GBST Holdings Limited Annual Report 2009 09 GBST is a leading provider of securities transaction and fund administration software for the fi nancial services industry. We are focused on earning recurring licence revenue in areas such as transactions processing, reporting, account management, books and records, data and content. GBST has three divisions: GBST Broker Services is a leading provider of client accounting and securities transaction technology to capital markets. GBST’s market solutions are used extensively across Asia, Europe and Australia. Through the Syn platform GBST provides next- generation technology to process equities, derivatives, fi xed income and managed funds transactions. GBST Wealth Management is the leading provider of funds administration and registry software to the Australian Wealth Management industry. GBST’s wealth management software, Composer, administers funds in Australia and the United Kingdom. GBST Financial Services is a wholesale provider of independent, market-leading fi nancial product data and related services to fi nancial advisers and institutions. It also provides web design, development and usability services. Listed on the Australian Securities Exchange in June 2005, GBST has over 300 staff in offi ces in Brisbane, Sydney, Melbourne, Wollongong, Adelaide and London, and operations in Hong Kong, New York, Paris and Singapore. Contents The Year in Review Chairman’s and Managing Director’s Report Executive Team Board of Directors Corporate Governance Statement Directors’ Report 1 2 6 8 10 13 Auditor’s Independence Declaration Directors’ Declaration Financial Statements Independent Auditor’s Report Additional Information Corporate Directory 27 28 29 85 87 88 Notice of AGM The Annual General Meeting of GBST Holdings Limited will be held at: McCullough Robertson, Level 11, Central Plaza Two, 66 Eagle Street, Brisbane on Thursday 22 October at 11.30am ii GBST HOLDINGS LIMITED ABN 85 010 488 874 The year in review Operating Revenue ($ million) FY05 FY06 FY07 FY08 FY09 $m 10 20 30 40 50 60 70 EBITDA ($ million) FY05 FY06 FY07 FY08 FY09 $m 4 8 12 16 20 Cash EPS (cents) FY05 FY06 FY07 FY08 FY09 cents 5 10 15 20 25 In one of the most challenging years for GBST and our customers, earnings declined as the global fi nancial crisis impacted the fi nancial services industry Australian operations performed well in this diffi cult environment, while the UK operations made a loss for the year Coexis acquisition expanded global operations signifi cantly and the Syn applications provide a strong platform for offshore growth Major investment in Composer in the United Kingdom is now complete and immediate prospects are very encouraging The Group is well positioned, with excellent customers and prospects, a complementary suite of products and an experienced and skilled team ANNUAL REPORT 2009 ANNUAL REPORT 2009 1 1 Chairman’s and Managing Director’s report We have signifi cant knowledge of fi nancial services processes within our business and value our staff and their professional expertise. It is this experience that allows us to provide the high service levels required by our clients. Dr John Puttick Chairman On behalf of the directors of GBST, we are pleased to report to you on our progress in GBST’s fourth year as a listed public company. Since listing as transaction processing specialist, GBST has grown to become a leading fi nancial technology group, with operations in Asia, Australia and Europe. Today, we have three divisions supporting some of the world’s leading institutional banks, stockbrokers and fund managers. GBST Broker Services provides technology for global capital markets; GBST Wealth Management is a developer of fund management and registry software for the wealth management industry; and GBST Financial Services offers wholesale, independent data services for institutional and retail clients. Signifi cant milestones have included our entry into the Australian and United Kingdom wealth management software sectors with the 2007 acquisition of Infocomp, and, in 2008, our search for a next-generation technology platform to transform our stockbroker services business led to the acquisition of UK securities software house, Coexis Limited, and the Syn technology. While this was a signifi cant investment to undertake in the current economic environment, we are convinced it is in the long-term interests of our clients and shareholders. The powerful Syn technology offers a single platform for the back offi ce, and will provide the backbone of GBST Broker Services’ technology development in the future. Importantly, it brings a strong opportunity to develop market-leading products to enter new markets. 2 GBST HOLDINGS LIMITED ABN 85 010 488 874 Resilience in challenging times GBST’s business model is to earn recurring revenue through participating in transaction processes and asset values. Our earnings are linked closely to the growth of our fi nancial services sector clients. These companies were among the fi rst to experience the repercussions of the global fi nancial crisis. In recent months, we have been encouraged by improving trading volumes and asset values on stock exchanges and anticipate a gradual return to normal trading levels. Our clients are increasing discretionary spending, indicating recovery in the fi nancial services sector. The extremely diffi cult economic environment of the past year was characterised by reduced trading volumes, asset values and spending. In this unpredictable market, GBST’s businesses demonstrated resilience, despite the impact on our Broker Services and Wealth Management divisions. During the year, GBST realigned its costs to meet lower revenue expectations. While we could have trimmed expenses further, we did not believe this to be in the long-term interests of the company. We have signifi cant knowledge of fi nancial services processes within our business and value our staff and their professional expertise. It is this experience that allows us to provide the high service levels required by our clients. The close relationship that we enjoy with our clients has helped us grow market share and to develop leading products. Mr Stephen Lake Managing Director & Chief Executive Offi cer Total revenue, including six months’ contribution from Coexis, was $62.6 million in FY2009. This compares with revenue of $60.8 million in FY2008, which included 10 months’ contribution from InfoComp. Cash profi t after tax was $9.0 million, while EBITDA decreased 26.1 percent to $12.7 million, signifi cantly below management expectations at the beginning of FY2009. Non-cash expenses included amortisation of $5.7 million and a $0.4 million write-down of GBST’s 16.2 percent interest in ASX-listed Razor Risk Technologies Limited (formerly IT&e Limited), as well as a $0.7 million write- down of intangible assets. Dividend and capital management initiatives Refl ecting a prudent approach to capital management while recovery of the fi nancial services sector is under way, we declared a fully franked dividend of 1.5 cents per share in FY2009, compared with 9.5 cents per share in FY2008. In July and August 2009, we successfully completed an institutional placement and a share purchase plan to raise a total of $5.0 million. These funds will be used to reduce debt, strengthening the company’s balance sheet. In addition, the company extended a $10 million loan with its major shareholder Crown Financial Pty Limited for two and a half years, in exchange for a call option enabling Crown to acquire GBST shares at $0.95 per share up to the maximum value of the loan. This option will lapse in the event that the loan is repaid. GBST Broker Services The strength of GBST’s Australian broker services’ business was demonstrated by solid performance in diffi cult market conditions. Revenue decreased 10.7 percent to $28.3 million in FY2009. Coexis sales of $8.9 million for the six months were also below forecast. GBST Broker Services’ EBITDA was $10.0 million, down from $10.8 million following cost reductions and tight control of discretionary spending. GBST maintained its leading market share over the year, with 44 percent of ASX equities’ trading volume carried out on GBST’s back offi ce platform, Shares. In total, 94 fi nancial institutions use GBST’s broker services products. More than 90 percent of GBST Broker Services’ income in Australia comes from recurring fi xed and variable fees, with variable fees based on ASX trading volumes or funds or loans under management. Coexis’ revenue comprises licence sales and professional service fees, which were impacted by the market downturn. The effects of fi nancial innovation, regulatory change and global connectivity are transforming global capital markets. We are working closely with our clients to help them take advantage of this dynamic environment. GBST has exciting medium-term prospects in the fast-growth markets of Asia, where we are rolling out the Syn platform to replace back offi ces across multiple countries. Although Syn is now live in these markets it will be developed further over the next two years. ANNUAL REPORT 2009 3 Chairman’s and Managing Director’s report continued While markets are improving they remain soft. Discretionary spending by our clients is constrained. We expect improvement in FY2010, but maintain a conservative view of immediate opportunities. We are focused on integrating our Australian broker services business with Coexis, and work has begun to combine Syn and GBST Shares. This will allow our Australian clients the opportunity to benefi t from the Syn technology, and represents our largest research and development program. Research and development expensed by the Australian Broker Services Division was $2.8 million in FY2009. GBST Wealth Management GBST Wealth Management’s Australian business is well established, but was impacted by the fall in asset values, resulting in a 4.4 percent decline in licence fee income. The decision by a major client to change its business model in the face of the global fi nancial crisis and cancel deployment was a signifi cant setback for our UK operations and revenue decreased substantially. GBST Wealth Management EBITDA was $3.3 million. Our wealth management services earn revenue through licence fees and consulting, based on both fi xed fees and value of funds under management. In Australia, we are broadening our business model to develop a higher level of recurring licence fees. In the UK, we gained a second UK institutional client and our medium term growth prospects appear to be on track. We maintain tight fi nancial controls across the division. Research and development expensed was $3.2 million in FY2009. Our focus for 2009 was the further development of ComposerWeb, the web-based enhancement to Composer which has been released in the UK market. GBST Financial Services GBST Financial Services made good progress in its fi rst year, and is expected to break even in FY2010. The September 2008 acquisition of internet developer Emu Design was a signifi cant step, providing skills to build web-based solutions. The division recently launched online fi nancial calculators to help fi nancial institutions, brokers and advisers manage fi nancial products such as term deposits and loans. Investments While the value of our investment in Razor Risk Technologies Limited has declined since purchase, there are no plans to vary our stake and Razor Risk Technologies Limited’s management has successfully refocused this business. The risk management industry is expanding, and we continue to see complementary opportunities. In addition, our companies have recently pursued business prospects together. People We have a great team of skilled people working for our clients around the world, and we are delighted to recognise their contribution. Since inception in 1983, GBST has amassed an enormous depth of professional expertise and domain knowledge. Across the group, over 35% of our staff have worked with us for more than fi ve years, and we appreciate the effort and dedication of all our people. Industry expert appointed In April 2009 we were delighted to welcome global securities industry expert Terry Williams as Chairman of GBST Europe and as an adviser to the GBST Board of Directors. From 2002 to 2008 Terry guided the growth of Coexis, and previously led ADP Wilco. His expertise and industry knowledge will make a valuable contribution as we build an international company. 4 GBST HOLDINGS LIMITED ABN 85 010 488 874 Corporate and social responsibility We aim to create a culture that motivates and engages our staff and community, and in FY2009 supported social welfare in Australia and people with medical needs. Through supporting organisations such as Youth Off the Streets, Lifeline Australia, the Salvation Army, Australian Red Cross, Youngcare, Hear & Say Centre and Autism Queensland GBST helped provide rehabilitation and comfort for people and their families with medical problems and disabilities, and contributed to long-term improvement in the lives of disadvantaged people. The year ahead We are cautiously optimistic that signs of recovery in the fi nancial services sector will strengthen, and anticipate market improvement in FY2010. Our businesses are sound and resilient but unavoidably subject to turmoil in fi nancial markets. The close relationship that we enjoy with our clients has helped us grow market share and to develop leading products. There are signifi cant medium-term opportunities in each of our key markets in Asia, Australia and Europe. As the year unfolds we expect to announce progress in all aspects of our business. With our strong team of experienced and skilled people, we are well positioned to achieve revenue and earnings growth. Dr John Puttick Chairman Mr Stephen Lake Managing Director & Chief Executive Offi cer ANNUAL REPORT 2009 5 GBST Executive Team Stephen Lake Managing Director and Chief Executive Offi cer Patrick Salis Chief Financial Offi cer Isabel Sanchez Chief Technology Offi cer Robert De Dominicis Chief Executive, GBST Wealth Management Sunil Shah Chief Executive, Global Broker Services Denis Orrock Chief Executive, GBST Financial Services 6 GBST HOLDINGS LIMITED ABN 85 010 488 874 Stephen Lake Robert De Dominicis Managing Director and Chief Executive Offi cer Chief Executive, GBST Wealth Management Stephen 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 Offi cer in 2001. Prior to joining GBST, Stephen held senior executive positions in banking and investment banking in Australia, Hong Kong and London. Patrick Salis Chief Financial Offi cer Patrick joined GBST in October 2007 as Chief Financial Offi cer. Patrick has held similar roles in the fi nancial services industry, most recently as Chief Financial Offi cer 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. Isabel Sanchez Chief Technology Offi cer Isabel was appointed as Chief Technology Offi cer in March 2008. Isabel has over 17 years experience in software development and has been a member of GBST’s Wealth Management Division (formerly InfoComp) for 15 years, where she acted in a similar capacity since 2000. Isabel holds a Bachelor of Computing Science from the University of Wollongong. Robert is a founding partner of InfoComp, now GBST’s Wealth Management Division, with over 25 years experience in the development of software applications. Robert holds a Bachelor of Mathematics. Robert has a business and technical software background having been part of the Wealth Management Division’s development and professional services teams. Sunil Shah Chief Executive, Global Broker Services Sunil Shah joined Coexis, now GBST’s Global Broker Services Division, as Chief Operating Offi cer in June 2002 from ADP Wilco, a subsidiary of Automatic Data Processing, Inc., where he was in a similar capacity. He took on the mantle of Chief Executive Offi cer of Coexis in November 2004. Denis Orrock Chief Executive, GBST Financial Services Denis joined GBST in May 2008 and manages the newly established Financial Services Division. Prior to joining GBST, Denis was General Manager of InfoChoice. Denis has worked within the Australian Financial Services industry for over 15 years. He has a broad understanding of domestic wholesale and retail markets and has held advisory and trading positions with UBS, Grange Securities and Taylor Collison. ANNUAL REPORT 2009 7 GBST Board of Directors Stephen Lake Managing Director and Chief Executive Offi cer John Puttick Non-Executive Chairman Allan Brackin Independent Non-Executive Director David Adams Independent Non-Executive Director Joakim Sundell Non-Executive Director 8 GBST HOLDINGS LIMITED ABN 85 010 488 874 John Puttick Non-Executive Chairman Joakim Sundell Non-Executive Director John Puttick is the founder and Chairman of GBST and has 40 years’ experience in the IT industry over 20 of which developing fi nancial services solutions at GBST. John serves as a member of the QUT Council and 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 Institute of Technology Business Council. John is a member of GBST’s Audit and Risk Management Committee and is Chairman of the Nominations and Remuneration Committee. Stephen Lake Managing Director and Chief Executive Offi cer 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 Offi cer in 2001. Prior to joining GBST, Stephen held senior executive positions in banking and investment banking in Australia, Hong Kong and London. 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 Offi cer of Volante Group Limited, one of Australia’s largest IT services companies from November 2000 to October 2004. Prior to this Allan founded a number of IT companies including Applied Micro Systems (Australia) Pty Ltd, Prion Pty Ltd and Netbridge Pty Ltd, all national organisations operating under the Group Company of AAG Technology Services Pty Ltd. Allan currently serves on the Board of the New South Wales Heart Foundation and is Chairman of IT software Company Emagine Pty Ltd. He 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. Joakim Sundell was appointed to the Board in 2001. Joakim has an extensive career in private equity fi nance, merchant banking, and management both in Sydney and London. He is Managing Director of Crown Financial Pty Ltd, a private investment Company. He was a Director of Infochoice Limited (from 13 December 2006 until 5 February 2008). Joakim is a Member of the Nominations and Remuneration Committee. David Adams Independent Non-Executive Director David Adams was appointed to the Board on 1 April 2008. David has an extensive career in the funds management industry including the establishment of Australia’s fi rst cash management trust at Hill Samuel Australia in 1980 and Group Head of the Funds Management Group for Macquarie Bank. He was a Director at Macquarie Bank from 1983 until 2001. David was Chairman of the Investment and Financial Services Association in 2000 and 2001. He was a Visiting Fellow (Management of Financial Institutions) at Macquarie University and holds a Bachelor of Science from the University of Sydney and a Masters in Business Administration from the University of New South Wales. David is a member of the Audit and Risk Management Committee and the Nominations and Remuneration Committee. ANNUAL REPORT 2009 9 Corporate Governance Statement Introduction The ASX document, ‘Principles of Good Corporate Governance and Best Practice Recommendations’ 2nd Edition (‘Guidelines’) applying to listed entities was released in August 2007 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 1 September 2009. Scope of Responsibility of Board 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. b. The Board’s broad function is to: d. Senior management roles are given authorities and responsibilities pursuant to both corporate policies and through directions issued from time to time. The CEO’s performance is reviewed by the Chairman in consultation with the Board and the CEO takes responsibility for the review of other executives’ performance. Formal reviews are conducted at least annually. Composition of Board 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; and c. at least two Directors will be Non-Executive Directors independent from management. Board Charter and Policy 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: i. chart strategy and set financial targets for the i. a detailed definition of ‘independence’; Company; ii. iii. monitor the implementation and execution of strategy and performance against financial targets; and 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: i. composition of the Board itself including the appointment and removal of Directors and the making of recommendations to shareholders concerning the appointment and removal of Directors; oversight of the Company including its control and accountability system; appointment and removal of the Chief Executive Officer and the Company Secretary; reviewing and overseeing systems of risk management and internal compliance and control, codes of ethics and conduct, and legal and statutory compliance; monitoring senior management’s performance and implementation of strategy; and approving and monitoring financial and other reporting and the operation of committees. ii. iii. iv. v. vi. ii. iii. iv. v. a framework for the identification of candidates for appointment to the Board and their selection; a framework for individual performance review and evaluation; proper training to be made available to Directors both at the time of their appointment and on an on-going basis; 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 detailed code of ethics and values; 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 the market. 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. The Board’s charter is included within the company’s corporate governance charter, which is available from the company’s web site. 10 GBST HOLDINGS LIMITED ABN 85 010 488 874 Audit and Risk Management Committee c. 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; and iii. Mr David Adams. 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. iii. iv. v. internal control framework including management information systems; corporate risk assessment and compliance with internal controls; internal audit function and management processes supporting external reporting; 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. x. assessing the adequacy of external reporting for the needs of shareholders; and 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. d. The company during the course of the year appointed new auditors, KPMG, in light of the increasing scale and global operations for the company and its subsidiaries. Nominations and Remuneration Committee a. The purpose of this committee with regard to remuneration is to review and approve the remuneration of senior executives, the remuneration policies for the group and the structure of equity based remuneration programmes. b. The purpose of this committee with regard to nominations is to consider the structure and membership of the Board, to review the performance of the Board, to set desirable criteria for future Board members and to assess candidates against those criteria. Due to the importance of people to the business of the group each Director is a member of the committee. Committee meetings are held from time to time as required by the Board. While no committee meeting has been called during the year relevant discussions on nominations and remuneration have been considered by the Board at various Board meetings as specific items of business and in general business. In particular, the Board did conduct a review of its own performance with the chair discussing performance with each director individually and then collectively with the Board. Best Practice 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. a. Independent professional advice 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 and is available for review on the Company’s web site. e. Substantial compliance with ASX corporate governance guidelines and best practice recommendations. ANNUAL REPORT 2009 11 Corporate Governance Statement continued GBST Board Assessment against the Guidelines 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 company uses its quality management system and project management methodologies to identify, assess and manage risk. With the acquisition of new subsidiaries the company initiated a program of integration which involved an assessment of the adequacies of risk management in the subsidiaries to ensure they were of a sufficient standard in light of the Board’s requirements in this area. 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 both committee level (Audit and Risk Committee), with meetings at least four times each year, and at Board level. The Board requires the CEO and CFO to sign all statements required to be provided under the Guidelines and Corporations Act in relation to the Company’s Financial Statements and risk management generally. Principle 8 – 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 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, namely Mr Allan Brackin and Mr David Adams. 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. The Board will consider increasing its size should suitable candidates be identified. 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 and Risk 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. 12 GBST HOLDINGS LIMITED ABN 85 010 488 874 Directors’ Report The Directors of GBST Holdings Limited (‘GBST’) submit herewith the consolidated financial report for the year ended 30 June 2009. Operating Result and Dividend The consolidated profit after income tax for the financial year amounted to $2.13 million (2008: $6.13 million). Directors The names of the Directors of the Company in office during the year and to the date of this report are: Name Period of Directorship Dr John F Puttick Mr Allan J Brackin Appointed January 1984 Appointed April 2005 Mr Stephen M L Lake Appointed September 2001 Mr Joakim J Sundell Mr David C Adams Company Secretary Appointed July 2001 Appointed April 2008 The following person 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. Principal Activities On 9 December 2008, GBST acquired Coexis for £18.18 ($41.19) million cash and 7,336,007 GBST shares up-front and a further deferred amount of £1.25 ($2.70) million cash and 1,414,000 shares (subject to shareholder approval) over the next 2 years. The cash component is debt funded. Coexis is a leading UK based global provider of software for the securities industry and this acquisition further extends the suite of products and services immediately available through the Group’s Broker Services Division and significantly expands the scale of GBST’s global operations. The principal activities of GBST in the year, were: (cid:129) (cid:129) (cid:129) the provision of client accounting and securities transaction technology solutions for the finance, banking and securities industry in Australia, Asia, Europe and North America; provision of funds administration and registry software for the wealth management industry in Australia and the United Kingdom; and provision of independent market-leading financial product data and related services to financial advisers and institutions in Australia which is supported by the purchase of Emu Design (Qld) Pty Ltd, which GBST acquired in October 2008. No other significant change in the nature of these activities occurred during the year. Dividends paid during the year were as follows: (cid:129) fully franked ordinary dividend of 4 cents per share 2008 paid on 26 September 2008, as recommended in last year’s report $2.01 million. (cid:129) interim fully franked ordinary dividend of 1.5 cents 2009 per share paid on 27 March 2009 $867 thousand. No dividend has been declared for the year ended 30 June 2009. Review of Operations The consolidated Group operates now in 4 business segments: (cid:129) (cid:129) (cid:129) provides client accounting GBST Australia Broker Services and securities transaction technology. Capital market participants such as banks, clearing houses, custodians, fund managers, margin lenders and institutional and retail stockbrokers use GBST’s specialist market access and transaction solutions to process approximately 44% of all volume traded on the ASX every month. GBST Global Broker Services (Coexis) through the Syn platform, provides next-generation technology to process equities, derivatives, fixed income and managed funds transactions to global capital markets in Asia, Europe and North America. provides funds GBST Wealth Management administration and registry software to the Wealth Management industry, both in Australia and the United Kingdom. It offers an integrated system for the administration of wrap platforms, master trusts, superannuation, pensions, risk and debt, with customers in Australia and the United Kingdom. (cid:129) is a wholesale provider GBST Financial Services of independent, market-leading financial product data and related services to financial advisors and institutions. It also provides web design, development and usability services through Emu Design. Acquisitions Emu Design On 1 October 2008, GBST acquired Emu Design (Qld) for $888 thousand in cash and 171,939 GBST shares. Emu Design specialises in a wide range of services including web development, graphic design, product design, corporate identity design and IT and software solutions. The acquisition of Emu Design is a significant step to provide the web-based development and design skills for the division. ANNUAL REPORT 2009 13 Directors’ Report continued Coexis On 9 December 2008, GBST acquired Coexis. Coexis is a leading UK based global provider of software for the securities industry. The cornerstone of Coexis’ offering is Syn , the key technology created by Coexis and now recognised as the next generation of software development. Syn ’s strengths include componentised configurability, full multi-currency, third generation software engineering and an absence of legacy architecture. Syn enables modelling of business flows and the creation of financial market applications for institutional brokers, global investment banks and securities exchanges that provide true exception based processing, greater scalability and flexibility and a faster time to market. Coexis operates in multiple locations including London, New York, Hong Kong, Singapore and Paris and has an established distribution channel comprising systems integrators, independent software vendors and correspondent clearers. Comparative year acquisitions In the prior comparative period, on 31 August 2007, GBST acquired InfoComp Pty Ltd, ICP Holdings Pty Ltd and its subsidiaries for $36.78 million in cash and an issue of 4,935,183 GBST shares. Profitability GBST Australia Broker Services The financial year saw a significant fall in retail trading volume, that had an adverse impact on revenue, falling from $31.74 million in 2008 to $28.28 million in 2009. The Company cut back on research and development spend in the year, incurring a cost in this area of $2.26 million, compared to $4.52 million in 2008. GBST still maintains the dominant market share of ASX trade volume at approximately 44%. The division reported an EBITDA (earnings before interest, tax, depreciation and amortisation) result of $10.00 million compared to $10.82 million in 2008. GBST Global Broker Services (Coexis) The GBST Global Broker Services was formed in December 2008 with the acquisition of Coexis. The division generated $8.91 million in revenue for the period from the acquisition date to June 2009, and achieved an EBITDA result of $98 thousand. The global credit crisis had a severe negative impact on the sales prospects for GBST’s Global Broker Services over the period, resulting in the delay and cancellation of several prospective opportunities. The business made a significant reduction in discretionary expenditure as a result of this. The integration of Coexis to GBST has progressed well, the GBST Australia Broker Services customer base have been introduced to the Syn technology, which has been very well received. The project for the transition of Syn into Australia has commenced and is currently on schedule. GBST Wealth Management The Wealth Management division saw a significant fall in revenue from $28.99 million in 2008 to $23.49 million this year, and an EBITDA of $3.30 million from $6.40 million in 2008. The UK operations of the division were impacted by the cancellation of the James Hay (Abbey) contract in December 2008. James Hay decided to change its strategic direction and business model. This meant that the set of business requirements to which the Composer software had been tailored were no longer required. This was not in any way related to the performance of the Composer software platform. GBST and James Hay reached an agreement in January 2009 to resolve this matter. GBST is still committed to our current UK clients and prospects and is continuing to invest in enhancing the Composer platform for both the Australian and UK market. The Australian operations are very well established and stable. The impact of the decline in asset values as a result of the fall in the market, was a fall in revenue, however this was offset by a fee structure that includes fixed licence fee minimums, providing resilience in the current market. GBST Financial Services GBST Financial Services was established in May 2008 to develop and distribute a range of wholesale financial product data and related services to financial advisor and wealth management professionals. This division generated revenue of $1.20 million in the year and made a loss before interest, tax, depreciation and amortisation of $700 thousand due to the investment being made to develop and enhance its products. The acquisition of Emu Design is a significant step to provide the web-based development and design skills for the division. 14 GBST HOLDINGS LIMITED ABN 85 010 488 874 Results Summary Group Operating Revenue Reported EBITDA Less: Write down of investment Less: Write down of intangible asset Less: Net Finance Cost Less: Depreciation Less: Amortisation Less: Tax PROFIT AFTER TAX BASIC EPS (CENTS) CASH NPAT CASH EPS (CENTS) The consolidated profit after income tax for the financial year amounted to $2.13 million (2008: $6.13 million). Revenue before interest and other income was $61.92 million (2008: $60.74 million). Basic earnings per share is 3.90 cents per share. During the financial year, factors impacting the profitability of the consolidated entity were: (cid:129) (cid:129) Approximately $680 thousand in termination payments to employees were incurred (2008: $178 thousand). Decline in the value of the 15.4% shareholding in Razor Risk Technologies Limited (ASX Code: RZR) (formerly IT&e Limited) has been taken into account, in accordance with AASB 139 at 31 December 2008. This non-cash write down is $394 thousand. At 30 June 2009 the value of the investment increased by $394 thousand resulting from an increase in the share price of RZR. This increase was booked to the Financial Asset Reserve in the Balance Sheet. The current carrying value of the investment is $1.62 million. (cid:129) Impairment testing of customer contracts in the UK due to a change in the customer base determined that the carrying amount of the UK customer contracts relating to Wealth Management was higher than its recoverable amount and an impairment loss of $252 thousand was recognised. (cid:129) $492 thousand software expense due to the write-down to nil of the current carrying value of an acquired software asset. FULL YEAR TO 30 JUNE 2009 ‘000 61,924 12,691 (394) (744) (2,711) (1,071) (5,745) 103 2,129 3.90 9,012 16.52 2008 ‘000 60,740 17,188 (2,288) – (1,093) (932) (3,122) (3,621) 6,132 12.44 11,542 23.41 % Change 2% (26)% (65)% (69)% (22)% (29)% Financial Position As noted in the After Balance Sheet Events in this report, and Note 14 of the Financial Statements, GBST entered into an agreement with Crown Financial Pty Ltd on 29 June 2009 to extend the term of the $10.00 million loan facility from January 2010 to February 2012, subject to shareholder approval. This approval from the shareholders was granted at an Extraordinary General Meeting held on 21 August 2009. Under the requirements of the Australian Accounting Standards Board, AASB 101 – Presentation of Financial Statements, paragraph 69 (d) the company is required to show this loan as a current liability at the balance sheet date of 30 June 2009, because the company did not have the unconditional right to defer settlement of the liability for a period of at least twelve months after the reporting period. The company therefore has a current asset balance of $13.57 million, a current liability balance of $34.34 million at 30 June 2009, and a net current asset deficiency of $20.77 million. $10.00 million of this deficiency is in respect of the loan from Crown Financial Pty Ltd, of which the repayment date has been extended from January 2010 to February 2012. A further $4.01 million is in respect of current liabilities owing to vendors for business acquisitions. The balance is payable through a cash payment and the issue of additional equity as prescribed in the relevant business acquisition sale and purchase agreements. Current loan repayments of $5.78 million under the commercial bill and GBP loan facility are payable in fixed quarterly instalments over the next twelve months and will be funded by earnings generated over that period. ANNUAL REPORT 2009 15 Directors’ Report continued Signifi cant Changes in State of Affairs During the year the Company issued 7,523,120 new shares, nil new options and 15,174 options were exercised. As previously noted, on 9 December 2008, GBST acquired Coexis for £18.18 ($41.19) million cash and 7,336,007 GBST shares and a further deferred amount of £1.25 ($2.70) million cash and 1,414,000 in shares (subject to shareholder approval) over the next 2 years. The cash consideration was sourced from debt drawn through a facility from the NAB and shareholder funded sub-ordinated debt. A term loan facility of $8.00 million Great British Pounds was established with National Australia Bank for the purpose of the acquisition. The GBP loan facilities expire on 31 October 2010, with quarterly principal repayments from 31 March 2009. Interest rates under the facility are variable. As previously noted on 1 October 2008, GBST acquired Emu Design (Qld) for $888 thousand in cash and 171,939 GBST shares. No other significant changes in the state of affairs of the Company occurred during the financial year. Future Developments, Prospects and Business Strategies The Company is actively pursuing opportunities to expand its sources of revenue from the delivery of technology to the financial services industry. 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. These developments, together with the current business strategies within GBST’s segments, are expected to assist in the achievement of GBST’s long term goals. 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 Balance Date Events Since balance date the Group has, concluded the following: 1. The Company entered into an agreement with Crown Financial Pty Ltd on 29 June 2009, to extend the term of the $10.00 million loan facility from January 2010 to February 2012, subject to shareholder approval. This approval was received from the shareholders at an EGM (extraordinary general meeting) held on 21 August 2009 and the revised loan agreement has been executed. The loan’s term has been extended in exchange for a call option issued to Crown Financial Pty Ltd to acquire ordinary shares in the Company at a price of 95 cents per share to the maximum value of the loan. 2. The Company completed a capital raising of $4.20 million on the 29 June 2009. The Company received commitments to raise approximately $4.20 million through the issue of 6.50 million shares at an issue price of 65 cents per share, subject to shareholder approval. This approval was also received from the shareholders on 21 August 2009. The funds raised from this issue were used to repay debt owed to the National Australia Bank. 3. As part of its capital raising initiative the Company also announced on 3 July 2009 a Share Purchase Plan (SPP). GBST raised $813 thousand following the issue of 1.25 million ordinary shares at 65 cents each. The funds raised from this issue were also used to repay debt owed to the National Australia Bank. Other than for the impact (if any) of the 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 operations of GBST, the results of those operations, or the state of affairs of GBST in future financial years. Environmental Issues GBST’s operations are not regulated by any significant environmental regulation under a law of the Commonwealth or of a State or Territory. Information on Directors John Puttick Non-Executive Chairman John Puttick 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 as a member of the QUT Council and 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 Institute of Technology Business Council. John is a member of GBST’s Audit and Risk Management Committee and is Chairman of the Nominations and Remuneration Committee. Interest in Shares and Options 7,307,760 Ordinary Shares of GBST Holdings Limited held by Dr Puttick and associated entities. 16 GBST HOLDINGS LIMITED ABN 85 010 488 874 Stephen Lake Managing Director and Chief Executive Officer Stephen 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 Offi cer in 2001. Prior to joining GBST, Stephen held senior executive positions in banking and investment banking in Australia, Hong Kong and London. Interest in Shares and Options 500,000 Options and 3,751,423 Ordinary Shares of GBST Holdings Limited held by Mr Lake. 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 services companies from November 2000 to October 2004. Prior to this Allan founded a number of IT companies including Applied Micro Systems (Australia) Pty Ltd, Prion Pty Ltd and Netbridge Pty Ltd, all national organisations operating under the Group Company of AAG Technology Services Pty Ltd. Allan currently serves on the Board of the New South Wales Heart Foundation and is Chairman of IT software Company Emagine Pty Ltd. He 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 311,943 Ordinary Shares of GBST Holdings Limited held by Mr Brackin’s associated entities. Joakim Sundell Non-Executive Director Joakim Sundell 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 was a Director of Infochoice Limited (from 13 December 2006 until 5 February 2008). Joakim is a Member of the Nominations and Remuneration Committee. Interest in Shares and Options 15,768,148 Ordinary Shares held by Mr Sundell’s associated entities. David Adams Independent Non-Executive Director David Adams was appointed to the Board on 1 April 2008. David has an extensive career in the funds management industry including the establishment of Australia’s first cash management trust at Hill Samuel Australia in 1980 and Group Head of the Funds Management Group for Macquarie Bank. He was a Director at Macquarie Bank from 1983 until 2001. David was Chairman of the Investment and Financial Services Association in 2000 and 2001. He was a Visiting Fellow (Management of Financial Institutions) at Macquarie University and holds a Bachelor of Science from the University of Sydney and a Masters in Business Administration from the University of New South Wales. David is a member of the Audit and Risk Management Committee and the Nominations and Remuneration Committee. Interests in Shares and Options Nil REMUNERATION REPORT The remuneration report is set out under the following main headings: (cid:129) Remuneration policies and practices (cid:129) Company performance and remuneration (cid:129) Service agreements (cid:129) 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 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 ANNUAL REPORT 2009 17 Directors’ Report continued incentives through an Employee Share Option Plan which seeks to align the Executives’ performance with the interests of shareholders. Remuneration Structure – Senior Executives Three elements make up the Company’s remuneration structure for Senior Executives. 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 Black-Scholes pricing 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. Remuneration Principles (cid:129) (cid:129) (cid:129) (cid:129) The Company will use competitive remuneration packages to attract, motivate and retain talented Executives. The employees will be rewarded for sustained and sustainable improvement in the performance of the Company. Directors and Senior Executives are encouraged to make investments in the Company but only in accordance with the Company’s share trading guidelines. Senior Executive agreements will not allow for significant termination payments if an employment agreement has to be terminated for cause. (cid:129) The Company will make full disclosure of Director and Executive remuneration. The Board recognises the significant role played by remuneration in attracting and retaining staff. 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. (cid:129) Fixed remuneration of salary and superannuation. (cid:129) Bonus payments based upon Company performance and the meeting of corporate objectives – Short Term Incentive (STI). (cid:129) Equity based remuneration – Long Term Incentive (LTI). Fixed Annual Remuneration The fixed remuneration consists of cash salary (‘Base’). To ensure that fixed remuneration arrangements remain competitive, the fixed remuneration component of Executive remuneration is reviewed annually based on performance and market data. Benchmarking of Executive remuneration is against Executive Black-Scholes pricing remuneration practices for Executive roles having similar scope, accountability and complexity to those being reviewed. Positions may be benchmarked against: (cid:129) (cid:129) Other positions within the Company so that internal relativities are maintained; and/or Roles situated in companies listed on the Australian Stock Exchange with market capitalisation similar to that of the Company’s and/or within an industry sector in which the Company has operations. Short Term Incentive Remuneration (STI) The Company operates a short term bonus scheme to provide competitive performance based remuneration incentives to both Executives and staff. Its objectives are to: (cid:129) (cid:129) (cid:129) Align the interests of the Executives and staff with those of shareholders; Provide participants with the opportunity to be rewarded with at risk remuneration where superior performance outcomes and achieved over the measurement period; and Reflect a strong commitment towards attracting and retaining high performing Executives and staff who are committed to the ongoing success of the Company. Performance objectives are established for all Executives and structured to reflect each Executive’s potential impact on and contribution to the business. The performance objectives comprise elements of total Company performance and individual performance and contain measures of financial, non-financial and strategic outcomes. Achievement of performance objectives would entitle an Executive to a cash bonus. 18 GBST HOLDINGS LIMITED ABN 85 010 488 874 LTI grants to Executives are delivered in the form of share options under the Employee Share Options Plan. The share options generally vest over a period of three years subject to meeting performance hurdles. Executives are able to exercise the share option for up to two years after vesting before the options lapse. The Company uses Shareholder Return as a performance hurdle for the LTI plan, measured by growth in earnings per share. Details of the plan are shown in Note 31 of the Financial Statements. On 24 October 2007, 100,000 options were issued to select Executive employees. The exercise price for each option is $3.92. These deferred 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 options lapse. The shareholders of the Company at the 2007 Annual General Meeting approved the issue of 500,000 options to the Company’s Chief Executive Officer and this occurred on 19 December 2007. The exercise price for each option is $3.85. The options vest 18 months after the date of grant. The options have a term of 24 months from the date of grant. On cessation of employment all unvested options lapse. The Executive options are subject to financial performance measures being met. Generally, bonus arrangements are capped at a maximum of 50% of Base, however when exceptional outcomes are delivered, or where warranted by special circumstances, it can exceed this amount. All Executive bonus amounts are determined based on the recommendation of the Managing Director, having regard to actual performance against the performance objectives. 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. Long Term Incentive Remuneration (LTI) 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. The objective of the LTI plan is to reward Executives in a manner that aligns remuneration with the creation of shareholders wealth. As such, LTI grants are only made to Executives who are able to influence the generation of shareholder wealth and thus have an impact on the Group’s performance against the relevant long term performance hurdle. ANNUAL REPORT 2009 19 Directors’ Report continued The performance criteria associated with each grant of share options outstanding made under the Deferred Options Scheme is summarised below: PERFORMANCE CRITERIA Grant Date 24 October 2007 Tranche 1 (20%)* Tranche 2 (30%)* Tranche 3 (50%)* Continued Employment until Financial Performance hurdle 24 October 2008 If normalised EPS CAGR for 2008 compared to 2007 is: (cid:129) (cid:129) (cid:129) (cid:129) Less than 10%: no options vest Equal to 10%: 33.33% of options vest Greater than 10% but less than 20%: pro rated vesting between 33.33% and 100% Equal to or greater than 20%: 100% vesting. 24 October 2009 If normalised EPS CAGR for the combined 2008 and 2009, compared to 2007 is: (cid:129) (cid:129) (cid:129) (cid:129) Less than 10%: no options vest Equal to 10%: 33.33% of options vest Greater than 10% but less than 20%: pro rated vesting between 33.33% and 100% Equal to or greater than 20%: 100% vesting. 24 October 2010 If normalised EPS CAGR for the combined 2008, 2009 and 2010, compared to 2007 is: (cid:129) (cid:129) (cid:129) (cid:129) Less than 10%: no options vest Equal to 10%: 33.33% of options vest Greater than 10% but less than 20%: pro rated vesting between 33.33% and 100% Equal to or greater than 20%: 100% vesting. The Company’s financial performance in the financial year ending 30 June 2008 is when measured at the Earnings per Share level 20% greater in the financial year ending 30 June 2008 when compared to the financial year ending 30 June 2007. 19 December 2007 19 June 2009 * If the performance condition for Tranche 1 is not met at the first exercise date, then 50% of those options lapse and 50% are rolled into Tranche 2. If the performance condition for Tranche 2 is not met at the first exercise date for Tranche 2, then 50% of those options lapse and 50% are rolled into Tranche 3. If the performance condition for Tranche 3 is not met at the first exercise date for Tranche 3, then all remaining options will lapse. EPS = Earnings per share CAGR = Compound average growth rate Company Performance and Remuneration The table below shows the financial performance of the Company over the last four years. GBST’s remuneration practices seek to align Executive remuneration with growth in profitability and shareholder value, amongst other things. EBITDA Growth Net profit before tax Growth Closing share price Dividends paid (cents) 2006 2007 2008 2009 $ 9.0m 127% $ 8.6m 144% $2.37 $11.4m 26% $11.4m 31% $4.00 0 9.0 $18.3m 60% $ 9.8m (14%) $1.89 11.5 $12.7m (34%) $2.0m (80%) $0.67 5.5 20 GBST HOLDINGS LIMITED ABN 85 010 488 874 Service Agreements 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 also contain normal provisions relating to the protection of confidential information and intellectual property rights as well as post employment restraints. Apart from Mr Lake’s service agreements, the agreements are expressed to be open ended appointments but may generally be terminated by three months notice by either party or earlier in the event of certain breaches of terms and conditions. The contracts do allow the company to make a payment in lieu of notice. No other termination payments are applicable. Mr Lake’s service agreement has a minimum term of two years ending in August 2009 and is able to be terminated at that time or after it by either party giving the other not less than six month’s notice. The agreement has subsequent to year-end been amended by extending the term a further two years. Shareholdings 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 D Adams A Brackin S Lake J Sundell Director (Non-executive Chairman) Director (Independent) Director (Independent) Director (Managing Director and Chief Executive Officer) Director (Non-executive) R De Dominicis Chief Executive Wealth Management D Orrock P Salis I Sanchez S Shah K Sprott Chief Executive GBST Financial Services (appointed 12 May 2008) Chief Financial Officer Chief Technology Officer Chief Executive Global Broker Services (appointed 9 December 2008) Human Resource Executive (resigned 6 February 2009) 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 below. 2009 Directors J Puttick D Adams A Brackin S Lake J Sundell TOTAL DIRECTORS Executives R De Dominicis D Orrock P Salis I Sanchez S Shah K Sprott TOTAL EXECUTIVES GROUP TOTAL Balance at 01/07/08 Received as Compensation Options exercised Net Change Other(i) Balance at 30/06/09 7,667,760 – 231,943 3,651,423 15,417,605 26,968,731 1,780,996 – – – – – 1,780,996 28,749,727 – – – – – – – – – – – – – – – – – – – – – – – – – – – – (360,000) 7,307,760 – – 80,000 311,943 100,000 3,751,423 350,543 15,768,148 170,543 27,139,274 – – – – 1,780,996 – – – 523,596 523,596 – – 523,596 2,304,592 694,139 29,443,866 i. Shares purchased or sold, consideration for shareholdings purchased by Group, or excluded from disclosure due to resignation. ANNUAL REPORT 2009 21 Directors’ Report continued The numbers of shares in the Company held (directly, indirectly or beneficially) during the 2008 financial year by Key Management Personnel, including their related parties, are set out below. 2008 Directors J Puttick D Adams A Brackin S Lake D Shirley J Sundell GBST ESOP Pty Ltd as trustee(ii) TOTAL DIRECTORS Executives R De Dominicis P Fowler P Salis I Sanchez K Sprott K Wallis TOTAL EXECUTIVES GROUP TOTAL Balance at 01/07/07 Received as Compensation Options exercised Net Change Other(i) Balance at 30/06/08 7,667,760 – 169,241 3,867,428 – 14,336,053 36,844 26,077,326 – – – – – 132,578 132,578 26,209,904 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 1,332 1,332 1,332 – – 7,667,760 – 62,702 231,943 (216,005) 3,651,423 – – 1,081,552 15,417,605 (36,844) – 891,405 26,968,731 1,780,996 1,780,996 – – – – (133,910) – – – – – 1,647,086 1,780,996 2,538,491 28,749,727 i. Shares purchased or sold, consideration for shareholdings purchased by Group, or excluded from disclosure due to resignation. ii. Shares held as trustee for the ESOP Trust (refer Note 31). 22 GBST HOLDINGS LIMITED ABN 85 010 488 874 Details of Remuneration The remuneration for each Director and Executive Officer (the key management personnel) of the Company and the consolidated entity receiving the highest remuneration during the year was as follows: SHORT-TERM BENEFITS POST EMPLOYMENT BENEFITS OTHER LONG-TERM BENEFITS SHARE -BASED PAYMENT Base salary & fees $ Bonus $ Other $ Super- annuation $ Leave entitlement $ Equity options $ Performance Related % Total $ Options Based % 2009 Directors J Puttick D Adams A Brackin S Lake J Sundell TOTAL DIRECTORS Executives R De Dominicis 95,000 55,046 60,000 590,000 60,000 860,046 383,394 D Orrock (appointed 12/05/08) 230,000 P Salis I Sanchez S Shah (appointed 09/12/08) K Sprott (resigned 06/02/09) TOTAL EXECUTIVES GROUP TOTAL 264,904 230,000 197,269 31,293 1,336,860 2,196,906 2008 Directors J Puttick D Adams (appointed 01/04/08) A Brackin S Lake D Shirley (resigned 29/04/08) J Sundell TOTAL DIRECTORS Executives R De Dominicis (appointed 31/08/07) P Fowler (resigned 07/02/08) P Salis (appointed 01/10/07) 87,500 15,000 50,000 580,385 50,000 50,000 832,885 321,688 166,967 179,077 I Sanchez (appointed 03/03/08) 66,667 K Sprott K Wallis (resigned 12/10/07) 169,387 83,744 – – – – – – – – – – – – – – – – – – – – – – – 40,000 80,000 40,000 – – – – – – – – – – – 53,846 – 4,954 – 53,100 – 58,054 34,505 20,700 23,841 22,477 19,727 3,553 53,846 124,803 53,846 182,857 – – – – – – – – 6,302 – – – – – – 52,235 – – 52,235 13,014 – 16,118 4,803 15,245 5,850 TOTAL EXECUTIVES 987,530 160,000 66,302 55,030 GROUP TOTAL 1,820,415 160,000 66,302 107,265 – 60,000 – – – – – – – – – – – 1,765 1,765 1,765 – – – – – – – – – – – – 32,308 32,308 32,308 – – – – – – – – – – – – – 95,000 60,000 60,000 643,100 60,000 918,100 417,899 250,700 288,745 252,477 216,996 90,457 1,517,274 – 2,435,374 – – – 87,500 15,000 50,000 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 3,109 635,729 0.5 0.5 – – 50,000 50,000 3,109 888,229 – – – – – 1.3 17.5 52.8 18.5 – – 1.3 0.6 – 0.8 – – 334,702 2,209 175,478 1,328 236,523 – 151,470 1,842 226,474 – 181,902 5,379 1,306,549 8,488 2,194,778 ANNUAL REPORT 2009 23 Directors’ Report continued Option Holdings Options issued as part of Remuneration for the year ended 30 June 2009 There were no options issued as remuneration to Key Management Personnel in the 30 June 2009 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 2009 financial year. Shares issued on exercise of compensation options There were no options exercised during the 30 June 2009 financial year that were granted as compensation in previous financial years as remuneration to Key Management Personnel. 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 01/07/08 Granted as Compensation Options Exercised or Sold Options Cancelled/ Forfeited Balance 30/06/09 Total Vested 30/06/09 Total Exercisable 30/06/09 Total Unexercisable 30/06/09 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – (100,000) – – – 500,000 – 500,000 – – 100,000 – – – (100,000) 100,000 (100,000) 600,000 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 500,000 – 500,000 – – 100,000 – – – 100,000 600,000 2009 Directors J Puttick D Adams A Brackin S Lake J Sundell – – – 500,000 – TOTAL DIRECTORS 500,000 Executives R De Dominicis D Orrock P Salis I Sanchez S Shah K Sprott – – 100,000 – – 100,000 TOTAL EXECUTIVES 200,000 GROUP TOTAL 700,000 24 GBST HOLDINGS LIMITED ABN 85 010 488 874 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. 2008 Directors J Puttick D Adams A Brackin S Lake D Shirley J Sundell TOTAL DIRECTORS Executives R De Dominicis P Fowler P Salis I Sanchez K Sprott K Wallis Balance 01/07/07 Granted as Compensation Options Exercised or Sold Options Cancelled/ Forfeited Balance 30/06/08 Total Vested 30/06/08 Total Exercisable 30/06/08 Total Unexercisable 30/06/08 – – – – – – – – – – – 500,000 – – 500,000 – 100,000 100,000 – – – 100,000 – 100,000 – – – – – – – – – – – – – – – – – – – – – – – 500,000 – – 500,000 – – – – – – – – – – – – – – – – – (100,000) 100,000 100,000 100,000 – – – 100,000 – 100,000 – – – – – – – – – – – 500,000 – – 500,000 – – 100,000 – 100,000 – 1,332 120,000 (1,332) (120,000) – TOTAL EXECUTIVES 101,332 420,000 (1,332) (220,000) 300,000 100,000 100,000 200,000 GROUP TOTAL 101,332 920,000 (1,332) (220,000) 800,000 100,000 100,000 700,000 Meetings of Directors During the financial year, 19 meetings of Directors (including committees of Directors) were held. Attendances by each Director during the year were as follows: Directors’ Names J Puttick D Adams A Brackin S Lake J Sundell DIRECTORS’ MEETINGS AUDIT AND RISK COMMITTEE Number eligible to attend Number attended Number eligible to attend Number attended 15 15 15 15 15 15 15 15 15 15 4 4 4 – – 4 4 4 4* 2** * At the request of the Audit and Risk Committee Mr S Lake (CEO) attends the Audit and Risk Committee meetings even though not a member of the committee. ** Mr J Sundell attends the Audit and Risk Committee meetings as a guest even though not a member of the committee. Indemnifying Directors and Offi cers During the financial year, the Company paid a premium in respect of a contract insuring the Directors of the Company, the Company Secretary and all Executive Officer of the Company against a liability incurred as such a Director, Secretary or Executive Officer to the extent permitted by the Corporations Act 2001. The directors have not included details of the nature of the liabilities covered or the amount of the premium paid in respect of the directors’ and officers’ liability and legal expenses’ insurance contracts, as such disclosure is prohibited under the terms of the contract. 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. ANNUAL REPORT 2009 25 Directors’ Report continued 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. Options The Company established the GBST Employee Option Plan on 9 March 2005. The number of options over ordinary shares outstanding at 30 June 2009 are as follows: Grant Date 09.03.05 25.07.07 24.10.07 19.12.07 Expiry and Exercise Date Exercise Price 08.03.10 24.07.10 23.10.10 18.12.09 $0.00 $3.90 $3.92 $3.85 Number 22,644 48,719 100,000 500,000 671,363 Refer to Note 22 in the financial report for details of fees for non-audit services paid/payable to the external Auditors during the year. Lead Auditor’s Independence Declaration The lead Auditor’s independence declaration for the year ended 30 June 2009 has been received and can be found on the page following this Directors’ report, and forms part of the Directors’ report. Rounding off The Company is an entity to which ASIC Class Order 98/100 dated 10 July 1998 applies and, accordingly, amounts in the financial statements and Directors’ report have been rounded off to the nearest thousand dollars, unless otherwise stated. Signed in accordance with a resolution of the Board of Directors: In addition 15,174 new shares were issued to meet the exercise of employee options (no amounts are unpaid on any of the shares). Dr J F Puttick Chairman S M L Lake Managing Director and Chief Executive Officer Brisbane Dated this 28th day of August 2009 Grant Date 09.03.05 25.07.07 Number 1,332 13,842 15,174 No further employee shares or options have been issued since 30 June 2009. 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. Proceedings on behalf of Company No person has applied for leave of Court to bring proceedings on behalf of the Company or intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings. The Company was not a party to any such proceedings during the year. Non-audit 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. 26 GBST HOLDINGS LIMITED ABN 85 010 488 874 Auditor’s Independence Declaration ANNUAL REPORT 2009 27 Directors’ Declaration The Directors of the Company declare that: 1. The financial statements and notes and the remuneration disclosures that are contained in the Remuneration report in the Directors’ report, are in accordance with the Corporations Act 2001 and: a. Give a true and fair view of the Company’s and the Group’s financial position as at 30 June 2009 and of their performance for the year ended on that date; and b. Comply with Australian Accounting Standards and the Corporations Regulations 2001. 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 give a true and fair view; and c. The financial statements and notes for the financial year comply with the Accounting Standards. 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. There are reasonable grounds to believe that the Company and its subsidiaries identified in Note 23 will be able to meet any obligations or liabilities to which they are or may become subject to by virtue of the Deed of Cross Guarantee between the Company and those Group entities pursuant to ASIC Class Order 98/1418. This declaration is made in accordance with a resolution of the Board of Directors. Dr J F Puttick Chairman S M L Lake Managing Director and Chief Executive Officer Brisbane Dated this 28th day of August 2009 28 GBST HOLDINGS LIMITED ABN 85 010 488 874 Consolidated Income Statements FOR THE YEAR ENDED 30 JUNE 2009 Revenue Other income GBST GROUP GBST HOLDINGS Note 30 Jun 2009 $’000 30 Jun 2008 $’000 30 Jun 2009 $’000 30 Jun 2008 $’000 61,924 720 62,644 60,740 85 60,825 28,258 1,823 30,081 31,741 1,290 33,031 Product delivery and support expenses (41,348) (32,902) (11,301) (14,379) Cost of third party product sold Property and equipment expenses Corporate and administrative expenses Impairment charges Finance costs Finance income PROFIT BEFORE INCOME TAX Income tax benefit/(expense) PROFIT FOR THE PERIOD PROFIT ATTRIBUTABLE TO MEMBERS OF THE PARENT COMPANY Basic earnings per share (cents) Diluted earnings per share (cents) (2,402) (6,993) (5,438) (1,138) (3,408) 109 2,026 103 2,129 2,129 3.90 3.90 (901) (5,288) (8,232) (2,288) (1,825) 364 9,753 (3,621) 6,132 6,132 12.44 12.37 3 3 4 32 32 (1,619) (3,718) (4,376) (886) (5,388) 7,929 10,722 (1,790) 8,932 (779) (3,224) (4,692) (2,288) (2,017) 1,735 7,387 (2,721) 4,666 8,932 4,666 The accompanying notes are all an integral part of these consolidated financial statements. ANNUAL REPORT 2009 29 Consolidated Balance Sheets AS AT 30 JUNE 2009 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 Loans from related parties Financial liabilities Current tax liabilities Unearned income Liabilities on business acquisition TOTAL CURRENT LIABILITIES NON-CURRENT LIABILITIES Trade and other payables Financial liabilities Deferred tax liabilities Provisions Unearned income Liabilities on business acquisition TOTAL NON-CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Issued capital Reserves Retained earnings TOTAL EQUITY GBST GROUP GBST HOLDINGS Note 30 Jun 2009 $’000 30 Jun 2008 $’000 30 Jun 2009 $’000 30 Jun 2008 $’000 6 7 8 12 7 9 10 11 15 12 13 14 14 15 17 18 13 14 15 16 17 18 19 20 2,314 9,498 370 1,389 1,492 9,712 471 711 13,571 12,386 – 1,622 3,102 – 1,622 2,518 93,443 53,808 3,335 180 101,682 115,253 6,968 10,000 7,946 486 4,927 4,009 2,835 231 61,014 73,400 6,284 – 4,486 368 4,049 750 8 3,662 132 907 4,709 76,559 53,993 1,489 4,985 1,205 180 138,411 143,120 3,114 10,000 7,192 294 2,749 3,259 228 3,835 419 631 5,113 60,650 1,622 1,363 4,944 1,178 231 69,988 75,101 4,249 – 4,422 791 2,501 – 34,336 15,937 26,608 11,963 457 27,516 7,056 1,552 111 580 37,272 71,608 43,645 31,819 (1,156) 12,982 43,645 – 16,260 176 1,467 192 – 18,095 34,032 39,368 25,499 136 13,733 39,368 36,788 27,390 – 973 111 580 65,842 92,450 50,670 31,819 505 18,346 50,670 7,748 16,136 143 1,046 192 – 25,265 37,228 37,873 25,499 80 12,294 37,873 The accompanying notes are all an integral part of these consolidated financial statements. 30 GBST HOLDINGS LIMITED ABN 85 010 488 874 Issued Capital $’000 Treasury Shares (a) $’000 Retained Earnings $’000 Foreign Currency Translation (b) $’000 Financial Asset Reserve (c) $’000 Equity Remuneration Reserve (d) $’000 Total $’000 6,808 (31) 13,365 Consolidated Statements of Changes in Equity FOR THE YEAR ENDED 30 JUNE 2009 GBST GROUP Balance at 1 July 2007 Profit for the year Share based payments-exempt shares Share based payments-options Share Issues Exercise of options Translation of foreign controlled subsidiary Transfer to/from ordinary capital SUBTOTAL Dividends paid (Note 5) BALANCE AT 30 JUNE 2008 Balance at 1 July 2008 Profit for the year Share based payments-exempt shares Share based payments-options Share Issues Translation of foreign controlled subsidiary Translation of foreign loan Transfer to financial asset reserve Transfer to/from ordinary capital SUBTOTAL Dividends paid (Note 5) BALANCE AT 30 JUNE 2009 – 108 – 18,260 272 – 51 25,499 – 25,499 25,499 – – – 6,266 – – – 54 31,819 – 31,819 – – – – 31 – – – – – – – – – – – – – – – – – 6,132 – – – – – – 19,497 (5,764) 13,733 13,733 2,129 – – – – – – – – – – – – – 56 – 56 – 56 56 – – – – (3,487) 1,770 – – 15,862 (1,661) (2,880) – 12,982 (1,661) – – – – – – – – – – – – – – – – – – 394 – 394 – 394 68 – (64) 127 – – – (51) 80 – 80 80 – 36 49 – – – – (54) 111 – 111 20,210 6,132 44 127 18,260 303 56 – 45,132 (5,764) 39,368 39,368 2,129 36 49 6,266 (3,487) 1,770 394 – 46,525 (2,880) 43,645 ANNUAL REPORT 2009 31 Consolidated Statements of Changes in Equity FOR THE YEAR ENDED 30 JUNE 2009 CONTINUED GBST HOLDINGS Balance at 1 July 2007 Profit for the year Share based payments-exempt shares Share based payments-options Share Issues Exercise of options Transfer to ordinary capital SUBTOTAL Dividends paid (Note 5) BALANCE AT 30 JUNE 2008 Balance at 1 July 2008 Profit for the year Share based payments-exempt shares Share based payments-options Share Issues Translation of foreign controlled subsidiary Translation of foreign loan Transfer to financial asset reserve Transfer to ordinary capital SUBTOTAL Net Dividends paid (Note 5) BALANCE AT 30 JUNE 2009 Issued Capital $’000 Treasury Shares (a) $’000 Retained Earnings $’000 Foreign Currency Translation (b) $’000 Financial Asset Reserve (c) $’000 Equity Remuneration Reserve (d) $’000 Total $’000 6,808 – 108 – 18,260 272 51 25,499 – 25,499 25,499 – – – 6,266 – – – 54 31,819 – 31,819 – – – – – – – – – – – – – – – – – – – – – – 13,393 4,666 – – – – – 18,059 (5,765) 12,294 12,294 8,932 – – – – – – – 21,226 (2,880) 18,346 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 394 – 394 – 394 68 – (64) 127 – – (51) 80 – 80 80 – 36 49 – – – – (54) 111 – 111 20,269 4,666 44 127 18,260 272 – 43,638 (5,765) 37,873 37,873 8,932 36 49 6,266 – – 394 – 53,550 (2,880) 50,670 a. During the year ended 30 June 2009, nil (2008: 36,844) shares were issued from the Trust to meet the exercise of employee options. GBST ESOP Pty Ltd held nil shares in GBST at 30 June 2009 (2008: nil). 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 translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations as well as from the translation of liabilities that hedge the Company’s net investment in a foreign subsidiary. c. The financial assets reserve records the revaluation of financial assets, classified as available for sale. d. The equity remuneration 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 are all an integral part of these consolidated financial statements. 32 GBST HOLDINGS LIMITED ABN 85 010 488 874 Consolidated Cash Flow Statements FOR THE YEAR ENDED 30 JUNE 2009 Acquisition of businesses (net of cash acquired) 25(d) (39,032) (31,235) CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers Payments to suppliers and employees Interest income Sundry income Finance costs Income tax paid NET CASH PROVIDED BY/(USED IN) OPERATING ACTIVITIES CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of plant & equipment Purchase of plant & equipment Purchase of software intangibles Proceeds/(payments) of 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 Proceeds from borrowings Repayment of borrowings Dividends paid NET CASH PROVIDED BY/(USED IN) FINANCING ACTIVITIES NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at beginning of the financial year CASH AND CASH EQUIVALENTS AT END OF FINANCIAL YEAR 25(b) GBST GROUP GBST HOLDINGS Note 30 Jun 2009 $’000 30 Jun 2008 $’000 30 Jun 2009 $’000 30 Jun 2008 $’000 74,695 (51,906) 109 681 (3,382) (1,577) 49,929 (37,015) 364 89 (1,533) (5,451) 31,230 36,578 (19,257) (23,585) 84 7 (3,310) (1,577) 232 3 (1,665) (5,563) 18,620 6,383 7,177 6,000 40 (1,103) (1,184) 3 (680) (168) – 17 – – 22 (3,127) 40 (630) (1,170) (42,081) 13,513 17 – 2 (406) (50) – (32,528) 21 (3,127) (41,262) (35,185) (30,311) (36,088) (153) – – 53,497 (27,480) (2,880) 22,984 342 129 471 (64) 31 273 20,000 (1,000) (5,764) 13,476 (15,326) 15,455 (59) – – 53,497 (27,480) (2,880) 23,078 (10) – 273 20,000 (1,000) (5,765) 13,498 (56) (16,590) (1,135) 15,455 129 (1,191) (1,135) The balance for the purpose of the statement comprises cash and cash equivalents as well as bank overdrafts (see Note 14). The accompanying notes are all an integral part of these consolidated financial statements. ANNUAL REPORT 2009 33 Notes to and forming part of the Consolidated Financial Statements FOR THE YEAR ENDED 30 JUNE 2009 The company therefore has a current asset balance of $13.57 million, and a current liability balance of $34.34 million at 30 June 2009, a net current asset deficiency of $20.77 million. $10.00 million of this deficiency is in respect of the loan from Crown Financial Pty Ltd, of which the repayment date has been extended from January 2010 to February 2012. A further $4.01 million is in respect of current liabilities owing to vendors for business acquisitions. The balance is payable through a cash payment and the issue of additional equity as prescribed in the relevant business acquisition sale and purchase agreements. Total current loan repayments of $5.78 million under the commercial bill and GBP loan facility are payable in fixed quarterly instalments over the next twelve months and will be funded by earnings generated over that period. 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. In assessing the power to govern, the existence and effect of holdings of actual and potential voting rights are considered. A list of controlled entities is contained in Note 23 of the financial statements. All controlled entities have a June financial year end. As at reporting date, the assets and liabilities of all controlled entities have been incorporated into the consolidated financial statements as well as their results for the year then ended. Where controlled entities have entered (left) the consolidated Group during the year, their operating results have been included (excluded) from the date control was obtained (ceased). All inter-company balances and transactions between entities in the consolidated entity, including any unrealised profits or losses, have been eliminated on consolidation. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with those adopted by the parent entity. This consolidated financial report was authorised for issue in accordance with a resolution of Directors on 28 August 2009. The Company is an entity to which ASIC Class Order 98/100 dated 10 July 1998 applies and, accordingly, amounts in the financial statements and Directors’ report have been rounded off to the nearest thousand dollars, unless otherwise stated. Note 1. Statement of Signifi cant Accounting Policies Reporting entity GBST Holdings Limited (the “Company”) 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. Basis of preparation 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 (AASB). Australian Accounting Standards set out accounting policies that the AASB has concluded would result in a financial report containing relevant and reliable information about transactions, events and conditions to which they apply. Compliance with Australian Accounting Standards ensures that the financial statements and notes also comply with International Financial Reporting Standards. Material accounting policies adopted in the preparation of this financial report are presented below. They have been consistently applied unless otherwise stated. Basis of measurement The financial report has been prepared on an accruals basis and is based on historical costs, modified, where applicable, by the measurement at fair value of selected non-current assets, financial assets and financial liabilities. Current ratio As noted in the After Balance Sheet Events in the Directors’ report, and Note 14 of the Financial Statements, GBST entered into an agreement with Crown Financial Pty Ltd on 29 June 2009 to extend the term of the $10.00 million loan facility from January 2010 to February 2012, subject to shareholder approval. This approval from the shareholders was granted at an Extraordinary General Meeting held on 21 August 2009. Under the requirements of the Australian Accounting Standards Board, AASB 101 – Presentation of Financial Statements, paragraph 69 (d) the company is required to show this loan as a current liability at the balance sheet date of 30 June 2009, because the company did not have the unconditional right to defer settlement of the liability for a period of at least twelve months after the reporting period. 34 GBST HOLDINGS LIMITED ABN 85 010 488 874 Business combinations Business combinations occur where control over another business is obtained and results in the consolidation of its assets and liabilities. All business combinations, including those involving entities under common control, are accounted for by applying the purchase method. The purchase method requires an acquirer of the business to be identified and for the cost of the acquisition and fair values of identifiable assets, liabilities and contingent liabilities to be determined as at acquisition date, being the date that control is obtained. Cost is determined as the aggregate of fair values of assets given, equity issued and liabilities assumed in exchange for control, together with costs directly attributable to the business combination. Any deferred consideration payable is discounted to present value using the entity’s incremental borrowing rate. Goodwill is recognised initially as the excess of cost over the acquirer’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If the fair value of the acquirer’s interest is greater than cost, the surplus is immediately recognised in profit or loss. Income tax The income tax expense (revenue) for the year comprises current income tax expense (income) and deferred tax expense (income). Current income tax expense charged to the profit or loss is the tax payable on taxable income calculated using applicable income tax rates enacted, or substantially enacted, as at reporting date. Current tax liabilities (assets) are therefore measured at the amounts expected to be paid to (recovered from) the relevant taxation authority. Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during the year as well unused tax losses. Current and deferred income tax expense (income) is charged or credited directly to equity instead of the profit or loss when the tax relates to items that are credited or charged directly to equity. Deferred tax assets and liabilities are ascertained based on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets also result where amounts have been fully expensed but future tax deductions are available. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss. Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates enacted or substantively enacted at reporting date. Their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability. Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised. Where temporary differences exist in relation to investments in subsidiaries, branches, associates, and joint ventures, deferred tax assets and liabilities are not recognised where the timing of the reversal of the temporary difference can be controlled and it is not probable that the reversal will occur in the foreseeable future. Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred tax assets and liabilities are offset where a legally enforceable right of set-off exists, the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur in future periods in which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled. Tax consolidation The Company and its wholly-owned Australian resident entities are part of a tax-consolidated Group. As a consequence, all members of the tax-consolidated Group are taxed as a single entity. The head entity within the tax-consolidated group is GBST Holdings Limited. The implementation date of the tax-consolidation group was 1 July 2003. The current and deferred tax amounts for the tax- consolidated group are allocated among the entities in the group using a ‘stand-alone taxpayer’ approach whereby each entity in the tax-consolidated group measures its current and deferred taxes as if it continued to be a separately taxable entity in its own right. Deferred tax assets and deferred tax liabilities are measured by reference to the carrying amounts of the assets and liabilities in the Company’s balance sheet and their tax values applying under tax consolidation. ANNUAL REPORT 2009 35 Notes to and forming part of the Consolidated Financial Statements FOR THE YEAR ENDED 30 JUNE 2009 CONTINUED Note 1. Statement of Signifi cant Accounting Policies continued Any current tax liabilities (or assets) and deferred tax assets arising from unused tax losses assumed by the head entity from the subsidiaries in the tax-consolidated group are recognised in conjunction with any tax funding arrangement amounts (refer below). Any difference between these amounts is recognised by the Company as an equity contribution to or distribution from the subsidiary. Distributions firstly reduce the carrying amount of the investment in the subsidiary are then recognised as revenue. The Company recognises deferred tax assets arising from unused tax losses of the tax-consolidated Group to the extent that it is probable that future taxable profits of the tax-consolidated Group will be available against which the asset can be utilised. Any subsequent period adjustments to deferred tax assets arising from unused tax losses assumed from subsidiaries are recognised by the head entity only. The members of the tax-consolidated Group have entered into a tax funding arrangement which sets out the funding obligations of members of the tax-consolidated Group in respect of tax amounts. The tax funding arrangements require payments to/from the head entity equal to the current tax liability (asset) assumed by the head entity and any tax-loss deferred tax asset assumed by the head entity. The members of the tax-consolidated Group have also entered into a valid Tax Sharing Agreement under the tax consolidation legislation which sets out the allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations and the treatment of entities leaving 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. Bank overdrafts are shown within financial liabilities on the balance sheet. Inventories Inventories are measured at the lower of cost and net realisable value. Work in progress is stated at the aggregate of long term project development contract costs incurred to date plus recognised profits less any recognised losses and progress billings. Contract costs include all costs directly related to specific contracts, costs that are specifically chargeable to the customer under the terms of the contract and an allocation of overhead expenses incurred in connection with the consolidated entity’s activities in general. Plant and equipment Plant and equipment are carried at cost, 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 Depreciation rate Basis Owned plant, equipment Leased plant, equipment 10–67% 10–40% Straight-Line Straight-Line 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. 36 GBST HOLDINGS LIMITED ABN 85 010 488 874 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. 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. Intangible assets The Group’s major intangible assets are software systems, customer contracts and goodwill. Acquired both separately and from a business combination Software systems and customer contracts 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, ranging from five to ten years. 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. 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. Development costs are capitalised only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable and the Group intends to and has sufficient resources to complete development and to use or sell the asset. The cost capitalised includes the cost of materials, direct labour and overhead costs that are directly attributable to preparing the asset for its intended use. Capitalised development costs are amortised over their useful life and are measured at cost less accumulated amortisation. 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, ranging from one to ten years. 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 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 Financial assets A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset. ANNUAL REPORT 2009 37 Notes to and forming part of the Consolidated Financial Statements FOR THE YEAR ENDED 30 JUNE 2009 CONTINUED Note 1. Statement of Signifi cant Accounting Policies continued An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount, and the present value of the estimated future cash flows discounted at the original effective interest rate. An impairment loss in respect of an available-for-sale financial asset is calculated by reference to its fair value. Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics. All impairment losses are recognised in profit or loss. Any cumulative loss in respect of an available-for-sale financial asset recognised previously in equity is transferred to profit or loss. An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. For financial assets measured at amortised cost and available-for-sale financial assets that are debt securities, the reversal is recognised in profit or loss. For available-for-sale financial assets that are equity securities, the reversal is recognised directly in equity. Non-financial assets The carrying amounts of the Group’s non-financial assets, other than deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists then the asset’s recoverable amount is estimated. For goodwill and intangible assets that have indefinite lives or that are not yet available for use, the recoverable amount is estimated each year at the same time. The recoverable amount of an asset is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the “cash-generating unit”). The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to cash-generating units that are expected to benefit from the synergies of the combination. An impairment loss is recognised if the carrying amount of an asset exceeds its recoverable amount. Impairment losses are recognised in profit or loss. 38 GBST HOLDINGS LIMITED ABN 85 010 488 874 An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. Financial instruments Recognition and initial measurement Financial instruments, incorporating financial assets and financial liabilities, are recognised when the entity becomes a party to the contractual provisions of the instrument. Trade date accounting is adopted for financial assets that are delivered within timeframes established by marketplace convention. Financial instruments are initially measured at fair value plus transactions costs where the instrument is not classified as at fair value through profit or loss. Transaction costs related to instruments classified as at fair value through profit or loss are expensed to profit or loss immediately. Financial instruments are classified and 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. They comprise investments in the equity of other entities where there is neither a fixed maturity nor fixed or determinable payments. Fair value is determined with reference to market prices. Unrealised gains and losses arising from changes in fair value are taken directly to equity other than for impairment (see below). Financial liabilities Non-derivative financial liabilities are subsequently measured at amortised cost, using the effective interest rate method. Fair value Fair value is determined based on current bid prices for all quoted investments. 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. An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. For available-for-sale financial assets that are equity securities, the reversal is recognised directly in equity. Derecognition Financial assets are derecognised where the contractual rights to receipt of cash flows expires or the asset is transferred to another party whereby the entity no longer has any significant continuing involvement in the risks and benefits associated with the asset. Financial liabilities are derecognised where the related obligations are either discharged, cancelled or expire. 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. Those cashflows are discounted using market yields on national government bonds with terms to maturity that match the expected timing of cashflows. Contributions are made by the Group to defined contribution superannuation funds and are charged as expenses when incurred. Equity-settled compensation The Group operates equity-settled share-based payment employee share and option schemes. The fair value of the equity to which employees become entitled is measured at grant date and recognised as an expense over the vesting period, with a corresponding increase to an equity account. The fair value of shares is ascertained as the market bid price. The fair value of options is ascertained using a Black– Scholes pricing model which incorporates all market vesting conditions. The number of shares and options expected to vest is reviewed and adjusted at each reporting date such that the amount recognised for services received as consideration for the equity instruments granted shall be based on the number of equity instruments that eventually vest. Revenue and other income Revenue is measured at the fair value of the consideration received or receivable after taking into account any trade discounts and volume rebates allowed. Any consideration deferred is treated as the provision of finance and is discounted at a rate of interest that is generally accepted in the market for similar arrangements. The difference between the amount initially recognised and the amount ultimately received is interest revenue. Software license fee revenue Revenue received in advance for software usage rental is recognised over the period of the usage. However, to the extent that GBST has fulfilled all its obligations under the contract, the license income is recognised as being earned at the time when all GBST’s obligations under the contract have been fulfilled. Maintenance/support revenue for licensed software Unearned income is recognised upon receipt of payment for maintenance/support contracts. Revenue is brought to account over time as it is earned. However, to the extent that GBST has fulfilled all its obligations under the contract, the income is recognised as being earned at the time when all GBST’s obligations under the contract have been fulfilled. Implementation and consulting services revenue Revenue for implementation and consulting services is recognised in proportion to the stage of completion. Project services revenue 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. When the outcome of a long-term service contract can be estimated reliably, contract revenue and expenses are recognised in the profit and loss account by reference to the stage of completion of the contract activity at the balance sheet date. The stage of completion is assessed by reference to the completion of a physical proportion of the contract work to date for each contract. When the outcome of a long-term service contract cannot be estimated reliably, revenue is recognised ANNUAL REPORT 2009 39 Notes to and forming part of the Consolidated Financial Statements FOR THE YEAR ENDED 30 JUNE 2009 CONTINUED Note 1. Statement of Signifi cant Accounting Policies continued only to the extent of contract costs incurred that are probable to be recoverable and contract costs are recognised as an expense in the period in which they are incurred. An expected loss on a contract is recognised immediately in profit or loss. Sale of goods Revenue from the sale of goods is recognised at the point of delivery as this corresponds to the transfer of significant risks and rewards of ownership of the goods and the cessation of all involvement in those goods. All revenue is stated net of the amount of goods and services tax (GST). Interest revenue Interest revenue is recognised using the effective interest rate method, which, for floating rate financial assets, is the rate inherent in the instrument. Dividend revenue Dividend revenue is recognised when the right to receive a dividend has been established. 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. Earnings per share The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Group by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which comprise share options granted to employees. Segment reporting A segment is a distinguishable component of the Group that is engaged either in providing related products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and returns that are different from those of other segments. Segment information is presented in respect of the Group’s business and geographical segments. The Group’s primary format for segment reporting is based on business segments. The business segments are determined based on the Group’s management and internal reporting structure. Inter-segment pricing is determined on an arm’s length basis. Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Segment capital expenditure is the total cost incurred during the period to acquire property, plant and equipment, and intangible assets other than goodwill. Foreign currency transactions and balances Functional and presentation currency The functional currency of each of the Group’s entities is measured using the currency of the primary economic environment in which that entity operates. The consolidated financial statements are presented in Australian dollars which is the parent entity’s functional and presentation currency. Transaction and balances Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the year-end exchange rate. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined. Exchange differences arising on the translation of monetary items are recognised in the income statement, except where deferred in equity as a qualifying cash flow or net investment hedge. Exchange differences arising on the translation of non- monetary items are recognised directly in equity to the extent that the gain or loss is directly recognised in equity, otherwise the exchange difference is recognised in the income statement. 40 GBST HOLDINGS LIMITED ABN 85 010 488 874 Group companies Critical accounting estimates and judgments The financial results and position of foreign operations whose functional currency is different from the Group’s presentation currency are translated as follows: a. Assets and liabilities are translated at year-end exchange rates prevailing at that reporting date; b. Income and expenses are translated at average exchange rates for the period; and c. Retained earnings are translated at the exchange rates prevailing at the date of the transaction. Exchange differences arising on translation of foreign operations are transferred directly to the Group’s foreign currency translation reserve in the balance sheet. These differences are recognised in the income statement in the period in which the operation is disposed. Hedge of net investment in foreign operation Foreign currency differences arising on the retranslation of a financial liability designated as a hedge of a net investment in a foreign operation are recognised directly in equity, in the foreign currency translation reserve, to the extent that the hedge is effective. To the extent that the hedge is ineffective, such differences are recognised in the profit or loss. When the hedged part of a net investment is disposed of, the associated cumulative amount in equity is transferred to profit or loss as an adjustment to the profit or loss on disposal. Note 2. Revenue a. Revenue Sales revenue Revenue from licence and service sales Revenue from sale of third party product b. Other income Net profit on sale of plant & equipment Other revenue Management fee income from controlled entity 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: (cid:129) classification of financial liabilities; (cid:129) revenue recognition; (cid:129) (cid:129) assessment of the fair value of assets and liabilities acquired in the Emu and Coexis acquisitions (Note 25); impairment testing of the consolidated entity’s cash- generating units containing goodwill (Note 11); (cid:129) share based payments (Note 31); and (cid:129) determination on whether contingent consideration will be achieved. 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. GBST GROUP GBST HOLDINGS 30 Jun 2009 $’000 30 Jun 2008 $’000 30 Jun 2009 $’000 30 Jun 2008 $’000 58,414 3,510 61,924 59,691 1,049 60,740 19 701 – 720 (4) 89 – 85 26,238 2,020 28,258 19 148 1,656 1,823 30,827 914 31,741 1 62 1,227 1,290 ANNUAL REPORT 2009 41 Notes to and forming part of the Consolidated Financial Statements FOR THE YEAR ENDED 30 JUNE 2009 CONTINUED Note 3. Profi t for the Year Profit before income tax expense includes the following items of revenue and expense: a. Expenses Cost of third party product sold Finance costs(b) Depreciation & amortisation(c) Operating lease rentals Research & developments costs Employee benefits expense(d) b. Finance costs Foreign currency losses Interest paid to external entities Interest paid to director related entities Interest paid to controlled entities Finance lease charges Facility fees c. Depreciation & amortisation Depreciation of plant & equipment Amortisation of tangible & intangible leased assets Amortisation of intangibles (excluding leased assets) d. Employee benefits expense Monetary based expense Share based payments expense e. Significant items The following significant expense items are relevant in explaining the financial performance: Impairment charge on investment in listed shares Impairment of software intangible Impairment charge on customer contract intangible Amortisation of intangibles Termination payments to employees f. Finance income Foreign currency gains Other entities Controlled entities 42 GBST HOLDINGS LIMITED ABN 85 010 488 874 GBST GROUP GBST HOLDINGS 30 Jun 2009 $’000 30 Jun 2008 $’000 30 Jun 2009 $’000 30 Jun 2008 $’000 2,402 3,408 6,816 2,512 5,539 901 1,825 4,054 1,913 8,045 1,619 5,388 1,139 1,458 2,261 779 2,017 940 1,277 4,522 32,374 24,618 11,924 13,057 273 1,542 600 – 33 960 292 1,438 – – 18 77 3,408 1,825 1,071 83 5,662 6,816 932 9 3,113 4,054 – 1,541 600 2,324 16 907 5,388 465 52 622 1,139 – 1,408 – 529 3 77 2,017 455 8 477 940 32,289 24,447 85 171 32,374 24,618 11,839 85 11,924 12,886 171 13,057 394 492 252 5,677 680 7,495 – 109 – 109 2,288 – – 3,116 178 5,582 – 364 – 364 394 492 – 637 342 2,288 – – 480 178 1,865 2,946 2,986 921 4,022 7,929 – 234 1,501 1,735 Note 4. Income Tax Expense a. The components of tax expense comprise Current tax Deferred tax (Note 15) Under/(over) provision in respect of prior years b. The prima facie tax on profit from ordinary activities before income tax is reconciled to income tax as follows Operating profit Prima facie tax payable at 30% Adjust for tax effect of: Amortisation of customer contracts Impairment charge on investment in listed shares Research & development expenditure claim Capital Investment Allowance Under/(over) provision in respect of prior years Tax losses carried back (Note 15) Current year losses for which no deferred tax asset was recognised (Note 15) Other non-allowable items (net) Effect of different tax rates of subsidiaries operating in other jurisdictions INCOME TAX ATTRIBUTABLE TO ENTITY Weighted average effective tax rates: GBST GROUP GBST HOLDINGS 30 Jun 2009 $’000 30 Jun 2008 $’000 30 Jun 2009 $’000 30 Jun 2008 $’000 1,606 (1,180) (529) (103) 2,026 608 551 118 (452) (47) (509) (1,003) 655 (54) 30 (103) (5%) 4,713 (1,135) 43 3,621 9,753 2,926 405 686 (489) – 43 – – 29 21 3,621 37% 2,544 (218) (537) 1,790 10,722 3,217 – 118 (190) (45) (537) – – (773) – 1,790 17% 2,778 (119) 62 2,721 7,387 2,216 – 686 (256) – 62 – – 13 – 2,721 37% The 42% decrease compared to 2008 in the weighted average effective consolidated tax rate has resulted primarily from the tax losses carried back from an acquired subsidiary $1.00 million (2008: nil). The 20% decrease compared to 2008 in the weighted average effective company rate has resulted primarily from the non-allowable foreign exchange gains and losses ($2.66 million : tax effect $798 thousand); and impairment of investment in listed shares ($394 thousand : tax effect $118 thousand – refer (i) below). i. The consolidated group and the company have not brought to account a deferred tax asset relating to the tax benefit on the impairment of the investment in listed shares due to the uncertainty of realisation of this capital loss. ANNUAL REPORT 2009 43 Notes to and forming part of the Consolidated Financial Statements FOR THE YEAR ENDED 30 JUNE 2009 CONTINUED Note 5. Dividends Provision for dividend on ordinary shares – – – – GBST GROUP GBST HOLDINGS 30 Jun 2009 $’000 30 Jun 2008 $’000 30 Jun 2009 $’000 30 Jun 2008 $’000 Dividend paid in the period: Interim fully franked ordinary dividend of 1.5 cents (2008: 5.5 cents) 2008 final fully franked ordinary dividend of 4 cents (2007: 6 cents) per share paid in 2008 TOTAL DIVIDENDS PAID Dividend received on Treasury Shares NET DIVIDEND PAID Franking credit balance: 867 2,766 867 2,766 2,013 2,880 – 2,999 5,765 (1) 2,013 2,880 – 2,999 5,765 – 2,880 5,764 2,880 5,765 Balance of franking account at year end 7,733 6,644 7,733 6,644 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 FRANKING CREDITS AVAILABLE FOR FUTURE REPORTING PERIODS 294 368 294 368 – (862) – (862) 8,027 6,150 8,027 6,150 The above available amounts are based on the balance of the dividend franking account at year-end adjusted for: a. franking credits that will arise from the payment of the current tax liabilities; b. franking debits that will arise from the payment of dividends recognised as a liability at the year end; c. franking credits that will arise from the receipt of dividends recognised as receivables by the tax consolidated group at the year end; and d. franking credits that the entity may be prevented from distributing in subsequent years. Note 6. Cash and Cash Equivalents Cash at bank and on hand GBST GROUP GBST HOLDINGS 30 Jun 2009 $’000 30 Jun 2008 $’000 30 Jun 2009 $’000 30 Jun 2008 $’000 2,314 2,314 1,492 1,492 8 8 228 228 44 GBST HOLDINGS LIMITED ABN 85 010 488 874 Note 7. Trade and Other Receivables Current Trade receivables(a) Controlled entities Other amounts receivable Non-Current receivables Controlled entities(a) Other amounts receivable GBST GROUP GBST HOLDINGS 30 Jun 2009 $’000 30 Jun 2008 $’000 30 Jun 2009 $’000 30 Jun 2008 $’000 9,358 – 140 9,498 – – – 9,207 – 505 9,712 – – – 3,526 32 104 3,662 3,231 210 394 3,835 76,559 60,650 – – 76,559 60,650 a. Trade debtor terms range between 14 to 30 days. Included in the Group’s trade receivable balance are debtors with a carrying amount of $3.51 million (2008: $1.98 million) which are past due at the reporting date for which the Group has not provided as there has not been a significant change in the credit quality and the Group believes that the amounts are still considered recoverable. The weighted average age of these receivables is 85 days (2008: 86 days). Included in the company’s trade receivable balance are debtors with a carrying amount of $907 thousand (2008: $244 thousand) which are past due at the reporting date for which the company has not provided as there has not been a significant change in the credit quality and the Group believes that the amounts are still considered recoverable. The weighted average age of these receivables is 79 days (2008: 65 days). b. Non-current intercompany balances are long term and interest bearing using the average overdraft rate of 9.69% p.a. (2008: 8.94% p.a.). Except for one, short term balances are non-interest bearing and repayable on demand. Note 8. Inventories Current – at cost Inventory on hand Work in progress Note 9. Financial Assets Non-Current Investment in controlled entities at cost (Note 23) Investment in listed shares at fair value(a) GBST GROUP GBST HOLDINGS 30 Jun 2009 $’000 30 Jun 2008 $’000 30 Jun 2009 $’000 30 Jun 2008 $’000 15 355 370 25 446 471 – 132 132 25 394 419 GBST GROUP GBST HOLDINGS 30 Jun 2009 $’000 30 Jun 2008 $’000 30 Jun 2009 $’000 30 Jun 2008 $’000 – 1,622 1,622 – 1,622 1,622 52,371 1,622 53,993 – 1,622 1,622 a. At 31 December 2008 the fair value of the investment shareholding in Razor Risk Technologies Limited (formerly IT&e Limited) resulted in an impairment charge of $394 thousand to the profit and loss. At 30 June 2009 fair valuing this investment resulted in a credit of $394 thousand to the Financial Asset Reserve in equity. ANNUAL REPORT 2009 45 Notes to and forming part of the Consolidated Financial Statements FOR THE YEAR ENDED 30 JUNE 2009 CONTINUED Note 10. Plant and Equipment Owned plant and equipment at cost Provision for depreciation Leased plant and equipment at cost Provision for amortisation GBST GROUP GBST HOLDINGS 30 Jun 2009 $’000 30 Jun 2008 $’000 30 Jun 2009 $’000 30 Jun 2008 $’000 9,668 (6,804) 2,864 313 (75) 238 7,644 (5,287) 2,357 168 (7) 161 4,063 (2,679) 1,384 148 (43) 105 3,441 (2,220) 1,221 148 (6) 142 TOTAL PLANT AND EQUIPMENT 3,102 2,518 1,489 1,363 a. Movement in plant and equipment GBST GROUP Year ended 30 June 2008 Balance at the beginning of the year Additions Additions through the acquisition of controlled entities Disposals Depreciation expense Effect of movements in exchange rates Owned $’000 Leased $’000 Total $’000 1,290 850 1,193 (43) (933) – – 168 – – (7) – 1,290 1,018 1,193 (43) (940) – CARRYING AMOUNT AT THE END OF THE YEAR 2,357 161 2,518 Year ended 30 June 2009 Balance at the beginning of the year Additions Additions through the acquisition of controlled entities Disposals Depreciation expense Effect of movements in exchange rates CARRYING AMOUNT AT THE END OF THE YEAR 2,357 1,103 533 (20) (1,071) (38) 2,864 161 145 – – (68) – 238 2,518 1,248 533 (20) (1,139) (38) 3,102 46 GBST HOLDINGS LIMITED ABN 85 010 488 874 Note 10. Plant and Equipment continued a. Movement in plant and equipment continued GBST HOLDINGS Year ended 30 June 2008 Balance at the beginning of the year Additions Disposals Depreciation expense CARRYING AMOUNT AT THE END OF THE YEAR Year ended 30 June 2009 Balance at the beginning of the year Additions Disposals Depreciation expense CARRYING AMOUNT AT THE END OF THE YEAR Note 11. Intangible Assets At Cost Software systems Accumulated amortisation NET CARRYING VALUE Customer contracts Accumulated amortisation NET CARRYING VALUE Goodwill NET CARRYING VALUE Leased software Provision for amortisation Owned $’000 Leased $’000 Total $’000 1,290 419 (33) (455) 1,221 1,221 630 (2) (465) 1,384 – 148 – (6) 142 1,290 567 (33) (461) 1,363 142 1,363 – – (37) 105 630 (2) (502) 1,489 GBST GROUP GBST HOLDINGS 30 Jun 2009 $’000 30 Jun 2008 $’000 30 Jun 2009 $’000 30 Jun 2008 $’000 39,321 (6,915) 32,406 13,487 (3,570) 9,917 51,098 51,098 39 (17) 22 18,190 (2,757) 15,433 8,100 (1,350) 6,750 31,588 31,588 39 (2) 37 3,704 (2,091) 1,613 – – – 3,350 3,350 39 (17) 22 3,026 (1,469) 1,557 – – – 3,350 3,350 39 (2) 37 TOTAL INTANGIBLES 93,443 53,808 4,985 4,944 ANNUAL REPORT 2009 47 Notes to and forming part of the Consolidated Financial Statements FOR THE YEAR ENDED 30 JUNE 2009 CONTINUED Note 11. Intangible Assets continued a. Movement in intangibles GBST GROUP Year ended 30 June 2008 Balance at the beginning of the year Additions Additions through the acquisition of controlled entities Disposals Amortisation charge Effect of movements in exchange rates Year ended 30 June 2009 Balance at the beginning of the year Additions Additions through the acquisition of controlled entities Remeasurement of contingent consideration Disposals Write down Amortisation charge Effect of movements in exchange rates Software Systems $’000 Customer Contracts $’000 Goodwill $’000 Leased Software $’000 1,989 168 – – 3,350 – 15,044 8,100 28,238 (5) – (1,763) (1,350) – – – – – 15,433 1,184 6,750 31,588 – – 21,394 6,168 – – (492) (3,382) (1,731) – – (252) (2,280) (469) 9,917 25,949 (4,695) – – – (1,744) 51,098 – 39 – – (2) – 37 37 – – – – – (15) – 22 CARRYING AMOUNT AT THE END OF THE YEAR 15,433 6,750 31,588 CARRYING AMOUNT AT THE END OF THE YEAR 32,406 GBST HOLDINGS Year ended 30 June 2008 Balance at the beginning of the year Additions Disposals Amortisation charge CARRYING AMOUNT AT THE END OF THE YEAR Year ended 30 June 2009 Balance at the beginning of the year Additions Disposals Write down Amortisation charge CARRYING AMOUNT AT THE END OF THE YEAR Software Systems $’000 Customer Contracts $’000 Goodwill $’000 Leased Software $’000 1,989 50 (5) (477) 1,557 1,557 1,170 – (492) (622) 1,613 – – – – – – – – – – – 3,350 – – – 3,350 3,350 – – – – 3,350 – 39 – (2) 37 37 – – – (15) 22 48 GBST HOLDINGS LIMITED ABN 85 010 488 874 Total $’000 5,339 207 51,382 (5) (3,115) – 53,808 53,808 1,184 53,511 (4,695) – (744) (5,677) (3,944) 93,443 Total $’000 5,339 89 (5) (479) 4,944 4,944 1,170 – (492) (637) 4,985 Note 11. Intangible Assets continued a. Movement in intangibles continued 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 Impairment testing of customer contracts in the UK due to a change in the customer base determined that the carrying amount of the UK customer contracts relating to Wealth Management was higher than its recoverable amount and an impairment loss of $252 thousand was recognised at December 2008. Goodwill is allocated to cash-generating units (CGU) which are based on the group’s reporting segments. Broker segment Wealth Management segment Coexis segment Financial Services segment TOTAL GOODWILL 30 Jun 2009 $’000 30 Jun 2008 $’000 3,350 28,238 18,624 886 51,098 3,350 28,238 – – 31,588 Broker Services segment goodwill relates to the 2005 Palion acquisition which has been fully integrated within the Broker segment. The Wealth Management segment goodwill relates to the InfoComp acquisition – see Note 25 (d). The Coexis segment goodwill relates to the Coexis acquisition – see Note 25 (d). The Financial Services segment goodwill relates to the Emu acquisition – see Note 25 (d). The recoverable amount of goodwill has been assessed using value in use calculations for each CGU. Key assumptions used for value-in-use calculations Value-in-use The cash-generating unit impairment tests are based on value in use calculations, using discounted cash flow projections based on actual operating results, the budgets and five-year strategic plans, approved by the Board and updated where appropriate. For the financial year ending 2010, management has used the 2010 financial budget approved by the Board. For future financial years, forecast projections or the current business strategic plan have been used. The assumptions are generally consistent with past performance or are based upon the Group’s view of future market activity. Growth and Discount Rates Growth rates used were generally determined by factors such as industry sector, the market to which the CGU is dedicated, the size of the business, geographic location, past performance and other industry factors. In particular for the emerging UK market for Coexis and Wealth Management segment’s existing products, successful penetration into the market is assumed. The long term growth rate used to extrapolate the cash forecasts beyond the five year period is 3%. Discount rates are pre-tax and are adjusted to incorporate the risks associated with the industries and countries the business operates in and are as follows: Broker Wealth Management Coexis Financial Services CONSOLIDATED PRE–TAX DISCOUNT RATE AUST 15% 15% – 20% UK – 20% 20% – ANNUAL REPORT 2009 49 Notes to and forming part of the Consolidated Financial Statements FOR THE YEAR ENDED 30 JUNE 2009 CONTINUED Note 11. Intangible Assets continued Impact of possible changes to assumptions With regard to the assessment of the value-in-use of the CGUs, management has conducted sensitivity analysis on the effect of a change in the respective key assumptions on the carrying value of each CGU. For all the CGUs, management believe that as the recoverable amount exceeds the carrying amount of the CGU assets, any reasonable possible change in the assumptions would not have a material impact on the recoverable amount of the goodwill. Impairment There is no impairment loss to any of the cash generating units containing goodwill in the 2009 financial year. Note 12. Other Assets Current Prepaid expenditure Non-Current Prepaid expenditure Note 13. Trade and Other Payables Current (unsecured) Trade payables & accruals Controlled entities Non-Current (unsecured) Trade payables & accruals Controlled entities GBST GROUP GBST HOLDINGS 30 Jun 2009 $’000 30 Jun 2008 $’000 30 Jun 2009 $’000 30 Jun 2008 $’000 1,389 180 180 711 231 231 907 180 180 631 231 231 GBST GROUP GBST HOLDINGS 30 Jun 2009 $’000 30 Jun 2008 $’000 30 Jun 2009 $’000 30 Jun 2008 $’000 6,968 6,284 – – 6,968 6,284 457 – 457 – – – 3,114 – 3,114 457 36,331 36,788 2,268 1,981 4,249 – 7,748 7,748 50 GBST HOLDINGS LIMITED ABN 85 010 488 874 Note 14. Financial Liabilities Loan from Related Parties Current GBST GROUP GBST HOLDINGS 30 Jun 2009 $’000 30 Jun 2008 $’000 30 Jun 2009 $’000 30 Jun 2008 $’000 Loan from director related entity (secured) 10,000 – 10,000 – Other Financial Liabilities Current Bank overdraft (secured) Commercial bill facility (secured) Loan of GBP £7,500,000 (secured) Commercial loan facility (secured) Finance lease liability (Note 21) Non-Current Commercial bill facility (secured) Loan of GBP £7,500,000 (secured) Commercial loan facility (secured) Finance lease liability (Note 21) TOTAL SECURED LIABILITIES 1,843 2,700 3,080 147 176 7,946 15,000 12,320 – 196 27,516 45,090 1,363 – – 3,000 123 4,486 – – 16,000 260 16,260 20,363 1,199 2,700 3,080 147 66 7,192 15,000 12,320 – 70 27,390 44,446 1,363 – – 3,000 59 4,422 – – 16,000 136 16,136 20,363 The bank overdraft, Commercial Bill, GBP loan facility and commercial loan facility are provided by National Australia Bank Limited. The facilities are secured by fixed and floating charges over the operating companies within the group. The commercial bill and GBP loan facilities expire on 31 October 2010, with quarterly principal repayments. Interest rates under the facility are variable. At 30 June 2009 the interest rate for the commercial bill was 6.45% p.a. and the GBP Loan was 5.01% p.a. The covenants within the bank borrowings require that the National Australia Bank debt to earnings before interest, tax, depreciation and amortisation (Senior Operating Leverage) is not greater than 2 to 1 in the first twelve months of the facility and not greater than 1.5 to 1 going forward; dividend payout is 50% or less and debt service cost to earnings before interest, tax, depreciation and amortisation is to exceed 1.5 to 1. In respect of the bank facilities, totalling $35.09 million at 30 June 2009, the company failed to meet the Senior Operating Leverage Ratio for the period ended 30 June 2009 and therefore has a breach of the covenant. The bank has indicated no action will be taken at this time other than to renegotiate the liabilities after year end. The carrying amount of group non-current assets secured is $101.68 million. The loan from a director related entity is sub-ordinated debt provided by Crown Financial Pty Ltd, an entity related to Mr J Sundell. The loan facility expires on the 1 January 2010. The terms of the loan including interest rates are on arm’s length terms. Interest is payable at a rate of 10% p.a. The company entered into an agreement with Crown Financial Pty Ltd to extend the term of the loan to February 2012, subject to shareholder approval that was granted on 21 August 2009. ANNUAL REPORT 2009 51 Notes to and forming part of the Consolidated Financial Statements FOR THE YEAR ENDED 30 JUNE 2009 CONTINUED Note 15. Tax a. Liabilities Current Income tax Non-Current Deferred tax liability comprises: Tax allowances relating to property, plant and equipment Tax allowances relating to intangibles Other b. Assets Non-Current Deferred tax assets comprise: Unused tax losses Provisions and prepaid income Other items Transaction costs on equity issue c. Reconciliations i. Gross Movement GBST GROUP GBST HOLDINGS 30 Jun 2009 $’000 30 Jun 2008 $’000 30 Jun 2009 $’000 30 Jun 2008 $’000 486 368 294 791 61 6,995 – 7,056 588 2,463 284 – 176 – – 176 588 2,139 60 48 – – – – – 1,164 41 – 143 – – 143 – 1,070 60 48 3,335 2,835 1,205 1,178 The overall movement in the deferred tax account is as follows: Opening balance Additions through the acquisition of controlled entities Charged to income statement Translation Charge to equity CLOSING BALANCE ii. Deferred Tax Liability a. 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 Additions through the acquisition of controlled entities Charged to income statement Translation CLOSING BALANCE 2,660 (8,251) 1,180 737 (47) 964 609 1,135 – (48) 1,035 – 218 – (47) 964 – 119 – (48) (3,721) 2,660 1,205 1,035 176 8,251 (633) (737) 7,056 174 – 2 – 176 143 – (143) – – 174 – (31) – 143 52 GBST HOLDINGS LIMITED ABN 85 010 488 874 Note 15. Tax continued c. Reconciliations continued iii. Deferred Tax Assets a. The movement in deferred tax asset for each temporary difference during the year is as follows: Provisions and prepaid income Opening balance Additions through the acquisition of controlled entities Charged to income statement CLOSING BALANCE Other Items Opening balance Charged to income statement CLOSING BALANCE Transaction costs on equity issue Opening balance Charged directly to equity CLOSING BALANCE Unused tax losses Opening balance Additions through the acquisition of controlled entities Charged to income statement CLOSING BALANCE b. Deferred tax assets not brought to account, the benefits of which will only be realised if the conditions for deductibility set out in Note 1: Income Tax occur: – tax losses: operating losses – tax losses: capital losses – temporary differences Note 16. Provisions Long-Term Employee benefits Asset retirement provision GBST GROUP GBST HOLDINGS 30 Jun 2009 $’000 30 Jun 2008 $’000 30 Jun 2009 $’000 30 Jun 2008 $’000 2,140 – 323 2,463 60 224 284 47 (47) – 588 – – 588 655 118 – 903 308 929 2,140 140 (80) 60 95 (48) 47 – 301 287 588 – 1,029 – 1,071 – 93 903 – 168 1,164 1,071 60 (19) 41 47 (47) – – – – – – 118 – 140 (80) 60 95 (48) 47 – – – – – 686 – GBST GROUP GBST HOLDINGS 30 Jun 2009 $’000 30 Jun 2008 $’000 30 Jun 2009 $’000 30 Jun 2008 $’000 974 578 1,552 1,000 467 1,467 656 317 973 738 308 1,046 ANNUAL REPORT 2009 53 Notes to and forming part of the Consolidated Financial Statements FOR THE YEAR ENDED 30 JUNE 2009 CONTINUED Long–term Employee benefits $’000 Asset Retirement $’000 1,000 332 (197) (69) (92) 974 467 111 – – – Total $’000 1,467 443 (197) (69) (92) 578 1,552 Long–term Employee benefits $’000 Asset Retirement $’000 Total $’000 738 124 (78) (60) (68) 656 308 1,046 9 – – – 317 133 (78) (60) (68) 973 GBST GROUP GBST HOLDINGS 30 Jun 2009 $’000 30 Jun 2008 $’000 30 Jun 2009 $’000 30 Jun 2008 $’000 4,927 4,927 4,049 4,049 2,749 2,749 2,501 2,501 111 111 192 192 111 111 192 192 Note 16. Provisions continued GBST GROUP Balance at the beginning of the year Additional provisions Transfer to payables Amounts used Unused amounts reversed BALANCE AT 30 JUNE 2009 GBST HOLDINGS Balance at the beginning of the year Additional provisions Transfer to payables Amounts used Unused amounts reversed BALANCE AT 30 JUNE 2009 Note 17. Unearned Income Current Non-trade amounts payable to: Revenue received in advance for software usage and support services Non-Current Revenue received in advance for software usage and support services 54 GBST HOLDINGS LIMITED ABN 85 010 488 874 Note 18. Liabilities on Business Acquisition Current Amount owing to vendors in respect of acquisition Non-Current Amount owing to vendors in respect of acquisition Note 19. Issued Capital 57,819,853 (June 2008: 50,296,733) fully paid ordinary shares Movements in issued capital: Opening balance Transfer from options reserve *Various dates Employee zero exercise options scheme Share issues during the year: 31 July 2007 Employee exempt share scheme 31 August 2007 Acquisition of InfoComp 1 October 2008 Acquisition of Emu 9 December 2008 Acquisition of Coexis *Various dates Employee deferred options scheme *Various dates Employee exempt options scheme Ordinary Shares Opening balance Share issues during the year: GBST GROUP GBST HOLDINGS 30 Jun 2009 $’000 30 Jun 2008 $’000 30 Jun 2009 $’000 30 Jun 2008 $’000 4,009 4,009 580 580 750 750 – – 3,259 3,259 580 580 – – – – GBST GROUP GBST HOLDINGS 30 Jun 2009 $’000 30 Jun 2008 $’000 30 Jun 2009 $’000 30 Jun 2008 $’000 31,819 31,819 25,499 25,499 31,819 31,819 25,499 25,499 25,499 6,808 25,499 6,808 – 54 – – 250 6,016 – – 51 – 108 18,260 – – 272 – – 54 – – 250 6,016 – – 51 – 108 18,260 – – 272 – 31,819 25,499 31,819 25,499 No. No. No. No. 50,296,733 45,013,562 50,296,733 45,013,562 31 July 2007 Employee exempt share scheme 31 August 2007 Acquisition of InfoComp 1 October 2008 Acquisition of Emu 9 December 2008 Acquisition of Coexis *Various dates Employee zero exercise options scheme – – 27,432 4,935,183 – – 27,432 4,935,183 171,939 7,336,007 13,842 – – – 171,939 7,336,007 13,842 – – – *Various dates Employee deferred options scheme – 210,000 – 210,000 *Various dates Employee exempt options scheme 1,332 110,556 1,332 110,556 57,819,853 50,296,733 57,819,853 50,296,733 * There were numerous share issues during the year as employees exercised options. ANNUAL REPORT 2009 55 Notes to and forming part of the Consolidated Financial Statements FOR THE YEAR ENDED 30 JUNE 2009 CONTINUED Note 19. Issued Capital continued 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. The Company does not have an amount of authorised capital. Options For details on options over ordinary shares, see Note 31. Capital Management The Board and Management controls the capital of the group in order to ensure that the group can fund its operations and continue as a going concern as well as provide the shareholders with optimal returns. The group also aims to maintain a capital structure that ensures the lowest cost of capital available to the entity. The Board’s policy is to build and maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Board monitors the capital mix, share price, as well as the return on capital. Total borrowings Less cash and cash equivalents NET DEBT Total equity TOTAL DEBT AND EQUITY Gearing ratio The group’s capital includes ordinary share capital, reserves and retained earnings, bank facilities, other financial liabilities; supported by financial assets. Management effectively manages the group’s capital by assessing the group’s financial risks and adjusting its capital structure in response to changes in these risks and in the market. These responses include the management of debt levels, distributions to shareholders and share issues. During the 2009 year, the group paid dividends of $2.88 million (2008: $5.76 million). The entity currently has a target dividend payout ratio of up to 50%. This is subject to regular review depending on the current circumstances of the entity. The group took on additional debt in the current year to finance its acquisition activity and the current gearing ratio (net debt/total debt and equity) of 50% (2008: 33%) is within the target range of between 30% and 50%. The gearing ratios for the year ended 30 June 2009 and 30 June 2008 are as follows: GBST GROUP GBST HOLDINGS 30 Jun 2009 $’000 30 Jun 2008 $’000 30 Jun 2009 $’000 30 Jun 2008 $’000 45,462 2,314 43,148 43,645 86,793 20,746 1,492 19,254 39,368 58,622 44,582 8 44,574 50,670 95,244 20,558 228 20,330 37,873 58,203 50% 33% 47% 35% The group is not subject to any externally imposed capital requirements, other than the facility covenants set out in Note 14. 56 GBST HOLDINGS LIMITED ABN 85 010 488 874 Note 20. Reserves Equity Remuneration Reserve(a),(b) Foreign Currency Translation Reserve(c) Financial Asset Reserve(d) GBST GROUP GBST HOLDINGS 30 Jun 2009 $’000 30 Jun 2008 $’000 30 Jun 2009 $’000 30 Jun 2008 $’000 111 (1,661) 394 (1,156) 80 56 – 136 111 – 394 505 80 – – 80 a. 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. b. The share remuneration reserve records total cost of share issues less amortisation expense, based on a vesting period of three years and employee employment status. The actual shares were issued at grant date. c. The foreign currency translation reserve records exchange differences arising on translation of a foreign controlled subsidiary and Great British Pound loan. d. The financial asset reserve records revaluation of financial assets. Note 21. Capital, Leasing and Other Commitments GBST GROUP GBST HOLDINGS 30 Jun 2009 $’000 30 Jun 2008 $’000 30 Jun 2009 $’000 30 Jun 2008 $’000 a. Finance leasing 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 14) Non-current (Note 14) 202 205 407 (35) 372 176 196 372 150 281 431 (48) 383 123 260 383 75 74 149 (13) 136 66 70 136 75 149 224 (29) 195 59 136 195 Finance leases relate to items of plant and equipment and have options to acquire the items on termination. b. Non-cancellable operating leases Lease amounts are payable: Not later than one year Later than one year but not later than five years Later than five years 2,912 5,980 – 8,892 1,759 5,293 1,008 8,060 1,644 5,186 – 6,830 1,268 4,865 1,008 7,141 Non-cancellable leases include rental premises with original lease terms up to eight years. The lease agreements require that the minimum lease payments shall be increased by incremental contingent rentals based on market or CPI. Certain leases contain options to renew at the end of their term. ANNUAL REPORT 2009 57 Notes to and forming part of the Consolidated Financial Statements FOR THE YEAR ENDED 30 JUNE 2009 CONTINUED Note 21. Capital, Leasing and Other Commitments continued GBST GROUP GBST HOLDINGS 30 Jun 2009 $’000 30 Jun 2008 $’000 30 Jun 2009 $’000 30 Jun 2008 $’000 56 56 – – 56 495 495 – – 495 26 26 – – 26 495 495 – – 495 GBST GROUP GBST HOLDINGS 30 Jun 2009 $ 30 Jun 2008 $ 30 Jun 2009 $ 30 Jun 2008 $ 222,542 – 52,091 – – – – 172,833 222,542 – – – 274,633 172,833 222,542 24,500 82,620 107,120 – – – 24,500 39,200 63,700 – – – 73,183 73,183 – – – – 9,359 – 6,120 c. Capital and other expenditure commitments Contracted for: Capital and other operating purchases Payable Not later than one year Later than one year but not later than five years Later than five years Note 22. Auditors’ Remuneration Audit Services KPMG Australia Audit & review of financial reports Other regulatory audit services Overseas KPMG firms Audit & review of financial reports Other Auditors Audit & review of financial reports Other Services KPMG Australia Other assurance services Taxation services Other Auditors Taxation services 58 GBST HOLDINGS LIMITED ABN 85 010 488 874 Note 23. Other Group Entities a. Controlled Entities Consolidated Group entity GBST Pty Ltd Emu Design (Qld) Pty Ltd GBST ESOP Pty Ltd Coexis Limited GBST Australia Pty Ltd Subsidiaries of Coexis Limited: Coexis Inc Coexis Software Ltd Subsidiaries of GBST Australia Pty Ltd: GBST Hong Kong Limited InfoComp Pty Ltd ICP Holdings Pty Ltd Subsidiaries of ICP Holdings Pty Ltd: InfoComp UK Limited GBST UK Holdings Limited Subsidiaries of GBST UK Holdings Ltd: GBST Hosting Limited ICP London Limited b. Acquisition of Controlled Entities Country of Incorporation Percentage owned Australia 100% (June 2008: 100%) Australia 100% (June 2008: nil) Australia 100% (June 2008: 100%) United Kingdom 100% (June 2008: nil) Australia 100% (June 2008: 100%) United States of America 100% (June 2008: nil) United Kingdom 100% (June 2008: nil) Hong Kong 100% (June 2008: 100%) Australia 100% (June 2008: 100%) Australia 100% (June 2008: 100%) Australia 95.9% (June 2008: 95.9%) United Kingdom 100% (June 2008: nil) United Kingdom 100% (June 2008: nil) United Kingdom 100% (June 2008: nil) On 1 October 2008 GBST Holdings Limited acquired 100% of ‘Emu Design (Qld) Pty Ltd’, with GBST Holdings Limited entitled to all profits earned from purchase date, for a purchase consideration of $1.30 million. On 9 December 2008 GBST Holdings Limited acquired 100% of ‘Coexis Limited’, with GBST Holdings Limited entitled to all profits earned from purchase date, for a purchase consideration of $51.07 million. c. Controlled Entities which ceased trading One of the subsidiaries of InfoComp ceased trading on 31 March 2009. d. Deed of Cross Guarantee Pursuant to ASIC Class Order 98/1418 (as amended), a number of wholly-owned controlled entities as listed below are relieved from the Corporations Act 2001 requirements for preparation, audit and lodgement of financial reports and Directors’ Report. It is a condition of the class order that the Company and each of the controlled entities enter into a Deed of Cross Guarantee (“Deed”). The effect of the Deed is that the Company guarantees to each creditor payment in full of any debt in the event of winding up any of the controlled entities under certain provisions of the Corporations Act 2001. If a winding up occurs under other provisions of the Corporations Act 2001, the Company will only be liable in the event that after six months any creditor has not been paid in full. The controlled entities have also given similar guarantees in the event that the Company is wound up. ANNUAL REPORT 2009 59 Notes to and forming part of the Consolidated Financial Statements FOR THE YEAR ENDED 30 JUNE 2009 CONTINUED Note 23. Other Group Entities continued d. Deed of Cross Guarantee continued The controlled entities subject to the Deed are: (cid:129) GBST Pty Ltd (cid:129) GBST Australia Pty Ltd (cid:129) InfoComp Pty Ltd (cid:129) GBST ESOP Pty Ltd (cid:129) ICP Holdings Pty Ltd (cid:129) Emu Design (Qld) Pty Ltd A consolidated income statement and consolidated balance sheet, comprising the Company and controlled entities which are party to the Deed, after eliminating all transactions between parties to the Deed of Cross Guarantee, at 30 June 2009 is set out as follows: Financial information in relation to: i. Income Statement Profit before income tax Income tax expense PROFIT AFTER INCOME TAX PROFIT ATTRIBUTABLE TO MEMBERS OF THE PARENT ENTITY ii. Retained Earnings Retained profits at the beginning of the year Retained profits of subsidiaries acquired Profit after income tax Dividends provided for or paid RETAINED EARNINGS AT THE END OF THE YEAR CLOSED GROUP AND PARTIES TO DEED OF CROSS GUARANTEE 30 Jun 2009 $’000 30 Jun 2008 $’000 3,098 (773) 2,325 2,325 6,860 (4,111) 2,749 2,749 12,096 13,365 – 2,325 (2,880) 11,541 1,746 2,749 (5,764) 12,096 60 GBST HOLDINGS LIMITED ABN 85 010 488 874 Note 23. Other Group Entities continued d. Deed of Cross Guarantee continued iii. Balance Sheet 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 Investment Deferred tax assets Other assets TOTAL NON-CURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES Trade and other payables Loans from related parties Financial liabilities Current tax liabilities Unearned income Liabilities on business acquisition TOTAL CURRENT LIABILITIES NON-CURRENT LIABILITIES Trade and other payables Financial liabilities Deferred tax liabilities Provisions Unearned income Liabilities on business acquisition TOTAL NON-CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS CLOSED GROUP AND PARTIES TO DEED OF CROSS GUARANTEE 30 Jun 2009 $’000 30 Jun 2008 $’000 1,535 6,825 270 941 1,045 8,829 419 674 9,571 10,967 3,009 1,622 2,466 51,357 42,039 2,502 180 103,175 112,746 5,017 10,000 7,946 294 4,320 4,009 – 1,644 2,513 53,604 – 2,247 231 60,239 71,206 6,390 – 4,486 368 4,049 – 31,586 15,293 457 27,516 7,056 1,491 111 580 37,211 68,797 43,949 – 16,260 176 1,467 192 – 18,095 33,388 37,818 ANNUAL REPORT 2009 61 Notes to and forming part of the Consolidated Financial Statements FOR THE YEAR ENDED 30 JUNE 2009 CONTINUED Note 23. Other Group Entities continued d. Deed of Cross Guarantee continued iii. Balance Sheet continued EQUITY Issued capital Reserves Retained earnings Note 24. Financing Arrangements Financing facilities(a) Amount utilised UNUSED CREDIT FACILITIES CLOSED GROUP AND PARTIES TO DEED OF CROSS GUARANTEE 30 Jun 2009 $’000 30 Jun 2008 $’000 31,819 589 11,541 43,949 25,499 223 12,096 37,818 GBST GROUP GBST HOLDINGS 30 Jun 2009 $’000 30 Jun 2008 $’000 30 Jun 2009 $’000 30 Jun 2008 $’000 50,011 (44,016) 5,995 23,669 (21,049) 2,620 49,665 23,467 (44,586) (20,847) 5,079 2,620 a. This amount comprises bank loans, a multi-option facility and a fully utilised loan from related parties of $10.00 million. The bank loans and multi-option facility are secured by a registered charge over the assets of the group. The bank loan facility has a two year term, with quarterly principal repayments. Interest rates under the facility are variable. The multi-option facility includes an overdraft, bill facility, letter of credit, bank guarantees, purchasing card and revolving lease limit. The multi-option facility is subject to annual review and has a number of other commercial terms and conditions. The revolving lease limit 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. There are no conditions/covenants in place and drawdown is subject to the bank’s acceptance of assets proposed for financing under the facility. The loan from related parties is sub-ordinated debt provided by Crown Financial Pty Ltd, an entity related to Mr J Sundell, a director of the Company. The loan facility expires on the 1 January 2010. The terms of the loan including interest rates are on arm’s length terms. Interest is payable at a rate of 10% p.a. The company entered into an agreement with Crown Financial Pty Ltd to extend the term of the loan to February 2012, subject to shareholder approval that was granted on 21 August 2009. 62 GBST HOLDINGS LIMITED ABN 85 010 488 874 Note 25. Cash Flow Information a. Reconciliation of net cash provided by operating activities to profit after income tax Profit after income tax Non-cash flows in operating profit: Depreciation and amortisation Write down of assets Write down on investments (Profit)/loss on sale of plant & equipment Share based payments expensed Changes in assets and liabilities: (Increase)/decrease in receivables (Increase)/decrease in other assets Increase/(decrease) in unearned income (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 Unrealised gains/losses GBST GROUP GBST HOLDINGS 30 Jun 2009 $’000 30 Jun 2008 $’000 30 Jun 2009 $’000 30 Jun 2008 $’000 2,129 6,132 8,932 4,666 6,816 4,054 252 886 (39) 85 13,166 (255) 203 372 (1,483) (1,969) (1,597) 54 – – 2,288 4 171 (2,994) (112) (2,560) 440 763 (2,609) 738 68 – 1,139 – 886 (39) 85 (1,955) (225) 167 287 (170) (497) 1,303 (73) (2,663) 7,177 940 – 2,288 (1) 171 (84) (334) 127 (419) (71) (1,289) 89 (83) – 6,000 CASH FLOW FROM OPERATIONS 18,620 6,383 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 6) Bank overdraft (Note 14) 2,314 (1,843) 471 1,492 (1,363) 129 8 (1,199) (1,191) 228 (1,363) (1,135) c. Non-cash financing activities During the 2009 financial year the group acquired plant and equipment and software with an aggregate value of $145 thousand (2008: $207 thousand) by means of finance leases; $294 thousand (2008: $nil) by means of equipment loan and the company acquired plant and equipment and software with an aggregate value of $nil (2008: $187 thousand) by means of finance leases; $294 thousand (2008: $nil) by means of equipment loan. During the year the following ordinary shares were issued as non-cash consideration: Coexis acquisition Emu acquisition Employee zero exercise options scheme Employee exempt options scheme These items are not reflected in the Statement of Cash Flows. Number Issue Price 7,336,007 171,939 13,842 1,332 $0.8200 $1.4540 $3.9000 $0.7505 ANNUAL REPORT 2009 63 Notes to and forming part of the Consolidated Financial Statements FOR THE YEAR ENDED 30 JUNE 2009 CONTINUED Note 25. Cash Flow Information continued d. Acquisition of Business The group acquired ‘Coexis’, a leading global provider of software for the securities industry, on 9 December 2008. The purchase was allocated as follows: Purchase consideration Transaction costs TOTAL PURCHASE CONSIDERATION This was funded by: 7,336,007 ordinary shares(a) Cash consideration CONSIDERATION PAID Amounts yet to be paid(b) 1,414,000 ordinary shares to be issued(a) GBST GROUP GBST HOLDINGS 30 Jun 2009 $’000 30 Jun 2008 $’000 30 Jun 2009 $’000 30 Jun 2008 $’000 49,866 1,200 51,066 6,016 41,193 47,209 2,698 1,159 51,066 – – – – – – – – – – – – – – – – – – – – – – – – – – – a. Market price at purchase date $0.82 b. At acquisition date there were contingent consideration payments estimated at $4.2 million which have been subsequently remeasured to zero. Assets and liabilities acquired at acquisition date: Intellectual property – software systems Intellectual property – customer contracts Deferred tax liability on intangible property Property, plant and equipment Cash Other assets Payables and provisions Goodwill TOTAL GBST GROUP GBST HOLDINGS 30 Jun 2009 $’000 30 Jun 2008 $’000 30 Jun 2009 $’000 30 Jun 2008 $’000 21,336 6,168 (8,251) 494 2,943 12,413 (4,405) 30,698 20,368 51,066 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – The goodwill is attributable to the significant synergies expected to arise after the acquisition of software systems. The transaction will significantly increase GBST’s global reach and expansion via Coexis’ existing international customers, prospects and distribution channels. The assets and liabilities arising from the acquisition are recognised at fair value which is equal to their carrying value. Since its acquisition on 9 December 2008 Coexis has incurred a loss before tax amounting to $130 thousand which is included in the consolidated income statement for the year. 64 GBST HOLDINGS LIMITED ABN 85 010 488 874 Note 25. Cash Flow Information continued d. Acquisition of Business continued The group acquired ‘Emu Design (Qld)’, a specialist in a wide range of services including web development, graphic design, product design, corporate identity design and IT and software solutions, on 1 October 2008. The purchase was allocated as follows: Purchase consideration Transaction costs TOTAL PURCHASE CONSIDERATION This was funded by: 171,939 ordinary shares(a) Cash consideration CONSIDERATION PAID Amounts yet to be paid(b) GBST GROUP GBST HOLDINGS 30 Jun 2009 $’000 30 Jun 2008 $’000 30 Jun 2009 $’000 30 Jun 2008 $’000 1,173 131 1,304 250 888 1,138 166 1,304 – – – – – – – – – – – – – – – – – – – – – – – – a. Market price at purchase date $1.45 b. At acquisition date there were contingent consideration payments estimated at $500 thousand which have been subsequently remeasured to zero. Assets and liabilities acquired at acquisition date: Property, plant and equipment Cash Trade and other receivables Payables and provisions Goodwill TOTAL GBST GROUP GBST HOLDINGS 30 Jun 2009 $’000 30 Jun 2008 $’000 30 Jun 2009 $’000 30 Jun 2008 $’000 97 107 789 (575) 418 886 1,304 – – – – – – – – – – – – – – – – – – – – – The goodwill recognised on the acquisition is attributable mainly to the skills and technical talent of the acquired business’ workforce and the synergies expected to be achieved from integrating the Company into the Group’s existing Financial Services business. The assets and liabilities arising from the acquisition are recognised at fair value which is equal to their carrying value. Since its acquisition on 1 October 2008 Emu has incurred a loss before tax amounting to $422 thousand which is included in the consolidated income statement for the year. Had the results of Emu and Coexis been consolidated for the full year, consolidated revenue would have been $71.32 million and consolidated profit before tax $2.61 million. ANNUAL REPORT 2009 65 Notes to and forming part of the Consolidated Financial Statements FOR THE YEAR ENDED 30 JUNE 2009 CONTINUED Note 25. Cash Flow Information continued d. Acquisition of Business continued In the prior comparative year the group acquired ‘InfoComp Pty Ltd, ICP Holdings Pty Ltd and its subsidiaries’, a software developer of highly regarded and advanced funds administration and registry software for the wealth management industry, and the dominant provider to Australian wrap and master trusts, on 31 August 2007. The purchase was allocated as follows: Purchase consideration Transaction costs TOTAL PURCHASE CONSIDERATION This was funded by: 4,935,183 ordinary shares(a) Cash consideration CONSIDERATION PAID AT 31 AUGUST 2007 Amounts yet to be paid a. Market price at purchase date $3.70 Assets and liabilities acquired at acquisition date: Intellectual property – software systems Intellectual property – customer contracts Cash Future income tax benefit Other assets Payables and provisions Borrowings Goodwill TOTAL GBST GROUP GBST HOLDINGS 30 Jun 2009 $’000 30 Jun 2008 $’000 30 Jun 2009 $’000 30 Jun 2008 $’000 – – – – – – – – 54,849 945 55,794 18,260 36,784 55,044 750 55,794 – – – – – – – – – – – – – – – – GBST GROUP GBST HOLDINGS 30 Jun 2009 $’000 30 Jun 2008 $’000 30 Jun 2009 $’000 30 Jun 2008 $’000 – – – – – – – – – – 15,000 8,100 5,549 609 6,643 (8,131) (214) 27,556 28,238 55,794 – – – – – – – – – – – – – – – – – – – – The goodwill is attributable to the high profitability of the acquired business and significant synergies expected to arise after the acquisition of software systems. The assets and liabilities arising from the acquisition are recognised at fair value which is equal to their carrying value. Profit before tax amounting to $2.33 million is included in the consolidated income statement for the year 30 June 2008. Had the results of InfoComp been consolidated for the full year, consolidated revenue would have been $65.68 million and consolidated profit $9.79 million for the year 30 June 2008. 66 GBST HOLDINGS LIMITED ABN 85 010 488 874 Note 26. Segment Reporting The Broker Services division supports and provides software solutions to stockbrokers and banks in connection with share trading, margin lending and option trading in Australia, Hong Kong and New Zealand. The Wealth Management division supports and provides software solutions to fund managers, superannuation providers and wrap account providers in connection with client and investment management in Australia and the United Kingdom. The Wealth Management division also provides a Union membership management system for use in Australia and New Zealand. Financial Services is a wholesale provider of independent, market-leading financial product data and related services to financial advisors and institutions. The Coexis division through the Syn platform, provide next-generation technology to process equities, derivatives, fixed income and managed funds transactions to global capital markets. Primary Reporting – Business Segments BROKER SERVICES WEALTH MANAGEMENT FINANCIAL SERVICES COEXIS ELIMINATIONS GBST GROUP 30 Jun 2009 $’000 30 Jun 2008 $’000 30 Jun 2009 $’000 30 Jun 2008 $’000 30 Jun 2009 $’000 30 Jun 2008 $’000 30 Jun 2009 $’000 30 Jun 2008 $’000 30 Jun 2009 $’000 30 Jun 2008 $’000 30 Jun 2009 $’000 30 Jun 2008 $’000 REVENUE Sales to external customers 28,276 31,741 23,485 28,999 1,251 Inter-segment revenues – – – 42 267 TOTAL SEGMENT REVENUE 28,276 31,741 23,485 29,041 1,518 – – – 8,912 121 9,033 8,044 7,350 (442) 3,864 (792) – (1,485) – – – – – – 61,924 60,740 (388) (42) – – (388) (42) 61,924 60,740 – – 5,325 11,214 – – (3,299) (1,461) 2,026 9,753 103 (3,621) 2,129 6,132 13,363 14,506 55,016 58,894 690 – 46,184 – – – 115,253 73,400 – – 115,253 73,400 12,908 8,922 23,356 25,110 365 – 34,979 – – – 71,608 34,032 – – 71,608 34,032 RESULT Segment result Unallocated expenses net of unallocated revenue NET FINANCE COSTS Profit before income tax Income tax expense PROFIT AFTER INCOME TAX ASSETS Segment assets Unallocated assets TOTAL ASSETS LIABILITIES Segment liabilities Unallocated liabilities TOTAL LIABILITIES OTHER Capital Expenditure 1,801 759 445 51,676 1,084 – 44,469 Depreciation and amortisation of segment assets 1,139 940 3,602 3,115 Other non-cash segment expenses 973 2,459 252 – 59 – – – 2,016 – – – – – – – – 47,799 52,435 – – 6,816 4,054 1,225 2,459 ANNUAL REPORT 2009 67 Notes to and forming part of the Consolidated Financial Statements FOR THE YEAR ENDED 30 JUNE 2009 CONTINUED Note 26. Segment Reporting continued Secondary Reporting – Geographical Segments SEGMENT REVENUES FROM EXTERNAL CUSTOMERS CARRYING AMOUNT OF SEGMENT ASSETS ACQUISITIONS OF NON- CURRENT SEGMENT ASSETS 30 Jun 2009 $’000 30 Jun 2008 $’000 30 Jun 2009 $’000 30 Jun 2008 $’000 30 Jun 2009 $’000 30 Jun 2008 $’000 Geographical Location: Australia United Kingdom 54,765 7,159 61,924 49,146 11,594 60,740 67,698 47,555 115,253 70,548 2,852 73,400 3,014 44,785 47,799 51,002 1,433 52,435 Accounting Policies Segment revenues and expenses are those directly attributable to the segments and include any joint revenue and expenses where a reasonable basis of allocation exists. Segment assets include all assets used by a segment and consist principally of cash, receivables, inventories, intangibles and property, plant and equipment, net of allowances and accumulated depreciation and amortisation. While most such assets can be directly attributed to individual segments, the carrying amount of certain assets used jointly by two or more segments is allocated to the segments on a reasonable basis. Segment liabilities consist principally of payables, employee benefits, accrued expenses, provisions and borrowings. Segment assets and liabilities do include deferred income taxes. (cid:129) Wealth Management division provides funds administration and registry software for the wealth management industry in Australia and the United Kingdom. Major product lines of the division include: Composer, Unison and ASP Access. A controlled entity within the division ceased trading during the year. (cid:129) Financial Services is a wholesale provider of independent, market-leading financial product data and related services to financial advisors and institutions. It also provides web design, development and usability services through the Emu Design business unit. (cid:129) platform, provides next- Coexis through the Syn generation technology to process equities, derivatives, fixed income and managed funds transactions to global capital markets in Asia, Europe and North America. Intersegment Transfers Geographical segments The consolidated group’s business segments are located in Australia with the Wealth Management and Coexis division also having operations in the United Kingdom. The Broker Services division has a customer base in South East Asia from sales to Australian entities. Segment revenues, expenses and results include transfers between segments. The prices charged on intersegment transactions are the same as those charged for similar goods to parties outside of the consolidated group at an arm’s length. These transfers are eliminated on consolidation. Business and Geographical Segments The consolidated group has the following four business segments: (cid:129) Broker Services division provides client accounting and securities transaction technology solutions for the finance, banking and securities industry in Australia and South East Asia. Major product lines of the division include: Shares, Palion, Margin Lending, Business Continuity Service, Business Interface and CMT. 68 GBST HOLDINGS LIMITED ABN 85 010 488 874 Note 27. Financial Risk Management a. Financial Risk Management Policies The Group’s principal financial instruments comprise of accounts receivable and payable, bank accounts, loans and overdrafts, investments and finance leases. The Company’s principal financial instruments include these items and inter-company receivables/payables. The main purpose of these financial instruments is to provide operating finance to the Group. It is, and has been throughout the period under review, the Group’s policy that no trading in financial instruments shall be undertaken. The Company and the Group have exposure to the following risks from their use of financial instruments – credit risk, liquidity risk and market risk. This note presents information about the exposure to each of the above risks. Further quantitative disclosures are included throughout these consolidated financial statements. The Board of Directors has overall responsibility for the establishment and oversight of the Company and the Group’s risk management framework. Management is responsible for developing and monitoring the risk management policies, and reports to the Board. The risk management policies are established to identify and analyse the risks faced, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Financial assets Cash Loans other entities Loans controlled entities Financial liabilities Bank overdraft Bank loan Loans controlled entities The Board of Directors meet on a regular basis to analyse financial risk exposure and to evaluate treasury management strategies in the context of the most recent economic conditions and forecasts. The Executive Management Team’s overall risk management strategy seeks to assist the consolidated Group in meeting its financial targets, whilst minimising potential adverse effects on financial performance. Risk management policies are approved and reviewed by the Board on a regular basis. b. Market Risk Market risk is the risk that changes in market prices, such as foreign exchange rates, share prices and interest rates will affect income or the value of holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return. Interest rate risk The exposure to market risk for the changes in interest rates relates primarily to borrowing obligations. The policy at the present is to manage interest cost using a combination of fixed and variable rate debt. Australian variable interest rate risk At balance date, the Group had the following mix of financial assets and liabilities exposed to Australian variable interest rate risk. GBST GROUP GBST HOLDINGS 2009 $’000 2008 $’000 2009 $’000 2008 $’000 1,533 1,492 – – 16 – 1,533 1,508 1,280 17,847 – 1,363 19,000 – 19,127 20,363 8 – 76,559 76,567 636 17,847 36,331 54,814 228 16 60,650 60,894 1,363 19,000 9,729 30,092 Lease liabilities have fixed rates, all other items are variable rate. The exposure to market interest rates relates primarily to long and short term debt obligations. ANNUAL REPORT 2009 69 Notes to and forming part of the Consolidated Financial Statements FOR THE YEAR ENDED 30 JUNE 2009 CONTINUED Note 27. Financial Risk Management continued b. Market Risk continued Great British Pound variable interest rate risk At balance date, the Group had the following mix of financial assets and liabilities exposed to Great British Pound variable interest rate risk. Financial assets Cash Financial liabilities Bank overdraft Bank loan GBST GROUP GBST HOLDINGS 2009 $’000 779 779 563 15,400 15,963 2008 $’000 2009 $’000 2008 $’000 – – – – – – – 563 15,400 15,963 – – – – – Foreign currency risk c. Liquidity Risk The Group is exposed to fluctuations in foreign currencies arising from the sale and purchase of goods and services in currencies other than the Group’s measurement currency. The Group constantly monitors its foreign currency exposure, and consideration is given to alternative hedging positions. At balance sheet date the Group had exposure to movements in the exchange rate for Great British Pounds in cash and receivables of $2.77 million (2008: $2.51 million) and payables and loans of $17.79 million (2008: $644 thousand). The Company’s exposure to movements in the exchange rate for Great British Pounds is for payables and loans of $15.96 million (2008: nil) and inter-company payables of $17.64 million (2008: $1.98 million). At balance sheet date the Group had exposure to movements in the exchange rate for US Dollars in cash and receivables of $638 thousand (2008: nil) and payables of $129 thousand (2008: nil). Share price risk The Company and Group have an investment in an ASX listed Company, Razor Risk Technologies Limited (formerly IT&e Limited), (see Note 9). This is a long term shareholding, however exposure exists to movements in the market price. Liquidity risk is the risk that the Company and the Group will not be able to meet its financial obligations as they fall due. The approach to managing liquidity is to ensure, as far as possible, that there will always be sufficient liquidity to meet liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company and the Group’s reputation. The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of overdrafts, loans and finance leases. The liquidity risk is managed by monitoring forecast cash flows, the collection of trade receivables and payment of trade payables, use of borrowing facilities and ensuring that adequate unutilised borrowing facilities are maintained. d. 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. The Company’s and Group’s exposure to credit risk arises from potential default of the counter party, with a maximum exposure equal to the carrying amount of these instruments. Credit risk arises primarily from exposures to customers. The Group trades only with recognised, creditworthy third parties, and as such collateral is not requested nor is it the Group’s policy to securitise its trade and other receivables. In addition, receivables balances are monitored on an ongoing basis with the result that apart from the risks noted below, there are no other material credit risks to the Company. 70 GBST HOLDINGS LIMITED ABN 85 010 488 874 Note 27. Financial Risk Management continued d. Credit Risk continued In respect of the parent entity, credit risk also incorporates the exposure of GBST Holdings Limited to the liabilities of all members of the closed Group under the deed of cross-guarantee. Refer to Note 23 for further information. 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 29% (2008: 46%) of the Group’s revenue is derived from five customers providing financial services in Australia and the United Kingdom. Approximately 51% (2008: 57%) of the Company’s revenue is derived from five customers providing financial services in Australia. The carrying amount of the financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was: Cash and cash equivalents Trade and other receivables Other financial assets GBST GROUP CARRYING AMOUNT GBST HOLDINGS CARRYING AMOUNT 2009 $’000 2,314 9,498 1,622 2008 $’000 1,492 9,712 1,622 13,434 12,826 2009 $’000 8 80,221 1,622 81,851 2008 $’000 228 64,485 1,622 66,335 The maximum exposure to credit risk for trade and other receivables at reporting date by geographic region was: Australia UK USA GBST GROUP CARRYING AMOUNT 2009 $’000 6,521 2,352 625 9,498 2008 $’000 7,857 1,855 – 9,712 GBST HOLDINGS CARRYING AMOUNT 2009 $’000 2008 $’000 80,221 64,485 – – – – 80,221 64,485 e. Financial Instruments i. Financial instrument composition and maturity analysis The following table reflects the undiscounted contractual settlement terms for Group financial instruments of a fixed period of maturity, as well as management’s expectations of the settlement period for all other financial instruments. As such, the amounts may not reconcile to the balance sheet. ANNUAL REPORT 2009 71 Notes to and forming part of the Consolidated Financial Statements FOR THE YEAR ENDED 30 JUNE 2009 CONTINUED Note 27. Financial Risk Management continued e. Financial Instruments continued 0–1 YEARS 1–2 YEARS 2–5 YEARS OVER 5 YEARS TOTAL 2009 $’000 2008 $’000 2009 $’000 2008 $’000 2009 $’000 2008 $’000 2009 $’000 2008 $’000 2009 $’000 2008 $’000 GBST Group FINANCIAL ASSETS Cash(i) 2,314 1,492 Trade and other receivables 9,498 9,712 Available for sale financial assets 1,622 1,622 TOTAL FINANCIAL ASSETS 13,434 12,826 FINANCIAL LIABILITIES – – – – – – – – – – – – – – – – Bank loan and overdraft(i) 17,770 4,363 27,320 4,000 – 12,000 Lease facilities(ii) Liabilities on acquisition 202 4,009 150 750 Trade & other payables 6,968 6,284 184 580 320 150 – – 21 – 137 131 – – TOTAL FINANCIAL LIABILITIES 28,949 11,547 28,404 4,150 158 12,131 i. These items have variable interest rates. ii. These items have fixed interest rates. All other items are non-interest bearing. For further discussion on current ratio refer Note 1 Current Ratio. – – – – – – – – – – – – – 2,314 1,492 9,498 9,712 1,622 1,622 13,434 12,826 – 45,090 20,363 – – – – 407 4,589 431 750 7,425 6,284 57,511 27,828 The table below reflects the undiscounted contractual settlement terms for Parent Entity financial instruments of a fixed period of maturity, as well as management’s expectations of the settlement period for all other financial instruments. As such, the amounts may not reconcile to the balance sheet. 0–1 YEARS 1–2 YEARS 2–5 YEARS OVER 5 YEARS TOTAL 2009 $’000 2008 $’000 2009 $’000 2008 $’000 2009 $’000 2008 $’000 2009 $’000 2008 $’000 2009 $’000 2008 $’000 GBST Holdings FINANCIAL ASSETS Cash(i) 8 228 Trade and other receivables 3,630 3,625 Amounts receivable related parties 32 210 Available for sale financial assets 1,622 1,622 TOTAL FINANCIAL ASSETS 5,292 5,685 FINANCIAL LIABILITIES – – – – – – – – – – – – – – – – – – – – – – – 8 228 3,630 3,625 76,559 60,650 76,591 60,860 – – 1,622 1,622 – 76,559 60,650 81,851 66,335 Bank loan and overdraft(i) 17,126 4,363 27,320 4,000 – 12,000 Lease facilities(ii) Liabilities on acquisition 75 3,259 75 – Trade & other payables 3,114 2,268 580 320 74 75 – – 137 74 – – – – – – – 44,446 20,363 – – – 149 3,839 224 – 3,571 2,268 Amounts payable Controlled entities – 1,981 – – – 36,331 7,748 36,331 9,729 – – – TOTAL FINANCIAL LIABILITIES 23,574 8,687 28,294 4,075 137 12,074 36,331 7,748 88,336 32,584 i. These items have variable interest rates. ii. These items have fixed interest rates. All other items are non-interest bearing. For further discussion on current ratio refer Note 1 Current Ratio. 72 GBST HOLDINGS LIMITED ABN 85 010 488 874 Note 27. Financial Risk Management continued e. Financial Instruments continued ii. Net fair values The fair value of investments traded on active liquid markets is determined with reference to quoted market prices. Term receivables and other loans and amounts due are determined by discounting the cash flows, at market interest rates of similar items, to their present value. Other financial assets and financial liabilities net fair value approximates their carrying value. Loans payable are determined by discounting the cashflow at market interest rates of similar items, to their present value. No financial assets and financial liabilities are readily traded on organised markets in standardised form other than listed investments. Financial assets where the carrying amount exceeds net fair values have not been written down as the Group intends to hold these assets to maturity. Aggregate net fair values and carrying amounts of Group financial assets and financial liabilities at balance date. Financial assets Cash and cash equivalents Trade and other receivables Available-for-sale financial assets at fair value Financial liabilities Trade and other payables Bank loans and overdrafts Lease facilities Liabilities on business acquisition 2009 2008 Carrying Amount $’000 Net Fair Value $’000 2,314 9,498 1,622 2,314 9,498 1,622 Carrying Amount $’000 1,492 9,712 1,622 Net Fair Value $’000 1,492 9,712 1,622 13,434 13,434 12,826 12,826 7,425 45,090 372 4,589 7,425 44,684 372 4,589 6,284 20,363 383 750 6,284 20,363 383 750 57,476 57,070 27,780 27,780 Fair values are materially in line with carrying values. A discount rate of 7.15% (2008: 8.66%) has been applied to all non-current borrowings to determine fair value. ANNUAL REPORT 2009 73 Notes to and forming part of the Consolidated Financial Statements FOR THE YEAR ENDED 30 JUNE 2009 CONTINUED Note 27. Financial Risk Management continued e. Financial Instruments continued Aggregate net fair values and carrying amounts of Company financial assets and financial liabilities at balance date. 2009 2008 Financial assets Cash and cash equivalents Trade and other receivables Loans controlled entities Available-for-sale financial assets at fair value Financial liabilities Trade and other payables Loans controlled entities Bank loans and overdrafts Lease facilities Liabilities on business acquisition Carrying Amount $’000 8 3,630 76,591 1,622 81,851 3,571 36,331 44,446 136 3,839 88,323 Net Fair Value $’000 8 3,630 76,591 1,622 81,851 3,571 36,331 44,040 136 3,839 87,917 Carrying Amount $’000 228 3,625 60,860 1,622 66,335 2,268 9,729 Net Fair Value $’000 228 3,625 60,860 1,622 66,335 2,268 9,729 20,363 20,363 195 – 195 – 32,555 32,555 Fair values are materially in line with carrying values. A discount rate of 7.15% (2008: 8.66%) has been applied to all non-current borrowings to determine fair value. iii. Sensitivity analysis Interest Rate Risk, Foreign Currency Risk and Price Risk The Group has performed sensitivity analysis relating to its exposure to interest rate risk, foreign currency risk and price risk at balance date. This sensitivity analysis demonstrates the effect on the current year results and equity which could result from a change in these risks. Interest rate sensitivity analysis At 30 June 2009, the net effect on full year profit and equity as a result of changes in the interest rate on variable rate financial instruments, with all other variables remaining constant would be as follows: Increase/(decrease) in profit Increase in interest rate by 1% Decrease in interest rate by 1% GBST GROUP GBST HOLDINGS 2009 $’000 (451) 451 2008 $’000 (204) 204 2009 $’000 42 (42) 2008 $’000 (204) 204 74 GBST HOLDINGS LIMITED ABN 85 010 488 874 Note 27. Financial Risk Management continued e. Financial Instruments continued Foreign Currency Risk Sensitivity Analysis At 30 June 2009, the effect on profit and equity as a result of changes in the value of the Australian Dollar to the Great British Pound, with all other variables remaining constant is as follows: Increase/(decrease) in profit Improvement in AUD to GBP by 10% Decline in AUD to GBP by 10% Change in Equity Improvement in AUD to GBP by 10% Decline in AUD to GBP by 10% GBST GROUP GBST HOLDINGS 2009 $’000 2008 $’000 27 (27) 233 (233) 191 (191) 191 (191) 2009 $’000 32 (32) 5,283 (5,283) 2008 $’000 198 (198) 198 (198) At 30 June 2009, the effect on profit and equity as a result of changes in the value of the Australian Dollar to the US Dollar, with all other variables remaining constant is as follows: Increase/(decrease) in profit Improvement in AUD to USD by 10% Decline in AUD to USD by 10% Change in Equity Improvement in AUD to USD by 10% Decline in AUD to USD by 10% Price risk GBST GROUP GBST HOLDINGS 2009 $’000 2008 $’000 2009 $’000 2008 $’000 85 (70) 85 (70) – – – – – – – – – – – – At 30 June 2009 the net effect on profit and equity of a 1 cent (27%) change in share price in the Group’s and the Company’s listed investment, with all other variables remaining constant is $438 thousand up/down (2008: $438 thousand up/down). Note 28. Contingent liabilities As at 30 June 2009, 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 and the liabilities are considered remote. ANNUAL REPORT 2009 75 Notes to and forming part of the Consolidated Financial Statements FOR THE YEAR ENDED 30 JUNE 2009 CONTINUED Note 29. 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 D Adams A Brackin S Lake J Sundell Director (Non-executive Chairman) Director (Independent) Director (Independent) Director (Managing Director and Chief Executive Officer) Director (Non-executive) R De Dominicis Chief Executive Wealth Management D Orrock P Salis I Sanchez S Shah K Sprott Chief Executive GBST Financial Services (appointed 12 May 2008) Chief Financial Officer Chief Technology Officer Chief Executive Global Broker Services (appointed 9 December 2008) Human Resource Executive (resigned 6 February 2009) b. Key Management Personnel compensation Short-term employee benefits Post-employment benefits Other long-term benefits Share-based payments GBST GROUP GBST HOLDINGS 2009 $ 2008 $ 2,250,752 2,046,717 182,857 107,265 1,765 – 32,308 8,488 2009 $ 720,045 53,963 883 – 2008 $ 979,149 47,126 32,308 5,349 2,435,374 2,194,778 774,891 1,063,932 Detailed disclosures on compensation for Key Management Personnel are set out in the Remuneration Report included in 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. 76 GBST HOLDINGS LIMITED ABN 85 010 488 874 Note 29. Key Management Personnel Disclosures continued 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 below. 2009 Directors J Puttick D Adams A Brackin S Lake J Sundell TOTAL DIRECTORS Executives R De Dominicis D Orrock P Salis I Sanchez S Shah K Sprott TOTAL EXECUTIVES GROUP TOTAL Balance at 01/07/08 Received as Compensation Options exercised Net Change Other(i) Balance at 30/06/09 7,667,760 – 231,943 3,651,423 15,417,605 26,968,731 1,780,996 – – – – – 1,780,996 28,749,727 – – – – – – – – – – – – – – – – – – – – – – – – – – – – (360,000) – 80,000 100,000 350,543 7,307,760 – 311,943 3,751,423 15,768,148 170,543 27,139,274 – – – – 523,596 – 1,780,996 – – – 523,596 – 523,596 2,304,592 694,139 29,443,866 i. Shares purchased or sold, consideration for shareholdings purchased by Group, or excluded from disclosure due to resignation. The numbers of shares in the Company held (directly, indirectly or beneficially) during the 2008 financial year by Key Management Personnel, including their related parties, are set out below. 2008 Directors J Puttick D Adams A Brackin S Lake D Shirley J Sundell GBST ESOP Pty Ltd as trustee(ii) TOTAL DIRECTORS Executives R De Dominicis P Fowler P Salis I Sanchez K Sprott K Wallis TOTAL EXECUTIVES GROUP TOTAL Balance at 01/07/07 Received as Compensation Options exercised Net Change Other(i) Balance at 30/06/07 7,667,760 – 169,241 3,867,428 – 14,336,053 36,844 26,077,326 – – – – – 132,578 132,578 26,209,904 – – – – – – – – – – – – – – – – – – – – – – – – – – 62,702 (216,005) – 1,081,552 (36,844) 7,667,760 – 231,943 3,651,423 – 15,417,605 – 891,405 26,968,731 – – – – – 1,332 1,332 1,332 1,780,996 – – – – (133,910) 1,780,996 – – – – – 1,647,086 1,780,996 2,538,491 28,749,727 i. Shares purchased or sold, consideration for shareholdings purchased by Group, or excluded from disclosure due to resignation. ii. Shares held as trustee for the ESOP Trust (refer Note 31). ANNUAL REPORT 2009 77 Notes to and forming part of the Consolidated Financial Statements FOR THE YEAR ENDED 30 JUNE 2009 CONTINUED Note 29. Key Management Personnel Disclosures continued e. Option 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 01/07/08 Granted as Compensation Options Exercised or Sold Options Cancelled/ Forfeited Balance 30/06/09 Total Vested 30/06/09 Total Exercisable 30/06/09 Total Unexercisable 30/06/09 2009 Directors J Puttick D Adams A Brackin S Lake J Sundell TOTAL DIRECTORS Executives R De Dominicis D Orrock P Salis I Sanchez S Shah K Sprott – – – 500,000 – 500,000 – – 100,000 – – 100,000 TOTAL EXECUTIVES 200,000 GROUP TOTAL 700,000 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – (100,000) – – – 500,000 – 500,000 – – 100,000 – – – (100,000) 100,000 (100,000) 600,000 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 500,000 – 500,000 – – 100,000 – – – 100,000 600,000 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. 2008 Directors J Puttick D Adams A Brackin S Lake D Shirley J Sundell TOTAL DIRECTORS Executives R De Dominicis P Fowler P Salis I Sanchez K Sprott K Wallis Balance 01/07/07 Granted as Compensation Options Exercised or Sold Options Cancelled/ Forfeited Balance 30/06/08 Total Vested 30/06/08 Total Exercisable 30/06/08 Total Unexercisable 30/06/08 – – – – – – – – 100,000 – – – 1,332 – – – 500,000 – – 500,000 – 100,000 100,000 – 100,000 120,000 – – – – – – – – – – – – – – – – – – – (1,332) – (100,000) – – – (120,000) – – – 500,000 – – 500,000 – 100,000 100,000 – 100,000 – – – – – – – – – – – – – – – – 100,000 – – – – – 100,000 – – – – – – – 500,000 – – 500,000 – – 100,000 – 100,000 – TOTAL EXECUTIVES 101,332 420,000 (1,332) (220,000) 300,000 100,000 100,000 200,000 GROUP TOTAL 101,332 920,000 (1,332) (220,000) 800,000 100,000 100,000 700,000 78 GBST HOLDINGS LIMITED ABN 85 010 488 874 Note 30. Related Party Transactions 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 29 and the Remuneration Report. Occupancy fees paid to entities of which Mr R De Dominicis has a beneficial interest. Maximum deferred consideration payable on InfoComp acquisition to Mr R De Dominicis and associates. Interest paid on a loan to an entity of which Mr J Sundell is a Director. Maximum deferred consideration payable on Coexis acquisition to Mr S Shah and associates. 255,861 ordinary shares are to be issued. b. Transactions with Controlled Entities GBST GROUP GBST HOLDINGS 2009 $ 2008 $ 2009 $ 2008 $ 285,216 299,554 250,000 250,000 599,580 350,715 – – – – 599,580 350,715 – – – – Details of transactions & balances with controlled entities are set out in Notes 2, 3, 7, 13 and 23. c. A loan existed at 30 June 2009 with Crown Financial Pty Ltd, of which Mr Sundell is a Director Refer to further discussion at Note 14. Note 31. 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. During the 2008 financial year two further schemes were established, an Exempt Shares Plan and a Zero Exercise Price Option Scheme. A total of 671,363 (2008: 1,002,178) share options remain outstanding at 30 June 2009 under these schemes. GBST ESOP Pty Ltd, in its capacity as trustee of the GBST Employee Share Trust, held shares in GBST for subsequent allocation under the GBST Employee Option Plan. GBST ESOP Pty Ltd held nil shares in GBST at 30 June 2009 (2008: nil). During the year ended 30 June 2009, nil (2008: 36,844) shares were issued from the trust to meet the exercise of employee options. The Trust was treated as a special purpose entity and consolidated. The trust’s shareholding in the Company has been disclosed as treasury shares and deducted from equity. 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 (2008: nil), and 22,644 share options (2008: 23,976) remain outstanding at 30 June 2009. 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. In the 2008 financial year there were four separate issues of options outstanding under this scheme, and a total of 400,000 options were outstanding. During the year in respect three of those issues, 200,000 options lapsed due cessation of employment and 100,000 options lapsed as they were unexercised by 19 July 2008. The status of the other issue under this scheme at 30 June 2009 is as follows: On 24 October 2007, 100,000 options were issued to select Executive employees. The exercise price for each option is $3.92. ANNUAL REPORT 2009 79 Notes to and forming part of the Consolidated Financial Statements FOR THE YEAR ENDED 30 JUNE 2009 CONTINUED in 48 months. The third tranche of 50% vest and may be exercised after 36 months and lapse if unexercised after 60 months. During the year 13,842 options were exercised, 15,641 options were forfeited and 48,719 options remain outstanding at balance date. On cessation of employment all unvested options lapse. At the Company’s 2007 Annual General Meeting the issue of these ZEPOs was ratified and the Employee Share Option Plan Zero Exercise Price Option Scheme was approved by shareholders. Note 31. Share Based Payments continued These deferred 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 options lapse. In addition to continuity of employment, the vesting of options is conditional upon the Company’s financial growth rate exceeding certain thresholds. Executive Options The shareholders of the Company at the 2007 Annual General Meeting approved the issue of 500,000 options to the Company’s Chief Executive Officer and this occurred on 19 December 2007. The exercise price for each option is $3.85. The options vest 18 months after the date of grant. The options have a term of 24 months from the date of grant. On cessation of employment all unvested options lapse. The Executive options are subject to financial performance measures being met. Exempt Shares Plan Under this Plan employees were offered $1,000 worth of ordinary shares. There was no payment or performance criteria that was required to be met prior to receiving the shares. Divestiture of the shares is restricted to the earlier of 3 years from the date of issue of the shares and cessation of employment. 27,432 shares were issued under the exempt scheme. At the Company’s 2007 Annual General Meeting the issue of these shares was ratified and the exempt employee share plan was approved by shareholders. Employee Share Option Plan Zero Exercise Price Option Scheme Under this scheme select staff are made individual offers of specific numbers of share options at the discretion of the Board. There is no price to be paid to exercise the options and convert the options into shares but the options cannot be exercised until continuity of employment tests have been passed. 85,894 Zero exercise price options (ZEPOs) were granted on 20 July 2007. At the beginning of the year there were a total of 78,202 options were outstanding. The ZEPOs 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 80 GBST HOLDINGS LIMITED ABN 85 010 488 874 Note 31. Share Based Payments continued Employee Share Option Plan Zero Exercise Price Option Scheme continued The performance criteria associated with each grant of share options outstanding made under the Deferred Options Scheme is summarised below: Grant Date 24 October 2007 Tranche 1 (20%)* Tranche 2 (30%)* Tranche 3 (50%)* PERFORMANCE CRITERIA Continued Employment until Financial Performance hurdle 24 October 2008 If normalised EPS CAGR for 2008 compared to 2007 is: (cid:129) (cid:129) (cid:129) (cid:129) Less than 10%: no options vest Equal to 10%: 33.33% of options vest Greater than 10% but less than 20%: pro rated vesting between 33.33% and 100% Equal to or greater than 20%: 100% vesting. 24 October 2009 If normalised EPS CAGR for the combined 2008 and 2009, compared to 2007 is: (cid:129) (cid:129) (cid:129) (cid:129) Less than 10%: no options vest Equal to 10%: 33.33% of options vest Greater than 10% but less than 20%: pro rated vesting between 33.33% and 100% Equal to or greater than 20%: 100% vesting. 24 October 2010 If normalised EPS CAGR for the combined 2008, 2009 and 2010, compared to 2007 is: (cid:129) (cid:129) (cid:129) (cid:129) Less than 10%: no options vest Equal to 10%: 33.33% of options vest Greater than 10% but less than 20%: pro rated vesting between 33.33% and 100% Equal to or greater than 20%: 100% vesting. The Company’s financial performance in the financial year ending 30 June 2008 is when measured at the Earnings per Share level 20% greater in the financial year ending 30 June 2008 when compared to the financial year ending 30 June 2007. 19 December 2007 19 June 2009 * If the performance condition for Tranche 1 is not met at the first exercise date, then 50% of those options lapse and 50% are rolled into Tranche 2. If the performance condition for Tranche 2 is not met at the first exercise date for Tranche 2, then 50% of those options lapse and 50% are rolled into Tranche 3. If the performance condition for Tranche 3 is not met at the first exercise date for Tranche 3, then all remaining options will lapse. EPS = Earnings per share CAGR = Compound average growth rate The fair value of the options at the 24 October 2007 grant date is determined using Black-Scholes formula. The model inputs were: the share price $3.92, the exercise price of $3.92, expected volatility of 33 percent, expected dividends of 2.9 percent, a term of three years and a risk-free interest rate of 6.59 percent. The fair value of the options at the 19 December 2007 grant date is determined using Black-Scholes formula. The model inputs were: the share price $3.92, the exercise price of $3.85, expected volatility of 33 percent, expected dividends of 3.4 percent, a term of two years and a risk-free interest rate of 6.76 percent. The following table illustrates the number (No.), weighted average exercise price (WAEP) and movement in share options under these schemes issued during the period. Outstanding at the beginning of the period Granted during the period Forfeited during the period Exercised during the period Expired during the period Outstanding at the end of the period Exercisable at the end of the period Jun 2009 No. Jun 2009 WAEP Jun 2008 No. Jun 2008 WAEP 1,002,178 – 215,641 15,174 100,000 671,363 24,181 $3.21 – $3.58 $0.00 $1.25 $3.45 $0.08 481,376 1,205,894 327,692 357,400 – 1,002,178 123,976 $0.92 $3.60 $3.83 $0.88 – $3.21 $1.01 ANNUAL REPORT 2009 81 Notes to and forming part of the Consolidated Financial Statements FOR THE YEAR ENDED 30 JUNE 2009 CONTINUED Note 31. Share Based Payments continued Employee Share Option Plan Zero Exercise Price Option Scheme continued The options outstanding at 30 June 2009 had a weighted average exercise price of 8 cents and a weighted average remaining contractual life of 8 months. The exercise price for share options outstanding under the Exempt and Zero Exercise Price Options Schemes is nil, the exercise prices for share options outstanding under the Deferred Options Scheme and Executive Scheme is $3.85 to $3.92 in respect of options outstanding at 30 June 2009. The expense recognised in the income statement in relation to share-based payments is disclosed in Note 3. No person entitled to exercise any option had or has any right by virtue of the option to participate in any share issue of any other body corporate. Note 32. 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 b. Weighted average number of ordinary shares GBST GROUP 2009 3.90 3.90 GBST GROUP 2009 $’000 2,129 2,129 2,129 2008 12.44 12.37 2008 $’000 6,132 6,132 6,132 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 54,535,390 49,308,236 67,455 268,810 54,602,845 49,577,046 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 31). 82 GBST HOLDINGS LIMITED ABN 85 010 488 874 Note 33. Subsequent Events The financial report was authorised for issue on 28 August 2009 by the Board of Directors. − Contingent consideration will be measured at fair value, with subsequent changes therein recognised in profit or loss − Transaction costs, other than share and debt issue Since balance date the Group has, concluded the following: costs, will be expensed as incurred 1. The Company entered into an agreement with Crown Financial Pty Ltd on 29 June 2009, to extend the term of the $10.00 million loan facility from January 2010 to February 2012, subject to shareholder approval. This approval was received from the shareholders at an EGM (extraordinary general meeting) held on 21 August 2009 and the revised loan agreement has been executed. The loan’s term has been extended in exchange for a call option issued to Crown Financial Pty Ltd to acquire ordinary shares in the Company at a price of 95 cents per share to the maximum value of the loan. 2. The Company completed a capital raising of $4.20 million on the 29 June 2009. The Company received commitments to raise approximately $4.20 million through the issue of 6.50 million shares at an issue price of 65 cents per share, subject to shareholder approval. This approval was also received from the shareholders on 21 August 2009. The funds raised from this issue were used to repay debt owed to the National Australia Bank. 3. As part of its capital raising initiative the Company also announced on 3 July 2009 a Share Purchase Plan (SPP). GBST raised $813 thousand following the issue of 1.25 million ordinary shares at 65 cents each. The funds raised from this issue were also used to repay debt owed to the National Australia Bank. Other than for the impact (if any) of the 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 operations of GBST, the results of those operations, or the state of affairs of GBST in future financial years. Note 34. Change in Accounting Policy The following standards, amendments to standards and interpretations have been identified as those which may impact the entity in the period of initial application. They are available for early adoption at 30 June 2009, but have not been applied preparing this financial report: (cid:129) Business Combinations (2008) incorporates Revised AASB 3 the following changes that are likely to be relevant to the Group’s operations: − The definition of a business has been broadened, which is likely to result in more acquisitions being treated as business combinations − Any pre-existing interest in the acquiree will be measured at fair value with the gain or loss recognised in profit or loss − Any non-controlling (minority) interest will be measured at either fair value, or at its proportionate interest in the identifiable assets and liabilities of the acquiree, on a transaction-by-transaction basis. Revised AASB 3, which becomes mandatory for the Group’s 30 June 2010 financial statements, will be applied prospectively and therefore there will be no impact on prior periods in the Group’s 2010 consolidated financial statement. Consolidated and Separate Financial Amended AASB 127 Statements (2008) requires accounting for changes in ownership interests by the Group in a subsidiary, while maintaining control, to be recognised as an equity transaction. When the Group loses control of subsidiary, any interest retained in the former subsidiary will be measured at fair value with the gain or loss recognised in profit or loss. The amendments to AASB 127, which become mandatory for the Group’s 30 June 2010 financial statements, are not expected to have a significant impact on the consolidated financial statements. Operating Segments introduces the “management AASB 8 approach” to segment reporting. AASB 8, which becomes mandatory for the Group’s 30 June 2010 financial statements, will require a change in the presentation on and disclosure of segment information based on the internal reports regularly reviewed by the Group’s Chief Operating Decision Maker in order to assess each segment’s performance and to allocate resources to them. Currently the Group presents segment information in respect of its business and geographical segments (see Note 26). The Group has not yet determined the potential effect of the new standard on the Group’s disclosures. Presentation of Financial Statements Revised AASB 101 (2007) introduces the term total comprehensive income, which represents changes in equity during a period other than those changes resulting from transactions with owners in their capacity as owners. Total comprehensive income may be presented in either a single statement of comprehensive income (effectively combining both the income statement and all non-owner changes in equity in a single statement) or, in an income statement and a separate statement of comprehensive income. Revised AASB 101, which becomes mandatory for the Group’s 30 June 2010 financial statements, is expected to have a (cid:129) (cid:129) (cid:129) ANNUAL REPORT 2009 83 Notes to and forming part of the Consolidated Financial Statements FOR THE YEAR ENDED 30 JUNE 2009 CONTINUED (cid:129) (cid:129) (cid:129) (cid:129) significant impact on the presentation of the consolidated financial statements. The Group plans to provide total comprehensive income in a single statement for its 2010 consolidated financial statements. Revised AASB 123 Borrowing Costs removes the option to expense borrowing costs and requires that an entity capitalise borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset. The revised AASB 123 will become mandatory for the Group’s 30 June 2010 financial statements and will constitute a change in accounting policy for the Group. In accordance with the transitional provisions the Group will apply the revised AASB 123 to qualifying assets for which capitalisation of borrowing costs commences on or after the effective date. Therefore there will be no impact on prior periods in the Group’s 30 June 2010 financial statements. Amendments to Australian Accounting AASB 2008-1 Standard – Share-based Payment: Vesting Conditions and Cancellations clarifies the definition of vesting conditions, introduces the concept of non-vesting conditions, requires non-vesting conditions to be reflected in grant-date fair value and provides the accounting treatment for non- vesting conditions and cancellations. The amendments to AASB 2 will be mandatory for the Group’s 30 June 2010 financial statements, with retrospective application. The Group has not yet determined the potential effect of the amendment. Amendments to Australian Accounting AASB 2008-5 Standards arising from the Annual Improvements Process and 2008-6 Further Amendments to Australian Accounting Standards arising from The Annual Improvements Process affect various AASBs resulting in minor changes for presentation, disclosure, recognition and measurement purposes. The amendments, which become mandatory for the Group’s 30 June 2010 financial statements, are not expected to have any impact on the financial statements. AASB 2008-7 Amendments to Accounting Standards – Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate changes the recognition and measurement dividend receipts as income and addresses the accounting of a newly formed parent entity in the separate financial statements. The amendments become mandatory for the Group’s 30 June 2010 financial statements. The Group has not yet determined the potential effect of the amendments. (cid:129) Amendments to Australian Accounting AASB 2008-8 Standard – Eligible Hedged Items clarifies the effect of using options as hedging instruments and the circumstances in which inflation risk can be hedged. The amendments become mandatory for the Group’s 84 GBST HOLDINGS LIMITED ABN 85 010 488 874 30 June 2010 financial statements, with retrospective application. The Group has not yet determined the potential effect of the amendment. (cid:129) (cid:129) (cid:129) Hedges of a Net Investment in a Foreign AI 16 Operation clarifies that net investment hedging can only be applied when the net assets of the foreign operation are recognised in the entity’s consolidated financial statements. AI 16 will become mandatory for the Group’s 30 June 2010 financial statements. The Group has not yet determined the potential effect of the Interpretation. AI 17 Distributions of Non-Cash Assets to Owners provides guidance in respect of measuring the value of distributions of non-cash assets to owners. AI 17 will become mandatory for the Group’s 30 June 2010 consolidated financial statements. The Group has not yet determined the potential effect of the Interpretation. AI 18 Transfers of Assets from Customers provides guidance on the accounting for contributions from customers in the form of transfers of property, plant and equipment (or cash to acquire or construct it). AI 18 will become mandatory for the Group’s 30 June 2010 consolidated financial statements. The Group has not yet determined the potential effect of the Interpretation. Note 35. Company Details 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 Group’s principal places of business are: 5 Cribb Street MILTON QLD 4064 Suite 1, Level 26 259 George Street SYDNEY NSW 2000 Level 2 63 Market Street WOLLONGONG NSW 2530 Second Floor (Right) Victoria House 64 Paul Street LONDON EC2A 4NA Independent Auditor’s Report TO THE MEMBERS OF GBST HOLDINGS LIMITED ANNUAL REPORT 2009 85 Independent Auditor’s Report TO THE MEMBERS OF GBST HOLDINGS LIMITED CONTINUED 86 GBST HOLDINGS LIMITED ABN 85 010 488 874 Additional Information Shareholding Information as at 1 September 2009 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 100,000 100,001 and over TOTAL b. The number of shareholdings in less than marketable parcels is 189 c. The names of the substantial shareholders listed in the company’s register are: Shareholder Crown Financial Pty Ltd Perpetual Limited John Francis Puttick Stephen Lake d. Voting rights Number ordinary 241 307 149 187 50 934 Number ordinary 16,264,148 9,075,430 7,667,760 3,567,428 The company only has ordinary shares on issue. There are 65,569,319 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. RBC DEXIA INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED 3. JOHN F PUTTICK 4. STEPHEN MAURICE LINTON LAKE 5. NATIONAL NOMINEES LIMITED 6. RBC DEXIA INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED 7. DEKACROFT PTY LTD 8. TERENCE JOHN WILLIAMS 9. SMITH HAMILTON LIMITED 10. MR JOAKIM SUNDELL + MRS SHARA SUNDELL 11. J P MORGAN NOMINEES AUSTRALIA LIMITED 12. BARRY BECAREVIC 13. HANK UBEROI 14. THREE CROWNS INVESTMENTS PTY LIMITED 15. BERISLAV BECAREVIC + IVANKA BECAREVIC 16. MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED 17. KEY IP LTD 18. ROBERT DEDOMINICIS 19. RAYMOND TUBMAN 20. TIMENOW PTY LTD No of ordinary shares 14,754,464 % Held of Issued Ordinary Capital 22.50% 5,024,266 4,771,020 3,562,428 3,221,610 3,103,927 2,536,740 2,297,919 2,045,471 1,563,462 897,237 872,408 865,706 863,684 751,553 725,000 720,321 707,839 707,839 703,594 7.66% 7.28% 5.43% 4.91% 4.73% 3.87% 3.50% 3.12% 2.38% 1.37% 1.33% 1.32% 1.32% 1.15% 1.11% 1.10% 1.08% 1.08% 1.07% ANNUAL REPORT 2009 87 Corporate Directory Registered Offi ce c/- McCullough Robertson, Lawyers Level 11, Central Plaza Two 66 Eagle Street BRISBANE QLD 4000 Ph 07 3233 8888 Fax 07 3229 9949 Principal Place of Business 5 Cribb Street MILTON QLD 4064 Ph 07 3331 5555 Fax 07 3367 0181 www.gbst.com Postal Address PO Box 1511 MILTON QLD 4064 Directors John Francis Puttick Stephen Maurice Linton Lake Joakim James Sundell Allan James Brackin David Campbell Adams Company Secretary David Michael Doyle Share Registry Link Market Services Level 19, 324 Queen Street BRISBANE QLD 4000 Ph 02 8280 7454 Stock Exchange Listing GBST Holdings Limited shares are quoted on the Australian Stock Exchange under the code GBT. Voluntary Restrictions Details of shares that are held in voluntary escrow: Ordinary fully paid shares escrowed until 1 October 2009 Ordinary fully paid shares escrowed until 9 December 2009 Ordinary fully paid shares escrowed until 31 August 2010 Ordinary fully paid shares escrowed until 9 December 2010 Unquoted Securities 171,939 3,668,004 1,645,061 3,668,003 A total of 656,233 options are on issue to 49 employees under the GBST Holdings Limited Employee Option Plan. 10,526,316 options are on issue to Crown Financial Pty Ltd. Auditors KPMG 10 Shelley St SYDNEY NSW 2000 Ph 02 9335 7000 Fax 02 9335 7001 88 GBST HOLDINGS LIMITED ABN 85 010 488 874 www.gbst.com Designed and produced by FCR ANNUAL REPORT 2009 89