,339
(28,417)
333,922
1,359,387
-
(1,011,852)
(13,613)
333,922
1,402,217
(42,830)
1,359,387
352,081
1,039,878
-
(32,572)
1,359,387
-
-
-
-
-
-
-
-
There are first mortgages registered over the Investment Properties (see Note 16).
The Directors have assessed the fair value of the investment properties to be at least equal to their carrying amounts.
14 INTANGIBLE ASSETS
Goodwill
3,830,835
3,830,835
-
Included in the carrying amount of Goodwill is an amount of
$3,485,711 which relates to the Goodwill acquired on
acquisition of the 180 Group Holdings Pty Ltd and its
controlled entities, and $345,124 which relates to the original
investment by the parent company in FSA Australia Pty Ltd
and controlled entities.
Impairment
The recoverable amount of goodwill is determined based on
“fair value less costs to sell” by capitalisation of estimated
Normalised Maintainable Earnings (“NME”) at an appropriate
earnings multiple.
The NME is that level of sustainable earning that can be
maintained by the Cash Generating Unit (“CGU”) and
excludes one-off and/or non-recurring items.
The appropriate earnings multiple is determined with
reference to the observed multiples of entities whose
businesses are comparable to that of the CGU being
considered. The key assumption on which management has
based its determination is that the CGUs could be sold for
the earnings multiple derived from the analysis.
Consolidated Entity
Parent Entity
2008
$
2007
$
2008
$
2007
$
15 TRADE AND OTHER PAYABLES
Current
Unsecured
Trade payables
Institutional creditors
Sundry payables and accruals
Intercompany loan – controlled entities
Notes payable – non-interest bearing
F S A G R O U P L I M I T E D
2,853,251
3,948,329
2,827,013
-
95,000
9,723,593
1,206,944
3,945,993
1,945,982
-
-
7,098,919
-
-
-
509,998
95,000
604,998
-
-
-
-
-
-
-
-
-
-
-
12,241
1,876,423
-
1,888,664
53
13NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2008
Consolidated Entity
Parent Entity
2008
$
2007
$
2008
$
2007
$
16 BORROWINGS
Current
Unsecured
Interest bearing notes
Other loans
Secured
Hire Purchase Liability
Non-current
Secured
Hire purchase liability
Mortgage
Bank loan – Other
Non-Recourse Financial Liabilities
Secured
Warehouse facilities
570,682
200,045
770,727
600,000
84,152
684,152
15,571
14,066
786,298
698,218
27,877
272,000
6,652,902
6,952,779
43,775
1,055,767
-
1,099,542
99,886,840
2,478,095
(a) Total Current, Non-Current and Non-Recourse secured liabilities:
Hire Purchase Liability
Mortgage
Bank loan – Other
Warehouse facilities
43,448
272,000
6,652,902
99,886,840
106,855,190
(b) The carrying amounts of non-current assets pledged as security are:
Fixed charge over assets
Motor vehicles
Investment properties
Loan and other assets in the Fox Symes
Home Loans Warehouse Trust No. 1
24,597
333,922
100,994,697
101,353,216
57,841
1,055,767
-
2,478,095
3,591,703
35,305
1,359,387
2,500,777
3,895,469
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
The Bank loan – Other is secured by a floating charge over
the remaining assets of the 180 Group Pty Limited and
controlled entities and the other wholly-owned subsidiaries of
FSA Group Limited.
Excluded from this charge are cash assets held on behalf of
Institutional and other creditors to Debt Agreements
administered by the Group. All borrowing covenants were
met during the year.
54
A N N U A L R E P O R T 2 0 0 8
13NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2008
Consolidated Entity
Parent Entity
2008
$
2007
$
2008
$
2007
$
16 BORROWINGS continued
(c) The interest bearing notes are held by persons outside the Group and are unsecured.
Maturity date
30 June 2008
Interest Rates
22.5%
570,682
570,682
550,000
550,000
These notes were fully repaid to investors on 4 July 2008.
(d) The interest bearing notes held by persons within the Group and are unsecured.
Interest Rates
20.0%
-
50,000
Maturity date
7 July 2007
(e) Warehouse facility
-
-
-
Warehouse facilities are used to fund mortgages prior to
securitisation and include revolving Senior and Mezzanine
Note facilities (the facilities). The drawdown limit under the
Senior and Mezzanine Note facilities is $200 million and $8
million respectively and at balance date $95,375,000 and
$4,006,000 respectively had been drawn down.
The Warehouse facilities are 364 day facilities that are
renewable annually. Refer to note 23 for details of the facility
renewal post year end.
17 PROVISIONS
Current
Provision for Institutional Creditor Payments
Employee benefits
Non Current
Employee benefits
Analysis of provisions
Institutional Creditor Payments
Balance at 1 July 2007
Additional provisions
Creditor payments reversal
Balance at 30 June 2008
Provision for employee benefits
A provision has been recognised for employee benefits
relating to annual leave and long service leave. The
measurement and recognition criteria relating to employee
benefits have been included in note 1 to this report.
Interest is payable at the applicable BBSW rate plus a margin
of 1% for the Senior Notes and a margin of 6% for the
Mezzanine Notes. The interest rate at 30 June 2008 for the
Senior and Mezzanine Notes is 8.61% and 13.61%
respectively.
The facilities are secured against current and future specialty
finance assets (refer note 10). All borrowing covenants were
met during the year.
Consolidated Entity
Parent Entity
2008
$
2007
$
2008
$
2007
$
1,413,615
475,535
1,889,150
882,596
377,214
1,259,810
71,959
39,218
882,596
1,413,615
(882,596)
1,413,615
283,665
882,596
(283,665)
882,596
-
-
-
-
-
-
-
-
As at 30 June 2008, the Consolidated Entity employed 150
full-time equivalent employees (2007: 138) plus a further 13
independent contractors (2007: 15).
-
-
-
-
-
-
-
-
-
-
-
F S A G R O U P L I M I T E D
55
13NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2008
18 SHARE CAPITAL
115,437,513 (2007: 106,837,513)
fully paid Ordinary Shares
16 (2007: 24) Convertible Redeemable
Preference Shares (CRPS)
(a) Ordinary shares
Balance 1 July
- 2 August 2006
- 11 September 2006
- 20 September 2006
- 9 October 2006
- 3 November 2006
- 1 May 2007
- 12 July 2007
- 7 August 2007
- 2 October 2007
Balance 30 June
Consolidated Entity
Parent Entity
2008
$
2007
$
2008
$
2007
$
5,898,848
5,085,535
5,898,848
5,085,535
**1,238,624
7,137,472
**1,857,937
6,943,472
**1,238,624
7,137,472
**1,857,937
6,943,472
2008
Number
2007
Number
2008
Number
2007
Number
106,837,513
-
-
-
-
-
-
400,000
200,000
8,000,000
115,437,513
98,217,513
100,000
120,000
200,000
8,000,000
100,000
100,000
-
-
-
106,837,513
106,837,513
-
-
-
-
-
-
400,000
200,000
8,000,000
115,437,513
98,217,513
100,000
120,000
200,000
8,000,000
100,000
100,000
-
-
-
106,837,513
** - During the period 8 CRPS converted into 8,000,000 ordinary shares. The determined fair value of the CRPS, amounting to $619,313 was transferred from the
CRPS capital account to the Ordinary share capital account.
2007
2008
On 2 August 2006, 100,000 unlisted ESOP $0.10 options
exercisable on or before 24 November 2006 were exercised
into 100,000 ordinary shares;
On 11 September 2006, 120,000 ordinary shares were issued
in consideration for services rendered;
On 20 September 2006, 200,000 ordinary shares were
issued in consideration for services rendered;
On 9 October 2006, 8 Convertible Redeemable Preference
Shares (“CRPS”) were converted pursuant to the terms of the
purchase agreement of 180 Group, which was acquired on
21 April 2006 and 180 Group exceeding its first profit target.
The 8 CRPS were converted into 8,000,000 ordinary shares;
On 3 November 2006, 100,000 ordinary shares were issued
on exercise of 100,000 $0.10 options; and
On 1 May 2007, 100,000 ordinary shares were issued on
exercise of 100,000 $0.10 options.
On 12 July 2007, 400,000 ordinary shares were issued on
exercise of 400,000 $0.10 options;
On 7 August 2007, 200,000 ordinary shares were issued in
consideration for services rendered; and
On 2 October 2007, 8 Convertible Redeemable Preference
Shares (“CRPS”) were converted pursuant to the terms of the
purchase agreement of 180 Group, which was acquired on
21 April 2006 and 180 Group exceeding its second profit
target. The 8 CRPS were converted into 8,000,000 ordinary
shares.
At the shareholders meetings each ordinary share is entitled
to one vote when a poll is called, otherwise each shareholder
has one vote on a show of hands.
56
A N N U A L R E P O R T 2 0 0 8
13NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2008
18 SHARE CAPITAL continued
On 1 December 2006, 25,000,000, $0.60 options expired;
(b) Convertible Redeemable Preference Shares (CRPS)
On 21 April 2006, 32 CRPS were issued relating to the
acquisition of 180 Group Holdings Pty Ltd, pursuant to
resolutions passed by the shareholders at general meeting.
In summary, the terms of the CRPS are as follows:
• each CRPS will be convertible, subject to certain
performance parameters being achieved in the 180
Group, into 1,000,000 ordinary fully paid FSA Group
shares (such that if all of the CRPS are converted, a
total of 32,000,000 FSA Group shares will be issued);
and
• CRPS are able to be converted into ordinary FSA
Group shares under one of three scenarios (or
“Phases”) based on the financial performance of the
180 Group. These Phases were set out fully in the
Notice of Meeting and Explanatory Memorandum
distributed to shareholders on 17 March 2006.
16 Convertible Redeemable Preference Shares remain
unconverted at 30 June 2008.
(c) Options
On 21 November 2006, 500,000 options exercisable at $0.25
on or before 20 November 2011 were issued as part of
Director’s remuneration;
On 19 February 2007, 640,000 options exercisable at $0.60
on or before 31 January 2010 were issued as part of staff
remuneration pursuant to the Company’s ESOP, and 450,000
options exercisable at $0.655 on or before 31 January 2010
were issued as part of executive remuneration pursuant to
the Company’s ESOP;
On 12 July 2007, 250,000 options exercisable at $0.98 on or
before 31 January 2010 were issued as part of Director’s
remuneration, and 400,000 ordinary shares were issued
upon exercise of 400,000 $0.10 options; and
On 11 April 2008, 250,000 options exercisable at $0.60 on or
before 31 January 2010 were issued as part of Director’s
remuneration.
Ordinary shares participate in dividends and the proceeds on
winding up of the parent entity in proportion to the number of
shares held.
For information relating to share options issued to key
management personnel during the financial year, refer to the
Remuneration Report included in the Directors’ Report.
F S A G R O U P L I M I T E D
57
13NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2008
19 RESERVES
Option Reserve
The option reserve records items recognised as expenses on valuation of employee share options.
Consolidated Entity
Parent Entity
2008
$
2007
$
2008
$
2007
$
3,203,924
6,821,586
(256,935)
118,704
426,763
(338,148)
39,512
357,496
-
27,669
20 CASH FLOW INFORMATION
Reconciliation of cash flows from
operations to Profit after tax
Profit/(loss) after tax
Non-cash flows in profit/(loss):
Depreciation
Gain on sale of investment property
Loss/ (Gain) on disposal of plant & equipment
Changes in assets and liabilities:
(Increase)/decrease in trade and other receivables
(6,097,738)
(6,931,109)
(Increase)/decrease in other non-current assets
(Increase)/decrease in other current assets
(Decrease)/increase in trade and other payables
(Decrease)/increase in employee entitlements
(Decrease)/increase in other liabilities
Cash flow from operating activities
21 COMMITMENTS
(i) Operating leases (non-cancellable):
Minimum lease payments
– not later than one year
– later than one year and not later than five years
(ii) Hire purchase liability:
– not later than one year
– later than one year and not later than five years
– later than five years
Total minimum hire purchase payments
– future finance charges
– hire purchase liability
– current liability (note 16)
– non-current liability (note 16)
590,816
(288,793)
3,053,187
131,062
(486,144)
234,441
45,747
(17,091)
1,441,879
160,590
905,936
2,812,703
1,153,378
1,211,431
2,364,809
841,713
2,364,809
3,206,522
18,077
30,517
-
48,594
(5,146)
43,448
15,571
27,877
43,448
17,161
48,962
-
66,123
(8,282)
57,841
14,066
43,775
57,841
-
-
-
-
-
-
(12,241)
-
(1,309,227)
(1,578,403)
-
-
-
-
-
-
93
-
(1,313,119)
(1,194,322)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
58
A N N U A L R E P O R T 2 0 0 8
13NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2008
22 KEY MANAGEMENT PERSONNEL DISCLOSURES
(a) Details of Directors and Key Management Personnel
(i) Directors
Sam Doumany
Tim Odillo Maher
Deborah Southon
Hugh Parsons
Stan Kalinko
Non-Executive Chairman
Executive Director
Executive Director
Non-Executive Director
Non-Executive Director
(ii) Key Management Personnel of the Group
Duncan Cornish
Anthony Carius
Pierre-Alain De Villecourt Chief Information Officer
Goran Turner
Nino Eid
Chief Executive - Fox Symes Home Loans
Manager - Refinance
Joint Company Secretary
Chief Financial Officer and Joint Company Secretary
Consolidated Entity
Parent Entity
2008
$
2007
$
2008
$
2007
$
(b) Remuneration of Directors and Key Management Personnel
Short-term employee benefits
Post-employment benefits
Share-based payments
1,254,437
159,486
194,498
1,608,421
1,274,273
99,575
85,564
1,459,412
-
-
194,498
194,498
-
-
85,564
85,564
Fair value of options granted as part of remuneration are
estimates only. The estimates are based on the use of the
Black Scholes option pricing model. This model takes
account of factors such as the option exercise price, the
current level and volatility of the underlying share price and
the time to maturity of the options.
Information about the remuneration of Directors and Key
Management Personnel which is currently required under
Section 300A of the Corporations Act and under Accounting
Standard AASB 124 “Related Party Disclosures” is included in
the Remuneration Report within the Director’s Report on
pages 15 to 22.
F S A G R O U P L I M I T E D
59
13NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2008
22 KEY MANAGEMENT PERSONNEL DISCLOSURES continued
(c) Options issued as part of remuneration for the period ended 30 June 2008
During the year options were granted as equity compensation benefits to one Non-Executive Director. The options were issued for
no consideration. Each of the granted options entitles the holder to subscribe for one fully paid ordinary share in the entity at an
exercise price and expiry date, as set out below.
The Company uses employee continuity of service and the future share price to align comparative shareholder return and reward
for Executives.
Terms & Conditions for Each Grant
Grant
Date
Grant
Number
Vest
Date
Fair Value
per Option
at grant
date
($)#
Exercise
Price
Fair Value
per Option
at Exercise
Date
Fair Value
at Date
Option
Lapsed
% of
Remuner-
ation
DDiirreeccttoorrss
Stan Kalinko
14 Mar 2008
250,000
28 Jun 2009
$0.098
$0.60
n/a
n/a
7%
# Calculation of fair value of options granted using the Black-Scholes option pricing model, which takes into account factors such as the option exercise price,
the market price at the date of issue and volatility of the underlying share price and the time to maturity of the option.
(d) Shares issued on exercise of remuneration options
Options exercised during the year that were granted as remuneration in prior periods
Key Management
Personnel
Duncan Cornish
Total
Number of Ordinary
Shares Issued
400,000
400,000
Amount Paid
per Share
$0.10
Amount Unpaid
per Share
-
(e) Option holdings of Directors and Key Management Personnel
Balance
at 1 July
2007
Granted
as
remuner-
ation
Options
Exercised
Net
Change
Other
Balance
at 30 June
2008
Vested at 30 June 2008
Total
Exercisable Exercisable
Not
ESOP Options
Directors
Key Management Personnel
Duncan Cornish
Anthony Carius
Nino Eid
Total ESOP Options
Unlisted Options
($0.25 @ 31-Jan-10)
Directors
Hugh Parsons
Key Management Personnel
n/a
400,000
450,000
50,000
900,000
500,000
n/a
-
-
-
-
-
(400,000)
-
-
(400,000)
-
-
-
-
-
-
-
450,000
50,000
-
150,000
-
500,000
150,000
500,000
-
-
-
-
-
-
-
150,000
-
150,000
-
60
A N N U A L R E P O R T 2 0 0 8
13NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2008
22 KEY MANAGEMENT PERSONNEL DISCLOSURES continued
(e) Option holdings of Directors and Key Management Personnel continued
Balance
at 1 July
2007
Granted
as
remuner-
ation
Options
Exercised
Net
Change
Other
Balance
at 30 June
2008
Vested at 30 June 2008
Total
Exercisable Exercisable
Not
Unlisted Options
($0.98 @ 31-Jan-10)
Directors
Stan Kalinko
Key Management Personnel
Unlisted Options
($0.60 @ 31-Jan-10)
Directors
Stan Kalinko
Key Management Personnel
250,000
n/a
-
250,000
-
n/a
Total Unlisted Options
750,000
250,000
-
-
-
-
-
-
250,000
250,000
1,000,000
-
-
-
-
-
-
-
-
-
(f) Shareholdings of Directors and Key Management Personnel
Shares held in FSA Group Ltd
including CRPS
(number)
Balance
1 July
2007
Granted as
remuner-
ation
Options
Exercised
Net
Change
Other
Balance
30 June
2008
Directors
Sam Doumany
Tim Odillo Maher
Deborah Southon
Stan Kalinko
Key Management
Personnel
Duncan Cornish
Anthony Carius
Nino Eid
Total
1,000,000
32,695,536
12,946,533
-
2,100,000
-
100,000
48,842,069
-
-
-
-
-
-
-
-
-
-
-
-
-
**8,100,197
-
10,000
1,000,000
40,795,733
12,946,533
10,000
400,000
-
-
400,000
(1,416,729)
26,158
-
6,719,626
1,083,271
26,158
100,000
55,961,695
** Included here is the conversion of 8 Convertible Redeemable Preference Shares to 8,000,000 ordinary shares.
Refer to (h) below. Total shareholdings includes 16 Convertible Redeemable Preference Shares.
(g) Loans to Directors and Key Management Personnel
There were no loans to Directors or Key Management Personnel during the period.
F S A G R O U P L I M I T E D
61
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2008
13
During the period the Group purchased supplies from the
Ethan Group Pty Ltd, a company which is associated with Mr
Tim Odillo Maher. The total amount purchased was $105,440
(2007:$22,023). The supplies were purchased on normal
commercial terms.
On 20 August 2007, in accordance with the subscription
notice, Gregory Woszczalski redeemed an interest bearing
note amounting to $50,000. The rate of interest paid was 20%
p.a. The total amount of interest paid to Gregory Woszczalski
was Nil (2007:$ 10,000). These note liabilities of $50,000 were
paid out on 20 August 2007 in accordance with the
subscription notice.
23 EVENTS OCCURRING AFTER BALANCE DATE
There have been no events since the end of the financial
year that impact upon the financial report as at 30 June
2008, except as follows:
• On 15 August 2008, Fox Symes Home Loans Warehouse
Trust #1’s $210m Warehouse facility was renewed until 15
May 2009.
24 RELATED PARTY DISCLOSURES
(a) Key management personnel
Disclosures relating to key management personnel are set
out in note 22.
(b) Subsidiaries
Interests in subsidiaries are set out in notes 9 and 11.
22 KEY MANAGEMENT PERSONNEL DISCLOSURES
continued
(h) Other transactions to Directors and Key
Management Personnel
Convertible Redeemable Preference Shares (CRPS)
Part of the consideration for the acquisition of 180 Group
Holdings was paid by FSA Group by the issue of the CRPS.
In summary, the terms of the CRPS are as follows:
• a total of 32 one dollar ($1) CRPS were issued to
Capital Management Corporation Pty Ltd, the Vendor;
• each CRPS will be convertible, subject to certain
performance parameters being achieved in the 180
Group, into 1,000,000 ordinary fully paid FSA Group
shares (such that if all of the CRPS are converted, a
total of 32,000,000 FSA Group shares will be issued);
and
• CRPS are able to be converted into ordinary FSA
Group shares under one of three scenarios (or
“Phases”) based on the financial performance of the
180 Group. These Phases were set out fully in the
Notice of Meeting and Explanatory Memorandum
distributed to shareholders on 17 March 2006.
On 8 October 2007, upon 180 Group exceeding the
performance parameters required, 8 CRPS, converted in to
8,000,000 ordinary shares and were issued to the Vendor, a
company associated with Mr Tim Odillo Maher.
Other transactions with Directors and Key
Management Personnel and related parties
During the period, the Group provided factoring finance to
Skin Patrol Pty Ltd, a company which is associated with Mr
Tim Odillo Maher. The total of all factoring fees received was
$35,535 for the year ended 30 June 2008, (2007: $36,685).
The finance facility and factoring fees charged were provided
on normal commercial terms.
62
A N N U A L R E P O R T 2 0 0 8
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2008
13
24 RELATED PARTY DISCLOSURES continued
(c) Transactions with related parties
Transactions with related parties of Directors or Key Management Personnel are as disclosed in note 22 (h)
Details of other related party transactions are as follows:
Consolidated Entity
Parent Entity
2008
$
2007
$
2008
$
2007
$
Tax Consolidation legislation
Current tax payable/(receivable) assumed from
wholly-owned tax consolidated entities
-
-
(421,952)
448,898
(d) Outstanding related party balances arising from sales/purchase of goods or services
Current payables – other related parties
Current factoring receivables – Other related parties
Current factoring payables – Other related parties
(e) Loans from related parties
Loans from subsidiaries
Beginning of the year
Advances received
Repayments made (including liabilities from the
tax consolidated group)
Balance at the end of the year
Consolidated Entity
Parent Entity
2008
$
204
174,071
47,906
2007
$
614
108,370
508
2008
$
2007
$
-
-
-
-
-
-
Consolidated Entity
Parent Entity
2008
$
2007
$
2008
$
2007
$
-
-
-
-
-
-
-
-
1,876,423
4,574,476
(5,940,901)
509,998
1,338,656
3,511,493
(2,973,726)
1,876,423
F S A G R O U P L I M I T E D
63
13NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2008
25 SEGMENT INFORMATION
Operating Segments
Revenue and Other Income
External sales
Finance Income
Finance expense
Personal and Corporate
Debt Services
Lending Services
Other/Unallocated
Consolidated Total
2008
$
2007
$
2008
$
2007
$
2008
$
2007
$
2008
$
2007
$
27,690,125
27,532,533
50,176
570,887
2,568,599
1,435,178
30,308,900
29,538,598
385,679
(31,406)
303,779
(17,352)
9,185,406
3,937,580
(4,042,117)
(182,013)
Net Finance Income
354,273
286,427
5,143,289
3,755,567
Other Income
-
-
-
Internal sales and income
1,119,553
266,817
594,796
-
-
Eliminations
26,571
(70,412)
(43,841)
526,090
312,072
136,414
(61,310)
9,597,656
(4,143,935)
4,377,773
(260,675)
75,104
5,453,721
4,117,098
-
526,090
-
373,260
2,026,421
640,077
(2,026,421)
(640,077)
Total Revenue and Income
29,163,951
28,085,777
5,788,261
4,326,454
3,362,920
1,883,542
36,288,711
33,655,696
Results
Segment profit before tax
3,763,134
9,573,674
Income tax (expense)/benefit
(1,110,888)
(2,872,102)
Profit for the year
2,652,246
6,701,572
362,724
(159,216)
203,508
255,462
(22,738)
232,724
611,878
(133,230)
4,737,736
9,695,906
(263,708)
348,170
20,520
(1,533,812)
(2,874,320)
(112,710)
3,203,924
6,821,586
Items included in Profit
for the year
Share of the profits of an
associate using the Equity
Accounting Method
Impairment in value
– trade receivables
Reversal of impairment in value
– trade receivables
Rental expense on operating lease
-
-
-
-
246,665
187,836
246,665
187,836
4,009,107
3,978,185
1,231,742
1,133,739
95,030
(1,149,662)
(3,239,073)
-
-
-
-
5,335,879
5,111,924
(1,149,662)
(3,239,073)
-
-
– minimum lease payment
822,019
687,283
45,926
24,864
70,500
846,883
803,709
Segment assets
Eliminations
Total assets
Included in Segment assets
Investment in associate
Segment liabilities
Eliminations
Total liabilities
39,509,756
32,279,336
121,324,015
11,225,167
8,426,345
11,203,751
169,260,116
54,708,254
(24,351,804)
(19,585,488)
144,908,312
35,122,766
-
-
62,114
139,449
-
-
62,114
139,449
24,885,333
17,228,241
117,570,437
10,621,624
1,487,283
5,200,236
143,943,053
33,050,101
(21,597,592)
(16,831,276)
122,345,461
16,218,825
64
A N N U A L R E P O R T 2 0 0 8
13NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2008
25 SEGMENT INFORMATION continued
Measurement
Information about operating segments
Identification of reportable segments
The Consolidated Entity’s Chief Operating Decision Maker
has identified two reportable segments based on the
differences in providing services and providing finance
products. These two segments are subject to different
regulatory environments and legislation.
The two identified reportable segments are:
Personal and Corporate Debt Services and Lending.
Personal and Corporate Debt Services include debt
agreement proposal preparation and administration, refinance
broking, trustee services, corporate insolvency consultancy
services and other related services.
Lending includes the provision of bridging finance, factoring
finance and the mortgage finance.
Each identified reportable segment accounts for transactions
consistently with the Accounting policies mentioned in note 1
to these financial statements. Inter-segment transactions are
highlighted as eliminated to reconcile to the profit, total assets
and liabilities amounts of the consolidated entity.
26 FINANCIAL INSTRUMENTS
Financial and Capital Risk Management
The Group undertakes transactions in a range of financial
instruments including:
• Cash and cash equivalents
• Receivables
• Current tax receivable/(payable)
• Specialty Finance Assets (Mortgage receivables)
• Other Financial Assets, mainly deposits
• Payables (including Institutional creditor liabilities)
• Interest Bearing Liabilities including 364 day rolling Note
Facility funding, Bank loans, Mortgage Loans and Hire
Purchase Liabilities
These financial instruments represented in the balance sheets are categorised under AASB 139 Financial Instruments:
Recognition and Measurement as follows:
Financial Assets
Cash and Cash Equivalents
Investments at fair value
Loans and Receivables at amortised cost
Financial Liabilities
Loans at amortised cost
Consolidated Entity
Parent Entity
2008
$
2007
$
2008
$
2007
$
18,863,812
-
119,442,668
8,420,886
594,716
19,111,325
256,456
2,253,102
-
421,952
-
-
117,349,510
12,304,124
604,998
2,377,743
The Group has exposure to the following risks from these
financial Instruments:
• credit risk
• liquidity risk
• market (interest) risk
The Board of Directors has overall responsibility for the
establishment and oversight of the risk management
framework through the work of the Audit and Risk
Management Committee.
The Audit and Risk Management Committee is responsible
for developing and monitoring risk management policies. The
Chairman of the Audit and Risk Management Committee
reports to the Board of Directors on its activities.
Risk management procedures are established by the Audit
and Risk Management Committee and carried out by
management to identify and analyse the risks faced by the
Group and to set controls and monitor risks. These are
discussed individually below.
F S A G R O U P L I M I T E D
65
13NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2008
26
FINANCIAL INSTRUMENTS continued
Financial and Capital Risk Management continued
Capital Management
The Group’s objectives in managing its capital is the
safeguard of the Group’s ability to continue as a going
concern, maintain the support of its Investors and other
business partners, support the future growth initiatives of the
Company and maintain an optimal capital structure to reduce
the costs of capital. The Group’s current capital maintenance
policy as opposed to a dividend policy is consistent with its
Capital Management objectives. These objectives are
reviewed periodically by the Board.
The Company assesses the adequacy of its capital
requirements, cost of capital and gearing (i.e. debt/equity mix)
in line with these objectives.
Gearing is used to monitor levels of debt capital used by the
Group to fund its operations. The ratio is calculated as Net
Interest Bearing Liabilities divided by Tangible Assets (less
Cash Assets).
The gearing ratio at 30 June 2008, excluding the Group’s
special purpose entity Fox Symes Home Loans Warehouse
Trust # 1, whose liabilities are non-recourse to the Group, was
23.8% (2007: 8.1%).
It was the policy of the Group during the 2008 financial year
to maintain a gearing ratio, excluding the Group’s special
purpose entity Fox Symes Home Loans Warehouse Trust #1
of less than 50% (2007: 50%)
The Group defines capital as total equity reported in the
balance sheet.
Fair Values
The carrying values of the Group’s financial assets and
liabilities approximate their fair values.
• Trade and other receivables, including bridging finance
receivables and factoring finance receivables; and
• Specialty finance assets (Residential mortgage secured
loans receivable)
Credit and lending policies have been established for all
lending operations whereby each new borrower is analysed
individually for creditworthiness and serviceability prior to the
Group doing business with them. This includes where
applicable credit history checks and affordability assessment
and, in the case of lending activities, confirming the existence
and title of the property security, and assessing the value of
the security provided. These are monitored by the Audit and
Risk Management Committee though the management of
the Group.
Specialty finance assets are secured by first mortgage
security over real property. Bridging finance and factoring
finance receivables are secured by first or second mortgage
security, and where applicable, fixed and floating charges
over business assets.
The Group retains the mortgages over the secured real
property (consisting of land and buildings) until the loans are
repaid. The Group is entitled to take possession of and
enforce the sale of the secured real property in the event that
the borrower defaults under the terms of their mortgage.
Personal Insolvency (debt agreement and personal
insolvency agreements under the Bankruptcy Act)
receivables are unsecured, though debtors are assessed for
serviceability and affordability prior to inception of each
agreement.
The above minimises the Group’s credit risk exposure to
acceptable levels.
The Audit and Risk Management Committee also establishes
the Group’s allowance for impairment policy which is
discussed in notes 8 and 10.
Credit Risk
Liquidity Risk
Credit risk is the risk of financial loss to the Group if a
customer or counterparty to a financial instrument fails to
meet its contractual obligations. The Group does not have
any material credit risk exposure to any single debtor or
group of debtors under financial instruments entered into by
the Group. Credit risk is concentrated in two categories of
financial instruments:
Liquidity risk is the risk that Group will not be able to meet its
financial obligations as they fall due. The Group’s approach in
managing liquidity is to ensure that it will always have
sufficient liquidity to meet its liabilities when due without
incurring unacceptable losses or risking damage to the
Group’s reputation.
66
A N N U A L R E P O R T 2 0 0 8
13NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2008
26
FINANCIAL INSTRUMENTS continued
Liquidity Risk continued
The Group’s liquidity risk management policies include
cashflow forecasting, which is reviewed and monitored
monthly by management as part of the Group’s master
budget and having access to funding through credit facilities.
The contractual maturity of the Group’s fixed and floating rate
financial liabilities are as follows. The amounts represent the
future undiscounted principal and interest cashflows and
therefore do not equate to the values in the financial
statements:
Consolidated Entity
30 June 2008
Carrying
amount
Contractual
Cashflows
6 months
or less
$
$
$
6 -12
months
$
1 to 2
years
$
2 to 5
years
$
Trade and Other Payables
Institutional creditors
Other Payables
Short term Note Liabilities
Hire Purchase Liabilities
Other Short term loans
Bank Loans
Mortgage Loans
2,853,251
3,948,329
2,922,013
570,682
43,448
200,045
6,652,902
272,000
2,853,251
3,948,329
2,922,013
580,853
48,594
200,045
7,683,300
295,518
2,853,251
3,948,329
2,922,013
580,853
9,039
200,045
329,400
11,759
-
-
-
-
9,039
-
329,400
11,759
-
-
-
-
13,264
-
7,024,500
272,000
Warehouse Facilities
99,886,840
108,056,961
4,085,061
103,971,900
Consolidated Entity
30 June 2007
Carrying
amount
Contractual
Cashflows
6 months
or less
$
$
$
6 -12
months
$
1 to 2
years
$
Trade and Other Payables
Institutional creditors
Other Payables
Short term Note Liabilities
Hire Purchase Liabilities
Other Short term loans
Mortgage Loans
Warehouse Facilities
1,206,944
3,945,993
1,945,982
600,000
57,841
84,152
1,055,767
2,478,095
1,206,944
3,945,993
1,945,982
713,917
66,123
84,152
1,148,565
2,661,367
1,206,944
3,945,993
1,945,982
56,959
8,581
84,152
43,526
91,636
-
-
-
656,958
8,581
-
809,521
2,569,731
-
-
-
-
17,252
-
-
-
-
-
-
-
-
2 to 5
years
$
-
-
-
-
-
18,077
-
23,518
-
30,884
-
272,000
-
The parent entity has trade and other payables amounting to
$604,998 (2007: $1,888,664). These relate to loans with
related parties. There is no contractual maturity on these
balances.
This facility is secured against the book of loan assets
created by the trust. As at 30 June 2008 the Group had
withdrawn $99,381,000 from this facility. It had unused credit
at the end of the year of $110,619,000.
FSA Group Ltd has a secured note facility comprising of
senior and mezzanine debt through a special purpose entity,
the Fox Symes Home Loans Warehouse Trust No.1. The
facility has a combined drawdown limit of $210,000,000.
FSA Group Ltd’s subsidiary 180 Group Pty Ltd has a secured
loan facility. The facility has a drawdown limit of $10,000,000.
As at 30 June 2008 the company had withdrawn $6,750,000
from this facility. It had unused credit at the end of the year
of $3,250,000.
F S A G R O U P L I M I T E D
67
13NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2008
26 FINANCIAL INSTRUMENTS continued
Liquidity Risk continued
Warehouse facilities
The Group is reliant on the renewal of existing warehouse
facilities, the negotiation of new warehouse facilities, or the
issuance of residential mortgage backed securities.
Each warehouse facility is structured so that if it is not
renewed or otherwise defaults there is only limited recourse
to the Group. If a warehouse facility is not renewed or
otherwise defaults and its assets are liquidated, the primary
impact to the Group would be the loss of future income
streams from excess spread, being the difference between
our mortgage rate and the cost of funds, fee income and the
write off of any unamortised balance of deferred transaction
costs.
The Directors are satisfied that any sale of mortgages in
repayment of warehouse facilities or an event of default in
relation to the Group’s warehouse facilities will not affect the
Group’s ability to continue as a going concern.
Market Risk
Market risk is the risk that changes in market prices will
affect the Group’s income or the value of holdings in its
financial instruments. The objective of market risk
management is to manage and control market risk
exposures within acceptable parameters, while optimising the
return. Market risk of the Group is concentrated in interest
rate risk.
Specialty finance assets are lent on variable interest rates
and are financed by variable rate borrowings, which mitigate
the Group’s exposure to interest rate risk on these
borrowings to an acceptable level. These borrowings are
provided to the Group on a 364 day rolling facility and are
non-recourse to the Group.
Bridging finance assets and factoring finance assets are
provided to borrowers on fixed and variable rate terms. These
are financed by variable rate borrowings. The returns on the
products are sufficient to mitigate adverse interest rate
movements on the borrowings. As such the risk does not
warrant the cost of purchasing derivative financial
instruments to mitigate this risk completely.
The Board and Management are satisfied that this policy is
appropriate for the Group at this time. These assets are
financed by a long term debt facility.
All other sources of finance are immaterial to the Group in
amount and exposure.
Interest rate sensitivity analysis
The tables below show the effect on finance costs and profit
after tax if interest rates had been 50 basis points (bps)
higher or lower at reporting date on the Group’s floating rate
financial instruments. A 50bps sensitivity is considered
reasonable given the current level of both short-term and
long-term Australian interest rates. This would represent
approximately 2 rate increases and in the current economic
environment, where the economy would appear to be at the
top of its interest rate cycle, is a conservative analysis given
the current economic outlook and the Reserve Bank of
Australia’s interest rate cut subsequent to year end and a
possible additional interest rate cut within the next 12 months.
The analysis is based on interest rate risk exposures at
balance date on both financial assets and liabilities.
Consolidated Entity
Profit after Tax
2008
$
2007
$
6,581
25,771
(6,581)
(25,771)
Parent Entity
Profit after Tax
2008
$
898
(898)
2007
$
7,886
(7,886)
If interest rates increased by
50bps - increase/(decrease)
If interest rates decreased by
50bps - increase/(decrease)
If interest rates increased by
50bps - increase/(decrease)
If interest rates decreased by
50bps - increase/(decrease)
68
A N N U A L R E P O R T 2 0 0 8
13NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2008
27
INVESTMENTS IN ASSOCIATES
Equity accounted investments in associates
Purchase consideration
Inter-entity loan
Share of associates retained earnings
Consolidated Entity
Parent Entity
2008
$
7,963
(250,000)
304,151
62,114
2007
$
7,963
-
131,486
139,449
2008
$
2007
$
-
-
-
-
-
-
-
-
The Consolidated Entity has one investment in an associate
which it accounts for using the equity accounting method.
The associate, Huntingdale Smythe Lawyers Pty Ltd is a
company incorporated in Australia and provides legal
services. The consolidated entity has 50% ownership and
50% of the voting power in the entity.
Information about the Associate is as follows:
Consolidated entity’s share of:
Profit before tax
Income tax expense
Profit for the year
Assets
Liabilities
Net assets
2008
$
246,665
(74,000)
172,665
166,602
161,834
4,768
2007
$
187,836
(56,350)
131,486
209,639
75,364
134,275
28 CONTINGENT LIABILITIES
There were no contingent liabilities relating to the Group at
balance date except the following:
2007
Mortgage loans
2008
Mortgage loans
At balance date loan applications that had been accepted by
the Group but not yet settled amount to $2,046,300.
Mortgages are usually settled within 4 weeks of acceptance.
At balance date loan applications that had been accepted by
the Group but not yet settled amount to $2,370,000.
Mortgages are usually settled within 4 weeks of acceptance.
F S A G R O U P L I M I T E D
69
14DIRECTORS’ DECLARATION
The directors of FSA Group Limited declare that:
(a) in the directors’ opinion the financial statements and notes
on pages 30 to 69, and the remuneration disclosures that
are contained in the Remuneration report in the Directors’
report, set out on pages 15 to 22, are in accordance with
the Corporations Act 2001, including:
(i) giving a true and fair view of the company’s and the
consolidated entity’s financial position as at 30 June
2008 and of their performance, for the financial year
ended on that date; and
(ii) complying with Australian Accounting Standards
(including the Australian Accounting Interpretations) and
Corporations Regulations 2001.
(b) the financial report also complies with International
Financial Reporting Standards as disclosed in note 1; and
(c) the remuneration disclosures that are contained in the
Remuneration report in the Directors’ report comply with
Australian Accounting Standard AASB 124 Related Party
Disclosures, the Corporations Act 2001 and the
Corporations Regulations 2001; and
(d) there are reasonable grounds to believe that the company
will be able to pay its debts as and when they become
due and payable.
The directors have been given the declarations by the chief
executive officer and chief financial officer for the financial
year ended 30 June 2008, required by Section 295A of the
Corporations Act 2001.
Signed in accordance with a resolution of the directors
Tim Odillo Maher
Director
Sydney
25 September 2008
70
A N N U A L R E P O R T 2 0 0 8
15INDEPENDENT AUDITOR’S REPORT
To the members of FSA Group Limited
Report on the Financial Report
We have audited the accompanying financial report of FSA
Group Limited, which comprises the balance sheet as at 30
June 2008, and the income statement, statement of changes
in equity and cash flow statement for the year ended on that
date, a summary of significant accounting policies and other
explanatory notes and the directors’ declaration for both FSA
Parent and of FSA Group Limited (the consolidated entity).
The consolidated entity comprises the entity 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 FSA Group Limited are responsible for
the preparation and fair presentation of the financial report in
accordance with Australian Accounting Standards (including
the Australian Accounting Interpretations) and the
Corporations Act 2001. This responsibility includes
establishing and maintaining internal controls relevant to the
preparation and fair presentation of the financial report that is
free from material misstatement, whether due to fraud or
error; selecting and applying appropriate accounting policies;
and making accounting estimates that are reasonable in the
circumstances. In Note 1, the directors also state, in
accordance with Accounting Standard AASB 101
Presentation of Financial Statements, that compliance with
Australian Equivalents to International Financial Reporting
Standards ensures that the financial report, comprising the
financial statements and notes, complies 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. These
Auditing Standards require that we comply with relevant
ethical requirements relating to audit engagements and plan
and perform the audit to obtain reasonable assurance
whether the financial report is free from material
misstatement.
Chartered Accountants
& Business Advisers
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
and fair presentation of the financial report 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.
Auditor’s Opinion
In our opinion:
(a) the financial report of FSA Group Limited is in accordance
with the Corporations Act 2001, including:
(i) giving a true and fair view of the parent entity’s and
consolidated entity’s financial position as at 30 June
2008 and of their performance for the year ended on
that date; and
(ii) complying with Australian Accounting Standards
(including the Australian Accounting Interpretations) and
the Corporations Regulations 2001; and
(b) the financial report also complies with International
Financial Reporting Standards as disclosed in Note 1.
F S A G R O U P L I M I T E D
71
15INDEPENDENT AUDITOR’S REPORT
Report on the Remuneration Report
We have audited the Remuneration Report included in pages
15 to 22 of the directors’ report for the period ended 30 June
2008. 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.
Auditor’s Opinion
In our opinion the Remuneration Report of FSA Group
Limited for the period ended 30 June 2008, complies with
section 300A of the Corporations Act 2001.
PKF
Wayne Wessels
Partner
Dated at Brisbane this 25th day of September 2008
Tel: 61 7 3226 3555 | Fax: 61 7 3226 3500 | www.pkf.com.au
PKF | ABN 83 236 985 726
Level 6, 10 Eagle Street | Brisbane | Queensland 4000 | Australia
GPO Box 1078 | Brisbane | Queensland 4001 | Australia
PKF East Coast Practice is a member of PKF Australia Limited a national association of independent chartered accounting and consulting firms each trading
as PKF. The East Coast Practice has offices in NSW, Victoria and Brisbane. PKF East Coast Practice is also a member of PKF International, an association of
legally independent chartered accounting and consulting firms.
Liability limited by a scheme approved under Professional Standards Legislation.
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FSA GROUP LTD
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