Global Blood Therapeutics
Annual Report 2007

Plain-text annual report

l G B S T H o d n g s L m i i i t e d A n n u a l R e p o r t 2 0 0 7 www.gbst.com Annual Report 2007 GBST Holdings Limited ABN 85 010 488 874 + + GBST is Australia’s leading provider of client accounting and securities transaction technology. Our strategy is to build consistently growing recurring revenues from financial transactions, by providing robust technology solutions to the financial services sector. Providing services to some of the world’s leading institutional banks and stockbrokers, approximately half of all equities traded on the Australian Securities Exchange are processed by GBST network participants. In August 2007 GBST extended its services to include wealth management with the acquisition of InfoComp Group, the foremost provider of funds administration and unit registry software to the Australian wealth management industry. Contents Highlights Chairman’s report CEO’s report GBST in the life of a transaction GBST’s competitive advantage GBST in the community Wealth management services Board of directors Executive team 1 2 3 6 8 9 10 11 12 Corporate governance statement Directors’ report Auditor’s independence declaration Directors’ declaration Financial report Notes to the financial statements Independent audit report Additional information Corporate directory 15 18 26 27 28 32 57 59 60 Notice of AGM The Annual General Meeting of GBST Holdings Limited will be held at: McCullough Robertson Level 11 Central Plaza 2 66 Eagle Street, Brisbane on Wednesday 21st November at 3.30pm. 4 1 1 T B G R C F y b d e c u d o r p d n a d e n g i s e D H i gH l i gH t s 2 0 0 6 / 2 0 0 7 – Growth strategy accelerated through acquisition of InfoComp – Profit after tax of $8.0 million, a 31% increase on the prior year – EBITDA increased 26% to $11.4 million – Fully franked dividends increased to 11 cents per share, with a 6 cents final dividend – 29.7% increase in earnings per share (EPS) to 18.1 cents Operating revenue eBitD a prOfit after tax 10% 26% 30 24 $m 18 12 6 0 $m 12 10 8 6 4 2 0 31% $m 10 8 6 4 2 0 FY ‘04 FY ‘05 FY ‘06 FY ‘07 FY ‘04 FY ‘05 FY ‘06 FY ‘07 FY ‘04 FY ‘05 FY ‘06 FY ‘07 G B S T A n n u A l R e p o R t 2 0 0 7 1 c H a i r m a n ’ s r e p O r t 2006/7 was a successful year for GBST, in which we strengthened our market-leading position and rewarded the confidence of our investors with strong profit growth. Profit after tax was $8 million, an increase of 31 per cent on the previous year. GBSt’s growth has enabled us to increase our fully franked dividend to 11 cents for the year. our services play an important role in continuing to improve financial market efficiency. new systems contributed spectacular benefits to market participants through transformed, diversified and more flexible methods of trading. our innovation has helped to streamline floats and transaction processing, and bring new stocks and financial products to market. In addition, GBSt’s financial services technology has contributed to record market trading volumes. our market share by volume increased to 42.5 per cent, and 48 stockbrokers use GBSt’s Shares platform, representing 56 per cent of the cash equities market. In 2006/7, Shares processed 8.3 million contract notes, a 27 per cent increase on the previous year. We are excited by the acquisition of InfoComp, which expands our business to wealth management, bringing us new, blue-chip customers and a leadership position as a supplier of funds administration and registry software to the fast-growing Australian wealth management industry. We are particularly pleased to acquire a business with which we have a natural cultural affinity. Among our similarities are a business model underpinned by recurring licence-fee revenues; a proven track record over nearly two decades; and specialised professional service capacity with staff recognised as experts in their respective fields. this acquisition readies GBSt to capitalise on the international trends toward investor-managed accounts and self-managed superannuation, which are supported by a broader investment mandate for stockbrokers and the growing private wealth industry. InfoComp has established a beachhead in the united Kingdom, where legislative change to the pensions and superannuation systems is expected to be a catalyst for long-term financial services industry growth. the market we serve continues to experience strong growth. this reflects increased activity from offshore traders, sophisticated hedge funds, new entrants and higher volume trade from existing market participants. We expect further volume growth and increased cross-border flows as investors are encouraged by the benefits of exposure to Australian financial markets which are seen as a sound, safe and profitable market in which to invest. We continue to upgrade our own systems, capitalising on the strong knowledge base of our people. our outsourcing activity has become more sophisticated, enabling us to purchase selectively. While proud of our capacity, we expect to make greater use of offshore skills to meet customer demand for product enhancements. looking ahead, we expect 2007/8 to be a defining year for GBSt, underpinned by the acquisition of InfoComp, which is expected to contribute revenue of $30 million, and to be cash earnings per share accretive in 2007/8. I would like to commend Stephen lake and his team for their outstanding efforts this year. to deliver strong growth it is important to work consistently together, and I would like to congratulate everyone that has been involved in making this a highly successful year for GBSt. John puttick Chairman 2 c e O ’ s r e p Or t 2007 was a significant year for GBST not only in terms of our strong financial results but also in the momentum we established in our core business and in meeting our longer-term objectives. GBSt builds and owns software applications for the financial services industry, and provides infrastructure and support services to maintain these applications. As part of our ongoing business we continue to look for opportunities to supply more data, information and efficiency to our customers. As detailed at the time of our initial public offering, a key objective of listing GBSt on the ASX was to allow us to supplement organic growth with acquisitions, to develop a broader base of financial services revenues. the purchase of palion, the leading derivatives trading and client accounting technology in Australia, brought us a presence in the derivatives market and substantially increased our customer base. It also contributed valuable management, industry knowledge, and very talented people. palion has been fully integrated into GBSt and is a core part of our business. While we did not conclude an acquisition during the financial year 2007, we laid the foundation for the acquisition of InfoComp. infocomp In August 2007, we doubled the size of GBSt through the purchase of InfoComp, the leading specialist provider of wealth management software. InfoComp extends our business into a new sector of the financial services market. our capacity to provide technology services to the financial services industry has increased substantially. this is a significant step in GBSt’s strategic evolution, and we are excited by its growth opportunities. We now offer combined equities and wealth management platforms, significantly expanding our customer community and network. our core wealth management product “Composer” offers a complete system for the administration of wrap platforms, master trusts, retail and wholesale unit trusts and retirement products such as superannuation plans and pensions. In the united Kingdom, InfoComp has secured a benchmark customer, Abbey Group business division, James Hay. over the next few years, the James Hay self-invested personal pension (SIpp) and Abbey wrap products will be progressively migrated to Composer. this is expected to provide a strong competitive advantage in the burgeoning wraps market. While wraps are established among retail investors in Australia, these investments are only now beginning to take off in the uK, and this market represents a substantial growth opportunity. According to industry research, an estimated £150 billion is set to flow into wraps by the end of 2008, driven by legislation change and simpler administration. locally, more than $150 billion of assets are administered currently on Composer, which is used by some of Australia’s leading financial services businesses. financial results our underlying business saw a 26% increase in eBItDA to $11.42 million and a 31% increase in net profit after tax, compared to the prior year. this resulted from a 10% increase in revenue to $29.2 million and growth in our eBItDA margin from 33% to 39%. We continue to benefit from increased trading volumes and new product sales. GBSt’s customer network continued to expand, with third party clearing clients adding 11 new financial services providers and palion product sales including seven new modules. GBSt’s share of ASX transactions continued to increase and remains a core focus of the business. Consulting revenue, although restrained by resources, grew 25% to $2.5 million. our plan is to continue to grow recurring revenues from financial markets transactions, client accounting and administration. We are focused on building a network of connected financial market participants, G B S T A n n u A l R e p o R t 2 0 0 7 3 w ceO’s report continued and exploiting the efficiencies that this offers. 2007 has provided us with the solid foundations to diversify and grow our business and to maintain our focus with confidence. upgraded to ensure we employ people who fit our culture and values. We also provide the opportunity for employee participation in GBSt equity through our employee share scheme. research and development Significant new products released in 2006/7 include GBSt Databus which assists our clients to transport data to internal data repositories and GBSt ClearView, a highly scalable connection to the ASX’s settlement and clearing system CHeSS. In building our systems we work closely with our customers. this ensures high-quality products tailored to the Australian market. the broker services market continues to evolve, driven by algorithmic trading, the introduction of offshore market participants, increased cross-border flows and changes to conventional market operating models. our strong research and development capability ensures we can continue to design industry-leading products that deliver more services to customers, at a lower cost. people GBSt has outstanding people throughout the business and a united culture based on values of initiative, teamwork, integrity and professionalism. We now employ nearly 300 staff across the group in Australia and the united Kingdom. our increased diversity and resources provide significant career paths for all staff. Although we continue to take steps to strengthen our team, buoyant finance and technology markets have created a high demand for skilled people. this shortage constrained our growth throughout the year although we have made good progress in recent months. We are building management expertise through leadership programs and encourage training and development. Recruitment processes have been I am delighted to welcome the staff of InfoComp, who bring a great deal of talent to GBSt, and in particular welcome to our executive team InfoComp founders Robert DeDominicis and Ray tubman, who will drive the wealth management business. community GBSt has a strong commitment to the community, which is recognised in greater detail on page 9 of this report. For the past two years, we have donated up to one per cent of eBItDA to organisations and charities that contribute to child welfare in Australia and people in developing countries. I would also like to recognise the efforts of our directors and staff who support the community through participation in professional bodies and many hours of voluntary work for education and not-for profit organisations. the future We enter 2007/8 a significantly larger and stronger company. Significant growth opportunities exist for our wealth management business in the uK and for our broker services business in Australia and Asia. our core ambition of building recurring revenue from financial markets transactions remains in place. the business models of our customers are changing as is the marketplace in which we operate. We aim to evolve with the marketplace through ongoing investment in building and acquiring a broader product portfolio. this drives our expansion to support new sectors of the financial services market. our acquisition strategy continues to be guided by our strict investment criteria of seeking out companies with similar business models, and commitment to their products and their domain. 4 I would like to thank our staff for their hard work and commitment in what has been a year of significant change and growth; and our customers for their continued support. + “Our CAPACITy TO PrOvIDE TEChnOlOGy SErvICES TO ThE FInAnCIAl SErvICES InDuSTry hAS InCrEASED SuBSTAnTIAlly. stephen lake Chief executive officer and Managing Director ThIS IS A SIGnIFICAnT STEP In GBST’S STrATEGIC EvOluTIOn, AnD wE ArE ExCITED By ITS GrOwTh OPPOrTunITIES.” G B S T A n n u A l R e p o R t 2 0 0 7 5 g B s t i n t H e l i f e O f a t r a n s a c t i O n 1. c lient 2. aD viser CUSTomer diSCUSSeS order wiTh Broker order iS plaCed By Broker gBst tOms UpdaTed porTfolio 6. BrOker B ack Office 5. aD viser ConTraCT iS GeneraTed gBst shares gBst clearview gBst shares gBst Dca SeTTlemenT oCCUrS Bank margin lenDer registry cmt prOviDer 6 gBst margin lending 3. BrOker f rOnt an D mi DDle Office gBst tOms gBst rms gBst shares order GoeS To aSx To Be Traded 4. a ustralian securities excHange Trade oCCUrS GBSt’s products and services provide client accounting and securities transaction solutions to support stock market trading and settlement. GBST TOMS toMS is an information and trading tool used by advisers, managing the process from the time the investor makes an investment decision, through to market execution, trade confirmation and account allocation. GBST Shares one of the world’s most advanced securities transaction processing systems, Shares automates trading, clearing, and settlement for multiple instruments, currencies and markets. GBST DCA DCA is a back office solution for clearing and settling derivatives transactions. Integrating with the clearing house, DCA eliminates the need for double entry, thereby minimising human error and the associated reconciliation and error correction processes. GBST rMS the RMS system enables brokers to better manage their client risk, providing the ability to monitor margins across customer and in-house positions as well as perform what-if scenarios. GBST Margin lending Margin lending is a tool used by margin lenders, broking firms, financial planners and fund managers to create and manage profitable lending services for their clients. GBST Clearview Integrating with back office applications, ClearView provides a guaranteed audit trail with real time connectivity to CHeSS. G B S T A n n u A l R e p o R t 2 0 0 7 7 g B s t ’ s c O m p e t i t i v e a D v a n t a g e GBST’s broker services are tailor-made for Australian and regional markets in collaboration with our customers. Our products are innovative, scalable and robust to deliver superior processing capability and efficiency. market leadership GBSt Shares is the industry-leading securities transaction platform used by 56% of the cash equities market. the leading equities option platform, GBSt DCA, is used by 22 brokers, which equates to around 50% of the options market. critical systems Distribution scalability clearing service capability innovation trading and clearing systems are critical for stockbrokers. levels of operational risk, settlement risk, and market risk are directly dependent on system capability, scalability and durability. GBSt Shares is one of the most advanced securities transaction systems in the world, providing the mission-critical information technology ‘backbone’ infrastructure essential for trading. our systems connect an extensive network of stockbrokers, financial institutions and financial market participants. this is a significant distribution channel for providers of financial services. As stockbrokers seek to compete by offering more products and services, GBSt can facilitate electronic connectivity to a wide range of providers, including funds managers; master trust and wrap providers; cash management providers; margin lenders; ratings, news and research services; and market data providers. our robust clearing and settlement systems underpin the Australian securities market. GBSt Shares processed 42.5% of ASX market volume transactions in 2007, up from 40% in 2006. GBSt Shares is the leading third party and agency clearing solution. We are an established financial technology leader with a track record of innovation since 1983. Recent releases include front office products to manage equities and derivatives orders from a single system, and to process floats. transaction based business model An important factor in GBSt’s success has been its commercial engagement model. GBSt’s revenue is a mix of variable and fixed service fees. the variable fees are linked to the volume of trading activity. this allows GBSt’s customers to share in the benefits of a user-pays model. client engagement & service differentiation GBSt’s support for customers is underpinned by the highest standards of service. We are dedicated to helping our customers achieve business efficiency, technology intergration and growth. 8 8 g B s t i n t H e c O m m u n i t y Supporting children and developing countries In June 2005, GBSt established a policy to donate up to one per cent of earnings before interest, tax, depreciation and amortisation to charitable organizations. our community involvement theme and focus for two years has been ‘children and developing countries’. In this time, GBSt has donated more than $125,000 to help organisations that make an ongoing socio- economic improvement for children in Australia and people in developing countries. + “ wOrlD vISIOn SEEkS TO PArTnEr wITh AuSTrAlIAnS TO AChIEvE ITS GOAl OF MAkInG POvErTy hISTOry In Our wOrlD. ThIS PArTnErShIP wAS POwErFully DEMOnSTrATED By GBST AnD ITS GEnErOSITy In AllOwInG wOrlD vISIOn Some organisations and charities that GBSt has helped: TO uSE ITS SyDnEy OFFICE SPACE. – World Vision Canteen – Innocents Relief – Caritas Australia – Variety, the Children’s Charity – Australian Red Cross – Abused Childs trust – – Salvation Army – unicef – – Youth off the Streets Cyclone larry relief appeal ThIS SuPPOrT EnABlED wOrlD vISIOn AuSTrAlIA TO ThIS yEAr (07) TOuCh ThE lIvES OF MOrE ThAn 12 MIllIOn PEOPlE In AlMOST 60 COunTrIES AnD PrOvIDE lIFE SAvInG rESPITE FrOM POvErTy AnD DISEASE.” tim costello Ceo World Vision Australia G B S T A n n u A l R e p o R t 2 0 0 7 9 w e a l t H m a n a g e m e n t s e r v i c e s gBst’s grOwing internatiOnal market gBst Broker services Offices Customer locations Adelaide Brisbane Melbourne Sydney Australia hong kong new Zealand gBst wealth management Offices Customer locations london Sydney wollongong Australia England through the purchase of InfoComp Group, GBSt is a leading supplier of software solutions to the Australian and united Kingdom wealth management industries. our flagship wealth management product, Composer, provides the technology to perform the complete administration of wrap platforms. Wrap platforms provide an administration service for investment, superannuation and pensions and offer an open investment architecture incorporating cash, equities, managed funds and other managed investments. they provide many benefits to financial advisers including a single point of contact - rather than having to deal with many fund managers and brokers - consolidated portfolio and tax reporting, consolidated portfolio valuations and automated administration facilities such as portfolio rebalancing. Wrap and master trusts today dominate retail investment, with 70-80 per cent of new wealth management business written through these platforms. Composer offers a complete system for the administration of wrap platforms, master trusts, retail and wholesale unit trusts, and retirement products, such as superannuation plans, pensions, annuities and provident funds. In the united Kingdom, Composer supports individual savings accounts (ISAs), personal equity plans (peps), self invested personal pensions (SIpps) and Group SIpps as well as general investment platforms. In Australia, more than $150 billion of assets are administered using the Composer platform. the electronic messaging product, Conductor, is integrated in Composer, and provides a framework for business-to-business e-commerce in the wealth management sector. unison provides registry and membership management services for associations, unions and clubs. the technology that underpins the Composer system incorporates a comprehensive and acclaimed service oriented architecture (Composer Business Integration Server) and external messaging framework (Conductor). these technologies facilitate enterprise integration and e-commerce within the wealth management sector. 1010 w e a l t H m a n a g e m e n t s e r v i c e s B O a r D O f D i r e c t O r s allan Brackin Independent Non-Executive Director Allan Brackin was appointed to the Board in April 2005. He has detailed knowledge of the It sector having served as Director and Chief executive officer of Volante Group limited, one of Australia’s largest It infrastructure service companies from november 2000 to october 2004. prior, he founded Queensland laser and Survey Supplies pty ltd, as well as Applied Micro Systems (Australia) pty ltd, which grew to become the national company AAG technology Services pty ltd. Allan currently serves on the board of Hutchison’s Child Care Services limited and the new South Wales Heart Foundation. Allan is Chairman of GBSt’s Audit and Risk Management Committee. David shirley Independent Non-Executive Director David joined GBSt in April 2005 as an Independent non-executive Director. David had a successful career providing strategic, business planning and governance advice in executive management positions with Microsoft Business Solutions and navision. He is also a non-executive board and audit committee member of Steel Foundations limited and he was a non-executive board and audit committee member with Queensland Capital Corporation limited. David also serves as an advisory board member for a number of privately owned companies and was a partner with Gadens lawyers. David is a member of the GBSt Audit and Risk Management Committee. Joakim sundell Non-Executive Director Joakim was appointed to the Board in 2001. Joakim has an extensive career in private equity finance, merchant banking, and management both in Sydney and london. He is Managing Director of Crown Financial pty ltd, a private investment company. 4 5 Board of directors 1 John puttick 2 Stephen lake 3 Allan Brackin 4 David Shirley 5 Joakim Sundell 1 2 3 John puttick Non-Executive Chairman John is the founder and Chairman of GBSt, and has 40 years’ experience in the It industry over 20 of which developing financial services solutions at GBSt. He is a member of GBSt’s Audit and Risk Management Committee. John serves on university of Queensland and Queensland university of technology faculty advisory committees. He is currently Adjunct professor, School of Information technology and electrical engineering at the university of Queensland and Chair of Southbank tAFe Community Council. stephen lake Managing Director and Chief Executive Officer Stephen lake joined GBSt in September 2001 after an extensive career in the capital markets industry in Australia, the united Kingdom and Asia. Mr lake became a shareholder of GBSt and was appointed Chief executive officer in 2001. prior to joining GBSt, he was Chief General Manager of Financial Markets at Adelaide Bank limited. Mr lake was Managing Director of BZW’s Capital Market’s Division Australia and also Managing Director of the Fixed Interest Division at BZW (Asia) ltd. G B S T A n n u A l R e p o R t 2 0 0 7 11 e x e c u t i v e t e a m stephen lake Chief Executive Officer patrick salis Chief Financial Officer patrick has recently joined GBSt, starting in october 2007 as Chief Financial officer. patrick has held similar roles in the financial services industry, most recently as Chief Financial officer of Virgin Money Australia limited, and has extensive experience working in wealth management, equities and derivatives broking, superannuation, mortgages and unsecured lending. patrick holds a Bachelor of Accounting and is a member of the Institute of Chartered Accountants in Australia. kylie sprott Human Resources & Communications Kylie has extensive experience in managing the HR component of acquisitions and mergers in the It sector, in particular overseeing the integration of five acquisitions and two substantial mergers. Kylie holds a Bachelor of Arts and a postgraduate Certificate in Management (Human Resources) and has studied Strategic Human Resources at Harvard Business School. peter ferguson Head of Corporate Development prior to joining GBSt in February 2005, peter held senior strategic positions with leading international financial markets technology company, oMX. Between 2001 and 2004 he was General Manager responsible for oMX’s Australian operations and substantially grew the business with prior experience providing international legal advice to oMX’s in-house counsel in Stockholm as well as serving as a solicitor in Stockholm and Sydney. peter holds a Bachelor of law from Sydney university. Hurrem Basdan Client Services & Business Development (Broker Services) Hurrem has re-joined GBSt having previously been instrumental in defining and implementing GBSt’s product marketing strategy. Hurrem has over 10 years industry experience in consultation and management roles within some of Australia’s leading financial services providers. She has also gained experience in other financial markets including the united Kingdom, the netherlands and Spain. Hurrem holds a Bachelor of economics (Accounting) from the university of Sydney and is in the final stages of completing a Master of Business Administration degree. 6 11 7 12 8 13 9 14 10 15 Executive team 6 patrick Salis 7 Kylie Sprott 8 peter Ferguson 9 Hurrem Basdan 10 peter Fowler 11 Andy Haddon 12 Robert DeDominicis 13 Ray tubman 14 Mark Smith 15 Isabel Sanchez 12 peter fowler Head of Products (Broker Services) Joining GBSt after GBSt’s successful acquisition of palion from oMX in December 2005, peter provides GBSt with a unique blend of business and It knowledge. peter has gained his experience working overseas in europe, America and Asia. His previous industry experience includes heading the regional operations of ICCH, which at the time was the international arm of the london Clearing House (lCH). peter also established a new central counterparty clearing service in Asia as well as palion pty limited in Australia. andy Haddon Acting Chief Technology Officer (Broker Services) Andrew joined GBSt in August 2007 with a strong background in software and technology development in Australia, Asia and the uK. prior to joining GBSt, from 2001 he was Country and General Manager for a software development firm in the banking and financial sectors. He has held senior management positions with At&t in Hong Kong, responsible for product Development in Asia, and establishing a professional Services business and new online services in Australia. Andrew was technical Manager for nortec, a uK telecommunication firm with responsibility for design and development. robert DeDominicis Chief Executive (Wealth Management) Robert is a founding partner of InfoComp with over 25 years experience in the development of software applications. Robert holds a Bachelor of Mathematics degree. Robert has a business and technical software background having been part of InfoComp’s development and professional services teams. Robert has extensive experience in the registry and wealth management sector both in Australia and the uK having driven InfoComp’s involvement with this sector since 1995. ray tubman Head of Global Products (Wealth Management ) Ray is a founding partner of InfoComp and Chief Architect for InfoComp’s wealth management product suite. Ray has over 20 years experience in the It industry and has worked in various senior technical roles on projects. His previous experience includes work on British Airways pension systems in england, Westpac and various other financial institutions. Ray has a Bachelor of Mathematics degree and ASFA qualifications and is considered a subject matter expert in the pensions and Investment industry in both the uK and Australia. mark smith Head of Professional Services (Wealth Management) Mark joined InfoComp in 1998 and since that time has worked in a number of roles ranging from project management, software development, professional services and contracts management. Mark has managed InfoComp’s projects both in Australia and the uK. prior to joining InfoComp Mark has held various senior software development and management roles both within Australia and the uK. Mark has over 19 years of industry experience in sectors including finance, medical, manufacturing and marketing with tertiary training in business administration. isabel sanchez Chief Technology Officer (Wealth Management) Isabel has over 15 years experience in software development and has been a member of the InfoComp team for 13 years. Since 2000, Isabel has been responsible for the management of development and support of all InfoComp product. Also responsible for the oversight of InfoComp’s It&t services and InfoComp’s off-shore development centre. Isabel holds a Bachelor of Computing Science from the university of Wollongong. G B S T A n n u A l R e p o R t 2 0 0 7 13 f i n a n c i a l r e p O r t + 14 C o r p o r a t e g o v e r n a n C e s t a t e m e n t IntroduC tIon the ASX document, ‘principles of Good Corporate Governance and Best practice Recommendations’ (‘Guidelines’) applying to listed entities was published in March 2003 by the ASX Corporate Governance Council with the aim of enhancing the credibility and transparency of Australia’s capital markets. the board has made an assessment of the company against the Guidelines. the board has made decisions in relation to its operations and the operations of the company that mean that it does not fully comply with all of the Guidelines but are in place to provide better performance. the Board outlines its assessment against the Guidelines below. this statement on corporate governance reflects our charter, policies and procedures on 5 october 2007. (v) monitoring senior management’s performance and implementation of strategy and (vi) approving and monitoring financial and other reporting and the operation of committees. ComposItIon of b oard the Board performs its roles and function, consistent with the above statement of its overall corporate governance responsibility, in accordance with the following principles: a) the Board should comprise at least five Directors b) the Board shall be constituted by members having an appropriate range of skills and expertise c) at least two directors will be non-executive Directors independent from management. sCope of r esponsIbIlIt y of b oard board Charter and p olIC y a) Responsibility for the Company’s proper corporate governance rests with the Board. the Board’s guiding principle in meeting this responsibility is to act honestly, conscientiously and fairly, in accordance with the law, in the interests of GBSt’s shareholders with a view to building sustainable value for them and the interests of employees and other stakeholders. a) the Board has adopted a charter (which will be kept under review and amended from time to time as the Board may consider appropriate) to give formal recognition to the matters outlined above. this charter sets out various other matters that are important for effective corporate governance including the following: b) the Board’s broad function is to: (i) a detailed definition of ‘independence’ (i) chart strategy and set financial targets for the Company (ii) a framework for the identification of candidates for appointment to the Board and their selection (ii) monitor the implementation and execution (iii) a framework for individual performance review of strategy and performance against financial targets and (iii) oversee the performance of executive management and generally to take and fulfil an effective leadership role in relation to the Company. c) power and authority in certain areas is specifically reserved to the Board – consistent with its function as outlined above. these areas include: and evaluation (iv) proper training to be made available to Directors both at the time of their appointment and on an on-going basis (v) basic procedures for meetings of the Board and its committees – frequency, agenda, minutes and private discussion of management issues among non-executive Directors (vi) ethical standards and values – formalised in a (i) composition of the Board itself including the detailed code of ethics and values appointment and removal of Directors and the making of recommendations to shareholders concerning the appointment and removal of Directors (ii) oversight of the Company including its control and accountability system (vii) dealings in securities – formalised in a detailed code for securities transactions designed to ensure fair and transparent trading by Directors and senior management and their associates and (viii) communications with shareholders and (iii) appointment and removal of the Chief executive the market. officer and the Company Secretary (iv) reviewing and overseeing systems of risk management and internal compliance and control, codes of ethics and conduct, and legal and statutory compliance b) these initiatives, together with the other matters provided for in the Board’s charter, are designed to ‘institutionalise’ good corporate governance and to build a culture of best practice in GBSt’s own internal practices and in its dealings with others. G B S T A n n u A l R e p o R t 2 0 0 7 15 C o r p o r a t e g o v e r n a n C e s t a t e m e n t C o n t I n u e d audIt and rI sk m anagement CommIt tee a) the purpose of this committee is to advise on the establishment and maintenance of a framework of internal control and appropriate ethical standards for the management of the Group. Its members are: (i) Mr Allan Brackin, Chairman (ii) Mr John puttick (iii) Mr David Shirley b) the committee performs a variety of functions relevant to risk management and internal and external reporting and reports to the Board following each meeting. Among other matters for which the committee is responsible are the following: (i) Board and committee structure to facilitate a proper review function by the Board (ii) internal control framework including management information systems (iii) corporate risk assessment and compliance with internal controls (iv) internal audit function and management processes supporting external reporting (v) review of financial statements and other financial information distributed externally (vi) review of the effectiveness of the audit function (vii) review of the performance and independence of the external auditors (viii) review of the external audit function to ensure prompt remedial action by management, where appropriate, in relation to any deficiency in or breakdown of controls (ix) assessing the adequacy of external reporting for the needs of shareholders and (x) monitoring compliance with the Company’s code of ethics. c) Meetings are held at least four times each year. A broad agenda is laid down for each regular meeting according to an annual cycle. the committee invites the external auditors to attend each of its meetings. best p r aC tICe CommItment the Company is committed to achieving and maintaining the highest standards of conduct and has undertaken various initiatives, as outlined in this section, which are designed to achieve this objective. GBSt’s corporate governance charter is intended to ‘institutionalise’ good corporate governance and, to build a culture of best practice both in the Company’s own internal practices and in its dealings with others. the following are a tangible demonstration of the Company’s corporate governance commitment. Independent professional advice a) With the prior approval of the Chairman, each Director has the right to seek independent legal and other professional advice concerning any aspect of the Company’s operations or undertakings in order to fulfil their duties and responsibilities as Directors. Any costs incurred are borne by the Company. b) Code of ethics and values the Company has developed and adopted a detailed code of ethics and values to guide Directors in the performance of their duties. c) Code of conduct for transactions in securities the Company has developed and adopted a formal code to regulate dealings in securities by Directors and senior management and their associates. this is designed to ensure fair and transparent trading in accordance with both the law and best practice. d) Charter the code of ethics and values and the code of conduct for transactions in securities (referred to above) both form part of the Company’s corporate governance charter which has been formally adopted. e) Substantial compliance with ASX corporate governance guidelines and best practice recommendations. gbst board assessment agaInst the guIdel Ines principle 1 – lay solid foundations for management and oversight the role of the Board and delegation to management have been formalised as described above in this section and will continue to be refined, in accordance with the Guidelines, in the light of practical experience gained in operating as a listed company. GBSt complies with the Guidelines in this area. principle 2 – structure the board to add value together the Directors have a broad range of experience, skills, qualifications and contacts relevant to the business of the Company. the majority of the current Board is not independent. In particular, the Chairman is not independent in terms of the Guidelines. there are at least two independent Directors. GBSt believes that the current board of five directors has been appropriate for a company of GBSt’s size and the current directors have been the best people to act in the interests of stakeholders and for this reason does not presently fully comply with the recommendations. With the Company’s 16 C o r p o r a t e g o v e r n a n C e s t a t e m e n t C o n t I n u e d both committee level (Audit and Risk Management Committee), with meetings at least four times each year, and at Board level. principle 8 – encourage enhanced performance the corporate governance charter adopted by the Board requires individual performance review and evaluation to be conducted formally on an annual basis. the Board acknowledges that performance can always be enhanced and will continue to seek and consider ways of further enhancing performance both individually and collectively. GBSt’s practice complies with the Guidelines in this area. principle 9 – remunerate fairly and responsibly Remuneration of Directors and executives will be fully disclosed in the annual report and any changes with respect to key executives announced in accordance with continuous disclosure principles. the Board from time to time calls a specific meeting of the board as a nominations and Remuneration Committee. Due to the importance of people within GBSt’s business all board members considered they would have a contribution to make to the meeting and as a result the committee is not independent. the Chairman will lead a review of the Directors and the independent Directors will lead a review of the Chairman. no individual will be directly involved in deciding his or her remuneration. principle 10 – recognise the legitimate interests of stakeholders the Board recognises the importance of this principle (which it believes represents not only sound ethics but also good business sense and commercial practice) and continues to develop and implement procedures to ensure compliance with legal and other obligations to legitimate stakeholders. the Company and its policies and practices comply with the Guidelines in this area. increased size and the expansion into new areas of the financial services industry the board believes its performance could be enhanced by the introduction of additional board members. the number of independent directors may be increased as a result of the additional appointments. the Board calls specific meetings of the board as a nominations and Remuneration Committee. principle 3 – promote ethical and responsible decision making the Board has adopted a detailed code of ethics and values and a detailed code of conduct for transactions in securities as referred to above. the purpose of these codes is to guide Directors in the performance of their duties and to define the circumstances in which both they and management, and their respective associates, are permitted to deal in securities. the Board will ensure that restrictions on dealings in securities are strictly enforced. Both codes have been designed with a view to ensuring the highest ethical and professional standards, as well as compliance with legal obligations, and therefore compliance with the Guidelines. principle 4 – safeguard integrity in financial reporting the Audit and Risk Committee has its own Charter. the Committee comprises three Directors, the majority of which are independent. All the members of the Audit Committee are financially literate. principle 5 – make timely and balanced disclosure policies and procedures for compliance with ASX listing Rule disclosure requirements are included in the Company’s corporate governance charter. principle 6 – respect the rights of shareholders the Board recognises the importance of this principle and strives to communicate with shareholders both regularly and clearly – both by electronic means and using more traditional communication methods. Shareholders are encouraged to attend and participate at general meetings. It is intended that the Company’s auditors will always attend the annual general meeting and be available to answer shareholders’ questions. the Company’s policies comply with the Guidelines in relation to the rights of shareholders. principle 7 – recognise and manage risks the Board, together with management, has constantly sought to identify, monitor and mitigate risk. Internal controls are monitored on a continuous basis and, wherever possible improved. the whole issue of risk management is formalised in the Company’s corporate governance charter (which complies with the Guidelines in relation to risk management) and will continue to be kept under regular review. Review takes place at G B S T A n n u A l R e p o R t 2 0 0 7 17 d I r e C t o r s ’ r e p o r t the directors of GBSt Holdings limited (‘GBSt’) submit herewith the consolidated financial report for the year ended 30 June 2007. dIreC tors the names of the directors of the company in office during the year and to the date of this report are: – – – – – Dr John F puttick Mr Allan J Brackin Mr Stephen M l lake Mr David C Shirley Mr Joakim J Sundell Company s eC retary the following persons held the position of company secretary at the end of the financial year: David M Doyle – Mr Doyle joined GBSt in 1997 as an in house legal advisor and was appointed Company Secretary on 18 April 2005. Mr Doyle holds Bachelor degrees in law and Business (Computing) from Queensland university of technology. John F puttick – Dr puttick was appointed Company Secretary in 1984. Information on Dr puttick is set out in the section of this report dealing with information on directors. prInCIpal aC tIvItIes the principal activities of GBSt in the year were the provision of advanced electronic business solutions for the finance, banking and securities industry in Australia and South east Asia. no significant change in the nature of these activities occurred during the year. oper atIng r esult and dI vIdend the consolidated profit after income tax for the financial year amounted to $8,021,396 (2006: $6,135,982). the directors recommend a final dividend of 6.0 cents per share to be paid to the holders of fully paid ordinary shares. the dividend will be 100% franked at 30% corporate tax rate and will be paid on 28 September 2007. Dividends paid during the year were as follows: – – 2006 fully franked ordinary dividend of 4 cents per share paid on 29 September 2006, as recommended in last year’s report $1,758,720. 2007 interim fully franked ordinary dividend of 5 cents per share paid on 29 March 2007 $2,250,412. revIew of o per atIons the growth in profit is attributable to the maintenance of operating costs in line with the prior comparative period whilst growing revenue from operations by 7% to $30.411 million (2006: $28.241 million). profit before tax grew by 31% to $11.338 million (2006: $8.628 million). profit after tax increased by 30% to $8.021 million (2006: $6.136 million). Significant factors impacting on profitability were; – – – – Revenue includes a full year of trading from the palion suite of products. license revenue of $2.701 million (2006: $1.312) was recognised in the year. the palion business was acquired in mid-December 2005. Increased usage fees from GBSt’s licensed products resulting from equity market trading conditions. Additional recurring revenue from new client and product licence sales made over the last year. An increase in revenue from consulting and software development services to $2.5 million (2006: $2 million). the net assets of the consolidated entity increased by $6.69 million during the year to $20.209 million at 30 June 2007 as a result of the improved operating performance of the group. the consolidated entity generated cash flows from operations of $7.63 million (2006: $9.96 million) after the payment of income taxes of $3.409m (2006: $343k). total assets increased from $22.134 million at 2006 to $28.345 million at 30 June 2007. total assets include cash reserves of $15.455 million at 30 June 2007. the directors believe the group is in a strong and stable position to grow its current operations. In the prior comparative period, on 15 December 2005, the company acquired the palion business from oMX technology Australia pty limited for a total acquisition cost of $5.348 million. palion is the leading supplier of derivatives clearing and client accounting technology in Australia. the purchase price included net assets of $1.998 million and goodwill of $3.35 million. the staff and products acquired with the palion business have been integrated into GBSt. Further information on the operational performance of the company is included in the Chairman and Managing Director’s Report. 18 d I r e C t o r s ’ r e p o r t C o n t I n u e d sIgnIfICant Changes I n s tate of a ffaIrs envIronmental Issues During the year the company issued 1,045,562 new shares, and 2,332,336 options (over existing shares) were exercised. no other significant changes in the state of affairs of the company occurred during the financial year. GBSt’s operations are not regulated by any significant environmental regulation under a law of the Commonwealth or of a State or territory. future developments, prospeC ts and busIness str ategIes the company is actively pursuing opportunities to expand its sources of revenue from the delivery of technology to the financial services industry and is currently in discussions with a number of acquisition prospects. the company will continue to invest in the internal research and development of software products and the acquisition of businesses that expand its client base and range of software products and services. the current results of the consolidated entity remain materially affected by the level of domestic equity trading volume. Disclosure of further information regarding future developments and financial results is likely to result in unreasonable prejudice to the company. Accordingly, this information has not been disclosed in this report. after b al anCe d ate e vents on 2 August 2007, GBSt Holdings limited entered into agreements to acquire Infocomp pty ltd, ICp Holdings pty ltd and its subsidiaries for a cash payment of $36.4 million and the issue of approximately 4.95 million shares. the cash component of the consideration is to be funded from existing cash reserves and a term loan facility of $20 million, established with Suncorp Metway ltd for the purpose of the acquistion. the term of the facility is six years. the facility limit will reduce by $1 million at the end of each quarter, commencing in the second year of the facility. the acquisition is expected to complete on or around 31 August 2007, the assets and liabilities arising from the acquisition will be valued at that time however it is expected that GBSt will acquire approximately $3 million in net tangible assets and approximately $53 million in identifiable intangible assets and goodwill. Identifiable intangible assets will comprise software systems and customer contracts and relationships. other than for the acquisition of the Infocomp group and the impact (if any) of prospects referred to in the commentary above, no matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the operations of GBSt, the results of those operations, or the state of affairs of GBSt in future financial years. InformatIon on dIreC tors John puttick non-executive Chairman John is the founder and Chairman of GBSt and has 40 years’ experience in the It industry over 20 of which developing financial services solutions at GBSt. John serves on university of Queensland and Queensland university of technology faculty advisory Committees. He is currently Adjunct professor, School of Information technology and electrical engineering at the university of Queensland and Chair of Southbank tAFe Community Council. John is Member of GBSt’s Audit and Risk Management Committee and is Chairman of the nominations and Remuneration Committee. Interest in Shares and Options - 7,667,760 ordinary Shares of GBSt Holdings limited held by Dr puttick and associated entities. allan brackin Independent non-executive Director Allan Brackin was appointed to the Board in April 2005. He has detailed knowledge of the It sector having served as Director and Chief executive officer of Volante Group limited, one of Australia’s largest It infrastructure service companies from november 2000 to 31 october 2004. prior to this Allan founded Queensland laser and Survey Supplies pty ltd, as well as Applied Micro Systems (Australia) pty ltd, which grew to become the national company AAG technology Services pty ltd. Allan currently serves on the board of the new South Wales Heart Foundation and is a former Director of Hutchisons Child Care Services limited (november 2005 to September 2006). Allan is Chairman of GBSt’s Audit and Risk Management Committee and is a member of the nominations and Remuneration Committee. Interest in Shares and Options - 169,241 ordinary Shares of GBSt Holdings limited held by Mr Brackin’s associated entities. Stephen Lake Managing Director and Chief executive officer Stephen lake joined GBSt in September 2001 after an extensive career in the capital markets industry in Australia, the united Kingdom and Asia. Stephen became a shareholder of GBSt and was appointed Chief executive officer in 2001. prior to joining GBSt, he was Chief General Manager of Financial Markets at Adelaide Bank limited. Stephen was Managing Director of BZW’s Capital Market’s Division Australia and also Managing Director of the Fixed Interest Division at BZW G B S T A n n u A l R e p o R t 2 0 0 7 19 d I r e C t o r s ’ r e p o r t C o n t I n u e d (Asia) ltd. Stephen is a Member of the nominations and Remuneration Committee. Interest in Shares and Options - 3,867,428 ordinary Shares of GBSt Holdings limited held by Mr lake. David Shirley Independent non-executive Director David joined GBSt in April 2005 as an Independent non-executive Director. David had a successful career providing strategic, business planning and governance advice in executive management positions with Microsoft Business Solutions and navision. He is a non-executive board and audit committee member of occupational & Medical Innovations limited (since 23 november 2006) and became non-executive chairman in January 2007, is a non-executive board and audit committee member of Steel Foundations limited and was non-executive board and audit committee member with Queensland Capital Corporation limited. David also serves as an advisory board member for a number of privately owned companies and was a partner with Gadens lawyers. David is a Member of the GBSt Audit and Risk Management Committee and is a member of the nominations and Remuneration Committee. Interest in Shares and Options - nil Joakim Sundell non-executive Director Joakim was appointed to the board in 2001. Joakim has an extensive career in private equity finance, merchant banking, and management both in Sydney and london. He is Managing Director of Crown Financial pty ltd, a private investment company. He is a director of Infochoice limited (since 13 December 2006). Joakim is a Member of the nominations and Remuneration Committee. Interest in Shares and Options - 14,336,053 ordinary shares held by Mr Sundell’s associated entities. remuner atIon report the remuneration report is set out under the following main headings: – – – – Remuneration policies and practices Company performance and remuneration Service agreements Details of remuneration the information provided in the remuneration report includes remuneration disclosures that are required under Accounting Standard AASB 124 Related Party Disclosures. these disclosures have transferred from the financial report and have been audited. remuneration policies and practices (audited) the policy for determining the nature and amount of remuneration of directors and specified executives is as follows: Remuneration of non-executive directors is determined by the Board with reference to market rates for comparable companies and reflective of the responsibilities and commitment required of the director. the remuneration of directors is voted on annually at the company’s annual general meeting. executive remuneration packages are aligned with the market and properly reflect the person’s duties, responsibilities and performance. the current remuneration structure has three components: fixed remuneration, performance-related bonus and equity based remuneration. executives are offered longer term incentives through an employee share option plan which seeks to align the executives’ performance with the interests of shareholders. the performance of executives is considered annually against agreed performance objectives relating to both individual performance goals and contribution to the achievement of broader company objectives. executive remuneration packages are reviewed annually by reference to the company’s economic performance, executive performance and comparative information from industry sectors. Remuneration paid to directors and executives is valued at the cost to the company and expensed. the company operates an employee option scheme, comprising of two sub-schemes, being an exempt options Scheme for staff generally and a Deferred options Scheme for select staff and eligible directors. options are valued using a binomial model which includes variables such as time, volatility, risk and return. the value of equity based remuneration under the Deferred option Scheme is recognised as an employee benefits expense. the board recognises that a key driver for shareholder value is the quality of the people employed by and attracted to the company. In order to meet corporate objectives GBSt must attract, motivate and retain highly skilled executives and talented employees. Remuneration principles 1. the company will use competitive remuneration packages to attract, motivate and retain talented executives. 2. the employees will be rewarded for sustained and sustainable improvement in the performance of the company. 20 d I r e C t o r s ’ r e p o r t C o n t I n u e d 3. Directors and senior executives are encouraged to make investments in the company but only in accordance with the company’s share trading guidelines. 4. Senior executive agreements will not allow for significant termination payments if an employment agreement has to be terminated for cause. 5. the company will make full disclosure of director and executive remuneration. the company has an employee share ownership plan. the plan involves the use of options to acquire shares. the plan is designed to reward executives in a manner which aligns this element of remuneration with the financial performance of the company and the interests of shareholders. executives are also required to meet continued service conditions in order to exercise the options. Details of executive options are shown in note 28 in the financial statements. the board recognises the significant role played by remuneration in attracting and retaining staff. Company performanCe and remuner atIon the table below shows the financial performance of the company over the last four years as measured by net operating revenue and net profit before tax. GBSt’s remuneration practices seek to align executive remuneration with growth in profitability and shareholder value, amongst other things. the company listed on the Australian Stock exchange on 28 June 2005. over the past year GBSt’s share price has increased by 69%. net operating revenue Growth net profit before tax Growth Closing Share price 2004 2005 2006 2007 $21.3m $22.17m $26.72m $29.28m 11% 4% 21% 10% $2.42m $3.54m $8.63m $11.4m 100% 46% 144% 31% n/a $1.23 $2.37 $4.00 service agreements (audited) Remuneration and other terms of employment for executive directors and executives are formalised in service contracts. All agreements with executives are subject to an annual review. each of the agreements provide for base pay, leave entitlements, superannuation and performance–related bonus. the agreements are expressed to cover periods specific to individual appointments but may generally be terminated by notice by either party or earlier in the event of certain breaches of terms and conditions. Mr lake’s service agreement has a rolling term subject to six months notice from either party. Remuneration Structure – non-executive directors non-executive directors are paid fixed annual remuneration as set out in letters of appointment. Reviews of each individual director and directors as a whole occur annually. non-executive directors may make investments in the company in accordance with the company’s share trading guidelines but they do not participate in the employee share ownership plan. GBSt does not operate a scheme for retirement benefits to directors. Remuneration Structure – senior executives three elements make up the company’s remuneration structure for senior executives. 1. Fixed remuneration of salary and superannuation. 2. Bonus payments based upon company performance and the meeting of corporate objectives. 3. equity based remuneration. Fixed remuneration levels are set with reference to commercial benchmark information and the individual’s role, responsibility, experience and geographic location. the fixed component of executive remuneration is reviewed annually. the company makes superannuation contributions on fixed remuneration amounts. Bonus and equity based schemes are designed to motivate employees for the continuing benefit of shareholders. no employee has a continuous entitlement to bonus payments. performance objectives for each executive are set on an annual basis and are reflective of the areas of responsibility of the executive and the broader objectives of the company. performance objectives include financial and non-financial goals. executive performance is reviewed annually with bonuses being awarded based on an assessment of performance against agreed criteria. the payment of performance bonuses is subject to a consideration of whether or not the overall performance of the company warrants the payment of a bonus. G B S T A n n u A l R e p o R t 2 0 0 7 21 d I r e C t o r s ’ r e p o r t C o n t I n u e d details of remuneration (audited) the remuneration for each director and executive officers (the key management personnel) receiving the highest remuneration during the year was as follows: short-term benefits post employment benefits other long- term benefits share-based payment performance related total bonus other super- annuation leave entitlement equity options $ % $ – – – – – – – – – 80,000 40,000 534,100 40,000 40,000 734,100 190,307 247,612 261,592 – 217,917 – – 112,528 232,667 – 1,262,623 – 1,996,723 – – – – – 7 9 13 6 4 13 base salary & fees $ 80,000 40,000 490,000 40,000 40,000 690,000 134,470 204,231 218,333 $ – – – – – – 13,761 22,936 $ – – – – – – – – 35,000 8,259 186,899 13,761 98,237 181,346 5,000 32,110 – – – $ – – 44,100 – – 44,100 13,274 20,445 – 17,257 9,291 19,211 $ – – – – – – 28,802 – – – – – 2007 directors J puttick A Brackin S lake D Shirley J Sundell total directors executives C Apps (resigned 16/3/07) p Ferguson p Fowler S Hayhoe (resigned 8/6/07) K Sprott (appointed 21/08/06) K Wallis total executives 1,023,516 122,568 8,259 79,478 28,802 group total 1,713,516 122,568 8,259 123,578 28,802 22 d I r e C t o r s ’ r e p o r t C o n t I n u e d short-term benefits post employment benefits other long- term benefits share-based payment performance related total bonus other super- annuation leave entitlement equity options $ % base salary & fees $ 100,730 40,000 490,000 40,000 40,000 2006 directors J puttick A Brackin S lake D Shirley J Sundell Total Directors 710,730 $ – – – – – – Executives C Apps p Ferguson p Fowler (appointed 15/12/05) S Hayhoe e lloyd (i) K Wallis 176,212 189,154 32,110 32,110 113,750 165,385 118,587 155,346 – 32,110 32,110 32,110 Total Executives 918,434 160,550 $ – – – – – – – – – – – – – $ $ 952 – 44,269 – – 103,393 – – – – $ – – 205,075 40,000 23,798 558,067 – – 40,000 40,000 45,221 103,393 23,798 883,142 18,749 19,914 – 17,774 13,563 16,871 86,871 – – – – – – – 6,415 233,486 9,520 250,698 11,544 125,294 7,723 222,992 6,415 6,415 170,675 210,742 48,032 1,213,887 – – 4 – – 16 17 9 18 23 18 Group Total 1,629,164 160,550 – 132,092 103,393 71,830 2,097,029 (i) e lloyd entered maternity leave on 2 December 2005 and resigned in the current year. Options issued as part of Remuneration for the Year Ended 30 June 2007 there were no options issued as remuneration to key management personnel in the 30 June 2007 financial year. the cost of equity options is reported in accordance with accounting standard AASB 2 Share-based payments, which has the effect of reporting the cost of the options over the period between the grant date and exercise date. Options granted as remuneration to key management personnel there were no options granted as remuneration to key management personnel in the 30 June 2007 financial year. Details of the total holdings of options granted as remuneration in previous financial years are set out in note 28 in the financial statements. Details of these options are set out in note 30 in the financial statements. G B S T A n n u A l R e p o R t 2 0 0 7 23 d I r e C t o r s ’ r e p o r t C o n t I n u e d Shares issued on exercise of compensation options options exercised during the year that were granted as compensation in previous financial years: directors J puttick A Brackin S lake D Shirley J Sundell total directors executives C Apps C Apps p Ferguson p Fowler S Hayhoe S Hayhoe K Sprott K Wallis total executives group total meetIngs of dIreC tors amounts paid per share amounts unpaid per share $ – – 0.7505 – – 0.7505 0.00 1.09 – 0.7505 1.45 – 0.7505 $ – – – – – – – – – – – – – no. of ordinary shares issued – – 999,332 – – 999,332 265,156 1,332 30,656 – 123,560 25,000 – 230,156 675,680 1,675,192 During the financial year, 20 meetings of directors (including committees of directors) were held. Attendances by each director during the year were as follows: directors’ names J puttick A Brackin S lake D Shirley J Sundell directors’ meetings audit and risk committee remuneration and nominations number eligible to attend number attended number eligible to attend number attended number eligible to attend number attended 15 15 15 15 15 14 15 15 15 14 4 4 4 4 – 4 4 4 4 – 1 1 1 1 1 1 1 1 1 1 Indemnifying directors and officers During the financial year, the company paid a premium in respect of a contract insuring the directors of the company, the company secretaries and all executive officers of the company against a liability incurred as such a director, secretary or executive officer to the extent permitted by the Corporations Act 2001. In addition, the company has entered into a Deed of Indemnity which ensures that generally the Directors and officers of the company will incur no monetary loss as a result of defending the actions taken against them as Directors and officers. the company has not otherwise, during or since the financial year, indemnified or agreed to indemnify an officer or auditor of the company against a liability incurred as such an officer or auditor. 24 D i r e c t o r s ’ r e p o r t c o n t i n u e D options the number of options over ordinary shares outstanding at 30 June 2007 are as follows: Grant date 09.03.05 25.08.05 05.12.05 03.01.06 expiry and exercise date 08.03.10 31.01.08 04.12.07 02.01.08 exercise price $0.00 $1.09 $1.25 $1.45 number 134,532 69,344 187,500 90,000 481,376 the company established an employee share trust on 9 March 2005 to hold shares in GBSt for subsequent allocation under the GBSt employee option plan. During the year ended 30 June 2007, 2,332,336 shares were issued from the trust and 1,045,562 new shares were issued to meet the exercise of employee options (grant date 09.03.05 and exercise price was $.7505). GBSt eSop pty ltd held 36,844 shares in GBSt at reporting date. the trust is treated as a special purpose entity and consolidated. the trust’s shareholding in the company is disclosed as treasury shares and deducted from equity. no person entitled to exercise the option had or has any right by virtue of the option to participate in any share issue of any other body corporate. Since the end of the financial year the company has issued 85,894 zero exercise price options to non-executive staff. the zero exercise price options are divided into three tranches. the first tranche, of 20%, vest and may be exercised after 12 months and lapse if unexercised in 36 months. the second tranche, of 30%, vest and may be exercised after 24 months and lapse if unexercised in 48 months. the third tranche, of 50%, vest and may be exercised after 36 months and lapse if unexercised after 60 months. on cessation of employment all unvested zero exercise price options lapse. the company has also issued 11,988 shares since the end of the financial year following the exercise of options under the GBSt exempt option plan. proceeDinGs on Behalf of c ompany no person has applied for leave of Court to bring proceedings on behalf of the company or intervene in any proceedings to which the company is a party for the purpose of taking responsibility on behalf of the company for all or any part of those proceedings. the company was not a party to any such proceedings during the year. non -au Dit services the board of directors, in accordance with advice from the audit 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. Refer to note 21 in the financial report for details of fees for non-audit services paid/payable to the external auditors during the year. auDitor ’s inDepenDence Decl ar ation the lead auditor’s independence declaration for the year ended 30 June 2007 has been received and can be found on the page following this directors’ report. Signed in accordance with a resolution of the Board of Directors: J f puttick Chairman Brisbane 16 August 2007 s m l lake Managing Director and Chief executive officer G B S T A n n u A l R e p o R t 2 0 0 7 25 a u d I t o r ’ s I n d e p e n d e n C e d e C l a r a t Io n 26 d I r e C t o r s ’ d e C l a r a t Io n the Directors of the company declare that: 1. the financial statements and notes, and the additional disclosures included in the directors’ report designated as audited, are in accordance with the Corporations Act 2001: a) comply with Accounting Standards and the Corporations Regulations 2001; and b) give a true and fair view of the financial position as at 30 June 2007 and of the performance for the year ended on that date of the company and consolidated entity. 2. the Chief executive officer and Chief Financial officer have each declared that: a) the financial records of the company for the financial year have been properly maintained in accordance with section 286 of the Corporations Act 2001; b) the financial statements and notes for the financial year comply with the Accounting Standards; and c) the financial statements and notes for financial year give a true and fair view. 3. In the directors’ opinion there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable. this declaration is made in accordance with a resolution of the board of directors. J f puttick Chairman Brisbane 16 August 2007 s m l lake Managing Director and Chief executive officer G B S T A n n u A l R e p o R t 2 0 0 7 27 I n C o m e s t a t e m e n t f o r t h e y e a r e n d e d 3 0 J u n e 2 0 0 7 Revenue other income total Revenue Consolidated Company note 2007 $ 2006 $ 2007 $ 2006 $ 30,410,971 28,241,374 30,410,971 28,241,374 876,156 441,188 944,955 441,188 31,287,127 28,682,562 31,355,926 28,682,562 product delivery and support expenses (12,139,888) (11,566,680) (12,139,888) (11,566,680) Cost of third party product sold (1,134,720) (1,532,529) (1,134,720) (1,532,529) property and equipment expenses (3,013,076) (2,774,417) (3,013,076) (2,774,417) Corporate and administrative expenses (3,641,934) (4,154,546) (3,604,248) (4,154,546) Finance costs profit before income tax Income tax expense profit from continuing operations profit attributable to members of the parent company Basic earnings per share (cents) Diluted earnings per share (cents) 2 3 31 31 (19,682) (26,214) (19,682) (26,214) 11,337,827 8,628,176 11,444,312 8,628,176 (3,316,431) (2,492,194) (3,316,431) (2,492,194) 8,021,396 6,135,982 8,127,881 6,135,982 8,021,396 6,135,982 8,127,881 6,135,982 18.11 17.77 13.96 13.77 the accompanying notes form part of these financial statements. 28 b a l a n C e s h e e t a s a t 3 0 J u n e 2 0 0 7 Current assets Cash and cash equivalents trade and other receivables Inventories other assets total current assets non-Current assets trade and other receivables Financial assets property, plant and equipment Intangible assets Deferred tax assets other assets totAl non-CuRRent ASSetS total assets Current lIabIlItIes trade and other payables Financial liabilities Current tax liabilities other liabilities totAl CuRRent lIABIlItIeS non-Current lIabIlItIes Deferred tax liabilities long-term provisions other liabilities totAl non-CuRRent lIABIlItIeS total lIabIlItIes net assets eQuIty Issued capital treasury shares Reserves Retained earnings total eQuIty Consolidated Company note 2007 $ 2006 $ 2007 $ 2006 $ 5 6 7 11 6 8 9 10 14 11 12 13 14 16 14 15 16 17 18 19 15,454,992 10,618,069 15,454,992 10,618,069 3,797,888 3,224,393 3,849,344 5,002,362 – 513,605 2,572 280,102 – 513,605 2,572 280,102 19,766,485 14,125,136 19,817,941 15,903,105 16,027 781,937 36,792 – 16,027 782,039 1,289,967 1,157,043 1,289,967 5,339,012 5,732,379 5,339,012 1,138,404 1,051,523 1,138,404 13,453 31,200 13,453 36,792 102 1,157,043 5,732,379 1,051,523 31,200 8,578,800 8,008,937 8,578,902 8,009,039 28,345,285 22,134,073 28,396,843 23,912,144 2,186,566 2,030,457 2,178,571 2,030,457 – 35,276 – 2,080,532 2,115,948 2,080,532 2,260,754 3,027,989 2,260,754 6,527,852 7,209,670 6,519,857 174,492 144,765 174,492 1,128,406 1,197,841 1,128,406 305,611 64,605 305,611 35,276 2,115,948 3,027,989 7,209,670 144,765 1,197,841 64,605 1,608,509 1,407,211 1,608,509 1,407,211 8,136,361 8,616,881 8,128,366 8,616,881 20,208,924 13,517,192 20,268,477 15,295,263 6,807,508 5,722,015 6,807,508 5,722,015 (31,253) (1,778,071) – – 67,788 298,816 67,788 298,816 13,364,881 9,274,432 13,393,181 9,274,432 20,208,924 13,517,192 20,268,477 15,295,263 G B S T A n n u A l R e p o R t 2 0 0 7 29 s tat e m e n t o f C h a n g e s I n e Q u I t y f o r t h e y e a r e n d e d 3 0 J u n e 2 0 0 7 Issued capital $ treasury shares (a) $ retained earnings $ option reserve (b) $ total $ ConsolIdated balance at 1 July 2005 5,722,015 (2,203,076) 3,138,450 175,000 6,832,389 profit for the year Share based payments exercise of options – – – – – 425,005 6,135,982 – 6,135,982 – – 123,816 – 123,816 425,005 balance at 30 June 2006 5,722,015 (1,778,071) 9,274,432 298,816 13,517,192 balance at 1 July 2006 5,722,015 (1,778,071) 9,274,432 298,816 13,517,192 profit for the year Share based payments Share Issues exercise of options – – 780,696 – – – – 1,746,818 transfer to ordinary capital 304,797 – 8,021,396 – 8,021,396 – – – – 73,769 – – 73,769 780,696 1,746,818 (304,797) – subtotal 6,807,508 (31,253) 17,295,828 67,788 24,139,871 net Dividends paid (note 4) – – (3,930,947) – (3,930,947) balance at 30 June 2007 6,807,508 (31,253) 13,364,881 67,788 20,208,924 parent Company balance at 1 July 2005 5,722,015 profit for the year Share based payments balance at 30 June 2006 balance at 1 July 2006 profit for the year Share based payments Share Issues transfer to ordinary capital subtotal net Dividends paid (note 4) – – 5,722,015 5,722,015 – – 780,696 304,797 6,807,508 – balance at 30 June 2007 6,807,508 – – – – – – – – – – – – 3,138,450 175,000 9,035,465 6,135,982 – 6,135,982 – 123,816 123,816 9,274,432 298,816 15,295,263 9,274,432 298,816 15,295,263 8,127,881 – 8,127,881 – – – 73,769 73,769 – 780,696 (304,797) – 17,402,313 67,788 24,277,609 (4,009,132) – (4,009,132) 13,393,181 67,788 20,268,477 (a) GBSt eSop pty ltd, in its capacity as trustee of the GBSt employee Share trust, holds shares in GBSt for subsequent allocation under the GBSt employee option plan. During the year ended 30 June 2007, 2,332,336 (2006: 384,820) shares were issued from the trust to meet the exercise of employee options. GBSt eSop pty ltd held 36,844 shares in GBSt at 30 June 2007 (2006: 2,369,180 ). the trust is treated as a special purpose entity and consolidated. the trust’s shareholding in the company is disclosed as treasury shares and deducted from equity. (b) the option reserve records items recognised as expenses on valuation of employee share options granted. When options are exercised, the amount in the reserve relating to those options is transferred to issued capital. the accompanying notes form part of these financial statements. 30 C a s h f l o w s t a t e m e n t f o r t h e y e a r e n d e d 3 0 J u n e 2 0 0 7 Consolidated Company note 2007 $ 2006 $ 2007 $ 2006 $ Cash flows from operatIng aCtIvItIes Receipts from customers 32,342,988 32,447,791 32,342,988 32,447,791 payments to suppliers and employees (22,068,505) (22,503,435) (22,058,056) (22,520,141) Interest & sundry income Interest and other costs of finance paid Income tax paid net cash provided by/(used in) operating activities Cash flows from InvestIng aCtIvItIes 775,697 (9,874) 379,230 (16,405) 775,697 (9,874) (3,409,002) (343,126) (3,409,002) 379,230 (16,405) (343,126) 25(a) 7,631,304 9,964,055 7,641,753 9,947,349 proceeds from sale of plant & equipment 31,801 11,324 31,801 purchase of plant & equipment (625,286) (561,932) (625,286) 11,324 (561,932) (599,527) purchase of intangibles Acquisition of business proceeds from related entity receivables proceeds from other entity receivables purchase of investments net cash provided by/(used in) investing activities Cash flows from fInanCIng aCtIvItIes Repayment of finance leases exercise of options/sale of treasury shares proceeds from issue of ordinary shares Dividends paid net cash provided by/(used in) financing activities net InCrease/(deCrease) In Cash and Cash eQuIvalents (82,974) (599,527) (82,974) 25(c) – – 21,527 (781,937) (5,348,482) – (5,348,482) – 1,895,751 30,182 21,527 – (781,937) 293,517 30,182 – (1,436,869) (6,468,435) 458,882 (6,174,918) (35,276) (37,397) (35,276) 1,828,015 780,696 (3,930,947) (37,397) 276,811 – – – 780,696 (4,009,132) – – – (1,357,512) 239,414 (3,263,712) (37,397) Cash at beginning of the financial year 10,618,069 6,883,035 10,618,069 4,836,923 3,735,034 4,836,923 3,735,034 6,883,035 Cash at end of the financial year 25(b) 15,454,992 10,618,069 15,454,992 10,618,069 the accompanying notes form part of these financial statements. G B S T A n n u A l R e p o R t 2 0 0 7 31 n o t e s t o a n d f o r mI n g p a r t o f t h e f I n a n C I a l s t a t e m e n t s f o r t h e y e a r e n d e d 3 0 J u n e 2 0 0 7 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES GBSt Holdings limited is a public company limited by shares, incorporated and domiciled in Australia. the financial report covers the consolidated entity of GBSt Holdings limited and its controlled entities, and GBSt Holdings limited as an individual parent entity. the financial report is a general purpose financial report prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards, including Australian Accounting Interpretations and other authoritative pronouncements of the Australian Accounting Standards Board. the financial report complies with all International Financial Reporting Standards (IFRS) in their entirety. basis of preparation the following is a summary of the material accounting policies adopted by the consolidated group in the preparation of the financial report. the accounting policies have been consistently applied, unless otherwise stated. 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. principles of consolidation A controlled entity is any entity over which GBSt Holdings limited 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 22 of the financial statements. All controlled entities have a June financial year end. All inter-company balances and transactions between entities in the consolidated entity, including any unrealised profits or losses, have been eliminated on consolidation. Where controlled entities have entered or left the consolidated entity during the year, their operating results have been included/excluded from the date control was obtained or until the date control ceased. revenue Revenue received in advance for software usage rental is recognised over the period of the usage. Revenue received in advance for long term project development contracts (depending on the terms of individual contracts) is deferred. this revenue is recognised over the period in which expenditure is incurred in relation to the development of the project. Revenue from the sale of goods, rendering of other services or the disposal of other assets is recognised upon the delivery to customers. Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial assets. All revenue is stated net of the amount of goods and services tax (GSt). goods and services tax (gst) Revenues, expenses and assets are recognised net of the amount of GSt, except where the amount of GSt incurred is not recoverable from the Australian tax office. In these circumstances the GSt is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the 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 investing and financing activities, which are disclosed as operating cash flows. Income tax the charge for current income tax expense is based on the profit for the year adjusted for any non-assessable or disallowed items. It is calculated using tax rates that have been enacted or are substantially enacted by the balance sheet date. Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. no deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss. Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or liability is settled. Deferred tax is credited in the income statement except where it relates to items that may be credited directly to equity, in which case the deferred tax is adjusted directly against equity. 32 n o t e s t o a n d f o r mI n g p a r t o f t h e f I n a n C I a l s t a t e m e n t s f o r t h e y e a r e n d e d 3 0 J u n e 2 0 0 7 Deferred income tax assets are recognised to the extent that is probable that future profits will be available against which deductible temporary difference 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 consolidated entity will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law. the company and its wholly-owned Australian subsidiaries have formed an income tax consolidated group under the tax Consolidation Regime. each entity in the group recognises its own current and deferred tax liabilities, except for any deferred tax liabilities resulting from unused tax losses and tax credits, which are immediately assumed by the parent entity. the tax consolidated group has entered a tax sharing agreement whereby each company in the group contributes to the income tax payable in proportion to their contribution to the net profit before tax of the tax consolidated group. Cash and cash equivalents Cash and cash equivalents includes cash on hand, deposits held at call with banks, other short term highly liquid investments with original maturities of three months or less, and bank overdrafts. Inventories Inventories are measured at the lower of cost and net realisable value. plant and equipment plant and equipment are carried at cost or fair value, less, where applicable, any accumulated depreciation and impairment losses. the carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount from those assets. the recoverable amount of an asset is assessed on the basis of the expected net cash flows that will be received from the asset’s employment and subsequent disposal. the expected net cash flows have been discounted to their present values in determining recoverable amounts. 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. the depreciable amount of all fixed assets including capitalised lease assets, is depreciated over their useful lives to the entity commencing from the time the asset is held ready for use. leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements. the depreciation rates used for each class of assets are: Class of fixed asset owned plant, equipment depreciation rate basis 7.5%-40% Straight-line / Diminishing Value Straight-line leased plant, equipment 33.3% the assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with the carrying amount. these gains and losses are included in the income statement. asset retirement obligations the cost of plant and equipment includes an initial estimate of the cost of make good allowances, and a corresponding provision for these future costs is raised. the company has a number of lease agreements over office premises which include an obligation to make good the premises at the conclusion of the lease term. the company recognises a liability and an asset for the estimated cost of making good at the time of entering a lease agreement. the resulting asset is amortised over the term of the premises lease. G B S T A n n u A l R e p o R t 2 0 0 7 33 n o t e s t o a n d f o r mI n g p a r t o f t h e f I n a n C I a l s t a t e m e n t s f o r t h e y e a r e n d e d 3 0 J u n e 2 0 0 7 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) leases and hire purchase leases of fixed assets where substantially all the risks and benefits incidental to the ownership of the asset, but not the legal ownership that is transferred to entities in the consolidated entity, 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 as expenses in the periods in which they are incurred. lease incentives under operating leases are recognised as a liability and amortised on a straight-line basis over the life of the lease term. research and development expenditure (software systems) Software systems are the core asset of the company. Intangible assets are tested for impairment where an indicator of impairment exists. useful lives are also examined on an annual basis and adjustments, where applicable, are made on a prospective basis. goodwill Goodwill is initially recorded at the amount by which the purchase price for a business acquisition exceeds the fair value attributed to its net assets at date of acquisition. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is not amortised Goodwill is tested annually for any indication of impairment, or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. Goodwill is allocated to cash generating units for the purpose of impairment testing. Impairment of assets At each reporting date, the group reviews the carrying values of its tangible and intangible assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, is compared to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to the income statement. Internally developed expenditure during the research phase of a project is recognised as an expense when incurred. Development costs are expensed in the year in which they are incurred when future economic benefits are uncertain or the future economic benefits cannot be measured reliably. Impairment testing is performed annually for goodwill and intangible assets with indefinite lives. 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. Externally acquired Software systems externally acquired are recognised at cost of acquisition. Software systems have a finite life and are carried at cost less any accumulated amortisation and any impairment losses. Software systems are amortised over their useful life on a straight line basis. Identifiable intangible assets Acquired both separately and from a business combination Intangible assets acquired are capitalised at cost. Intangible assets acquired from a business combination are recognised separately from goodwill and capitalised at fair value as at the date of acquisition. Following initial recognition, the cost model is applied to the class of intangible assets. the useful lives of these intangible assets are assessed and the asset is amortised over its useful life on a straight line basis. 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. employee benefits provision is made for the group’s liability for employee benefits arising from services rendered by employees to balance date. employee benefits expected to be settled within one year have been measured at the amounts expected to be paid when the liability is settled, plus related oncosts. other 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 entitlements. Contributions are made by the group to employee superannuation funds and are charged as expenses when incurred. 34 financial instruments Recognition Financial instruments are initially measured at cost on trade date, which includes transaction costs, when the related contractual rights or obligations exist. Subsequent to initial recognition these instruments are measured as set out below. Loans and receivables loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are stated at amortised cost using the effective interest rate method. Available-for-sale financial assets Available-for-sale financial assets (investments) are reflected at fair value or cost. Fair value is determined with reference to market prices. unrealised gains and losses arising from changes in fair value are taken directly to equity. Financial liabilities non-derivative financial liabilities are recognised at amortised cost, comprising original debt less principal payments and amortisation. Impairment At each reporting date, the group assesses whether there is objective evidence that a financial instrument has been impaired. In the case of available-for-sale financial instruments, a prolonged decline in the value of the instrument is considered to determine whether an impairment has arisen. Impairment losses are recognised in the income statement. Comparative figures Where required by Accounting Standards comparative figures have been adjusted to conform to changes in presentation for the current financial period. Details of any such changes are included in the financial report. the group operates an employee option scheme, comprising of two sub-schemes, being an exempt options Scheme for staff generally and a Deferred options Scheme for select staff and eligible Directors. the company determines the fair value of options (and other equity-based incentives) issued to employees as remuneration and recognises an expense in the Income Statement. options are valued using a binomial model which includes variables such as time, volatility, risk and return. treasury shares the GBSt employee Share trust is treated as a special purpose entity and consolidated. this results in the trust’s shareholding in the company being disclosed as treasury shares and deducted from equity. this consolidation treatment arises on the basis that, although the consolidated entity has no proprietary interest in the shares, the GBSt employee Share trust has been established to maintain and hold securities in accordance with the remuneration policies and objectives of the group. It is deemed that the trust is controlled by the group. Where the employee share options are exercised and the employees acquire the shares from the eSop trust, the treasury shares will be removed from the balance sheet as cash is received from the employees. Critical accounting estimates and judgments the directors evaluate estimates and judgments incorporated into the financial report based on historical knowledge and best available current information. estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the group. Actual results may differ from these estimates. the key estimates and judgements made in this financial report concern the assessment of the carrying value of the consolidated entity’s intangible assets. foreign currency transactions and balances the consolidated financial statements are presented in Australian dollars which is the parent entity’s functional and presentation currency. Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the year end exchange rate. exchange differences arising on the translation of monetary items are recognised in the income statement. G B S T A n n u A l R e p o R t 2 0 0 7 35 n o t e s t o a n d f o r mI n g p a r t o f t h e f I n a n C I a l s t a t e m e n t s f o r t h e y e a r e n d e d 3 0 J u n e 2 0 0 7 Consolidated Company 2007 $ 2006 $ 2007 $ 2006 $ NOTE 2: PROFIT FOR THE YEAR (a) Revenue: Sales revenue: Revenue from license and service sales 29,086,199 26,408,429 29,086,199 26,408,429 Revenue from sale of third party product 1,324,772 1,832,945 1,324,772 1,832,945 30,410,971 28,241,374 30,410,971 28,241,374 other income: Interest revenue (c) profit on sale of plant & equipment (d) other revenue total Revenue (b) expenses: 866,046 430,357 934,845 430,357 9,280 830 876,156 – 10,831 441,188 9,280 830 944,955 – 10,831 441,188 31,287,127 28,682,562 31,355,926 28,682,562 loss on sale of plant & equipment (d) Finance costs (e) Depreciation & amortisation (f) – 19,682 942,374 90,281 26,214 – 19,682 822,519 942,374 Foreign currency translation losses/(gains) – 1,218 – operating lease rentals 1,262,612 936,533 1,262,612 90,281 26,214 822,519 1,218 936,533 Research & developments costs 2,915,214 3,328,571 2,915,214 3,328,571 employee benefits expense (g) 11,285,343 11,908,162 11,305,179 11,908,162 (c) Interest revenue: other entities Controlled entity (d) Sale of assets: proceeds on sale of plant and equipment (e) Finance costs: Finance lease charges Facility fees 866,046 430,357 866,046 430,357 – – 68,799 – 866,046 430,357 934,845 430,357 31,801 31,801 974 18,708 19,682 11,324 11,324 4,035 22,179 26,214 31,801 31,801 974 18,708 19,682 11,324 11,324 4,035 22,179 26,214 36 NOTE 2: PROFIT FOR THE YEAR (CONTINUED) (f) Depreciation & amortisation: Depreciation of plant & equipment Amortisation of leased assets Amortisation of intangibles (g) employee benefits expense: Consolidated Company 2007 $ 2006 $ 2007 $ 2006 $ 442,791 23,530 476,053 942,374 478,712 40,317 303,490 822,519 442,791 23,530 476,053 942,374 478,712 40,317 303,490 822,519 Monetary based expense (i) 11,231,410 11,636,152 11,231,410 11,636,152 Share based payments expense (ii) 73,769 272,010 73,769 272,010 11,305,179 11,908,162 11,305,179 11,908,162 (i) Monetary based expense includes salary and fees, bonus payments, superannuation and other benefits. (ii) Share based payments expense is calculated in accordance with AASB 2 “Share–based payments”. Consolidated Company 2007 $ 2006 $ 2007 $ 2006 $ 3,441,241 2,502,489 3,441,241 2,502,489 (104,888) (19,922) 44,907 (55,202) (104,888) (19,922) 44,907 (55,202) 3,316,431 2,492,194 3,316,431 2,492,194 NOTE 3: INCOME TA X EXPENSE (a) the components of tax expense comprise: Current tax Deferred tax (note 14) over provision in respect of prior years the prima facie tax on profit from ordinary activities before income tax is reconciled to income tax as follows: operating profit 11,337,827 8,628,176 11,444,312 8,628,176 prima facie tax payable at 30% 3,401,348 2,588,453 3,433,294 2,588,453 Adjust for tax effect of: other non–allowable items (net) Research & development expenditure claim over provision for income tax in prior year 41,072 (106,067) (19,922) 48,943 (90,000) (55,202) 9,126 (106,067) (19,922) 48,943 (90,000) (55,202) Income tax attributable to entity 3,316,431 2,492,194 3,316,431 2,492,194 Average effective tax rates: 29% 29% 29% 29% G B S T A n n u A l R e p o R t 2 0 0 7 37 n o t e s t o a n d f o r mI n g p a r t o f t h e f I n a n C I a l s t a t e m e n t s f o r t h e y e a r e n d e d 3 0 J u n e 2 0 0 7 NOTE 4: DIVIDENDS provision for dividend on ordinary shares Dividend paid in the period: Interim fully franked ordinary dividend of 5 cents (2006: nil) per share 2006 proposed final fully franked ordinary dividend of 4 cents per share paid in 2007 total dividends paid Dividend received on treasury shares net dividend paid Franking credit balance: Consolidated Company 2007 $ – 2,250,412 1,758,720 4,009,132 (78,185) 3,930,947 2006 $ – – – – – – 2007 $ – 2,250,412 1,758,720 4,009,132 – 4,009,132 2006 $ – – – – – – Balance of franking account at year end Franking credits arising from payment of provision for income tax as at the end of the financial year Impact of estimated final dividend not recognised during the period 2,033,928 2,080,532 343,126 2,033,928 343,126 2,115,948 2,080,532 2,115,948 (1,285,000) (753,737) (1,285,000) (753,737) Franking credits available for future reporting periods 2,829,460 1,705,337 2,829,460 1,705,337 NOTE 5: CASH AND CASH EQUIVALENTS Cash at bank and on hand Short term deposits (i) 854,992 1,618,069 854,992 1,618,069 14,600,000 9,000,000 14,600,000 9,000,000 15,454,992 10,618,069 15,454,992 10,618,069 (i) the effective interest rate on short-term bank deposits was 6.3% (2006: 5.8%); these deposits have an average maturity of 30 days. NOTE 6: TR ADE AND OTHER RECEIVABLES Current trade debtors other related entities (a) other amounts receivable non-Current receivables other entities Consolidated Company 2007 $ 2006 $ 2007 $ 2006 $ 3,439,457 2,793,353 3,439,457 – – 42,960 2,793,353 1,778,071 358,431 431,040 366,927 430,938 3,797,888 3,224,393 3,849,344 5,002,362 16,027 16,027 36,792 36,792 16,027 16,027 36,792 36,792 (a) Amount advanced to GBSt eSop as trustee for the eSop trust (refer note 30). the loan will be recovered at the time the employee share options are exercised and the employees acquire the shares from the eSop trust. the recoverability of the loan is dependant on the value of GBSt’s shares. the GBSt group has no proprietary interest in the share options or the shares. 38 NOTE 7: INVENTORIES Inventory on hand at cost NOTE 8: FINANCIAL ASSE TS non-Current Available for sale financial assets: Investment in controlled entities at cost (note 22) Investment in shares at fair value Consolidated Company 2007 $ – – – 781,937 781,937 2006 $ 2,572 2,572 2007 $ – – – – – 102 781,937 782,039 2006 $ 2,572 2,572 102 – 102 NOTE 9: PL ANT AND EQUIPMENT owned plant and equipment at cost 3,097,181 4,298,355 3,097,181 4,298,355 provision for depreciation (1,807,214) (3,164,842) (1,807,214) (3,164,842) leased plant and equipment at cost provision for amortisation 1,289,967 1,133,513 1,289,967 1,133,513 – – – 120,963 (97,433) 23,530 – – – 120,963 (97,433) 23,530 total plant and equipment 1,289,967 1,157,043 1,289,967 1,157,043 (a) movement in plant and equipment Consolidated and parent Company year ended 30 June 2006 Balance at the beginning of the year Additions Disposals Depreciation expense Carrying amount at the end of the year year ended 30 June 2007 Balance at the beginning of the year Additions Disposals Depreciation expense Reclassification to owned assets - cost Reclassification to owned assets - accumulated depreciation owned $ leased $ total $ 1,047,364 63,847 1,111,211 681,245 (116,384) (478,712) 1,133,513 – – (40,317) 23,530 681,245 (116,384) (519,029) 1,157,043 1,133,513 23,530 1,157,043 641,765 (42,520) (442,791) 120,963 (120,963) – – (23,530) (120,963) 120,963 641,765 (42,520) (466,321) – – Carrying amount at the end of the year 1,289,967 – 1,289,967 G B S T A n n u A l R e p o R t 2 0 0 7 39 n o t e s t o a n d f o r mI n g p a r t o f t h e f I n a n C I a l s t a t e m e n t s f o r t h e y e a r e n d e d 3 0 J u n e 2 0 0 7 NOTE 10: INTANGIBLE ASSE TS Software Systems Accumulated amortisation net carrying value Goodwill net carrying value total intangibles (a) movement in intangibles Consolidated and parent company year ended 30 June 2006 Balance at the beginning of the year Additions Amortisation charge Carrying amount at the end of the year year ended 30 June 2007 Balance at the beginning of the year Additions Disposals Amortisation charge Consolidated Company 2007 $ 2006 $ 2007 $ 2006 $ 2,985,455 3,096,288 2,985,455 3,096,288 (996,504) (713,970) (996,504) (713,970) 1,988,951 2,382,318 1,988,951 2,382,318 3,350,061 3,350,061 3,350,061 3,350,061 3,350,061 3,350,061 5,339,012 5,732,379 5,339,012 3,350,061 3,350,061 5,732,379 software systems $ goodwill $ total $ 86,281 – 86,281 2,599,527 3,350,061 5,949,588 (303,490) – (303,490) 2,382,318 3,350,061 5,732,379 2,382,318 3,350,061 5,732,379 82,974 (288) (476,053) – – – 82,974 (288) (476,053) Carrying amount at the end of the year 1,988,951 3,350,061 5,339,012 Intangible assets, other than goodwill, have finite useful lives. the current amortisation charges for intangible assets are included under depreciation and amortisation expense per the income statement. Goodwill has an infinite life. Impairment disclosures Goodwill relates to the acquisition of the palion business in December 2005. the palion business is fully integrated within the operations of GBSt and is not a separable cash generating unit. the recoverable amount of goodwill has been determined based on a value in use calculation. the following assumptions were used in the value-in-use calculations: Value in use has been calculated from the present value of cash flows included in management approved operating budgets for the year ended 30 June 2008. these budgets use historical performance to project revenue and expenses. no impairment loss was charged for goodwill in the 2007 financial year. 40 NOTE 11: OTHER ASSE TS Current prepaid expenditure non-current prepaid expenditure Consolidated Company 2007 $ 2006 $ 2007 $ 2006 $ 513,605 280,102 513,605 280,102 13,453 13,453 31,200 31,200 13,453 13,453 31,200 31,200 NOTE 12: TR ADE AND OTHER PAYABLES Current trade creditors & accruals (unsecured) 2,186,566 2,030,457 2,178,571 2,186,566 2,030,457 2,178,571 2,030,457 2,030,457 NOTE 13: FINANCIAL LIABILITIES Current Finance lease liability (note 20) NOTE 14: TA X (a) liabilities Current Income tax non-current Deferred tax liability comprises: tax allowances relating to property, plant and equipment (b) assets Deferred tax assets comprise: provisions and prepaid income other items transaction costs on equity issue – – 35,276 35,276 – – 35,276 35,276 2,080,532 2,115,948 2,080,532 2,115,948 174,492 144,765 174,492 144,765 174,492 144,765 174,492 144,765 902,584 140,353 95,467 853,259 55,063 143,201 902,584 140,353 95,467 853,259 55,063 143,201 1,138,404 1,051,523 1,138,404 1,051,523 G B S T A n n u A l R e p o R t 2 0 0 7 41 n o t e s t o a n d f o r mI n g p a r t o f t h e f I n a n C I a l s t a t e m e n t s f o r t h e y e a r e n d e d 3 0 J u n e 2 0 0 7 Consolidated Company 2007 $ 2006 $ 2007 $ 2006 $ NOTE 14: TA X (CONTINUED) (c) reconciliations (i) gross movement the overall movement in the deferred tax account is as follows: opening balance (Charge)/credit to income statement Charge to equity Closing balance (ii) deferred tax liability the movement in deferred tax liability for each temporary difference during the year is as follows: tax allowances relating to property, plant and equipment opening balance Charged to income statement Closing balance (iii) deferred tax assets the movement in deferred tax liability for each temporary difference during the year is as follows: provisions and prepaid income opening balance Credited to income statement Closing balance other Items opening balance Credited/(charged) to income statement Closing balance transaction costs on equity issue opening balance Charged directly to equity Closing balance 906,758 104,888 (47,734) 963,912 999,399 (44,907) (47,734) 906,758 906,758 104,888 (47,734) 963,912 999,399 (44,907) (47,734) 906,758 144,765 29,727 174,492 2,512 142,253 144,765 144,765 29,727 174,492 2,512 142,253 144,765 853,259 49,325 902,584 55,063 85,290 140,353 143,201 (47,734) 95,467 736,429 116,830 853,259 74,547 (19,484) 55,063 190,935 (47,734) 143,201 853,259 49,325 902,584 55,063 85,290 140,353 143,201 (47,734) 95,467 736,429 116,830 853,259 74,547 (19,484) 55,063 190,935 (47,734) 143,201 42 NOTE 15: PROVISIONS long-term employee benefits (a) Asset retirement provision (b) Consolidated and parent company Balance at the beginning of the year Additional provisions Amounts used unused amounts reversed Balance at 30 June 2007 Consolidated Company 2007 $ 2006 $ 2007 $ 2006 $ 770,414 357,992 836,041 361,800 770,414 357,992 836,041 361,800 1,128,406 1,197,841 1,128,406 1,197,841 long-term employee benefits $ asset retirement $ total $ 836,041 61,132 (42,366) (84,393) 361,800 16,192 – 1,197,841 77,324 (42,366) (20,000) (104,393) 770,414 357,992 1,128,406 (a) the measurement and recognition criteria relating to employee benefits has been included in note 1 to this report. (b) An asset retirement provision has been recognised for expected future refurbishment costs of office premises. NOTE 16: OTHER LIABILITIES Current Revenue received in advance for software usage and support services non-current Revenue received in advance for software usage and support services NOTE 17: ISSUED CAPITAL 45,013,562 (June 2006: 43,968,000) fully paid ordinary shares Consolidated Company 2007 $ 2006 $ 2007 $ 2006 $ 2,260,754 3,027,989 2,260,754 2,260,754 3,027,989 2,260,754 3,027,989 3,027,989 305,611 305,611 64,605 64,605 305,611 305,611 64,605 64,605 6,807,508 5,722,015 6,807,508 6,807,508 5,722,015 6,807,508 5,722,015 5,722,015 G B S T A n n u A l R e p o R t 2 0 0 7 43 n o t e s t o a n d f o r mI n g p a r t o f t h e f I n a n C I a l s t a t e m e n t s f o r t h e y e a r e n d e d 3 0 J u n e 2 0 0 7 Consolidated Company 2007 $ 2006 $ 2007 $ 2006 $ NOTE 17: ISSUED CAPITAL (CONTINUED) Movements in issued capital: opening balance 5,722,015 5,722,015 5,722,015 5,722,015 transfer from options reserve (note 19) Share issue ordinary shares opening balance Share issue 304,797 780,696 – – 304,797 780,696 – – 6,807,508 5,722,015 6,807,508 5,722,015 no. no. no. no. 43,968,000 43,968,000 43,968,000 43,968,000 1,045,562 – 1,045,562 – 45,013,562 43,968,000 45,013,562 43,968,000 For details on options over ordinary shares, see note 30. ordinary shares participate in dividends and the proceeds of winding up of the parent entity in proportion to the number of shares held. At shareholders’ meetings each ordinary share is entitled to one vote. NOTE 18: TREASURY SHARES treasury Shares (note 30) NOTE 19: RESERVES option Reserve Consolidated Company 2007 $ 2006 $ 2007 $ 2006 $ 31,253 31,253 1,778,071 1,778,071 – – – – 67,788 67,788 298,816 298,816 67,788 67,788 298,816 298,816 the option reserve records the amount recognised as an expense on valuation of employee share options granted. When options are exercised, the amount in the reserve relating to those options is transferred to issued capital. 44 Consolidated Company 2007 $ 2006 $ 2007 $ 2006 $ NOTE 20: CAPITAL, LEASING AND OTHER COMMITMENTS (a) finance leasing and hire purchase commitments payable on leases: not later than one year later than one year but not later than five years less future finance charges total liability lease liabilities are included in the Balance Sheet as: Current (note 13) non-current (note 13) – – – – – – – – 36,264 – 36,264 (988) 35,276 35,276 – 35,276 – – – – – – – – 36,264 – 36,264 (988) 35,276 35,276 – 35,276 (b) non-cancellable operating leases lease amounts are payable: not later than one year 1,252,771 1,250,822 1,252,771 1,250,822 later than one year but not later than five years 4,800,307 later than five years 2,262,742 8,315,820 4,512,823 3,469,314 9,232,959 4,800,307 2,262,742 8,315,820 4,512,823 3,469,314 9,232,959 non-cancellable leases include rental premises with lease terms between five and eight years. the lease agreements require that the minimum lease payments shall be increased by 4% per annum. Certain leases contain options to renew at the end of their term. (c) Capital and other expenditure commitments Contracted for: Capital and other operating purchases 29,680 536,858 29,680 536,858 payable not later than one year NOTE 21: AUDITORS’ REMUNER ATION Remuneration of the auditor of the company for: Auditing or reviewing the financial report other taxation and statutory compliance assistance 29,680 29,680 536,858 536,858 29,680 29,680 536,858 536,858 60,350 4,250 64,600 53,000 4,175 57,175 60,350 4,250 64,600 53,000 4,175 57,175 Remuneration of other auditors of subsidiary for auditing that financial report 5,378 4,700 – – G B S T A n n u A l R e p o R t 2 0 0 7 45 n o t e s t o a n d f o r mI n g p a r t o f t h e f I n a n C I a l s t a t e m e n t s f o r t h e y e a r e n d e d 3 0 J u n e 2 0 0 7 NOTE 22: OTHER GROUP ENTITIES Group entity: Country of Incorporation: percentage owned: Group entity: Country of Incorporation: percentage owned: Group entity: Country of Incorporation: percentage owned: GBSt pty ltd Australia 100% (June 2006: 100%) GBSt eSop pty ltd Australia 100% (June 2006: 100%) GBSt Australia pty ltd Australia 100% (June 2006: 100%) these companies are dormant and have nominal shareholders’ equity. GBSt eSop pty ltd, acts solely as trustee for the eSop Share trust (see note 30). Group entity: Country of Incorporation: percentage owned: Date of incorporation: GBSt Hong Kong limited Hong Kong 100% (June 2006: 100%) 14 August 2002 During the year GBSt Hong Kong limited performed services on behalf of GBSt Holdings limited to the value of $nIl (2006: $149,348). NOTE 23: SEGMENT REPORTING the company operates in the finance, banking and securities industry where it provides advanced electronic business solutions, predominately in Australia, and also Hong Kong and new Zealand. Consolidated Company 2007 $ 2006 $ 2007 $ 2006 $ NOTE 24: FINANCING ARR ANGEMENTS other Financing facilities (a) 2,625,000 2,250,000 2,625,000 2,250,000 Amount utilised unused credit facilities (319,709) – (319,709) – 2,305,291 2,250,000 2,305,291 2,250,000 (a) this amount comprises bank facilities and lease facilities. the bank facility is secured over the assets and undertakings of the consolidated entity. Interest rates under the facility are variable. the facility has a number of other commercial terms and conditions and is subject to review within 12 months. the lease facility is a “revolving asset finance facility” to enable equipment financing, required for business operations. each draw on the lease facility creates a rental agreement for a 36 month period. the facility is subject to annual review. there are no conditions/covenants in place and drawdown is subject to the bank’s acceptance of assets proposed for financing under the facility. 46 Consolidated Company 2007 $ 2006 $ 2007 $ 2006 $ NOTE 25: CASHFLOW INFORMATION (a) reconciliation of net cash provided by operating activities to profit after income tax profit after income tax 8,021,396 6,135,982 8,127,881 6,135,982 non-cash flows in operating profit: Depreciation and amortisation 942,374 822,519 942,374 (profit)/loss on sale of plant & equipment Share based payments expensed (9,280) 73,769 90,281 272,010 (9,280) 73,769 822,519 90,281 272,010 Changes in assets and liabilities : (Increase)/decrease in receivables (Increase)/decrease in other assets Increase/(decrease) in other liabilities (Increase)/decrease in inventories (Increase)/decrease in deferred tax balances Increase/(decrease) in tax provision Increase/(decrease) in trade and other payables Increase/(decrease) in provisions (647,460) (215,756) (526,228) 2,572 (57,154) (35,416) 148,114 (65,627) (861,252) (743,496) (54,916) (215,756) (877,958) (54,916) 2,061,738 (526,228) 2,061,738 59,738 92,641 2,027,858 (813,311) 130,767 2,572 (57,154) (35,416) 148,114 (65,627) 59,738 92,641 2,027,858 (813,311) 130,767 Cash flow from operations 7,631,304 9,964,055 7,641,753 9,947,349 (b) reconciliation of cash Cash at the end of the financial year as shown in the Statement of Cash Flows is reconciled to items in the Balance Sheet as follows: Cash at bank (note 5) 854,992 1,618,069 854,992 1,618,069 Short term deposit (note 5) 14,600,000 9,000,000 14,600,000 9,000,000 15,454,992 10,618,069 15,454,992 10,618,069 (c) acquisition of business on 15 December 2005, the company acquired the palion business from oMX technology Australia pty limited. the purchase was allocated as follows: purchase consideration transaction costs total purchase consideration total cash consideration paid – – – – 5,033,337 315,145 5,348,482 5,348,482 – – – – 5,033,337 315,145 5,348,482 5,348,482 G B S T A n n u A l R e p o R t 2 0 0 7 47 n o t e s t o a n d f o r mI n g p a r t o f t h e f I n a n C I a l s t a t e m e n t s f o r t h e y e a r e n d e d 3 0 J u n e 2 0 0 7 NOTE 25: CASHFLOW INFORMATION (CONTINUED) Assets and liabilities acquired at acquisition date: Intellectual property – software systems plant and equipment Future income tax benefit employee entitlements Goodwill total Consolidated Company 2007 $ 2006 $ 2007 $ 2006 $ – – – – – – – 2,000,000 65,084 28,569 (95,232) 1,998,421 3,350,061 5,348,482 – – – – – – – 2,000,000 65,084 28,569 (95,232) 1,998,421 3,350,061 5,348,482 NOTE 26: FINANCIAL INSTRUMENTS (a) financial risk management the group’s principal financial instruments comprise of cash and short-term deposits with banks and fund managers. the main purpose of these financial instruments is to provide operating finance to group. the group has various other financial assets and liabilities such as trade receivables and trade payables, which arise directly from its operations. the main risks arising from these financial instruments are interest rate risk and credit risk. the group manages liquidity risk by monitoring forecast cash flows and ensuring that adequate unutilised borrowing facilities are maintained. Interest rate risk (i) the group’s exposure to the risk of changes in market interest rates relates primarily to the cash and short term deposits. the debt facilities were undrawn at balance date. For further details on interest rate risk refer to note 26 (b) (i). (ii) Credit risk the maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date to recognised financial assets is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the balance sheet and notes to the financial statements. except for the following concentrations of credit risks, the group does not have any material credit risk exposure to any single debtor or group of debtors under financial instruments entered into. Approximately 50% (2006: 50%) of the company’s revenue is derived from five customers. Funds on deposit with banks and fund managers adhere to an internal policy approved by the board. 48 6 $ 0 l a t o t 7 $ 0 , 9 6 0 8 1 6 0 1 , , 2 9 9 4 5 4 5 1 , , 5 8 1 1 6 2 3 , , 5 1 9 3 1 8 3 , 6 7 2 5 3 , – – 7 3 9 1 8 7 , , 4 5 2 9 7 8 3 1 , , 4 4 8 0 5 0 0 2 , , 7 5 4 0 3 0 2 , , 6 6 5 6 8 1 2 , , 3 3 7 5 6 0 2 , 6 6 5 , 6 8 1 2 , 6 $ 0 7 $ 0 6 $ 0 7 $ 0 6 $ 0 7 $ 0 6 $ 0 7 $ 0 6 $ 0 7 $ 0 e v i t c e f f e e h t d n a s e t a r t s e r e t n i t e k r a m n i s e g n a h c f o t l u s e r a s a e t a u t c u l f l l i w e u a v l s ’ t n e m u r t s n i l i a c n a n i f a t a h t k s i r e h t s i i h c h w , k s i r e t a r t s e r e t n i ’ o t e r u s o p x e s y t i t n e c m o n o c e e h t i ) D E U N I T N O C ( S T N E M U R T S N I L A I C N A N I F : 6 2 E T O N s t n e m u r t s n i l a i c n a n i f ) b ( k s i r e t a r t s e r e t n I ) i ( s r a e y 5 r e v o s r a e y 5 - 1 r a e y 1 n h t i i w g n i t a o l f e t a r t s e r e t n i t s e r e t n i - n o n g n i r a e b e g a r e v a d e t h g e w i e v i t c e f f e e t a r t s e r e t n i g n i r u t a m e t a r t s e r e t n i d e x i f : s w o l l o f s a s i , s e i t i l i b a i l l i a c n a n i f d n a s t e s s a l i a c n a n i f f l o s e s s a c n o s e t a r t s e r e t n i e g a r e v a d e t h g e w i – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 6 7 2 5 3 , – 6 7 2 5 3 , – – – – – – – , 0 2 9 2 1 6 0 1 , , 6 9 8 0 5 4 5 1 , 9 4 1 5 , 6 9 0 4 , 8 8 4 0 5 , 7 2 8 3 3 , , 7 9 6 0 1 2 3 , , 8 8 0 0 8 7 3 , – – – 7 3 9 1 8 7 , , 8 0 4 3 6 6 0 1 , , 3 2 7 4 8 4 5 1 , , 6 4 8 5 1 2 3 , , 1 2 1 7 6 5 4 , – – – – – – – – , 7 5 4 0 3 0 2 , , 6 6 5 6 8 1 2 , 6 % 0 8 5 . 3 7. 1 7. – 7 % 0 3 6 . 5 0 8 . – – s t e s s a l a i c n a n i f r e h t o d n a h s a C e d a r t l s e b a v e c e r i r o l f e b a l i a v A s t e s s a l a i c n a n i f l a t o t s e i t i l i b a i l l a i c n a n i f s t e s s a p H & e s a e l s e i t i l i c a f r e h t o & e d a r t l s e b a y a p l i a c n a n i f e a s l m r o f d e s i d r a d n a t s n i s t e k r a m d e s i n a g r o n o d e d a r t y l i d a e r e r a s e i t i l i b a i l l i a c n a n i f d n a s t e s s a l i a c n a n i f o n . l e u a v g n y r r a c i r i e h t i s e t a m x o r p p a e u a v l r i a f t e n s e i t i l i b a i l l i a c n a n i f d n a s t e s s a . y t i r u t a m o t s t e s s a e s e h t d o h o t l s d n e t n i p u o r g e h t s a n w o d n e t t i r w n e e b t o n e v a h s e u a v l r i a f t e n s d e e c x e t n u o m a g n y r r a c e h t e r e h w s t e s s a i l i a c n a n F i . s t n e m t s e v n i d e t s i l n a h t r e h t o . t e e h s e c n a a b e h t n l i l d e s o c s i d e r a s e i t i l i b a i l l i a c n a n i f d n a s t e s s a l i a c n a n i f f o ) s t n u o m a g n y r r a c h t i i w e n i l n i y l l a i r e t a m e r a h c h w i ( s e u a v l r i a f t e n e t a g e r g g a e h t l i a c n a n i f r e h t o . e u a v l t n e s e r p r i e h t o t , s m e t i r a l i m i s f o s e t a r t s e r e t n i t e k r a m t a , s w o l f i h s a c e h t g n i t n u o c s i d y b d e n m r e t e d e r a e u d s t n u o m a d n a s n a o l r e h t o d n a l s e b a v e c e r i m r e t . s e c i r p t e k r a m d e t o u q o t e c n e r e f e r h t i i w d e n m r e t e d s i s t e k r a m d u q i i l e v i t c a n o d e d a r t s t n e m t s e v n i f o e u a v l r i a f e h t , 7 5 4 0 3 0 2 , , 6 6 5 6 8 1 2 , s e i t i l i b a i l l a i c n a n i f l a t o t l s e u a v r i a f t e N ) i i ( G B S T A n n u A l R e p o R t 2 0 0 7 49 n o t e s t o a n d f o r mI n g p a r t o f t h e f I n a n C I a l s t a t e m e n t s f o r t h e y e a r e n d e d 3 0 J u n e 2 0 0 7 NOTE 27: CONTINGENT LIABILITIES GBSt has with its clients a variety of software supply agreements, each of which contain service and performance warranties and indemnities. these warranties and indemnities are of the standard type used in the industry. NOTE 28: KEY MANAGEMENT PERSONNEL DISCLOSURES (a) names and positions held of group and company key management personnel in office at any time during the financial year are: key management person position J puttick A Brackin S lake D Shirley J Sundell C Apps Director (non-executive Chairman) Director (Independent) Director (Managing Director and Chief executive officer) Director (Independent) Director (non-executive) General Manager, Clearing, Settlements & Custody Solutions (resigned 16 March 2007) p Ferguson Head of Corporate Development p Fowler S Hayhoe K Sprott K Wallis Head of product and Client Services Chief technology officer (resigned 8 June 2007) Human Resource executive (appointed 21 August 2006) Chief Financial officer Consolidated Company 2007 $ 2006 $ 2007 $ 2006 $ (b) key management personnel compensation Short-term employee benefits 1,844,343 1,789,714 1,844,343 1,789,714 post-employment benefits other long-term benefits Share-based payments 123,578 28,802 – 132,092 103,393 71,830 123,578 28,802 – 132,092 103,393 71,830 1,966,723 2,097,029 1,966,723 2,097,029 the company has taken advantage of the option under Regulation 2M.06.04 of Schedule 5B Corporations Regulations 2001 to transfer the detailed remuneration disclosures to the directors’ report. (c) equity instrument disclosures relating to key management personnel Details of options provided as compensation and shares issued on the exercise of such options, together with terms and conditions of the options, can be found in the remuneration report section of the directors’ report. (d) shareholdings the numbers of shares in the company held (directly, indirectly or beneficially) during the financial year by key management personnel, including their related parties, are set out on the following page 50 . directors J puttick A Brackin S lake D Shirley J Sundell GBSt eSop pty ltd as trustee (ii) total directors executives C Apps p Ferguson p Fowler S Hayhoe K Sprott K Wallis total executives group total balance at 1/7/06 received as compensation options exercised net change other (i) balance at 30/06/07 9,167,760 169,241 3,568,096 – 18,450,122 2,369,180 33,724,399 – – – – – – – 33,724,399 – – – – – – – – – – – – – – – – – (1,500,000) – 7,667,760 169,241 999,332 (700,000) 3,867,428 – – – – (4,114,069) 14,336,053 (2,332,336) – 36,844 (1,333,004) (6,314,069) 26,077,326 266,488 30,656 – (266,488) (30,656) – 148,560 (148,560) – 230,156 675,860 – (96,246) (541,950) – – – – – 133,910 133,910 (657,144) (6,856,019) 26,211,236 (i) Shares purchased or sold, or excluded from disclosure due to resignation. (ii) Shares held as trustee for the eSop trust (refer note 30). (e) options holdings the numbers of options in the company held (directly, indirectly or beneficially) during the financial year by key management personnel, including their related parties, are set out below. balance 01.07.06 granted as compensation options exercised or sold options cancelled balance 30.06.07 total vested 30.06.07 total exercisable 30.06.07 total unexercisable 30.06.07 directors J puttick A Brackin S lake D Shirley J Sundell – – 999,332 – – total directors 999,332 executives C Apps p Ferguson p Fowler S Hayhoe K Sprott K Wallis 266,488 100,000 100,000 174,892 – 231,488 – – – – – – – – – – – – – – (999,332) – – (999,332) (266,488) (30,656) – – – – – – – – – – (148,560) (25,000) – (230,156) – – – – – – – – – – – 100,000 1,332 – 1,332 total executives 872,868 – (675,860) (25,000) 172,008 group total 1,872,200 – (1,675,192) (25,000) 172,008 – – – – – – – – – – – – – – – – – – – – – 19,344 50,000 1,332 – 1,332 72,008 72,008 19,344 50,000 1,332 – – 50,000 50,000 – – 1,332 70,676 101,332 70,676 101,332 G B S T A n n u A l R e p o R t 2 0 0 7 51 n o t e s t o a n d f o r mI n g p a r t o f t h e f I n a n C I a l s t a t e m e n t s f o r t h e y e a r e n d e d 3 0 J u n e 2 0 0 7 NOTE 29: REL ATED PART Y TR ANSAC TIONS transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated. (a) transactions with directors and key management personnel Compensation and equity interests are set out in note 28. (b) transactions with controlled entities Details of transactions with controlled entities are set out in notes 6 & 22. NOTE 30: SHARE BASED PAYMENTS on 9 March 2005, GBSt established the GBSt employee option plan. the plan comprised two sub-schemes, being an exempt options Scheme for staff generally and a Deferred options Scheme for select staff and eligible Directors. A total of 481,376 (2006: 3,911,932) share options remain outstanding at 30 June 2007. GBSt eSop pty ltd, in its capacity as trustee of the GBSt employee Share trust, holds shares in GBSt for subsequent allocation under the GBSt employee option plan. During the year ended 30 June 2007, 2,332,336 (2006: 384,820) shares were issued from the trust to meet the exercise of employee options. GBSt eSop pty ltd held 36,844 shares in GBSt at 30 June 2007 (2006: 2,369,180). the trust is treated as a special purpose entity and consolidated. the trust’s shareholding in the company is disclosed as treasury shares and deducted from equity (refer note 18). exempt options scheme under this Scheme employees were offered the right to acquire $1,000 worth of shares in GBSt. there was no performance or vesting criteria which needed to be satisfied before employees had the benefit from holding the share options. Divestiture of the shares is restricted for a period of 3 years, subject to cessation of employment. no share options were granted during the year under this scheme (2006: nil), and 134,532 share options (2006: 159,840) remain outstanding at 30 June 2007. the options lapse on 8 March 2010. deferred options scheme under this Scheme select staff are made individual offers of specific numbers of share options at the discretion of the Board. the Board may determine the number of share options, issue price, vesting conditions, vesting period, exercise price and expiry date. Share options may be granted at any time, subject to the Corporations Act and ASX listing Rules. the following share based payment arrangements existed at 30 June 2007 under the Deferred options Scheme: on 25 August 2005, 100,000 share options were granted to an executive employee of GBSt at an exercise price of $1.09. the share options were granted in two equal tranches. each tranche includes performance criteria relating to continued employment with GBSt and financial hurdles as summarised below. 69,344 share options remain outstanding at balance date. the share options lapse in August 2007. on 5 December 2005, 240,000 share options were granted to staff in connection with the acquisition of the palion business unit. the share options have an exercise price of $1.25. the share options were granted in two equal tranches. each tranche includes performance criteria relating to continued employment with GBSt and financial hurdles as summarised below. 187,500 share options remain outstanding at balance date. the share options lapse in December 2007. on 3 January 2006, 210,000 options were granted to select staff to accept ordinary shares in GBSt at an exercise price of $1.45. the share options were granted in two equal tranches. each tranche includes performance criteria relating to continued employment with GBSt and financial hurdles as summarised below. 90,000 share options remain outstanding at reporting date. the share options lapse in January 2008. 52 the performance criteria associated with each grant of share options made under the Deferred options Scheme is summarised below: grant date Continued employment until financial performance hurdle performance criteria 25 august 2005 tranche 1 31 october 2006 targeted growth of 15% or greater in GBSt’s normalised earnings per share for the year ended 30 June 2006. the target growth percentage is moderated against relative increases or decreases in ASX trading volumes. tranche 2 31 october 2007 either; 5 december 2005 tranche 1 31 october 2006 – – the annual percentage growth in earnings before inter- est, tax, depreciation and amortisation (eBItDA) for the year ended 30 June 2007 meets or exceeds 25%, or the annual percentage growth in earnings per share for the year ended 30 June 2007 meets or exceeds 15%. targeted growth of 15% or greater in GBSt’s normalised earnings per share for the year ended 30 June 2006. the target growth percentage is moderated against relative increases or decreases in ASX trading volumes. tranche 2 31 october 2007 either; 3 January 2006 tranche 1 31 october 2006 – – the annual percentage growth in earnings before inter- est, tax, depreciation and amortisation (eBItDA) for the year ended 30 June 2007 meets or exceeds 25%, or the annual percentage growth in earnings per share for the year ended 30 June 2007 meets or exceeds 15%. targeted growth of 15% or greater in GBSt’s normalised earnings per share for the year ended 30 June 2006. the target growth percentage is moderated against relative increases or decreases in ASX trading volumes. tranche 2 31 october 2007 either; – – the annual percentage growth in earnings before inter- est, tax, depreciation and amortisation (eBItDA) for the year ended 30 June 2007 meets or exceeds 25%, or the annual percentage growth in earnings per share for the year ended 30 June 2007 meets or exceeds 15%. G B S T A n n u A l R e p o R t 2 0 0 7 53 n o t e s t o a n d f o r mI n g p a r t o f t h e f I n a n C I a l s t a t e m e n t s f o r t h e y e a r e n d e d 3 0 J u n e 2 0 0 7 NOTE 30: SHARE BASED PAYMENTS (CONTINUED) the following table illustrates the number (no.), weighted average exercise price (WAep) and movement in share options issued during the year. 2007 no. 2007 waep 2006 no. outstanding at the beginning of the year 3,911,932 $0.80 4,097,184 Granted during the year Forfeited during the year exercised during the year expired during the year outstanding at the end of the year exercisable at the end of the year – 52,658 3,377,898 – 481,376 111,844 – $1.28 $0.77 – $0.92 $1.27 550,000 350,432 384,820 – 3,911,932 1,513,230 2006 waep $0.72 $1.30 $0.75 $0.72 – $0.80 $0.75 there were 3,377,898 share options exercised during the year ended 30 June 2007. these options had a weighted average share price of $3.41 at exercise date. the options outstanding at 30 June 2007 had a weighted average exercise price of $0.92 and a weighted average remaining contractual life of 12 months. the exercise price for share options outstanding under the exempt options Scheme is nil, the exercise prices for share options outstanding under the Deferred options Scheme range from $1.09 to $1.45 in respect of options outstanding at 30 June 2007. there were no share options granted during the year (2006: 550,000 with a weighted average fair value of $0.21). the expense recognised in the income statement in relation to share-based payments is disclosed in note 2. no person entitled to exercise the option had or has any right by virtue of the option to participate in any share issue of any other body corporate. Since the end of the financial year the company has issued 85,894 zero exercise price options to non-executive staff. the zero exercise price options are divided into three tranches. the first tranche, of 20%, vest and may be exercised after 12 months and lapse if unexercised in 36 months. the second tranche, of 30%, vest and may be exercised after 24 months and lapse if unexercised in 48 months. the third tranche, of 50%, vest and may be exercised after 36 months and lapse if unexercised after 60 months. on cessation of employment all unvested zero exercise price options lapse. the company has also issued 11,988 shares since the end of the financial year following the exercise of options under the GBSt exempt option plan. NOTE 31: EARNINGS PER SHARE Basic earnings per share (cents) Diluted earnings per share (cents) (a) reconciliation of earnings to net profit or loss net profit earnings used in the calculation of basic epS earnings used in the calculation of dilutive epS Consolidated 2007 Consolidated 2006 18.11 17.77 8,021,396 8,021,396 8,021,396 13.96 13.77 6,135,982 6,135,982 6,135,982 54 NOTE 31: EARNINGS PER SHARE (CONTINUED) (b) weighted average number of ordinary shares Weighted average number of ordinary shares outstanding during the year used in calculation of adjusted basic epS (i) Weighted average number of ordinary shares outstanding during the year used in calculation of basic epS Weighted average number of options outstanding or exercised during the year (i) Weighted average number of ordinary shares outstanding during the year used in calculation of dilutive epS Consolidated 2007 $ Consolidated 2006 $ 44,302,441 43,968,000 44,302,441 43,968,000 846,643 580,780 45,149,084 44,548,780 (i) options issued under the GBSt employee option plan are not included in the basic or dilutive epS to the extent that the issue of shares is contingent upon future events and, as at reporting date, conditions which would result in the issue of shares had not been obtained (refer to note 30). NOTE 32: SUBSEQUENT EVENTS on 2 August 2007, GBSt Holdings limited entered into agreements to acquire Infocomp pty ltd, ICp Holdings pty ltd and its subsidiaries for a cash payment of $36.4 million and the issue of approximately 4.95 million shares. the cash component of the consideration is to be funded from existing cash reserves and a term loan facility of $20 million, established with Suncorp for the purpose of the acquistion. the term of the facility is six years. the facility limit will reduce by $1 million at the end of each quarter, commencing in the second year of the facility. the acquisition is expected to complete on or around 31 August 2007, the assets and liabilities arising from the acquisition will be valued at that time however it is expected that GBSt will acquire approximately $3 million in net tangible assets and approximately $53 million in identifiable intangible assets and goodwill. Identifiable intangible assets will comprise computer systems and software and customer contracts and relationships. As outlined in the Future Developments section of the Directors’ Report, the company is actively pursuing opportunities to expand. other than for the acquisition of the Infocomp group and the impact (if any) of prospects, no matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the operations of GBSt, the results of those operations, or the state of affairs of GBSt in future financial years. the financial report was authorised for issue on 16 August 2007 by the board of directors. the directors recommend a final dividend of 6.0 cents per share to be paid to the holders of fully paid ordinary shares on 28 September 2007. the total amount of the dividend, after including the estimate of shares to be issued in relation to the Infocomp acquisition (see above), will approximate $3.0 million. the dividend has not been provided for in the financial statements. G B S T A n n u A l R e p o R t 2 0 0 7 55 n o t e s t o a n d f o r mI n g p a r t o f t h e f I n a n C I a l s t a t e m e n t s f o r t h e y e a r e n d e d 3 0 J u n e 2 0 0 7 NOTE 33: CHANGE IN ACCOUNTING POLIC Y the following Australian Accounting Standards have been issued or amended and are applicable to the parent and group but are not yet effective. they have not been adopted in preparation of the financial statements at reporting date. application date of the standard application date for the group 1 January 2007 1 July 2007 aasb amendment AASB 2005–10 Amendments to Australian Accounting Standards aasb standard affected AASB 1: First-time Adoption of AIFRS AASB 101: presentation of Financial Statements AASB 114: Segment Reporting AASB 117: leases AASB 133: earnings per share AASB 139: Financial Instruments: Recognition and Measurement nature of change in accounting policy and impact the disclosure requirements of AASB 132: Financial Instruments: Disclosure and presentation have been replaced due to the issuing of AASB 7: Financial Instruments: Disclosures in August 2005. these amendments will involve changes to financial instrument disclosures within the financial report. However, there will be no direct impact on amounts included in the financial report as it is a disclosure standard. AASB 7 Financial Instruments: Disclosures Amendment to AASB 123 AASB 132: Financial Instruments: Disclosure and presentation As above 1 January 2007 1 July 2007 AASB 123: Borrowing Costs 1 January 2009 1 July 2009 under the amendments to AASB 123 only the capitalisation treatment is permitted in relation to borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset. the amendment will have no effect on the group. NOTE 34: COMPANY DE TAILS the registered office of the company is: GBSt Holdings limited C/– McCullough Robertson level 11, Central plaza two 66 eagle Street BRISBAne QlD 4000 the principal place of business of the company is: GBSt Holdings limited 5 Cribb Street MIlton QlD 4064 56 I n d e p e n d e n t a u dI t r e p o r t t o t h e m e m b e r s o f g b s t ho l d I n g s l I mI t e d G B S T A n n u A l R e p o R t 2 0 0 7 57 I n d e p e n d e n t a u d I t r e p o r t C o n t I n u e d 58 a d d I t Io n a l I n f o r m a t Io n SHAREHOLDING (a) Distribution of Shareholders Category (size of holding) 1 to 1,000 1,001 to 5,000 5,001 to 10,000 10,001 to 100,0000 100,001 and over number ordinary 206 395 201 196 35 1033 (b) the number of shareholdings in less than marketable parcels is 2 (c) the names of the substantial shareholders and their controlled shareholdings listed in the company’s register as at 5 october 2007 are: Shareholder Crown Financial pty ltd John Francis puttick perpetual limited Stephen lake pengana Holdings pty ltd number ordinary 14,386,053 7,667,760 5,864,177 3,867,428 2,203,213 (d) Voting rights the company only has ordinary shares on issue. each ordinary share is entitled to one vote when a poll is called, otherwise each member present at a meeting or by proxy has one vote on a show of hands. (e) 20 largest Shareholders – ordinary Shares name 1. Crown Financial pty ltd 2. Mr John Francis puttick 3. Stephen lake 4. RBC Dexia Investor Services Australia nominees pty limited 5. Cogent nominees pty limited 6. RBC Dexia Investor Services Australia nominees pty limited 7. Geraldine Ann Maunder and John Francis puttick 8. Robert DeDominicis 9. Raymond tubman 10. Barry Becarevic 11. timenow pty ltd 12. Wangaruka Holdings pty ltd 13. Mr John Francis puttick and Ms Geraldine Ann Maunder 14. Berislav Becarevic and Ivanka Becarevic 15. Bydand Capital pty ltd 16. Merrill lynch (Australia) nominees pty limited 17. Jp Morgan nominees Australia limited 18. tpIC pty limited 19. Sayers Investments (ACt) pty limited 20. Bogasi pty ltd number of ordinary shares % held of Issued ordinary Capital 13,740,053 5,116,260 3,867,428 3,534,614 2,207,213 2,000,943 2,000,000 1,061,758 1,061,758 872,408 709,238 709,238 551,500 520,783 392,596 343,285 328,216 300,000 284,000 248,000 27.49 10.23 7.73 7.07 4.42 4.00 4.00 2.12 2.12 1.75 1.42 1.42 1.10 1.04 0.79 0.69 0.66 0.60 0.57 0.50 G B S T A n n u A l R e p o R t 2 0 0 7 59 C o r p o r a t e d I r e C t o r y REGISTERED OFFICE c/- McCullough Robertson, lawyers level 11, Central plaza two 66 eagle Street BRISBAne QlD 4000 ph 07 3233 8888 Fax 07 3229 9949 PRINCIPAL P L ACE OF B USINESS 5 Cribb Street Milton QlD 4064 ph 07 3331 5555 Fax 07 3367 0181 www.gbst.com POSTAL A DDRESS po Box 1511 Milton QlD 4064 DIREC TORS John Francis puttick Stephen Maurice linton lake Joakim James Sundell David Cameron Shirley Allan James Brackin COMPANY S ECRE TARIES David Michael Doyle John Francis puttick SHARE R EGISTRY link Market Services level 12, 300 Queen Street Brisbane QlD 4000 ph 02 8280 7454 STOCK E XCHANGE LISTING GBSt Holdings limited shares are quoted on the Australian Stock exchange under the code GBt. VOLUNTARY RESTRIC TIONS Details of shares that are held in voluntary escrow: ordinary fully paid shares escrowed until 31 August 2008 1,645,061 ordinary fully paid shares escrowed until 31 August 2009 1,645,061 ordinary fully paid shares escrowed until 31 August 2010 1,645,061 UNQUOTED SECURITIES A total of 1,102,158 options are on issue to 98 employees under the GBSt Holdings limited employee option plan. AUDITORS Robertsons Audit and Assurance pty ltd level 4, 127 Creek Street Brisbane QlD 4000 ph 07 3229 2022 Fax 07 3229 3277 60 + GBST is Australia’s leading provider of client accounting and securities transaction technology. Our strategy is to build consistently growing recurring revenues from financial transactions, by providing robust technology solutions to the financial services sector. Providing services to some of the world’s leading institutional banks and stockbrokers, approximately half of all equities traded on the Australian Securities Exchange are processed by GBST network participants. In August 2007 GBST extended its services to include wealth management with the acquisition of InfoComp Group, the foremost provider of funds administration and unit registry software to the Australian wealth management industry. Contents Highlights Chairman’s report CEO’s report GBST in the life of a transaction GBST’s competitive advantage GBST in the community Wealth management services Board of directors Executive team 1 2 3 6 8 9 10 11 12 Corporate governance statement Directors’ report Auditor’s independence declaration Directors’ declaration Financial report Notes to the financial statements Independent audit report Additional information Corporate directory 15 18 26 27 28 32 57 59 60 Notice of AGM The Annual General Meeting of GBST Holdings Limited will be held at: McCullough Robertson Level 11 Central Plaza 2 66 Eagle Street, Brisbane on Wednesday 21st November at 3.30pm. 4 1 1 T B G R C F y b d e c u d o r p d n a d e n g i s e D l G B S T H o d n g s L m i i i t e d A n n u a l R e p o r t 2 0 0 7 www.gbst.com Annual Report 2007 GBST Holdings Limited ABN 85 010 488 874 + 

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